Shore Health System, Inc., formerly The Memorial Hospital at Easton, Md., Inc. (the "Corporation") is a non-stock corporation organized under the laws of the State of Maryland. It is a non-profit corporation, no part of the net earnings of which inure to the benefit of any private individual.

Its primary role is to furnish health care services to all persons who require them, regardless of place of residence, sex, race, creed, national origin, disability or financial status.

The Corporation shall deliver high quality health care through the operation of The Memorial Hospital at Easton and Dorchester General Hospital (the "Hospitals") as well as other appropriate facilities.

SECTION 2.1. Authority. The business and operation of the clinical practice, quality, property, funds and affairs of the Corporation shall be managed under the direction of the Board of Directors of the Corporation (the "Board"). Among other things, the Board shall be responsible for the following:

(a) Approving the officers of the Corporation specified in Section 3.2.

(b) Appointing members of the Medical Staff and granting, modifying and revoking privileges;

(c) Appointing the Chiefs of the Medical Staff Divisions;

(d) Formulating and implementing policies and objectives;

(e) Establishing a system of quality oversight.

The following actions shall not be taken by the Board except by a two-thirds vote of the entire Board:

(i) the merger or consolidation of the Corporation;

(ii) the sale of all or substantially all of the assets of the Corporation;

(iii) any change in the membership of the Corporation or the qualifications, number or manner of electing Directors to the Board; or

(iv) the termination of any clinical service at either of the Hospitals.

SECTION 2.2. Qualifications. The Board shall include a broad representation of the community. Its members shall be persons of high personal standing and reputation who shall be selected for their individual expertise, knowledge and skills, community awareness, and for their ability to devote sufficient time to the affairs of the Corporation to be effective participants in fulfilling the responsibilities of the Board, as the same may be set forth in these By-Laws, or as required by statute, rule or regulation.

SECTION 2.3. Number. The number of Directors of the Corporation shall be eighteen (18), seventeen (17) of whom shall be elected (the "Elected Directors") and one of whom, the President and Chief Executive Officer, shall be ex officio, or such other number not less than three (3).

SECTION 2.4. Nominations, Composition and Election. Not later than thirty (30) days before each Annual Meeting, the Governance Committee shall nominate candidates for Elected Directors. The Governance Committee shall consult with and solicit advice from the Medical Staff, the Memorial Hospital Association and the Dorchester General Hospital Association (collectively, the "Associations") and from other persons and organizations as appropriate to carry out its function. The President and Chief Executive Officer shall be a voting member of the Board, ex officio. Honorary Directors shall serve without the need to be re-elected as provided in Section 2.5. The Elected Directors shall be elected by the Board, after considering recommendations made by the Governance Committee; provided that not more than twenty five percent (25%) of the Elected Directors of the Board shall be Maryland Licensed Physicians who are members of the Attending Medical Staff of one or both Hospitals. Should the Attending Medical Staff membership of a member of the Board be resigned, terminated or suspended, his membership on the Board shall thereupon be terminated.

It is further provided that the Elected Directors shall be comprised of individuals who satisfy the following criteria:

(a) At least five (5) of the Elected Directors, not including the Maryland Licensed physician described in Section 2.4(b), shall have their primary residence or principal place of business in Dorchester County, Maryland.

 

(b) One (1) of the Elected Directors shall be a Maryland Licensed physician who is an Attending Staff Category I member of the Medical Staff with clinical privileges at Dorchester General Hospital ("DGH"), but shall not be the Division Chief of DGH.

 

(c) One (1) of the Elected Directors shall be a Maryland Licensed physician who is an Attending Staff Category I member of the Medical Staff with clinical privileges at The Memorial Hospital at Easton ("MHE"), but shall not be the Division Chief of MHE.

 

SECTION 2.5. Honorary Directors. Persons who are serving as Honorary Directors on the date of adoption of this Amendment and Restatement of the By-Laws shall continue to serve as non-voting Directors, and shall not be included in the determination of a quorum, without the necessity of being elected and without limitation as to the length of their terms.

