The Articles of  Incorporation  of SHORE  BANCSHARES,  INC., a Maryland
corporation  (hereinafter  called  the  "Corporation")  are hereby  amended  and
restated in their entirety as follows:
         FIRST:  The name of the Corporation is:
                             SHORE BANCSHARES, INC.
         SECOND:  The purposes for which the Corporation is formed are to engage
         in any lawful act or activities  permitted by a  corporation  organized
         under the laws of the State of Maryland.
         THIRD:  The present address of the principal  office of the Corporation
in this State is 18 East Dover Street, Easton, Maryland 21601.
         FOURTH:  The name and address of the resident agent of the  Corporation
in this  State are W.  Moorhead  Vermilye,  c/o 18 East  Dover  Street,  Easton,
Maryland  21601.  Said resident  agent is a citizen of the State of Maryland who
resides there.
         FIFTH: (a) The total number of shares of stock of all classes which the
Corporation  has authority to issue is  35,000,000  shares of capital stock (par
value $.01 per share),  amounting in aggregate par value to $350,000.00.  All of
such shares are initially  classified as "Common Stock".  The Board of Directors
may classify and reclassify  any unissued  shares of capital stock by setting or
changing  in any one or more  respects  the  preferences,  conversion  or  other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of such shares of capital stock. A majority
of the entire Board of Directors, without action by the stockholders,  may amend
the Charter to increase or decrease the  aggregate  number of shares of stock or
the number of shares of stock of any class that the Corporation has authority to
         (b) The following is a description of the  preferences,  conversion and
other  rights,  voting  powers,  restrictions,   limitations  as  to  dividends,
qualifications and terms and conditions of redemption of the Common Stock of the
                (1) Each share of Common Stock shall have one vote,  and, except
       as  otherwise  provided  in  respect  of any  class  of  stock  hereafter
       classified or  reclassified,  the exclusive voting power for all purposes
       shall be vested in the  holders  of the  Common  Stock.  Shares of Common
       Stock shall not have cumulative voting rights.
                (2) Subject to the provisions of law and any  preferences of any
       class of stock hereafter classified or reclassified, dividends, including
       dividends payable in shares of another class of the Corporation's  stock,
       may be paid  ratably on the Common Stock at such time and in such amounts
       as the Board of Directors may deem advisable.
                (3) In the event of any  liquidation,  dissolution or winding up
       of the Corporation,  whether voluntary or involuntary, the holders of the
       Common  Stock shall be entitled,  together  with the holders of any other
       class  of  stock  hereafter  classified  or  reclassified  not  having  a
       preference on distributions in the liquidation, dissolution or winding up
       of the Corporation, to share ratably in the net assets of the Corporation
       remaining,  after payment or provision for payment of the debts and other
       liabilities of the Corporation and the amount to which the holders of any
       class of stock hereafter  classified or reclassified  having a preference
       on  distributions  in the  liquidation,  dissolution or winding up of the
       Corporation shall be entitled.
         (c) Subject to the  foregoing,  the power of the Board of  Directors to
classify  and  reclassify  any of the shares of  capital  stock  shall  include,
without  limitation,  subject to the  provisions  of the  Charter,  authority to
classify or reclassify any unissued shares of such stock into a class or classes
of preferred  stock,  preference  stock,  special  stock or other stock,  and to
divide and  classify  shares of any class into one or more series of such class,
by determining, fixing, or altering one or more of the following:
                (1) The distinctive  designation of such class or series and the
       number of shares to  constitute  such  class or  series;  provided  that,
       unless  otherwise  prohibited  by the terms of such or any other class or
       series,  the number of shares of any class or series may be  decreased by
       the  Board  of  Directors  in  connection  with  any   classification  or
       reclassification  of  unissued  shares  and the  number of shares of such
       class or series may be increased by the Board of Directors in  connection
       with any such classification or  reclassification,  and any shares of any
       class or series which have been redeemed,  purchased,  otherwise acquired
       or  converted  into  shares of Common  Stock or any other class or series
       shall  become  part of the  authorized  capital  stock and be  subject to
       classification and reclassification as provided in this sub-paragraph.
                (2) Whether or not and,  if so, the rates,  amounts and times at
       which,  and the  conditions  under which,  dividends  shall be payable on
       shares of such class or series,  whether  any such  dividends  shall rank
       senior or  junior to or on a parity  with the  dividends  payable  on any
       other class or series of stock,  and the status of any such  dividends as
       cumulative,  cumulative  to a  limited  extent or  non-cumulative  and as
       participating or non-participating.
                (3)  Whether or not  shares of such  class or series  shall have
       voting rights,  in addition to any voting rights  provided by law and, if
       so, the terms of such voting rights.
