THE MERGER
This section
of the proxy statement/prospectus describes material aspects of the merger. This summary may not contain all of the information
that is important to you. You should carefully read this entire proxy statement/prospectus and the other documents we refer you
to for a more complete understanding of the merger. In addition, we incorporate important business and financial information about
each of us into this document by reference. You may obtain the information incorporated by reference into this document without
charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page
ii.
General
The Carolina
Trust board of directors is using this proxy statement/prospectus to solicit proxies from the holders of Carolina Trust common
stock for use at the Carolina Trust special shareholders’ meeting.
At the Carolina
Trust special shareholders’ meeting, holders of Carolina Trust common stock will be asked to vote upon the approval
of the merger agreement, among other things. The merger will not be completed unless Carolina Trust’s shareholders approve
the merger agreement and, by doing so, approve the proposed merger.
Effects of the Merger
At the effective
time of the merger, Carolina Trust will merge with and into Carolina Financial. Carolina Financial will be the surviving entity
following the merger.
In the merger,
each outstanding share of Carolina Trust common stock will be converted into the right to receive either $10.57 in cash or
0.3000 shares of Carolina Financial common stock, together with cash paid in lieu of any fractional share of Carolina Financial
common stock.
The following table presents the closing sale
price per share of Carolina Financial common stock on July 12, 2019, the last trading day before we publicly announced the merger
agreement, and October 16, 2019, the last practicable trading day prior to the date of this proxy statement/prospectus.
The table also presents the equivalent value of the merger consideration per share of Carolina Trust common stock on those dates,
calculated by multiplying the closing price of Carolina Financial common stock on those dates by the exchange ratio.
Date
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Carolina
Financial
Closing
Price
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Equivalent Carolina
Trust
Per Share Value
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July
12, 2019
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$35.62
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$10.69
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October
16, 2019
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35.19
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10.56
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Because
the exchange ratio is fixed and the market price of Carolina Financial common stock is subject to fluctuation, the market value
of the shares of Carolina Financial common stock that Carolina Trust shareholders may receive in the merger may increase or decrease
prior to and following the merger. Carolina Trust shareholders are urged to obtain current market quotations for Carolina Financial
common stock, which are available at www.nasdaq.com.
Background of the Merger
As part of the ongoing oversight and management
of their respective companies, the Carolina Financial board of directors and the Carolina Trust board of directors each regularly
review and assess their respective companies’ long-term strategic goals and opportunities, and consider ways to enhance
their respective companies’ performance and prospects in light of competitive and other relevant developments, all with
the goal of enhancing shareholder value. For each company, these reviews have included periodic discussions with respect to strategic
alternatives, including potential business combinations, acquisitions and dispositions.
Jerold L. Rexroad, President and Chief Executive
Officer of Carolina Financial, and Jerry L. Ocheltree, President and Chief Executive Officer of Carolina Trust, met informally
during 2018. Their discussions were of a general and introductory nature. In 2018, Carolina Trust’s strategic priorities
included raising capital through a public offering of common stock, which was completed on April 23, 2018, and the acquisition
by merger of Clover Community Bankshares, Inc., which was announced on June 14, 2018 and closed on January 1, 2019.
In the fall of 2018, Mr. Ocheltree became
aware of a possible merger opportunity with another financial institution, which we refer to as Bank A. The Carolina Trust board
discussed this potential opportunity at its meeting on November 18, 2018. The next day, Mr. Ocheltree met with the President of
Bank A. Further discussions with Bank A took place in early 2019, as described below.
At a meeting on December 18, 2018, Johnathan
L. Rhyne, Jr., Chairman of Carolina Trust’s board of directors, led the board in a discussion of Carolina Trust’s
strategic alternatives. The board discussed four potential alternatives: (1) remaining an independent corporate entity, (2) combining
with an institution of roughly equivalent size in a “merger of equals,” (3) combining with another institution where
Carolina Trust’s management team would be able to lead the combined entity, and (4) combining with a larger institution.
The board directed management to develop a working outline of Carolina Trust’s strategic alternatives and potential partners.
The outline and list of potential partners was presented to the board on January 15, 2019.
At a banking industry conference in late
January 2019 in Phoenix, Arizona, Messrs. Ocheltree and Rhyne met with Mr. Rexroad over lunch. The discussion was of a general,
introductory nature.
The Carolina Trust board received an update
on the strategic planning process at its meeting on February 19, 2019, and discussed engaging an outside financial advisor to
assist the board in analyzing its options. On February 27, 2019, Messrs. Ocheltree and Rhyne had an introductory meeting with
the President of another financial institution, which we refer to as Bank B. This meeting did not result in any further material
conversations between Carolina Trust and Bank B. The next day, February 28, 2019, Mr. Rhyne had a similar introductory meeting
with the President of Bank A.
At its next meeting held on March 19, 2019,
the Carolina Trust board instructed management to engage a firm that could provide strategic advice and give an informational
presentation on strategic options to the board at its next regularly scheduled meeting in April 2019. The objectives for the engagement
included understanding opportunities and challenges in the current economic and regulatory environment, considering several strategic
alternatives and comparing them to Carolina Trust’s long-term objectives, and positioning the Carolina Trust board to implement
a particular strategy and determine near-term actions. By letter dated March 28, 2019, Carolina Trust
engaged The Burke Group, Atlanta, Georgia, to provide such a presentation
to the board at its regularly scheduled meeting to be held on April 16, 2019.
On March 26, 2019, Messrs. Ocheltree and
Rhyne met with Mr. Rexroad and a representative of Carolina Trust’s financial advisor, Raymond James & Associates, Inc.
(“Raymond James”). Raymond James was familiar with Carolina Financial and had previously served as financial advisor
to Carolina Trust in connection with Carolina Trust’s acquisition of Clover Community Bankshares, Inc. that closed on January
1, 2019. On March 27, 2019, the Carolina Trust board met with the President of Bank A referenced above, and the parties discussed
whether there would be mutual interest in a potential business combination. The preliminary conversations with Bank A regarding
any interest in a potential combination terminated on April 30, 2019, without any further developments.
Carolina Trust and Carolina Financial entered
into a mutual non-disclosure agreement on April 12, 2019 to facilitate the sharing of non-public information between the parties
and their advisors. Under the terms of the non-disclosure agreement, each party agreed to take all necessary steps to maintain
the confidentiality and secrecy of the other party’s confidential information, and not to disclose such information to any
third parties with the exception of their representatives, affiliates, and representatives of affiliates who were assigned to
participate in the potential transaction, had a need to know such information to enable them to perform their duties, and who
had agreed to be bound by the terms of the non-disclosure agreement. The parties also agreed that they would not utilize any confidential
information to induce or attempt to induce any customer, supplier, or other business relation of the other party to cease doing
business with such party, or in any way utilize any confidential information to interfere with the relationship between any customer,
supplier, or business relation and the party providing the confidential information. Following execution of the mutual non-disclosure
agreement, Carolina Trust and Carolina Financial began sharing preliminary due diligence information with one another.
On April 11, 2019, Raymond James provided
to Mr. Rhyne a preliminary analysis modeling a business combination of Carolina Trust with Carolina Financial, as well as an analysis
of various other potential acquirers’ capacity to pay, with various assumptions. This preliminary analysis was shared with
the Carolina Trust board at its meeting on April 16, 2019. At this same meeting, the Carolina Trust board received a presentation
from The Burke Group regarding strategic alternatives, current market conditions, the impact of a potential transaction, and other
information. Representatives from The Burke Group took the Carolina Trust board through their analysis of three potential scenarios,
including “buy,” “sell,” and “hold,” scenarios and answered questions from the board.
On May 14, 2019, the Carolina Trust board
met with Mr. Rexroad and M. J. Huggins III, Executive Vice President and Secretary of Carolina Financial. Messrs. Rexroad and
Huggins presented information about Carolina Financial and its acquisition history. On May 21, 2019, Carolina Financial delivered
a draft non-binding letter of intent to Carolina Trust through Raymond James. At the May 24, 2019 Carolina Trust board meeting,
the proposed letter of intent was presented to the Carolina Trust board. The Carolina Trust board determined the letter of intent
was not acceptable in its then-current form, and instructed Raymond James to seek clarification on certain issues and to further
negotiate the proposed stock exchange ratio. The Carolina Trust board subsequently held two additional update conference calls
with Raymond James on May 31 and June 4, 2019, where progress on the proposed terms of the letter of intent were discussed.
On June 5, 2019, Raymond James and Carolina
Trust began populating a password-protected electronic data room with financial and other business information to facilitate more
extensive
due diligence among the parties. Carolina Financial also uploaded financial and other business information to the electronic
data room. Diligence was conducted by both parties over the course of the next five weeks.
A revised letter of intent was presented to
the Carolina Trust board on June 6, 2019, which reflected an increased stock exchange ratio and sufficiently addressed the other
issues that the Carolina Trust board had sought to be clarified or revised.
The financial terms of the letter of intent
provided for a stock and cash transaction with an exchange ratio of 0.3000 shares of Carolina Financial common stock or $10.57
in cash for each share of Carolina Trust common stock, with the consideration consisting of 90% stock and 10% cash. These terms
were subject to completion of Carolina Financial’s due diligence on Carolina Trust. The letter further indicated that one
director of Carolina Trust would be invited to join the Carolina Financial board and that the other Carolina Trust directors would
be asked to serve on a Charlotte Area Advisory Board for CresCom Bank. The letter also contained an exclusivity provision. This
provision required that Carolina Trust refrain from (1) participating in any negotiations or soliciting, initiating, or seeking
to encourage submission of inquiries, proposals, or offers from any potential buyer of Carolina Trust; (2) entering into any agreement
or taking any action that by its terms or effect was intended to adversely affect the ability of Carolina Trust and Carolina Financial
to consummate the merger; and (3) furnishing or authorizing any agent or representative to furnish any information concerning
the proposed merger to any party. The exclusivity period began on June 6, 2019 and ended on July 21, 2019. During the exclusivity
period, Carolina Trust was required to notify Carolina Financial of any unsolicited inquiries, proposals, or offers from any other
potential buyer of Carolina Trust. Carolina Financial requested a response to the letter of intent no later than 5:00 p.m. Eastern
Time on June 11, 2019. The Carolina Trust board approved the non-binding letter of intent on June 6, 2019, after which it was
executed by Messrs. Ocheltree and Rexroad.
The Carolina Trust board met again on June
18, 2019, at its regularly scheduled board meeting and received an update on the progress of due diligence from Mr. Ocheltree.
On July 2, 2019, Nelson Mullins Riley & Scarborough LLP, or Nelson Mullins, legal counsel to Carolina Financial, provided
a draft merger agreement to Wyrick Robbins Yates & Ponton LLP, or Wyrick Robbins, legal counsel to Carolina Trust. On July
9, 2019, representatives of Carolina Trust’s executive management team, Raymond James, and Wyrick Robbins conducted due
diligence interviews of representatives of Carolina Financial. Also on July 9, 2019, Wyrick Robbins sent a revised draft of the
merger agreement to Nelson Mullins reflecting Carolina Trust’s initial comments and requested modifications. Over the course
of the next three days, Carolina Trust, Raymond James, and Wyrick Robbins continued to perform additional diligence on Carolina
Financial.
Nelson Mullins provided an updated draft
of the merger agreement to Wyrick Robbins on July 10, 2019. On the afternoon of July 10, the Carolina Trust board held a meeting
at which the potential merger transaction with Carolina Financial was discussed. It was made clear at the outset of the meeting
that the Carolina Trust board would not be voting to approve any transaction at this meeting. The purpose of the meeting was to
provide the Carolina Trust board with an opportunity to review, consider, and discuss the proposed transaction. Representatives
from Raymond James and Wyrick Robbins also attended the meeting and provided an update on the status of merger discussions and
due diligence. Raymond James presented a financial analysis of the proposed merger with Carolina Financial, including a review
of selected transactions, an analysis of the proposed consideration in the form of common stock of Carolina Financial and cash,
pro forma ownership percentages, and tax considerations. Wyrick Robbins reviewed the proposed merger agreement with Carolina Financial
in detail with the board. The board, with the assistance of
Raymond James and Wyrick Robbins, engaged in extensive discussion
of the proposed merger with Carolina Financial and the advantages and disadvantages of the proposed merger.
Carolina Trust and Carolina Financial, with
the assistance of their respective advisors, continued negotiation of the merger agreement over the following days. By July 13,
2019, the terms of the merger agreement were largely finalized. Carolina Financial’s board met on July 14 and unanimously
approved the merger.
On the morning of July 15, 2019, the Carolina
Trust board met and further considered the proposed merger with Carolina Financial and reviewed the latest draft of the merger
agreement. Representatives of Raymond James and Wyrick Robbins joined the meeting by telephone. Based on its analysis previously
presented at the July 10 meeting, Raymond James stated it was prepared to deliver a written opinion stating that the merger consideration
was fair to Carolina Trust’s shareholders from a financial point of view. Following discussion and receipt of the Raymond
James opinion, the Carolina Trust board unanimously voted to approve the merger and adopt the merger agreement with Carolina Financial,
and directed Carolina Trust’s management to finalize and execute a definitive merger agreement on the terms presented at
the meeting.
Carolina Trust and Carolina Financial executed
the merger agreement on July 15, 2019 and, before the financial markets opened that day, issued a joint press release announcing
the execution of the merger agreement and the terms of the merger.
Carolina Trust’s Reasons for the Merger; Recommendation
of the Carolina Trust Board of Directors
After careful consideration, Carolina
Trust’s board of directors, at a meeting held on July 15, 2019, unanimously determined the merger agreement and the transactions
contemplated thereby to be fair and in the best interest of Carolina Trust and its shareholders. Accordingly, Carolina Trust’s
board of directors adopted and approved the merger agreement and unanimously recommends that Carolina Trust’s shareholders
vote “FOR” the approval of the merger agreement.
In evaluating the merger agreement and reaching
its decision to adopt and approve the merger agreement and recommend that Carolina Trust’s shareholders approve the merger
agreement, Carolina Trust’s board consulted with Carolina Trust’s management, as well as its outside legal and financial
advisors, and considered a number of factors, including the following material factors (not in any relative order of importance):
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Carolina
Trust’s board’s knowledge and understanding of Carolina Trust’s business,
operations, financial condition, asset quality, earnings and prospects, and of Carolina
Financial’s business, operations, financial condition, asset quality, earnings
and prospects, taking into account the presentations made by Carolina Financial officers
and information provided by Carolina Trust’s financial advisors;
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its
understanding of Carolina Financial’s commitment to enhancing its strategic position
in Carolina Trust’s market area, its prospects for the future and its projected
financial results, and Carolina Trust’s board’s belief that the combined
enterprise would benefit from Carolina Financial’s ability to take advantage of
economies of scale and grow in the current economic environment;
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Carolina
Financial’s earnings track record and the market performance of its common stock;
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the
ability of Carolina Trust’s shareholders to benefit from Carolina Financial’s
potential growth and stock appreciation since it is more likely that the combined entity
will have superior future earnings and prospects compared to Carolina Trust’s earnings
and prospects on an independent basis due to greater operating efficiencies and better
penetration of commercial and consumer markets;
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the
perceived ability of Carolina Financial to complete a merger transaction from a financial
and regulatory perspective, including its prior history of successful merger transactions;
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the
financial and other terms of the merger agreement, including the amount and nature of
the consideration proposed to be paid, which Carolina Trust’s board reviewed with
its outside financial and legal advisors, including:
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Carolina
Trust’s ability, under certain circumstances specified in and prior to the time
Carolina Trust’s shareholders approve the merger agreement (i) to provide non-public
information in response to a written acquisition proposal from a third party and (ii)
participate in discussions or negotiations with a third party making such proposal, if,
in each case, the acquisition proposal was not the result of a material violation of
the provisions of the merger agreement relating to the solicitation of acquisition proposals,
and if Carolina Trust’s board, prior to taking any such actions, determines in
good faith, after consultation with its outside legal counsel, that failure to take such
actions would violate Carolina Trust’s board’s fiduciary duties under applicable
law and, after consultation with its financial advisor and outside counsel, that such
acquisition proposal constitutes a superior proposal;
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the
fact that the outside date under the merger agreement allows for sufficient time to complete
the merger;
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Carolina
Trust’s board’s belief that the proposed merger with Carolina Financial will
generally be a tax-free transaction to Carolina Trust’s shareholders with respect
to Carolina Financial common stock received by virtue of the merger;
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the
level of effort that Carolina Financial must use under the merger agreement to obtain
required regulatory approvals, and the prospects for such approvals being obtained in
a timely fashion and without the imposition of any adverse conditions; and
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its
review of the potential costs associated with executing the merger agreement, including
change in control, severance and related costs, as well as estimated advisor fees, which
Carolina Trust’s board concluded were reasonable and would not affect the advice
from, or the work performed by senior management of Carolina Trust or Carolina Trust’s
financial advisors in connection with the evaluation of the merger and the merger agreement
by Carolina Trust’s board;
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the
complementary aspects of the Carolina Trust and Carolina Financial businesses, including
customer focus, geographic coverage, business orientation and compatibility of the companies’
management operating styles;
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the
potential expense-saving and revenue-enhancing opportunities in connection with the merger,
the related potential impact on the combined company’s earnings and the
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fact that
the nature of the stock portion of the merger consideration would allow former Carolina
Trust shareholders to participate in the potential future upside as Carolina Financial
shareholders;
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the
anticipated effect of the acquisition on Carolina Trust’s retained employees and
the terms of severance for employees who would not be retained;
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the
long-term and short-term interests of Carolina Trust and its shareholders, and the interests
of Carolina Trust’s employees, customers, creditors and suppliers, and the community
and societal considerations of the communities in which Carolina Trust maintains offices;
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the
financial analyses provided by Raymond James, Carolina Trust’s financial advisor,
regarding the merger, and its opinion, delivered to Carolina Trust’s board on July
15, 2019, that as of that date, the merger consideration to be received under the terms
of the merger agreement was fair, from a financial point of view, to Carolina Trust’s
shareholders;
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its
knowledge of the current environment in the financial services industry, including national,
regional and local economic conditions, continued industry consolidation, increased regulatory
burdens, evolving trends in technology and increasing nationwide and global competition,
the current financial market conditions, the current environment for community banks,
particularly in the Carolinas, and the likely effects of these factors on Carolina Trust’s
and the combined company’s potential growth, development, productivity, profitability
and strategic options, and the historical prices of Carolina Trust and Carolina Financial
common shares;
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its
knowledge of Carolina Trust’s prospects as an independent entity, including challenges
relating to increasing regulatory burdens and overhead expense, and Carolina Trust’s
ability to increase capital to support growth;
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its
knowledge of the strategic alternatives available to Carolina Trust, including the challenges
for organic growth by a financial institution of Carolina Trust’s size; and
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its
belief that the merger is more favorable to Carolina Trust’s shareholders than
the alternatives to the merger, which belief was formed based on the careful review undertaken
by Carolina Trust’s board of directors, with the assistance of its management and
outside legal and financial advisors.
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Carolina Trust’s board also considered
potential risks and a variety of potential negative factors in connection with its deliberations concerning the merger agreement
and the merger, including the following material factors (not in any relative order of importance):
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the
fact that, while Carolina Trust expects that the merger will be consummated, there can
be no assurance that all conditions to the parties’ obligations to complete the
merger agreement will be satisfied, including the risk that certain regulatory approvals,
the receipt of which are conditions to the consummation of the merger, might not be obtained,
and, as a result, the merger may not be consummated;
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the
restrictions on the conduct of Carolina Trust’s business prior to the completion
of the merger, which are customary for public company merger agreements involving financial
institutions, but which, subject to specific exceptions, could delay or prevent Carolina
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Trust from undertaking business opportunities that may arise or any other action it would
otherwise take with respect to the operations of Carolina Trust absent the pending completion
of the merger;
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the
significant risks and costs involved in connection with entering into or completing the
merger, or failing to complete the merger in a timely manner, or at all, including as
a result of any failure to obtain required regulatory approvals or shareholder approval,
such as the risks and costs relating to diversion of management and employee attention
from other strategic opportunities and operational matters, potential employee attrition,
and the potential effect on business and customer relationships;
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the
fact that Carolina Trust would be prohibited from soliciting acquisition proposals after
execution of the merger agreement, and the possibility that the $4,712,000 termination
fee payable by Carolina Trust upon the termination of the merger agreement under certain
circumstances could discourage other potential acquirers from making a competing bid
to acquire Carolina Trust;
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the
fact that some of Carolina Trust’s directors and executive officers have other
interests in the merger that are different from, or in addition to, their interests as
Carolina Trust shareholders, including the specific terms of the employment agreement
offered to Mr. Ocheltree; and
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the
possibility of litigation in connection with the merger.
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Based on the factors described above, the
board of Carolina Trust determined that the merger with Carolina Financial and the merger of Carolina Trust Bank with CresCom
Bank would be advisable and in the best interests of Carolina Trust and its shareholders and other constituencies the board was
authorized by the articles of incorporation to consider, and adopted the merger agreement and resolved to recommend its approval
to the shareholders of Carolina Trust.
The foregoing discussion of the information
and factors considered by Carolina Trust’s board is not intended to be exhaustive but includes the material factors considered
by Carolina Trust’s board. In view of the wide variety of factors considered in connection with its evaluation of the merger
and the complexity of these matters, Carolina Trust’s board did not find it useful, and did not attempt, to quantify, rank
or otherwise assign relative weights to these factors. In considering the factors described above, the individual members of Carolina
Trust’s board may have given different weight to different factors. Carolina Trust’s board conducted an overall analysis
of the factors described above including through discussions with, and questioning of, Carolina Trust’s management and Carolina
Trust’s legal and financial advisors, and considered the factors overall to be favorable to, and to support, its determination
to adopt the merger agreement and recommend its approval to Carolina Trust’s shareholders.
Opinion of Carolina Trust’s
Financial Advisor
Carolina Trust retained Raymond James as
financial advisor pursuant to an engagement agreement dated June 20, 2019. Pursuant to that engagement, the Carolina Trust board
of directors requested that Raymond James evaluate the fairness, from a financial point of view, to the holders of Carolina Trust’s
outstanding common stock of the merger consideration to be received by such holders pursuant to the merger agreement.
At the July 15, 2019 meeting of the Carolina
Trust board of directors, representatives of Raymond James rendered its oral opinion, which was subsequently confirmed by delivery
of a written opinion to the Carolina Trust board of directors dated July 15, 2019, as to the fairness, as of July 15, 2019, from
a financial point of view, to the holders of Carolina Trust’s outstanding common stock of the merger consideration to be
received by such holders in the merger pursuant to the merger agreement, based upon and subject to the qualifications, assumptions,
limitations and other matters considered in connection with the preparation of its opinion.
The full text of the written opinion of
Raymond James is attached as Annex B to this document. The summary of the opinion of Raymond James set forth in this document
is qualified in its entirety by reference to the full text of such written opinion. Holders of Carolina Trust common stock are
urged to read the opinion in its entirety.
Raymond James provided its opinion for the
information of the Carolina Trust board of directors (solely in each director’s capacity as such) in connection with, and
for purposes of, its consideration of the merger and its opinion only addresses whether, as of the date of such opinion, the merger
consideration to be received by the holders of Carolina Trust common stock in the merger pursuant to the merger agreement was
fair, from a financial point of view, to such holders. The opinion of Raymond James does not address any other term or aspect
of the merger agreement or the merger contemplated thereby. The Raymond James opinion does not constitute a recommendation to
the Carolina Trust board of directors or to any holder of Carolina Trust common stock as to how the Carolina Trust board of directors,
such shareholder or any other person should vote or otherwise act with respect to the merger or any other matter. Raymond James
does not express any opinion as to the likely trading range of Carolina Trust common stock or of Carolina Financial common stock
following the date of the opinion and prior to or as of the time of the merger, which may vary depending on numerous factors that
generally impact the price of securities or on the financial condition of Carolina Trust or Carolina Financial at such times.
Raymond James also does not express any opinion as to the likely trading range of Carolina Financial common stock following the
merger, which may vary depending on numerous factors that generally impact the price of securities or on the financial condition
of Carolina Financial at such times.
In connection with its review of the proposed
merger and the preparation of its opinion, Raymond James, among other things:
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reviewed
the financial terms and conditions as stated in the draft of the merger agreement dated
July 13, 2019, which we refer to in this section as the “Draft Agreement”;
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reviewed
certain information related to the historical, current and future operations, financial
condition and prospects of Carolina Trust made available to Raymond James by Carolina
Trust, including, but not limited to, financial projections prepared by the management
of Carolina Trust relating to Carolina Trust for the periods ending December 31, 2019
through 2024, as approved for Raymond James’ use by Carolina Trust, which we refer
to in this section as the “Projections”;
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reviewed
Carolina Trust’s and Carolina Financial’s recent public filings and certain
other publicly available information regarding Carolina Trust and Carolina Financial;
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reviewed
financial, operating and other information regarding Carolina Trust and Carolina Financial
and the industry in which they operate;
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reviewed
the financial and operating performance of Carolina Trust and those of other selected
public companies that Raymond James deemed to be relevant;
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reviewed
the current and historical market prices and trading volume for the Carolina Trust common
stock, and the current market prices of the publicly traded securities of certain other
companies that Raymond James deemed to be relevant;
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reviewed
a certificate, dated July 15, 2019, addressed to Raymond James from a member of senior
management of Carolina Trust regarding, among other things, the accuracy of financial
information and data provided to, or discussed with, Raymond James by or on behalf of
Carolina Trust;
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considered
the publicly available financial terms of certain transactions that Raymond James deemed
to be relevant;
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conducted
such other financial studies, analyses and inquiries and considered such other information
and factors as Raymond James deemed appropriate; and
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discussed
with members of the senior management of Carolina Trust certain information relating
to the aforementioned and any other matters which Raymond James deemed relevant to its
inquiry.
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With Carolina Trust’s consent, Raymond
James assumed and relied upon the accuracy and completeness of all information supplied by or on behalf of Carolina Trust, or
otherwise reviewed by or discussed with Raymond James, and Raymond James did not undertake any duty or responsibility to, nor
did Raymond James, independently verify any of such information. Raymond James did not make or obtain an independent appraisal
of the assets or liabilities (contingent or otherwise) of Carolina Trust. Raymond James is not an expert in the evaluation of
loan and lease portfolios for purposes of assessing the adequacy of the allowances for loan losses; accordingly, Raymond James
assumed that such allowances for losses were in the aggregate adequate to cover such losses. With respect to the Projections and
any other information and data provided to or otherwise reviewed by or discussed with Raymond James, Raymond James, with Carolina
Trust’s consent, assumed that the Projections and such other information and data were reasonably prepared in good faith
on bases reflecting the best currently available estimates and judgments of management of Carolina Trust and Raymond James relied
upon Carolina Trust to advise Raymond James promptly if any information previously provided became inaccurate or was required
to be updated during the period of its review. Raymond James expressed no opinion with respect to the Projections or the assumptions
on which they were based. Raymond James relied upon and assumed, without independent verification, that the final form of the
merger agreement would be substantially similar to the Draft Agreement reviewed by Raymond James in all respects material to its
analysis, and that the merger would be consummated in accordance with the terms of the merger agreement without waiver of or amendment
to any of the conditions thereto. Furthermore, Raymond James assumed, in all respects material to its analysis, that the representations
and warranties of each party contained in the merger agreement were true and correct and that each party would perform all of
the covenants and agreements required to be performed by it under the merger agreement without being waived. Raymond James also
relied upon and assumed, without independent verification, that (i) the merger would be consummated in a manner that complies
in all respects with all applicable international, federal and state statutes, rules and regulations, and (ii) all governmental,
regulatory or other consents and approvals necessary for the consummation of the merger would be obtained
and that no delay, limitations,
restrictions or conditions would be imposed or amendments, modifications or waivers made that would have an effect on the merger
or Carolina Trust that would be material to Raymond James’ analyses or opinion.
Raymond James expressed no opinion as to
the underlying business decision to effect the merger, the structure or tax consequences of the merger, or the availability or
advisability of any alternatives to the merger. Raymond James did not solicit indications of interest with respect to a transaction
involving Carolina Trust. Raymond James does not express any opinion as to the likely trading range of Carolina Financial common
stock following the merger. The Raymond James opinion is limited to the fairness, from a financial point of view, of the merger
consideration to be received by the holders of Carolina Trust common stock. Raymond James expressed no opinion with respect to
any other reasons (legal, business, or otherwise) that may support the decision of Carolina Trust’s board of directors to
approve or consummate the merger. Furthermore, no opinion, counsel or interpretation was intended by Raymond James on matters
that require legal, accounting, tax or regulatory advice. Raymond James assumed that such opinions, counsel or interpretations
had been or would be obtained from appropriate professional sources. Furthermore, Raymond James relied, with the consent of Carolina
Trust, on the fact that Carolina Trust was assisted by legal, accounting, tax and regulatory advisors, and, with the consent of
Carolina Trust, relied upon and assumed the accuracy and completeness of the assessments by Carolina Trust and its advisors, as
to all legal, accounting, tax and regulatory matters with respect to Carolina Trust and the merger, including, without limitation,
that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.
In formulating its opinion, Raymond James
considered only the merger consideration to be received by the holders of Carolina Trust common stock, and Raymond James did not
consider, and its opinion did not address, the fairness of the amount or nature of any compensation to be paid or payable to any
of the officers, directors or employees of Carolina Trust, or such class of persons, in connection with the merger whether relative
to the merger consideration or otherwise. Raymond James was not requested to opine as to, and its opinion did not express an opinion
as to or otherwise address, among other things: (1) the fairness of the merger to the holders of any class of securities, creditors
or other constituencies of Carolina Trust, or to any other party, except and only to the extent expressly set forth in the last
sentence of its opinion or (2) the fairness of the merger to any one class or group of Carolina Trust’s or any other party’s
security holders or other constituents vis-à-vis any other class or group of Carolina Trust’s or such other party’s
security holders or other constituents (including, without limitation, the allocation of any consideration to be received in the
merger amongst or within such classes or groups of security holders or other constituents). Raymond James expressed no opinion
as to the impact of the merger on the solvency or viability of Carolina Trust or Carolina Financial or the ability of Carolina
Trust or Carolina Financial to pay their respective obligations when they come due.
Material Financial Analyses
The following summarizes the material financial
analyses reviewed by Raymond James with the Carolina Trust board of directors, which material was considered by Raymond James
in rendering its opinion dated July 15, 2019. Raymond James presented a preliminary version of this analysis to the Carolina Trust
board of directors at its meeting on July 10, 2019. No company or transaction used in the analyses described below is identical
or directly comparable to Carolina Trust, Carolina Financial or the contemplated merger. For purposes of its opinion and with
Carolina Trust’s consent, Raymond James valued the merger consideration to be received by holders of Carolina Trust common
stock at $10.53, which is calculated as the product of 10%
multiplied by $10.57 (the cash consideration), plus the product
of 90% multiplied by 0.3000 (the exchange ratio) multiplied by $35.09, which represented the 10-day average closing price for
Carolina Financial’s common stock as of July 12, 2019, the last trading day prior to the date of its opinion.
Selected Companies Analysis. Raymond
James analyzed the relative valuation multiples of 36 publicly traded equity securities that satisfied the following criteria:
(i) headquartered in the Southeast United States (AL, AR, FL, GA, MS, NC, SC, TN, VA, and WV); (ii) had total assets between $400
million and $1.0 billion; (iii) had a tangible common equity to tangible assets ratio between 8.0% and 12.0%; (iv) had last twelve
month (“LTM”) return on average assets greater than 0.00%; and (v) had a non-performing assets to assets ratio less
than 2.50%; this group excluded mutual holding companies and targets of announced mergers. The selected companies may include
companies with equity securities that are thinly traded “over-the-counter” and their prices may not be as closely
indicative of the market’s view of their value as more liquid stocks. The selected companies and resulting data are below:
|
•
|
|
Thomasville Bancshares Inc.
|
|
•
|
|
Security Federal Corp.
|
|
•
|
|
Chesapeake Financial Shares
|
|
•
|
|
Mountain Commerce Bancorp Inc.
|
|
•
|
|
Auburn National Bancorp
|
|
•
|
|
GrandSouth Bancorporation
|
|
•
|
|
Eagle Financial Services Inc.
|
|
•
|
|
First US Bancshares Inc
|
|
•
|
|
F & M Bank Corp.
|
|
•
|
|
First National Corp.
|
|
•
|
|
Union Bank
|
|
•
|
|
Benchmark Bankshares Inc.
|
|
•
|
|
Fauquier Bankshares Inc.
|
|
•
|
|
Bank of the James Financial Group Inc.
|
|
•
|
|
First Advantage Bancorp
|
|
•
|
|
South Atlantic Bancshares Inc.
|
|
•
|
|
Parkway Acquisition Corp.
|
|
•
|
|
Virginia National Bankshares Corp.
|
|
•
|
|
Highlands Bankshares Inc.
|
|
•
|
|
First Reliance Bancshares
|
|
•
|
|
Merchants & Marine Bancorp
|
|
•
|
|
Blue Ridge Bankshares Inc.
|
|
•
|
|
Southwest Georgia Financial
|
|
•
|
|
SouthCrest Financial Group Inc.
|
|
•
|
|
InsCorp Inc.
|
|
•
|
|
Potomac Bancshares Inc.
|
|
•
|
|
Truxton Corporation
|
|
•
|
|
Pinnacle Bankshares Corp.
|
|
•
|
|
Aquesta Financial Holdings, Inc.
|
|
•
|
|
Farmers Bankshares Inc.
|
|
•
|
|
Bank of Botetourt
|
|
•
|
|
Touchstone Bank
|
|
•
|
|
Bank of South Carolina Corp.
|
|
•
|
|
Touchmark Bancshares Inc.
|
|
•
|
|
Paragon Financial Solutions Inc.
|
|
•
|
|
Citizens Bancshares Corp.
|
Raymond James calculated various financial
multiples for each selected public company, including closing price per share on July 12, 2019 compared to (i) basic tangible
book value per share at March 31, 2019 as shown by S&P Global Market Intelligence; and (ii) core LTM earnings per share as
of the most recent twelve-month period available as shown by S&P Global Market Intelligence. All financial multiples greater
than two standard deviations away from the unadjusted mean were considered not meaningful. Raymond James reviewed the mean, median,
25th percentile and 75th percentile relative valuation multiples of the selected public companies. The results
of the selected public companies analysis are summarized below:
|
|
Summary Pricing Multiples
|
|
|
Price /
|
|
|
Tangible Book Value
|
|
Core LTM Earnings
|
|
|
per Share
|
|
per Share
|
|
|
|
|
|
75th Percentile
|
|
|
132
|
%
|
|
|
14.4
|
x
|
Mean
|
|
|
120
|
%
|
|
|
12.9
|
x
|
Median
|
|
|
114
|
%
|
|
|
12.8
|
x
|
25th Percentile
|
|
|
108
|
%
|
|
|
10.9
|
x
|
Implied Transaction Metric
|
|
|
166
|
%
|
|
|
16.5
|
x
|
Furthermore, Raymond James applied the mean,
median, 25th percentile and 75th percentile relative valuation multiples for each of the metrics to Carolina
Trust’s actual financial results to derive an implied transaction consideration. Raymond James then compared those implied
values to $10.53, the value attributed to the merger consideration. The results of this analysis are summarized below:
|
|
Implied
Merger Consideration
|
|
|
Price
/
|
|
|
Tangible Book Value
|
|
Core LTM Earnings
|
|
|
per
Share
|
|
per
Share
|
|
|
|
|
|
|
75th
Percentile
|
|
|
$
|
8.39
|
|
|
$
|
9.23
|
|
|
Mean
|
|
|
$
|
7.60
|
|
|
$
|
8.23
|
|
|
Median
|
|
|
$
|
7.24
|
|
|
$
|
8.19
|
|
|
25th
Percentile
|
|
|
$
|
6.87
|
|
|
$
|
6.96
|
|
Selected Transaction Analysis. Raymond
James analyzed publicly available information relating to selected regional transactions announced in the 24 months prior to the
date of the fairness opinion involving targets headquartered in the Southeast United States (AL, AR, FL, GA, MS, NC, SC, TN, VA,
and WV) with (i) assets between $400 million and $1.0 billion; (ii) tangible common equity to tangible assets ratio between 8.0%
and 12.0%; (iii) LTM return on average assets greater than 0.00%; and (iv) non-performing assets to assets ratio less than 2.50%.
