10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2004
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to

Commission file number 1-9183

Harley-Davidson, Inc.

(Exact name of registrant as specified in its charter)

Wisconsin	39-1382325
(State of organization)	(I.R.S. Employer Identification No.)
3700 West Juneau Avenue,
Milwaukee, Wisconsin	53208
(Address of principal executive offices)	(Zip code)

Registrants telephone number: (414) 342-4680

Securities registered pursuant to Section 12(b) of the Act:

	Name of each Exchange
Title of each class	on which registered
COMMON STOCK, $.01 PAR VALUE PER SHARE	NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS	NEW YORK STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act:      NONE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such requirements for the past 90 days.  Yes ý No o.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes ý   No o.

Aggregate market value of the voting stock held by non-affiliates of the registrant at June 27, 2004:

$17,747,151,212

Number of shares of the registrant’s common stock outstanding at March 7, 2005:

291,972,467 shares

Documents Incorporated by Reference

Part III of this report incorporates information by reference from registrant’s Proxy Statement for the annual meeting of its shareholders to be held on April 30, 2005.

Harley-Davidson, Inc.

Form 10-K

For The Year Ended December 31, 2004

Part I
Item 1.	Business
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.	Selected Financial Data
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk
Item 8.	Consolidated Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.	Controls and Procedures
Part III
Item 10.	Directors and Executive Officers of the Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management
Item 13.	Certain Relationships and Related Transactions
Item 14.	Principal Accounting Fees and Services
Part IV
Item 15.	Exhibits and Financial Statements Schedules
Signatures

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Part I

Note regarding forward-looking statements

Certain matters discussed by the Company are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995.  These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the Company “believes,” “anticipates,” “expects” or “estimates” or words of similar meaning.  Similarly, statements that describe the Company’s future plans, objectives, targets or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report.  Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report, including the Risk Factors discussed on page 35 of this report.  Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.  The forward-looking statements included herein are only made as of the date of this report, and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Item 1. Business

Harley-Davidson, Inc. was incorporated in 1981, at which time it purchased the Harley-Davidson^® motorcycle business from AMF Incorporated in a management buyout.  In 1986, Harley-Davidson, Inc. became publicly held. Unless the context otherwise requires, all references to the “Company” include Harley-Davidson, Inc., all of its subsidiaries and all of its majority-owned affiliates.  The Company operates in two segments:  the Motorcycles & Related Products segment and the Financial Services segment.  The Company’s reportable segments are strategic business units that offer different products and services.  They are managed separately based on the fundamental differences in their operations.

The Motorcycles & Related Products (Motorcycles) segment includes the group of companies doing business as Harley-Davidson Motor Company (Motor Company) and the group of companies doing business as Buell Motorcycle Company (BMC).  The Motorcycles segment designs, manufactures and sells primarily heavyweight (engine displacement of 651+cc) touring, custom and performance motorcycles as well as a complete line of motorcycle parts, accessories, clothing and collectibles. The Company, which is the only major American motorcycle manufacturer, has had the largest share of the United States heavyweight (651+cc) motorcycle market since 1986. At the end of 2004, the Company’s market share, based on retail sales of new Harley-Davidson motorcycles, was 49.5% in the United States (Data provided by the Motorcycle Industry Council).

The Financial Services (Financial Services) segment includes the group of companies doing business as Harley-Davidson Financial Services (HDFS).  HDFS is engaged in the business of financing and servicing wholesale inventory receivables and retail loans, primarily for the purchase of motorcycles. HDFS conducts business in the United States, Canada and Europe.

See Note 12 to the Consolidated Financial Statements for financial information related to the Company’s business segments.

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Motorcycles and Related Products

Motorcycles. The primary business of the Motorcycles segment is to design, manufacture and sell premium motorcycles for the heavyweight market.  The Company is best known for its Harley-Davidson motorcycle products, but also offers a line of motorcycles and related products under the Buell brand name.  The Company’s worldwide motorcycle sales generated 80.0%, 80.0% and 78.9% of the total net revenue in the Motorcycles segment during 2004, 2003 and 2002, respectively.

The Company’s Harley-Davidson branded motorcycle products emphasize traditional styling, design simplicity, durability and quality.  The Company’s 2005 model year line up includes 32 models of Harley-Davidson touring and custom heavyweight motorcycles, with domestic manufacturer’s suggested retail prices ranging from $6,495 to $20,405.  The Company also offers exclusive limited-edition factory-custom motorcycles through its Custom Vehicle Operation (CVO) program.  Motorcycles sold through the CVO program are available in limited quantities and offer unique features, paint schemes and accessories.  The Company currently has three motorcycle offerings available through the CVO program with domestic manufacturer’s suggested retail prices ranging from $25,495 to $29,995.

The Motor Company manufactures five families of motorcycles: Sportster^®, Dyna Glide, Softail^®, Touring and VRSC.  These motorcycles are powered by one of four air-cooled, twin-cylinder engines with a 45-degree “V” configuration, or in the case of the VRSC family, a liquid-cooled, twin-cylinder engine with a 60-degree “V” configuration. The Motor Company’s Harley-Davidson engines range in size from 883cc’s to 1690cc’s.

The average U.S. purchaser of a new Harley-Davidson motorcycle is a married male in his mid-forties (over two-thirds of purchasers are between the ages of 35 and 54), with a median household income of approximately $81,400. These customers generally purchase a motorcycle for recreational purposes rather than to provide transportation. Over two-thirds of the Company’s U.S. retail sales of new Harley-Davidson motorcycles are to buyers with at least one year of education beyond high school, and 30% of the buyers have college degrees.  Approximately 10% of the Company’s Harley-Davidson U.S. retail motorcycle sales are to female buyers.  (Source: 2004 Company studies)

The Company’s Buell^® motorcycle products emphasize innovative design, responsive handling and overall performance.  Buell currently manufactures and sells six models, including five heavyweight models in its XB family, and the Blast^®.  The Buell XB motorcycles focus on superior handling and are powered by either a 984cc (XB9) or a 1203cc (XB12) air-cooled, twin-cylinder engine with a 45-degree “V” configuration.  The Buell XB motorcycle models have domestic manufacturer’s suggested retail prices ranging from $8,695 to $10,495.  The Buell Blast is smaller and less expensive than the Buell XB models and is powered by a 492cc single-cylinder engine.  The Blast, which competes in the standard market segment, has a domestic manufacturer’s suggested retail price of $4,595.

The average U.S. purchaser of a new Buell XB motorcycle is a male at the age of 36 with a household income of approximately $79,600.  Approximately 9% of all new Buell XB U.S. retail motorcycle sales are to females. The average U.S. purchaser of a new Buell Blast is at the age of 37, with over one-half of them being female.  Approximately 57% of new Buell Blast purchasers have never owned a motorcycle before and in excess of 97% of them had never owned a Buell motorcycle before.  (Source: 2004 Company studies).

The motorcycle market is comprised of four segments: standard, which emphasizes simplicity and cost; performance, which emphasizes handling and acceleration; touring, which emphasizes comfort and amenities for long-distance travel; and custom, which emphasizes styling and individual owner customization.  The touring segment of the heavyweight market was pioneered by the Company and includes motorcycles equipped for long-distance touring with fairings, windshields, saddlebags and Tour Pak^® luggage carriers.  The custom segment of the market includes motorcycles featuring the distinctive styling associated with classic Harley-Davidson motorcycles. The standard and performance segments of the market are served primarily by the Company’s Buell motorcycle line.

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In the United States, suggested retail prices for the Company’s Harley-Davidson motorcycles range from being competitive to 50% higher than suggested retail prices for comparable motorcycles available in the market.  Although there are some differences in accessories between the Company’s top-of-the line touring motorcycles and those of its competitors, suggested retail prices are generally comparable.  The high-end of the custom portion of the Harley-Davidson product line represents the Company’s highest unit volumes and the Company believes Harley-Davidson custom products continue to command a premium price because of the features, styling and high resale value associated with Harley-Davidson custom products.  The Company’s smallest displacement custom motorcycle (the 883cc Sportster) is price competitive with comparable motorcycles available in the market. The Company’s 2004 surveys of retail purchasers in the United States indicate that 83% of the purchasers of its Sportster models either have previously owned competitive-brand motorcycles, are completely new to the sport of motorcycling or have not participated in the sport for at least five years.  The Company expects to see sales of its Sportster models lead to future sales of its higher-priced models.

Since 1988, the Company’s research has consistently shown that U.S. purchasers of new Harley-Davidson motorcycles have a repurchase intent at or in excess of 90%.

Parts & Accessories. The major Parts and Accessories (P&A) products are replacement parts (Genuine Motor Parts) and mechanical and cosmetic accessories (Genuine Motor Accessories).  Worldwide P&A net revenue comprised 15.6%, 15.4% and 15.4% of net revenue in the Motorcycles segment in 2004, 2003 and 2002, respectively.

General Merchandise. Worldwide General Merchandise net revenue, which includes MotorClothes^TM apparel and collectibles, comprised 4.5%, 4.6% and 5.7% of net revenue in the Motorcycles segment in 2004, 2003 and 2002, respectively.

Other Services.  The Company also provides a variety of services to its dealers including service and business management training programs, customized dealer software packages, delivery of its motorcycles, a motorcycle rental and tour program and Riders Edge^®, the Company’s rider training program.