                (4)  Whether or not  shares of such  class or series  shall have
       conversion or exchange  privileges  and, if so, the terms and  conditions
       thereof, including provision for adjustment of the conversion or exchange
       rate in such  events  or at such  times as the Board of  Directors  shall
                (5)  Whether  or not  shares of such  class or  series  shall be
       subject  to  redemption  and,  if so,  the terms and  conditions  of such
       redemption, including the date or dates upon or after which they shall be
       redeemable and the amount per share payable in case of redemption,  which
       amount may vary under  different  conditions and at different  redemption
       dates;  and whether or not there  shall be any  sinking  fund or purchase
       account in respect thereof, and if so, the terms thereof.
                (6) The rights of the  holders of shares of such class or series
       upon the  liquidation,  dissolution  or winding up of the  affairs of, or
       upon any distribution of the assets of, the Corporation, which rights may
       vary depending upon whether such  liquidation,  dissolution or winding up
       is  voluntary or  involuntary  and, if  voluntary,  may vary at different
       dates,  and whether  such  rights  shall rank senior or junior to or on a
       parity with such rights of any other class or series of stock.
                (7)  Whether or not there shall be any  limitations  applicable,
       while shares of such class or series are outstanding, upon the payment of
       dividends or making of  distributions  on, or the  acquisition of, or the
       use  of  moneys  for  purchase  or  redemption   of,  any  stock  of  the
       Corporation,  or upon any  other  action  of the  Corporation,  including
       action  under this  sub-paragraph,  and, if so, the terms and  conditions
                (8)  Any  other  preferences,  rights,  restrictions,  including
       restrictions on  transferability,  and  qualifications  of shares of such
       class  or  series,  not  inconsistent  with  law and the  Charter  of the
         (d) For the purposes  hereof and of any articles  supplementary  to the
Charter providing for the  classification or  reclassification  of any shares of
capital  stock or of any  other  Charter  document  of the  Corporation  (unless
otherwise  provided in any such  articles or  document),  any class or series of
stock of the Corporation shall be deemed to rank:
                (1) prior to another  class or series  either as to dividends or
       upon  liquidation,  if the  holders  of such  class  or  series  shall be
       entitled  to the  receipt of  dividends  or of amounts  distributable  on
       liquidation, dissolution or winding up, as the case may be, in preference
       or priority to holders of such other class or series;
                (2) on a parity  with  another  class  or  series  either  as to
       dividends  or  upon  liquidation,  whether  or not  the  dividend  rates,
       dividend  payment  dates or  redemption  or  liquidation  price per share
       thereof be different  from those of such  others,  if the holders of such
       class or series of stock  shall be entitled  to receipt of  dividends  or
       amounts distributable upon liquidation, dissolution or winding up, as the
       case  may be,  in  proportion  to  their  respective  dividend  rates  or
       redemption or liquidation prices, without preference or priority over the
       holders of such other class or series; and
         (3) junior to another  class or series  either as to  dividends or upon
liquidation,  if the  rights of the  holders  of such  class or series  shall be
subject  or  subordinate  to the rights of the  holders  of such other  class or
series in respect of the receipt of dividends or the amounts  distributable upon
liquidation, dissolution or winding up, as the case may be.
         SIXTH:  The number of  Directors of the  Corporation  shall be not less
than three (3) nor more than  twenty-five  (25).  The number of Directors may be
increased or decreased in  accordance  with the Bylaws of the  Corporation.  The
Directors shall be divided into three classes with respect to the time for which
they shall hold  office.  Directors of Class I shall hold office for one year or
until the  first  annual  meeting  of  stockholders  following  their  election;
Directors of Class II shall hold office for two years or until the second annual
meeting of stockholders  following  their  election;  and Directors of Class III
shall  hold  office  for  three  years or until  the  third  annual  meeting  of
stockholders  following their election;  and in each case until their successors
are elected and qualify.  At each future  annual  meeting of  stockholders,  the
successors to the Class of Directors  whose term shall expire at that time shall
be elected to hold office for a term of three years,  so that the term of office
of one Class of Directors  shall  expire in each year.  The  provisions  of this
Article  Sixth  may  not  be  amended  or  modified  unless  such  amendment  or
modification  is authorized by the Board of Directors and approved by holders of
80% of the stock of the  Corporation  entitled to vote on the matter.  As of the
date hereof, the Directors of the Corporation are:
                  (1) Class I: David L.  Pyles,  Daniel T. Cannon and Richard C.
                  (2) Class II: David C. Bryan,  Ronald N. Fox, Neil R. LeCompte
         and Herbert L. Andrew, III; and
                  (3) Class III: Paul M. Bowman,  Lloyd L. Beatty, Jr., B. Vance
         Carmean, Jr. and W. Moorhead Vermilye.
