1988 Stock Option Plan - Harley-Davidson Inc.


                            HARLEY-DAVIDSON, INC.

                             1988 STOCK OPTION PLAN

                     (as amended through February 2, 1995)

                                   ARTICLE I

                                    PURPOSE

     The purpose of the Harley-Davidson, Inc. 1988 Stock Option Plan is to
provide favorable opportunities for certain selected employees of Harley-
Davidson, Inc. and its subsidiaries to purchase or receive shares of Common
Stock of Harley-Davidson, Inc., or to benefit from the appreciation thereof.
Such opportunities should provide an increased incentive for these employees to
contribute to the future success and prosperity of Harley-Davidson, Inc., thus
enhancing the value of the stock for the benefit of the shareholders, and
increase the ability of Harley-Davidson, Inc. to attract and retain individuals
of exceptional skill upon whom, in large measure, its sustained progress, growth
and profitability depend.


                                   ARTICLE II

                                  DEFINITIONS

     The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:

       2.1.  Board:  The Board of Directors of Harley-Davidson, Inc.

       2.2.  Code:  The Internal Revenue Code of 1986, as amended, and the rules
  and regulations promulgated thereunder.

       2.3.  Committee:  The Human Resources Committee of the Board; provided
  that if any member of the Human Resources Committee is not both a
  Disinterested Person and Outside Director, the Committee shall be comprised of
  only those members of the Human Resources Committee who are both Disinterested
  Persons and Outside Directors.

       2.4.  Common Stock:  The common stock of Harley-Davidson, Inc.

       2.5.  Company:  Harley-Davidson, Inc. and any of its Subsidiaries.

       2.6.  Disability:  Disability within the meaning of Section 22(e)(3) of
  the Code, as determined by the Committee.

       2.7.  Disinterested Persons:  Disinterested persons within the meaning of
  Rule 16b-3 as promulgated under the Securities Exchange Act of 1934, as
  amended.

 
       2.8.  Employer:  The entity that employs the employee or Optionee.

       2.9.  Fair Market Value:  The average of the high and low reported sales
  prices of Common Stock on the New York Stock Exchange Composite Tape on the
  date for which fair market value is being determined.

       2.10.  ISO:  An incentive stock option within the meaning of Section 422
  of the Code and which is designated as an incentive stock option by the
  Committee.

       2.11.  Non-ISO:  A stock option which is not an ISO.

       2.12.  Option:  A stock option granted under the Plan.  Options include
  both ISOs and Non-ISOs.

       2.13.  Option Price:  The purchase price of a share of Common Stock under
  an Option.

       2.14.  Optionee:  A person who has been granted one or more Options.

       2.15.  Outside Directors:  Outside Directors within the meaning of
  Section 162(m) of the Code and the regulations promulgated thereunder.

       2.16.  Parent Corporation:  The parent corporation, as defined in Section
  424(e) of the Code.

       2.17.  Plan:  The Harley-Davidson, Inc. 1988 Stock Option Plan.

       2.18.  Retirement:  Retirement on or after age sixty-two or, with the
  consent of the Committee, at an earlier age.

       2.19.  Subsidiary:  A corporation, limited partnership, general
  partnership, limited liability company, business trust or other entity of
  which more than fifty percent (50%) of the voting power or ownership interest
  is directly and/or indirectly held by the Harley-Davidson, Inc.

       2.20.  Termination Date:  A date fixed by the Committee but not later
  than the day preceding the tenth anniversary of the date on which the Option
  is granted.


                                  ARTICLE III

                                 ADMINISTRATION

        3.1.  The Committee shall administer the Plan and shall have full power
to grant Options, construe and interpret the Plan, establish and amend rules and
regulations for its administration, and perform all other acts relating to the
Plan, including the delegation of administrative responsibilities, which it
believes reasonable and proper.

        3.2.  Subject to the provisions of the Plan, the Committee shall, in its
discretion, determine who shall be granted Options, the number of shares subject
to option under any such Options, the dates after which Options may be
exercised, in whole or in part, whether Options shall be ISOs, and the terms and
conditions of the Options.