Licensing. The Company creates an awareness of the Harley-Davidson brand among its customers and the non-riding public through a wide range of products for enthusiasts by licensing the name “Harley-Davidson” and other trademarks owned by the Company.  The Company’s licensed products include t-shirts, jewelry, small leather goods, toys and numerous other products.  The Company also licenses the use of its name in connection with a cafe located in Las Vegas, Nevada.  Although the majority of licensing activity occurs in the U.S., the Company continues to expand these activities in international markets.  Royalty revenues from licensing, included in Motorcycles segment net revenue, were approximately $41 million, $38 million and $36 million in 2004, 2003 and 2002, respectively.  While royalty revenues from licensing activities are relatively small, the profitability of this business is relatively high.

Patents and Trademarks.  The Company owns certain patents that relate to its motorcycles and related products and processes for their production. The Company diligently protects its intellectual property and it rights to innovative and proprietary technology.  This protection, including enforcement, is important as the Company moves forward with investments in new products, designs and technologies.

Trademarks are important to the Company’s motorcycle business and licensing activities.  The Company has a vigorous world wide program of trademark registration and enforcement to strengthen the value of the trademarks and prevent the unauthorized use of those trademarks. The Company believes the HARLEY-DAVIDSON trademark and the Company’s Bar and Shield trademark are each highly recognizable to the public and are very valuable assets. The BUELL trademark is well-known in performance motorcycle circles, as is the associated Pegasus logo.  Additionally, the Company uses numerous other trademarks, trade names and logos, which are registered world wide, where the Company conducts business. The following are among the Company’s trademarks:  Harley-Davidson, H-D, Harley, the Bar & Shield Logo, MotorClothes, the MotorClothes Logo, Rider’s Edge, Harley Owners Group, H.O.G., the H.O.G. Logo, Softail, Sportster, V-Rod, Buell, the Pegasus Logo and BRAG.  The HARLEY-DAVIDSON trademark has been used since 1903 and the Bar and Shield trademark since at least 1910.  The BUELL trademark has been used since 1984.  All of the Company’s

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trademarks are owned by H-D Michigan, Inc.

Marketing.  The Company’s products are marketed primarily through dealer promotions, customer events and advertising through national television, print, radio and direct mailings.  Many of the Company’s marketing efforts are accomplished through a cooperative program with its independent dealers. The Company also sponsors racing activities and special promotional events and participates in many major motorcycle consumer shows and rallies.

On an ongoing basis, the Company promotes its products and lifestyle through the Harley Owners Group^®, or H.O.G.^® H.O.G. has approximately 900,000 members worldwide and is the industry’s largest company-sponsored motorcycle enthusiast organization.  The Company formed the Harley Owners Group in 1983 in an effort to encourage Harley-Davidson owners to become more actively involved in the sport of motorcycling.  The Company has also formed the Buell Riders Adventure Group, or BRAG^®, which has approximately 10,000 members.  These groups sponsor many motorcycle events, including world wide rallies and rides for Harley-Davidson and Buell motorcycle enthusiasts.

The Company Web site (www.harley-davidson.com) is also utilized to market its products and services.  The Web site features an online catalog which allows customers to create and share product wish lists, utilize a dealer locator and place catalog orders.  Internet orders are sold and fulfilled by the participating authorized Harley-Davidson dealer selected by the customer. Dealers also handle any after-sale services that customers may require.

International Sales.  International revenue was approximately $917 million, $816 million and $675 million, or approximately 18%, 18% and 17% of net revenue of the Motorcycles segment, during 2004, 2003 and 2002, respectively.  At the end of 2004, the Company’s market share, based on retail sales of new Harley-Davidson motorcycles, was 7.7% in the European heavyweight (651+cc) market and 25.3% in the Asia/Pacific (Japan and Australia) heavyweight (651+cc) market.  See Note 12 to the Consolidated Financial Statements for additional information regarding foreign operations.

Distribution-United States.  The Company’s basic channel of distribution in the United States for its motorcycles and related products consists of 659 independently-owned full-service Harley-Davidson dealerships to whom the Company sells directly.  This includes 411 combined Harley-Davidson and Buell dealerships.  With respect to sales of new motorcycles, approximately 82% of the U.S. dealerships sell the Company’s motorcycles exclusively.  All dealerships stock and sell the Company’s genuine replacement parts, accessories, and MotorClothes apparel and collectibles, and perform service for the Company’s motorcycles.  The Company’s dealers also sell a smaller portion of parts and accessories and general merchandise through “non-traditional” retail outlets.  The “non-traditional” outlets, which are extensions of the main dealership, consist of Secondary Retail Locations (SRLs), Alternate Retail Outlets (AROs), and Seasonal Retail Outlets (SROs).  SRLs are satellites of the main dealership and are developed to meet the service needs of the Company’s riding customers. SRLs also provide replacement parts and accessories and MotorClothes apparel and collectibles and are authorized to sell new motorcycles.  AROs are located primarily in high traffic locations such as malls, airports or popular vacation destinations and focus on selling the Company’s MotorClothes apparel, collectibles and licensed products. SROs are located in similar high traffic areas, but operate on a seasonal basis out of temporary locations such as vendor kiosks.  AROs and SROs are not authorized to sell new motorcycles.  In 2004, there were approximately 87 SRLs, 64 AROs, and 10 SROs located in the United States.

Distribution-Europe.  The Company’s European management team is located in Oxford, England and is responsible for all sales, marketing and distribution activities in Europe, the Middle East and Africa.  The Company has sales offices in the United Kingdom, France, Germany, Italy, the Netherlands, Spain, Switzerland and seven independent distributors throughout the region. In the European region, there are approximately 389independent Harley-Davidson dealerships serving 36 country markets.  This includes 292combined Harley-Davidson and Buell dealerships.  Buell is further represented by 7dealerships that do not sell Harley-Davidson motorcycles.  In addition, the Company’s dealer network includes 31ARO’s across Europe.

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Distribution-Asia/Pacific.  The Asia/Pacific region is served by 170 independent dealers in 10 countries.  Of these dealers, 134 sell both Harley-Davidson and Buell products, while three are Buell-only dealers.  The Company’s distribution in Japan, which is the largest market in this region, is managed directly by the Company’s subsidiary in Tokyo.  Operations of this subsidiary include sales, marketing, and distribution of product to the country’s network of 113 independent dealers.  Independent distributors manage distribution for the region’s second largest market, Australia/New Zealand, with 51 dealerships currently in operation.  Of these, 24 sell both Harley-Davidson and Buell products.  The Company supplies product directly from its U.S. operations to the remaining Asia/Pacific dealers, which are located in East and Southeast Asia.

Distribution-Latin America.  In Latin America, 14 countries are served by 31 independent dealers.  Mexico is the Company’s largest market in Latin America with 10 dealers.  In Brazil, the region’s second largest market, products are distributed by an independent master dealer through eight dealership locations.  Certain motorcycle models sold in Brazil are assembled at the Company’s subsidiary in Manaus, Brazil.  The remaining dealers in Latin America receive product directly from the Company’s U.S. operations.

Distribution-Canada. In Canada, there are approximately 75 independent Harley-Davidson dealershipsand three AROs, all served by a single independent distributor, Deeley Harley-Davidson Canada/Fred Deeley Imports Ltd. Currently, 43 of the 75 dealerships are combined Harley-Davidson and Buell dealerships.

Seasonality.  In general, the Motor Company has not experienced seasonal fluctuations in its wholesale sales.  This has been primarily the result of strong demand for the Company’s Harley-Davidson motorcycles and related products, as well as the availability of floor plan financing arrangements for its North American and European independent dealers.  Floor plan financing allows dealers to build their inventory levels in anticipation of the spring and summer selling seasons.

As the Company works to narrow the gap between supply and demand for its Harley-Davidson motorcycles, the Company’s independent dealers are likely to experience a greater degree of seasonality in their retail sales patterns.

Retail Customer and Dealer Financing.  The Company believes that HDFS as well as other financial services companies provide adequate financing to the Company’s distributors, dealers and their retail customers.  HDFS provides financing to the Company’s dealers, distributors and dealers’ retail customers in the U.S. and Canada. Beginning in 2002, HDFS began servicing the wholesale financing needs of many of the Company’s European dealers.  The Company’s customers in the Asia/Pacific and Latin America regions are not serviced by HDFS, but have access to financing though other established financial services companies.

Competition.  The heavyweight (651+cc) motorcycle market is highly competitive.  The Company’s major competitors are based outside the U.S. and generally have financial and marketing resources that are substantially greater than those of the Company.  They also have larger worldwide revenue and are more diversified than the Company.  In addition to these larger, established competitors, the Company has competitors headquartered in the United States.  These competitors generally offer heavyweight motorcycles with traditional styling that compete directly with many of the Company’s products.  These competitors currently have production and sales volumes that are lower than the Company’s and do not hold significant market shares.