SECTION 2.6. Directors Emeritus. The Board may elect any former member of the Board a Director Emeritus. A Director Emeritus shall have no vote, shall not be included in the determination of a quorum and shall not be required to be given notice of any meetings of the Board. Directors Emeritus may be invited by the Board to attend the Annual Meeting of the Board.

SECTION 2.7. Term. Except for the ex officio members, the Honorary Directors and Directors Emeritus, Directors shall be elected for a term of three (3) years. Each Elected Director shall serve until his successor is duly elected and qualified. The terms of the Elected Directors shall expire in staggered intervals so that approximately one-third (1/3) of the Elected Directors' terms expire each year. An Elected Director may be assigned a term of one or two years to accomplish such staggering. An Elected Director elected to fill a vacancy created by the removal, death or resignation of an Elected Director shall succeed to the unexpired term of such former Elected Director. No Director, other than the President and Chief Executive Officer or the Honorary Directors or Directors Emeritus may serve more than two (2) consecutive three (3) year terms, which may be immediately preceded by any term of less than three (3) years. The terms of the Elected Directors shall begin on July 1 succeeding their election.

SECTION 2.8. Attendance Requirement and Place of Meeting. Members, other than Honorary members, who fail to attend three (3) consecutive regular meetings of the Board in any fiscal year, unless excused by the Chairman, shall, after ten (10) days written notice, be removed from the Board at the next regular meeting of the Board. The Board may hold its meetings either within or outside the State of Maryland. The Board of Directors may hold its meetings by telephone conference or other similar means of communication in accordance with the provisions of Maryland Corporation Law.

SECTION 2.9. Vacancies. Vacancies occurring in the Board between Annual Meetings of the Board, whether caused by death, resignation, removal, or inability to serve, may be filled by the Board. Each Director elected to fill a vacancy shall serve the unexpired term of the former Director whose vacancy he or she filled.

SECTION 2.10. Annual Meeting. The Annual Meeting of the Board shall be held in June of each year at such time and place as are designated by the Board and included in the notice of the meeting. At each Annual Meeting, the Board shall elect officers, consider approval of officers appointed by the President and Chief Executive Officer pursuant to Section 3.2 of Article III, and appoint the members of such committees as are required to be appointed by the Board to serve for the ensuing year and until their successors are elected and appointed.

SECTION 2.11 Regular Meetings. Regular meetings of the Board shall be held not less often than quarterly at such times as the Board may determine from time to time by resolution. The Annual Meeting shall be considered a regular meeting for this purpose.

SECTION 2.12. Special Meetings. Special meetings of the Board may be called at any time by the Chairman or by any five (5) members of the Board.

SECTION 2.13. Notice of Annual Meeting. Notice of the place, date and time of the Annual Meeting shall be given in writing to each Director not less than ten (10) days prior to the meeting.

SECTION 2.14. Notice of Special Meetings. Notice of the place, date and time of special meetings shall be given either in writing, in person or by telephone not less than three (3) days prior to the meeting.

SECTION 2.15. Notice of Regular Meetings. Notice of regular meetings, other than the Annual Meeting, is not required, provided that upon the adoption of a resolution which initially determines the place, date and time of a regular meeting, or which changes the place, date and time thereof, each Director who was not present at the meeting at which such resolution was adopted shall be given notice of the place, date and time for regular meetings provided by the resolution at least ten (10) days before the first regular meeting held pursuant to the resolution.

SECTION 2.16. Form of Notice. Notices of the Annual Meeting and of the resolution setting or changing the place, date and time of other regular meetings shall be given in writing. Notices of Special Meetings shall be given in writing, in person, or by telephone. Written notice shall be deemed to have been given when deposited in the United States mail, postage prepaid, or sent by facsimile and addressed to the Director at his address and facsimile number as it appears upon the records of the Corporation, not less than three (3) days prior to the meeting.