 
        3.3.  Any decision made, or action taken, by the Committee arising out
of or in connection with the interpretation and administration of the Plan shall
be final and conclusive.


                                   ARTICLE IV

                           SHARES SUBJECT TO THE PLAN

        4.1.  The total number of shares of Common Stock available for grants of
Options under the Plan shall be 800,000; provided that Options for not more than
100,000 shares of Common Stock shall be granted to an Optionee in any calendar
year under the Plan, which amount shall be reduced by the amount of Common Stock
subject to options granted to such Optionee in such calendar year under any
other stock option plan of the Company.  The foregoing amounts shall be subject
to adjustment in accordance with Article VIII of the Plan.  These shares may be
either authorized but unissued or reacquired shares of Common Stock.  If an
Option or portion thereof shall expire, be canceled or terminate for any reason
without having been exercised in full, the unpurchased shares covered by such
Option shall be available for future grants of Options.  An Option, or portion
thereof, exercised through the exercise of a stock appreciation right pursuant
to Section 6.7 of the Plan shall be treated, for the purposes of this Article,
as though the Option, or portion thereof, had been exercised through the
purchase of Common Stock, with the result that the shares of Common Stock
subject to the Option, or portion thereof, that was so exercised shall not be
available for future grants of Options.


                                   ARTICLE V

                                  ELIGIBILITY

        5.1.  Options may be granted to key employees of the Company or to
persons who have been engaged to become key employees of the Company.  Key
employees will comprise, in general, those who contribute to the management,
direction and overall success of the Company, including those who are members of
the Board.  Members of the Board who are not employees of the Company shall not
be eligible for Option grants.


                                   ARTICLE VI

                                TERM OF OPTIONS

        6.1.  Option Agreements:  All Options shall be evidenced by written
agreements executed by the Company.  Such Options shall be subject to the
applicable provisions of the Plan, and shall contain such provisions as are
required by the Plan and any other provisions the Committee may prescribe.  All
agreements evidencing Options shall specify the total number of shares subject
to each grant, the Option Price and the Termination Date.  Those Options that
comply with the requirements for an ISO set forth in Section 422 of the Code and
are designated ISOs by the Committee shall be ISOs and all other Options shall
be Non-ISOs.

 
        6.2.  Option Price:  The Option Price shall be set by the Committee;
provided, however, that the price per share shall not be less than the Fair
Market Value of a share of Common Stock on the date the Option is granted.

        6.3.  Period of Exercise:  The Committee shall determine the dates after
which Options may be exercised in whole or in part.  If Options are exercisable
in installments, installments or portions thereof that are exercisable and not
exercised shall accumulate and remain exercisable.  The Committee may also amend
an Option to accelerate the dates after which Options may be exercised in whole
or in part.  However, no Option or portion thereof shall be exercisable after
the Termination Date.

        6.4.  Special Rules Regarding ISOs Granted to Certain Employees:
Notwithstanding any contrary provisions of Sections 6.2 and 6.3 of the Plan, no
ISO shall be granted to any employee who, at the time the Option is granted,
owns (directly or indirectly, within the meaning of Section 424(d) of the Code)
more than ten percent of the total combined voting power of all classes of stock
of the Employer or of any Subsidiary or Parent Corporation thereof, unless (a)
the Option Price under such Option is at least 110 percent of the Fair Market
Value of a share of Common Stock on the date the Option is granted and (b) the
Termination Date of such Option is a date not later than the day preceding the
fifth anniversary of the date on which the Option is granted.

        6.5.  Manner of Exercise and Payment:  An Option, or portion thereof,
shall be exercised by delivery of a written notice of exercise to the Company
and payment of the full price of the shares being purchased pursuant to the
Option.  An Optionee may exercise an Option with respect to less than the full
number of shares for which the Option may then be exercised, but an Optionee
must exercise the Option in full shares of Common Stock.  The price of Common
Stock purchased pursuant to an Option, or portion thereof, may be paid:

        a.  in United States dollars in cash or by check, bank draft or money
   order payable to the order of the Company.

        b.  through the delivery of shares of Common Stock with an aggregate
   Fair Market Value on the date of exercise equal to the Option Price, or

        c.  by any combination of the above methods of payment.