         SEVENTH:  (a) The  following  provisions  are  hereby  adopted  for the
purpose of defining,  limiting, and regulating the powers of the Corporation and
of the directors and the stockholders:
                (1) The Board of Directors is hereby  empowered to authorize the
       issuance  from time to time of shares of its stock of any class,  whether
       now or hereafter authorized, or securities convertible into shares of its
       stock of any class or classes,  whether now or hereafter authorized,  for
       such  consideration  as may be deemed advisable by the Board of Directors
       and without any action by the stockholders.
                (2) No  holder  of any  stock  or any  other  securities  of the
       Corporation,   whether  now  or  hereafter  authorized,  shall  have  any
       preemptive  right to  subscribe  for or  purchase  any stock or any other
       securities  of the  Corporation  other than such, if any, as the Board of
       Directors,  in its sole  discretion,  may  determine and at such price or
       prices and upon such other terms as the Board of  Directors,  in its sole
       discretion, may fix; and any stock or other securities which the Board of
       Directors  may determine to offer for  subscription  may, as the Board of
       Directors  in its sole  discretion  shall  determine,  be  offered to the
       holders of any class,  series or type of stock or other securities at the
       time  outstanding  to the  exclusion  of the  holders of any or all other
       classes,  series  or  types of  stock  or  other  securities  at the time
                (3) The Board of Directors of the Corporation shall,  consistent
       with  applicable law, have power in its sole discretion to determine from
       time to time in  accordance  with  sound  accounting  practice  or  other
       reasonable  valuation  methods  what  constitutes  annual  or  other  net
       profits, earnings, surplus or net assets in excess of capital; to fix and
       vary from time to time the amount to be reserved as working  capital,  or
       determine that retained  earnings or surplus shall remain in the hands of
       the  Corporation;  to set apart out of any funds of the Corporation  such
       reserve or reserves in such amount or amounts and for such proper purpose
       or purposes as it shall  determine and to abolish any such reserve or any
       part thereof;  to redeem or purchase its stock or to  distribute  and pay
       distributions  or  dividends  in  stock,  cash  or  other  securities  or
       property,  out of surplus or any other funds or amounts legally available
       therefor,  at such times and to the  stockholders of record on such dates
       as it may,  from  time to  time,  determine;  to  determine  the  amount,
       purpose,   time  of  creation,   increase  or  decrease,   alteration  or
       cancellation  of any  reserves  or  charges  and  the  propriety  thereof
       (whether or not any  obligation  or liability  for which such reserves or
       charges shall have been created shall have been paid or discharged);  and
       to determine the fair value and any matters  relating to the acquisition,
       holding and disposition of any assets by the Corporation.
                (4)   Notwithstanding   any   provision  of  law  requiring  the
       authorization  of any action by a greater  proportion  than a majority of
       the total  number of shares of all  classes  of  capital  stock or of the
       total number of shares of any class of capital  stock,  such action shall
       be valid and  effective  if  authorized  by the  affirmative  vote of the
       holders  of a  majority  of the total  number  of  shares of all  classes
       outstanding and entitled to vote thereon, except as otherwise provided in
       the Charter.
                (5)  The  Corporation  shall  indemnify  (A) its  directors  and
       officers,  whether  serving the  Corporation  or at its request any other
       entity,  to the full extent  required or permitted by the General Laws of
       the State of Maryland now or hereafter in force, including the advance of
       expenses under the procedures and to the full extent permitted by law and
       (B) other  employees  and agents to such extent as shall be authorized by
       the Board of Directors or the  Corporation's  By-Laws and be permitted by
       law. The foregoing  rights of  indemnification  shall not be exclusive of
       any other rights to which those seeking  indemnification may be entitled.
       The Board of Directors  may take such action as is necessary to carry out
       these  indemnification  provisions  and is expressly  empowered to adopt,
       approve  and  amend  from  time  to time  such  by-laws,  resolutions  or
       contracts  implementing  such provisions or such further  indemnification
       arrangements  as may be  permitted by law. No amendment of the Charter of
       the  Corporation  or  repeal  of any of its  provisions  shall  limit  or
       eliminate the right to indemnification provided hereunder with respect to
       acts or omissions occurring prior to such amendment or repeal.