SECTION 2.17. Quorum. A majority of the Board shall constitute a quorum for the transaction of business at meetings of the Board. Except as otherwise provided by statute or by the Corporation's charter, or by these By-Laws, the act of a majority of the members present at a meeting of which a quorum is present shall be the act of the Board. The Board may also act by any other method which may be permitted by statute.

SECTION 2.18. Attendance at Meetings by Certain Non-Board Members. Except as may be otherwise provided in any conflict of interest policy adopted by the Board and applying to any particular meeting, the following non-Board members shall be given the same notice of Board meetings as is required to be given to Directors and may attend Board meetings and participate in discussions at such meetings:

SECTION 2.18.1 Auxiliary Representatives. A member of each Auxiliary designated annually by each Auxiliary.

 

SECTION 2.18.2 Hospital Association Representative. The Presidents of each of the Associations.

 

SECTION 2.18.3 Medical Staff Representatives. The Chief of Division for each Hospital.

 

SECTION 2.19. Reimbursement of Directors. Directors shall not receive any salary or fees for their services as such. The Board may adopt policies for reimbursing reasonable expenses incurred in connection with Board service.

ARTICLE III

SECTION 3.1. Election, Tenure and Compensation. The officers of the Corporation shall be a Chairman of the Board of Directors, a President and Chief Executive Officer, one or more Vice-Chairmen, a Secretary, a Treasurer, and also such other officers as the Board of Directors from time to time may consider necessary for the proper conduct of the business of the Corporation. Officers shall be elected annually by the Board of Directors at its annual meeting. No person shall serve as Chairman for more than two (2) consecutive terms. Any two or more of the above offices other than the Chairman and Vice-Chairman may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law or by these By-Laws to be executed, acknowledged or verified by any two or more officers. If more than one Vice-Chairman is elected, the Board shall designate their order of seniority.

All officers shall be subject to removal at any time by the affirmative vote of a majority of the Board of Directors, and all officers shall hold office at the discretion of the Board of Directors.

SECTION 3.2. Other Officers Appointed with Approval by the Board. Such Vice Presidents, Assistant Secretaries, Assistant Treasurers and other corporate officers as may be deemed necessary by the Board may be appointed by the President and Chief Executive Officer, with the approval of the Board to serve at the pleasure of the Board, and to perform such duties as are delegated to them by the President and Chief Executive Officer. If more than one Vice President is elected, the Board shall designate their order of seniority.

SECTION 3.3. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board and the Executive Committee of the Board. He shall, with the approval of the Board, appoint the standing committees, appoint ad hoc committees, and shall perform such other duties as may be designated from time to time by the Board. He shall attend meetings of all committees of the Board of which he is a member and may attend meetings of all other committees of the Board and participate in discussions of such meetings.

SECTION 3.4. Vice Chairmen. In the absence or disability of the Chairman, the Vice Chairmen, in the order of their tenure on the Board, shall perform the duties of the Chairman and shall perform such other duties as may be delegated to them by the Chairman.

SECTION 3.5. President and Chief Executive Officer. The President and Chief Executive Officer of the Corporation shall be a competent, qualified, and experienced chief executive officer. He shall have the responsibility to manage and operate the Corporation in accordance with the policies established from time to time by the Board, and shall have whatever power and authority may be reasonably required to permit him to properly discharge that responsibility. The President and Chief Executive Officer shall be an ex officio voting member of the Board and all Board Committees, except in connection with his evaluation and compensation. The duties of the President and Chief Executive Officer shall include, but shall not necessarily be limited to the following:

(a) To prepare and submit to the Board for approval a plan of organization of personnel and others concerned with the operation of the Corporation.

(b) To prepare each May a preliminary and each June a final budget showing expected receipts and expenditures for the ensuing fiscal year.

(c) To select, employ, control, and discharge all employees and to ensure that a process is in place to annually evaluate all employees providing patient or non-patient care services to assure that they are competent to provide such services.

(d) To establish appropriate liaison with the Medical Staff and the Auxiliary and to secure like cooperation on the part of all those concerned with rendering professional service to the end that patients may receive competent care.