The Committee shall determine acceptable methods for tendering Common Stock as
payment upon exercise of an Option and may impose such limitations and
prohibitions on the use of Common Stock to exercise an Option as it deems
appropriate, including, without limitation, any limitation or prohibition
designed to avoid certain accounting consequences which may result from the use
of Common Stock as payment upon exercise of an Option.

        6.6.  Withholding Taxes:  The Company may, in its discretion, require an
Optionee to pay to the Company at the time of exercise the amount that the
Company deems necessary to satisfy its obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise.  Upon or prior
to the exercise of an Option requiring tax withholding, an Optionee may make a
written election to have shares of Common Stock withheld by the Company from the
shares otherwise to be received.  The number of shares so withheld shall have an
aggregate Fair Market Value on the date of exercise sufficient to satisfy the
applicable withholding taxes.  The acceptance of any such

 
election by an Optionee shall be at the sole discretion of the Committee.  Where
the exercise of an Option does not give rise to an obligation to withhold
Federal income taxes on the date of exercise, the Company may, in its
discretion, require an Optionee to place shares of Common Stock purchased under
the Option in escrow for the benefit of the Company until such time as Federal
income tax withholding is required on amounts included in the gross income of
the Optionee as a result of the exercise of an Option.  At such time, the
Company, in its discretion, may require an Optionee to pay to the Company the
amount that the Company deems necessary to satisfy its obligation to withhold
Federal, state or local income or other taxes incurred by reason of the exercise
of the Option, in which case the shares of Common Stock will be released from
escrow to the Optionee.  Alternatively, subject to acceptance by the Committee,
in its sole discretion, an Optionee may make a written election to have shares
of Common Stock held in escrow applied toward the Company's obligation to
withhold Federal, state or local income or other taxes incurred by reason of the
exercise of the Option, based on the Fair Market Value of the shares on the date
of the termination of the escrow arrangement.  Upon application of such shares
toward the Company's withholding obligation, any shares of Common Stock held in
escrow and not, in the judgment of the Committee, necessary to satisfy such
obligation shall be released from escrow to the Optionee.

        6.7.  Stock Appreciation Rights:  At or after the grant of an Option,
the Committee, in its discretion, may provide an Optionee with an alternate
means of exercising an Option, or a designated portion thereof, by granting the
Optionee a stock appreciation right.  A 'stock appreciation right' is a right to
receive, upon exercise of an Option or any portion thereof, in the Committee's
sole discretion, an amount of cash equal to, and/or shares of Common Stock
having a Fair Market Value on the date of exercise equal to, the excess of the
Fair Market Value of a share of Common Stock on the date of exercise over the
Option Price, multiplied by the number of shares of Common Stock that the
Optionee would have received had the Option or portion thereof been exercised
through the purchase of shares of Common Stock at the Option Price, provided
that (a) such Option or portion thereof has been designated as exercisable in
this alternative manner, (b) such Option or portion thereof is otherwise
exercisable, and (c) the Fair Market Value of a share of Common Stock on the
date of exercise exceeds the Option Price.

        6.8.  Nontransferability of Options:  Each Option shall, during the
Optionee's lifetime, be exercisable only by the Optionee, and neither it nor any
right hereunder shall be transferable otherwise than by will or the laws of
descent and distribution or be subject to attachment, execution or other similar
process.  In the event of any attempt by the Optionee to alienate, assign,
pledge, hypothecate or otherwise dispose of an Option or of any right hereunder,
except as provided for herein, or in the event of any levy or any attachment,
execution or similar process upon the rights or interest hereby conferred, the
Company may terminate the Option by notice to the Optionee and the Option shall
thereupon become null and void.