Raymond James also analyzed publicly available information relating to selected national transactions announced in the 12 months
prior to the date of the fairness opinion involving targets headquartered in the United States with (i) assets between $400 million
and $1.0 billion; (ii) tangible common equity to tangible assets ratio between 8.0% and 12.0%; (iii) LTM return on average assets
greater than 0.00%; and (iv) non-performing assets to assets ratio less than 2.50%. Financial data for the selected targets was
based on the most recent twelve-month period prior to transaction announcement. Both regional and national selected transactions
excluded (i) transactions without publicly disclosed deal value or sufficient financial information; (ii) mergers of equals; (iii)
transactions in which less than 85% of equity ownership was acquired; and (iv) transactions in which the target reported a negative
tax benefit. The selected transactions (with respective transaction announcement dates shown) used in the analyses included:
Selected Regional Transactions
|
•
|
|
Acquisition of HomeTown Bankshares Corp.
by American National Bankshares (10/01/18)
|
|
•
|
|
Acquisition of CAB Financial Corp. by
Park National Corp. (09/13/18)
|
|
•
|
|
Acquisition of FMB Banking Corp. by
First Bancshares Inc. (07/24/18)
|
|
•
|
|
Acquisition of First Green Bancorp Inc.
by Seacoast Banking Corp. of FL (06/11/18)
|
|
•
|
|
Acquisition of Athens Bancshares Corporation
by CapStar Financial Holdings Inc. (06/11/18)
|
|
•
|
|
Acquisition of Volunteer State Bancshares,
Inc. by private investor Gaylon Lawrence Jr. (04/25/18)
|
|
•
|
|
Acquisition of Landmark Bancshares Inc.
by National Commerce Corp. (04/24/18)
|
|
•
|
|
Acquisition of Floridian Community Holdings
Inc. by FCB Financial Holdings Inc. (11/27/17)
|
|
•
|
|
Acquisition of Coastal Banking Co. by
First Federal Bancorp MHC (11/07/17)
|
|
•
|
|
Acquisition of Sunshine Bancorp Inc.
by CenterState Bank Corp. (08/14/17)
|
Selected National Transactions
|
•
|
|
Acquisition of Frederick County Bancorp,
Inc. by ACNB Corporation (07/02/19)
|
|
•
|
|
Acquisition of Choice Bancorp, Inc.
by Nicolet Bankshares, Inc. (06/27/19)
|
|
•
|
|
Acquisition of Stewardship Financial
Corporation by Columbia Financial, Inc. (MHC) (06/07/19)
|
|
•
|
|
Acquisition of Presidio Bank by Heritage
Commerce Corp (05/16/19)
|
|
•
|
|
Acquisition of Liberty Bancorp Inc.
by Central Bancompany Inc. (04/10/19)
|
|
•
|
|
Acquisition of Citizens First Corp.
by German American Bancorp Inc. (02/21/19)
|
|
•
|
|
Acquisition of HopFed Bancorp Inc. by
First Financial Corp. (01/07/19)
|
|
•
|
|
Acquisition of Salin Bancshares Inc.
by Horizon Bancorp Inc. (10/29/18)
|
|
•
|
|
Acquisition of Capital Bank of New Jersey
by OceanFirst Financial Corp. (10/25/18)
|
|
•
|
|
Acquisition of Idaho Independent Bank
by First Interstate BancSystem (10/11/18)
|
|
•
|
|
Acquisition of HomeTown Bankshares Corp.
by American National Bankshares (10/01/18)
|
|
•
|
|
Acquisition of CAB Financial Corp. by
Park National Corp. (09/13/18)
|
|
•
|
|
Acquisition of Skagit Bancorp Inc. by
Banner Corp. (07/25/18)
|
|
•
|
|
Acquisition of FMB Banking Corp. by
First Bancshares Inc. (07/24/18)
|
Raymond James examined valuation multiples
for each transaction, including (i) deal value to tangible book value; (ii) deal value to core LTM earnings per share; and (iii)
premium to core deposits (total deposits less time deposits greater than $100,000). All financial multiples greater than two standard
deviations away from the unadjusted mean were considered not meaningful. Raymond James reviewed the mean, median, 25th
percentile and 75th percentile relative valuation multiples of the selected transactions. The results of the analyses
are below:
|
|
Summary Transaction Multiples
|
|
|
|
|
Deal Value /
|
|
|
|
|
Tangible
|
|
Core LTM
|
|
Premium /
|
Regional Transactions:
|
|
Book Value
|
|
Earnings
|
|
Core Deposits
|
|
|
|
|
|
|
|
75th Percentile
|
|
|
216
|
%
|
|
|
32.4
|
x
|
|
|
17.2
|
%
|
Mean
|
|
|
196
|
%
|
|
|
28.9
|
x
|
|
|
14.2
|
%
|
Median
|
|
|
191
|
%
|
|
|
29.3
|
x
|
|
|
14.7
|
%
|
25th Percentile
|
|
|
185
|
%
|
|
|
23.5
|
x
|
|
|
11.3
|
%
|
Implied Transaction Metric
|
|
|
167
|
%
|
|
|
20.6
|
x
|
|
|
9.8
|
%
|
|
|
Summary Transaction Multiples
|
|
|
|
|
Deal Value /
|
|
|
|
|
Tangible
|
|
Core LTM
|
|
Premium /
|
National Transactions:
|
|
Book Value
|
|
Earnings
|
|
Core Deposits
|
|
|
|
|
|
|
|
75th Percentile
|
|
|
196
|
%
|
|
|
29.7
|
x
|
|
|
14.0
|
%
|
Mean
|
|
|
185
|
%
|
|
|
22.2
|
x
|
|
|
11.6
|
%
|
Median
|
|
|
184
|
%
|
|
|
21.9
|
x
|
|
|
10.9
|
%
|
25th Percentile
|
|
|
167
|
%
|
|
|
15.6
|
x
|
|
|
8.1
|
%
|
Furthermore, Raymond James applied the mean,
median, 25th percentile and 75th percentile relative valuation multiples to Carolina Trust’s actual
financial results and core deposits. Raymond James then compared those implied values to $10.53, the value attributed to the merger
consideration. The results of the selected transactions analysis are summarized below:
|
|
Implied Merger Consideration
|
|
|
|
|
Deal Value /
|
|
|
|
|
Tangible
|
|
Core LTM
|
|
Premium /
|
Regional Transactions:
|
|
Book Value
|
|
Earnings
|
|
Core Deposits
|
|
|
|
|
|
|
|
75th Percentile
|
|
$
|
13.64
|
|
|
$
|
16.62
|
|
|
$
|
13.85
|
|
Mean
|
|
$
|
12.41
|
|
|
$
|
14.85
|
|
|
$
|
12.54
|
|
Median
|
|
$
|
12.12
|
|
|
$
|
15.04
|
|
|
$
|
12.76
|
|
25th Percentile
|
|
$
|
11.69
|
|
|
$
|
12.10
|
|
|
$
|
11.26
|
|
|
|
Implied Merger Consideration
|
|
|
|
|
Deal Value /
|
|
|
|
|
Tangible
|
|
Core LTM
|
|
Premium /
|
National Transactions:
|
|
Book Value
|
|
Earnings
|
|
Core Deposits
|
|
|
|
|
|
|
|
75th Percentile
|
|
$
|
12.43
|
|
|
$
|
15.26
|
|
|
$
|
12.46
|
|
Mean
|
|
$
|
11.71
|
|
|
$
|
11.43
|
|
|
$
|
11.40
|
|
Median
|
|
$
|
11.67
|
|
|
$
|
11.25
|
|
|
$
|
11.11
|
|
25th Percentile
|
|
$
|
10.56
|
|
|
$
|
8.04
|
|
|
$
|
9.89
|
|
Discounted Cash Flow Analysis. Raymond
James performed a discounted cash flow analysis of Carolina Trust based solely on the Projections, which were provided to Raymond
James and approved for its use by Carolina Trust. Consistent with the periods included in the Projections, Raymond James used
calendar year 2024 as the final year for the analysis and applied multiples, ranging from 14.0x to 16.0x, to projected calendar
year 2024 earnings in order to derive a range of terminal values for Carolina Trust in 2024. Raymond James selected a range of
terminal price-to-earnings multiples based on the long-term average of the price-to-earnings multiple of selected banking indexes
and current multiples for similar public companies.
Raymond James used discount rates ranging
from 11.5% to 15.5%. Raymond James arrived at its discount range by using the Modified CAPM (Capital Asset Pricing Model) methodology
as presented in the 2018 Duff & Phelps Valuation Handbook. Raymond James calculated a range of implied per share values indicated
by the discounted cash flow analysis for Carolina Trust. The results of the discounted cash flow analysis are summarized in the
table below:
|
|
Carolina
Trust
|
|
|
Equity Value/
|
|
|
Per
Share
|
|
|
|
Minumum
|
|
$
|
8.76
|
|
Maximum
|
|
$
|
13.05
|
|
Merger Consideration
|
|
$
|
10.53
|
|
Additional Considerations. The preparation
of a fairness opinion is a complex process and is not susceptible to a partial analysis or summary description. Raymond James
believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering the
analyses taken as a whole, would create an incomplete view of the process underlying its opinion. In addition, Raymond James considered
the results of all such analyses and did not assign relative weights to any of the analyses, but rather made qualitative judgments
as to significance and relevance of each analysis and factor, so the ranges of valuations resulting from any particular analysis
described above should not be taken to be the view of Raymond James as to the actual value of Carolina Trust.
In performing its analyses, Raymond James made
numerous assumptions with respect to industry performance, general business, economic and regulatory conditions and other matters,
many of which are beyond the control of Carolina Trust. The analyses performed by Raymond James are not necessarily indicative
of actual values, trading values or actual future results which might be achieved, all of which may be significantly more or less
favorable than suggested by such analyses. Such analyses were provided to the Carolina Trust board of directors (solely in each
director’s capacity as such) and were prepared solely as part of the analysis of Raymond James of the fairness, from a financial
point of view, to the holders of Carolina Trust common stock of the merger consideration to be received by such holders in connection
with the proposed merger
pursuant to the merger agreement. The analyses do not purport to be appraisals or to reflect the prices
at which companies may actually be sold, and such estimates are inherently subject to uncertainty. The opinion of Raymond James
was one of many factors taken into account by the Carolina Trust board in making its determination to approve the merger. Neither
Raymond James’ opinion nor the analyses described above should be viewed as determinative of the Carolina Trust board of
directors’ or Carolina Trust management’s views with respect to Carolina Trust, Carolina Financial or the merger.
Raymond James provided advice to Carolina Trust with respect to the proposed merger. Raymond James did not, however, recommend
any specific amount of consideration to the Carolina Trust board of directors or that any specific merger consideration constituted
the only appropriate consideration for the merger. Carolina Trust placed no limits on the scope of the analysis performed, or
opinion expressed, by Raymond James.
The Raymond James opinion was necessarily based
upon market, economic, financial and other circumstances and conditions existing and disclosed to it on July 15, 2019, and any
material change in such circumstances and conditions may affect the opinion of Raymond James, but Raymond James does not have any
obligation to update, revise or reaffirm that opinion. Raymond James relied upon and assumed, without independent verification,
that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects
of Carolina Trust since the respective dates of the most recent financial statements and other information, financial or otherwise,
provided to Raymond James that would be material to its analyses or its opinion, and that there was no information or any facts
that would make any of the information reviewed by Raymond James incomplete or misleading in any material respect.
During the two years preceding the date of Raymond
James’ written opinion, Raymond James has been engaged by or otherwise performed services for Carolina Trust for which it
was paid a fee (separately from any amounts that were paid to Raymond James under the engagement letter described in this proxy
statement/prospectus pursuant to which Raymond James was retained as a financial advisor to Carolina Trust to assist in reviewing
strategic alternatives).
For services rendered in connection with the
delivery of its opinion, Carolina Trust paid Raymond James a fee of $250,000 upon delivery of its opinion. Carolina Trust will
also pay Raymond James a fee for advisory services in connection with the merger equal to approximately $1,250,000 (less the fee
paid upon the delivery of the opinion, the amount of which shall be deducted), which is contingent upon the closing of the merger.
The actual amount of the fee Carolina Trust will pay Raymond James for its advisory services is subject to the final amount of
the merger consideration at closing. Carolina Trust also agreed to reimburse Raymond James up to $35,000 for its expenses incurred
in connection with its services, including the fees and expenses of its counsel, and has an obligation to indemnify Raymond James
against certain liabilities should any claim be asserted against Raymond James arising out of its engagement.
Raymond James is actively involved in the investment
banking business and regularly undertakes the valuation of investment securities in connection with public offerings, private
placements, business combinations and similar transactions. In the ordinary course of business, Raymond James may trade in the
securities of Carolina Trust and Carolina Financial for its own account and for the accounts of its customers and, accordingly,
may at any time hold a long or short position in such securities. In the previous two years: (i) Raymond James provided financial
advisory services to Carolina Trust in connection with the acquisition of Clover Community Bankshares, Inc., for which it was
paid a fee; (ii) Raymond James provided fixed income trading services to Carolina Trust Bank for which it has been paid trading
commissions; (iii) Raymond James served as underwriter for a public offering of common stock by Carolina Financial and certain
selling stockholders, for which Raymond James received compensation; (iv) Raymond James has served and is serving as exclusive
agent for a share repurchase program of Carolina Financial, for which it has
been paid commissions and may be paid commissions
in the future; (v) Raymond James provided fixed income trading services to CresCom Bank for which it has been paid trading commissions;
and (vi) CresCom Bank made an investment in a Raymond James tax credit fund, for which Raymond James has earned a fee and will
earn additional fees in the future. For these aforementioned services, Raymond James has received, in aggregate in the previous
two years, fees of $314,600 from Carolina Trust and Carolina Trust Bank and fees of $1,162,219 from Carolina Financial and CresCom
Bank. Additionally, Raymond James has earned but not yet received fees relating to CresCom Bank’s investment in a Raymond
James tax credit fund. Raymond James may provide investment banking, financial advisory and other financial services to Carolina
Trust and/or Carolina Financial or other participants in the merger in the future, for which Raymond James may receive compensation.
Carolina Trust’s Unaudited Prospective Financial Information
Carolina Trust does not as a matter of course
publicly disclose forecasts or internal projections as to future performance, revenues, earnings, financial condition, or other
results due to, among other reasons, the uncertainty of the underlying assumptions and estimates and the inherent difficulty of
accurately predicting financial performance for future periods. However, in connection with the proposed merger, Carolina Trust
management prepared certain projections of Carolina Trust’s future financial performance, which contain unaudited prospective
financial information with respect to Carolina Trust on a standalone, pre-merger basis. Carolina Trust has included in this proxy
statement/prospectus limited unaudited prospective financial information for Carolina Trust to give its shareholders access to
certain nonpublic prospective financial information provided to the Carolina Trust board of directors for purposes of considering
and evaluating the merger and to Raymond James for purposes of performing financial analyses in connection with its opinion to
the Carolina Trust board of directors.
The unaudited prospective financial information
was not prepared with a view toward public disclosure and the inclusion of this information should not be regarded as an indication
that any of Carolina Financial, Carolina Trust, Raymond James, their respective representatives or any other recipient of this
information considered, or now considers, it to be necessarily predictive of actual future results, or that it should be construed
as financial guidance, and it should not be relied on as such. None of Carolina Financial, Carolina Trust, or their respective
affiliates assume any responsibility for the accuracy of the unaudited prospective financial information. This information was
not prepared with a view toward complying with GAAP, published guidelines of the SEC, or the guidelines established by the American
Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Neither Carolina
Trust’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures
with respect to the projections or expressed any opinion or other form of assurance on such information or its achievability.
The unaudited prospective financial information
reflects numerous estimates and assumptions with respect to industry performance, general business, economic, regulatory, market,
and financial conditions and other future events, as well as matters specific to Carolina Trust’s business, all of which
are difficult to predict and many of which are beyond Carolina Trust’s control. The unaudited prospective financial information
also reflects assumptions as to certain business decisions that are subject to change. The information reflects subjective judgment
in many respects and this is susceptible to multiple interpretations and periodic revisions based on actual experience and business
developments. As such, the unaudited prospective financial information constitutes forward-looking information and is subject
to risks and uncertainties that could cause actual results to differ materially from the results forecasted in such prospective
information. The unaudited prospective financial information does not take into account any circumstances or events occurring
after the date it was prepared. Neither Carolina Trust nor any of its advisors or affiliates intends to, and each of
them disclaims
any obligation to, update, revise, or correct such information. The inclusion of such information should not be deemed an admission
or representation by Carolina Financial or Carolina Trust that it is viewed by Carolina Financial or Carolina Trust as material
information, particularly in light of the inherent risks and uncertainties associated with such information.
In light of the foregoing, and considering
that the Carolina Trust special meeting will be held many months after the unaudited prospective financial information was prepared,
as well as the uncertainties inherent in any forecasted information, Carolina Trust shareholders are cautioned not to place unwarranted
reliance on such information, and Carolina Trust urges all of its shareholders to review Carolina Trust’s historical consolidated
financial statements and other information contained elsewhere in or incorporated by reference into this proxy statement/prospectus
for a description of Carolina Trust’s business and financial results.
The following table presents selected items
of Carolina Trust’s unaudited prospective financial information:
|
|
Estimated
For Years Ended December 31,
|
(Dollars in thousands, except per share data)
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
Balance Sheet Financials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Loans
|
|
$
|
500,786
|
|
|
$
|
545,856
|
|
|
$
|
594,983
|
|
|
$
|
648,532
|
|
|
$
|
706,900
|
|
|
$
|
770,521
|
|
Total Deposits
|
|
|
550,063
|
|
|
|
599,568
|
|
|
|
653,529
|
|
|
|
712,347
|
|
|
|
776,458
|
|
|
|
846,339
|
|
Common Shares Outstanding
|
|
|
9,296,977
|
|
|
|
9,296,977
|
|
|
|
9,296,977
|
|
|
|
9,296,977
|
|
|
|
9,296,977
|
|
|
|
9,296,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement Financials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
|
|
$
|
23,119
|
|
|
$
|
25,200
|
|
|
$
|
27,468
|
|
|
$
|
29,940
|
|
|
$
|
32,776
|
|
|
$
|
35,871
|
|
Provision for Loan Losses
|
|
|
510
|
|
|
|
713
|
|
|
|
777
|
|
|
|
847
|
|
|
|
929
|
|
|
|
1,019
|
|
Non-Interest Income
|
|
|
2,512
|
|
|
|
2,638
|
|
|
|
2,770
|
|
|
|
2,908
|
|
|
|
3,054
|
|
|
|
3,206
|
|
Non-Interest
Expense
|
|
|
16,043
|
|
|
|
16,846
|
|
|
|
17,688
|
|
|
|
18,572
|
|
|
|
19,930
|
|
|
|
21,389
|
|
Net Income before
Taxes
|
|
|
9,079
|
|
|
|
10,279
|
|
|
|
11,773
|
|
|
|
13,429
|
|
|
|
14,970
|
|
|
|
16,669
|
|
Provision
for Income Taxes
|
|
|
1,978
|
|
|
|
2,313
|
|
|
|
2,649
|
|
|
|
3,021
|
|
|
|
3,368
|
|
|
|
3,750
|
|
Effective
Tax Rate
|
|
|
21.8
|
%
|
|
|
22.5
|
%
|
|
|
22.5
|
%
|
|
|
22.5
|
%
|
|
|
22.5
|
%
|
|
|
22.5
|
%
|
Net
Income Available to Common Shareholders
|
|
$
|
7,100
|
|
|
$
|
7,966
|
|
|
$
|
9,124
|
|
|
$
|
10,407
|
|
|
$
|
11,602
|
|
|
$
|
12,918
|
|
Merger Expenses*
|
|
|
1,362
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Net
Income Avail. to Common Shareholders Incl. Merger Costs
|
|
$
|
5,738
|
|
|
$
|
7,966
|
|
|
$
|
9,124
|
|
|
$
|
10,407
|
|
|
$
|
11,602
|
|
|
$
|
12,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully Diluted Shares (000s)
|
|
|
9,375
|
|
|
|
9,388
|
|
|
|
9,391
|
|
|
|
9,395
|
|
|
|
9,399
|
|
|
|
9,402
|
|
Diluted Earnings Per Share
|
|
$
|
0.76
|
|
|
$
|
0.85
|
|
|
$
|
0.97
|
|
|
$
|
1.11
|
|
|
$
|
1.23
|
|
|
$
|
1.37
|
|
_______________
* Reflects merger expenses for Carolina
Trust’s acquisition of Clover Community Bankshares, Inc. Does not include expenses in connection with the proposed merger
with Carolina Financial.
Carolina Financial’s Reasons for the Merger
Carolina Financial’s board of directors
believes that the completion of the merger presents a unique opportunity for Carolina Financial to further its strategic plan
by expanding its franchise and banking operations in the Charlotte and central North Carolina markets, which Carolina Financial
believes is an attractive market area in North Carolina. The merger is consistent with Carolina Financial’s strategic growth
plan, would add a solid core deposit base, diversify its loan portfolio composition, be accretive to earnings and a good cultural
fit.
The terms of the merger, including the merger
consideration, are the result of arm’s-length negotiations between representatives of Carolina Financial and Carolina Trust.
In reaching its decision to approve the merger, Carolina Financial’s board of directors consulted with its legal advisors
regarding the terms of the transaction and with management of Carolina Financial. In approving the entry into the merger agreement,
Carolina Financial’s board of directors considered the following material factors:
|
·
|
The
merger represents an attractive opportunity to continue to execute on its strategic objective
of disciplined, profitable growth;
|
|
·
|
Carolina
Trust represents a scarce market expansion opportunity as one of the few suitable community
banks in the attractive Charlotte and central North Carolina markets, which have strong
demographics complementary to Carolina Financial’s previous expansion into North
Carolina;
|
|
·
|
The
merger would expand and diversify Carolina Financial’s markets, and further diversify
its loan portfolio, revenue and deposit mix;
|
|
·
|
Carolina
Trust is a very well-managed, quality organization with strong historical earnings and
a service-focused business model;
|
|
·
|
Carolina
Trust’s and Carolina Financial’s respective management teams share a common
business vision and commitment to their respective clients, stockholders, employees and
other constituencies;
|
|
·
|
The
two companies have complementary service-focused business models;
|
|
·
|
Carolina
Financial’s management believes that the merger would be immediately accretive
to Carolina Financial’s earnings per share (excluding one-time charges) due to
a combination of revenue synergies and cost savings opportunities for the combined company.
Revenue synergies will be derived from Carolina Financial having a greater array of products
and services to offer to the former Carolina Trust customers, as well as having the ability
to provide expanded credit availability through Carolina Financial’s higher capital
resources; and
|
|
·
|
Carolina
Financial board’s belief that the merger is likely to provide an increase in stockholder
value, including the benefits of a stronger strategic position.
|
In addition, Carolina Financial’s
board of directors considered the opinion, dated July 14, 2019, of Sandler O'Neill & Partners, L.P. to the Carolina
Financial board of directors to the effect that, as of the date of the opinion and subject to the procedures followed, assumptions
made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill
& Partners,
L.P., the merger consideration in the proposed merger was fair, from a financial point of view, to Carolina Financial.
Carolina Financial’s board of
directors also considered potential risks associated with the merger in connection with its deliberations of the proposed transaction,
including the challenges of integrating Carolina Trust’s business, operations, and workforce with those of Carolina Financial,
the potential negative impact on Carolina Financial’s stock price and the need to obtain Carolina Trust shareholder
approval and regulatory approvals in order to complete the transaction.
Carolina Financial’s board
of directors considered all of these factors as a whole and, on balance, Carolina Financial’s board of directors believes
that the opportunities created by the merger to increase the value of Carolina Financial’s franchise more than offset any
integration or other risks inherent in the merger.
The foregoing discussion of the information
and factors considered by Carolina Financial’s board of directors is not exhaustive, but includes the material factors considered
by Carolina Financial’s board of directors. In view of the wide variety of factors considered by Carolina Financial’s
board of directors in connection with its evaluation of the merger and the complexity of these matters, Carolina Financial’s
board of directors did not consider it practical to, nor did it attempt to, quantify, rank or otherwise assign relative weights
to the specific factors that it considered in reaching its decision. In considering the factors described above, individual members
of Carolina Financial’s board of directors may have given different weights to different factors.
The Carolina Financial board of directors unanimously
adopted the merger agreement, authorized the merger and the other transactions contemplated by the merger agreement, and determined
that the merger and the other transactions contemplated by the merger agreement, including the issuance of shares of Carolina
Financial common stock to Carolina Trust shareholders in connection with the merger, are in the best interests of Carolina Financial
and its stockholders.
Interests of Executive Officers
and Directors of Carolina Trust in the Merger
General. Some of the executive
officers and directors of Carolina Trust may be deemed to have interests in the merger in addition to their interests as shareholders
of Carolina Trust generally. These interests include, among others, change in control payments under the executive officer’s
employment or other agreements with Carolina Trust; proposed employee benefits for those who become employees of Carolina Financial
or a Carolina Financial subsidiary after the merger; the appointment of certain Carolina Trust directors to the Carolina
Financial board, the CresCom Bank board, and the Charlotte, North Carolina Advisory Board of CresCom Bank; Carolina Trust stock
options will be converted into options to acquire shares of Carolina Financial common stock, as adjusted to reflect the exchange
ratio; and insurance coverage and indemnification for Carolina Trust’s directors and officers, as described below.
Board Representation. Prior to
the effective time of the merger, Carolina Financial has agreed to appoint Johnathan L. Rhyne, Jr. of Carolina Trust’s board
of directors to the boards of Carolina Financial and CresCom Bank. Mr. Rhyne is expected to receive compensation in connection
with his service on the Carolina Financial and CresCom Bank boards. During 2018, non-employee directors of Carolina Financial
received a retainer fee of $8,000 paid in cash and 629 shares of Carolina Financial’s common stock. Those directors not
employed by a subsidiary of Carolina Financial also received $750 for each audit committee meeting attended, $500 for each compensation/benefits
committee meeting and corporate governance/nominating committee meeting attended, and $300 for each board of directors loan committee
meeting attended.
Additional fees are paid to the chair of Carolina Financial’s board and to the chairs of Carolina Financial’s
audit committee, compensation/benefits committee, corporate governance/nominating committee, and board loan committee. As
of the date of this proxy statement/prospectus, Carolina Financial’s board has not determined Mr. Rhyne’s committee
assignments or leadership positions. During 2018, non-employee directors of CresCom Bank received $1,250 per board meeting
attended.
It is anticipated that the directors of Carolina
Trust Bank in office immediately prior to the effective time of the bank merger, other than Mr. Rhyne, and Mr.
Ocheltree, will serve as CresCom Bank’s Charlotte, North Carolina Advisory Board and will be entitled to receive
a fee of $500 for each advisory board meeting attended. The CresCom Bank Charlotte, North Carolina Advisory Board is expected
to meet no less than six times per year in each of the first two years subsequent to the effective time of the merger.
Officer Position. Carolina Financial
will appoint Jerry L. Ocheltree, President and Chief Executive Officer of Carolina Trust and Carolina Trust Bank, as CresCom
Bank’s President of North Carolina Commercial Banking, effective upon consummation of the merger.
Employment Agreement for Mr. Ocheltree.
In connection with entering into the merger agreement, Carolina Financial has entered into an employment agreement
with Mr. Ocheltree that will be effective upon consummation of the merger, as summarized below. Mr. Ocheltree will serve
as CresCom Bank’s President of North Carolina Commercial Banking. The term of Mr. Ocheltree’s
employment will begin upon the closing of the merger and continue for two years thereafter, unless otherwise terminated as provided
in the agreement. On the first anniversary of the merger closing, and at each anniversary date thereafter, the agreement will
automatically renew for an additional year unless either party provides notice of nonrenewal at least thirty days prior to the
anniversary date.
During the employment period, Mr. Ocheltree
will receive an annual base salary of $275,000, a $1,250 monthly automobile allowance, and payment of membership dues to
one country club. During this period, he will also be entitled to receive annual cash incentive payments and stock awards in such
amounts and at such times as may be determined by CresCom Bank pursuant to its incentive plans and programs.
Mr. Ocheltree will also be eligible each year
to receive a cash bonus of between 20% and 50% of his base salary if he and CresCom Bank achieve certain performance levels established
from time to time by the CresCom Bank board. In addition, he will be eligible each year to receive an additional bonus
of 5% of his salary, to be paid in shares of common stock of Carolina Financial, if he and CresCom Bank achieve certain earnings
targets established by the CresCom Bank board.
Beginning in January 2020, Mr. Ocheltree
will be included in CresCom Bank’s annual incentive plan and, as part of that plan, is expected to receive $20,000 in restricted
common stock units of Carolina Financial. These restricted stock units will vest over a two-year period if Carolina Financial
achieves the incentive targets determined by its compensation committee.
Within 30 days after the merger closing, Carolina
Financial will issue to Mr. Ocheltree shares of restricted common stock of Carolina Financial with a market value of $700,000
as of the grant date. The restricted shares will vest in six annual increments beginning on the first anniversary of the
closing of the merger, provided that Mr. Ocheltree has not been terminated for cause, as defined in the employment agreement,
by CresCom Bank on such anniversary date.
During the employment period, Mr. Ocheltree
will have access to CresCom Bank’s health-and-accident plans and medical coverage benefits on the same basis as other similarly
situated senior executives and key management employees of CresCom Bank. He will also be entitled to participate in all incentive,
bonus, retirement, supplemental retirement, pension, profit-sharing, and other employee benefits plans and programs of CresCom
Bank. CresCom Bank will pay or reimburse Mr. Ocheltree for reasonable expenses incurred by him in the performance of his duties
pursuant to the employment agreement.
If Mr. Ocheltree dies while employed by CresCom
Bank, CresCom Bank will pay his estate, legal representatives, or named beneficiaries all benefits for which he is eligible under
his 2014 supplemental executive retirement plan agreement (which will be assumed by CresCom Bank) and any retirement
plan of CresCom Bank, if any, to which Mr. Ocheltree is party or in which he participated immediately prior to his death.
If Mr. Ocheltree becomes disabled while employed
by CresCom Bank, CresCom Bank must provide him with written notice of its intention to terminate his employment, in which event
his employment would terminate on the thirtieth day after receipt of such notice. If Mr. Ocheltree’s employment is terminated
due to disability, he will receive his base salary through the date of his termination, all benefits for which he is eligible
under his 2014 supplemental executive retirement plan agreement and split dollar agreement (which will be assumed
by CresCom Bank), and any applicable long-term disability plan maintained by CresCom Bank. Mr. Ocheltree will be considered “disabled”
if he is entitled to receive long-term disability benefits under CresCom Bank’s long-term disability plan, or, if there
is no such plan, if he would qualify for disability benefits under the federal social security system.
If Mr. Ocheltree voluntarily resigns from his
employment, then he will have no right to render services or to receive compensation or other benefits following such termination
other than benefits for which he is eligible under his 2014 supplemental executive retirement plan agreement and
split dollar agreement. Mr. Ocheltree must provide CresCom Bank with written notice of his intention to terminate his employment,
in which event his employment would terminate on the thirtieth day after receipt by CresCom Bank of such notice.
CresCom Bank may terminate Mr. Ocheltree’s
employment at any time for “cause.” If Mr. Ocheltree’s employment is terminated for cause, he will have no right
to render services or to receive compensation or other benefits from CresCom Bank following termination other than benefits for
which he is eligible under the 2014 supplemental executive retirement plan agreement and split dollar agreement. The following
constitute “cause” for termination:
|
(1)
|
personal
dishonesty, incompetence, or willful misconduct by Mr. Ocheltree;
|
|
(2)
|
any
breach of fiduciary duty involving personal profit or intentional failure by Mr. Ocheltree
to perform his duties as stated in the employment agreement;
|
|
(3)
|
Mr.
Ocheltree’s willful violation of any law, rule, or regulation (other than
traffic violations, regulations that do not adversely affect CresCom Bank or its employees,
or similar offenses) or final cease-and-desist order; or
|
|
(4)
|
breach
of a material term of the employment agreement.
|
In the event of a change in control or if CresCom
Bank terminates Mr. Ocheltree’s employment without cause before the end of the employment period, Mr. Ocheltree
will receive the benefits described below if he signs a release and waiver of claims in favor of CresCom Bank:
|
(1)
|
All
base salary through the date of termination;
|
|
(2)
|
A
lump sum cash payment equal to two times Mr. Ocheltree’s base salary as in effect
immediately preceding the change in control; and
|
|
(3)
|
All
benefits for which Mr. Ocheltree is eligible under his supplemental executive
retirement plan and any retirement plan of CresCom Bank, if any, to which
he is party or in which he participated immediately prior to his termination.
|
Mr. Ocheltree will be subject to a covenant
not to compete and a covenant not to solicit customers or employees of CresCom Bank. These restrictions apply during the employment
period and for a period of two years following the term of the employment agreement, except when termination of Mr. Ocheltree’s
employment agreement is due to CresCom Bank’s nonrenewal of the employment agreement.
Employee Benefits.
The merger agreement generally provides that Carolina Financial will furnish to those employees of Carolina Trust who
become employees of CresCom Bank or one of its subsidiaries after the effective time of the merger benefits on the same basis
as it provides coverage to other Carolina Financial or CresCom Bank employees, and Carolina Financial will use commercially reasonable
efforts to cause any pre-existing condition, eligibility waiting period, or other limitation or exclusion otherwise applicable
under such plans to new employees not to apply to a continuing employee or his or her covered dependents who were covered under
a similar Carolina Trust plan at the effective time of the merger. For purposes of eligibility and vesting under Carolina Financial’s
employee benefit plans, service with Carolina Trust prior to the effective time of the merger will be treated as service with
Carolina Financial or its subsidiaries. Carolina Financial will use commercially reasonable efforts to cause any successor Carolina
Financial employee benefit plan providing health coverage to give credit towards satisfaction of any annual deductible limitation
and out-of-pocket maximum applied under such successor plan for any deductible, co-payment and other cost-sharing amounts previously
paid by a Carolina Trust employee respecting his or her participation in the corresponding Carolina Trust benefit plan during
the plan year prior to the transition effective date.
Insurance and Indemnification.
Carolina Financial has agreed to provide directors’ and officers’ insurance coverage for directors and officers of
Carolina Trust and Carolina Trust Bank, by purchasing or directing Carolina Trust to purchase, at Carolina Financial’s election,
continuation coverage under Carolina Trust’s current policy for directors and officers for a period of not less than six
years after the effective time of the merger. Carolina Financial has also agreed to indemnify the present and former directors,
officers, and employees of Carolina Trust and Carolina Trust Bank against all liabilities and damages for all acts or omissions
arising out of service for Carolina Trust or, at Carolina Trust’s request, for another entity, occurring at or prior to
the merger to the fullest extent permitted under Delaware corporate law, North Carolina corporate law, Section 402 of the Sarbanes-Oxley
Act, the federal securities laws and FDIC Regulations Part 359, the rules and regulations of any other regulatory authority, and
by Carolina Trust’s and Carolina Trust Bank’s articles of incorporation and bylaws.
Insofar as indemnification for liabilities
arising under the Securities Act or otherwise may be permitted to directors, officers, and controlling persons pursuant
to the foregoing provisions, Carolina Financial has been informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable.
Stock Options. Carolina
Trust has granted certain employees, officers and directors options to purchase Carolina Trust common stock under its equity compensation
plans. Pursuant to these plans, all stock options outstanding at the time of a corporate transaction such as the merger will vest
and become fully exercisable upon the effective date of such corporate transaction. All unexercised Carolina Trust
stock options outstanding immediately prior to the effective time of the merger will either be (i) assumed by Carolina Financial
or (ii) replaced with substantially identical awards under Carolina Financial’s existing equity plans, such that after the merger
the Carolina Trust stock options will be converted into and become rights with respect to Carolina Financial common stock.
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
OF CAROLINA TRUST
The following
table shows how many shares of common stock in Carolina Trust are owned by the directors, the named executive officers, owners
of more than 5% of the outstanding common stock, and all directors and executive officers as a group as of October 9, 2019.
Unless otherwise indicated, the mailing address for each beneficial owner is care of Carolina Trust BancShares, Inc., 901 East
Main Street, Lincolnton, NC 28092.
Name (position) and Address
|
|
Shares
currently
owned(1)
|
|
|
Percent
of
shares
owned(2)
|
|
Bryan Elliott Beal (director)
Lincolnton, NC
|
|
|
15,528
|
|
|
|
|
*
|
Rose B. Cummings (director)
Clover, SC
|
|
|
5,774
|
|
|
|
|
*
|
Scott C. Davis (director)
Lincolnton, NC
|
|
|
38,884
|
|
|
|
|
*
|
Edwin E. Laws (EVP and Chief Financial Officer)
Statesville, NC
|
|
|
5,575
|
|
|
|
|
*
|
Jerry L. Ocheltree (President, CEO and director)
Hickory, NC
|
|
|
77,078
|
|
|
|
|
*
|
Richard M. Rager (EVP and Chief Credit Officer)
Cramerton, NC
|
|
|
20,871
|
|
|
|
|
*
|
Johnathan L. Rhyne, Jr. (director and Chairman)
Gastonia, NC
|
|
|
162,415
|
(3)
|
|
|
1.74
|
%
|
Frederick P. Spach, Jr. (director)
Gastonia,
NC
|
|
|
11,742
|
|
|
|
|
*
|
Jim R. Watson (director)
Lincolnton, NC
|
|
|
27,761
|
|
|
|
|
*
|
Directors, nominees, and executive officers as a
group (9 persons)
|
|
|
365,628
|
|
|
|
3.90
|
%
|
|
|
|
|
|
|
|
|
|
AllianceBernstein L.P.
1345 Avenue of the
Americas
New York, New York 10105
|
|
|
910,846
|
(4)
|
|
|
9.79
|
%
|
|
|
|
|
|
|
|
|
|
Brian Pratt
2100 McKinney Ave, #1550
Dallas,
Texas 75201
|
|
|
698,307
|
(5)
|
|
|
7.50
|
%
|
|
|
|
|
|
|
|
|
|
The Banc Funds Company, L.L.C.
20 North Wacker
Drive, Suite 3300
Chicago, Illinois 60606
|
|
|
551,294
|
(6)
|
|
|
5.92
|
%
|
*
|
Owns less than one percent of the outstanding
shares of common stock.
|
|
|
(1)
|
For each director and executive officer
listed above, this column includes the following number of shares of common stock capable of being issued within 60 days of
October 9, 2019, upon the exercise of stock options held by the named individual: Beal – 1,187 shares; Davis
– 1,810 shares; Ocheltree – 44,166 shares; Rager – 13,166 shares; Rhyne – 4,161 shares; Spach –
1,066 shares; and all directors and executive officers as a group – 65,556 shares. To the Company’s knowledge,
each person has sole voting and investment power over the securities shown as beneficially owned by such person, except for
the following shares of common stock for which the individual indicates that the holder shares voting and/or investment power:
Davis – 732 shares; Spach – 2,187 shares; Watson – 20,284 shares; and all directors, nominees and executive
officers as a group – 23,203 shares.
|
(2)
|
The ownership percentage of each individual
is calculated based on the total of 9,305,214 shares of common stock issued and outstanding at October 9, 2019 plus
the number of shares that can be issued to that individual within 60 days of October 9, 2019, upon the exercise of
stock options held by the individual. The ownership percentage of the group is based on the total shares outstanding plus
the number of shares that can be issued to the entire group within 60 days of October 9, 2019, upon the exercise of
all stock options held by the group.
|
|
|
(3)
|
Reported
ownership for Mr. Rhyne includes 41,928 shares that are pledged under a margin loan.
|
|
|
(4)
|
Share ownership is based on a Form 13F
holdings report and associated Information Table filed by AllianceBernstein L.P. with the SEC on August 14, 2019.
|
|
|
(5)
|
Share ownership is based on a Schedule
13G/A filed by Mr. Pratt with the Securities and Exchange Commission, or SEC, on June 4, 2019. The shares are owned
jointly with Mr. Pratt’s spouse, Barbara Pratt.
|
|
|
(6)
|
Share ownership is based on a Form 13F
holdings report and associated Information Table filed by Banc Funds Co LLC with the SEC on August 12, 2019.
|
Annex
A
AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION
By And Between
CAROLINA
FINANCIAL CORPORATION
and
CAROLINA
TRUST BANCSHARES, INC.