Competition in the heavyweight motorcycle market is based upon a number of factors, including price, quality, reliability, styling, product features, customer preference and warranties.  The Company emphasizes quality, reliability and styling in its products and offers a 2 year warranty for its motorcycles.  The Company regards its support of the motorcycling lifestyle in the form of events, rides, rallies and H.O.G.^® and its financing through HDFS as a competitive advantage. In general, resale prices for used Harley-Davidson motorcycles, as a percentage of prices when new, are significantly higher than resale prices for used motorcycles of the Company’s competitors. (source: 2004 Company data)

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Domestically, the Company competes most heavily in the touring and custom segments of the heavyweight motorcycle market. These segments accounted for 81%, 82% and 80% of total heavyweight retail unit sales in the U.S. during 2004, 2003 and 2002, respectively.  The custom and touring motorcycles are generally the most expensive vehicles in the market and the most profitable for the Company.  During 2004, the heavyweight segment (including standard, performance, touring and custom motorcycles) represented approximately one-half of the total U.S. motorcycle market (on- and off-highway motorcycles and scooters) in terms of new units registered.

For the last 17 years, the Company has led the industry in the United States for retail unit sales of heavyweight motorcycles.  The Company’s (Harley-Davidson motorcycles only) share of the heavyweight market was 49.5% in 2004 and 2003. This share is significantly greater than that of the Company’s largest competitor in the domestic market which ended 2004 with an 18.7% market share.

The following chart includes U.S. retail registration data for the Company and its major competitors for the years 2000 through 2004.

Market share of U.S. Heavyweight Motorcycles (a)

(Engine Displacement of 651+cc)

(Units in thousands)

	Year Ended December 31
	2004		2003		2002		2001		2000
New U.S. Registrations (thousands of units):
Total market new registrations	494.0		461.2		442.3		394.3		340.0
Harley-Davidson new registrations	244.5		228.4		209.3		177.4		155.1
Buell new registrations	3.6		3.5		2.9		2.6		4.2
Total Company new registrations	248.1		231.9		212.2		180.0		159.3
Percentage Market Share:
Harley-Davidson motorcycles	49.5	%	49.5	%	47.5	%	45.0	%	45.6	%
Buell motorcycles	0.7		0.8		0.7		0.7		1.2
Total Company	50.2		50.3		48.2		45.7		46.8
Honda	18.7		18.4		19.8		20.5		18.5
Suzuki	10.2		9.8		9.6		10.8		9.3
Yamaha	8.7		8.5		8.9		7.9		8.4
Kawasaki	6.4		6.7		6.9		8.0		9.0
Other	5.8		6.3		6.6		7.1		8.0
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

(a)         Motorcycle registration data provided by the Motorcycle Industry Council.

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The Company faces unique competitive challenges in the international markets.  The European heavyweight motorcycle market (as defined below) is roughly two-thirds of the size of the U.S. market; but unlike the domestic market, it is comprised of the unique tastes of many individual countries.  In addition, the standard and performance segments represent approximately 80% of the European heavyweight (651+cc) motorcycle market. The Company continues to expand its product offerings to compete in these segments by including motorcycles like the VRSC family and the Buell XB.  The Company’s traditional Harley-Davidson products compete primarily in the custom and touring segments.

On a worldwide basis, the Company measures its market share using the heavyweight classification.  Although definitive market share information does not exist for many of the smaller foreign markets, the Company estimates its worldwide competitive position, using data reasonably available to the Company, to be as follows:

Worldwide Heavyweight Motorcycle Registration Data

(Engine Displacement of 651+cc)

(Units in thousands)

	2004			2003			2002
	Units	% Share		Units	% Share		Units	% Share
North America(a)
Harley-Davidson new registrations	255.8	48.2	%	238.3	48.1	%	220.1	46.4	%
Buell new registrations	3.8	0.7		3.7	0.8		3.0	.6
Company registrations	259.6	48.9	%	242.0	48.9	%	223.1	47.0	%
Market new registrations	530.8			495.5			475.0
Europe(b)
Harley-Davidson new registrations	25.9	7.7	%	26.3	8.1	%	23.5	7.1	%
Buell new registrations	4.5	1.3		3.1	1.0		1.9	0.6
Company registrations	30.4	9.0	%	29.4	9.1	%	25.5	7.7	%
Market new registrations	336.2			323.1			331.8
Japan/Australia(c)
Harley-Davidson new registrations	15.6	25.3	%	15.2	25.8	%	13.6	21.3	%
Buell new registrations	1.0	1.5		1.0	1.7		.7	1.2
Company registrations	16.6	26.8	%	16.2	27.5	%	14.3	22.5	%
Market new registrations	61.9			58.9			63.9
Total(d)
Harley-Davidson new registrations	297.3	32.0	%	279.8	31.9	%	257.2	29.6	%
Buell new registrations	9.3	1.0		7.8	0.9		5.6	0.7
Company registrations	306.6	33.0	%	287.5	32.8	%	262.8	30.3	%
Market new registrations	928.9			877.5			870.7

(a)Includes the United States and Canada.  U.S. data provided by the Motorcycle Industry Council and Canada data provided by the Moped and Motorcycle Industry of Canada.

(b)Europe data, provided by Giral S.A., includes retail sales in Austria, Belgium, France, Germany, Italy, The Netherlands, Spain, Switzerland, United Kingdom, Denmark, Finland, Greece, Norway, Portugal and Sweden.

(c)Japan data provided by Japan Automobile Importers Association and Australia data provided by ERG, International.

(d)Includes the North American, European and Japan/Australia markets as defined above.

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Motorcycle Manufacturing. The Motor Company’s ongoing manufacturing strategy is designed to increase capacity, improve product quality, reduce costs and increase flexibility to respond to changes in the marketplace. The Motor Company incorporates manufacturing techniques focused on continuous improvement. These techniques, which include employee involvement, just-in-time inventory principles, partnering agreements with the local unions, high performance work organizations and statistical process control, are designed to improve product quality, productivity and asset utilization in the production of Harley-Davidson motorcycles.

The Motor Company’s use of just-in-time inventory principles allows it to minimize its inventories of raw materials and work in process, and minimize scrap and rework costs.  This system also allows quicker reaction to engineering design changes, quality improvements and market demands.  The Motor Company continues to train the majority of its manufacturing employees in problem solving and statistical methods.

Raw Material and Purchased Components.  The Company continues to proceed aggressively to establish and/or reinforce long-term, mutually beneficial relationships with its suppliers.  Through these collaborative relationships, the Company gains access to technical and commercial resources for application directly to product design, development and manufacturing initiatives and gains commitment from suppliers to advance Company interests efficiently and effectively.  This strategy has resulted in improved product quality, technical integrity, application of new features and innovations, reduced lead times for product development, and smoother/faster manufacturing ramp-up of new vehicle introductions.  The Company’s 2003 initiative to improve supplier productivity and component cost was fully implemented during 2004 and was instrumental in delivering improvement in cost and in offsetting raw material commodity price pressures throughout the sourcing value stream.  The Company anticipates that its focus on collaboration and strong supplier relationships will be beneficial to achieving cost improvement over the long-term.

The Company purchases all of its raw materials, principally steel and aluminum castings, forgings, sheets and bars, and certain motorcycle components, including carburetors, batteries, tires, seats, electrical components and instruments.  Given current economic conditions in certain raw material commodity markets, the Company is closely monitoring supply, availability and pricing for both its suppliers and in-house operations.  However, at this time, the Company does not anticipate any significant difficulties in obtaining raw materials or components.

Research and Development.  The Company believes research and development are significant factors in its ability to lead the custom and touring motorcycling market and to develop products for the performance segment.  The Company’s Product Development Center (PDC) brings employees from styling, purchasing and manufacturing together with regulatory professionals and supplier representatives to create a concurrent product and process development team.  The Company incurred research and development expenses of $170.7 million, $150.3 million and $139.7 million during 2004, 2003 and 2002, respectively.

Regulation. Federal, state and local authorities have various environmental control requirements relating to air, water and noise pollution that affect the business and operations of the Company.  The Company strives to ensure that its facilities and products comply with all applicable environmental regulations and standards.

The Company’s motorcycles are subject to certification by the U.S. Environmental Protection Agency (EPA) for compliance with applicable emissions and noise standards and by the State of California Air Resources Board (CARB) with respect to CARB’s more stringent emissions standards.  Company motorcycles sold in California are also subject to certain tailpipe and evaporative emissions standards that are unique to California. The Company’s motorcycle products have been certified to comply fully with all such applicable standards. CARB’s motorcycle emissions standards will become more stringent with model year 2008.  The EPA has finalized new tail pipe emission standards for 2006 and 2010, respectively, which are harmonized with the California emissions standards.  Harley-Davidson expects its motorcycle products will comply with the new requirements when they go into effect. Additionally, the European Union, Japan and certain emerging markets are considering making motorcycle emissions and noise standards more stringent, which in the European Union are already more stringent than those of the EPA.  Consequently, the Company will continue to incur some level of research and development and production costs related to motorcycle emissions and noise for the foreseeable future. The Company does not anticipate that any of these standards will have a materially adverse impact on its capital expenditures, earnings or competitive position.

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The Company, as a manufacturer of motorcycle products, is subject to the National Traffic and Motor Vehicle Safety Act, which is administered by the National Highway Traffic Safety Administration (NHTSA).  The Company has certified to NHTSA that its motorcycle products comply fully with all applicable federal motor vehicle safety standards and related regulations.  The Company has from time to time initiated certain voluntary recalls.  During the last three years, the Company has initiated 18 voluntary recalls at a total cost of $7.9 million. The Company reserves for all estimated costs associated with recalls in the period that the recalls are announced.

