2008 Annual Incentive Plan

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The following is a summary of the material terms of the Bar Harbor Bankshares 2008 Annual Incentive Plan

Bar Harbor Bankshare’s ("BHB") Annual Incentive Plan (the "Plan") is designed to recognize and reward executives for their collective contributions to BHB’s success. Our Plan focuses on rewarding for the achievement of specific goals that are critical to BHB’s growth and profitability. Individually and collectively, we believe our executive team has the ability to influence and drive our success. Our Plan is designed to reward our executives for driving BHB’s success. This document summarizes the elements and features of the Plan.

In short, the objectives of the Plan are to:

• Focus executive attention on key business metrics;
• Align pay with organizational and individual performance;
• Encourage teamwork and collaboration across all areas of BHB. Our collective contributions will drive improved business results;
• Motivate and reward the achievement of specific, measurable performance objectives;
• Provide competitive total cash compensation;
• Provide significant reward for achieving and exceeding performance results; and
• Enable BHB to attract and retain the talent needed to drive success.

Eligibility

• Eligibility will be limited to executive positions that have a significant impact on the success of the organization.
• Participants must be employed by October 1 ^st of the plan year in order to be eligible for that year’s incentive. New employees will receive pro-rated awards based on date of hire.
• Participants must be an active employee as of the reward payout date to receive an award.
• Participant’s performance must be in good standing for the measurement period.

Performance Period

The performance period and plan operate on a calendar year basis (January 1 ^st – December 31 ^st ). Actual payout awards are made in cash following year-end after BHB’s financial results and performance are known.

 Incentive Payout Opportunity

Each participant will have a target incentive opportunity based on his/her role. The target incentive will reflect a percentage of base salary and be determined consistent with competitive market practices. Actual awards will vary based on achievement of specific goals. The opportunity reflects a range of potential awards. Actual awards may range from 0% of target (for not achieving minimal performance) to 150% of target (for exceptional performance). The table below summarizes the incentive ranges for the 2008 Plan year.

Incentive Plan Measures

Each participant will have predefined performance goals that will determine his/her annual incentive award.  There are two performance categories:   BHB and Individual.  BHB performance will be reflected by common goals for all participants. Individual goals will reflect each participants individual contributions based on their role. The specific allocation of goals will be weighted to reflect the focus and contribution for each role/level in BHB and its wholly owned subsidiary Bar Harbor Bank & Trust (the "bank") and its second tier subsidiary Bar Harbor Trust Services.

The table below provides guidelines for the allocation of participant’s incentives for each performance component

BHB Performance

BHB performance goals for 2008 are Net Income and Efficiency Ratio. Specific performance goals at threshold, target, and stretch for 2008 are established by the BHB Compensation Committee and approved by the BHB Board of Directors.

Individual Performance

In addition to the BHB’s performance, participants will have 2 - 3 individual goals that will focus on either department/team performance (e.g. lending growth, deposit growth) and/or individual performance. The mix of these goals will vary by role. Where possible, performance targets and ranges for each measure will be set at the beginning of the Plan year. A minimum achievement of threshold level performance is required for the plan to pay for each component.

Plan Trigger

In order for the Plan to "activate" or turn on, BHB must achieve at least the minimum Net Income threshold established by the Compensation Committee. If BHB does not meet this level, the Plan will not pay out any awards for the year, regardless of performance on other goals.

Payouts

Payouts will be made in cash as soon as possible after the closing of BHB’s financials each year. Awards are calculated based on actual performance relative to target. Achieving threshold performance will pay out at 50% of target incentive, target performance will pay out 100% of target, and stretch performance will pay out at 150% of target incentive. Performance below threshold will be zero. Payouts are assessed by component such that one goal may achieve stretch and another may achieve only threshold. Actual payouts for each performance goal will be pro-rated between threshold, target and stretch levels to reward incremental improvement.

Below is an illustration of a simple plan design for a SVP (Tier 3) with a base salary of $100,000 and an incentive target of 15% of base salary ($15,000). Goals are for illustration purposes only.

This participant’s payout of $12,750 is 85% of target. The payout reflects BHB’s Net Income performance at "Target", Efficiency Ratio at Threshold, one Individual goal at stretch, another that was not achieved, and another at Target.

Terms and Conditions                                                                                                                                                                            

Effective Date

This Plan is effective January 1, 2008 to reflect plan year January 1, 2008 to December 31, 2008. The Plan will be reviewed annually by the BHB’s Compensation Committee and Executive Management to ensure proper alignment with BHB’s business objectives. BHB retains the rights as described below to amend, modify or discontinue the Plan at any time during the specified period. The Incentive Plan will remain in effect until December 31, 2008.

Program Administration

The Plan is authorized by the BHB Compensation Committee and voted by the BHB Board of Directors. The Compensation Committee has the sole authority to interpret the Plan and to make or nullify any rules and procedures, as necessary, for proper administration. Any determination by the Compensation Committee will be final and binding on all participants.

Program Changes or Discontinuance

BHB has developed the plan based on existing business, market and economic conditions. If substantial changes occur that affect these conditions, BHB may add to, amend, modify or discontinue any of the terms or conditions of the Plan at any time. The Compensation Committee may, at its sole discretion, waive, change or amend the Plan as it deems appropriate.

Incentive Award Payments

Awards will be paid as a cash bonus before the end of the first quarter following the Plan year (within 75 days to avoid potential 409A trigger). Awards will be paid out as a percentage of a participant’s base salary earned during the year as of December 31 ^st for a given calendar year. Incentive awards will be considered taxable income to participants in the year paid and will be subject to withholding for required income and other applicable taxes.

Any rights accruing to a participant or his/her beneficiary under the Plan shall be solely those of an unsecured general creditor of BHB. Nothing contained in the Plan, and no action taken pursuant to the provisions hereof, will create or be construed to create a trust of any kind, or a pledge, or a fid