Dated as
of
July 15,
2019
TABLE OF
CONTENTS
Page
AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION
THIS
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this “Agreement”) dated as of July 15, 2019, is by and
between Carolina Financial Corporation, a Delaware corporation (“Carolina Financial”), and Carolina Trust BancShares,
Inc., a North Carolina corporation (“Carolina Trust”). Except as otherwise set forth herein, capitalized and
certain other terms used herein shall have the meanings set forth in Section 10.1 of this Agreement.
RECITALS
WHEREAS,
the respective Boards of Directors of Carolina Financial and Carolina Trust have determined that it is in the best interests of
their respective companies and shareholders for Carolina Financial to acquire Carolina Trust pursuant to the terms of this Agreement
and have unanimously approved the merger of Carolina Trust with and into Carolina Financial, with Carolina Financial being the
surviving entity (the “Merger”), upon the terms and subject to the conditions set forth in this Agreement,
whereby the issued and outstanding shares of Carolina Trust Common Stock will be converted into the right to receive the Merger
Consideration from Carolina Financial;
WHEREAS,
the Board of Directors of Carolina Financial has adopted this Agreement, duly authorized the Merger and the other transactions
contemplated hereby;
WHEREAS,
the Board of Directors of Carolina Trust has adopted this Agreement, duly authorized the Merger and the other transactions contemplated
hereby, and resolved to recommend that Carolina Trust’s shareholders approve this Agreement and the transactions contemplated
hereby, including the Merger;
WHEREAS,
it is intended that, immediately following the Merger, or as soon as is practicable thereafter, Carolina Trust Bank, a North Carolina
bank and wholly-owned subsidiary of Carolina Trust, will be merged with and into CresCom Bank, a South Carolina banking corporation
and wholly-owned subsidiary of Carolina Financial, so that CresCom Bank is the surviving bank;
WHEREAS,
for federal income Tax purposes, it is intended that the Merger qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the “Code”); and
WHEREAS,
Carolina Financial and Carolina Trust desire to make certain representations, warranties, covenants, and agreements in connection
with the Merger and also to prescribe various conditions to the Merger;
NOW,
THEREFORE, in consideration of the above and the mutual warranties, representations, covenants, and agreements set forth herein,
and other good and valuable consideration and the receipt and sufficiency of which are acknowledged, the Parties, intending to
be legally bound, agree as follows:
Article
1
TRANSACTIONS AND TERMS OF MERGER
Subject
to the terms and conditions of this Agreement, at the Effective Time, Carolina Trust shall be merged with and into Carolina Financial
pursuant to and with the effect provided in Section 252 of the DGCL and Sections 55-11-01, 55-11-06, and 55-11-07 of the NCBCA,
and Carolina Financial shall be the Surviving Corporation resulting from the Merger and shall continue to be governed by the Laws
of the State of Delaware. As of the Effective Time, the separate corporate existence of Carolina Trust shall cease. The Merger
shall be consummated pursuant to the terms of this Agreement, which has been approved and adopted by the respective Boards of
Directors of Carolina Financial and Carolina Trust.
|
1.2
|
Time
and Place of Closing.
|
The
closing of the transactions contemplated hereby (the “Closing”) will take place at 12:01 A.M. Eastern Time
on the date that the Effective Time occurs (the “Effective Date”), or at such other time as the Parties, acting
through their authorized officers, may mutually agree. The Closing shall be held at such location as may be mutually agreed upon
by the Parties and may be effected by electronic or other transmission of signature pages, as mutually agreed upon.
The
Merger shall be consummated by filing a Certificate of Merger reflecting the Merger with the Delaware Secretary of State (the
“Certificate of Merger”) and Articles of Merger reflecting the Merger with the Office of the Secretary of State
of the State of North Carolina (the “Articles of Merger”). The Merger shall become effective (the “Effective
Time”) when the Certificate of Merger and Articles of Merger have been filed or at such later time as may be mutually
agreed upon by Carolina Financial and Carolina Trust and specified in the Certificate of Merger and Articles of Merger. Subject
to the terms and conditions hereof, unless otherwise mutually agreed upon in writing by the authorized officers of each Party,
the Parties shall use their reasonable efforts to cause the Effective Time to occur within 10 business days after the last of
the following dates to occur: (i) the effective date (including expiration of any applicable waiting period) of the last
required Consent of any Regulatory Authority having authority over and approving or exempting the Merger and (ii) the date
on which the shareholders of Carolina Trust approve this Agreement.
|
1.4
|
Tax
Treatment of the Merger.
|
It
is intended by the Parties that the Merger constitute a “reorganization” within the meaning of Section 368(a) of the
Code. The Parties hereby adopt this Agreement as a “plan of reorganization” within the meaning of Treasury Regulations
Sections 1.368-2(g) and 1.368-3(a). All of the Parties agree to cooperate and use their best efforts in order to qualify the transactions
contemplated herein as a reorganization under Section 368(a)(1)(A) of the Code, to not take any action that could reasonably be
expected to cause the Merger to fail to so qualify, and to report the Merger for federal, state and any local income Tax purposes
in a manner consistent with such characterization.
|
1.5
|
Restructure
of Transaction.
|
Carolina
Financial shall have the right to revise the structure of the Merger contemplated by this Agreement by merging Carolina Trust
with and into a wholly-owned subsidiary of Carolina
Financial, provided, that no such revision to the structure of the
Merger (i) shall result in any changes in the amount or type of the consideration which the holders of shares of Carolina Trust
Common Stock are entitled to receive under this Agreement, (ii) would unreasonably impede or delay consummation of the Merger,
or (iii) imposes any less favorable terms or conditions on Carolina Trust or Carolina Trust Bank. In such event, Carolina Financial
will give written notice to Carolina Trust in the manner provided in Section 10.8, which notice shall be in the form of
an amendment to this Agreement, in the form of a proposed amendment to this Agreement, or in the form of an Amended and Restated
Agreement and Plan of Merger and Reorganization, and the addition of such other exhibits hereto as are reasonably necessary or
appropriate to effect such change.
|
1.6
|
Bank
Merger; Directors and Officers of the Surviving Bank.
|
(a) Concurrently with or as soon as practicable after the execution and delivery of this Agreement, CresCom Bank and Carolina
Trust Bank shall enter into the Bank Agreement and Plan of Merger, in the form attached hereto as Exhibit A (the “Bank
Agreement and Plan of Merger”), with such changes thereto as Carolina Financial and Carolina Trust mutually agree to,
pursuant to which Carolina Trust Bank will merge with and into CresCom Bank (the “Bank Merger”), with CresCom
Bank as the surviving institution (the “Surviving Bank”). The Parties intend that the Bank Merger will become
effective immediately following the Effective Time.
(b) The Bank Agreement and Plan of Merger shall provide that the Articles of Incorporation and Bylaws of the Surviving Bank
shall be the Articles of Incorporation and Bylaws of CresCom Bank as in effect immediately prior to the Bank Merger until otherwise
duly amended or repealed.
(c) The Bank Agreement and Plan of Merger shall provide that the directors of the Surviving Bank shall be the directors of
CresCom Bank serving immediately prior to the Bank Merger from and after the effective time of the Bank Merger, in accordance
with the Surviving Bank’s Bylaws, until the earlier of their resignation or removal or otherwise ceasing to be a director.
Prior to the Effective Time, Carolina Financial and CresCom Bank shall take all action necessary to appoint Johnathan L. Rhyne,
Jr. as a director on the Board of Directors of the Surviving Bank, to be effective immediately following the effective time of
the Bank Merger; provided, however, that, if prior to the Effective Time, Mr. Rhyne should die or should be unable or unwilling
to serve as a director of the Surviving Bank, then Carolina Financial shall select, following consultation with Carolina Trust,
a substitute member of Carolina Trust’s Board of Directors to be appointed to the Board of Directors of the Surviving Bank
pursuant to this Section 1.6(c). It is anticipated that the directors of Carolina Trust Bank in office immediately prior to the
effective time of the Bank Merger, other than Mr. Rhyne and Jerry L. Ocheltree, shall serve as the Surviving Bank’s
Charlotte Area Advisory Board and shall be entitled to receive a fee of $500.00 for each advisory board meeting attended. The
Surviving Bank’s Charlotte Area Advisory Board shall meet no less than six times per year in each of the first two years
subsequent to the Effective Time.
(d) The Bank Agreement and Plan of Merger shall provide that the officers of the Surviving Bank shall be the officers of CresCom
Bank serving immediately prior to the Bank Merger, together with such additional persons as may hereafter be appointed, from and
after the effective time of the Bank Merger in accordance with the Surviving Bank’s Bylaws, until the earlier of their resignation
or removal or otherwise ceasing to be an officer. Concurrently with or as soon as practicable after the execution and delivery
of this Agreement, Mr. Ocheltree shall enter into an employment agreement in the form attached hereto as Exhibit G, which
shall become effective only upon the Effective Time.
Article
2
TERMS OF MERGER
|
2.1
|
Articles
of Incorporation.
|
The
Certificate of Incorporation of Carolina Financial in effect immediately prior to the Effective Time shall be the Certificate
of Incorporation of the Surviving Corporation until otherwise duly amended or repealed.
The
Bylaws of Carolina Financial in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until otherwise duly amended or repealed.
|
2.3
|
Directors
and Officers.
|
The
directors of Carolina Financial in office immediately prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving Corporation from and after the Effective Time in accordance
with the Surviving Corporation’s Bylaws, until the earlier of their resignation or removal or otherwise ceasing to be a
director. Prior to the Effective Time, Carolina Financial shall take all action necessary to appoint Johnathan L. Rhyne, Jr. as
a Class III director on the Board of Directors of the Surviving Corporation, to be effective as of 12:01 a.m. on the next business
day following the Effective Time, and to cause Mr. Rhyne to be nominated as a board nominee for election by the stockholders to
the Board of Directors of the Surviving Corporation at the next annual meeting of stockholders of the Surviving Corporation at
which Class III directors are nominated for re-election; provided, however, that, if prior to the Effective Time, Mr. Rhyne
should die or should be unable or unwilling to serve as a director of the Surviving Corporation, then Carolina Financial shall
select, following consultation with Carolina Trust, a substitute member of Carolina Trust’s Board of Directors to be appointed
to the Board of Directors of the Surviving Corporation pursuant to this Section 2.3. The officers of Carolina Financial in office
immediately prior to the Effective Time, together with such additional persons as may hereafter be appointed, shall serve as the
officers of the Surviving Corporation from and after the Effective Time in accordance with the Surviving Corporation’s Bylaws,
until the earlier of their resignation or removal or otherwise ceasing to be an officer.
Article
3
MANNER OF CONVERTING SHARES
|
3.1
|
Effect
on Carolina Trust Common Stock.
|
(a) At the Effective Time, in each case subject to Sections 3.1(b), 3.1(c) and 3.1(d), by virtue of the Merger and without
any action on the part of the Parties, each share of Carolina Trust Common Stock that is issued and outstanding immediately prior
to the Effective Time (other than the Extinguished Shares) shall be converted into the right to receive one of the following:
|
(i)
|
cash in the amount of
$10.57 (the “Cash Consideration”), less any applicable withholding Taxes;
|
|
(ii)
|
a number of duly authorized,
validly issued, fully paid and nonassessable shares of Carolina Financial Common Stock equal to the Exchange Ratio (the “Stock
Consideration”); or
|
|
(iii)
|
a combination of the
Cash Consideration and Stock Consideration in such proportions as requested by a Carolina Trust shareholder, to the extent available
after the proration of the total Merger Consideration to 10% Cash Consideration and 90% Stock Consideration (the “Mixed
Consideration”) (items (i), (ii), or (iii) referred to herein individually as the “Per Share Purchase Price”
and collectively as the “Merger Consideration”).
|
The “Exchange Ratio”
shall be 0.3000 share of Carolina Financial Common Stock per one share of Carolina Trust Common Stock.
(b) At the Effective Time, all shares of Carolina Trust Common Stock shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist as of the Effective Time, and each certificate previously representing any such
shares of Carolina Trust Common Stock (the “Certificates”) and each non-certificated share of Carolina Trust
Common Stock (the “Carolina Trust Book-Entry Shares”) shall thereafter represent only the right to receive
the Merger Consideration and applicable payments as set forth in Section 3.1(a) and Section 3.7.
(c) If, prior to the Effective Time, the outstanding shares of Carolina Trust Common Stock, Carolina Trust Options, or the
outstanding shares of Carolina Financial Common Stock or any rights with respect to Carolina Financial Common Stock pursuant to
stock options or other equity-based awards granted by Carolina Financial under the Carolina Financial Corporation 2013 Equity
Incentive Plan (the “Carolina Financial Awards”) shall have been increased, decreased, changed into or exchanged
for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, or other similar change in capitalization, then an appropriate and proportionate adjustment
shall be made to the Stock Consideration. For the avoidance of doubt, Carolina Financial shall have the right to grant additional
Carolina Financial Awards prior to the Effective Date under the Carolina Financial Corporation 2013 Equity Incentive Plan without
triggering an adjustment to the Stock Consideration under this Section 3.1(c).
(d) Each share of Carolina Trust Common Stock issued and outstanding immediately prior to the Effective Time and owned by either
of the Parties or their respective Subsidiaries (in each case other than shares of Carolina Trust Common Stock held on behalf
of third parties or as a result of debts previously contracted) shall, by virtue of the Merger and without any action on the part
of the holder thereof, cease to be outstanding, shall be cancelled and retired without payment of any consideration therefor,
and shall cease to exist (the “Extinguished Shares”).
|
3.2
|
Election
and Proration Procedures.
|
(a) Unless
different timing is agreed to by Carolina Financial and Carolina Trust, as soon as reasonably practicable after the Effective
Time, but in any event no more than ten days after the Effective Time, an election form (an “Election Form”),
together with the transmittal materials described in Section 3.3 below, shall be mailed to each holder of Carolina Trust Common
Stock of record at the Effective Time by the exchange agent selected by Carolina Financial and reasonably acceptable to Carolina
Trust (the “Exchange Agent”). Carolina Trust shall provide (or use reasonable efforts to cause its registrar
and transfer agent to provide) all information reasonably necessary for the Exchange Agent to perform its obligations as specified
herein.
(b) Subject
to the provisions of this Article 3 (including, without limitation, Sections 3.2(d) and (e)), each Election Form shall entitle
the holder of Carolina Trust Common
Stock (or the beneficial owner through appropriate and customary documentation and instructions)
to elect to receive (i) the Cash Consideration for all of such holder’s shares (a “Cash Election”), (ii)
the Stock Consideration for all of such holder’s shares (a “Stock Election”), (iii) the Mixed Consideration
for all of such holder’s shares (a “Mixed Election”), or (iv) make no election (a “Non-Election”).
Holders of record of Carolina Trust Common Stock who hold such shares as nominees, trustees or in other representative capacity
(a “Holder Representative”) may submit multiple Election Forms, provided that such Holder Representative certifies
that each such Election Form covers all of the shares of Carolina Trust Common Stock held by that Holder Representative for a
particular beneficial owner. The shares of Carolina Trust Common Stock as to which a Cash Election has been made (including
pursuant to a Mixed Election) are referred to herein as “Cash Election Shares” and the aggregate number thereof
is referred to as the “Cash Election Number.” The shares of Carolina Trust Common Stock as to which a
Stock Election has been made (including pursuant to a Mixed Election) are referred to herein as “Stock Election Shares”
and the aggregate number thereof is referred to herein as the “Stock Election Number.” Shares of Carolina
Trust Common Stock as to which no election has been made (or as to which an Election Form is not properly completed or returned
in a timely fashion) are referred to as “Non-Election Shares.”
(c) To
be effective, a properly completed Election Form must be received by the Exchange Agent on or before 4:00 p.m., local time on
such date as the Parties may mutually agree (the “Election Deadline”), which, in no event, shall be later than
45 calendar days following the Effective Time. An election shall have been properly made only if the Exchange Agent shall
have actually received a properly completed Election Form by the Election Deadline. With respect to any holder that owns
one or more shares of Carolina Trust Common Stock in certificate form, an Election Form shall be deemed properly completed only
if accompanied by all Certificates representing all shares of Carolina Trust Common Stock covered by such Election Form, or the
guaranteed delivery of such Certificates (or customary affidavits and, if required by the Carolina Financial, indemnification
regarding the loss or destruction of such Certificates), together with duly completed transmittal materials. For the holders
of Carolina Trust Common Stock who make a Non-Election, subject to Section 3.2(e), the Exchange Agent shall have the authority
to determine the type of consideration constituting the Per Share Purchase Price to be exchanged for the Non-Election Shares.
Any Carolina Trust shareholder may at any time prior to, but not after, the Election Deadline change such shareholder’s
election by written notice received by the Exchange Agent prior to the Election Deadline accompanied by a properly completed and
signed revised Election Form. Any Carolina Trust shareholder may, at any time prior to the Election Deadline, revoke such
shareholder’s election by written notice received by the Exchange Agent prior to the Election Deadline or by withdrawal
prior to the Election Deadline of such shareholder’s Certificates, or of the guarantee of delivery of such Certificates.
All elections shall be revoked automatically if the Exchange Agent is notified in writing by either party that this Agreement
has been terminated pursuant to the applicable Section of Article 9 of this Agreement. If a Carolina Trust shareholder either
(i) does not submit a properly completed Election Form by the Election Deadline, or (ii) revokes such shareholder’s Election
Form prior to the Election Deadline but does not submit a new properly executed Election Form prior to the Election Deadline,
the shares of Carolina Trust Common Stock held by such Carolina Trust shareholder shall be designated as Non-Election Shares.
Subject to the terms of this Agreement and the Election Form, the Exchange Agent shall have reasonable discretion to determine
whether any election, revocation or change has been properly made and to disregard immaterial defects in any Election Form, and
any good faith decisions of the Exchange Agent regarding such matters shall be binding and conclusive.
(d) The
number of shares of Carolina Trust Common Stock to be converted into the right to receive the Cash Consideration shall be equal
as nearly as possible to 10% of the number of shares of Carolina Trust Common Stock outstanding immediately prior to the Effective
Time (the “Aggregate Cash Limit”) and the number of shares of Carolina Trust Common Stock to be converted into
the right to receive the Stock Consideration shall be equal as nearly as possible to 90% of the number of shares of Carolina Trust
Common Stock outstanding immediately prior to the Effective Time (the “Aggregate Stock Limit”).
(e) Within
seven business days after the Election Deadline, Carolina Financial shall cause the Exchange Agent to effect the allocation among
holders of Carolina Trust Common Stock of rights to receive the Per Share Purchase Price and to distribute such as follows:
(i) if
the Cash Election Number exceeds the Aggregate Cash Limit, then all Stock Election Shares and all Non-Election Shares shall be
converted into the right to receive the Stock Consideration, and each Cash Election Share shall be converted into the right to
receive (A) the Cash Consideration in respect of that number of Cash Election Shares equal to the product obtained by multiplying
(1) the number of Cash Election Shares held by such holder by (2) a fraction, the numerator of which is the Aggregate Cash Limit
and the denominator of which is the Cash Election Number, and (B) the Stock Consideration for those Cash Election Shares which
were not converted into the right to receive Cash Consideration as a result of the Cash Election Number exceeding the Aggregate
Cash Limit;
(ii) if
the Stock Election Number exceeds the Aggregate Stock Limit, then all Cash Election Shares and all Non-Election Shares shall be
converted into the right to receive the Cash Consideration, and each Stock Election Share shall be converted into the right to
receive (A) the Stock Consideration in respect of that number of Stock Election Shares equal to the product obtained by multiplying
(1) the number of Stock Election Shares held by such holder by (2) a fraction, the numerator of which is the Aggregate Stock Limit
and the denominator of which is the Stock Election Number, and (B) the Cash Consideration for those Stock Election Shares which
were not converted into the right to receive Stock Election Shares as a result of the Stock Election Number exceeding the Aggregate
Stock Limit; and
(iii) if
the Cash Election Number and the Stock Election Number do not exceed the Aggregate Cash Limit and the Aggregate Stock Limit, respectively,
then (i) all Cash Election Shares shall be converted into the right to receive the Cash Consideration, (ii) all Stock Election
Shares shall be converted into the right to receive the Stock Consideration, and (iii) all Non-Election Shares shall be converted
into the right to receive the Cash Consideration and/or the Stock Consideration such that the aggregate number of shares of Carolina
Trust Common Stock entitled to receive the Cash Consideration is equal to the Aggregate Cash Limit and the aggregate number of
shares of Carolina Trust Common Stock entitled to receive the Stock Consideration is equal to the Aggregate Stock Limit.
(a) Promptly after the Effective Time, Carolina Financial shall deposit with the Exchange Agent, for exchange in accordance
with this Section 3.3, the Merger Consideration and cash in an aggregate amount sufficient for payment in lieu of fractional shares
of Carolina Financial Common Stock to which holders of Carolina Trust Common Stock may be entitled pursuant to Section 3.7 (collectively,
the “Exchange Fund”). In the event the cash in the
Exchange Fund shall be insufficient to fully satisfy all
of the payment obligations to be made by the Exchange Agent hereunder (including pursuant to Section 3.7), Carolina Financial
shall promptly make available to the Exchange Agent the amounts so required to satisfy such payment obligations in full. The Exchange
Agent shall deliver the Merger Consideration and cash in lieu of any fractional shares of Carolina Financial Common Stock out
of the Exchange Fund. Except as contemplated by this Section 3.3 and Section 3.7, the Exchange Fund will not be used for any other
purpose.
(b) Unless different timing is agreed to by Carolina Financial and Carolina Trust, as soon as reasonably practicable after
the Effective Time, but in any event no more than ten days after the Effective Time, Carolina Financial shall cause the Exchange
Agent to mail to the former shareholders of Carolina Trust appropriate transmittal materials (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates or other instruments theretofore representing shares of Carolina
Trust Common Stock (it being understood that any reference hereinafter to “Certificate” shall be deemed to include
reference to “Carolina Trust Book Entry Shares”) shall pass, only upon proper delivery of such Certificates or other
instruments to the Exchange Agent). In the event of a transfer of ownership of shares of Carolina Trust Common Stock represented
by one or more Certificates that are not registered in the transfer records of Carolina Trust, the Per Share Purchase Price payable
for such shares as provided in Section 3.1(a) and Section 3.2 may be issued to a transferee if the Certificate or Certificates
representing such shares are delivered to the Exchange Agent, accompanied by all documents required to evidence such transfer
and by evidence reasonably satisfactory to the Exchange Agent that such transfer is proper and that any applicable stock transfer
Taxes have been paid. In the event any Certificate representing Carolina Trust Common Stock shall have been lost, mutilated, stolen,
or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen, mutilated,
or destroyed and, if requested by Carolina Financial, the posting by such person of a bond in such amount as Carolina Financial
may reasonably direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange
Agent shall issue in exchange for such lost, mutilated, stolen, or destroyed Certificate the Per Share Purchase Price as provided
for in Section 3.1(a) and Section 3.2. The Exchange Agent may establish such other reasonable and customary rules and procedures
in connection with its duties as it may deem appropriate. Carolina Financial shall pay all charges and expenses, including those
of the Exchange Agent, in connection with the distribution of the Per Share Purchase Price. Carolina Financial or the Exchange
Agent will maintain a book entry list of the Merger Consideration to which each former holder of Carolina Trust Common Stock is
entitled. The Stock Consideration into which Carolina Trust Common Stock has been converted shall be issued in uncertificated
form.
(c) Unless different timing is agreed to by Carolina Financial and Carolina Trust, after the Effective Time, each holder of
shares of Carolina Trust Common Stock (other than Extinguished Shares) issued and outstanding at the Effective Time shall surrender
the Certificate or Certificates representing such shares to the Exchange Agent and shall promptly upon surrender thereof receive
in exchange therefor the consideration provided in Sections 3.1(a), 3.2, and 3.7, without interest, pursuant to this Section 3.3.
The Certificate or Certificates of Carolina Trust Common Stock so surrendered shall be duly endorsed as the Exchange Agent may
reasonably require. Carolina Financial shall not be obligated to deliver the Per Share Purchase Price to which any former holder
of Carolina Trust Common Stock is entitled as a result of the Merger until such holder surrenders such holder’s Certificate
or Certificates (or affidavit of loss in lieu thereof as provided in Section 3.3(b)) for exchange as provided in this Section
3.3. Similarly, no dividends or other distributions in respect of the Carolina Financial Common Stock shall be paid to any holder
of any unsurrendered Certificate or Certificates until such Certificate or Certificates (or affidavit of
loss in lieu thereof
as provided in Section 3.3(b)) are surrendered for exchange as provided in this Section 3.3. Any other provision of this Agreement
notwithstanding, neither any Carolina Financial Entity, nor any Carolina Trust Entity, nor the Exchange Agent shall be liable
to any holder of Carolina Trust Common Stock for any amounts paid or properly delivered in good faith to a public official pursuant
to any applicable abandoned property, escheat, or similar Law.
(d) Each of Carolina Financial and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Carolina Trust Common Stock such amounts, if any, as it is required
to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local, or foreign
Tax Law or by any Taxing Authority or Governmental Authority. To the extent that any amounts are so withheld by Carolina Financial
or the Exchange Agent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Carolina Trust Common Stock, as applicable in respect of which such deduction and withholding
was made by Carolina Financial or the Exchange Agent, as the case may be.
(e) Any
portion of the Merger Consideration and cash delivered to the Exchange Agent by Carolina Financial pursuant to Section 3.3(a)
that remains unclaimed by the holder of shares of Carolina Trust Common Stock for six months after the Effective Time (as well
as any proceeds from any investment thereof) shall be delivered by the Exchange Agent to Carolina Financial. Any holder of shares
of Carolina Trust Common Stock who has not theretofore complied with Section 3.3(c) shall thereafter look only to Carolina Financial
for the consideration deliverable in respect of each share of Carolina Trust Common Stock such holder holds as determined pursuant
to this Agreement without any interest thereon. If outstanding Certificates for shares of Carolina Trust Common Stock are not
surrendered or the payment for them is not claimed prior to the date on which such shares of Carolina Financial Common Stock and
cash would otherwise escheat to or become the property of any Governmental Authority, the unclaimed items shall, to the extent
permitted by abandoned property and any other applicable law, become the property of Carolina Financial (and to the extent not
in its possession shall be delivered to it), free and clear of all claims or interest of any person previously entitled to such
property. Neither the Exchange Agent nor any party to this Agreement shall be liable to any holder of stock represented by any
Certificate for any consideration paid to a Governmental Authority pursuant to applicable abandoned property, escheat or similar
laws. Carolina Financial and the Exchange Agent shall be entitled to rely upon the stock transfer books of Carolina Trust to establish
the identity of those persons entitled to receive the consideration specified in this Agreement, which books shall be conclusive
with respect thereto. In the event of a dispute with respect to ownership of stock represented by any Certificate or Certificates,
Carolina Financial and the Exchange Agent shall be entitled to deposit any consideration represented thereby in escrow with an
independent third party and thereafter be relieved with respect to any claims thereto.
(f) Approval of this Agreement by the shareholders of Carolina Trust shall constitute ratification of the appointment of the
Exchange Agent.
|
3.4
|
Effect
on Carolina Financial Common Stock.
|
At
and after the Effective Time, each share of Carolina Financial Common Stock issued and outstanding immediately prior to the Effective
Time shall remain an issued and outstanding share of common stock of Carolina Financial and shall not be affected by the Merger.
|
3.5
|
Carolina
Trust Options.
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(a) As of the Effective Time, Carolina Financial shall either (i) assume any options or other stock-based awards (“Carolina
Trust Options”) substantially in accordance with the terms of the Carolina Trust Equity Plans and the option grants
or other award agreements by which they are evidenced in accordance with the terms of the Carolina Trust Equity Plans or (ii)
replace the Carolina Trust Options with substantially identical awards under any plans sponsored by Carolina Financial under which
options and other stock-based awards are granted, and the award agreements thereunder (each, a “Carolina Financial Stock
Plan”), such that after the Merger and without any action on the part of the holders of any Carolina Trust Options,
the Carolina Trust Options shall be converted into and become rights with respect to Carolina Financial Common Stock. From and
after the Effective Time, (A) each Carolina Trust Option assumed or replaced by Carolina Financial may be exercised solely for
shares of Carolina Financial Common Stock, (B) the number of shares of Carolina Financial Common Stock subject to such Carolina
Trust Option shall be equal to the number of shares of Carolina Trust Common Stock subject to such Carolina Trust Option immediately
prior to the Effective Time multiplied by the Exchange Ratio (rounded down to the nearest whole share), and (C) the per share
exercise price under each such Carolina Trust Option shall be divided by the Exchange Ratio (rounded up to the nearest whole cent).
It is intended that the foregoing assumption shall be undertaken in a manner that will not constitute a “modification”
as defined in Section 424 of the Code, as to any stock option which is an “incentive stock option.” Carolina Financial
and Carolina Trust agree to take all steps necessary to effect the provisions of this Section 3.5(a).
(b) Carolina Trust’s Board of Directors and its compensation committee shall not make any grants of Carolina Trust Options
following the execution of this Agreement.
(c) To the extent permitted under applicable Law and the terms of any equity-based compensation plan administered by Carolina
Trust (collectively, the “Carolina Trust Equity Plans”), Carolina Trust’s Board of Directors or its compensation
committee shall, upon reasonable request of Carolina Financial, make any adjustments and amendments to or make such determinations
with respect to the Carolina Trust Options necessary to effect the foregoing provisions of this Section 3.5.
(d) Carolina Financial shall take all corporate actions that are necessary, including the reservation, issuance and listing
of Carolina Financial Common Stock, to effect the transactions contemplated by Section 3.5(a). As soon as practicable following
the Effective Time, Carolina Financial shall file with the SEC one or more registration statements on Form S-8 (or any successor
or other appropriate form) with respect to the shares of Carolina Financial Common Stock underlying such Carolina Trust Options,
and shall use reasonable best efforts to maintain the effectiveness of such registration statement(s) for so long as such assumed
Carolina Trust Options remain outstanding.
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3.6
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Rights
of Former Carolina Trust Shareholders.
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At
the Effective Time, the stock transfer books of Carolina Trust shall be closed as to holders of Carolina Trust Common Stock and
no transfer of Carolina Trust Common Stock by any holder of such shares shall thereafter be made or recognized. Until surrendered
for exchange in accordance with the provisions of Section 3.3, each Certificate theretofore representing shares of Carolina Trust
Common Stock (other than Certificates representing Extinguished Shares), shall from and after the Effective Time represent for
all purposes only the right to receive the Merger Consideration, without interest, as provided in Article 3.
Notwithstanding
any other provision of this Agreement, each holder of shares of Carolina Trust Common Stock exchanged pursuant to the Merger,
who would otherwise have been entitled to receive a fraction of a share of Carolina Financial Common Stock (after taking into
account all Certificates delivered by such holder), shall receive, in lieu thereof, cash (without interest) in an amount equal
to such fractional part of a share of Carolina Financial Common Stock multiplied by the Average Closing Price. No such holder
will be entitled to dividends, voting rights, or any other rights as a shareholder in respect of any fractional shares.
Article
4
REPRESENTATIONS AND WARRANTIES OF CAROLINA TRUST
Carolina
Trust represents and warrants to Carolina Financial, except as set forth on the Carolina Trust Disclosure Memorandum with respect
to each such Section below, as follows:
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4.1
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Organization,
Standing, and Power.
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Carolina
Trust is a corporation duly organized, validly existing, and in good standing under the Laws of the State of North Carolina and
is a bank holding company within the meaning of the Bank Holding Company Act of 1956 (the “BHCA”). Carolina
Trust Bank is a North Carolina state bank, duly organized, validly existing and in good standing under the laws of the State of
North Carolina. Each of Carolina Trust and Carolina Trust Bank has the corporate power and authority to carry on its business
as now conducted and to own, lease, and operate its Assets. Each of Carolina Trust and Carolina Trust Bank is duly qualified or
licensed to transact business as a foreign corporation in good standing in the states of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions where the failure to be so qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Carolina Trust Material Adverse Effect. The minute book and other organizational documents for each of Carolina Trust
and Carolina Trust Bank have been made available to Carolina Financial for its review and are true and complete in all material
respects as in effect as of the date of this Agreement and accurately reflect in all material respects all amendments thereto
and all proceedings of the respective Board of Directors (including any committees of the Board of Directors) and shareholders
thereof, except to the extent that minutes for the most recent meetings have not been transcribed and finalized and minutes of
deliberations regarding negotiations with Carolina Financial may be redacted. Carolina Trust Bank is an “insured institution”
as defined in the Federal Deposit Insurance Act and applicable regulations thereunder, and the deposits held by Carolina Trust
Bank are insured up to applicable limits by the FDIC’s Deposit Insurance Fund.
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4.2
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Authority
of Carolina Trust; No Breach by Agreement.
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(a) Carolina Trust has the corporate power and authority necessary to execute, deliver, and, other than with respect to the
Merger, perform this Agreement, and with respect to the Merger, upon the approval of the Merger, including any necessary approvals
referred to in Sections 8.1(b) and 8.1(c) and by Carolina Trust’s shareholders in accordance with Section 8.1(a) of this
Agreement and the NCBCA, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated herein, including
the Merger, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Carolina
Trust, subject to the approval of this Agreement by the holders of a majority
of the outstanding shares of Carolina Trust Common
Stock, which is the only Carolina Trust shareholder vote required for approval of this Agreement and consummation of the Merger
(the “Requisite Carolina Trust Shareholder Vote”). Subject to any necessary approvals referred to in Sections
8.1(b) and 8.1(c) and by such Requisite Carolina Trust Shareholder Vote, this Agreement represents a legal, valid, and binding
obligation of Carolina Trust, enforceable against Carolina Trust in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting the enforcement of
creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may be brought).
(b) Except as disclosed in Section 4.2 of the Carolina Trust Disclosure Memorandum, neither the execution and delivery of this
Agreement by Carolina Trust, nor the consummation by Carolina Trust and Carolina Trust Bank of the transactions contemplated hereby,
nor compliance by Carolina Trust and Carolina Trust Bank with any of the provisions hereof, will (i) assuming the Requisite
Carolina Trust Shareholder Vote, conflict with or result in a breach of any provision of Carolina Trust’s Articles of Incorporation
or Bylaws or the Articles of Incorporation or Bylaws of any Carolina Trust Subsidiary or any resolution adopted by the Board of
Directors or the shareholders of any Carolina Trust Entity, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any material Asset of any Carolina Trust Entity under, any material Contract
or any material Permit of any Carolina Trust Entity or, (iii) subject to receipt of the requisite Consents referred to in
Section 8.1(b), constitute or result in a Default under, or require any Consent pursuant to, any Law or Order applicable to any
Carolina Trust Entity or any of their respective material Assets (including any Carolina Trust Entity becoming subject to or liable
for the payment of any Tax on any of the Assets owned by any Carolina Trust Entity being reassessed or revalued by any Regulatory
Authority).
(c) Except for (a) the filing of applications and notices with, and approval of such applications and notices from, the Federal
Reserve, the FDIC, the South Carolina Board of Financial Institutions and North Carolina Commissioner of Banks, (b) the filing
of any other required applications, filings, or notices with any other federal or state banking, insurance or other regulatory
or self-regulatory authorities or any courts, administrative agencies or commissions or other Governmental Authorities and approval
of or non-objection to such applications, filings and notices, (c) the filing with the SEC of a registration statement on Form
S-4 (the “Registration Statement”) in which a proxy statement relating to Carolina Trust’s Shareholders’
Meeting to be held in connection with this Agreement and the transactions contemplated by this Agreement (the “Proxy
Statement/Prospectus”) will be included, and the declaration of effectiveness of the Registration Statement, (d) the
filing of the Certificate of Merger and the Articles of Merger, (e) any consents, authorizations, approvals, filings or exemptions
in connection with compliance with the applicable provisions of federal and state securities laws relating to the regulation of
broker-dealers, investment advisers or transfer agents, and federal commodities laws relating to the regulation of futures commission
merchants and the rules and regulations thereunder and of any applicable industry self-regulatory organization, and the rules
and regulations of the NASDAQ Stock Market, or that are required under consumer finance, mortgage banking and other similar laws,
and (f) notices or filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, if any, no consents or
approvals of or filings or registrations with any Governmental Authority are necessary in connection with the consummation by
Carolina Trust of the Merger and the other transactions contemplated by this Agreement. No consents or approvals of or filings
or registrations with any Governmental Authority are necessary in connection with the execution and delivery by Carolina Trust
of this Agreement.
(a) The authorized capital stock of Carolina Trust consists of 20,000,000 shares of Carolina Trust Common Stock, $2.50 par
value per share, of which 9,301,575 shares are issued and outstanding as of the date of this Agreement, and 1,000,000 shares of
serial preferred stock, of which no shares are issued and outstanding as of the date of this Agreement. Section 4.3(a) of the
Carolina Trust Disclosure Memorandum lists all issued and outstanding Carolina Trust Options, which schedule includes the names
of the recipients, the date of grant, the exercise prices, the vesting schedules and the expiration dates, to the extent applicable.
All of the issued and outstanding shares of capital stock of Carolina Trust are duly and validly issued and outstanding and are
fully paid and nonassessable. None of the outstanding shares of capital stock of Carolina Trust has been issued in violation of
any preemptive rights of the current or past shareholders of Carolina Trust.
(b) Except for the 119,545 shares of Carolina Trust Common Stock reserved for issuance pursuant to outstanding Carolina Trust
Options, as disclosed in Section 4.3(a) of the Carolina Trust Disclosure Memorandum, there are no shares of capital stock or other
equity securities of Carolina Trust reserved for issuance and no outstanding Rights relating to the capital stock of Carolina
Trust.
(c) Except as specifically set forth in this Section 4.3 and disclosed in Section 4.3(a) of the Carolina Trust Disclosure Memorandum,
there are no shares of Carolina Trust capital stock or other equity securities of Carolina Trust outstanding and there are no
outstanding Rights with respect to any Carolina Trust securities or any right or privilege (whether pre-emptive or contractual)
capable of becoming a Contract or Right for the purchase from Carolina Trust of, exchange with Carolina Trust for, subscription
for or issuance of any securities of Carolina Trust.
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4.4
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Carolina
Trust Subsidiaries.