Employees.  As of December 31, 2004, the Motorcycles segment had approximately 8,900 employees.  Unionized employees at the motorcycle manufacturing facilities in Wauwatosa and Menomonee Falls, Wisconsin and Kansas City, Missouri are represented by the Paper Allied-Industrial Chemical and Energy Workers International Union (PACE) of the AFL-CIO, as well as the International Association of Machinist and Aerospace Workers (IAM).  Unionized employees at the distribution and manufacturing facilities in Franklin and Tomahawk, Wisconsin are represented by the Paper Allied-Industrial Chemical and Energy Workers International Union (PACE) of the AFL-CIO.  Production workers at the motorcycle manufacturing facility in York, Pennsylvania, are represented principally by the IAM.  The collective bargaining agreement with the Pennsylvania-IAM will expire on February 2, 2007, the collective bargaining agreement with the Kansas City-PACE and IAM will expire on August 1, 2007, and the collective bargaining agreement with the Wisconsin-PACE and IAM will expire on March 31, 2008.

Internet Access. The Company’s Internet address is www.harley-davidson.com.  The Company makes available free of charge (other than an investor’s own Internet access charges) through its Internet website the Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after it electronically files such material with, or furnishes such material to, the Securities and Exchange Commission.  In addition, the Company makes available, through its website, the following corporate governance materials: (a) the Harley-Davidson, Inc. Corporate Governance Policy, (b) Committee Charters approved by the Harley-Davidson, Inc. Board of Directors for the Audit Committee, Human Resources Committee and Nominating and Corporate Governance Committee, (c) the Company’s Financial Code of Ethics, (d) the Company’s Code of Business Conduct (the “Code of Conduct”) and (e) the Conflict of Interest Process for Directors and Executive Officers of Harley-Davidson, Inc. (the “Conflict Process”). This information is also available from the Company upon request. The Company intends to satisfy the disclosure requirements under the Code of Conduct, the Conflict Process and applicable New York Stock Exchange listing requirements regarding waivers of the Code of Conduct or the Conflict Process for executive officers and directors by posting such information on its website at www.harley-davidson.com or disclosing the information in the Company’s proxy statement for its annual meeting of shareholders. The Company is not including the information contained on or available through its website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K.

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Financial Services

HDFS is engaged in the business of financing and servicing wholesale inventory receivables and consumer retail loans (primarily for the purchase of motorcycles).  HDFS conducts business in the United States, Canada and Europe.

Harley-Davidson and Buell. HDFS, operating under the trade name Harley-Davidson Credit, provides wholesale financial services to Harley-Davidson and Buell dealers and retail financing to consumers.  HDFS, operating under the trade name Harley-Davidson Insurance, provides the brokerage of a range of motorcycle insurance policies and extended service warranty agreements.

Wholesale financial services include floorplan and open account financing of motorcycles and motorcycle parts and accessories, real estate loans, computer loans and showroom remodeling loans.  HDFS offers wholesale financial services to Harley-Davidson dealers in the U.S. and Canada, and during 2004, approximately 95% of such dealers utilized those services. Prior to August 2002, HDFS offered wholesale financing to some of the Company’s European motorcycle dealers through a joint venture with Transamerica Distribution Finance.  In August 2002, HDFS terminated this joint venture relationship and began directly serving the wholesale financing needs of some European dealers.  The wholesale finance operations of HDFS are located in Plano, Texas and Oxford, England.

Retail financial services include installment lending for new and used Harley-Davidson and Buell motorcycles. HDFS’ retail financial services are available through most Harley-Davidson and Buell dealers in the United States and Canada. HDFS’ retail finance operations are located in Carson City, Nevada, Reno, Nevada, and Plano, Texas.

Other Manufacturers. HDFS’ retail aircraft financial service programs are similar to programs for Harley-Davidson and Buell consumers described above. HDFS’ aircraft business is a small portion of its total business and made up less than 5% of total managed loans as of the end of 2004.

Funding.  HDFS is financed by operating cash flow, asset-backed securitizations, the issuance of commercial paper, revolving credit facilities, medium term notes, senior subordinated debt and advances and loans from the Company.

Competition. The ability to offer a package of wholesale and retail financial services is a significant competitive advantage for HDFS. Competitors compete for business based largely on price and, to a lesser extent, service. HDFS competes based on convenience, service, brand association, strong dealer relations, industry experience, terms, and price.

During 2004, HDFS financed 40% of the new Harley-Davidson motorcycles retailed by independent dealers in the United States, as compared to 38% in 2003. HDFS faces competition for the Company’s retail motorcycle finance business. Competitors are primarily banks and other financial institutions providing retail financing to local or regional markets. Credit unions, banks, other financial institutions and insurance agencies also compete for retail financial services business in selected markets.

HDFS faces little national competition for the Company’s wholesale motorcycle finance business. Competitors are primarily regional and local banks and other financial institutions providing wholesale financing to Harley-Davidson and Buell dealers in their local markets.

Trademarks.  HDFS utilizes various trademarks and trade names licensed from H-D Michigan, Inc., including: “HARLEY-DAVIDSON, H-D and the Bar & Shield logo.

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Seasonality.  In the northern United States and Canada, motorcycles are primarily used during warmer months. Accordingly, HDFS experiences seasonal variations. From mid-March through August, retail financing volume increases and wholesale financing volume decreases as dealers deplete their inventories. From September through mid-March, there is a decrease in retail financing volume while dealer inventories build and turn over more slowly, substantially increasing wholesale financing volume.

Regulation.  The operations of HDFS are subject, in certain instances, to supervision and regulation by state, federal, and various foreign governmental authorities.  Operations may be subject to various laws and judicial and administrative decisions imposing requirements and restrictions, which among other things, (1) regulate credit granting activities, including establishing licensing requirements, in applicable jurisdictions, (2) establish maximum interest rates, finance charges and other charges, (3) regulate customers’ insurance coverages, (4) require disclosure to customers, (5) govern secured transactions, (6) set collection, foreclosure, repossession and claims handling procedures and other trade practices, (7) prohibit discrimination in the extension of credit and administration of loans, and (8) regulate the use and reporting of information related to a borrower.

Depending on the provisions of the applicable laws and regulations and the specific facts and circumstances involved, violations of these laws may limit the ability of HDFS to collect all or part of the principal or interest on applicable loans, may entitle the borrower to rescind the loan or to obtain a refund of amounts previously paid, and in addition, could subject HDFS to damages and administrative sanctions.

The above regulation and supervision could limit the discretion of HDFS in operating its business. Noncompliance with applicable statutes or regulations could result in the suspension or revocation of any license or registration at issue, as well as the imposition of civil fines and criminal penalties.  The Company cannot assure that the applicable laws or regulations will not be amended or construed differently, that new laws and regulations will not be adopted or that interest rates charged by HDFS will not rise to maximum levels permitted by law, the effect of any of which could be to adversely affect the business of HDFS or its results of operations.

A subsidiary of HDFS, Eaglemark Savings Bank (ESB), is a Nevada state thrift. As such, the activities of this subsidiary are governed by federal and State of Nevada banking laws and are subject to examination by federal and state examiners.  ESB is also required to maintain minimum capital reserves.  During 2002, ESB began to originate retail motorcycle and aircraft loans and sell the loans to a non-banking subsidiary of HDFS.  This process allows HDFS to offer retail products with common characteristics across the United States and uniformly manage all domestic retail customers.

Employees.  As of December 31, 2004, the Financial Services segment had approximately 680 employees. No employees of HDFS are represented by labor unions.

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Item 2. Properties

The following is a summary of the principal operating properties of the Company as of December 31, 2004.

Motorcycles and Related Products Segment

Type of Facility	Location	Approximate Square Feet	Status
Corporate Office	Milwaukee, WI	515,000	Owned
Warehouse	Milwaukee, WI	24,000	Lease expiring 2006
Airplane Hangar	Milwaukee, WI	14,600	Owned
Product Development Center	Wauwatosa, WI	409,000	Owned
Manufacturing	Wauwatosa, WI	422,000	Owned
Manufacturing	Menomonee Falls, WI	479,000	Owned
Manufacturing	Tomahawk, WI	211,000	Owned
Manufacturing	York, PA	1,331,000	Owned
Materials Velocity Center	Manchester, PA	212,000	Owned
Manufacturing and Materials Velocity Center	Kansas City, MO	450,000	Owned
Manufacturing	East Troy, WI	40,000	Lease expiring 2008
Product Development and Office	East Troy, WI	54,000	Lease expiring 2008
Distribution Center	Franklin, WI	250,000	Owned
Office	Cleveland, OH	23,000	Lease expiring 2014
Motorcycle Testing	Talladega, AL	24,000	Leases expiring 2007
Motorcycle Testing	Mesa, AZ	12,000	Lease expiring 2005
Motorcycle Testing	Naples, FL	82,000	Owned
Office	Ann Arbor, MI	3,000	Lease expiring 2009
Office	Morfelden-Waldorf, Germany	22,000	Lease expiring 2008
Office and Warehouse	Oxford, England	27,000	Lease expiring 2017
Office	Liederdorp, The Netherlands	8,000	Lease expiring 2006
Office	Paris, France	7,000	Lease expiring 2005
Office and Warehouse	Arese, Italy	17,000	Lease expiring 2009
Office	Zurich, Switzerland	2,000	Lease expiring 2009
Office	Barcelona, Spain	2,000	Lease expiring 2010
Office	Tokyo, Japan	14,000	Lease expiring 2006
Warehouse	Yokohama, Japan	15,000	Lease expiring 2006
Manufacturing and Office	Manaus, Brazil	30,000	Lease expiring 2005

The Company has seven facilities that perform manufacturing operations:  Wauwatosa and Menomonee Falls, Wisconsin (motorcycle powertrain production); Tomahawk, Wisconsin (fiberglass parts production and painting); York, Pennsylvania (motorcycle parts fabrication, painting and Softail^® and touring model assembly); Kansas City, Missouri (motorcycle parts fabrication, painting and Dyna Glide, Sportster^® and VRSC assembly); East Troy, Wisconsin (Buell^® motorcycle assembly); Manaus, Brazil (assembly of select models for Brazilian market).

