Agreement and Plan of Merger and Reorganization, dated July 15, 2019, by and between Carolina Financial Corporation and Carolina Trust BancShares, Inc

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.

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.

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.

(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.

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.

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.

(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:

(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”).

(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.

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.

(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.

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.

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:

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.

(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.

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.

(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.

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.

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.

(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.

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.

(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.

(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).

(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.

(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.

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.

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.

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.

(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.

Carolina Trust has delivered to Carolina Financial a complete Carolina Trust Disclosure Memorandum.

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.

Carolina Financial hereby represents and warrants to Carolina Trust as follows:

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.

(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.

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.

(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.

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.

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).

(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.

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).

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.

(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.

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.

(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.

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.

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.

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).

(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.

(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.