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Carolina
Trust and Carolina Trust Bank have no Subsidiaries other than the Carolina Trust Subsidiaries, and Carolina Trust or Carolina
Trust Bank, as applicable, own all of the equity interests in each of the Carolina Trust Subsidiaries. No capital stock (or other
equity interest) of any Carolina Trust Subsidiary is or may become required to be issued (other than to another Carolina Trust
Entity) by reason of any Rights, and there are no Contracts by which any Carolina Trust Subsidiary is bound to issue (other than
to another Carolina Trust Entity) additional shares of its capital stock (or other equity interests) or Rights or by which any
Carolina Trust Entity is or may be bound to transfer any shares of the capital stock (or other equity interests) of any Carolina
Trust Subsidiary (other than to another Carolina Trust Entity). There are no Contracts relating to the rights of any Carolina
Trust Entity to vote or to dispose of any shares of the capital stock (or other equity interests) of any Carolina Trust Subsidiary.
All of the shares of capital stock (or other equity interests) of each Carolina Trust Subsidiary are fully paid and nonassessable
and are owned directly or indirectly by Carolina Trust free and clear of any Lien.
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4.5
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Exchange
Act Filings; Securities Offerings; Financial Statements.
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(a) Carolina Trust has timely filed all Exchange Act Documents required to be filed since December 31, 2016 (the “Carolina
Trust Exchange Act Reports”). The Carolina Trust Exchange Act Reports (i) at the time filed, (or, if amended or superseded
by a filing prior to the date of this Agreement, then on the date of such filing) complied in all material respects with the applicable
requirements of the Securities Laws and other applicable Laws and (ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact
required to be stated in such Carolina Trust Exchange Act Reports or necessary
in order to make the statements in such Carolina Trust Exchange Act Reports, in light of the circumstances under which they were
made, not misleading. Each offering or sale of securities by Carolina Trust (x) was either registered under the Securities Act
or made pursuant to a valid exemption from registration under the Securities Act, (y) complied in all material respects with the
applicable requirements of the Securities Laws and other applicable Laws, except for immaterial “blue sky” filings,
including disclosure and broker/dealer registration requirements, and (z) was made pursuant to offering documents which did not,
at the time of the offering (or, in the case of registration statements, at the effective date thereof) contain any untrue statement
of a material fact or omit to state a material fact required to be stated in the offering documents or necessary in order to make
the statements in such documents, in light of the circumstances under which they were made, not misleading. Carolina Trust’s
principal executive officer and principal financial officer have made the certifications required by Sections 302 and 906 of the
Sarbanes-Oxley Act and the rules and regulations of the Exchange Act thereunder with respect to Carolina Trust Exchange Act Reports
to the extent such rules or regulations applied at the time of the filing. For purposes of the preceding sentence, “principal
executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes–Oxley
Act. Such certifications contain no qualifications or exceptions to the matters certified therein and have not been modified or
withdrawn; and neither Carolina Trust nor any of its officers has received notice from any Regulatory Authority questioning or
challenging the accuracy, completeness, content, form, or manner of filing or submission of such certifications. No Carolina Trust
Subsidiary is required to file any Exchange Act Documents.
(b) Each of the Carolina Trust Financial Statements (including, in each case, any related notes) that are contained in Carolina
Trust Exchange Act Reports, including any Carolina Trust Exchange Act Reports filed after the date of this Agreement until the
Effective Time, complied, or will comply, as to form in all material respects with the Exchange Act, was, or will be, prepared
in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited interim statements, as permitted by Form 10-Q of the Exchange Act),
fairly presented in accordance with GAAP the consolidated financial position of Carolina Trust and its Subsidiaries as of the
respective dates and the consolidated results of operations and cash flows for the periods indicated, including the fair values
of the assets and liabilities shown therein, except that the unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments which were not or are not expected to be material in amount or effect, and were certified to
the extent required by the Sarbanes-Oxley Act.
(c) Carolina Trust’s independent registered public accountants, which have expressed their opinion with respect to the
Carolina Trust Financial Statements and its Subsidiaries whether or not included in Carolina Trust’s Exchange Act Reports
(including the related notes), are and have been throughout the periods covered by such Financial Statements (i) a registered
public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act) (to the extent applicable during such period),
(ii) “independent” with respect to Carolina Trust within the meaning of Regulation S-X, and (iii) with respect to
Carolina Trust, in compliance with subsections (g) through (l) of Section 10A of the Exchange Act and related Securities Laws.
Carolina Trust’s independent public accountants have audited Carolina Trust’s year-end financial statements, and have
reviewed Carolina Trust’s interim financial statements, that are included in the Carolina Trust Financial Statements in
accordance with Public Accounting Oversight Board Auditing Standard No. 4015. Section 4.5(c) of the Carolina Trust Disclosure
Memorandum lists all non-audit services performed by Carolina Trust’s independent public accountants for Carolina Trust
or Carolina Trust Bank during the periods covered by the Carolina Trust Financial Statements.
(d) Carolina Trust maintains disclosure controls and procedures as required by Rule 13a-15 or 15d-15 under the Exchange Act,
and such controls and procedures are effective to ensure that all material information relating to Carolina Trust and its Subsidiaries
is made known on a timely basis to Carolina Trust’s principal executive officer and Carolina Trust’s principal financial
officer.
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4.6
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Absence
of Undisclosed Liabilities.
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No
Carolina Trust Entity has any Liabilities required under GAAP to be set forth on a consolidated balance sheet or in the notes
thereto that are reasonably likely to have, individually or in the aggregate, a Carolina Trust Material Adverse Effect, except
Liabilities which are (i) accrued or reserved against in the consolidated balance sheet of Carolina Trust as of March 31, 2019
as filed with the SEC or reflected in the notes thereto, (ii) incurred in the ordinary course of business consistent with past
practices, or (iii) incurred in connection with the transactions contemplated by this Agreement. Section 4.6 of the Carolina Trust
Disclosure Memorandum lists, and Carolina Trust has delivered to Carolina Financial copies of the documentation creating or governing,
all securitization transactions and “off-balance sheet arrangements” (as defined in Item 303(c)(2) of Regulation
S-K of the Exchange Act) effected by Carolina Trust or its Subsidiaries since December 31, 2018 (or with respect to off-balance
sheet arrangements, that remain in effect), other than letters of credit and unfunded loan commitments or credit lines. Except
as reflected on Carolina Trust’s balance sheet at March 31, 2019 as filed with the SEC, no Carolina Trust Entity is directly
or indirectly liable, by guarantee, indemnity, or otherwise, upon or with respect to, or obligated, by discount or repurchase
agreement or in any other way, to provide funds in respect to, or obligated to guarantee or assume any Liability of any Person
for any amount in excess of $25,000 and any amounts, whether or not in excess of $25,000 that, in the aggregate, exceed $50,000.
Except (x) as reflected in Carolina Trust’s balance sheet at March 31, 2019 as filed with the SEC or Liabilities described
in any notes thereto (or Liabilities for which neither accrual nor footnote disclosure is required pursuant to GAAP or any applicable
Regulatory Authority) or (y) for Liabilities incurred in the ordinary course of business since March 31, 2019 as filed with the
SEC consistent with past practice or in connection with this Agreement or the transactions contemplated hereby, neither Carolina
Trust nor any Carolina Trust Subsidiary has any Material Liabilities or obligations of any nature.
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4.7
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Absence
of Certain Changes or Events.
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Except
as disclosed in the Carolina Trust Financial Statements as filed with the SEC, (i) since December 31, 2018, there have been
no events, changes, or occurrences which have had, or are reasonably likely to have, individually or in the aggregate, a Carolina
Trust Material Adverse Effect and (ii) since December 31, 2018, the Carolina Trust Entities have conducted their respective
businesses in the ordinary course of business consistent with past practice. Section 4.7 of the Carolina Trust Disclosure Memorandum
sets forth attorneys’ fees, investment banking fees, accounting fees and other costs or fees of Carolina Trust and the Carolina
Trust Subsidiaries that, based upon reasonable inquiry, are expected to be paid or accrued through the Effective Time in connection
with the merger transaction contemplated by this Agreement.
(a) Each of the Carolina Trust Entities has filed with the appropriate Taxing Authorities, all material Tax Returns in all
jurisdictions in which Tax Returns are required to be filed, and such Tax Returns are correct and complete in all material respects.
All material Taxes of the Carolina Trust Entities to the extent due and payable (whether or not shown on any Tax Return) have
been fully and timely paid. There are no Liens for any material Taxes (other than a Lien for current real
property or ad valorem
Taxes not yet due and payable, or for Taxes being contested in good faith for which adequate reserves are established in the
Carolina Trust Financial Statements) filed of record on any of the Assets of any of the Carolina Trust Entities. No written claim
has ever been made by any Taxing Authority in a jurisdiction where any Carolina Trust Entity does not file a Tax Return that such
Carolina Trust Entity may be subject to Taxes by that jurisdiction.
(b) None of the Carolina Trust Entities has received any written notice of assessment or proposed assessment in connection
with any Taxes, other than any that has been fully resolved with the applicable Taxing Authority. There are no ongoing or pending
written claims, audits, or examinations regarding any Taxes of any Carolina Trust Entity or the assets of any Carolina Trust Entity.
No officer or employee responsible for Tax matters of any Carolina Trust Entity expects any Taxing Authority to assess any additional
material Taxes for any period for which Tax Returns have been filed. No issue has been raised by a Taxing Authority in any prior
examination of the Carolina Trust that, by application of the same or similar principles, could be expected to result in a proposed
material deficiency for any subsequent taxable period. None of the Carolina Trust Entities has waived any statute of limitations
in respect of any Taxes that remain in effect or agreed to a Tax assessment or deficiency.
(c) Each Carolina Trust Entity has complied in all material respects with all applicable Laws relating to the withholding of
Taxes and the payment thereof to Governmental Authorities, including Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee or independent contractor, and Taxes required to be withheld and paid pursuant to Sections
1441 and 1442 of the Code or similar provisions under foreign Law.
(d) The unpaid Taxes of each Carolina Trust Entity (i) did not, as of the most recent fiscal month end, materially exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the face of the most recent balance sheet (rather than in any notes thereto) for such Carolina Trust
Entity and (ii) do not materially exceed that reserve as adjusted for the passage of time through the Closing Date in accordance
with past custom and practice of the Carolina Trust Entities in filing their Tax Returns; provided, however, that notwithstanding
anything to the contrary in this Agreement, Carolina Trust makes no representation in this Agreement regarding any Tax liability
that might arise or accrue to any of the Carolina Trust Entities or any other Person by reason of, or in connection with, any
election by or on behalf of Carolina Trust or any of the Carolina Trust Subsidiaries pursuant to Sections 336(e) or 338 of the
Code with respect to the Merger or any other transactions contemplated by this Agreement.
(e) Except as disclosed in Section 4.8(e) of the Carolina Trust Disclosure Memorandum, none of the Carolina Trust Entities
is a party to any Tax allocation or sharing agreement and none of the Carolina Trust Entities has been a member of an affiliated
group filing a consolidated federal income Tax Return (other than a group the common parent of which was Carolina Trust) or has
any Liability for Taxes of any Person (other than Carolina Trust or any of its Subsidiaries) under Treasury Regulations Section
1.1502-6 or any similar provision of state, local or foreign Law, or as a transferee or successor, by contract or otherwise.
(f) During the five-year period ending on the date hereof, none of the Carolina Trust Entities was a “distributing corporation”
or a “controlled corporation” as defined in, and in a transaction intended to be governed by Section 355 of the Code.
(g) None of the Carolina Trust Entities has made any payments, is obligated to make any payments, or is a party to any contract
that could obligate it to make any payments, for which a
deduction will be disallowed under Section 280G or 162(m) of the Code,
or that would be subject to withholding under Section 4999 of the Code. None of the Carolina Trust Entities has been or will be
required to include any adjustment in taxable income for any Tax period (or portion thereof) pursuant to Section 481 of the Code
or any comparable provision under state or foreign Tax Laws as a result of transactions or events occurring prior to the Closing.
There is no material taxable income of Carolina Trust that will be required under applicable Tax law to be reported by Carolina
Financial for a taxable period beginning after the date of the Effective Time which taxable income was realized prior to the Closing
Date.
(h) Each of the Carolina Trust Entities is in compliance in all material respects with, and its records contain all information
and documents (including properly completed IRS Forms W-9) necessary to comply in all material respects with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax Laws, and such records identify with specificity
all accounts subject to backup withholding under Section 3406 of the Code.
(i) No Carolina Trust Entity is subject to any private letter ruling of the IRS or comparable rulings of any Taxing Authority
that is currently applicable.
(j) No property owned by any Carolina Trust Entity is (i) property required to be treated as being owned by another Person
pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect immediately prior
to the enactment of the Tax Reform Act of 1986, (ii) “tax-exempt use property” within the meaning of Section 168(h)(1)
of the Code, (iii) “tax-exempt bond financed property” within the meaning of Section 168(g) of the Code, (iv) “limited
use property” within the meaning of IRS Revenue Procedure 76-30, (v) tangible property used predominantly outside the United
States, or (vi) subject to any provision of state, local or foreign Law comparable to any of the provisions listed above in this
paragraph.
(k) No Carolina Trust Entity has any “corporate acquisition indebtedness” within the meaning of Section 279 of
the Code.
(l) Carolina Trust has disclosed on its federal income Tax Returns all positions taken therein that are reasonably believed
to give rise to substantial understatement of federal income tax within the meaning of Section 6662 of the Code.
(m) No
Carolina Trust Entity has participated in any reportable transaction, as defined in Code Section 6707A(c)(1) or Treasury Regulations
Section 1.6011-4(b)(1).
(n) Carolina Trust has made available to Carolina Financial complete copies of (i) all federal, state, local and foreign income
or franchise Tax Returns of the Carolina Trust Entities relating to the taxable periods since December 31, 2014, and (ii) any
audit report issued by any Taxing Authority since December 31, 2014 relating to any Taxes due from or with respect to the Carolina
Trust Entities.
(o) No Carolina Trust Entity nor any other Person on its behalf has (i) filed a consent pursuant to Section 341(f) of the Code
(as in effect prior to the repeal under the Jobs and Growth Tax Reconciliation Act of 2003) or agreed to have Section 341(f)(2)
of the Code (as in effect prior to the repeal under the Jobs and Growth Tax Reconciliation Act of 2003) apply to any disposition
of a subsection (f) asset (as such term is defined in former Section 341(f)(4) of the Code) owned by any Carolina Trust Entities,
(ii) executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of Law with respect
to the Carolina Trust
Entities, or (iii) granted to any Person any power of attorney that is currently in force with respect to
any Tax matter.
(p) No Carolina Trust Entity has, or ever had, a permanent establishment in any country other than the United States, or has
engaged in a trade or business in any country other than the United States that subjected it to Tax in such country.
(q) No Carolina Trust Entity has been a United States real property holding corporation within the meaning of Section 897(c)(2)
of the Code since January 1, 2014.
For
purposes of this Section 4.8, any reference to Carolina Trust or any Carolina Trust Entity shall be deemed to include any Person
that merged with or was liquidated into or otherwise combined with Carolina Trust or a Carolina Trust Entity prior to the Effective
Time.
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4.9
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Allowance
for Possible Loan Losses; Loan and Investment Portfolios, etc.
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(a) Carolina Trust’s allowance for possible loan or lease losses (the “Allowance”) is, and has been
since January 1, 2018, in material compliance with Carolina Trust’s methodology for determining the adequacy of its allowance
for loan losses as well as the standards established by applicable Governmental Authorities and the Financial Accounting Standards
Board in all material respects.
(b) As of the date hereof, all loans, discounts and leases (in which any Carolina Trust Entity is lessor) reflected on Carolina
Trust’s Financial Statements were, and with respect to the consolidated balance sheets delivered as of the dates subsequent
to the execution of this Agreement will be as of the dates thereof, (a) at the time and under the circumstances in which made,
made for good, valuable and adequate consideration in the ordinary course of business and, to the Knowledge of Carolina Trust,
are the legal and binding obligations of the obligors thereof, (b) evidenced by genuine notes, agreements, or other evidences
of indebtedness and (c) to the extent secured, to the Knowledge of Carolina Trust, have been secured by valid liens and security
interests which have been perfected. Accurate lists of all loans, discounts, other real estate owned and financing leases as of
June 30, 2019 and on a monthly basis thereafter, and of the investment portfolios of each Carolina Trust Entity as of such date,
have been and will be made available to Carolina Financial concurrently with the Carolina Trust Disclosure Memorandum. Neither
Carolina Trust nor Carolina Trust Bank is a party to any written or oral loan agreement, note, or borrowing arrangement, including
any loan guaranty, that was, as of the most recent month-end (i) delinquent by more than 30 days in the payment of principal or
interest, (ii) otherwise in material default for more than 30 days, (iii) classified as “substandard,” “doubtful,”
“loss,” “other assets especially mentioned” or any comparable classification by Carolina Trust or under
the standards of any applicable Regulatory Authority, (iv) an obligation of any director, executive officer or 10% shareholder
of any Carolina Trust Entity who is subject to Regulation O of the Federal Reserve (12 C.F.R. Part 215), or any person, corporation
or enterprise controlling, controlled by or under common control with any of the foregoing, or (v) in material violation of any
Law.
(c) All securities held by Carolina Trust or Carolina Trust Bank, as reflected in the consolidated balance sheets of Carolina
Trust included in the Carolina Trust Financial Statements, are carried in accordance with GAAP, specifically including Accounting
Standards Codification Topic 320, Investments – Debt and Equity Securities. Except for pledges to secure public and trust
deposits and Federal Home Loan Bank advances, none of the securities reflected in the Carolina Trust Financial Statements as of
March 31, 2019, and none of the securities since acquired by
Carolina Trust or Carolina Trust Bank is subject to any restriction,
whether contractual or statutory, which impairs the ability of Carolina Trust or Carolina Trust Bank to freely dispose of such
security at any time, other than those restrictions imposed on securities held to maturity under GAAP, pursuant to a clearing
agreement or in accordance with laws.
(d) Section 4.9(d) of the Carolina Trust Disclosure Memorandum lists all interest rate swaps, caps, floors, option agreements,
futures and forward contracts and other similar risk management arrangements, whether entered into for Carolina Trust’s
own account, or for the account of Carolina Trust Bank or its customers, and all such risk management agreements or arrangements
were entered into (a) in the ordinary and usual course of business consistent with past practice and in compliance with all applicable
laws, rules, regulations and regulatory policies, and (b) with counterparties believed to be financially responsible at the time;
and each of them constitutes the valid and legally binding obligation of Carolina Trust or Carolina Trust Bank, enforceable in
accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity
principles), and is in full force and effect. Neither Carolina Trust nor Carolina Trust Bank, nor to Carolina Trust’s Knowledge,
any other party thereto, is in breach of any material obligation under any such agreement or arrangement.
(a) Except as disclosed or reserved against in the Carolina Trust Financial Statements, the Carolina Trust Entities have good
and marketable title, free and clear of all Liens except those permitted in Section 4.10(e), to all of their respective Assets
that they own. In addition, to Carolina Trust’s Knowledge, all tangible properties used in the businesses of the Carolina
Trust Entities are in good condition, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent
with Carolina Trust’s past practices.
(b) All Assets which are material to Carolina Trust’s business, held under leases or subleases by any of the Carolina
Trust Entities, are held under valid Contracts enforceable in accordance with their respective terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting the
enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance
or injunctive relief is subject to the discretion of the court before which any proceeding may be brought), and to the Knowledge
of Carolina Trust each such Contract is in full force and effect.
(c) The Carolina Trust Entities currently maintain insurance, including bankers’ blanket bonds, with insurers of recognized
financial responsibility in such amounts as management of Carolina Trust has reasonably determined to be prudent. None of the
Carolina Trust Entities has received notice from any insurance carrier that (i) any policy of insurance will be canceled
or that coverage thereunder will be reduced or eliminated, (ii) premium costs with respect to such policies of insurance
will be substantially increased, or (iii) similar coverage will be denied or limited or not extended or renewed with respect to
any Carolina Trust Entity, any act or occurrence, or that any Asset, officer, director, employee or agent of any Carolina Trust
Entity will not be covered by such insurance or bond. There are presently no claims for amounts exceeding $50,000 individually
or in the aggregate pending under such policies of insurance or bonds, and no written notices of claims in excess of such amounts
have been given by any Carolina Trust Entity under such policies. Carolina Trust has made no claims, and no claims are contemplated
to be made, under its directors’ and officers’ errors and omissions or other insurance or bankers’ blanket bond.
(d) The Assets of the Carolina Trust Entities include all material Assets required by Carolina Trust Entities to operate the
business of the Carolina Trust Entities as presently conducted. All real and personal property which is material to the business
of Carolina Trust or Carolina Trust Bank that is leased or licensed by it is held pursuant to leases or licenses which are valid
and enforceable in accordance with their respective terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting the enforcement of creditors’ rights generally
and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought) and such leases and licenses will not terminate or lapse prior to the
Effective Time or thereafter by reason of completion of the Merger. To the Knowledge of Carolina Trust, all improved real property
owned or leased by Carolina Trust or Carolina Trust Bank is in material compliance with all applicable laws, including zoning
laws and the Americans with Disabilities Act of 1990.
(e) Each Carolina Trust Entity has fee simple title to all the real property assets reflected in the Carolina Trust Financial
Statements as being owned by a Carolina Trust Entity or acquired after the date thereof (except properties sold or otherwise disposed
of since the date thereof in the ordinary course of business) (the “Carolina Trust Realty”) or has a valid leasehold
interest in the Carolina Trust Leased Real Properties, free and clear of all Liens of any nature whatsoever, except (i) statutory
Liens securing payments not yet due (or which are being contested in good faith, including Liens of warehousemen, mechanics, suppliers,
materialmen, and repairmen), (ii) Liens for real property or ad valorem Taxes not yet delinquent (or being contested in good faith
and for which adequate reserves have been established), (iii) in the case of the Carolina Trust Realty, (A) easements, rights
of way, servitudes, permits, licenses, surface leases, ground leases to utilities, municipal agreements, and other similar encumbrances
and matters of record, (B) conditions, covenants or other similar restrictions, (C) easements for streets, alleys, highways, telephone
lines, gas pipelines, powerlines, railways, and other similar easements and rights of way of record, (D) encroachments and other
matters that would be shown by an accurate survey of the Carolina Trust Realty, (E) any exceptions listed in the title insurance
policies of the Carolina Trust Entity that owns each parcel of the Carolina Trust Realty, which for purposes of clauses (A) through
(E) do not, individually or in the aggregate, materially adversely affect the use of the properties or assets subject thereto
or affected thereby as used by a Carolina Trust Entity on the date hereof or otherwise materially impair business operations at
such properties, as conducted by a Carolina Trust Entity on the date hereof, (iv) Liens granted in the ordinary course of business
in any personal property located on the Carolina Trust Leased Real Properties or any personal property leased under Contracts,
and (v) such imperfections or irregularities of title or Liens as do not materially affect the use of the properties or assets
subject thereto or affected thereby or otherwise materially impair business operations at such properties as used on the date
hereof.
(f) To the Knowledge of Carolina Trust, the Carolina Trust Realty and the real property with respect to which a Carolina Trust
Entity is the lessee (the “Carolina Trust Leased Real Properties”) are not in violation of any applicable building,
fire, zoning (or are legal nonconforming uses allowed under applicable zoning ordinances) or other applicable laws, ordinances
and regulations or of any deed restrictions of record, no written notice of any material violation or material alleged violation
thereof has been received in the past three years that has not been resolved, and there are no proposed changes therein that would
materially and adversely affect the Carolina Trust Realty, the Carolina Trust Leased Real Properties or their current uses. Carolina
Trust has no Knowledge of any proposed or pending change in the zoning of, or of any proposed or pending condemnation proceeding
with respect to, any of the Carolina Trust Realty or the Carolina Trust Leased Real Properties which may materially and adversely
affect the Carolina Trust Realty or the Carolina Trust Leased Real Properties or the current use by a Carolina Trust Entity thereof.
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4.11
|
Intellectual
Property.
|
Each
Carolina Trust Entity owns or has a license to use all of the Intellectual Property used by such Carolina Trust Entity in the
course of its business, including sufficient rights in each copy possessed by each Carolina Trust Entity. Each Carolina Trust
Entity is the owner of or has a license, with the right to sublicense, to any Intellectual Property sold or licensed to a third
party by such Carolina Trust Entity in connection with such Carolina Trust Entity’s business operations, and such Carolina
Trust Entity has the right to convey by sale or license any Intellectual Property so conveyed. No Carolina Trust Entity is in
material Default under any of its Intellectual Property licenses. To Carolina Trust’s Knowledge, no proceedings have been
instituted, are pending, or are threatened, that challenge the rights of any Carolina Trust Entity with respect to Intellectual
Property used, sold, or licensed by such Carolina Trust Entity in the course of its business, nor to Carolina Trust’s Knowledge,
has any person claimed or alleged that any Carolina Trust Entity has misappropriated any rights to such Intellectual Property.
To the Knowledge of Carolina Trust, the conduct of the business of the Carolina Trust Entities does not infringe any Intellectual
Property of any other person. No Carolina Trust Entity is obligated to pay any recurring royalties to any Person with respect
to any Intellectual Property used by such Carolina Trust Entity in the course of its business, other than any license, maintenance,
or other fees specified in a license or other agreement with such party by which such Carolina Trust Entity obtained its rights
to such Intellectual Property. To Carolina Trust’s Knowledge, no officer, director, or employee of any Carolina Trust Entity
is party to any Contract with any Person other than a Carolina Trust Entity that requires such officer, director or employee to
assign any interest in any Intellectual Property to any Person other than a Carolina Trust Entity, or to keep confidential any
trade secrets, proprietary data, customer information, or other business information of any Person other than a Carolina Trust
Entity in a manner that would conflict with their contractual obligations to any Carolina Trust Entity to assign Intellectual
Property to, or keep confidential any trade secrets, proprietary data, customer information, or other business information of,
such Carolina Trust Entity. To Carolina Trust’s Knowledge, no officer, director, or employee of any Carolina Trust Entity
is in material breach of any confidentiality, nonsolicitation, noncompetition, or other Contract that restricts or prohibits such
officer, director, or employee from engaging in activities competitive with any Person, including any Carolina Trust Entity.
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4.12
|
Environmental
Matters.
|
(a) Carolina Trust has delivered, or caused to be delivered or made available to Carolina Financial, copies of, all environmental
site assessments, test results, analytical data, boring logs, permits for storm water, wetlands fill, or other environmental permits
for construction of any building, parking lot or other improvement, and other environmental reports, studies, or non-privileged
correspondence in the possession of any Carolina Trust Entity relating to any property owned, leased or operated by any of the
Carolina Trust Entities. To the Knowledge of Carolina Trust, there are no material violations of Environmental Laws on properties
that secure loans made by Carolina Trust or Carolina Trust Bank.
(b) There are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action, orders, assessments
(including penalty assessments) or written notices of any kind with respect to any environmental, health or safety matters or
any private or governmental environmental, health or safety investigations or remediation activities of any nature seeking to
impose, or that are reasonably likely to result in, any material liability or obligation of the Carolina Trust Entities arising
under any Environmental Law pending or, to Carolina Trust’s Knowledge, threatened against the Carolina Trust Entities. To
Carolina Trust’s Knowledge, there is no reasonable basis for, or circumstances that are reasonably likely to give rise to,
any such proceeding, claim, action, investigation or remediation by any Governmental Authority or any
third party that would give
rise to any material liability or obligation on the part of the Carolina Trust Entities. None of the Carolina Trust Entities is
subject to any agreement, order, judgment, decree, letter or memorandum by or with any Governmental Authority or third party imposing
any liability or obligation with respect to any of the foregoing. To the Knowledge of Carolina Trust, each property owned or operated
by Carolina Trust, and any property in which any of the Carolina Trust Entities holds a security interest, is in material compliance
with all Environmental Laws.
(c) Except as disclosed on Schedule 4.12, to the Knowledge of Carolina Trust, there have been no releases of Hazardous Material
at any property owned, leased, or operated by any of the Carolina Trust Entities.
(d) Notwithstanding any other provision herein, the representations and warranties in Subsections 4.12(a) and (b) above constitute
Carolina Trust’s sole representations and warranties with respect to compliance with Environmental Laws or the presence
of Hazardous Material.
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4.13
|
Compliance
with Laws.
|
(a) Carolina Trust is a bank holding company duly registered and in good standing as such with the Federal Reserve. Carolina
Trust Bank is a state chartered bank in good standing with the North Carolina Commissioner of Banks.
(b) Compliance with Permits, Laws and Orders.
(i)
Each of the Carolina Trust Entities has in effect all Permits and has made all filings, applications, and registrations
with Governmental Authorities that are required for it to own, lease, or operate its assets and to carry on its business as now
conducted, and to the Knowledge of Carolina Trust, there has occurred no Default under any such Permit applicable to their respective
businesses or employees conducting their respective businesses.
(ii)
To the Knowledge of Carolina Trust, none of the Carolina Trust Entities is in material Default under any Laws or Orders
applicable to its business or employees conducting its business.
(iii)
None of the Carolina Trust Entities has received any notification or communication from any Governmental Authority (A) asserting
that Carolina Trust or any of its Subsidiaries is in Default under any of the Permits, Laws, or Orders which such Governmental
Authority enforces, (B) threatening to revoke any Permits, or (C) requiring Carolina Trust or any of its Subsidiaries
(x) to enter into or consent to the issuance of a cease and desist order, formal agreement, directive, commitment, or memorandum
of understanding, or (y) to adopt any resolution of its Board of Directors or similar undertaking.
(iv)
There (A) is no material unresolved legal violation cited by any Governmental Authority with respect to any report
or statement relating to any examinations or inspections of Carolina Trust or any of its Subsidiaries, (B) are no written notices
or correspondence received by Carolina Trust with respect to pending formal inquiries of a material nature by, or disputes with,
any Governmental Authority with respect to Carolina Trust’s or any of Carolina Trust’s Subsidiaries’ business,
operations, policies, or procedures since its inception, and (C) to the Knowledge of Carolina Trust, is no investigation or review
by any Governmental Authority pending or threatened, nor has any Governmental Authority indicated an intention to conduct, any
investigation or review (other than regular or routine examinations or inspections) of it or any of its Subsidiaries.
(v)
None of the Carolina Trust Entities nor, to the Knowledge of Carolina Trust, any of its directors, officers, employees,
or Representatives acting on its behalf has offered, paid, or agreed to pay any Person, including any Government Authority, directly
or indirectly, any thing of value for the purpose of, or with the intent of obtaining or retaining any business in violation of
applicable Laws, including (1) using any corporate funds for any unlawful contribution, gift, entertainment, or other unlawful
expense relating to political activity, (2) making any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds, (3) violating any provision of the Foreign Corrupt Practices Act of 1977, as amended,
or (4) making any bribe, rebate, payoff, influence payment, kickback, or other unlawful payment.
(vi)
Each Carolina Trust Entity has complied in all material respects with all requirements of Law under the Bank Secrecy Act
and the USA Patriot Act, and each Carolina Trust Entity has timely filed all reports of suspicious activity, including those required
under 12 C.F.R. § 353.3.
(vii)
Each Carolina Trust Entity’s collection and use of individually identifiable personal information (“IIPI”)
to an identifiable or identified natural person complies in all material respects with the Fair Credit Reporting Act and the Gramm-Leach-Bliley
Act.
(a) No Carolina Trust Entity is the subject of any Litigation asserting that it or any other Carolina Trust Entity has committed
an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state Law) or other violation of
state or federal labor Law or seeking to compel it or any other Carolina Trust Entity to bargain with any labor organization or
other employee representative as to wages or conditions of employment, nor is any Carolina Trust Entity party to any collective
bargaining agreement or subject to any bargaining order, injunction, or other Order governing any Carolina Trust Entity’s
relationship or dealings with its employees, any labor organization or any other employee representative. There is no strike,
slowdown, lockout, or other similar job action or labor dispute involving any Carolina Trust Entity pending or, to the Knowledge
of Carolina Trust, threatened, and there have been no such actions or disputes in the past five years. To Carolina Trust’s
Knowledge, there has not been any attempt by any Carolina Trust Entity employees or any labor organization or other employee representative
to organize or certify a collective bargaining unit or to engage in any other union organization activity with respect to the
workforce of any Carolina Trust Entity.
(b) Except as disclosed in Section 4.14(b) of the Carolina Trust Disclosure Memorandum, the employment of each employee and
the engagement of each independent contractor of each Carolina Trust Entity is terminable at will by the relevant Carolina Trust
Entity (i) without any penalty, liability, or severance obligation incurred by any Carolina Trust Entity, and in all cases (ii)
without prior consent by any Governmental Authority. No Carolina Trust Entity will owe any amounts to any of its employees or
independent contractors as of the Closing Date, including any amounts incurred for wages, bonuses, vacation pay, sick leave, contract
notice periods, change of control payments, or severance obligations other than as incurred in the ordinary course of business
and properly accounted for or otherwise recorded in the books and records of Carolina Trust.
(c) To Carolina Trust’s Knowledge, all of the employees employed by Carolina Trust and Carolina Trust Bank in the United
States are either United States citizens or are legally eligible to work in the United States under the Immigration Reform and
Control Act of 1986, as amended,
other United States immigration Laws and the Laws related to the employment of non-United States
citizens applicable in the state in which the employees are employed.
(d) No Carolina Trust Entity has effectuated (i) a “plant closing” (as defined in the Worker Adjustment and Retraining
Notification Act (the “WARN Act”)) affecting a single site of employment or one or more facilities or operating
units within a single site of employment of any Carolina Trust Entity; or (ii) a “mass layoff” (as defined in
the WARN Act) affecting a single site of employment of any Carolina Trust Entity; and no Carolina Trust Entity has been affected
by any layoffs or employment losses sufficient in number to trigger application of any similar state or local Law.
(e) Section 4.14(e) of the Carolina Trust Disclosure Memorandum contains a list of all individuals who are independent contractors
of each Carolina Trust Entity (separately listed by Carolina Trust Entity) and each such individual is correctly classified as
an independent contractor under all Laws (including Treasury Regulations under the Code and federal and state labor and employment
Laws).
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4.15
|
Employee
Benefit Plans.
|
(a) Carolina Trust has disclosed in Section 4.15(a) of the Carolina Trust Disclosure Memorandum, and has delivered or made
available to Carolina Financial prior to the execution of this Agreement, (i) copies of each Employee Benefit Plan currently adopted,
maintained by, sponsored in whole or in part by, or contributed or required to be contributed to by any Carolina Trust Entity
or any ERISA Affiliate thereof for the benefit of employees, former employees, retirees, directors, independent contractors, or
their respective dependents, spouses, or other beneficiaries or under which employees, retirees, former employees, directors,
independent contractors, or their respective dependents, spouses, or other beneficiaries are eligible to participate (each, a
“Carolina Trust Benefit Plan,” and collectively, the “Carolina Trust Benefit Plans”) and
(ii) a list of each Employee Benefit Plan that is not identified in (i) above and in connection with which any Carolina Trust
Entity or any ERISA Affiliate thereof has or reasonably could have any obligation or Liability. Any of the Carolina Trust Benefit
Plans which is an “employee pension benefit plan,” as that term is defined in ERISA Section 3(2), is referred to herein
as a “Carolina Trust ERISA Plan.”
(b) Carolina Trust has delivered or made available to Carolina Financial prior to the execution of this Agreement (i) all trust
agreements or other funding arrangements for all Employee Benefit Plans, (ii) all determination letters, rulings, opinion letters,
information letters, or advisory opinions issued by the United States Internal Revenue Service (“IRS”), the
United States Department of Labor (“DOL”) or the Pension Benefit Guaranty Corporation (“PBGC”)
during this calendar year or any of the preceding three calendar years, (iii) any filing or documentation (whether or not filed
with the IRS) where corrective action was taken in connection with the IRS EPCRS program set forth in Revenue Procedure 2013-12,
as modified (or its predecessor or successor rulings), (iv) annual reports or returns, audited or unaudited financial statements,
actuarial reports, and valuations prepared for any Employee Benefit Plan for the current plan year and the three preceding plan
years, (v) the most recent summary plan descriptions for each Carolina Trust Benefit Plan and any material modifications thereto,
and (vi) all material correspondence from or to the IRS, DOL, or PBGC regarding any Carolina Trust Benefit Plan received or sent
during this calendar year or any of the preceding three calendar years.
(c) Each Carolina Trust Benefit Plan is in material compliance with (i) its terms, (ii) the applicable requirements of the
Code and ERISA, and (iii) any and all other applicable Laws. Each Carolina Trust ERISA Plan which is intended to be qualified
under Section 401(a) of the Code so qualifies, and its related trust is tax exempt under Section 501(a) of the Code, has received
a favorable determination letter from the IRS or, in the alternative, appropriately relies upon a favorable opinion letter issued
to a prototype plan or volume submitter under which the Carolina Trust ERISA Plan has been adopted and Carolina Trust is not aware
of any circumstances likely to result in revocation of any such favorable determination or opinion letter. To Carolina Trust’s
Knowledge, no event has occurred and no condition exists that would reasonably be expected to cause the loss of such qualified
or tax exempt status, and Carolina Trust has not received any written or unwritten communication from any Governmental Authority
questioning or challenging the compliance of any Carolina Trust Benefit Plan with applicable Laws. No Carolina Trust Benefit Plan
is currently being audited by any Governmental Authority for compliance with applicable Laws or has been audited with a determination
by any Governmental Authority that the Carolina Trust Benefit Plan failed to comply with applicable Laws.
(d) There has been no material written or, to Carolina Trust’s Knowledge, oral representation or communication with respect
to any aspect of the Carolina Trust Benefit Plans made to employees of Carolina Trust which is not in all material respects in
accordance with the written or otherwise preexisting terms and provisions of such plans. Neither Carolina Trust nor, to Carolina
Trust’s Knowledge, any administrator or fiduciary of any Carolina Trust Benefit Plan (or any agent of any of the foregoing)
has engaged in any transaction, or acted or failed to act in any manner, which could subject Carolina Trust or Carolina Financial
to any direct or indirect Liability (by indemnity or otherwise) for breach of any fiduciary, co-fiduciary, or other duty under
ERISA. There are no unresolved claims or disputes under the terms of, or in connection with, the Carolina Trust Benefit Plans
other than claims for benefits which are payable in the ordinary course of business and no action, proceeding, prosecution, inquiry,
hearing, or investigation has been commenced with respect to any Carolina Trust Benefit Plan other than routine claims for benefits.