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Financial Services Segment

Type of Facility	Location	ApproximateSquare Feet	Status
Office	Chicago, IL	35,000	Lease expiring 2007
Office	Carson City, NV	100,000	Owned
Office	Reno, NV	14,000	Lease expiring 2005
Office	Plano, TX	61,500	Lease expiring 2014
Office	Oxford, England	6,000	Lease expiring 2017

The Financial Services segment has five office facilities: Chicago, Illinois (corporate headquarters); Carson City, Nevada and Reno, Nevada (retail and insurance operations); Plano, Texas (wholesale, insurance and retail operations) and Oxford, England (European wholesale operations).

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Item 3.  Legal Proceedings

In January 2001, the Company, on its own initiative, notified each owner of 1999 and early-2000 model year Harley-Davidson^® motorcycles equipped with Twin Cam 88 and Twin Cam 88B engines that the Company was extending the warranty for a rear cam bearing to 5 years or 50,000 miles. Subsequently, on June 28, 2001, a putative nationwide class action was filed against the Company in state court in Milwaukee County, Wisconsin, which was amended by a complaint filed September 28, 2001. The complaint alleged that this cam bearing is defective and asserted various legal theories. This complaint and a second lawsuit filed on April 12, 2002 in state court in Milwaukee County, Wisconsin were dismissed as reported in more detail in Note 6 – Commitments and Contingencies (Note 6), to the Consolidated Financial Statements.  On April 12, 2004, the same attorneys filed a third action in state court in Milwaukee County on behalf of the same plaintiffs from the action dismissed by the Wisconsin Supreme Court.  This third action was dismissed by the court on July 26, 2004.  In addition, the plaintiffs in the original case moved to reopen that matter and amend the complaint to add new causes of action, which motion was denied on August 23, 2004.  A notice of appeal to the Wisconsin Court of Appeals from the latter dismissal has now been filed. The Company intends to continue to vigorously defend this matter.  The Company believes that the 5 year/50,000 mile warranty extension it announced in January 2001 adequately addresses the condition for affected owners.

The Company is involved with government agencies and groups of potentially responsible parties in various environmental matters, including a matter involving the clean up of soil and groundwater contamination at its York, Pennsylvania facility. The York facility was formerly used by the U.S. Navy and AMF prior to the purchase of the York facility by the Company from AMF in 1981. Although the Company is not certain as to the full extent of the environmental contamination at the York facility, it has been working with the Pennsylvania Department of Environmental Protection since 1986 in undertaking environmental investigation and remediation activities, including an on-going site-wide remedial investigation/feasibility study (RI/FS).  Note 6 includes a discussion of the history of this matter in more detail.

Although the RI/FS is still underway and substantial uncertainty exists concerning the nature and scope of the additional environmental investigation and remediation that will ultimately be required at the York facility, the Company estimates that its share of the future costs associated with environmental investigation and remediation activities at the York facility (Response Costs) will be approximately $6.7 million. The Company has established reserves for this amount, which are included in Accrued Expenses and Other Liabilities in the Company’s Consolidated Balance Sheets.

The estimate of the Company’s future Response Costs that will be incurred at the York facility is based on reports of independent environmental consultants retained by the Company, the actual costs incurred to date, and the estimated costs to complete the necessary investigation and remediation activities.  Response Costs related to the remediation of soil are expected to be incurred over a period of several years ending in 2010.  Response Costs related to ground water remediation may continue for some time beyond 2010.  However these Response Costs are expected to be much lower than those related to the remediation of soil.

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Item 4.  Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of shareholders of the Company in the fourth quarter of 2004.

Executive Officers of the Registrant

The following sets forth, as of December 31, 2004, the name, age and business experience for the last five years for each of the executive officers of Harley-Davidson, Inc.  Executive officers are defined by the Company as Corporate Officers of Harley-Davidson, Inc. plus all members of the Leadership and Strategy Council (LSC).  The LSC, which is comprised of selected members of senior management from various areas within the Company, makes high-level resource decisions, develops policies, and acts as an advisory group to the Chief Executive Officer.

Executive Officers

Name	Age
Jeffrey L. Bleustein	65
Chairman and Chief Executive Officer
James M. Brostowitz	52
Vice President and Treasurer
William B. Dannehl	46
Vice President, North American Sales and Dealer Services - Harley-Davidson Motor Company
Jon R. Flickinger	47
Vice President – Harley-Davidson Motor Company and President and Chief Operating Officer - Buell Motorcycle Company
John A. Hevey	47
Vice President, Strategic Planning and New Business Development - Harley-Davidson Motor Company
Ronald M. Hutchinson	57
Vice President, Parts and Accessories - Harley-Davidson Motor Company
Gail A. Lione	55
Vice President, General Counsel and Secretary Chief Compliance Officer
James A. McCaslin	56
President and Chief Operating Officer - Harley-Davidson Motor Company
W. Kenneth Sutton, Jr.	56
Vice President, Engineering - Harley-Davidson Motor Company
Donna F. Zarcone	47
President and Chief Operating Officer - Harley-Davidson Financial Services
James L. Ziemer	54
Vice President and Chief Financial Officer and Director

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Except for the following persons, all such executive officers have been employed by the Company in an executive officer capacity, as defined above, for more than five years:  William B. Dannehl, Jon R. Flickinger and Kenneth Sutton. The following is additional biographical information relating to these three executive officers:

Mr. Dannehl became the Vice President, North American Sales and Dealer Serivces for Harley-Davidson Motor Company in August 2004.  Prior to his current position, Mr. Dannehl served as the Vice President, Strategic Planning and New Business Development for Harley-Davidson Motor Company since August 2002.  From September 1997 to July 2002, Mr. Dannehl served as Vice President and General Manager of York Vehicle Operations.

Mr. Flickinger became the President and Chief Operating Officer of Buell Motorcycle Company in August 2004. Prior to his current position, Mr. Flickinger served as Vice President, North American Sales and Dealer Services for Harley-Davidson Motor Company from March 1999 to July 2004.

Mr. Sutton became the Vice President, Engineering for the Motor Company in 2002.  From 2000 to 2002, Mr. Sutton served as Vice President, Continuous Improvement for the Motor Company.

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PART II

Item 5.  Market for Harley-Davidson, Inc. Common Stock and Related Shareholder Matters

Harley-Davidson, Inc. common stock is traded on the New York Stock Exchange, Inc.  The high and low market prices for the common stock, reported as New York Stock Exchange, Inc. Composite Transactions, were as follows:

2004	Low		High
First quarter	$	45.20	$	54.42
Second quarter	52.30		62.31
Third quarter	56.42		63.75
Fourth quarter	55.01		61.24
2003
First quarter	$	35.01	$	49.65
Second quarter	37.25		46.81
Third quarter	38.06		50.25
Fourth quarter	44.57		52.51

The Company paid the following dividends per share:

	2004		2003		2002
First quarter	$	.080	$	.035	$	.030
Second quarter	.100		.040		.035
Third quarter	.100		.040		.035
Fourth quarter	.125		.080		.035
Total year	$	.405	$	.195	$	.135

As of March 4, 2005 there were 86,789 shareholders of record of Harley-Davidson, Inc. common stock.

The following table contains detail related to the Company’s authority to repurchase common stock during the quarter ended December 31, 2004.

2004 Fiscal Month	Total Number of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Be Purchased Under the Plans or Programs
Sep. 27 to Oct. 31	—	—	—	23,086,117
Nov. 1 to Nov. 28	—	—	—	23,476,523
Nov. 28 to Dec. 31	—	—	—	23,615,879
Total	—	—	—

The Company has continuing authorization from its Board of Directors to repurchase shares of its outstanding common stock under which the cumulative number of shares repurchased, at the time of any repurchase, shall not exceed the sum of (1) the number of shares issued in connection with the exercise of stock options occurring on or after January 1, 2004 plus (2) one percent of the issued and outstanding common stock of the Company on January 1 of the current year, adjusted for any stock split.

The Company’s Board of Directors has also separately authorized the Company to buy back 20 million shares of its common stock with no dollar limit or expiration date.  No repurchases have been made under this authorization as of the end of 2004.