(e) To see that the buildings and grounds are kept in a good state of repair carrying on routine repairs and maintenance without consultation with the Board, but conferring with the Board in major matters.

(f) To supervise all business affairs such as the records of financial transactions, collection of accounts, and purchase and issue of supplies, and to be certain that all funds are collected and expended to the best possible advantage.

(g) To see that the By-Laws, Rules and Regulations of the Board and the Medical Staff, are enforced at all times.

(h) To submit regularly to the Board monthly reports showing the professional service and financial activities of the Corporation and to prepare and submit any special reports that may be required by the Board.

(i) To attend meetings of the committees of the Board and meetings of those committees of the Medical Staff which the Medical Staff By-Laws require or permit him to attend.

(j) To perform any other duty necessary in the best interest of the Corporation.

SECTION 3.6. Secretary. The Secretary shall be responsible for the keeping of accurate minutes of the meetings of the Board, shall conduct all official correspondence of the Board, including the giving of notice of all meetings in accordance with these By-Laws, shall have custody of the corporate seal, shall attest all instruments executed by the Corporation where such attestation is required, and shall perform such other duties as may be ordered by the Board.

SECTION 3.7. Assistant Secretary. The Assistant Secretary shall perform the duties of the Secretary during the absence or disability of the Secretary; may execute and attest such documents as require the Secretary's execution or attestation, and shall perform such other duties as may be ordered by the Board.

SECTION 3.8. Treasurer, Assistant Treasurer. The Treasurer and Assistant Treasurer shall have such duties as are delegated to them by the Board.

SECTION 4.1. Organization. There shall be a Medical Staff of the Hospitals which is organized under Medical Staff By-Laws and rules and regulations which shall be developed, adopted and periodically reviewed by the Medical Staff and which shall be consistent with each Hospital’s policy and with applicable legal and other requirements. Medical Staff By-Laws and rules and regulations adopted by the Medical Staff are subject to and effective upon approval by the Board, which approval will not be unreasonably withheld.

SECTION 4.2. Officers of the Medical Staff. The Medical Staff By-Laws shall provide for officers of the Medical Staff. The election of such officers shall be subject to the approval of the Board. A stipend may be paid to the Division Chiefs, , Chiefs of Division Emeritus, and Vice Chiefs of Division in recognition of services rendered to each Hospital.

SECTION 4.3. Department Chiefs and Section Chairmen. The Medical Staff By-Laws shall provide for Department Chiefs of the various clinical departments and services of each Hospital. The election or appointment of such Department Chiefs shall be subject to the approval of the Board.

SECTION 4.4. Appointments and Privileges. The Medical Staff shall evaluate the qualifications of Medical Staff members and applicants for staff membership and applicants for clinical privileges, and it shall be responsible for making recommendations to the Board concerning initial staff appointments, reappointments and the granting, curtailing or revocation of privileges.

SECTION 4.5. Procedures. Appointments, reappointments and the granting, curtailment or revocation of clinical privileges will follow the procedures set forth in the Medical Staff By-Laws and such provisions set forth in the Medical Staff By-Laws as they are in effect from time to time are incorporated herein by reference.

SECTION 4.6. Evaluation of Quality of Care. The Board shall require that the Medical Staff implement and report on the activities and mechanisms for monitoring and evaluating the quality of patients' care, for identifying and resolving problems and for identifying opportunities to improve patients' care.

ARTICLE V

SECTION 5.1. Employment and Termination. All physicians employed by, or under contract with, the Corporation, to perform services that are medico-administrative in nature and include medical staff clinical responsibilities or functions involving their professional capabilities must be members of the Medical Staff. Their Medical Staff membership may be made contingent upon continued employment. The termination of such a physician's employment or contract shall be subject only to regular personnel policies (in the case of an employee) and to any contract with such physician; however, his or her Medical Staff membership and clinical privileges may not be terminated without the same due process provided any other member of the Medical Staff, unless otherwise provided by contract, or in the grant of his Medical Staff membership.