(e) All Carolina Trust Benefit Plan documents and, as applicable, any annual reports or returns, audited or unaudited financial
statements, actuarial valuations, summary annual reports, and summary plan descriptions issued with respect to the Carolina Trust
Benefit Plans are correct and complete in all material respects, and to the extent applicable, have been timely filed with the
IRS or the DOL, and distributed to participants of the Carolina Trust Benefit Plans (to the extent required by Law), and there
have been no material misstatements or omissions in the information set forth therein.
(f) To Carolina Trust’s Knowledge, no “Party in Interest” (as defined in ERISA Section 3(14)) or “Disqualified
Person” (as defined in Code Section 4975(e)(2)) of any Carolina Trust Benefit Plan has engaged in any nonexempt “Prohibited
Transaction” (described in Code Section 4975(c) or ERISA Section 406).
(g) No Carolina Trust Entity nor any of its ERISA Affiliates has, or ever has had, any obligation or Liability in connection
with, any plan that is or was subject to Code Section 412 or ERISA Section 302 or Title IV of ERISA.
(h) No material Liability under Title IV of ERISA has been or is expected to be incurred by any Carolina Trust Entity or any
ERISA Affiliate thereof, and no event has occurred that could reasonably result in Liability under Title IV of ERISA being incurred
by any Carolina Trust Entity or any ERISA Affiliate thereof with respect to any ongoing, frozen, terminated, or other single-employer
plan of any Carolina Trust Entity or the single-employer plan of any ERISA Affiliate. Except as may arise in connection with the
transactions contemplated by this Agreement, there has been no “reportable event,” within the meaning of ERISA Section
4043, for which the 30-day reporting requirement has not been waived by any ongoing, frozen, terminated, or other single-employer
plan of Carolina Trust or of an ERISA Affiliate.
(i) Except as required under Part 6 of ERISA or Code Section 4980B, no Carolina Trust Entity has any material Liability or
obligation for retiree or post-termination of employment or services health or life benefits under any of the Carolina Trust Benefit
Plans, or other plan or arrangement, and there are no restrictions on the rights of such Carolina Trust Entity to amend or terminate
any and all such retiree or post-termination of employment or services health or benefit plans or arrangements without incurring
any Liability. No Tax under Code Sections 4980B or 5000 has been incurred with respect to any Carolina Trust Benefit Plan, or
other plan or arrangement, and no circumstance exists that could give rise to such Taxes.
(j) Except as disclosed in Section 4.15(j) of the Carolina Trust Disclosure Memorandum, neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment for or related
to individual services (including severance, unemployment compensation, “excess parachute payment” as defined under
Code Section 280G, or otherwise) becoming due from any Carolina Trust Entity to any employee, officer, director or independent
contractor under any Carolina Trust Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Carolina
Trust Benefit Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefit, or any benefit
under any life insurance owned by any Carolina Trust Entity or the rights of any Carolina Trust Entity in, to or under any insurance
on the life of any current or former officer, director, or employee of any Carolina Trust Entity, or change any rights or obligations
of any Carolina Trust Entity with respect to such insurance.
(k) Section 4.15(k) of the Carolina Trust Disclosure Memorandum sets forth preliminary calculations, based on assumptions set
forth therein, of the following: (i) the amount of all payments and benefits to which each individual set forth on such Carolina
Trust Disclosure Memorandum is entitled to receive, pursuant to all employment, salary continuation, bonus, change in control,
and all other agreements, plans and arrangements, in connection with a termination of employment before or following, or otherwise
in connection with or contingent upon, the transactions contemplated under this Agreement (for the avoidance of doubt, excluding
payments or benefits in respect of vested equity awards) (each such total amount in respect of each such individual, the “Change
in Control Benefit”), other than the payment any such individual shall otherwise be entitled to receive as a gross-up
payment in respect of any excise tax imposed on the individual pursuant to Section 4999 of the Code as calculated pursuant to
the applicable agreement (any each such payment, a “Gross-Up Payment”); (ii) the amount of any Gross-Up Payment
payable to each such individual; and (iii) the aggregate amount of all Change in Control Benefits and Gross-Up Payments.
(l) No Carolina Trust Benefit Plan is or has been funded by, associated with, or related to a “voluntary employee’s
beneficiary association” within the meaning of Section 501(c)(9) of the Code, a “welfare benefit fund” within
the meaning of Section 419 of the Code, a “qualified asset account” within the meaning of Section 419A of the Code
or a “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA. The actuarial present values
of all accrued deferred compensation entitlements (including entitlements under any executive compensation, supplemental retirement,
or employment agreement) of employees and former employees of any Carolina Trust Entity and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans, whether or not subject to the provisions of Code Section 412 or
ERISA Section 302, have been fully reflected on the Carolina Trust Financial Statements in all material respects to the extent
required by and in accordance with GAAP.
(m) Each Carolina Trust Benefit Plan that is a “nonqualified deferred compensation plan” (within the meaning of
Section 409A of the Code) has been operated in material compliance with
Section 409A of the Code and the guidance issued by the
IRS with respect to such plans or is not required to comply therewith due to its grandfathered status under Section 409A of the
Code.
(n) All individuals who render services to any Carolina Trust Entity and who are authorized to participate in a Carolina Trust
Benefit Plan pursuant to the terms of such Carolina Trust Benefit Plan are in fact eligible to and authorized to participate in
such Carolina Trust Benefit Plan. All Carolina Trust Entities have, for purposes of the Carolina Trust Benefit Plans and all other
purposes, correctly classified all individuals performing services for such Carolina Trust Entity as common law employees, independent
contractors or agents, as applicable.
(o) Neither the Carolina Trust nor any of its ERISA Affiliates has had an “obligation to contribute” (as defined
in ERISA Section 4212) to, or other obligations or Liability in connection with, a “multiemployer plan” (as defined
in ERISA Sections 4001(a)(3) or 3(37)(A)) or any employee pension benefit plan within the meaning of ERISA Section 3(2) that is
subject to Section 412 of the Code or Section 302 of ERISA or a multiple employer plan within the meaning of Section 413(c) of
the Code or ERISA Sections 4063, 4064 or 4066.
(p) There are no payments or changes in terms due to any insured person as a result of this Agreement, the Merger or the transactions
contemplated herein, under any bank-owned, corporate-owned split dollar life insurance, other life insurance, or similar arrangement
or Contract, and the Successor Corporation shall, upon and after the Effective Time, succeed to and have all the rights in, to
and under such life insurance Contracts as Carolina Trust presently holds. Each Carolina Trust Entity will, upon the execution
and delivery of this Agreement, and will continue to have, notwithstanding this Agreement or the consummation of the transaction
contemplated hereby, all ownership rights and interest in all corporate or bank-owned life insurance.
(q) Each Carolina Trust Benefit Plan may be amended or terminated by Carolina Trust without the consent of any Person.
(r) No Carolina Trust Benefit Plan that is described in ERISA Section 3(2) is involved or connected with any fund or other
investment that has or involves any early termination, market value adjustment or other similar fee, payment requirement, or other
charge.
(s) Other than agreements identified in Section 4.15(a) of the Carolina Trust Disclosure Memorandum, no Carolina Trust Benefit
Plan, or other plan or arrangement, is subject to any requirement of Section 409A(a)(2), (3), or (4) of the Code.
(t) Other than the Carolina Trust Benefit Plans identified in Section 4.15(a) of the Carolina Trust Disclosure Memorandum,
no Carolina Trust Benefit Plan provides for the potential issuance of equity compensation.
(u) No event has occurred or condition exists that could subject the Carolina Trust or any of its ERISA Affiliates to Liability
(whether direct or indirect, contingent or otherwise) on account of a violation of the health care requirements of Part 6 or 7
of Title I of ERISA or Section 4980B or 4980D of the Code.
(v) Each group health plan sponsored, maintained or contributed to by the Carolina Trust or any of its ERISA Affiliates (or
to which the Carolina Trust or any of its ERISA Affiliates is obligated to contribute or otherwise has any liability or contingent
liability) satisfies the requirements of the Patient Protection and Affordable Care Act and the regulations and guidance issued
thereunder (“PPACA”), such that there is no Tax or penalty that could be imposed pursuant
to the PPACA that
relates to such group health plan. To Carolina Trust’s Knowledge, no condition exists that could cause the Carolina Trust
or any of its ERISA Affiliates to incur Liability for any assessable payment under Section 4980H of the Code.
(a) Except as reflected in the Carolina Trust Financial Statements, disclosed in Carolina Trust Exchange Act Reports or otherwise
disclosed in Section 4.16(a) of the Carolina Trust Disclosure Memorandum, as of the date of this Agreement, none of the Carolina
Trust Entities, nor any of their respective Assets, businesses, or operations, is a party to, or is bound or affected by, or receives
benefits under, (i) any employment, bonus, severance, termination, consulting, or retirement Contract providing for aggregate
payments to any Person in any calendar year in excess of $25,000, (ii) any Contract relating to the borrowing of money by
any Carolina Trust Entity or the guarantee by any Carolina Trust Entity of any such obligation (other than Contracts evidencing
the creation of deposit liabilities, endorsements or guarantees in connection with presentation of items for collection, purchases
of federal funds, advances from the Federal Reserve or Federal Home Loan Bank, entry into repurchase agreements fully secured
by U.S. government securities or U.S. government agency securities, advances of depository institution Subsidiaries incurred in
the ordinary course of Carolina Trust’s business, and trade payables and Contracts relating to borrowings or guarantees
made in the ordinary course of Carolina Trust’s business), (iii) any Contract which prohibits or restricts any Carolina
Trust Entity or any personnel of a Carolina Trust Entity from engaging in any business activities in any geographic area, line
of business or otherwise in competition with any other Person, (iv) any Contract involving Intellectual Property (other than Contracts
entered into in the ordinary course with employees, vendors or customers, reasonable and customary confidentiality or nondisclosure
agreements entered into with third parties, or “shrink-wrap” or “click-through” software licenses), (v) any
Contract relating to the provision of data processing, network communication, or other technical services to or by any Carolina
Trust Entity, (vi) any Contract relating to the purchase or sale of any goods or services (other than Contracts entered into
in the ordinary course of business and involving payments under any individual Contract or series of contracts not in excess of
$25,000), (vii) any exchange-traded or over-the-counter swap, forward, future, option, cap, floor, or collar financial Contract,
or any other interest rate or foreign currency protection Contract or any Contract that is a combination thereof not included
on its balance sheet, and (viii) any other Contract that would be required to be filed as an exhibit to a Form 10-K filed by Carolina
Trust as of the date of this Agreement pursuant to the reporting requirements of the Exchange Act (together with all Contracts
referred to in Sections 4.11 and 4.15(a), the “Carolina Trust Contracts”).
(b) With respect to each Carolina Trust Contract, (i) the Contract is in full force and effect; (ii) no Carolina
Trust Entity is in material Default thereunder; (iii) no Carolina Trust Entity has repudiated or waived any material provision
of any such Contract; (iv) no other party to any such Contract is, to Carolina Trust’s Knowledge, in Default in any
respect or has repudiated or waived any material provision thereunder; and (v) except as disclosed in Section 4.16(b) of the Carolina
Trust Disclosure Memorandum, no consent which has not been or will not be obtained is required by a Contract for the execution,
delivery, or performance of this Agreement, the consummation of the Merger or the other transactions contemplated hereby. Section
4.16(b) of the Carolina Trust Disclosure Memorandum lists every consent required by any Contract involving an amount in excess
of $50,000. All of the indebtedness of any Carolina Trust Entity for money borrowed (other than deposit liabilities, purchases
of federal funds, advances from the Federal Reserve or Federal Home Loan Bank, repurchase agreements fully secured by U.S. government
securities or U.S. government agency securities, advances of depository institution Subsidiaries incurred in the ordinary course
of Carolina Trust’s business, and trade payables and Contracts relating to
borrowings or guarantees made in the ordinary
course of Carolina Trust’s business) is prepayable at any time by such Carolina Trust Entity without penalty, premium or
charge.
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4.17
|
Privacy
of Customer Information.
|
(a) For the purposes contemplated by this Agreement, each Carolina Trust Entity has valid rights to use and transfer to Carolina
Financial and to CresCom Bank all IIPI relating to customers, former customers, and prospective customers that will be transferred
pursuant to this Agreement.
(b) Each Carolina Trust Entity’s collection and use of such IIPI and the transfer of such IIPI to Carolina Financial
or CresCom Bank complies in all material respects with Carolina Trust’s Gramm-Leach-Bliley Act privacy notice, the Gramm-Leach-Bliley
Act, and the Fair Credit Reporting Act.
Except
as disclosed in Section 4.18 of the Carolina Trust Disclosure Memorandum, there is no Litigation instituted or pending, or, to
the Knowledge of Carolina Trust, threatened (or unasserted but considered probable of assertion) against any Carolina Trust Entity,
or to Carolina Trust’s Knowledge, against any director, officer, employee, or agent of any Carolina Trust Entity in their
capacities as such or with respect to any service to or on behalf of any Carolina Trust Benefit Plan or any other Person at the
request of the Carolina Trust Entity or Carolina Trust Benefit Plan, or against any Asset, interest, or right of any of them,
nor are there any Orders or judgments outstanding against any Carolina Trust Entity. No claim for indemnity has been made or,
to Carolina Trust’s Knowledge, threatened by any director, officer, employee, independent contractor, or agent to any Carolina
Trust Entity and to the Knowledge of Carolina Trust, no basis for any such claim exists.
Except
for immaterial late filings, since December 31, 2015, each Carolina Trust Entity has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it was required to file with Governmental Authorities.
As of their respective dates, each of such reports and documents, including the financial statements, exhibits, and schedules
thereto, complied in all material respects with all applicable Laws. As of their respective dates, such reports and documents
did not, in all material respects, contain any untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made,
not misleading.
Carolina
Trust’s internal control over financial reporting is effective to provide reasonable assurance regarding the reliability
of Carolina Trust’s financial reporting and the preparation of Carolina Trust financial statements for external purposes
in accordance with GAAP. Carolina Trust’s internal control over financial reporting is effective to provide reasonable assurance
(i) regarding the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions and disposition
of Carolina Trust’s consolidated Assets; (ii) that transactions are recorded as necessary to permit the preparation of Carolina
Trust’s financial statements in accordance with GAAP and that receipts and expenditures are being made only in accordance
with the authorizations of Carolina Trust’s management and directors; and (iii) regarding
prevention or
timely detection
of unauthorized acquisition, use or disposition of Carolina Trust’s consolidated Assets that could have a material
impact on Carolina Trust’s financial statements.
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4.21
|
Loans
to, and Transactions with, Executive Officers and Directors.
|
No
Carolina Trust Entity has, since December 31, 2015, extended or maintained credit, arranged for the extension of credit, or renewed
an extension of credit, in the form of a personal loan to or for any director or executive officer (or equivalent thereof) of
any Carolina Trust Entity, except as permitted by Section 13(k) of the Exchange Act and Federal Reserve Regulation O. Section
4.21 of the Carolina Trust Disclosure Memorandum sets forth a list of all Loans as of the date hereof by the Carolina Trust Entities
to any directors, executive officers and principal shareholders (as such terms are defined in Regulation O of the Federal Reserve
(12 C.F.R. Part 215)) of Carolina Trust or any Carolina Trust Entity. There are no employee, officer, director or other affiliate
Loans on which the borrower is paying a rate other than that reflected in the note or other relevant credit or security agreement
or on which the borrower is paying a rate which was below market rate for similar loans to similarly situated borrowers at the
time the Loan was originated. All such Loans are and were originated in compliance in all material respects with all applicable
laws. No director or executive officer of Carolina Trust or any Carolina Trust Entity, or any “associate” (as such
term is defined in Rule 14a-1 under the Exchange Act) or related interest of any such Person, has any interest in any contract
or property (real or personal, tangible or intangible), used in, or pertaining to, the business of Carolina Trust or any Carolina
Trust Entity.
No
Carolina Trust Entity nor, to the Knowledge of Carolina Trust, any Affiliate thereof, has taken or agreed to take any action or
has any Knowledge of any fact or circumstance that is reasonably likely to materially impede or delay receipt of any required
Consents or result in the imposition of a condition or restriction of the type referred to in the last sentence of Section 8.1(b).
No Carolina Trust Entity is subject to any cease-and-desist or other order or enforcement action issued by, or is a party to any
written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or has been ordered to pay any civil penalty by, or is a recipient of any supervisory
letter from, or has adopted any board resolutions at the request or suggestion of any Regulatory Authority or other Governmental
Authority that restricts the conduct of its business or that relates to its capital adequacy, its ability to pay dividends, its
credit or risk management policies, its management or its business (any such agreement, memorandum of understanding, letter, undertaking,
order, directive or resolutions, whether or not set forth in the Carolina Trust Disclosure Memorandum, a “Carolina Trust
Regulatory Agreement”), nor are there any pending or, to the Knowledge of Carolina Trust, threatened regulatory investigations
or other actions by any Regulatory Authority or other Governmental Authority that could reasonably be expected to lead to the
issuance of any such Carolina Trust Regulatory Agreement.
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4.23
|
Brokers
and Finders; Opinion of Financial Advisor.
|
Except
for the Carolina Trust Financial Advisor, neither Carolina Trust nor any Carolina Trust Entity, or any of their respective officers,
directors, employees, or Representatives, has employed any broker, finder, or investment banker or incurred any Liability for
any financial advisory fees, investment banker’s fees, brokerage fees, commissions, or finder’s or other such fees
in connection with this Agreement or the transactions contemplated hereby. Section 4.23 of the Carolina Trust Disclosure Memorandum
lists the fees and expenses that are currently owed to the Carolina Trust Financial Advisor and that will be owed to the Carolina
Trust Financial Advisor as a result of
transactions contemplated by this Agreement. Carolina Trust has received the written opinion
of the Carolina Trust Financial Advisor, dated as of the date of this Agreement, to the effect that the Merger Consideration is
fair, from a financial point of view, to the holders of Carolina Trust Common Stock, a signed copy of which has been or will be
delivered to Carolina Financial.
|
4.24
|
Board
Recommendation.
|
Carolina
Trust’s Board, at a meeting duly called and held, has by unanimous vote of the directors present (i) adopted this Agreement
and approved the transactions contemplated hereby, including the Merger and the transactions contemplated hereby and thereby,
and has determined that, taken together, they are fair to and in the best interests of Carolina Trust’s shareholders, and
(ii) resolved, subject to the terms of this Agreement, to recommend that the holders of the shares of Carolina Trust Common
Stock approve this Agreement, the Merger, and the related transactions and to call and hold a meeting of Carolina Trust’s
shareholders at which this Agreement, the Merger, and the related transactions shall be submitted to the holders of the shares
of Carolina Trust Common Stock for approval.
|
4.25
|
Statements
True and Correct.
|
(a) No statement, certificate, instrument, or other writing furnished or to be furnished by any Carolina Trust Entity or any
Affiliate thereof to Carolina Financial pursuant to this Agreement or any other document, agreement, or instrument referred to
herein contains or will contain any untrue statement of material fact or will omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading.
(b) None of the information supplied or to be supplied by any Carolina Trust Entity or any Affiliate thereof for inclusion
in the Registration Statement to be filed by Carolina Financial with the SEC in connection with the Merger will (after taking
into account any supplemental or amended information provided prior to approval), when the Registration Statement is declared
effective by the SEC, be false or misleading with respect to any material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were made, not misleading. None of the information
supplied or to be supplied by the Carolina Trust Entity or any Affiliate thereof for inclusion in any final Proxy Statement/Prospectus
to be mailed to the shareholders of Carolina Trust in connection with Carolina Trust’s Shareholders’ Meeting, and
any other documents to be filed by any Carolina Trust Entity or any Affiliate thereof with any Regulatory Authority in connection
with the transactions contemplated hereby, will, (after taking into account any supplemental or amended information provided prior
to filing, mailing, or the date of Carolina Trust’s Shareholders’ Meeting) at the respective time such documents are
filed, and with respect to any Proxy Statement/Prospectus, when first mailed to the shareholders of Carolina Trust be false or
misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in the case of the Proxy Statement/Prospectus or any
amendment thereof or supplement thereto, at the time of Carolina Trust’s Shareholders’ Meeting be false or misleading
with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxies for the meeting.
(c) All documents that any Carolina Trust Entity or any Affiliate thereof is responsible for filing with any Governmental Authority
in connection with the transactions contemplated hereby will comply as to form in all material respects with the provisions of
applicable Law.
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4.26
|
Delivery
of Carolina Trust Disclosure Memorandum.
|
Carolina
Trust has delivered to Carolina Financial a complete Carolina Trust Disclosure Memorandum.
|
4.27
|
No
Additional Representations.
|
Except
for the representations and warranties specifically set forth in Article 4 of this Agreement, neither Carolina Trust nor any of
its Affiliates or Representatives, nor any other Person, makes or shall be deemed to make any representation or warranty to Carolina
Financial, express or implied, at law or in equity, with respect to the transactions contemplated hereby, and Carolina Trust hereby
disclaims any such representation or warranty by Carolina Trust or any of its officers, directors, employees, agents, or representatives,
or any other person. Carolina Trust acknowledges and agrees that neither Carolina Financial nor any other Person has made or is
making any express or implied representation or warranty other than those contained in Article 5.
Article
5
REPRESENTATIONS AND WARRANTIES OF CAROLINA FINANCIAL
Carolina
Financial hereby represents and warrants to Carolina Trust as follows:
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5.1
|
Organization,
Standing, and Power.
|
Carolina
Financial is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Delaware and
is a financial holding company within the meaning of the BHCA. CresCom Bank is a South Carolina state bank, duly organized, validly
existing and in good standing under the laws of the State of South Carolina. Each of Carolina Financial and CresCom Bank has the
corporate power and authority to carry on its business as now conducted and to own, lease, and operate its Assets. Each of Carolina
Financial and CresCom Bank is duly qualified or licensed to transact business as a foreign corporation in good standing in the
states of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed
is not reasonably likely to have, individually or in the aggregate, a Carolina Financial Material Adverse Effect. The minute book
and other organizational documents for each of Carolina Financial and CresCom Bank (including any and all amendments thereto)
have been made available to Carolina Trust for its review and are complete and accurate as in effect as of the date of this Agreement
and accurately reflect in all material respects all amendments thereto and all proceedings of the respective Board of Directors
(including any committees of the Board of Directors) and stockholders thereof; provided, however, that to the extent that
minutes for the most recent meetings have not been transcribed and finalized and minutes of deliberations regarding discussions
with Carolina Trust may be redacted. CresCom Bank is an “insured institution” as defined in the Federal Deposit Insurance
Act and applicable regulations thereunder, and the deposits held by CresCom Bank are insured up to applicable limits by the FDIC’s
Deposit Insurance Fund.
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5.2
|
Authority;
No Breach by Agreement.
|
(a) Carolina Financial has the corporate power and authority necessary to execute, deliver, and perform this Agreement and
with respect to the Merger, upon the approval of the Merger, including any necessary approvals referred to in Sections 8.1(b)
and 8.1(c), to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement and the consummation of the transactions contemplated herein, including the Merger,
have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Carolina Financial.
Subject to any necessary approvals referred to in Sections 8.1(b) and 8.1(c), this Agreement represents a legal, valid, and binding
obligation of Carolina Financial, enforceable against Carolina Financial in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance
or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Carolina Financial, nor the consummation by Carolina Financial
and CresCom Bank of the transactions contemplated hereby, nor compliance by Carolina Financial and CresCom Bank with any of the
provisions hereof, will (i) conflict with or result in a breach of any provision of Carolina Financial’s Certificate of
Incorporation or Bylaws or the Articles of Incorporation or Bylaws of any Carolina Financial Subsidiary or any resolution adopted
by the Board of Directors or the shareholders of any Carolina Financial Entity, or (ii) constitute or result in a Default under,
or require any Consent pursuant to, or result in the creation of any Lien on any material Asset of any Carolina Financial Entity
under, any material Contract or material Permit of any Carolina Financial Entity or, (iii) subject to receipt of the requisite
Consents referred to in Section 8.1(b), constitute or result in a Default under, or require any Consent pursuant to, any Law or
Order applicable to any Carolina Financial Entity or any of their respective material Assets (including any Carolina Financial
Entity becoming subject to or liable for the payment of any Tax on any of the Assets owned by any Carolina Financial Entity being
reassessed or revalued by any Regulatory Authority).
(c) Except for (a) the filing of applications and notices with, and approval of such applications and notices from, the Federal
Reserve, the FDIC, the South Carolina Board of Financial Institutions and North Carolina Commissioner of Banks, (b) the filing
of any other required applications, filings, or notices with any other federal or state banking, insurance or other regulatory
or self-regulatory authorities or any courts, administrative agencies or commissions or other Governmental Authorities and approval
of or non-objection to such applications, filings and notices, (c) the filing with the SEC of the Registration Statement in which
the Proxy Statement/Prospectus will be included, and the declaration of effectiveness of the Registration Statement, (d) the filing
of the Certificate of Merger and the Articles of Merger, (e) any consents, authorizations, approvals, filings or exemptions in
connection with compliance with the applicable provisions of federal and state securities laws relating to the regulation of broker-dealers,
investment advisers or transfer agents, and federal commodities laws relating to the regulation of futures commission merchants
and the rules and regulations thereunder and of any applicable industry self-regulatory organization, and the rules and regulations
of the NASDAQ Stock Market, or that are required under consumer finance, mortgage banking and other similar laws, and (f) notices
or filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, if any, no consents or approvals of or
filings or registrations with any Governmental Authority are necessary in connection with the consummation by Carolina Financial
of the Merger and the other transactions contemplated by this Agreement. No consents or approvals of or filings or registrations
with any Governmental Authority are necessary in connection with the execution and delivery by Carolina Financial of this Agreement.
The
authorized capital stock of Carolina Financial consists of 50,000,000 shares of Carolina Financial Common Stock, of which 22,282,862
shares are issued and outstanding as of the date of
this Agreement, and 1,000,000 shares of Carolina Financial preferred stock,
of which no shares are issued and outstanding as of the date of this Agreement. All of the issued and outstanding shares of capital
stock of Carolina Financial are duly and validly issued and outstanding and are fully paid and nonassessable. Carolina Financial
Common Stock is listed for trading and quotation on the Nasdaq Capital Market. None of the outstanding shares of capital stock
of Carolina Financial has been issued in violation of any preemptive rights of the current or past stockholders of Carolina Financial.
The shares of Carolina Financial Common Stock to be issued in the Merger will be (i) duly authorized, validly issued, fully paid
and nonassessable; (ii) registered under the Securities Act; and (iii) listed for trading and quotation on the Nasdaq Capital
Market.
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5.4
|
Carolina
Financial Subsidiaries
|
Carolina
Financial has no Subsidiaries except as set forth in the Carolina Financial Exchange Act Reports, and Carolina Financial owns
all of the equity interests in each of its Subsidiaries. No capital stock (or other equity interest) of any such Subsidiary is
or may become required to be issued (other than to another Carolina Financial Entity) by reason of any Rights, and there are no
Contracts by which any such Subsidiary is bound to issue (other than to another Carolina Financial Entity) additional shares of
its capital stock (or other equity interests) or Rights or by which any Carolina Financial Entity is or may be bound to transfer
any shares of the capital stock (or other equity interests) of any such Subsidiary (other than to another Carolina Financial Entity).
There are no Contracts relating to the rights of any Carolina Financial Entity to vote or to dispose of any shares of the capital
stock (or other equity interests) of any such Subsidiary. All of the shares of capital stock (or other equity interests) of each
Subsidiary are fully paid and nonassessable and are owned directly or indirectly by Carolina Financial free and clear of any Lien.
|
5.5
|
Exchange
Act Filings; Offer and Sale of Securities; Financial Statements.
|
(a) Carolina Financial has timely filed and made available to Carolina Trust all Exchange Act Documents required to be filed
by Carolina Financial since December 31, 2016 (together with all such Exchange Act Documents filed, whether or not required to
be filed, the “Carolina Financial Exchange Act Reports”). The Carolina Financial Exchange Act Reports (i) at
the time filed (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing),
complied in all material respects with the applicable requirements of the Securities Laws and other applicable Laws and (ii) did
not, at the time they were filed (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date
of such amended or subsequent filing or, in the case of registration statements, at the effective date thereof) contain any untrue
statement of a material fact or omit to state a material fact required to be stated in such Carolina Financial Exchange Act Reports
or necessary in order to make the statements in such Carolina Financial Exchange Act Reports, in light of the circumstances under
which they were made, not misleading. No Carolina Financial Subsidiary is required to file any Exchange Act Documents. Each offering
or sale of securities by Carolina Financial (i) was either registered under the Securities Act or made pursuant to a valid exemption
from registration, (ii) complied in all material respects with the applicable requirements of the Securities Laws and other applicable
Laws, except for immaterial late “blue sky” filings, including disclosure and broker/dealer registration requirements,
and (iii) was made pursuant to offering documents which did not, at the time of the offering (or, in the case of registration
statements, at the effective date thereof) contain any untrue statement of a material fact or omit to state a material fact required
to be stated in the offering documents or necessary in order to make the statements in such documents, in light of the circumstances
under which they were made, not misleading. Carolina Financial’s principal executive officer and principal financial officer
have made the certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act and the rules and regulations of the Exchange
Act
thereunder with respect to the Carolina Financial Exchange Act Reports to the extent such rules or regulations applied at
the time of the filing. For purposes of the preceding sentence, “principal executive officer” and “principal
financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act. Such certifications contain no
qualifications or exceptions to the matters certified therein and have not been modified or withdrawn; and neither Carolina Financial
nor any of its officers has received notice from any Regulatory Authority questioning or challenging the accuracy, completeness,
content, form, or manner of filing or submission of such certifications.
(b) Each of the Carolina Financial Financial Statements (including, in each case, any related notes) contained in the Carolina
Financial Exchange Act Reports, including any Carolina Financial Exchange Act Reports filed after the date of this Agreement until
the Effective Time, complied, or will comply, as to form in all material respects with the applicable published rules and regulations
of the Exchange Act with respect thereto, was, or will be, prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited interim
statements, as permitted by Form 10-Q of the Exchange Act), fairly presented in accordance with GAAP the consolidated financial
position of Carolina Financial and its Subsidiaries as of the respective dates and the consolidated results of operations and
cash flows for the periods indicated, including the fair values of the assets and liabilities shown therein, except that the unaudited
interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected
to be material in amount or effect. The Carolina Financial Financial Statements are certified to the extent required by the Sarbanes-Oxley
Act.
(c) Carolina Financial’s independent registered public accountants, which have expressed their opinion with respect to
the Financial Statements of Carolina Financial and its Subsidiaries whether or not included in Carolina Financial’s Exchange
Act Reports (including the related notes), are and have been throughout the periods covered by such Financial Statements (x) a
registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act) (to the extent applicable during
such period), (y) “independent” with respect to Carolina Financial within the meaning of Regulation S-X and, (z) with
respect to Carolina Financial, in compliance with subsections (g) through (l) of Section 10A of the Exchange Act and related Securities
Laws. Carolina Financial’s independent public accountants have audited Carolina Financial’s year-end financial statements,
and have reviewed Carolina Financial’s interim financial statements that are included in the Financial Statements of Carolina
Financial in accordance with Public Company Accounting Oversight Board Auditing Standard No. 4105.
(d) Carolina Financial maintains disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the Exchange Act;
such controls and procedures are effective to ensure that all material information concerning Carolina Financial is made known
on a timely basis to the individuals responsible for the preparation of Carolina Financial’s Exchange Act Documents.
|
5.6
|
Absence
of Undisclosed Liabilities.
|
Neither
Carolina Financial nor any of its Subsidiaries has incurred any liability or obligation of any nature whatsoever (whether absolute,
accrued, contingent, determined, determinable, or otherwise and whether due or to become due), except for (i) those liabilities
that are reflected or reserved against on the consolidated balance sheet of Carolina Financial included in its Quarterly Report
on Form 10-Q for the quarter ended March 31, 2019 (including any notes thereto), (ii) liabilities incurred in the ordinary course
of business consistent in nature and amount with past practice since March 31, 2019, or (iii) liabilities incurred in connection
with this Agreement and the transactions contemplated hereby. Neither Carolina Financial nor any of its Subsidiaries
is a party
to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract or arrangement
(including any Contract or arrangement relating to any transaction or relationship between or among Carolina Financial and any
of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited
purpose entity or Person, on the other hand, or any “off-balance sheet arrangement”), where the result, purpose or
intended effect of such Contract or arrangement is to avoid disclosure of any material transaction involving, or material liabilities
of, Carolina Financial or any of its Subsidiaries in Carolina Financial’s or such Subsidiary’s financial statements.
|
5.7
|
Absence
of Certain Changes or Events.
|
Since
December 31, 2018, (i) there have been no events, changes, or occurrences which have had, or are reasonably likely to have, individually
or in the aggregate, a Carolina Financial Material Adverse Effect, (ii) none of the Carolina Financial Entities has taken any
action, or failed to take any action, prior to the date of this Agreement, which action or failure, if taken after the date of
this Agreement, would represent or result in a material breach or violation of any covenants and agreements of Carolina Financial
provided in this Agreement, and (iii) since December 31, 2018, the Carolina Financial Entities have conducted their respective
businesses in the ordinary course of business consistent with past practice.
As
of the date of this Agreement, it is the present intention, and as of the day of the Effective Time, it will be the present intention,
of Carolina Financial to continue, either through Carolina Financial or through a member of Carolina Financial’s “qualified
group” within the meaning of Treasury Regulations Section 1.368-1(d)(4)(ii) (the “Qualified Group”),
at least one significant historic business line of Carolina Trust, or to use at least a significant portion of Carolina Trust’s
historic business assets in a business, in each case within the meaning of Treasury Regulations Section 1.368-1(d). As of the
date of this Agreement and as of the Effective Time, neither Carolina Financial nor any “related person” (as defined
in Treasury Regulations Section 1.368-1(e)(4)) to Carolina Financial has or will have any plan or intention to redeem or reacquire,
either directly or indirectly, any of the Carolina Financial Common Stock issued to the holders of Carolina Trust Common Stock
in connection with the Merger. As of the date of this Agreement and as of the Effective Time, Carolina Financial does not have
and will not have any plan or intention to sell or otherwise dispose of any of the assets of Carolina Trust acquired in the Merger,
except for dispositions made in the ordinary course of business or transfers described in Section 368(a)(2)(C) of the Code or
described and permitted in Treasury Regulations Section 1.368-2(k).
|
5.9
|
Compliance
with Laws.
|
(a) Carolina Financial is a financial holding company duly registered and in good standing as such with the Federal Reserve.
CresCom Bank is a state chartered bank in good standing with the South Carolina Board of Financial Institutions.
(b) Compliance with Permits, Laws and Orders.
(i)
Each of the Carolina Financial Entities has in effect all Permits and has made all filings, applications, and registrations
with Governmental Authorities that are required for it to own, lease, or operate its assets and to carry on its business as now
conducted, and to the Knowledge of Carolina Financial, there has occurred no Default under any such Permit applicable to their
respective businesses or employees conducting their respective businesses.
(ii)
To the Knowledge of Carolina Financial, none of the Carolina Financial Entities is in material Default under any Laws or
Orders applicable to its business or employees conducting its business.
(iii)
None of the Carolina Financial Entities has received any notification or communication from any Governmental Authority
(A) asserting that Carolina Financial or any of its Subsidiaries is in Default under any of the Permits, Laws, or Orders
which such Governmental Authority enforces, (B) threatening to revoke any Permits, or (C) requiring Carolina Financial
or any of its Subsidiaries (x) to enter into or consent to the issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or (y) to adopt any resolution of its Board of Directors or similar undertaking.
(iv)
There (A) is no material unresolved legal violation cited by any Governmental Authority with respect to any report
or statement relating to any examinations or inspections of Carolina Financial or any of its Subsidiaries, (B) are no written
notices or correspondence received by Carolina Financial with respect to pending formal inquiries of a material nature by, or
disputes with, any Governmental Authority with respect to Carolina Financial’s or any of Carolina Financial’s Subsidiaries’
business, operations, policies, or procedures since its inception, and (C) to the Knowledge of Carolina Financial, is no investigation
or review by any Governmental Authority is pending or threatened, nor has any Governmental Authority indicated an intention to
conduct, any investigation or review (other than regular or routine examinations or inspections) of it or any of its Subsidiaries.
(v)
None of the Carolina Financial Entities nor, to the Knowledge of Carolina Financial, any of its directors, officers, employees,
or Representatives acting on its behalf has offered, paid, or agreed to pay any Person, including any Government Authority, directly
or indirectly, any thing of value for the purpose of, or with the intent of obtaining or retaining any business in violation of
applicable Laws, including (1) using any corporate funds for any unlawful contribution, gift, entertainment, or other unlawful
expense relating to political activity, (2) making any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds, (3) violating any provision of the Foreign Corrupt Practices Act of 1977, as amended,
or (4) making any bribe, rebate, payoff, influence payment, kickback, or other unlawful payment.
(vi)
Each Carolina Financial Entity has complied in all material respects with all requirements of Law under the Bank Secrecy
Act and the USA Patriot Act, and each Carolina Financial Entity has timely filed all reports of suspicious activity, including
those required under 12 C.F.R. § 353.3.
(vii)
Each Carolina Financial Entity’s collection and use of IIPI complies in all material respects with Carolina Financial’s
Gramm-Leach-Bliley Act privacy notice, the Gramm-Leach-Bliley Act, and the Fair Credit Reporting Act.
There
is no Litigation instituted or pending, or, to the Knowledge of Carolina Financial, threatened (or unasserted but considered probable
of assertion) against Carolina Financial, or to Carolina Financial’s Knowledge, against any director, officer, employee,
or agent of Carolina Financial in their capacities as such or with respect to any service to or on behalf of any Employee Benefit
Plan or any other Person at the request of the Carolina Financial or Employee Benefit Plan of Carolina Financial, or against any
Asset, interest, or right of any of them, nor are there
any Orders or judgments outstanding against Carolina Financial; and no
claim for indemnity has been made or, to Carolina Financial’s Knowledge, threatened by any director, officer, employee,
independent contractor, or agent to Carolina Financial and, to the Knowledge of Carolina Financial, no basis for any such claim
exists.
Except
for immaterial late filings, since December 31, 2016, each Carolina Financial Entity has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it was required to file with Governmental Authorities.