                (6) To the fullest  extent  permitted  by Maryland  statutory or
       decisional law, as amended or interpreted,  no director or officer of the
       Corporation  shall  be  personally  liable  to  the  Corporation  or  its
       stockholders  for money  damages.  No  amendment  of the  Charter  of the
       Corporation or repeal of any of its  provisions  shall limit or eliminate
       the limitation on liability  provided to directors and officers hereunder
       with respect to any act or omission  occurring prior to such amendment or
                (7) For any  stockholder  proposal to be presented in connection
       with an annual or special  meeting of  stockholders  of the  Corporation,
       including  any proposal  relating to the  nomination  of a director to be
       elected to the Board of Directors of the  Corporation,  the  stockholders
       must have given timely written notice thereof in writing to the Secretary
       of the Corporation in the manner and containing the information  required
       by the By-Laws.  Stockholder proposals to be presented in connection with
       a special meeting of stockholders, including any proposal relating to the
       nomination  of a director to be elected to the Board of  Directors of the
       Corporation,  will be  presented  by the  Corporation  only to the extent
       required by Section 2-502 of the Maryland General Corporation Law and the
                (8)  Notwithstanding  any  other  provision  in the  charter  or
        by-laws,  each vacancy on the board of directors  resulting  from (a) an
        increase  in the  size of the  board  of  directors  or (b)  the  death,
        resignation  or  removal  of a  director  may  be  filled  only  by  the
        affirmative  vote of a majority of the  remaining  directors  in office,
        even if the  remaining  directors do not  constitute a quorum,  provided
        however,  that until  September 30, 2005 such directors shall be elected
        from the directors of the same financial institution subsidiary in which
        the vacating  director  served.  Any director  elected to fill a vacancy
        shall  hold  office for the  remainder  of the full term of the class of
        directors in which the vacancy occurred and until a successor is elected
        and qualifies.
                (9) The Directors of the Corporation  shall consider all factors
        they deem relevant in evaluating any proposed offer for the  Corporation
        or any  of its  stock,  any  proposed  merger  or  consolidation  of the
        Corporation  or  subsidiary  of the  Corporation  with or  into  another
        entity,   any  proposal  to  purchase  or   otherwise   acquire  all  or
        substantially all the assets of the Corporation or any subsidiary of the
        Corporation, and any other business combination (as such term is defined
        in the Maryland General  Corporation  Law). The Directors shall evaluate
        whether the proposal is in the best interests of the Corporation and its
        subsidiaries by considering the best interests of the  stockholders  and
        other  factors the  Directors  determine to be relevant,  including  the
        social, legal and economic effects on employees, customers,  depositors,
        and  communities  served by the  Corporation  and any  subsidiary of the
        Corporation.  The  Directors  shall  evaluate  the  consideration  being
        offered to the stockholders in relation to the then current market value
        of the Corporation and its  subsidiaries,  the then current market value
        of the stock of the Corporation or any subsidiary in a freely negotiated
        transaction,  and the Directors'  judgment as to the future value of the
        stock of the Corporation as an independent entity.
                (10) Until September 30, 2005,  without the approval of at lease
       two-thirds  of the entire  Board of  Directors  of the  Corporation,  the
       Corporation  may not (i)  merge  or  consolidate  with,  transfer  all or
       substantially  all of its assets to, or engage in a share  exchange  with
       another entity, (ii) may not cause any subsidiary bank of the Corporation
       to merge or consolidate  with, to transfer of all or substantially all of
       its assets to, or engage in a share  exchange  with  another  entity,  or
       (iii) sell or otherwise dispose of any stock of any subsidiary bank.
                (11) The  Corporation  reserves  the right  from time to time to
       make  any  amendments  of the  Charter  which  may  now or  hereafter  be
       authorized  by law,  including  any  amendments  changing  the  terms  or
       contract  rights,  as expressly  set forth in the Charter,  of any of its
       outstanding stock by  classification,  reclassification  or otherwise and
       any  objecting   stockholder   whose  rights  may  or  shall  be  thereby
       substantially  adversely  affected  shall not be  entitled  to demand and
       receive payment of the fair value of his stock;  provided,  however, that
       any amendment  to,  repeal of or adoption of any  provision  inconsistent
       with Article SIXTH or with  sub-paragraphs  (5), (6) (7), (8), or (10) of
       this  paragraph  (a) of this Article  SEVENTH or with this  sub-paragraph
       (11) of this paragraph (a) of this Article  SEVENTH must be authorized by
       not less than 80% of the  aggregate  votes  entitled  to be cast  thereon
       (considered for this purpose as a single class),  by vote at a meeting or
       in writing with or without a meeting.
                (b) The enumeration  and definition of particular  powers of the
       Board of Directors  included in the foregoing  shall in no way be limited
       or  restricted  by reference to or inference  from the terms of any other
       clause of this or any other Article of the Charter of the Corporation, or
       construed as or deemed by inference or otherwise in any manner to exclude
       or limit  any  powers  conferred  upon the Board of  Directors  under the
       General Laws of the State of Maryland now or hereafter in force.
         EIGHTH: The duration of the Corporation shall be perpetual.