Item 12 of this Annual Report on Form 10-K contains certain information relating to the Company’s equity compensation plans

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Item  6. Selected Financial Data

	2004			2003			2002			2001			2000
Income statement data:
Net revenue	$	5,015,190		$	4,624,274		$	4,090,970		$	3,406,786		$	2,943,346
Cost of goods sold	3,115,655			2,958,708			2,673,129			2,253,815			1,979,572
Gross profit	1,899,535			1,665,566			1,417,841			1,152,971			963,774
Financial services income	305,262			279,459			211,500			181,545			140,135
Financial services expense	116,662			111,586			107,273			120,272			102,957
Operating income from financial services	188,600			167,873			104,227			61,273			37,178
Selling, administrative and engineering expense	726,644			684,175			639,366			551,743			485,980
Income from operations	1,361,491			1,149,264			882,702			662,501			514,972
Gain on sale of credit card business				—			—			—			18,915
Investment income, net	23,101			23,088			16,541			17,478			17,583
Other, net	(5,106		)	(6,317		)	(13,416		)	(6,524		)	(2,914		)
Income before provision for income taxes	1,379,486			1,166,035			885,827			673,455			548,556
Provision for income taxes	489,720			405,107			305,610			235,709			200,843
Net income	$	889,766		$	760,928		$	580,217		$	437,746		$	347,713
Weighted-average common shares:
Basic	295,008			302,271			302,297			302,506			302,691
Diluted	296,852			304,470			305,158			306,248			307,470
Earnings per common share:
Basic	$	3.02		$	2.52		$	1.92		$	1.45		$	1.15
Diluted	$	3.00		$	2.50		$	1.90		$	1.43		$	1.13
Dividends paid	$	.405		$	.195		$	.135		$	.115		$	.098
Balance sheet data:
Working capital	$	2,093,576		$	1,773,354		$	1,076,534		$	949,154		$	799,521
Current finance receivables, net	1,207,124			1,001,990			855,771			656,421			530,859
Long-term finance receivables, net	905,176			735,859			589,809			379,335			234,091
Total assets	5,483,293			4,923,088			3,861,217			3,118,495			2,436,404
Current finance debt	495,441			324,305			382,579			217,051			89,509
Long-term finance debt	800,000			670,000			380,000			380,000			355,000
Total finance debt	1,295,441			994,305			762,579			597,051			444,509
Shareholders’ equity	$	3,218,471		$	2,957,692		$	2,232,915		$	1,756,283		$	1,405,655

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Item 7. Management’s Discussion and Analysis of Financial Position and Results of Operations

Harley-Davidson, Inc. is the parent company for the group of companies doing business as Harley-Davidson Motor Company (HDMC), Buell Motorcycle Company and Harley-Davidson Financial Services (HDFS).  HDMC produces heavyweight motorcycles and offers a complete line of motorcycle parts, accessories, apparel and general merchandise.  HDMC manufactures five families of motorcycles: Touring, Dyna Glide, Softail^®, VRSC and Sportster^®.  Buell Motorcycle Company produces sport motorcycles, including five v-twin XB models and the single-cylinder Buell^® Blast^®.  Buell also offers a line of motorcycle parts, accessories, apparel and general merchandise. HDFS provides wholesale and retail financing and insurance programs primarily to Harley-Davidson/Buell dealers and customers. The Company operates in two principal business segments:  Motorcycles and Related Products (Motorcycles) and Financial Services (Financial Services).

Overview(1)

The Company’s 19 years of record revenues and earnings since its initial public stock offering in 1986 are the result of a combination of factors.  These include the ability to deliver new products to market, attract new customers, retain existing customers and expand capacity in a responsible way. Unique marketplace events have also created special growth opportunities for Harley-Davidson.

The Company believes that demand for Harley-Davidson^® motorcycles grows at an average core rate of 7% to 9% per year. However, in many of the 19 years since 1986, the Company’s growth has exceeded this core rate driven by a rapidly growing heavyweight motorcycle market, the stock market bubble of the mid-and late-1990s including its associated wealth effect, and more recently, the Company’s 100^th Anniversary.  The Company’s growth since 1986 required several factory expansions, which provided it with the opportunity to thoroughly modernize its facilities, resulting in improved productivity, quality and manufacturing margins.

In 2004, the Company shipped 317,289 Harley-Davidson motorcycle units or 9% more than in 2003. The Company expects unit shipments to grow approximately 7% in 2005 with an annual shipment target of 339,000 Harley-Davidson units. The Company believes that these growth rates are consistent with the core growth rate for Harley-Davidson motorcycles and support its longer term goal to satisfy demand for 400,000 Harley-Davidson units in 2007.  The Company also expects that by continuing to offer innovative products and services and by driving productivity gains in all facets of its business, it will achieve earnings growth rates in the mid-teens for the foreseeable future.

The “% Change” figures included in the “Results of Operations” section have been calculated using unrounded dollar amounts and may differ from calculations using the rounded dollar amounts presented.

Results of Operations 2004 Compared to 2003

Overall

Net revenue for 2004 totaled $5.02 billion, a $390.9 million or 8.5% increase over 2003. Net income for 2004 was $889.8 million compared to $760.9 million in 2003, an increase of 16.9%.  Diluted earnings per share for 2004 was $3.00 on 296.9 million weighted-average shares outstanding, compared to $2.50 on 304.5 million weighted-average shares outstanding in 2003, an increase in earnings per share of 20.0%.

The Company paid dividends in 2004 of $.08 per share in March, $.10 per share in June and September and $.125 per share in December.  The aggregate annual dividend paid in 2004 was $.405 per share, representing a 108% increase over the aggregate annual dividend of $.195 per share in 2003.

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Motorcycle Unit Shipments & Net Revenue

The following table includes wholesale motorcycle unit shipments and net revenue for the Motorcycles segment for 2004 and 2003 (dollars in millions):

					Increase			%
	2004		2003		(Decrease)			Change
Motorcycle Unit Shipments
Touring motorcycle units	93,305		82,577		10,728			13.0	%
Custom motorcycle units*	154,163		151,405		2,758			1.8
Sportster motorcycle units	69,821		57,165		12,656			22.1
Harley-Davidson motorcycle units	317,289		291,147		26,142			9.0
Buell motorcycle units	9,857		9,974		(117		)	(1.2	)
Total motorcycle units	327,146		301,121		26,025			8.6	%
Net Revenue
Harley-Davidson motorcycles	$	3,928.2	$	3,621.5	$	306.7		8.5	%
Buell motorcycles	79.0		76.1		2.9			3.9
Total motorcycles	4,007.2		3,697.6		309.6			8.4
Parts & Accessories	781.6		712.8		68.8			9.7
General Merchandise	223.7		211.4		12.3			5.8
Other	2.7		2.5		0.2			8.0
Net revenue	$	5,015.2	$	4,624.3	$	390.9		8.5	%

*Custom motorcycle units, as used in this table, includes Softail, Dyna Glide, VRSC and other custom models.

The increase in net revenue for the Motorcycles segment during 2004 was driven by the $306.7 million or 8.5% increase in Harley-Davidson motorcycle net revenue.  Harley-Davidson motorcycle revenue was higher primarily as a result of the 9.0% increase in units shipped. Harley-Davidson motorcycle revenue also benefited from changes in foreign currency exchange rates, which resulted in $46.4 million of higher revenue during 2004. However, the benefit from exchange rates was offset by lower revenue due to changes in product mix and lower average wholesale prices, as discussed below.

During 2004, Harley-Davidson motorcycle revenue was impacted by changes in product mix related primarily to an increase in the percentage of shipments consisting of lower-priced Sportster motorcycles and a decrease in the percentage of shipments consisting of more expensive Custom motorcycles. Sportsters are an important part of the Company’s strategy to attract new customers to the Harley-Davidson family.  The Company introduced a completely redesigned family of Sportster models in September 2003, and demand for the redesigned models has continued to drive increases in Sportster shipments throughout 2004.  The percentage of shipments consisting of Sportster motorcycles was 22.0% in 2004, up from 19.6% in 2003.  As a result, the percentage of shipments consisting of Custom motorcycles has also been impacted during 2004.  The Company expects that the mix of Sportster motorcycles will continue to be in the range of 20% to 25% of total units shipped over the longer term.(1)

Harley-Davidson motorcycle revenue was also impacted by changes in average wholesale prices. Wholesale prices on the 2004 models reflected the elimination of 100^th Anniversary special edition features and, as a result, were slightly lower than the wholesale prices for the 100^th Anniversary models sold during 2003.  Wholesale prices on 2005 model year motorcycles were approximately 0.5% higher than model year 2004 prices.  However, the positive revenue impact from the 2005 model year price increase only partially offset the impact of the lower 2004 model year pricing.

22

During 2004, net revenue from Parts and Accessories (P&A) totaled $781.6 million, a 9.7% increase over 2003. P&A revenue growth in 2004 was driven by the increase in Harley-Davidson motorcycle shipments and also benefited from favorable changes in foreign currency exchange rates.  On a long-term basis, the Company expects the growth rate for P&A revenue to be slightly higher than the growth rate for Harley-Davidson motorcycle units.(1)

General Merchandise revenue during 2004 was $223.7 million, up 5.8% over 2003.  The Company expects that the long-term growth rate for General Merchandise revenue will be lower than the growth rate for Harley-Davidson motorcycle units. (1)

Harley-Davidson Retail Motorcycle Sales

The Company’s wholesale motorcycle unit shipments are retailed through an independent worldwide dealer network.  Retail sales of the Company’s Harley-Davidson motorcycles in 2004 were up 7.1% in the United States. Retail sales of Harley-Davidson motorcycles also grew in most of the Company’s major international markets.  However, overall retail sales in Europe during 2004 decreased 1.7% when compared to 2003.