As of their respective dates, each of such reports and documents, including the financial statements, exhibits, and schedules
thereto, complied in all material respects with all applicable Laws. As of their respective date, such reports and documents did
not, in all material respects, contain any untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not
misleading.
Carolina
Financial ’s internal control over financial reporting is effective to provide reasonable assurance regarding the reliability
of Carolina Financial’s financial reporting and the preparation of Carolina Financial’s financial statements for external
purposes in accordance with GAAP. Carolina Financial’s internal control over financial reporting is effective to provide
reasonable assurance (i) regarding the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions
and disposition of Carolina Financial’s consolidated Assets; (ii) that transactions are recorded as necessary to permit
the preparation of Carolina Financial’s financial statements in accordance with GAAP and that receipts and expenditures
are being made only in accordance with the authorizations of Carolina Financial’s management and directors; and (iii) regarding
prevention or timely detection of unauthorized acquisition, use or disposition of Carolina Financial’s consolidated Assets
that could have a material impact on Carolina Financial’s consolidated financial statements.
No
Carolina Financial Entity is subject to any cease-and-desist or other order or enforcement action issued by, or is a party to
any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil penalty by, or is a recipient
of any supervisory letter from, or has adopted any board resolutions at the request or suggestion of any Regulatory Authority
or other Governmental Authority that restricts the conduct of its business or that relates to its capital adequacy, its ability
to pay dividends, its credit or risk management policies, its management or its business (any such agreement, memorandum of understanding,
letter, undertaking, order, directive or resolutions, a “Carolina Financial Regulatory Agreement”), nor are
there any pending or, to the Knowledge of Carolina Financial, threatened regulatory investigations or other actions by any Regulatory
Authority or other Governmental Authority that could reasonably be expected to lead to the issuance of any such Carolina Financial
Regulatory Agreement.
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5.14
|
Brokers
and Finders; Opinion of Financial Advisor.
|
Except
for the Carolina Financial Financial Advisor, neither Carolina Financial nor any Carolina Financial Entity, or any of their respective
officers, directors, employees, or Representatives, has employed any broker, finder or investment banker or incurred any Liability
for any financial
advisory fees, investment bankers’ fees, brokerage fees, commissions, or finder’s or other such
fees in connection with this Agreement or the transactions contemplated hereby. The board of directors of Carolina Financial has
received the opinion of the Carolina Financial Financial Advisor (which, if initially rendered orally, has been or will be confirmed
by a written opinion, dated the same date) to the effect that, as of the date of such opinion, and based upon and subject to the
factors, assumptions and qualifications contained therein, the Merger Consideration is fair, from a financial point of view, to
Carolina Financial.
No
Carolina Financial Entity or any Affiliate thereof has taken or agreed to take any action or has any Knowledge of any fact or
circumstance that is reasonably likely to materially impede or delay receipt of any required Consents or result in the imposition
of a condition or restriction of the type referred to in the last sentence of Section 8.1(b).
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5.16
|
Available
Consideration.
|
Carolina
Financial has available to it, or as of the Effective Time will have available to it, sufficient shares of authorized and unissued
Carolina Financial Common Stock and all funds necessary for the issuance and payment of the Merger Consideration and has funds
available to it to satisfy its payment obligations under this Agreement.
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5.17
|
Statements
True and Correct.
|
(a) No statement, certificate, instrument, or other writing furnished or to be furnished by any Carolina Financial Entity or
any Affiliate thereof to Carolina Trust pursuant to this Agreement or any other document, agreement, or instrument referred to
herein contains or will contain any untrue statement of material fact or will omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading.
(b) None of the information supplied or to be supplied by any Carolina Financial Entity or any Affiliate thereof for inclusion
in the Registration Statement to be filed by Carolina Financial with the SEC in connection with the Merger will (after taking
into account any supplemental or amended information provided prior to approval), when the Registration Statement is declared
effective by the SEC, be false or misleading with respect to any material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were made, not misleading. None of the information
supplied or to be supplied by any Carolina Financial Entity or any Affiliate thereof for inclusion in any final Proxy Statement/Prospectus
to be mailed to the shareholders of Carolina Trust in connection with Carolina Trust’s Shareholders’ Meeting, and
any other documents to be filed by any Carolina Financial Entity or any Affiliate thereof with any Regulatory Authority in connection
with the transactions contemplated hereby, will, (after taking into account any supplemental or amended information provided prior
to filing, mailing, or the date of Carolina Trust’s Shareholders’ Meeting) at the respective time such documents are
filed, and with respect to any Proxy Statement/Prospectus, when first mailed to the shareholders of Carolina Trust be false or
misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in the case of the Proxy Statement/Prospectus or any
amendment thereof or supplement thereto, at the time of Carolina Trust’s Shareholders’ Meeting, be false or misleading
with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxies for each meeting.
(c) All documents that any Carolina Financial Entity or any Affiliate thereof is responsible for filing with any Governmental
Authority in connection with the transactions contemplated hereby will comply as to form in all material respects with the provisions
of applicable Law.
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5.18
|
No
Additional Representations.
|
Except
for the representations and warranties specifically set forth in Article 5 of this Agreement, neither Carolina Financial nor any
of its Affiliates or Representatives, nor any other Person, makes or shall be deemed to make any representation or warranty to
Carolina Trust, express or implied, at law or in equity, with respect to the transactions contemplated hereby, and Carolina Financial
hereby disclaims any such representation or warranty by Carolina Financial or any of its officers, directors, employees, agents,
or representatives, or any other person. Carolina Financial acknowledges and agrees that neither Carolina Trust nor any other
Person has made or is making any express or implied representation or warranty other than those contained in Article 4.
Article
6
CONDUCT OF BUSINESS PENDING CONSUMMATION
|
6.1
|
Affirmative
Covenants of Carolina Trust and Carolina Financial.
|
(a) From the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of Carolina Financial shall have been obtained, and except as otherwise expressly contemplated herein, Carolina
Trust shall, and shall cause each of its Subsidiaries to, (i) operate its business only in the usual, regular, and ordinary course,
(ii) use commercially reasonable efforts to preserve intact its business organization and Assets and maintain its rights and franchises,
(iii) use commercially reasonable efforts to cause its representations and warranties to be correct at all times, (iv) use best
efforts to provide all information requested by Carolina Financial related to loans or other transactions made by Carolina Trust
with a value equal to or exceeding $1,000,000, and (v) take no action which would reasonably be expected to (A) adversely affect
the ability of any Party to obtain any Consents required for the transactions contemplated hereby without imposition of a condition
or restriction of the type referred to in the last sentences of Sections 8.1(b) or 8.1(c), or (B) materially adversely affect
the ability of any Party to perform its covenants and agreements under this Agreement.
(b) From the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of Carolina Trust shall have been obtained, and except as otherwise expressly contemplated herein, Carolina
Financial shall, and shall cause each of its Subsidiaries to, (i) operate its business only in the usual, regular, and ordinary
course, (ii) use commercially reasonable efforts to preserve intact its business organization and Assets and maintain its rights
and franchises, (iii) use commercially reasonable efforts to cause its representations and warranties to be correct at all times,
and (iv) take no action which would (A) adversely affect the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type referred to in the last sentences of Sections
8.1(b) or 8.1(c), or (B) materially adversely affect the ability of any Party to perform its covenants and agreements under this
Agreement.
(c) Carolina Trust and Carolina Financial each shall, and shall cause each of its Subsidiaries to, cooperate with the other
Party and provide all necessary corporate approvals, and cooperate in seeking all approvals of any business combinations of such
Carolina Trust and its Subsidiaries requested by Carolina Financial, provided, the effective time of such business combinations
is on or after the Effective Time of the Merger.
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6.2
|
Negative
Covenants of Carolina Trust.
|
From
the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, unless the prior written
consent of Carolina Financial shall have been obtained (not to be unreasonably withheld or delayed), and except as otherwise expressly
contemplated herein, Carolina Trust covenants and agrees that it will not do or agree or commit to do, or permit any of its Subsidiaries
to do or agree or commit to do, any of the following:
(a) amend the Articles of Incorporation, Bylaws, or other governing instruments of any Carolina Trust Entity;
(b) incur any additional debt obligation or other obligation for borrowed money in excess of an aggregate of $500,000 except
in the ordinary course of the business of any Carolina Trust Entity consistent with past practices (which exception shall
include, for Carolina Trust Entities that are depository institutions, creation of deposit liabilities, purchases of federal funds,
advances from the Federal Home Loan Bank and the Federal Reserve Bank, and entry into repurchase agreements fully secured by U.S.
government securities or U.S. government agency securities), or impose, or suffer the imposition, on any Asset of any Carolina
Trust Entity of any Lien or permit any such Lien to exist (other than in connection with public deposits, repurchase agreements,
bankers’ acceptances, “treasury tax and loan” accounts established in the ordinary course of business of Subsidiaries
that are depository institutions, the satisfaction of legal requirements in the exercise of trust powers, and Liens in effect
as of the date hereof that are disclosed in the Carolina Trust Disclosure Memorandum);
(c) repurchase, redeem, or otherwise acquire or exchange (other than exchanges in the ordinary course under employee benefit
plans or as required by this Agreement), directly or indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any Carolina Trust Entity, or declare or pay any dividend or make any other distribution in respect of Carolina
Trust’s capital stock;
(d) except for this Agreement or upon the exercise of Carolina Trust Options, issue, sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue, sell, pledge, encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of Carolina Trust Common Stock, any other capital stock of any Carolina Trust Entity, or any
Right;
(e) adjust, split, combine, or reclassify any capital stock of any Carolina Trust Entity or issue or authorize the issuance
of any other securities in respect of or in substitution for shares of Carolina Trust Common Stock, or sell, lease, mortgage,
or otherwise dispose of (i) any shares of capital stock of any Carolina Trust Subsidiary or (ii) any Asset other than in the ordinary
course of business for reasonable and adequate consideration;
(f) purchase any securities or make any material investment except in the ordinary course of business consistent with past
practice, either by purchase of stock or securities, contributions to capital, Asset transfers, or purchase of any Assets, in
any Person other than a wholly owned Carolina Trust Subsidiary, or otherwise acquire direct or indirect control over any Person,
other than in connection with foreclosures of loans in the ordinary course of business;
(g) except as disclosed on Section 6.2 of the Carolina Trust Disclosure Memorandum or as contemplated by this Agreement, (i)
grant any bonus or increase in compensation or benefits in excess of $5,000 to any individual employee, officer or director of
any Carolina Trust Entity (except in accordance with past practice), (ii) enter into any new commitment or agreement to pay any
severance
or termination pay, or any stay or other bonus to any Carolina Trust director, officer or employee (except for any agreements
entered into pursuant to Section 7.9(g) of this Agreement), (iii) enter into or amend any severance agreements with officers,
employees, directors, independent contractors, or agents of any Carolina Trust Entity, (iv) change any fees or other compensation
or other benefits to directors of any Carolina Trust Entity, (v) waive any stock repurchase rights, accelerate, amend, or change
the period of exercisability of any Rights or restricted stock, or reprice Rights granted under the outstanding Carolina Trust
Options or authorize cash payments in exchange for any Rights; or (vi) except to the extent required under applicable Law or existing
Contracts, accelerate, vest or commit or agree to accelerate or vest any amounts, benefits or rights payable by any Carolina Trust
Entity;
(h) enter into or amend any employment Contract between any Carolina Trust Entity and any Person (unless such amendment is
required by Law or this Agreement) that the Carolina Trust Entity does not have the unconditional right to terminate without Liability
(other than Liability for services already rendered), at any time on or after the Effective Time;
(i) adopt any new employee benefit plan of any Carolina Trust Entity or, except as disclosed in Section 6.2 of the Carolina
Trust Disclosure Memorandum, terminate or withdraw from, or make any material change in or to, any existing employee benefit plans,
welfare plans, insurance, stock or other plans of any Carolina Trust Entity other than any such change that is required by Law
or to maintain continuous benefits at current levels or that, in the reasonable judgment of counsel, is necessary or advisable
to maintain the tax qualified status of any such plan, or make any distributions from such employee benefit or welfare plans,
except as required by Law, the terms of such plans or consistent with past practice;
(j) make any change in any Tax or accounting methods, systems of internal accounting controls or schedule of internal audits,
except as may be appropriate and necessary to conform to changes in Tax Laws, regulatory accounting requirements, or GAAP or at
the specific request of Carolina Financial;
(k) commence any Litigation other than in accordance with past practice or settle any Litigation involving any Liability of
any Carolina Trust Entity for money damages or restrictions upon the operations of any Carolina Trust Entity;
(l) enter into, modify, amend, or terminate any material Contract other than with respect to those involving aggregate payments
of less than, or the provision of goods or services with a market value of less than, $50,000 per annum and other than Contracts
covered by Sections 6.2(m), (n), (o) or (p);
(m) enter into or make any Consumer Loan with a value equal to or exceeding $250,000;
(n) enter into or make any loans or extensions of credit with a value equal to or exceeding $2,500,000, other than residential
mortgage loans for which Carolina Trust has a commitment to buy from a reputable investor (for the avoidance of doubt, such limit
shall apply to separate extensions of credit and not to the total credit exposure to any Person);
(o) enter into or make any loans that exceed internal policy or regulatory loan-to-value guidelines;
(p) except in the ordinary course of business, (i) modify any existing loan, lease (credit equivalent), advance, credit enhancement
or other extension of credit except, with respect to any
existing extension of credit with an unpaid balance of less than $250,000
(for the avoidance of doubt, such limit shall apply to separate extensions of credit and not to the total credit exposure to any
Person), in conformity with existing lending policies and practices, (ii) waive, release, compromise, or assign any material rights
or claims, or (iii) make any adverse changes in the mix, rates, terms, or maturities of Carolina Trust’s deposits and other
Liabilities.
(q) except for loans or extensions of credit made on terms generally available to the public, make or increase any loan or
other extension of credit, or commit to make or increase any such loan or extension of credit, to any director or executive officer
of Carolina Trust or Carolina Trust Bank, or any entity controlled, directly or indirectly, by any of the foregoing, other than
renewals of existing loans or commitments to loan;
(r) except in the ordinary course of business, restructure or materially change its investment securities portfolio or its
interest rate risk position, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported;
(s) make any capital expenditures other than pursuant to binding commitments existing on the date hereof and other than expenditures
of less than $50,000 and expenditures otherwise necessary to maintain existing assets in good repair or to make payment of necessary
Taxes;
(t) establish or commit to the establishment of any new branch or other office facilities or file any application to relocate
or terminate the operation of any banking office;
(u) take any action that is intended or expected to result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions to the Merger
set forth in Article 8 not being satisfied or in a violation of any provision of this Agreement;
(v) knowingly take any action that would prevent or impede the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code;
(w) agree to take, make any commitment to take, or adopt any resolutions of its Board of Directors in support of, any of the
actions prohibited by this Section 6.2;
(x) maintain Carolina Trust Bank’s allowance for loan losses in a manner inconsistent with GAAP and applicable regulatory
guidelines and accounting principles, practices and methods consistent with past practices of Carolina Trust Bank; or
(y) take any action or fail to take any action that at the time of such action or inaction is reasonably likely to prevent,
or would be reasonably likely to materially interfere with, the consummation of the Merger.
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6.3
|
Adverse
Changes in Condition.
|
Each
Party agrees to give written notice promptly to the other Party upon becoming aware of the occurrence or impending occurrence
of any event or circumstance relating to it or any of its Subsidiaries which (i) has had or is reasonably likely to have, individually
or in the aggregate, a Carolina Trust Material Adverse Effect or a Carolina Financial Material Adverse Effect, as applicable,
(ii) would cause or constitute a material breach of any of its representations, warranties, or covenants contained herein, or
(iii) would be reasonably likely to prevent or materially interfere with the consummation of the Merger, and to use its reasonable
efforts to prevent or promptly to remedy the same.
Each
of Carolina Financial and its Subsidiaries and Carolina Trust and the Carolina Trust Entities shall file all reports required
to be filed by it with Regulatory Authorities between the date of this Agreement and the Effective Time and shall make available
to the other Party copies of all such reports promptly after the same are filed. Carolina Trust and the Carolina Trust Entities
shall also make available to Carolina Financial monthly financial statements, copies of all written materials provided to members
of Carolina Trust’s board of Directors in connection with its regular monthly meetings (other than reports or presentations
prepared by the Carolina Trust Financial Advisor or legal counsel in connection with the Merger or materials containing confidential
supervisory information) and quarterly call reports following distribution to Carolina Trust’s Board of Directors or filing,
as applicable. The financial statements of Carolina Financial and Carolina Trust, whether or not contained in any such reports
filed under the Exchange Act or with any other Regulatory Authority, will fairly present the consolidated financial position of
the entity filing such statements as of the dates indicated and the consolidated results of operations, changes in shareholders’
or stockholders’ equity, as applicable, and cash flows for the periods then ended in accordance with GAAP (subject in the
case of interim financial statements to normal recurring year-end adjustments that are not material). As of their respective dates,
such reports of Carolina Financial and Carolina Trust filed under the Exchange Act or with any other Regulatory Authority will
comply in all material respects with the Securities Laws and will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained in any other reports to another Regulatory Authority
shall be prepared in accordance with the Laws applicable to such reports.
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6.5
|
Carolina
Financial Use and Disclosure of IIPI.
|
Carolina
Financial acknowledges that IIPI disclosed to Carolina Financial Entities in connection with the Agreement has been and will be
disclosed pursuant to 15 U.S.C. 6802(e)(7). Carolina Financial Entities may not use or disclose IIPI, nor permit the use or disclosure
of IIPI, other than for the purposes described in 15 U.S.C. § 6802(e)(7).
Article
7
ADDITIONAL
AGREEMENTS
|
7.1
|
Shareholder
Approval.
|
(a) Unless this Agreement has been terminated in accordance with its terms, Carolina Trust shall submit to its shareholders
this Agreement and any other matters required to be approved by shareholders in order to carry out the intentions of this Agreement.
In furtherance of that obligation, Carolina Trust shall take, in accordance with applicable Law and its Articles of Incorporation
and Bylaws, all action necessary to call, give notice of, convene, and hold Carolina Trust’s Shareholders’ Meeting
as soon as reasonably practicable. Carolina Trust’s Board shall recommend that its shareholders approve this Agreement in
accordance with the NCBCA (the “Carolina Trust Recommendation”) and shall include such recommendation in the
Proxy Statement/Prospectus, except to the extent Carolina Trust’s Board has made an Adverse Recommendation Change (as defined
below) in accordance with the terms of this Agreement. Subject to Section 7.1(b) and 7.3, Carolina Trust shall solicit and use
its commercially reasonable efforts to obtain the Requisite Carolina Trust Shareholder Vote.
(b) Neither Carolina Trust’s Board nor any committee thereof shall, except as expressly permitted by this Section 7.1(b),
(i) withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify, in a manner adverse to Carolina Financial,
the Carolina Trust Recommendation or (ii) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal
(each, an “Adverse Recommendation Change”). Notwithstanding the foregoing, prior to the Requisite Carolina
Trust Shareholder Vote, Carolina Trust’s Board may make an Adverse Recommendation Change if and only if (A) a material development
or material change in circumstance occurs, arises or becomes known to Carolina Trust’s Board after the date of this Agreement
unrelated to any potential or actual Acquisition Proposal (such material development or change in circumstances being referred
to as an “Intervening Event”) and Carolina Trust’s Board determines in good faith, after consultation
with Carolina Trust’s outside counsel, that in light of such Intervening Event an Adverse Recommendation Change is required
in order for Carolina Trust’s Board to comply with its fiduciary obligations to Carolina Trust’s shareholders under
applicable Law, or (B):
(i)
Carolina Trust’s Board determines in good faith, after consultation with the Carolina Trust Financial Advisor and
outside counsel, that it has received an Acquisition Proposal (that did not result from a breach of Section 7.3) that is a Superior
Proposal;
(ii)
Carolina Trust’s Board determines in good faith, after consultation with Carolina Trust’s outside counsel,
that a failure to accept such Superior Proposal would result in Carolina Trust’s Board breaching its fiduciary duties to
Carolina Trust and its shareholders under applicable Law;
(iii)
Carolina Trust’s Board provides written notice (a “Notice of Recommendation Change”) to Carolina
Financial of its receipt of the Superior Proposal and its intent to announce an Adverse Recommendation Change on the fifth business
day following delivery of such notice, which notice shall specify the material terms and conditions of the Superior Proposal (and
include a copy thereof with all accompanying documentation, if in writing) and identify the Person or Group making such Superior
Proposal (it being understood that any amendment to any material term of such Superior Proposal shall require a new Notice of
Recommendation Change, except that, in such case, the five business day period referred to in this clause (iii) and in clauses
(iv) and (v) shall be reduced to three business days following the giving of such new Notice of Recommendation Change);
(iv)
after providing such Notice of Recommendation Change, Carolina Trust shall negotiate in good faith with Carolina Financial
(if requested by Carolina Financial) and provide Carolina Financial reasonable opportunity during the subsequent five business
day period to make such adjustments in the terms and conditions of this Agreement as would enable Carolina Trust’s Board
to proceed without an Adverse Recommendation Change (provided, however, that Carolina Financial shall not be required to
propose any such adjustments); and
(v)
Carolina Trust’s Board, following such five business day period, again determines in good faith, after consultation with
the Carolina Trust Financial Advisor and outside counsel, that such Acquisition Proposal nonetheless continues to constitute a
Superior Proposal and that failure to take such action would violate their fiduciary duties to Carolina Trust and its shareholders
under applicable Law.
(c)
Notwithstanding any other provision of this Agreement, except to the extent prohibited by the NCBCA as determined
by Carolina Trust after consultation with Carolina Trust’s outside counsel, Carolina Trust shall submit this Agreement to
its shareholders at Carolina Trust’s
Shareholders’ Meeting even if Carolina Trust’s Board has made an Adverse
Recommendation Change, in which case Carolina Trust’s Board may communicate the Adverse Recommendation Change and the basis
for it to the shareholders of Carolina Trust in the Proxy Statement/Prospectus or any appropriate amendment or supplement thereto;
provided, however, that Carolina Trust may postpone or adjourn Carolina Trust’s Shareholders’ Meeting: (i)
with the consent of Carolina Financial; (ii) for the absence of a quorum; (iii) to the extent necessary to ensure that any required
supplement or amendment to the Proxy Statement/Prospectus is provided to the shareholders of Carolina Trust within a reasonable
period of time in advance of Carolina Trust’s Shareholders’ Meeting; (iv) to allow reasonable additional time to solicit
additional proxies; (v) if required by applicable Law; or (vi) if Carolina Trust has provided a Notice of Recommendation Change
to Carolina Financial pursuant to Section 7.1(b)(iii) and the notice period contemplated by Section 7.1(b)(iii) has not yet expired.
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7.2
|
Securities
Act Compliance.
|
(a) As promptly as reasonably practicable following the date hereof, Carolina Financial shall prepare and file with the SEC
the Registration Statement, which shall include the Proxy Statement/Prospectus and constitute the prospectus relating to the shares
of Carolina Financial Common Stock to be issued in the Merger. Carolina Trust will furnish to Carolina Financial the information
required to be included in the Registration Statement with respect to its business and affairs and shall have the right to review
and consult with Carolina Financial on the form of, and any characterizations of such information included in, the Registration
Statement prior to its being filed with the SEC. Carolina Financial shall use reasonable best efforts to have the Registration
Statement declared effective by the SEC and to keep the Registration Statement effective as long as is necessary to consummate
the Merger and the transactions contemplated hereby. Carolina Financial and Carolina Trust will use their reasonable best efforts
to cause the Proxy Statement/Prospectus to be mailed to the Carolina Trust shareholders as promptly as practicable after the Registration
Statement is declared effective under the Securities Act. Carolina Financial will advise Carolina Trust, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective, the issuance of any stop order, the suspension
of the qualification of the Carolina Financial Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Proxy Statement/Prospectus or the Registration Statement. If at any
time prior to the Effective Time any information relating to Carolina Financial or Carolina Trust, or any of their respective
affiliates, officers or directors, should be discovered by Carolina Financial or Carolina Trust which should be set forth in an
amendment or supplement to any of the Registration Statement or the Proxy Statement/Prospectus so that any of such documents would
not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party that discovers such information shall promptly
notify the other party hereto and, to the extent required by law, rules or regulations, an appropriate amendment or supplement
describing such information shall be promptly filed by Carolina Financial with the SEC and disseminated by Carolina Trust to its
shareholders.
(b) Carolina Financial shall also take any action required to be taken under any applicable state securities laws in connection
with the Merger and each of Carolina Financial and Carolina Trust shall furnish all information concerning it and the holders
of Carolina Trust Common Stock as may be reasonably requested in connection with any such action.
(c) Prior to the Effective Time, Carolina Financial shall notify the NASDAQ Stock Market of the additional shares of Carolina
Financial Common Stock to be issued by Carolina Financial in exchange for the shares of Carolina Trust Common Stock.
(a) From the date of this Agreement through the first to occur of the Effective Time or termination of this Agreement, each
Carolina Trust Entity shall not, and shall cause its Affiliates and Representatives not to, directly or indirectly (i) solicit
or initiate, or knowingly encourage, induce or knowingly facilitate the making, submission, or announcement of any proposal that
constitutes an Acquisition Proposal, (ii) participate in any discussions (except to notify a third party of the existence of restrictions
provided in this Section 7.3 or to clarify the terms and conditions of an unsolicited Acquisition Proposal) or negotiations regarding,
or disclose or provide any nonpublic information with respect to, or knowingly take any other action to facilitate any inquiries
or the making of any proposal that constitutes an Acquisition Proposal, (iii) enter into any agreement (including any agreement
in principle, letter of intent or understanding, merger agreement, stock purchase agreement, asset purchase agreement, or share
exchange agreement, but excluding a confidentiality agreement of the type described below) (an “Acquisition Agreement”)
contemplating or otherwise relating to any Acquisition Transaction, or (iv) propose or agree to do any of the foregoing; provided,
however, that prior to the Requisite Carolina Trust Shareholder Vote, this Section 7.3 shall not prohibit a Carolina Trust
Entity from furnishing nonpublic information regarding any Carolina Trust Entity to, or entering into a confidentiality agreement
or discussions or negotiations with, any Person or Group in response to a bona fide, unsolicited written Acquisition
Proposal submitted by such Person or Group (and not withdrawn) if and only if: (A) no Carolina Trust Entity or Representative
or Affiliate thereof shall have violated any of the restrictions set forth in this Section 7.3 (other than any breach of such
obligation that is unintentional and immaterial and did not result in the submission of such Acquisition Proposal), (B) Carolina
Trust’s Board shall have determined in good faith, after consultation with the Carolina Trust Financial Advisor and Carolina
Trust’s outside counsel, that such Acquisition Proposal constitutes or could reasonably be expected to result in a Superior
Proposal, (C) Carolina Trust’s Board concludes in good faith, after consultation with its outside counsel, that the failure
to take such action would be inconsistent with its fiduciary duties under applicable Law to Carolina Trust and its shareholders,
(D) (1) at least two business days prior to furnishing any such nonpublic information to, or entering into discussions or negotiations
with, such Person or Group, Carolina Trust gives Carolina Financial written notice (which may be by electronic mail) of the identity
of such Person or Group and of Carolina Trust’s intention to furnish nonpublic information to, or enter into discussions
or negotiations with, such Person or Group, and (2) Carolina Trust receives from such Person or Group an executed confidentiality
agreement containing terms no less favorable to the disclosing Party than the confidentiality terms of this Agreement, and (E)
contemporaneously with furnishing any such nonpublic information to such Person or Group, Carolina Trust furnishes such nonpublic
information to Carolina Financial (to the extent such nonpublic information has not been previously furnished by Carolina Trust
to Carolina Financial). In addition to the foregoing, Carolina Trust shall provide Carolina Financial with at least two business
days’ prior written notice of a meeting of Carolina Trust’s Board at which meeting Carolina Trust’s Board is
reasonably expected to resolve to recommend the Acquisition Agreement as a Superior Proposal to its shareholders, and Carolina
Trust shall keep Carolina Financial reasonably informed on a prompt basis, of the status and material terms of such Acquisition
Proposal, including any material amendments or proposed amendments as to price and other material terms thereof.
(b) In addition to the obligations of Carolina Trust set forth in this Section 7.3, as promptly as practicable, after any of
the directors or executive officers of Carolina Trust become aware thereof, Carolina Trust shall advise Carolina Financial of
any request received by Carolina Trust for nonpublic information which Carolina Trust reasonably believes could lead to an Acquisition
Proposal or of any Acquisition Proposal, the material terms and conditions of such request
or Acquisition Proposal, and the identity
of the Person or Group making any such request or Acquisition Proposal. Carolina Trust shall keep Carolina Financial informed
promptly of material amendments or modifications to any such request or Acquisition Proposal.
(c) Carolina Trust shall, and shall cause its and each Carolina Trust Entity’s directors, officers, employees, and Representatives
to immediately cease any and all existing activities, discussions, or negotiations with any Persons conducted heretofore with
respect to any Acquisition Proposal and will use and cause to be used all commercially reasonable best efforts to enforce any
confidentiality or similar or related agreement relating to any Acquisition Proposal.
(d) Nothing contained in this Agreement shall prevent a Party or its Board of Directors from (i) complying with Rule 14e-2
under the Exchange Act with respect to an Acquisition Proposal, provided, however, that such Rule will in no way
eliminate or modify the effect that any action pursuant to such Rule would otherwise have under this Agreement; (ii) making any
disclosure to Carolina Trust’s shareholders if Carolina Trust’s Board determines in good faith, after consultation
with its outside legal counsel, that the failure to make such disclosure would be reasonably likely to be inconsistent with applicable
Law, (iii) informing any Person of the existence of the provisions contained in this Section 7.3 or (iv) making any “stop,
look and listen” communication to Carolina Trust’s shareholders pursuant to Rule 14d-9(f) under the Exchange Act (or
any similar communication to Carolina Trust’s shareholders).
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7.4
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Consents
of Regulatory Authorities.
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The
Parties hereto shall cooperate with each other and use their commercially reasonable efforts to promptly prepare and file all
necessary documentation and applications, to effect all applications, notices, petitions and filings, and to obtain as promptly
as practicable all Consents of all Regulatory Authorities and other Persons which are necessary or advisable to consummate the
transactions contemplated by this Agreement (including the Merger). The Parties agree that they will consult with each other with
respect to the obtaining of all Consents of all Regulatory Authorities and other Persons necessary or advisable to consummate
the transactions contemplated by this Agreement and each Party will keep the other apprised of the status of matters relating
to consummation of the transactions contemplated herein. Each Party also shall promptly advise the other upon receiving any communication
from any Regulatory Authority or other Person whose Consent is required for consummation of the transactions contemplated by this
Agreement which causes such Party to believe that there is a reasonable likelihood that any requisite Consent will not be obtained
or that the receipt of any such Consent will be materially delayed.
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7.5
|
Agreement
as to Efforts to Consummate.
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Subject
to the terms and conditions of this Agreement, each Party agrees to use, and to cause its Subsidiaries to use, its commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as reasonably practicable after the date of this Agreement,
the transactions contemplated by this Agreement, including using its commercially reasonable efforts to lift or rescind any Order
adversely affecting its ability to consummate the transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 8; provided, however, that nothing herein shall preclude either Party from exercising its
rights under this Agreement.
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7.6
|
Investigation
and Confidentiality.
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(a) Prior to the Effective Time, each Party shall keep the other Party advised of all material developments relevant to its
business and the consummation of the Merger and shall permit the other Party to make or cause to be made such investigation of
its business and properties (including that of its Subsidiaries) and of their respective financial and legal conditions as the
other Party reasonably requests, provided, that such investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily or materially with normal operations and that no such investigation shall include
sampling of the indoor or outdoor air, soil or soil vapor, surface water, or groundwater without Carolina Trust’s written
consent. Between the date hereof and the Effective Time, Carolina Trust shall permit Carolina Financial’s senior officers
and independent accountants to meet with the senior officers of Carolina Trust, including officers responsible for the Carolina
Trust Financial Statements, the internal controls of Carolina Trust, and the disclosure controls and procedures of Carolina Trust
and Carolina Trust’s independent public accountants, to discuss such matters as Carolina Financial may deem reasonably necessary
or appropriate for Carolina Financial to satisfy its obligations under Sections 302, 404 and 906 of the Sarbanes-Oxley Act.
(b) In addition to each Party’s obligations pursuant to Section 7.6(a), each Party shall, and shall cause its advisors
and agents to, maintain the confidentiality of all confidential information furnished to it by the other Party concerning its
and its Subsidiaries’ businesses, operations, and financial positions and shall not use such information for any purpose
except in furtherance of the transactions contemplated by this Agreement. If this Agreement is terminated prior to the Effective
Time, each Party shall promptly return or certify the destruction of all documents and copies thereof, and all work papers containing
confidential information received from the other Party.
(c) Carolina Trust shall use its commercially reasonable efforts to exercise, and shall not waive any of, its rights under
confidentiality agreements entered into with Persons which were considering an Acquisition Proposal with respect to Carolina Trust
to preserve the confidentiality of the information relating to the Carolina Trust Entities provided to such Persons and their
Affiliates and Representatives.
(d) Each Party agrees to give the other Party notice as soon as practicable after any determination by it of any fact or occurrence
relating to the other Party which it has discovered through the course of its investigation and which represents, or is reasonably
likely to represent, either a material breach of any representation, warranty, covenant, or agreement of the other Party or which
has had or is reasonably likely to have a Carolina Trust Material Adverse Effect or a Carolina Financial Material Adverse Effect,
as applicable.
(e) Each Carolina Financial Entity shall, in accordance with Carolina Financial’s comprehensive written data security
program established and maintained pursuant to 15 U.S.C. § 6801 and regulations promulgated thereunder (“Carolina
Financial Security Program”), safeguard IIPI disclosed to that Carolina Financial Entity pursuant to this Agreement
or in connection with the transactions contemplated hereby. In the event that any Carolina Financial Entity allows a third party
to access such IIPI, Carolina Financial shall ensure that the third party safeguards that IIPI in accordance with a data security
program substantially equivalent to the Carolina Financial Security Program.
(f) Carolina Financial shall notify Carolina Trust promptly (but in no event more than 24 hours) of any Data Incident. All
Carolina Financial Entities shall promptly take all actions that are necessary and advisable to correct, mitigate, and prevent
recurrence of the Data Incident.
All Carolina Financial Entities shall cooperate fully with Carolina Trust and its designees in
all reasonable efforts to investigate the Data Incident.
(g) If this Agreement is terminated prior to the Effective Time, each Carolina Financial Entity shall promptly return or dispose
of, and certify the return or disposal, of all IIPI received by the Carolina Financial Entity in connection with this Agreement.
Any disposal of such IIPI must be performed in a manner that ensures that the IIPI is rendered permanently unreadable and unrecoverable.
Prior
to the Effective Time, Carolina Trust and Carolina Financial shall consult with each other as to the form and substance of any
press release, communication with Carolina Trust’s shareholders, or other public disclosure materially related to this Agreement,
or any other transaction contemplated hereby; provided, however, that nothing in this Section 7.7 shall be deemed
to prohibit any Party from making any disclosure which its counsel deems necessary or advisable in order to satisfy such Party’s
disclosure obligations imposed by Law.
Each
Carolina Trust Entity shall take all necessary action to ensure that the entering into of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby do not and will not result in the grant of any rights to any Person
under the Articles of Incorporation, Bylaws, or other governing instruments of any Carolina Trust Entity or restrict or impair
the ability of Carolina Financial or any of its Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of any Carolina Trust Entity that may be directly or indirectly acquired or controlled by them.
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7.9
|
Employee
Benefits and Contracts.
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(a) Except as specifically provided in this Agreement, all persons who are employees of the Carolina Trust Entities immediately
prior to the Effective Time and whose employment is not terminated, if any, at or prior to the Effective Time (a “Continuing
Employee”) shall, at the Effective Time, become at-will employees of the Surviving Bank or one of its subsidiaries;
provided, however, that in no event shall any of the employees of the Carolina Trust Entities be officers of the Surviving
Corporation or the Surviving Bank, or have or exercise any power or duty conferred upon such an officer, unless and until duly
elected or appointed to such position by the Board of Directors of the Surviving Corporation or the Surviving Bank and in accordance
with the Bylaws of the Surviving Corporation or the Surviving Bank. All of the Continuing Employees shall be employed at the will
of the Surviving Bank, and no contractual right to employment shall inure to such employees because of this Agreement except as
may be otherwise expressly set forth in this Agreement.
(b) As of the Effective Time, each Continuing Employee shall be eligible to participate in each of Carolina Financial’s
Employee Benefit Plans with full credit for prior service with Carolina Trust and any other Carolina Trust Entity solely for purposes
of eligibility and vesting, except that such service shall also be credited for purposes of calculating benefits under Carolina
Financial’s standard severance policy. For the avoidance of doubt, each Continuing Employee who is terminated involuntarily
other than for cause (as determined by Carolina Financial) will be eligible to receive severance benefits under Carolina Financial’s
standard severance policy for its employees, an accurate and complete description of which has been provided to Carolina Trust,
in
addition to outplacement assistance; provided, however, that any Continuing Employees who are eligible to receive severance
benefits, change of control benefits or any payments that are enhanced on account of the Merger pursuant to an individual employment
arrangement, change of control arrangement or deferred compensation plan other than any Cash Retention Bonus Agreement or Cash
and Stock Retention Bonus Agreement in the form of Exhibit E or Exhibit F, respectively, shall not be eligible to
receive severance benefits under Carolina Financial’s standard severance policy.
(c) As of the Effective Time, Carolina Financial shall make available employer-provided benefits under Carolina Financial Employee
Benefit Plans to each Continuing Employee on the same basis as it provides such coverage to Carolina Financial or CresCom Bank
employees. With respect to Carolina Financial Employee Benefit Plans providing health coverage, Carolina Financial shall use commercially
reasonable efforts to cause any pre-existing condition, eligibility waiting period, or other limitations or exclusions otherwise
applicable under such plans to new employees not to apply to a Continuing Employee or their covered dependents who were covered
under a similar Carolina Trust plan at the Effective Time of the Merger. In addition, if any such transition occurs during the
middle of a plan year, Carolina Financial shall use commercially reasonable efforts to cause any such successor Carolina Financial
Employee Benefit Plan providing health coverage to give credit towards satisfaction of any annual deductible limitation and out-of-pocket
maximum applied under such successor plan for any deductible, co-payment and other cost-sharing amounts previously paid by a Continuing
Employee respecting his or her participation in the corresponding Carolina Trust Employee Benefit Plan during that plan year prior
to the transition effective date.