        6.9.  Cessation of Employment of Optionee:

        a.  Cessation of Employment other than by Reason of Retirement,
   Disability or Death.  If an Optionee shall cease to be employed by the
   Company otherwise than by reason of Retirement, Disability, or death, each
   Option held by the Optionee, together with all rights hereunder, shall
   terminate on the date of cessation of employment, to the extent not
   previously exercised.

 
        b.  Cessation of Employment by Reason of Retirement or Disability.  If
   an Optionee shall cease to be employed by the Company by reason of Retirement
   or Disability, each Option held by the Optionee shall remain exercisable, to
   the extent it was exercisable at the time of cessation of employment, until
   the earliest of:

         i.  the Termination Date,

         ii.  the death of the Optionee, or such later date not more than one
       year after the death of the Optionee as the Committee, in its discretion,
       may provide pursuant to Section 6.9(c) of the Plan,

         iii.  the third anniversary of the date of the cessation of the
       Optionee's employment, if employment ceased by reason of Retirement, or

         iv.  the first anniversary of the date of the cessation of the
       Optionee's employment by reason of Disability;

   and thereafter all such Options shall terminate together with all rights
   hereunder, to the extent not previously exercised.

        c.  Cessation of Employment by Reason of Death.  In the event of the
   death of the Optionee, while employed by the Company, an Option may be
   exercised at any time or from time to time prior to the earlier of the
   Termination Date or the first anniversary of the date of the Optionee's
   death, by the person or persons to whom the Optionee's rights under each
   Option shall pass by will or by the applicable laws of descent and
   distribution, to the extent that the Optionee was entitled to exercise such
   Option on the Optionee's date of death.  In the event of the death of the
   Optionee while entitled to exercise an Option pursuant to Section 6.9(b), the
   Committee, in its discretion, may permit such Option to be exercised at any
   time or from time to time prior to the Termination Date during a period of up
   to one year from the death of the Optionee, as determined by the Committee,
   by the person or persons to whom the Optionee's rights under each Option
   shall pass by will or by the applicable laws of descent and distribution, to
   the extent that the Option was exercisable at the time of cessation of the
   Optionee's employment.  Any person or persons to whom an Optionee's rights
   under an Option have passed by will or by the applicable laws of descent and
   distribution shall be subject to all terms and conditions of the Plan and the
   Option applicable to the Optionee.

        6.10.  Notification of Sales of Common Stock:  Any Optionee who disposes
of shares of Common Stock acquired upon the exercise of an ISO either (a) within
two years after the date of the grant of the ISO under which the stock was
acquired or (b) within one year after the transfer of such shares to the
Optionee, shall notify the Company of such disposition and of the amount
realized upon such disposition.

 
                                  ARTICLE VII

                LIMITATIONS AND ACCELERATIONS ON EXERCISABILITY

        7.1.  Notwithstanding any other provision of this Plan, in the case of
an ISO, the aggregate Fair Market Value (determined at the time the ISO is
granted) of the shares of Common Stock with respect to which all 'incentive
stock options' (within the meaning of Section 422 of the Code) are first
exercisable by the Optionee during any calendar year (under this Plan and under
all other incentive stock option plans of the Employer, any Subsidiary and any
Parent Corporation) shall not exceed $100,000.


                                  ARTICLE VIII

                                  ADJUSTMENTS

        8.1.  If (a) the Company shall at any time be involved in a transaction
to which Section 424(a) of the Code is applicable; (b) the Company shall declare
a dividend payable in, or shall subdivide or combine, its Common Stock; or (c)
any other event shall occur which in the judgment of the Committee necessitates
an adjustment to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Committee may,
in such manner as it may deem equitable, adjust any or all of (i) the number and
type of securities subject to the Plan and which thereafter may be the subject
of Options; (ii) the number and type of securities subject to outstanding
Options; (iii) the Option Price with respect to any Option; and (iv) the number
of shares of Common Stock that may e issued pursuant to Options granted to an
Optionee in any calendar year; provided, however, that each such adjustment, in
the case of ISOs, shall be made in such manner as not to constitute a
'modification' within the meaning of Section 424(h)(3) of the Code.  The
judgment of the Committee with respect to any matter referred to in this Article
shall be conclusive and binding upon each Optionee.


