1988 Stock Option Plan - Harley-Davidson Inc.


                                HARLEY-DAVIDSON, INC.

                                1988 STOCK OPTION PLAN

                         (as amended through August 20, 1997)

                                      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: Non-employee directors 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 1,600,000; provided that Options for not 
more than 400,000 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, 

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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

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             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, 


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     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.


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                                     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 


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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 O ptionees 
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 May 6, 1995.


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