(d) Except as disclosed in Section 7.9 of the Carolina Trust Disclosure Memorandum, Carolina Trust shall use commercially reasonable
efforts to cause each director of Carolina Trust or Carolina Trust Bank who will not be an employee or director of Carolina Financial
or CresCom Bank immediately following the Effective Time, to execute and deliver a Non-Employee Director Non-Competition Agreement
dated as of the date hereof in the form attached hereto as Exhibit B.
(e) Carolina Trust shall cause each director of Carolina Trust or Carolina Trust Bank and each Executive Officer to execute
and deliver a Shareholder Support Agreement dated as of the date hereof in the form attached hereto as Exhibit C pursuant
to which he or she will vote his or her shares of Carolina Trust Common Stock in favor of this Agreement and the transactions
contemplated hereby.
(f)
No officer, employee, or other Person (other than the corporate Parties to this Agreement) shall be deemed a third party
or other beneficiary of this Agreement, and no such Person shall have any right or other entitlement to enforce any provision
of this Agreement or seek any remedy in connection with this Agreement, except as may be expressly set forth in Section 7.11.
No provision of this Agreement constitutes or shall be deemed to constitute, an employee benefit plan or other arrangement, an
amendment of any employee benefit plan or other arrangement, or any provision of any employee benefit plan or other arrangement.
(g) Carolina Trust shall use its reasonable best efforts to cause the employees designated by Carolina Financial to execute
a CresCom Merger / Cash Retention Bonus Agreement in the form attached hereto as Exhibit E or a CresCom Merger / Cash and
Stock Retention Bonus Agreement in the form attached hereto as Exhibit F.
(h) Concurrently with or as soon as practicable after the execution and delivery of this Agreement, Jerry L. Ocheltree shall
enter into an employment agreement in the form attached hereto as Exhibit G, which shall become effective only upon the
effective time of the Merger.
(i) Upon not less than 10 days’ notice prior to the Closing Date from Carolina Financial to Carolina Trust, Carolina
Trust shall cause the adoption of resolutions (which are acceptable to Carolina Financial) by each applicable Carolina Trust Entity’s
Board of Directors terminating, amending or causing other appropriate modification of each Carolina Trust Benefit Plan as specified
by Carolina Financial in such notice, effective as of the date which immediately precedes the Closing Date or as of the Closing
Date (as shall be specified in such notice), provided that (a) Carolina Trust shall be required to take such action only with
respect to Carolina Trust Benefit Plans that may unilaterally be terminated, amended or modified, as applicable, as requested
by Carolina Financial, by a Carolina Trust Entity in accordance with the terms of the plan and applicable Law, (b) Carolina Trust
shall not be required to take such action if and to the extent it would cause a plan participant to be denied a benefit, or vesting
of a benefit, that the participant would have been entitled to under the plan if the plan had not been so terminated, amended
or modified at or prior to the Effective Time; and (c) for the avoidance of doubt, any reasonable costs or expenses that are incurred
by a Carolina Trust Entity in connection with such termination, amendment or modification (including without limitation the payment
of any benefits or compensation) shall be considered reasonable expenses incurred by a Carolina Trust Entity in connection with
the Merger. Upon such action, participants in such applicable Carolina Trust Benefit Plans that are Carolina Trust ERISA Plans
shall be 100% vested in their account balances or other applicable plan benefits.
Prior
to the Effective Time, Carolina Trust and Carolina Financial shall take all such steps as may be required to cause (in the case
of Carolina Trust) any dispositions of Carolina Trust Common Stock (including derivative securities with respect to Carolina Trust
Common Stock) by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect
to Carolina Trust (“Carolina Trust Insiders”) or (in the case of Carolina Financial) any acquisitions of Carolina
Financial Common Stock (including derivative securities with respect to Carolina Financial Common Stock) by any Carolina Trust
Insiders who, immediately following the Merger, will be subject to the reporting requirements of Section 16(a) of the Exchange
Act with respect to Carolina Financial, in each case resulting from the transactions contemplated by this Agreement, to be exempt
from liability pursuant to Rule 16b-3 promulgated under the Exchange Act to the fullest extent permitted by applicable law. Carolina
Trust agrees to promptly furnish Carolina Financial with all requisite information necessary for Carolina Financial to take the
actions contemplated by this Section 7.10.
(a) Carolina Financial shall indemnify, defend, and hold harmless the present and former directors and executive officers of
the Carolina Trust Entities (each, an “Indemnified Party”) against all Liabilities arising out of actions or
omissions arising out of the Indemnified Party’s service or services as directors, officers, employees, or agents of a Carolina
Trust Entity or, at Carolina Trust’s request, of another corporation, partnership, joint venture, trust, or other enterprise
occurring at or prior to the Effective Time (including service in connection with the transactions contemplated by this Agreement)
to the fullest extent permitted under the DGCL, the NCBCA, Section 402 of the Sarbanes-Oxley Act, the Securities Laws and FDIC
Regulations Part 359, and by the Articles of Incorporation and Bylaws of Carolina Trust and any other Carolina Trust Entity as
in effect on the date hereof, including provisions relating to advances of expenses incurred in the defense of any Litigation
and whether or not any Carolina Trust Entity is insured against any such matter.
(b) Prior to the Effective Time, Carolina Financial shall purchase, or shall direct Carolina Trust to purchase, an extended
reporting period endorsement under Carolina Trust’s existing directors’ and officers’ liability insurance coverage
(“Carolina Trust Entities’ D&O Policies”) for acts or omissions occurring prior to the Effective
Time by such directors and officers currently covered by Carolina Trust Entities’ D&O Policies. The directors and officers
of Carolina Trust shall take all reasonable actions required by the insurance carrier necessary to procure such endorsement. Such
endorsement shall provide such directors and officers with coverage (including bankers’ professional liability, cyber and
employment practices coverage) following the Effective Time for six years or such lesser period of time as can be purchased for
an aggregate amount equal to 300% of the current annual premiums for the Carolina Trust Entities’ D&O Policies (the
“Premium Multiple”). If Carolina Financial is unable to obtain or maintain the insurance coverage called for
in this Section 7.11(b), then Carolina Financial shall obtain the most advantageous coverage that can be purchased for the Premium
Multiple.
(c) Any Indemnified Party wishing to claim indemnification under paragraph (a) of this Section 7.11, upon learning of any such
Liability or Litigation, shall promptly notify Carolina Financial and the Surviving Corporation thereof in writing. In the event
of any such Litigation (whether arising before or after the Effective Time), (i) Carolina Financial or the Surviving Corporation
shall have the right to assume the defense thereof and neither Carolina Financial nor the Surviving Corporation shall be liable
to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if Carolina Financial or the Surviving Corporation elects not to assume
such defense or counsel for the Indemnified Parties advises that there are substantive issues which raise conflicts of interest
between Carolina Financial or the Surviving Corporation and the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and Carolina Financial or the Surviving Corporation shall pay all reasonable fees and expenses of such counsel
for the Indemnified Parties promptly as statements therefor are received; provided, however, that Carolina Financial and
the Surviving Corporation shall be obligated pursuant to this paragraph (c) to pay for only one firm of counsel for all Indemnified
Parties in any jurisdiction; (ii) the Indemnified Parties will cooperate in good faith in the defense of any such Litigation;
and (iii) neither Carolina Financial nor the Surviving Corporation shall be liable for any settlement effected without its prior
written consent and which does not provide for a complete and irrevocable release of all Carolina Financial’s Entities and
their respective directors, officers, and controlling persons, employees, agents, and Representatives; and provided, further,
that neither Carolina Financial nor the Surviving Corporation shall have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall determine, and such determination shall have become final, that the indemnification
of such Indemnified Party in the manner contemplated hereby is prohibited by applicable Law.
(d) If Carolina Financial or any successors or assigns shall consolidate with or merge into any other Person and shall not
be the continuing or surviving Person of such consolidation or merger or shall transfer all or substantially all of its assets
to any Person, then and in each case, proper provision shall be made so that the successors and assigns of Carolina Financial
or the Surviving Corporation shall assume the obligations set forth in this Section 7.11.
(e) The provisions of this Section 7.11 are intended to be for the benefit of, shall be enforceable by, and may not be modified
without the prior written consent of each Indemnified Party and their respective heirs and legal and personal representatives.
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7.12
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Tax
Covenants of Carolina Financial.
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At
and after the Effective Time, Carolina Financial covenants and agrees that it:
(a) will not take any action that could reasonably be expected to cause the Merger to fail to qualify as a reorganization under
Section 368(a)(1)(A) of the Code;
(b) will maintain all books and records and prepare and file all federal, state and local income Tax Returns and schedules
thereto of Carolina Financial, Carolina Trust and all Affiliates thereof in a manner consistent with the Merger’s being
qualified as a reorganization and nontaxable exchange under Section 368(a)(1)(A) of the Code (and comparable provisions of any
applicable state or local Tax Laws);
(c) will, either directly or through a member of Carolina Financial’s Qualified Group, continue at least one significant
historic business line of Carolina Trust, or use at least a significant portion of the historic business assets of Carolina Trust
in a business, in each case within the meaning of Treasury Regulations Section 1.368-1(d);
(d) in connection with the Merger, will not reacquire, and will not permit any Person that is a “related person”
(as defined in Treasury Regulations Section 1.368-1(e)(4)) to Carolina Financial to acquire, any of the Carolina Financial Common
Stock issued in connection with the Merger; and
(e) will
not sell or otherwise dispose of any of Carolina Trust’s assets acquired in the Merger, and will not cause or permit CresCom
Bank to sell or otherwise dispose of any of the Bank’s assets acquired in the Bank Merger, except for dispositions made
in the ordinary course of business or transfers described in Section 368(a)(2)(C) of the Code or described and permitted in Treasury
Regulations Section 1.368-2(k).
Article
8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
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8.1
|
Conditions
to Obligations of Each Party.
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The
respective obligations of each Party to perform this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless waived by both Parties pursuant to Section 10.6:
(a) Shareholder Approvals. The shareholders of Carolina Trust shall have approved this Agreement and the consummation
of the transactions contemplated hereby, including the Merger, by the Requisite Carolina Trust Shareholder Vote, as and to the
extent required by Law and by the provisions of Carolina Trust’s Articles of Incorporation and Bylaws.
(b) Regulatory Approvals. All Consents of, filings and registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Merger shall have been obtained or made and shall be in full force and effect and all waiting
periods required by Law shall have expired. No Consent obtained from any Regulatory Authority which is necessary to consummate
the transactions contemplated hereby shall be conditioned or restricted in a manner (including requirements relating to the raising
of additional capital or the disposition of Assets) which in the reasonable judgment of the Board of Directors of Carolina Financial
would so materially adversely
affect the economic or business benefits of the transactions contemplated by this Agreement that,
had such condition or requirement been known, Carolina Financial would not, in its reasonable judgment, have entered into this
Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and all Consents required for consummation of the Merger
(other than those referred to in Section 8.1(b)) or for the preventing of any Default under any Contract or Permit of such Party
which, if not obtained or made, would be reasonably likely to have, individually or in the aggregate, a Carolina Trust Material
Adverse Effect or a Carolina Financial Material Adverse Effect, as applicable. Carolina Trust shall have obtained the Consents
listed in Section 8.1(c) of the Carolina Trust Disclosure Memorandum, including Consents from the lessors of each office leased
by Carolina Trust, if any. No Consent so obtained which is necessary to consummate the transactions contemplated hereby shall
be conditioned or restricted in a manner which in the reasonable judgment of the Board of Directors of Carolina Financial would
so materially adversely affect the economic or business benefits of the transactions contemplated by this Agreement that, had
such condition or requirement been known, Carolina Financial would not, in its reasonable judgment, have entered into this Agreement.
(d) Registration Statement. The Registration Statement shall have been declared effective by the SEC, and no proceedings
shall be pending or threatened by the SEC to suspend the effectiveness of the Registration Statement.
(e) Legal Proceedings. No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced, or entered any Law or Order (whether temporary, preliminary or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated by this Agreement.
(f) Exchange Listing. Carolina Financial shall have filed with the NASDAQ Stock Market a notification form for the listing
of all shares of Carolina Financial Common Stock to be delivered as Merger Consideration, and the NASDAQ Stock Market shall not
have objected to the listing of such shares of Carolina Financial Common Stock.
(g) Tax Opinion. Carolina Financial and Carolina Trust shall have received the opinion of Carolina Financial’s
legal counsel, dated as of the Closing, in form and substance customary in transactions of the type contemplated hereby, substantially
to the effect that on the basis of the facts, representations, and assumptions set forth in such opinion, which are consistent
with the state of facts existing at the Effective Time, (i) the Merger will be treated for federal income Tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and (ii) Carolina Financial and Carolina Trust will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. Such opinion may be based on, in addition to the review of such
matters of fact and Law as the opinion given considers appropriate, representations contained in certificates of officers of Carolina
Financial and Carolina Trust.
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8.2
|
Conditions
to Obligations of Carolina Financial.
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The
obligations of Carolina Financial to perform this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless waived by Carolina Financial pursuant to Section 10.6(a):
(a) Representations and Warranties. For purposes of this Section 8.2(a), the accuracy of the representations and warranties
of Carolina Trust set forth in this Agreement shall be assessed
as of the date of this Agreement and as of the Effective Time
with the same effect as though all such representations and warranties had been made on and as of the Effective Time (provided,
that representations and warranties which are confined to a specified date shall speak only as of such date). The representations
and warranties set forth in Sections 4.1, 4.2(a), 4.2(b)(i), 4.3, and 4.24 shall be true and correct (except for inaccuracies
which are de minimis in amount or effect). There shall not exist inaccuracies in the representations and warranties of
Carolina Trust set forth in this Agreement (including the representations and warranties set forth in Sections 4.1, 4.2(a), 4.2(b)(i),
4.3, and 4.24) such that the aggregate effect of such inaccuracies has, or is reasonably likely to have, a Carolina Trust Material
Adverse Effect; provided, that for purposes of this sentence only, those representations and warranties which are qualified
by references to “material” or “Material Adverse Effect” or to the “Knowledge” of any Person
shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the agreements and covenants of Carolina Trust to be performed
and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time shall have
been duly performed and complied with in all material respects.
(c) Officers’ Certificate. Carolina Trust shall have delivered to Carolina Financial (i) a certificate, dated
as of the Closing Date and signed on its behalf by its chief executive officer and its chief financial officer, to the effect
that the conditions set forth in Section 8.1 as they relate to Carolina Trust and in Sections 8.2(a), 8.2(b), and 8.2(f) have
been satisfied.
(d) Secretary’s Certificate. Carolina Trust and Carolina Trust Bank shall have delivered a certificate of the
secretary of Carolina Trust and Carolina Trust Bank, dated as of the Closing Date, certifying as to (i) the incumbency of officers
of Carolina Trust and Carolina Trust Bank executing documents executed and delivered in connection herewith, (ii) a copy of the
Articles of Incorporation of Carolina Trust as in effect from the date of this Agreement until the Closing Date, along with a
certificate (dated not more than 10 days prior to the Closing Date) of the North Carolina Secretary of State as to the existence
of Carolina Trust; (iii) a copy of the Bylaws of the Carolina Trust as in effect from the date of this Agreement until the Closing
Date, (iv) a copy of the consent or resolutions of Carolina Trust’s Board of Directors authorizing and approving the applicable
matters contemplated hereunder, (v) a certificate of the Federal Reserve (dated not more than 10 days prior to the Closing Date)
certifying that the Carolina Trust is a registered bank holding company, (vi) a copy of the Articles of Incorporation of Carolina
Trust Bank as in effect from the date of this Agreement until the Closing Date, (vii) a copy of the Bylaws of Carolina Trust Bank
as in effect from the date of this Agreement until the Closing Date, (viii) a certificate of the North Carolina Commissioner of
Banks (dated not more than 10 days prior to the Closing Date) as to the good standing of Carolina Trust Bank, and (ix) a certificate
of the FDIC (dated not more than 10 days prior to the Closing Date) certifying that Carolina Trust Bank is an insured depository
institution.
(e) Claims Letters. Each of the directors of Carolina Trust and Carolina Trust Bank and the Executive Officers shall
have executed claims letters in the form attached hereto as Exhibit D and delivered the same to Carolina Financial.
(f) Non-Employee Director Non-Competition Agreements. Each of the Non-Employee Director Non-Competition Agreements executed
and delivered pursuant to Section 7.9(d) of this Agreement shall remain in full force and effect and no director party thereto
shall have advised Carolina Financial that he or she intends to breach any such agreement.
(g) Employment Agreement. The Employment Agreement executed and delivered pursuant to Section 7.9(h) of this Agreement
shall remain in full force and effect and the executive party thereto shall not have advised Carolina Financial that he intends
to breach such agreement.
(h) No Material Adverse Effect. There shall not have occurred any Carolina Trust Material Adverse Effect from the March
31, 2019 balance sheet to the Effective Time with respect to Carolina Trust or Carolina Trust Bank.
(i) Bank Merger. The Parties shall stand ready to consummate the Bank Merger immediately after the Merger.
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8.3
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Conditions
to Obligations of Carolina Trust.
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The
obligations of Carolina Trust to perform this Agreement and consummate the Merger and the other transactions contemplated hereby
are subject to the satisfaction of the following conditions, unless waived by Carolina Trust pursuant to Section 10.6(b):
(a) Representations and Warranties. For purposes of this Section 8.3(a), the accuracy of the representations and warranties
of Carolina Financial set forth in this Agreement shall be assessed as of the date of this Agreement and as of the Effective Time
with the same effect as though all such representations and warranties had been made on and as of the Effective Time (provided
that representations and warranties which are confined to a specified date shall speak only as of such date). The representations
and warranties set forth in Sections 5.1, 5.2(a) and 5.2(b)(i), and 5.5 shall be true and correct (except for inaccuracies which
are de minimis in amount or effect). There shall not exist inaccuracies in the representations and warranties of Carolina
Financial set forth in this Agreement (including the representations and warranties set forth in Sections 5.1, 5.2(a) and 5.2(b)(i),
and 5.5) such that the aggregate effect of such inaccuracies has, or is reasonably likely to have, a Carolina Financial Material
Adverse Effect; provided that, for purposes of this sentence only, those representations and warranties which are qualified
by references to “material” or “Material Adverse Effect” or to the “Knowledge” of any Person
shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the agreements and covenants of Carolina Financial to be
performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time
shall have been duly performed and complied with in all material respects.
(c) Officers’ Certificate. Carolina Financial shall have delivered to the Carolina Trust a certificate, dated
as of the Closing Date and signed on its behalf by its chief executive officer and its chief financial officer, to the effect
that the conditions set forth in Section 8.1 as they relate to Carolina Financial and in Sections 8.3(a), 8.3(b), and 8.3(f) have
been satisfied.
(d) Secretary’s Certificate. Carolina Financial and CresCom Bank shall have delivered a certificate of the secretary
of Carolina Financial and CresCom Bank, dated as of the Closing Date, certifying as to (i) the incumbency of officers of Carolina
Financial and CresCom Bank executing documents executed and delivered in connection herewith, (ii) a copy of the Certificate of
Incorporation of the Carolina Financial as in effect from the date of this Agreement until the Closing Date, along with a certificate
(dated not more than 10 days prior to the Closing Date) of the Secretary of State of the State of Delaware as to the good standing
of the Carolina Financial; (iii) a copy of the Bylaws of the Carolina Financial as in effect from the date of this Agreement until
the Closing Date, (iv) a copy of the consent or resolutions of Carolina Financial’s Board of Directors authorizing and approving
the applicable matters contemplated hereunder, (v) a certificate of the
Federal Reserve (dated not more than 10 days prior to
the Closing Date) certifying that the Carolina Financial is a registered financial holding company, (vi) a copy of the Articles
of Incorporation of CresCom Bank as in effect from the date of this Agreement until the Closing Date, (vii) a copy of the Bylaws
of CresCom Bank as in effect from the date of this Agreement until the Closing Date, (viii) a certificate of the South Carolina
Board of Financial Institutions (dated not more than 10 days prior to the Closing Date) as to the good standing of CresCom Bank,
and (ix) a certificate of the FDIC (dated not more than 10 days prior to the Closing Date) certifying that CresCom Bank is an
insured depository institution.
(e) Payment of Merger Consideration. Carolina Financial shall have executed and delivered an agreement with the Exchange
Agent obligating Carolina Financial to deliver the Merger Consideration and cash in an aggregate amount sufficient for payment
in lieu of fractional shares of Carolina Financial Common Stock to which holders of Carolina Trust Common Stock may be entitled
to the Exchange Agent within five Business Days of the Effective Time.
(f) No Material Adverse Effect. There shall not have occurred any Carolina Financial Material Adverse Effect from the
March 31, 2019 balance sheet to the Effective Time with respect to Carolina Financial.
Article
9
TERMINATION
Notwithstanding
any other provision of this Agreement, and notwithstanding the approval of this Agreement by the shareholders of Carolina Trust,
this Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time:
(a) By mutual written agreement of Carolina Financial and Carolina Trust; or
(b) By Carolina Financial or Carolina Trust (provided, that the terminating Party is not then in material breach of
any representation, warranty, covenant, or other agreement contained in this Agreement) in the event of a breach by the other
Party of any representation or warranty contained in this Agreement which cannot be or has not been cured within 30 days after
the giving of written notice to the breaching Party of such breach and which breach is reasonably likely, in the opinion of the
non-breaching Party, to permit such Party to refuse to consummate the transactions contemplated by this Agreement pursuant to
the standard set forth in Section 8.2 or 8.3 as applicable; or
(c) By Carolina Financial or Carolina Trust in the event (i) any Consent of any Regulatory Authority required for consummation
of the Merger and the other transactions contemplated hereby shall have been denied by final non-appealable action of such authority
or if any action taken by such authority is not appealed within the time limit for appeal, (ii) any Law or Order permanently restraining,
enjoining or otherwise prohibiting the consummation of the Merger shall have become final and non-appealable, or (iii) the Requisite
Carolina Trust Shareholder Vote is not obtained at Carolina Trust’s Shareholders’ Meeting; or
(d) By Carolina Financial or Carolina Trust in the event that the Merger shall not have been consummated by February 28, 2020,
if the failure to consummate the transactions contemplated hereby on or before such date is not caused by any breach of this Agreement
by the Party electing to terminate pursuant to this Section 9.1(d); or
(e) By Carolina Financial (provided, that Carolina Financial is not then in material breach of any representation, warranty,
covenant, or other agreement contained in this Agreement) in the event that (i) Carolina Trust’s Board shall have made an
Adverse Recommendation Change relating to an Acquisition Proposal; (ii) Carolina Trust’s Board shall have failed to reaffirm
the Carolina Trust Recommendation within 10 business days after Carolina Financial requests such at any time following the public
announcement of an Acquisition Proposal, provided, however, that any actions taken by Carolina Trust pursuant to
Section 7.3 of this Agreement shall not be considered a failure to reaffirm the Carolina Trust Recommendation, or (iii) Carolina
Trust shall have failed to comply in all material respects with its obligations under Section 7.1 or 7.3; or
(f) By Carolina Trust, if (i) Carolina Trust’s Shareholders’ Meeting has been held, (ii) the Requisite Carolina
Trust Shareholder Vote has not been obtained, (iii) prior to Carolina Trust’s Shareholders’ Meeting, Carolina Trust
has received a Superior Proposal which did not result from a breach of Section 7.3, and (iv) Carolina Trust’s Board has
determined to enter into a definitive agreement providing for such Superior Proposal upon termination of this Agreement in accordance
with this Section 9.1(f) and enters into such agreement concurrently with such termination; provided, that Carolina Trust
shall pay Carolina Financial the Termination Fee pursuant to Section 9.3(a) concurrently with and as a condition to the effectiveness
of such termination; or
(g)
by Carolina Trust, at any time prior to receipt of the Requisite Carolina Trust Shareholder Vote, if the Carolina Trust
Board shall have effected an Adverse Recommendation Change in response to, or as a result of, an Intervening Event.
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9.2
|
Effect
of Termination.
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In
the event of the termination and abandonment of this Agreement by either Carolina Financial or Carolina Trust pursuant to Section
9.1, this Agreement shall become void and have no effect, except that (i) the provisions of Sections 7.6, 9.2, 9.3, 10.2, and
10.3 shall survive any such termination and abandonment, and (ii) no such termination shall relieve the breaching Party from Liability
resulting from any breach by that Party of this Agreement.
(a) If Carolina Financial terminates this Agreement pursuant to Section 9.1(e) of this Agreement or Carolina Trust terminates
this Agreement pursuant to Section 9.1(f) of this Agreement, then Carolina Trust shall pay to Carolina Financial the sum of $4,712,000
(the “Termination Fee”) within three business days of the termination date, except as required by Section 9.1(f).
The Termination Fee shall be paid to Carolina Financial in same day funds. Carolina Trust hereby waives any right to set-off or
counterclaim against such amount.
(b) In the event that, (i) before the termination of this Agreement, an Acquisition Proposal with respect to Carolina Trust
shall have been communicated to or otherwise made known to the shareholders, senior management or Board of Directors of Carolina
Trust, or any Person shall have publicly announced an intention (whether or not conditional) to make an Acquisition Proposal with
respect to Carolina Trust, in either case after the date of this Agreement, (ii) thereafter this Agreement is terminated (A) by
Carolina Trust or Carolina Financial pursuant to Section 9.1(d) (if the Requisite Carolina Trust Shareholder Vote has not theretofore
been obtained), (B) by Carolina Financial pursuant to Section 9.1(b), or (C) by Carolina Trust or Carolina Financial pursuant
to Section 9.1(c)(iii), and (iii) prior to the date that is 12 months after the date of such termination, Carolina Trust consummates,
or enters into a definitive agreement to consummate, an Acquisition Transaction in which, as applicable, the acquirer acquires
a majority of the total outstanding
voting securities of Carolina Trust or Carolina Trust Bank, the shareholders of Carolina Trust
immediately preceding the transaction hold less than a majority of the equity interests of the surviving or resulting entity or
the acquirer acquires more than 50% of the assets of Carolina Trust, then Carolina Trust shall on the earlier of the date such
Acquisition Transaction is consummated or such definitive agreement is entered into, as applicable, pay Carolina Financial a fee
equal to the Termination Fee in same day funds. Carolina Trust hereby waives any right to set-off or counterclaim against such
amount.
(c) The Parties acknowledge that the agreements contained in this Article 9 are an integral part of the transactions contemplated
by this Agreement, and that without these agreements, they would not enter into this Agreement; accordingly, if Carolina Trust
fails to pay promptly any fee payable by it pursuant to this Section 9.3, then Carolina Trust shall pay to Carolina Financial
its reasonable costs and expenses (including reasonable attorneys’ fees) in connection with collecting such Termination
Fee, together with interest on the amount of the fee at the prime annual rate of interest (as published in The Wall Street
Journal) plus 2% as the same is in effect from time to time from the date such payment was due under this Agreement until
the date of payment.
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9.4
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Non-Survival
of Representations and Covenants.
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Except
for Article 2, Article 3, Sections 7.6(b), 7.8, 7.9, 7.11, and 7.12 and this Article 9, the respective representations, warranties,
obligations, covenants, and agreements of the Parties shall not survive the Effective Time.
Article
10
MISCELLANEOUS
(a) Except as otherwise provided herein, the capitalized terms set forth below shall have the following meanings:
“Acquisition
Agreement” shall have the meaning as set forth in Section 7.3 of the Agreement.
“Acquisition
Proposal” means any proposal that is communicated to Carolina Trust’s chief executive officer, chief financial
officer or Board of Directors or publicly announced to Carolina Trust’s shareholders by any Person (other than Carolina
Financial or any of its Affiliates) for an Acquisition Transaction involving Carolina Trust or any of its present or future consolidated
Subsidiaries, or any combination of such Subsidiaries, the assets of which constitute 5% or more of the consolidated assets of
Carolina Trust as reflected on Carolina Trust’s consolidated statement of condition prepared in accordance with GAAP.
“Acquisition
Transaction” means any transaction or series of related transactions (other than the transactions contemplated by this
Agreement) involving: (i) any acquisition or purchase from Carolina Trust by any Person or Group (other than Carolina Financial
or any of its Affiliates) of 25% or more in interest of the total outstanding voting securities of Carolina Trust or any of its
Subsidiaries, or any tender offer or exchange offer that if consummated would result in any Person or Group (other than Carolina
Financial or any of its Affiliates) beneficially owning 25% or more in interest of the total outstanding voting securities of
Carolina Trust or any of its Subsidiaries, or any merger, consolidation, business combination or similar transaction involving
Carolina Trust pursuant to which the shareholders of Carolina Trust immediately preceding such transaction hold less than 75%
of the equity interests in the surviving or resulting entity (which includes the parent
corporation of any constituent corporation
to any such transaction) of such transaction; (ii) any sale or lease (other than in the ordinary course of business), or
exchange, transfer, license (other than in the ordinary course of business), acquisition or disposition of 5% or more of the assets
of Carolina Trust; or (iii) any liquidation or dissolution of Carolina Trust.
“Adverse
Recommendation Change” shall have the meaning as set forth in Section 7.1(b) of the Agreement.
“Affiliate”
of a Person means: (i) any other Person directly, or indirectly through one or more intermediaries, controlling, controlled
by or under common control with such Person; (ii) any officer, director, partner, employer, or direct or indirect beneficial
owner of any 10% or greater equity or voting interest of such Person; or (iii) any other Person for which a Person described
in clause (ii) acts in any such capacity.
“Aggregate
Cash Limit” shall have the meaning as set forth in Section 3.2(d) of the Agreement.
“Aggregate
Stock Limit” shall have the meaning as set forth in Section 3.2(d) of the Agreement.
“Agreement”
shall have the meaning as set forth in the introduction of the Agreement.
“Allowance”
shall have the meaning as set forth in Section 4.9(a) of the Agreement.
“Articles
of Merger” shall have the meaning as set forth in Section 1.3 of the Agreement.
“Assets”
of a Person means all of the assets, properties, businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or contingent, or otherwise relating to or utilized
in such Person’s business, directly or indirectly, in whole or in part, whether or not carried on the books and records
of such Person, and whether or not owned in the name of such Person or any Affiliate of such Person and wherever located.
“Average
Closing Price” means the average of the closing sale prices of Carolina Financial Common Stock on the NASDAQ Capital
Market (as reported by Bloomberg L.P.) for the ten full trading days ending on the day preceding the date on which the Effective
Time is to occur.
“Bank
Agreement of Merger” shall have the meaning as set forth in Section 1.6 of the Agreement, and the form attached hereto
as Exhibit A.
“Bank
Merger” shall have the meaning as set forth in Section 1.6 of the Agreement.
“BHCA”
shall have the meaning as set forth in Section 4.1 of the Agreement.
“Carolina
Financial” shall have the meaning as set forth in the introduction of the Agreement.
“Carolina
Financial Awards” shall have the meaning as set forth in Section 3.1(e) of the Agreement.
“Carolina
Financial Common Stock” means the common stock, par value $0.01 per share, of Carolina Financial.
“Carolina
Financial Entities” means, collectively, Carolina Financial and all Carolina Financial Subsidiaries.
“Carolina
Financial Exchange Act Reports” shall have the meaning as set forth in Section 5.4(a) of the Agreement.
“Carolina
Financial Financial Advisor” shall mean Sandler O’Neill & Partners, L.P.
“Carolina
Financial Financial Statements” means (i) the consolidated balance sheets of Carolina Financial as of March 31, 2019,
and the related statements of income, changes in stockholders’ equity, and cash flows (including related notes and schedules,
if any) for the period ended March 31, 2019, and for each of the three fiscal years ended December 31, 2018, included in Exchange
Act Documents filed with the SEC by Carolina Financial, and (ii) the consolidated balance sheets of Carolina Financial (including
related notes and schedules, if any) and related statements of income, changes in stockholders’ equity, and cash flows (including
related notes and schedules, if any) included in Exchange Act Documents filed with the SEC by Carolina Financial with respect
to periods ended subsequent to March 31, 2017.
“Carolina
Financial Material Adverse Effect” means an event, change or occurrence which, individually or together with any other
event, change or occurrence, has a material adverse effect on (i) the financial position, property, business, assets or results
of operations of Carolina Financial and its Subsidiaries, taken as a whole, or (ii) the ability of Carolina Financial to
perform its material obligations under this Agreement or to consummate the Merger or the other transactions contemplated by this
Agreement, provided, that “Carolina Financial Material Adverse Effect” shall not be deemed to include the effects
of (A) changes in banking and other Laws of general applicability or interpretations thereof by Governmental Authorities,
(B) changes in GAAP or regulatory accounting principles generally applicable to banks and their holding companies, (C) actions
and omissions of Carolina Financial (or any of its Subsidiaries) taken with the prior written Consent of Carolina Trust in contemplation
of the transactions contemplated hereby, (D) changes in economic conditions affecting financial institutions generally, including
changes in interest rates, credit availability and liquidity, and price levels or trading volumes in securities markets, except
to the extent Carolina Financial is materially and adversely affected in a disproportionate manner as compared to other community
banks and their holding companies in the Southeastern United States, (E) changes resulting from the announcement or pendency of
the transactions contemplated by this Agreement, or (F) the direct effects of negotiating, entering into, and compliance with
this Agreement on the operating performance of Carolina Financial. “Carolina Financial Material Adverse Effect” shall
not be deemed to include any failure to meet analyst projections, in and of itself, or, in and of itself, or the trading price
of Carolina Financial Common Stock (it being understood that the facts or occurrences giving rise or contributing to any such
effect, change or development which affects or otherwise relates to the failure to meet analyst financial forecasts or the trading
price, as the case may be, may be deemed to constitute, or be taken into account in determining whether there has been, or would
reasonably be expected to be, a Carolina Financial Material Adverse Effect).
“Carolina
Financial Security Program” shall have the meaning as set forth in Section 7.6(e) of the Agreement.
“Carolina
Financial Subsidiaries” means the Subsidiaries of Carolina Financial, which shall include any corporation, bank, savings
association, limited liability company, limited partnership, limited liability partnership or other organization acquired as a
Subsidiary of Carolina Financial in the future and held as a Subsidiary by Carolina Financial at the Effective Time.
“Carolina
Trust” shall have the meaning as set forth in the introduction of the Agreement.
“Carolina
Trust Benefit Plan(s)” shall have the meaning as set forth in Section 4.15(a) of the Agreement.
“Carolina
Trust’s Board” means the Board of Directors of Carolina Trust.
“Carolina
Trust Book-Entry Shares” shall have the meaning set forth in Section 3.1(b) of the Agreement.
“Carolina
Trust Common Stock” means the $2.50 par value common stock of Carolina Trust.
“Carolina
Trust Contracts” shall have the meaning as set forth in Section 4.16(a) of the Agreement.
“Carolina
Trust Disclosure Memorandum” means the written information entitled “Carolina Trust Disclosure Memorandum”
delivered with this Agreement, it being understood that a disclosure in any section of the Carolina Trust Disclosure Memorandum
shall be deemed to have been set forth in all other applicable sections of the Carolina Trust Disclosure Memorandum where it is
reasonably apparent on the face of such disclosure that such disclosure is applicable to such other sections of the Carolina Trust
Disclosure Memorandum, notwithstanding the omission of any cross-reference to such other section, and it being understood further
that the inclusion of any disclosure on the Carolina Trust Disclosure Memorandum does not make such disclosure a material disclosure.
“Carolina
Trust Entities” means, collectively, Carolina Trust and all Carolina Trust Subsidiaries.
“Carolina
Trust Entities’ D&O Policies” shall have the meaning as set forth in Section 7.11(b) of the Agreement.
“Carolina
Trust Equity Plans” means the Carolina Trust Bank 2001 Incentive Stock Option Plan, the Carolina Trust Bank 2005 Incentive
Stock Option Plan, the Carolina Trust Bank 2005 Nonstatutory Stock Option Plan, the Carolina Commerce Bank Employee Stock Option
Plan, and the Carolina Commerce Bank Director Stock Option Plan.
“Carolina
Trust ERISA Plan” shall have the meaning as set forth in Section 4.15(a) of the Agreement.
“Carolina
Trust Financial Advisor” means Raymond James & Associates, Inc.
“Carolina
Trust Financial Statements” means (i) the consolidated balance sheets of Carolina Trust as of March 31, 2019, and the
related statements of income, changes in shareholders’ equity, and cash flows (including related notes and schedules, if
any) for the quarter ended March 31, 2019, and for each of the three fiscal years ended December 31, 2018, included in Exchange
Act Documents filed with the SEC by Carolina Trust, and (ii) the consolidated balance sheets of Carolina Trust (including related
notes and schedules, if any) and related statements of income, changes in shareholders’ equity, and cash flows (including
related notes and schedules, if any) included in Exchange Act Documents filed with the SEC by Carolina Trust with respect to periods
ended subsequent to March 31, 2019.
“Carolina
Trust Material Adverse Effect” means an event, change or occurrence which, individually or together with any other event,
change or occurrence, has a material adverse effect on (i) the financial position, property, business, assets or results of operations
of Carolina Trust and its Subsidiaries, taken as a whole, or (ii) the ability of Carolina Trust to perform its material obligations
under this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement, provided, that “Carolina
Trust Material Adverse Effect” shall not be deemed to include the effects of (A) changes in banking and other Laws of general
applicability or interpretations thereof by Governmental Authorities, (B) changes in GAAP or regulatory accounting principles
generally applicable to banks and their holding companies, (C) actions and omissions of Carolina Trust (or any of its Subsidiaries)
taken with the prior written consent of Carolina Financial in contemplation of the transactions contemplated hereby, (D) changes
in economic conditions affecting financial institutions generally, including changes in interest rates, credit availability and
liquidity, and price levels or trading volumes in securities markets, except to the extent Carolina Trust is materially and adversely
affected in a disproportionate manner as compared to other community banks and their holding companies in the Southeastern United
States, (E) changes resulting from the announcement or pendency of the transactions contemplated by this Agreement, or (F) the
direct effects of negotiating, entering into, and compliance with this Agreement on the operating performance of Carolina Trust.