                                   ARTICLE IX

                       AMENDMENT AND TERMINATION OF PLAN

        9.1.  The Board may at any time, or from time to time, suspend or
terminate the Plan in whole or in part or amend it in such respects as the Board
may deem appropriate, provided, however, that no such amendment shall be made,
which would, without approval of the shareholders:

        a.  materially modify the eligibility requirements for receiving
   Options;

        b.  increase the aggregate number of Shares of Common Stock which may be
   issued pursuant to Options granted under the Plan, except as is provided for
   in accordance with Article VIII of the Plan;

        c.  Increase the number of shares of Common Stock which may be issued
   pursuant to Options granted to an Optionee in any calendar year, except as is
   provided for in accordance with Article VIII of the Plan;

 
        d.  reduce the minimum Option Price, except as is provided for in
   accordance with Article VIII of the Plan;

        e.  extend the period of granting Options; or

        f.  materially increase in any other way the benefits accruing to
   Optionees.

        9.2.  No amendment, suspension or termination of this Plan shall,
without the Optionee's consent, alter or impair any of the rights or obligations
under any Option theretofore granted to an Optionee under the Plan.

        9.3.  The Board may amend this Plan, subject to the limitations cited
above, in such manner as it deems necessary to permit the granting of Options
meeting the requirements of future amendments or issued regulations, if any, to
the Code.


                                   ARTICLE X

                        GOVERNMENT AND OTHER REGULATIONS

        10.1.  The obligation of the Company to issue or transfer and deliver
shares for Options exercised under the Plan shall be subject to all applicable
laws, regulations, rules, orders and approvals which shall then be in effect and
required by governmental entities and the stock exchanges on which Common Stock
is traded.


                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

        11.1.  Plan Does Not Confer Employment or Shareholder Rights:  The right
of the Employer to terminate (whether by dismissal, discharge, retirement or
otherwise) the Optionee's employment with it at any time at will, or as
otherwise provided by any agreement between the Company and the Optionee, is
specifically reserved.  Neither the Optionee nor any person entitled to exercise
the Optionee's rights in the event of the Optionee's death shall have any rights
of a shareholder with respect to the shares subject to each Option, except to
the extent that, and until, such shares shall have been issued upon the exercise
of each Option.

        11.2.  Plan Expenses:  Any expenses of administering this Plan shall be
borne by the Company.

        11.3.  Use of Exercise Proceeds:  Payments received from Optionees upon
the exercise of Options shall be used for the general corporate purposes of the
Company, except that any stock received in payment may be retired, or retained
in the Company's treasury and reissued.

        11.4.  Indemnification:  In addition to such other rights of
indemnification as they may have as members of the Board, or the Committee, the
members of the Committee and the Board shall be indemnified by the Company
against all costs and expenses reasonably incurred by them in connection with
any action, suit or proceeding to which they or any of them may be party by
reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by

 
independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except a
judgment based upon a finding of bad faith; provided that upon the institution
of any such action, suit or proceeding a Committee or Board member shall, in
writing, give the Company notice thereof and an opportunity, at its own expense,
to handle and defend the same before such Committee or Board member undertakes
to handle and defend it on such member's own behalf.


                                  ARTICLE XII

                    SHAREHOLDER APPROVAL AND EFFECTIVE DATES

        12.1.  The Plan shall become effective when it is adopted by the Board.
However, the Plan and all Options shall terminate after the passage of one year
from the date the Plan was adopted by the Board unless:

        a.  within such one year period, the Plan is approved by the vote at a
   meeting of the shareholders of Harley-Davidson, Inc. of the holders of a
   majority of the outstanding shares of Harley-Davidson, Inc. entitled to vote;
   provided that if at a meeting of such shareholders held within such one year
   period, the Plan is not so approved, the Plan and all Options shall terminate
   at the time of that meeting of shareholders; or

        b.  within such one year period, the Plan is approved by the
   shareholders of Harley-Davidson, Inc.

Options may not be granted under the Plan after March 7, 1998.