In response to current market conditions and the strength of European currencies, the Company reduced its wholesale and suggested retail prices on select motorcycle families across Europe in early 2005.

Retail sales data for the heavyweight motorcycle industry in the U.S., Canada, Europe and Japan are provided in the following table (units in thousands):

Heavyweight (651+cc) Motorcycle Retail Registrations

	2004	2003	% Change
United States (a)
Harley-Davidson models only	244.5	228.4	7.1	%
Industry	494.0	461.2	7.1	%
Canada (b)
Harley-Davidson models only	11.3	9.9	14.3	%
Industry	36.7	34.3	7.1	%
Europe (c)
Harley-Davidson models only	25.9	26.3	(1.7	)%
Industry	336.2	323.1	4.1	%
Japan (d)
Harley-Davidson models only	11.9	11.8	1.0	%
Industry	44.0	44.3	(0.6	)%

(a)U.S. data provided by the Motorcycle Industry Council.

(b)Canada data provided by the Moped and Motorcycle Industry of Canada.

(c)Europe data provided by Giral S.A., includes retail sales in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and The United Kingdom.

(d)Japan data provided by Japan Automobile Importers Association.

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Gross Profit

Gross profit for 2004 totaled $1.90 billion, an increase of $234.0 million or 14.0% over 2003.  Gross margin was 37.9% in 2004, up from 36.0% for 2003.  During 2004, gross margin was positively impacted by lower production costs and changes in foreign currency exchange rates, which more than offset the impact of product mix changes discussed under “Net Revenue.”  In 2004, production costs were lower due to manufacturing efficiencies, but also benefited from a new and fully integrated Softail^® factory in York, Pennsylvania.  During the second half of 2003, the Company experienced higher costs and inefficiencies associated with the rampup of the new Softail factory.  Finally, during 2004, changes in foreign currency exchange rates resulted in $38.5 million of higher gross profit when compared to 2003.

Price increases in the metal markets during 2004 did not have a significant impact on the Company’s gross profit. The majority of the metal market price increases were managed by the Company’s suppliers.  During 2004, the Company incurred metal surcharges from some of its suppliers of approximately $9 million. . The majority of the surcharge in 2004 was incurred during the fourth quarter and if similar surcharges continue in 2005 the Company’s gross profit in 2005 could be impacted.(1)  The Company will continue to closely monitor metal market prices in 2005.

Financial Services

The following table includes the condensed statements of operations for the Financial Services segment (which consists of HDFS) for 2004 and 2003 (in millions):

							%
	2004		2003		Increase		Change
Interest income	$	102.2	$	87.1	$	15.1	17.4	%
Income from securitizations	115.1		114.4		0.7		0.6
Other income	88.0		78.0		10.0		12.8
Financial services income	305.3		279.5		25.8		9.2
Interest expense	22.7		17.6		5.1		28.9
Operating expenses	94.0		94.0		0.0		—
Financial services expense	116.7		111.6		5.1		4.5
Operating income from financial services	$	188.6	$	167.9	$	20.7	12.3	%

The increase in operating income from Financial Services in 2004 was driven by continued strong marketplace acceptance of HDFS’ finance and insurance products. During 2004, income from securitizations was up only slightly over 2003 as the increase in income on investment in retained securitization interests was mostly offset by lower gains on current year securitization transactions.

During 2004, income on investment in retained securitization interests was $56.8 million, an increase of $24.6 million over 2003, due primarily to better than anticipated performance on prior years’ securitization transactions.  During 2004, HDFS sold $1.9 billion of retail motorcycle loans through securitization transactions resulting in gains of $58.3 million.  During 2003, HDFS sold approximately $1.7 billion of retail motorcycle loans resulting in gains of $82.2 million.  The gain as a percentage of the amount of loans securitized was lower when compared with the prior year’s gain due to rising market interest rates during 2004 and the cost of an enhanced dealer participation program that was introduced during the second quarter of 2004.  Under HDFS’ dealer participation program, HDFS pays Harley-Davidson dealers cash incentives for originating retail motorcycle loans.

Over the long term, the Company expects the HDFS operating income growth rate to be slightly higher than the Company’s motorcycle unit growth rate.(1)

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Changes in HDFS’ allowance for credit losses during 2004 and 2003 were as follows (in millions):

	2004			2003
Balance, beginning of period	$	31.3		$	31.0
Provision for credit losses	3.1			4.1
Charge-offs, net of recoveries	(4.1		)	(3.8		)
Balance, end of period	$	30.3		$	31.3

HDFS’ periodic evaluation of the adequacy of the allowance for credit losses is generally based on HDFS’ past loan loss experience, known and inherent risks in the portfolio, and current economic conditions.  HDFS believes the allowance is adequate to cover the losses of principal and accrued interest in the existing portfolio.

Included in charge-offs, net of recoveries are $3.7 million and $1.3 million of recoveries in 2004 and 2003, respectively, received by HDFS from HDMC. These recoveries relate to guarantees provided by HDMC on wholesale loans to independent European Harley-Davidson dealers.

Operating Expenses

The following table includes operating expenses for the Motorcycles segment and Corporate for 2004 and 2003 (in millions):

							%
	2004		2003		Increase		Change
Motorcycles	$	710.0	$	668.7	$	41.3	6.2	%
Corporate	16.6		15.5		1.1		7.3
Total operating expenses	$	726.6	$	684.2	$	42.4	6.2	%

The increase in operating expenses in 2004 was driven by overall growth in the Motorcycles business combined with the Company’s ongoing investment in specific initiatives designed to support its growth objectives. Operating expenses, which include selling, administrative and engineering expenses, were 14.5% and 14.8% of net revenue for 2004 and 2003, respectively.

Other, net

Other net expense was $5.1 million and $6.3 million in 2004 and 2003, respectively.  Other, net expense consists primarily of charitable contributions in 2004 and 2003.

Investment Income, net

Net investment income (excluding Financial Services interest income) in 2004 was $23.1 million, even with $23.1 million in 2003.  In connection with the Company’s capacity expansion efforts, $3.9 million of interest cost was capitalized during 2003; no amounts were capitalized during 2004.

Consolidated Income Taxes

The Company’s effective income tax rate was 35.5% and 34.7.% during 2004 and 2003, respectively.  The Company’s effective income tax rate increased as pretax income grew faster than certain permanent tax differences.  The Company expects that the income tax rate will be 35.5% during 2005.(1)

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Results of Operations 2003 Compared to 2002

Overall

The Company’s net revenue for 2003 totaled $4.62 billion, a $533.3 million, or 13.0%, increase over 2002.  Net income for 2003 was $760.9 million compared to $580.2 million in 2002, an increase of 31.1%.  Diluted earnings per share for 2003 was $2.50 on 304.5 million weighted-average shares outstanding compared to $1.90 on 305.2 million weighted-average shares outstanding in 2002, an increase of 31.6% in earnings per share.

The Company paid dividends in 2003 of $.035 per share in March, $.04 per share in June and September and $.08 per share in December.  The aggregate annual dividend paid in 2003 was $.195 per share, representing a 44% increase over the aggregate annual dividend of $.135 per share in 2002.

Motorcycle Unit Shipments & Net Revenue

The following table includes wholesale motorcycle unit shipments and net revenue for the Motorcycles segment for 2003 and 2002 (dollars in millions):

					Increase			%
	2003		2002		(Decrease)			Change
Motorcycle Unit Shipments
Touring motorcycle units	82,577		70,713		11,864			16.8	%
Custom motorcycle units*	151,405		141,769		9,636			8.5
Sportster motorcycle units	57,165		51,171		5,994			11.7
Harley-Davidson motorcycle units	291,147		263,653		27,494			10.4
Buell motorcycle units	9,974		10,943		(969		)	(8.9	)
Total motorcycle units	301,121		274,596		26,525			9.7	%
Net Revenue
Harley-Davidson motorcycles	$	3,621.5	$	3,161.0	$	460.5		14.6	%
Buell motorcycles	76.1		66.9		9.2			13.6
Total motorcycles	3,697.6		3,227.9		469.7			14.6
Parts & Accessories	712.8		629.2		83.6			13.3
General Merchandise	211.4		231.5		(20.1		)	(8.7	)
Other	2.5		2.4		0.1			n.m.
Net revenue	$	4,624.3	$	4,091.0	$	533.3		13.0	%

*Custom motorcycle units, as used in this table, includes Softail, Dyna Glide, VRSC and other custom models.

The 13.0% increase in net revenue for the Motorcycles segment during 2003 was led by a $460.5 million, or 14.6%, increase in Harley-Davidson motorcycle net revenue.  Harley-Davidson motorcycle revenue was driven by the 10.4% increase in Harley-Davidson motorcycle unit shipments, but also benefited from wholesale price increases, a slightly favorable product mix and favorable foreign currency exchange rates during 2003.

Wholesale motorcycle shipments during the first eight months of 2003 consisted of the Company’s 100^th Anniversary models as the Company completed its 14 month 100^th Anniversary model year.  Wholesale price increases for the 100^th Anniversary models provided for higher average selling prices on units sold during the first half of 2003 when compared to the 2002 model year units sold in the first half of 2002.  However, as a result of the extended 100^th Anniversary model year, wholesale shipments of 100th Anniversary models, carrying the same pricing, occurred in the third quarters of both 2003 and 2002.  Revenue in the fourth quarter of 2003 was only slightly impacted by the lower wholesale prices associated with the 2004 model year motorcycles.