SECTION 6.1. Executive Committee. Subject to the approval of the Board, the Chairman shall appoint an Executive Committee consisting of the Chairman and at least two other Elected Directors. During the intervals between the regular meetings of the Board, the Executive Committee shall have and exercise the authority of the Board, except that the Executive Committee may not approve amendment of these By-Laws or any action described in Article II, Section 2.1. The Executive Committee shall advise the Board on and make recommendations regarding executive compensation. The Chairman of the Board shall be Chairman of the Executive Committee.

SECTION 6.1.1. Report of Actions. Actions taken by the Executive Committee shall be reported to the Board at its next meeting following such actions.

SECTION 6.2. Standing Committees. The Chairman, with concurrence of the Board, shall appoint the Chairman and other members of the following standing committees, with the specified duties. Standing committee members shall be appointed promptly after the Annual Meeting and shall serve for terms of one year or until their successors are appointed and qualified. Standing committee members may be reappointed.

SECTION 6.2.1. Performance Improvement Committee. The Performance Improvement Committee shall advise the Board on and make recommendations regarding professional credentialing and the quality assurance activities performed by the Medical Staff and Administration. The Committee shall facilitate the discharge of these responsibilities in the manner provided by the Corporation's Performance Improvement Plan.

SECTION 6.2.2. Finance Committee. The Finance Committee shall advise the Board on and make recommendations regarding all matters related to financial policy. It shall review the annual budgets, annual audits, major financial transactions, and insurance and risk management policies and programs.

SECTION 6.2.3. Investments Committee. The Investments Committee shall advise the Board on and make recommendations regarding investments policies and results.

SECTION 6.2.4. Governance Committee. The Governance Committee shall nominate directors and monitor and develop the effectiveness of the Board..

SECTION 6.2.5. Strategic PlanningCommittee. The Strategic Planning Committee shall evaluate community and regional health planning needs and develop plans for addressing such needs.

SECTION 6.3. Minutes and Reports. Each standing committee shall keep minutes of its meetings and submit appropriate reports and recommendations to the Board.

SECTION 6.4. Ad Hoc Committees. The Chairman may appoint the Chairman and members of such Ad Hoc Committees as he from time to time deems appropriate, provided that the area of responsibility of such committees shall not infringe upon the responsibilities of any standing committee.

SECTION 6.5. Quorum. A majority of the members of a committee shall constitute a quorum, and the act of a majority of the committee members present at a meeting at which a quorum is present shall be the act of the committee.

SECTION 6.6. Expenditure Limits. All unbudgeted expenditures in excess of $50,000 shall be approved by the Executive Committee or the Board of Directors. In the case of unbudgeted expenditures in excess of $50,000, an administrative procedure shall be adopted whereby justification shall be presented in writing with a full explanation, including clinical and/or administrative implications and an assessment of the return on investment. A follow-up review of these expenditures and the results will be given to the Board. All expenditures exceeding $50,000 will require counter signature by an authorized member of the Board.

Funds and Securities of the Corporation shall be deposited in such depositories as are approved by resolutions of the Board adopted from time to time, and shall be subject to the order of such persons as the Board may designate by resolution.

The Corporation shall indemnify its Directors and officers to the full extent permitted by the law of Maryland.

The Auxiliary of each Hospital shall be organized and governed by By-Laws approved by the Board after considering the recommendation of the governing body of each Auxiliary. Such By-Laws shall provide that the fundraising activities engaged in by each Auxiliary shall be subject to approval by the Board or, by the Board’s authorization, the President and Chief Executive Officer.

ARTICLE X

These By-Laws may only be amended, altered or repealed by a two-thirds vote of the Board of Directors.

I CERTIFY that the foregoing Amendment and Restatement of the By-Laws of Shore Health System, Inc., formerly The Memorial Hospital at Easton, Md., Inc. was duly adopted on the ________ day of June, 2003, to be effective upon the merger of Shore Health System, Inc. and Dorchester General Hospital, Inc. into the Corporation.

Secretary, Shore Health System, Inc.