“Carolina Trust Material Adverse Effect” shall not be deemed to include any failure to meet analyst projections, in
and of itself, or, in and of itself, or the trading price of the Carolina Trust Common Stock (it being understood that the facts
or occurrences giving rise or contributing to any such effect, change or development which affects or otherwise relates to the
failure to meet analyst financial forecasts or the trading price, as the case may be, may be deemed to constitute, or be taken
into account in determining whether there has been, or would reasonably be expected to be, a Carolina Trust Material Adverse Effect).
“Carolina
Trust Options” shall have the meaning as set forth in Section 3.4(b) of the Agreement.
“Carolina
Trust Recommendation” shall have the meaning as set forth in Section 7.1(a) of the Agreement.
“Carolina
Trust Realty” shall have the meaning as set forth in Section 4.10(e) of the Agreement.
“Carolina
Trust’s Shareholders’ Meeting” means the meeting of Carolina Trust’s shareholders to be held pursuant
to Section 7.1(a), including any postponements or adjournments thereof.
“Carolina
Trust Subsidiaries” means the Subsidiaries of Carolina Trust and Carolina Trust Bank. As of the date of this Agreement,
the only Carolina Trust Subsidiaries are Carolina Trust Bank, which is a Subsidiary of Carolina Trust, and Western Carolina Holdings,
LLC, which is a Subsidiary of Carolina Trust Bank.
“Cash
Consideration” shall have the meaning as set forth in Section 3.1(a) of the Agreement.
“Cash
Election” shall have the meaning as set forth in Section 3.2(b) of the Agreement.
“Cash
Election Number” shall have the meaning as set forth in Section 3.2(b) of the Agreement.
“Cash
Election Shares” shall have the meaning as set forth in Section 3.2(b) of the Agreement.
“Certificate
of Merger” shall have the meaning as set forth in Section 1.3 of the Agreement.
“Certificates”
shall have the meaning as set forth in Section 3.1(b) of the Agreement.
“Closing”
shall have the meaning as set forth in Section 1.2 of the Agreement.
“Closing
Date” means the date on which the Closing occurs.
“Code”
means the Internal Revenue Code of 1986, as amended, in effect from time to time.
“Consent”
means any consent, approval, authorization, clearance, exemption, waiver, or similar affirmation by any Person pursuant to
any Contract, Law, Order, or Permit.
“Consumer
Loan” a loan or other extension of credit to one or more individuals for household, family and other consumer purposes
which has been or would be classified as a “Consumer loan” in tabular data presented by Carolina Trust in an Exchange
Act Document, which, for the avoidance of doubt, excludes a loan which is or would be classified in such Exchange Act Document
as a “Residential mortgage.”
“Continuing
Employee” shall have the meaning as set forth in Section 7.9(a) of the Agreement.
“Contract”
means any written or oral agreement, arrangement, authorization, commitment, contract, indenture, instrument, lease, license,
obligation, plan, practice, restriction, understanding, or undertaking of any kind or character, or other document to which any
Person is a party or that is binding on any Person or its capital stock, Assets or business.
“Data
Incident” means any actual or reasonably suspected unauthorized access to or acquisition, disclosure, use, or loss of
IIPI disclosed to any Carolina Financial Entity in connection with this Agreement (including hard copies) or breach or compromise
of Carolina Financial’s Security Program that presents a viable threat to any such IIPI or any Carolina Trust Entity’s
systems.
“Default”
means (i) any breach or violation of, default under, contravention of, or conflict with, any Contract, Law, Order, or
Permit, (ii) any occurrence of any event that with the passage of time or the giving of notice or both would constitute a
breach or violation of, default under, contravention of, or conflict with, any Contract, Law, Order, or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the giving of notice would give rise to a right of any Person
to exercise any remedy or obtain any relief under, terminate or revoke, suspend, cancel, or modify or change the current terms
of, or renegotiate, or to accelerate the maturity or performance of, or to increase or impose any Liability under, any Contract,
Law, Order, or Permit.
“DGCL”
means the Delaware General Corporation Law.
“Director
Non-Competition Agreement” shall have the meaning as set forth in Section 7.9(e) of the Agreement.
“Disqualified
Person” shall have the meaning as set forth in Section 4.15(f) of the Agreement.
“DOL”
shall have the meaning as set forth in Section 4.15(b) of the Agreement.
“Effective
Date” shall have the meaning as set forth in Section 1.2 of the Agreement.
“Effective
Time” shall have the meaning as set forth in Section 1.3 of the Agreement.
“Election
Deadline” shall have the meaning as set forth in Section 3.2(c) of the Agreement.
“Employee
Benefit Plan” means each pension, retirement, profit-sharing, deferred compensation, stock option, equity incentive,
synthetic equity incentive, phantom stock, employee stock ownership, share purchase, severance pay, vacation, bonus, retention,
change in control or other incentive plan, medical, vision, dental or other health plan, any life insurance plan, flexible spending
account, cafeteria plan, vacation, holiday, disability or any other employee benefit plan or fringe benefit plan, including any
“employee benefit plan,” as that term is defined in Section 3(3) of ERISA and any other plan, fund, policy, program,
practice, custom understanding or arrangement providing compensation or other benefits, whether or not such Employee Benefit Plan
is or is intended to be (i) covered or qualified under the Code, ERISA or any other applicable Law, (ii) written or oral, (iii)
funded or unfunded, (iv) actual or contingent or (v) arrived at through collective bargaining or otherwise.
“Environmental
Laws” shall mean all Laws relating to pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata) and which are administered, interpreted or enforced by the
United States Environmental Protection Agency and state and local Governmental Authorities with jurisdiction over, and including
common law in respect of, pollution or protection of the environment, including: (i) the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. §§9601 et seq. (“CERCLA”); (ii) the Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act, 42 U.S.C. §§6901 et seq. (“RCRA”);
(iii) the Emergency Planning and Community Right to Know Act (42 U.S.C. §§11001 et seq.); (iv) the Clean Air Act (42
U.S.C. §§7401 et seq.); (v) the Clean Water Act (33 U.S.C. §§1251 et seq.); (vi) the Toxic Substances Control
Act (15 U.S.C. §§2601 et seq.); (vii) any state, county, municipal or local statues, laws or ordinances similar or analogous
to the federal statutes listed in parts (i) - (vi) of this subparagraph; (viii) any existing amendments to the statues, laws or
ordinances listed in parts (i) - (vi) of this subparagraph, (ix) any rules, regulations, guidelines, directives, orders or the
like adopted pursuant to or implementing the statutes, laws, ordinances and amendments listed in parts (i) - (vii) of this subparagraph;
and (x) any other law, statute, ordinance, amendment, rule, regulation, guideline, directive, order or the like in effect now
relating to environmental, health or safety matters and other Laws relating to emissions, discharges, releases, or threatened
releases of any Hazardous Material, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of any Hazardous Material.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended through the date of this Agreement.
“ERISA
Affiliate” means any trade or business, whether or not incorporated, which together with a Carolina Trust Entity would
be treated as a single employer under Code Section 414 or would be deemed a single employer within the meaning of Code Section
414.
“Exchange
Act” means the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder.
“Exchange
Act Documents” means all forms, proxy statements, registration statements, reports, schedules, and other documents,
as amended or supplemented, including all certifications and statements required by the Exchange Act or Section 906 of the Sarbanes-Oxley
Act with
respect to any report that is an Exchange Act Document, filed, or required to be filed, by a Party or any of its Subsidiaries
with any Regulatory Authority pursuant to the Securities Laws.
“Exchange
Agent” shall have the meaning as set forth in Section 3.2(a) of the Agreement.
“Exchange
Fund” shall have the meaning as set forth in Section 3.2(a) of the Agreement.
“Exchange
Ratio” shall have the meaning as set forth in Section 3.1(a) of the Agreement.
“Executive
Officers” means the President and Chief Executive Officer of Carolina Trust, Executive Vice President and Chief Financial
Officer of Carolina Trust and the Executive Vice President and Chief Credit Officer of Carolina Trust Bank.
“Exhibits”
means the Exhibits so marked, copies of which are attached to this Agreement. Such Exhibits are hereby incorporated by reference
herein and made a part hereof, and may be referred to in this Agreement and any other related instrument or document without being
attached hereto or thereto.
“Extinguished
Shares” shall have the meaning as set forth in Section 3.1(f) of the Agreement.
“FDIC”
means the Federal Deposit Insurance Corporation.
“Federal
Reserve” means the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of Richmond, as applicable.
“GAAP”
means generally accepted accounting principles in the United States, consistently applied during the periods involved.
“Governmental
Authority” means any federal, state, local, foreign, or other court, board, body, commission, agency, authority or instrumentality,
arbitral authority, self-regulatory authority, mediator, tribunal, including Regulatory Authorities and Taxing Authorities.
“Group”
shall have the meaning as set forth in Section 13(d) of the Exchange Act.
“Hazardous
Material” means any chemical, substance, waste, material, pollutant, or contaminant defined as or deemed hazardous or
toxic or otherwise regulated under any Environmental Law, including RCRA hazardous wastes, CERCLA hazardous substances, and state
regulated substances, pesticides and other agricultural chemicals, oil and petroleum products or byproducts and any constituents
thereof, urea formaldehyde insulation, lead in paint or drinking water, mold, asbestos (and specifically shall include asbestos
requiring abatement, removal, or encapsulation pursuant to the requirements of Environmental Law), and polychlorinated biphenyls
(PCBs), provided, notwithstanding the foregoing or any other provision in this Agreement to the contrary, the words “Hazardous
Material” shall not mean or include any such Hazardous Material used, generated, manufactured, stored, disposed of or otherwise
handled in normal quantities in the ordinary course of business in compliance with all applicable Environmental Laws, or such
that may be naturally occurring in any ambient air, surface water, ground water, land surface or subsurface strata.
“Holder
Representative” shall have the meaning as set forth in Section 3.2(b) of the Agreement.
“IIPI”
shall have the meaning as set forth in Section 4.13(b)(vii) of the Agreement.
“Indemnified
Party” shall have the meaning as set forth in Section 7.11(a) of the Agreement.
“Individually
Identifiable Personal Information” or “IIPI” shall have the meaning as set forth in Section 4.13(b)(vii)
of the Agreement.
“Intellectual
Property” means copyrights, patents, trademarks, service marks, service names, trade names, domain names, together with
all goodwill associated therewith, registrations and applications therefor, technology rights and licenses, computer software
(including any source or object codes therefor or documentation relating thereto), trade secrets, franchises, know-how, inventions,
and other intellectual property rights.
“Intervening
Event” shall have the meaning as set forth in Section 7.1(b) of the Agreement.
“IRS”
shall have the meaning as set forth in Section 4.15(b) of the Agreement.
“Knowledge”
as used with respect to a Person (including references to such Person being aware of a particular matter) means those facts
that are known, or should reasonably have been known after reasonable inquiry of the records and employees of such Person, by
the chief executive officer or chief financial officer of such Person without any further investigation.
“Law”
means any code, law (including common law), ordinance, regulation, reporting or licensing requirement, rule, statute, regulation
or order applicable to a Person or its Assets, Liabilities or business, including those promulgated, interpreted or enforced by
any Regulatory Authority.
“Liability”
or “Liabilities” means any direct or indirect, primary or secondary, liability, indebtedness, obligation,
penalty, cost or expense (including reasonable attorneys’ fees, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than endorsements of notes, bills, checks, and drafts presented
for collection or deposit in the ordinary course of business) of any type, whether accrued, absolute or contingent, liquidated
or unliquidated, matured or unmatured, or otherwise.
“Lien”
means any conditional sale agreement, default of title, easement, encroachment, encumbrance, hypothecation, infringement,
lien, mortgage, pledge, reservation, restriction, security interest, title retention or other security arrangement, or any adverse
right or interest, charge, or claim of any nature whatsoever of, on, or with respect to any property or any property interest,
other than (i) Liens for current property Taxes not yet due and payable, and (ii) for any depository institution,
pledges to secure public deposits and other Liens incurred in the ordinary course of the banking business.
“Litigation”
means any action, arbitration, cause of action, lawsuit, claim, complaint, criminal prosecution, governmental or other examination
or investigation, audit (other than regular audits of financial statements by outside auditors), compliance review, inspection,
hearing, administrative or other proceeding relating to or affecting a Party, its business, its Assets or Liabilities (including
Contracts related to Assets or Liabilities), or the transactions contemplated by this Agreement, but shall not include regular,
periodic examinations of depository institutions and their Affiliates by Regulatory Authorities.
“Loan”
means all loan agreements, notes or borrowing arrangements (including leases, credit enhancements, commitments, guarantees
and interest-bearing assets) payable to the Carolina Trust Entities.
“Material”
or “material” for purposes of this Agreement shall be determined in light of the facts and circumstances
of the matter in question; provided, that any specific monetary amount stated in this Agreement shall determine materiality
in that instance.
“Merger”
shall have the meaning as set forth in the Recitals of the Agreement.
“Merger
Consideration” shall have the meaning as set forth in Section 3.1(a) of the Agreement.
“Mixed
Election” shall have the meaning as set forth in Section 3.2(b) of the Agreement.
“NCBCA”
means the North Carolina Business Corporation Act.
“Non-Election”
shall have the meaning as set forth in Section 3.2(b) of the Agreement.
“Non-Election
Shares” shall have the meaning as set forth in Section 3.2(b) of the Agreement.
“Notice
of Recommendation Change” shall have the meaning as set forth in Section 7.1(b) of the Agreement.
“Off-Balance
Sheet Arrangements” shall have the meaning as set forth in Section 4.6 of the Agreement.
“Order”
means any administrative decision or award, decree, injunction, judgment, order, quasi-judicial decision or award, directive,
ruling, or writ of any Governmental Authority.
“Party”
means Carolina Trust or Carolina Financial, as applicable, and “Parties” means Carolina Trust and Carolina
Financial.
“Party
in Interest” shall have the meaning as set forth in Section 4.15(f) of the Agreement.
“Permit”
means any federal, state, local, and foreign Governmental Authority approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party or that is or may be binding upon or inure to the
benefit of any Person or its securities, Assets, or business, the absence of which or a default under would constitute a Carolina
Financial Material Adverse Effect or Carolina Trust Adverse Effect, as the case may be.
“Per
Share Purchase Price” shall have the meaning as set forth in Section 3.1(a) of the Agreement.
“Person”
means a natural person or any legal, commercial or Governmental Authority, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company, limited liability partnership, trust, business association,
group acting in concert, or any person acting in a representative capacity.
“PPACA”
shall have the meaning as set forth in Section 4.15(x) of the Agreement.
“Premium
Multiple” shall have the meaning as set forth in Section 7.11(b) of the Agreement.
“Prohibited
Transaction” shall have the meaning as set forth in Section 4.15(f) of the Agreement.
“Proxy
Statement/Prospectus” shall have the meaning as set forth in Section 4.2(c) of the Agreement.
“Qualified
Group” shall have the meaning set forth in Section 5.8 of the Agreement.
“RCRA”
shall have the meaning as set forth in the definition of “Environmental Laws” set forth above.
“Registration
Statement” shall have the meaning set forth in Section 4.2(c) of the Agreement.
“Regulatory
Authorities” means, collectively, the SEC, the NASDAQ Stock Market, the Financial Industry Regulatory Authority, Inc.,
the North Carolina Commissioner of Banks, the North Carolina Banking Commission, the South Carolina Board of Financial Institutions,
the FDIC, the Department of Justice, and the Federal Reserve and all other federal, state, county, local or other Governmental
Authorities having jurisdiction over a Party or its Subsidiaries.
“Representative”
means any investment banker, financial advisor, attorney, accountant, consultant, or other representative or agent of a Person.
“Requisite
Carolina Trust Shareholder Vote” shall have the meaning as set forth in Section 4.2(a) of the Agreement.
“Rights”
shall mean all arrangements, calls, commitments, Contracts, options, rights to subscribe to, scrip, warrants, or other binding
obligations of any character whatsoever by which a Person is or may be bound to issue additional shares of its capital stock or
other securities, securities or rights convertible into or exchangeable for, shares of the capital stock or other securities of
a Person or by which a Person is or may be bound to issue additional shares of its capital stock or other Rights.
“Sarbanes-Oxley
Act” means the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated thereunder.
“SEC”
means the United States Securities and Exchange Commission.
“Securities
Act” means the Securities Act of 1933, and the rules and regulations promulgated thereunder.
“Securities
Laws” means the Securities Act, the Exchange Act, the Investment Company Act of 1940, the Investment Advisors Act of
1940, the Trust Indenture Act of 1939, and the rules and regulations of any Regulatory Authority promulgated thereunder.
“Shareholder
Support Agreements” shall have the meaning as set forth in Section 7.9(e) of the Agreement.
“Stock
Consideration” shall have the meaning as set forth in Section 3.1(a) of the Agreement.
“Stock
Election” shall have the meaning as set forth in Section 3.2(b) of the Agreement.
“Stock
Election Number” shall have the meaning as set forth in Section 3.2(b) of the Agreement.
“Stock
Election Shares” shall have the meaning as set forth in Section 3.2(b) of the Agreement.
“Subsidiaries”
means all those corporations, banks associations, or other entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly or through an unbroken chain of entities as to each
of which 50% or more of the outstanding equity securities is owned directly or indirectly by its parent (provided, there
shall not be included any such entity the equity securities of which are owned or controlled in a fiduciary capacity), (ii) in
the case of partnerships, serves as a general partner, (iii) in the case of a limited liability company, serves as a managing
member, or (iv) otherwise has the ability to elect a majority of the directors, trustees or managing members thereof.
“Superior
Proposal” means any bona fide written Acquisition Proposal made by a third party that if consummated would result in
such Person (or its shareholders) owning, directly or indirectly, more than 50% of the shares of Carolina Trust Common Stock then
outstanding (or of the shares of the surviving entity in a merger or the direct or indirect parent of the surviving entity in
a merger) or all or substantially all of the assets of Carolina Trust which Carolina Trust’s Board (after consultation with
the Carolina Trust Financial Advisor and the Carolina Trust’s outside counsel) determines (taking into account all financial,
legal, regulatory, and other aspects of such proposal and the third party making the proposal) in good faith to be (i) more favorable
to Carolina Trust’s Shareholders from a financial point of view than the Merger (taking into account all the terms and conditions
of such proposal and this Agreement (including any changes to the financial terms of this Agreement proposed by Carolina Financial
in response to such offer or otherwise)), and (ii) reasonably capable of being completed.
“Surviving
Corporation” means Carolina Financial as the surviving corporation resulting from the Merger as set forth in Section
1.1 of the Agreement.
“Surviving
Bank” means CresCom Bank as the surviving bank resulting from the Bank Merger as set forth in Section 1.6 of the Agreement.
“Tax”
or “Taxes” means any and all taxes and charges, fees, levies, imposts, duties, or assessments in the nature
of a tax, including income, gross receipts, excise, employment, sales, use, transfer, recording license, payroll, franchise, severance,
documentary, stamp, occupation, windfall profits, environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business and unemployment, disability, real property, personal
property, registration, ad valorem, value added, alternative or add-on minimum, estimated, or other taxes, fees, assessments
or charges of any kind whatsoever, that, in any case, are imposed or required to be withheld by any Governmental Authority (domestic
or foreign), including any interest, penalties, and additions imposed thereon or with respect thereto.
“Tax
Return” means any report, return, information return, or other information required to be supplied to a Governmental
Authority in connection with Taxes, including any return of an affiliated or combined or unitary group that includes a Party or
its Subsidiaries.
“Taxing
Authority” means the Internal Revenue Service and any other Governmental Authority responsible for the administration
of any Tax.
“Termination
Fee” shall have the meaning as set forth in Section 9.3(a) of the Agreement.
“Treasury
Regulations” means the final regulations promulgated under the Code by the United States Department of the Treasury.
“WARN
Act” shall have the meaning as set forth in Section 4.14(d) of the Agreement.
(b) Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the
words “include,” “includes” or “including” are used in this Agreement, they shall be deemed
followed by the words “without limitation”, and such terms shall not be limited by enumeration or example. When used
in this Agreement, words such as “herein”, “hereinafter”, “hereof”, “hereto”,
and “hereunder” refer to this Agreement as a whole, unless the context clearly requires otherwise.
Each
of the Parties shall bear and pay all direct costs and expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration and application fees, printing fees, and fees and expenses of its own financial
or other consultants, investment bankers, accountants, and counsel, and which in the case of Carolina Trust, shall be paid at
or prior to Closing and prior to the Effective Time.
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10.3
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Brokers
and Finders.
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Except
for the Carolina Trust Financial Advisor as to Carolina Trust and the Carolina Financial Financial Advisor as to Carolina Financial,
each of the Parties represents and warrants that neither it nor any of its officers, directors, employees, or Affiliates has employed
any broker or finder or incurred any Liability for any financial advisory fees, investment bankers’ fees, brokerage fees,
commissions, or finders’ fees in connection with this Agreement or the transactions contemplated hereby. In the event of
a claim by any broker or finder based upon such broker’s representing or being retained by or allegedly representing or
being retained by Carolina Trust or Carolina Financial, each of Carolina Trust or Carolina Financial, as the case may be, agrees
to indemnify and hold the other Party harmless from any Liability in respect of any such claim. Carolina Trust has provided a
copy of the Carolina Trust Financial Advisor’s engagement letter and expected fee for its services as disclosed in Section
10.3 of the Carolina Trust Disclosure Memorandum and shall pay all amounts due thereunder at Closing and prior to the Effective
Time.
Except
as otherwise expressly provided herein, this Agreement (including the documents and instruments referred to herein) constitutes
the entire agreement between the Parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral. Nothing in this Agreement expressed or implied, is intended to confer
upon any Person, other than the Parties or their respective successors, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, other than as provided in Sections 7.9 and 7.11.
To
the extent permitted by Law, and subject to Section 1.4, this Agreement may be amended by a subsequent writing signed by each
of the Parties upon the approval of each of the Parties, whether before or after the Requisite Carolina Trust Shareholder Vote
and the Requisite Carolina Financial Stockholder Votes of this Agreement have been obtained; provided, that after any such
approval by the holders of Carolina Trust Common Stock, there shall be made no amendment that (a) reduces or modifies in any respect
the consideration to be received by holders of Carolina Trust Common Stock or (b) alters or changes any of the terms and conditions
of this Agreement if such alteration or change would adversely affect the holders of Carolina Trust Common Stock.
(a) Prior to or at the Effective Time, Carolina Financial, acting through its Board of Directors, chief executive officer,
or other authorized officers, shall have the right to waive any Default in the performance of any term of this Agreement by Carolina
Trust, to waive or extend the time for the compliance or fulfillment by Carolina Trust of any and all of its obligations under
this Agreement, and to waive any or all of the conditions precedent to the obligations of Carolina Financial under this Agreement,
except any condition which, if not satisfied, would result in the violation of any Law. No such waiver shall be effective unless
in writing signed by a duly authorized officer of Carolina Financial.
(b) Prior to or at the Effective Time, Carolina Trust, acting through its Board of Directors, chief executive officer, or other
authorized officer, shall have the right to waive any Default in the performance of any term of this Agreement by Carolina Financial,
to waive or extend the time for the compliance or fulfillment by Carolina Financial of any and all of its obligations under
this Agreement, and to waive any or all of the conditions precedent to the obligations of Carolina Trust under this Agreement,
except any condition which, if not satisfied, would result in the violation of any Law. No such waiver shall be effective unless
in writing signed by a duly authorized officer of Carolina Trust.
(c) The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect
the right of such Party at a later time to enforce the same or any other provision of this Agreement. No waiver of any condition
or of the breach of any term contained in this Agreement in one or more instances shall be deemed to be or construed as a further
or continuing waiver of such condition or breach or a waiver of any other condition or of the breach of any other term of this
Agreement.
Except
as expressly contemplated hereby, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned
by any Party hereto (whether by operation of Law, including by merger or consolidation, or otherwise) without the prior written
consent of the other Party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and
be enforceable by the Parties and their respective successors and assigns.
All
notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered by hand,
by registered or certified mail, postage pre-paid, or by courier or overnight carrier, or email (with, in the case of email, confirmation
of date and time by the transmitting equipment) to the persons at the addresses set forth below (or at such other address as may
be provided hereunder), and shall be deemed to have been delivered as of the date so delivered or refused:
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Carolina Financial:
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Carolina Financial Corporation
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288 Meeting Street
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Charleston, SC 29401
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Attention: Jerold L. Rexroad
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Copy to Counsel:
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Nelson Mullins Riley & Scarborough
LLP
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Poinsett Plaza, Suite 900
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104 South Main Street
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Greenville, SC 29601
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Attention: Neil E. Grayson
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Carolina Trust:
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Carolina Trust BancShares, Inc.
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901 East Main Street
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Lincolnton, NC 28092
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Attention: Jerry L. Ocheltree
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Copy to Counsel:
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Wyrick Robbins Yates & Ponton LLP
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4101 Lake Boone Trail, Suite 300
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Raleigh, NC 27607
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Attention: Todd H. Eveson
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10.9
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Governing
Law; Jurisdiction.
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Regardless
of any conflict of law or choice of law principles that might otherwise apply, the Parties agree that this Agreement shall be
governed by and construed in all respects in accordance with the laws of the State of South Carolina. The Parties agree that any
suit, action or proceeding brought by either Party to enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby shall be brought in any federal or state court located in Charleston,
South Carolina. Each of the Parties submits to the jurisdiction of any such court in any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated
hereby and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such
action or proceeding. Each Party irrevocably waives, to the fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient forum.
This
Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
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10.11
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Captions;
Articles and Sections.
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The
captions contained in this Agreement are for reference purposes only and are not part of this Agreement. Unless otherwise indicated,
all references to particular Articles or Sections shall mean and refer to the referenced Articles and Sections of this Agreement.
(a) Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any Party, whether
under any rule of construction or otherwise. No Party to this Agreement shall be considered the draftsman. The Parties acknowledge
and agree that this Agreement has been reviewed, negotiated, and accepted by all Parties and their attorneys and shall be construed
and interpreted according to the ordinary meaning of the words used so as fairly to accomplish the purposes and intentions of
all Parties hereto.
(b) No disclosure, representation or warranty shall be required to be made (or any other action taken) pursuant to this Agreement
that would involve the disclosure of confidential supervisory information of a Governmental Authority by any Party hereto to the
extent prohibited by applicable law, and, to the extent legally permissible, appropriate substitute disclosures or actions shall
be made or taken under circumstances in which the limitations of this sentence apply.
(c) Any reference contained in this Agreement to specific statutory or regulatory provisions or to specific Governmental Authorities
includes any successor statute or regulation, or Governmental Authority, as the case may be. Unless otherwise specified, the references
to “Section” and “Article” in this Agreement are to the Sections and Articles of this Agreement.
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10.13
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Enforcement
of Agreement.
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The
Parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement was not performed
in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the Parties shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof
in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
Any
term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions
of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
[Signature
page follows]
IN
WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed on its behalf by its duly authorized officers
as of the day and year first above written.
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CAROLINA FINANCIAL CORPORATION
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By:
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/s/ Jerold L.
Rexroad
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Name:
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Jerold L. Rexroad
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Title:
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President and CEO
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CAROLINA
TRUST BANCSHARES, INC.
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By:
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/s/ Jerry L.
Ocheltree
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Name:
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Jerry L. Ocheltree
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Title:
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President & CEO
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[Signature
page to Agreement and Plan of Merger and Reorganization]
Annex B
July 15, 2019
Board of Directors
Carolina Trust BancShares, Inc.
901 East Main Street
Lincolnton, NC 28092
Members of the Board of Directors:
We understand that Carolina Financial Corporation
(“Carolina Financial”) and Carolina Trust BancShares, Inc. ( “Carolina Trust”) propose to enter into the
Agreement (defined below) pursuant to which, among other things, Carolina Financial will acquire 100% of the common stock, par
value $2.50 per share, of Carolina Trust (the “Common Shares”) pursuant to the merger (the “Merger”) of
Carolina Trust with and into Carolina Financial and that, in connection with the Merger, each issued and outstanding Common Share
will be converted into the right to receive, at the election of the holder, (1) $10.57 per share in cash, (2) 0.3000 shares of
Carolina Financial common stock or (3) a combination of cash and Carolina Financial common stock, subject to 10% of the Common
Shares being exchanged for cash and the remainder exchanged for Carolina Financial common stock (the “Merger Consideration”).
The Board of Directors of Carolina Trust (the “Board”) has requested that Raymond James & Associates, Inc. (“Raymond
James”) provide an opinion (the “Opinion”) to the Board as to whether, as of the date hereof, the Merger Consideration
to be received by the holders of the Common Shares in the Merger pursuant to the Agreement is fair from a financial point of view
to such holders. For purposes of this Opinion, and with your consent, we have assumed that the Merger Consideration is $10.53 per
share, which is calculated as the product of 10% multiplied by $10.57 plus the product of 90% multiplied by 0.3000 multiplied by
$35.09, which represents the 10 day average closing price for Carolina Financial’s common stock as of July 12, 2019.
In connection with our review of the proposed
Merger and the preparation of this Opinion, we have, among other things:
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1.
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reviewed the financial terms and conditions as stated in the draft of the Agreement and Plan of Merger and Reorganization by
and between Carolina Financial Corporation and Carolina Trust BancShares, Inc., dated as of July 13, 2019 (the “Agreement”);
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2.
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reviewed certain information related to the historical, current and future operations, financial condition and prospects of
Carolina Trust made available to us by Carolina Trust, including, but not limited to, financial projections prepared by the management
of Carolina Trust relating to Carolina Trust for the periods ending December 31, 2019 through 2024, as approved for our
use by Carolina Trust (the “Projections”);
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3.
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reviewed Carolina Trust’s and Carolina Financial’s recent public filings and certain other publicly available information
regarding Carolina Trust and Carolina Financial;
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4.
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reviewed financial, operating and other information regarding Carolina Trust and Carolina Financial and the industry in which
it operates;
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5.
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reviewed the financial and operating performance of Carolina Trust and those of other selected public companies that we deemed
to be relevant;
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6.
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considered the publicly available financial terms of certain transactions we deemed to be relevant;
|
4000 WestChase Boulevard, Suite 500 //
Raleigh, NC 27607
T 909.755.2600 // F 919.424.0110 // rjfinancialbanking.com
Raymond James & Associates, Inc., member
New York Stock Exchange/SIPC
Board of Directors
Carolina Trust BancShares, Inc.
July 15, 2019
Page 2
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7.
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reviewed the current and historical market prices and trading volume for the Common Shares, and the current market prices of
the publicly traded securities of certain other companies that we deemed to be relevant;
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8.
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reviewed a certificate, dated July 15, 2019, addressed to Raymond James from a member of senior management of Carolina Trust
regarding, among other things, the accuracy of financial information and data provided to, or discussed with, Raymond James by
or on behalf of Carolina Trust;
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9.
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conducted such other financial studies, analyses and inquiries and considered such other information and factors as we deemed
appropriate; and
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10.
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discussed with members of the senior management of Carolina Trust certain information relating to the aforementioned and any
other matters which we have deemed relevant to our inquiry.
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With your consent, we have assumed and relied upon the accuracy
and completeness of all information supplied by or on behalf of Carolina Trust or otherwise reviewed by or discussed with us, and
we have undertaken no duty or responsibility to, nor did we, independently verify any of such information. We have not made or
obtained an independent appraisal of the assets or liabilities (contingent or otherwise) of Carolina Trust. We are not experts
in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowances for loan losses; accordingly,
we have assumed that such allowances for losses are in the aggregate adequate to cover such losses. With respect to the Projections
and any other information and data provided to or otherwise reviewed by or discussed with us, we have, with your consent, assumed
that the Projections and such other information and data have been reasonably prepared in good faith on bases reflecting the best
currently available estimates and judgments of management of Carolina Trust, and we have relied upon Carolina Trust to advise us
promptly if any information previously provided became inaccurate or was required to be updated during the period of our review.
We express no opinion with respect to the Projections or the assumptions on which they are based. We have assumed that the final
form of the Agreement will be substantially similar to the draft reviewed by us, and that the Merger will be consummated in accordance
with the terms of the Agreement without waiver or amendment of any conditions thereto. Furthermore, we have assumed, in all respects
material to our analysis, that the representations and warranties of each party contained in the Agreement are true and correct
and that each such party will perform all of the covenants and agreements required to be performed by it under the Agreement without
being waived. We have relied upon and assumed, without independent verification, that (i) the Merger will be consummated in a manner
that complies in all respects with all applicable international, federal and state statutes, rules and regulations, and (ii) all
governmental, regulatory, and other consents and approvals necessary for the consummation of the Merger will be obtained and that
no delay, limitations, restrictions or conditions will be imposed or amendments, modifications or waivers made that would have
an effect on the Merger or Carolina Trust that would be material to our analyses or this Opinion.
Our opinion is based upon market, economic, financial and other
circumstances and conditions existing and disclosed to us as of July 12, 2019 and any material change in such circumstances and
conditions would require a reevaluation of this Opinion, which we are under no obligation to undertake. We have relied upon and
assumed, without independent verification, that there has been no change in the business, assets, liabilities, financial condition,
results of operations, cash flows or prospects of Carolina Trust since the respective dates of the most recent financial statements
and other information, financial or otherwise, provided to us that would be material to our analyses or this Opinion, and that
there is no information or any facts that would make any of the information reviewed by us incomplete or misleading in any material
respect.
Board of Directors
Carolina Trust BancShares, Inc.
July 15, 2019
Page 3
We express no opinion
as to the underlying business decision to effect the Merger, the structure or tax consequences
of the Merger or the availability or advisability of any alternatives to the Merger.
We provided advice to the Board with respect to the proposed Merger. We did not, however, recommend any specific amount of consideration
or that any specific consideration constituted the only appropriate consideration for the Merger. We did not solicit indications
of interest with respect to a transaction involving Carolina Trust. This letter does not express any opinion as to the likely trading
range of Carolina Financial stock following the Merger, which may vary depending on numerous factors that generally impact the
price of securities or on the financial condition of Carolina Financial at that time. Our opinion is limited to the fairness, from
a financial point of view, of the Merger Consideration to be received by the holders of the Common Shares.
We express no opinion with respect to any other
reasons, legal, business, or otherwise, that may support the decision of the Board of Directors to approve or consummate the Merger.
Furthermore, no opinion, counsel or interpretation is intended by Raymond James on matters that require legal, accounting, tax
or regulatory advice. It is assumed that such opinions, counsel or interpretations have been or will be obtained from the appropriate
professional sources. Furthermore, we have relied, with the consent of the Board, on the fact that Carolina Trust has been assisted
by legal, accounting, tax and regulatory advisors and we have, with the consent of the Board, relied upon and assumed the accuracy
and completeness of the assessments by Carolina Trust and its advisors as to all legal, accounting, tax and regulatory matters
with respect to Carolina Trust and the Merger, including, without limitation, that the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
In formulating our opinion, we have considered
only what we understand to be the consideration to be received by the holders of Common Shares as is described above and we did
not consider and we express no opinion on the fairness of the amount or nature of any compensation to be paid or payable to any
of Carolina Trust’s officers, directors or employees, or class of such persons, whether relative to the compensation received
by the holders of the Common Shares or otherwise. We have not been requested to opine as to, and this Opinion does not express
an opinion as to or otherwise address, among other things: (1) the fairness of the Merger to the holders of any class of securities,
creditors, or other constituencies of Carolina Trust, or to any other party, except and only to the extent expressly set forth
in the last sentence of this Opinion or (2) the fairness of the Merger to any one class or group of Carolina Trust’s or any
other party’s security holders or other constituencies vis-à-vis any other class or group of Carolina Trust’s
or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration
to be received in the Merger amongst or within such classes or groups of security holders or other constituents). We are not expressing
any opinion as to the impact of the Merger on the solvency or viability of Carolina Trust or Carolina Financial or the ability
of Carolina Trust or Carolina Financial to pay their respective obligations when they come due.
The delivery of this opinion was approved by an opinion committee
of Raymond James.
Raymond James has been engaged to render financial advisory services
to Carolina Trust in connection with the proposed Merger and will receive a fee for such services, a substantial portion of which
is contingent upon consummation of the Merger. Raymond James will also receive a fee upon the delivery of this Opinion, which is
not contingent upon the successful completion of the Merger or on the conclusion reached herein. In addition, Carolina Trust has
agreed to reimburse certain of our expenses and to indemnify us against certain liabilities arising out of our engagement.
Board of Directors
Carolina Trust BancShares, Inc.
July 15, 2019
Page 4
In the ordinary course of our business, Raymond James may trade
in the securities of Carolina Trust and/or Carolina Financial for our own account or for the accounts of our customers and, accordingly,
may at any time hold a long or short position in such securities. In the previous two years: (i) Raymond James provided financial
advisory services to Carolina Trust in connection with the acquisition of Clover Community Bankshares, Inc., for which it has been
paid a fee; (ii) Raymond James provided fixed income trading services to Carolina Trust Bank, a subsidiary of Carolina Trust, for
which it has been paid trading commissions; (iii) Raymond James served as underwriter for a public offering of common stock by
Carolina Financial and certain selling shareholders, for which Raymond James received compensation; (iv) Raymond James has served
and is serving as exclusive agent for a share purchase program of Carolina Financial, for which it has been paid commissions and
may be paid commissions in the future; (v) Raymond James provided fixed income trading services to CresCom Bank, a subsidiary of
Carolina Financial, for which it has been paid trading commissions; and (vi) CresCom Bank made an investment in a Raymond James
tax credit fund, for which Raymond James has earned a fee and will earn additional fees in the future. Furthermore, Raymond James
may provide investment banking, financial advisory and other financial services to Carolina Trust and/or Carolina Financial or
other participants in the Merger in the future, for which Raymond James may receive compensation.
It is understood that this letter is for the information
of the Board of Directors of Carolina Trust (solely in each director’s capacity as such) in evaluating the proposed Merger
and does not constitute a recommendation to any shareholder of Carolina Trust regarding how said shareholder should vote on the
proposed Merger. Furthermore, this letter should not be construed as creating any fiduciary duty on the part of Raymond James to
any such party. This Opinion may not be reproduced or used for any other purpose without our prior written consent, except that
this Opinion may be disclosed in and filed with a proxy statement used in connection with the Merger that is required to be filed
with the Securities and Exchange Commission, provided that this Opinion is quoted in full in such proxy statement.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Merger Consideration to be received by the holders of the Common Shares in the Merger pursuant to the
Agreement is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ Raymond James & Associates, Inc.
RAYMOND JAMES & ASSOCIATES, INC.