26

During 2003, the Company experienced product mix changes both within and between its motorcycle families. Changes in product mix within the Company’s motorcycle families generally resulted in higher revenue during 2003 when compared to 2002. The net result of mix changes between motorcycle families did not have a significant net impact on Harley-Davidson motorcycle revenue in 2003.

Foreign currency exchange rates had a favorable effect on Harley-Davidson motorcycle revenue of approximately $60 million in 2003, primarily as a result of stronger foreign currencies in Europe and Japan, when compared to 2002.

During 2003, net revenue from Parts and Accessories (P&A) totaled $712.8 million, a 13.3% increase over 2002. The 2003 increase in P&A revenue was driven primarily by higher motorcycle shipments.  P&A revenue was positively impacted in 2003 and 2002 by sales of 100^th Anniversary P&A products.  Total P&A revenue for 2003 included $32.1 million from sales of 100th Anniversary P&A products compared to $34.0 million in 2002. Excluding the impact of 100^th Anniversary revenue from both 2003 and 2002 the P&A revenue growth rate for 2003 is 14.4%.

General Merchandise revenue during 2003 was $211.4 million, down 8.7% from 2003. Sales from 100th Anniversary General Merchandise products accounted for $9.3 million of total General Merchandise revenue during 2003 compared to $52.2 million during 2002. Sales of 100^th Anniversary General Merchandise were more heavily concentrated in 2002 in order to prepare the Company’s independent dealers for the 14 month-long 100^th Anniversary celebration.  Excluding the revenue from the sale of 100^th Anniversary products from both 2003 and 2002, the General Merchandise revenue growth rate for 2003 is 12.7%.

Harley-Davidson Retail Motorcycle Sales

The Company’s wholesale motorcycle unit shipments are distributed through an independent worldwide dealer network.  During 2003, growth in retail sales of the Company’s Harley-Davidson motorcycles outpaced the heavyweight motorcycle (651+cc) industry in the U.S., Europe and Japan.  Retail sales of the Company’s Harley-Davidson motorcycles were up 8.8% in the United States for 2003. In Europe and Japan, retail sales of the Company’s Harley-Davidson motorcycles were up 11.8% and 8.3%, respectively, during 2003.  Retail sales information for the United States, Canada, Europe and Japan is as follows (units in thousands):

Heavyweight (651+ cc) Motorcycle Retail Registrations

	2003	2002	% Change
United States (a)
Harley-Davidson models only	228.4	209.9	8.8	%
Industry	461.2	442.3	4.3	%
Canada (b)
Harley-Davidson models only	9.9	10.2	(3.4	)%
Industry	34.3	32.6	2.5	%
Europe (c)
Harley-Davidson models only	26.3	23.5	11.8	%
Industry	323.1	331.8	(2.6	)%
Japan (d)
Harley- Davidson models only	11.8	10.9	8.3	%
Industry	44.3	47.9	(7.4	)%

(a)U.S. data provided by the Motorcycle Industry Council.

(b)Canada data provided by the Moped and Motorcycle Industry of Canada.

(c)Europe data, provided by Giral S.A., includes retail sales in Austria, Belgium, Denmark, Finland, France, Greece, Germany, Italy, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and United Kingdom.

(d)Japan data provided by industry sources.

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Gross Profit

Gross profit in 2003 of $1.7 billion was $247.7 million or 17.5% higher than gross profit in 2002.  The increase in gross profit is primarily related to the increase in net revenue.  The gross profit margin was 36.0% in 2003 compared to 34.7% in 2002. The increase in gross margin in 2003 was driven by wholesale price increases on 2003 models, favorable motorcycle product mix and foreign currency exchange rates.  Gross profit was higher in 2003 when compared to 2002 by approximately $38 million from foreign currency exchange rate changes to both revenue and costs.

Financial Services

The following table includes the condensed statements of operations for the Financial Services segment for 2003 and 2002 (in millions):

							%
	2003		2002		Increase		Change
Interest income	$	87.1	$	76.1	$	11.0	14.4	%
Income from securitizations	114.4		74.9		39.5		52.7
Other income	78.0		60.5		17.5		28.9
Financial services income	279.5		211.5		68.0		32.1
Interest expense	17.6		15.1		2.5		16.4
Operating expenses	94.0		92.2		1.8		2.0
Financial services expense	111.6		107.3		4.3		4.0
Operating income from financial services	$	167.9	$	104.2	$	63.7	61.1	%

The increase in Financial Services operating income in 2003 was driven by continued strong marketplace acceptance of HDFS’ finance and insurance products and higher income from securitizations.  The increase in income from securitizations was driven by increases in income on investment in retained securitization interests and higher gains on current year securitization transactions.

During 2003, income on investment in retained securitization interests was $32.2 million, an increase of $13.4 million over 2002, due primarily to better than anticipated performance on prior years’ securtization transactions. During 2003, HDFS sold $1.7 billion of retail motorcycle loans through securitization transactions, resulting in gains of $82.2 million.  During 2002, HDFS sold approximately $1.3 billion of retail motorcycle loans, resulting in gains of $56.1 million.  The net gain as a percentage of the amount of loans securitized increased from 4.39% in 2002 to 4.70% in 2003 as HDFS continued to benefit from a favorable interest rate environment.

Changes in HDFS’ allowance for credit losses during 2003 and 2002 were as follows (in millions):

	2003			2002
Balance, beginning of period	$	31.0		$	28.7
Provision for credit losses	4.1			6.2
Charge-offs, net of recoveries	(3.8		)	(3.9		)
Balance, end of period	$	31.3		$	31.0

HDFS’ periodic evaluation of the adequacy of the allowance for credit losses is generally based on HDFS’ past loan loss experience, known and inherent risks in the portfolio, and current economic conditions.

In 2003, charge-offs, net of recoveries included $1.3 million of recoveries received by HDFS from HDMC.  These recoveries relate to guarantees provided by HDMC on wholesale loans to independent European Harley-Davidson dealers.

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Operating Expenses

The following table includes operating expenses for the Motorcycles segment and Corporate for 2003 and 2002 (in millions):

							%
	2003		2002		Increase		Change
Motorcycles	$	668.7	$	626.7	$	42.0	6.7	%
Corporate	15.5		12.6		2.9		22.6
Total operating expenses	$	684.2	$	639.3	$	44.9	7.0	%

Operating expenses, which include selling, administrative and engineering expenses, increased in connection with the Company’s ongoing investment in initiatives designed to support its current and future growth objectives.  However, the increase in 2003 was partially offset by lower net expenditures related to the Company’s 100^th Anniversary celebration as compared to 2002.  The Company began its 14 month-long 100^th Anniversary celebration during the third quarter of 2002 and net expenses associated with the celebration were most heavily concentrated in 2002.  Comparatively, costs incurred during 2003 for the 100^th Anniversary celebration were mostly offset by event proceeds and sponsorships.  Operating expenses as a percent of net revenue were 14.8% and 15.6% for 2003 and 2002, respectively.

Other, net

Other net expense was $6.3 million and $13.4 million in 2003 and 2002, respectively.  The most significant component of other, net expense in 2003 was $4.5 million in charitable contributions.  During 2002, the most significant components of other net expense were $7.1 million in losses on the disposal of fixed assets, $5.5 million in charitable contributions and $4.8 million in costs associated with environmental matters.

Investment Income, net

Net investment income (excluding Financial Services interest income) in 2003 was $23.1 million compared to $16.5 million in 2002. The increase in net investment income resulted from higher average balances of cash and marketable securities during 2003 when compared to 2002.  In connection with the Company’s capacity expansion efforts, $3.9 million of interest cost was capitalized during 2003 compared to $2.7 million during 2002.

Consolidated Income Taxes

The Company’s effective income tax rate was 34.7% and 34.5% during 2003 and 2002, respectively.  The Company’s effective income tax rate increased during 2003 as pre tax income grew faster than certain tax deductions.  The Company’s effective income tax rate increased as pre tax income grew faster than certain permanent tax differences.

29

Other Matters

Accounting Changes

As discussed in Note 1 to the Consolidated Financial Statements, the Company began expensing the cost of stock options on January 1, 2005, when it adopted Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004) “Share-Based Payment.”  The Company expects that total stock compensation expense, including all types of share based payments, will be similar to the 2004 pro-forma stock compensation expense of $22.5 million, or $13.9 million, after taxes, included in Note 1 to the Consolidated Financial Statements.

Critical Accounting Policies

The Company’s financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. Management believes that the following are some of the more critical judgment areas in the application of accounting policies that currently affect the Company’s financial condition and results of operations.

Finance Receivable Securitizations - The Company sells retail motorcycle loans through securitization transactions utilizing qualifying special purpose entities (QSPEs). Upon sale of retail loans in a securitization transaction, HDFS receives cash and retains an interest in excess cash flows, servicing rights and cash reserve account deposits, all of which are collectively referred to as retained interests in the securitized receivables. Retained interests are carried at fair value and periodically reviewed for impairment. Market value quotes are generally not available for retained interests; therefore HDFS estimates fair value based on the present value of future expected cash flows using management’s best estimates of the key assumptions for credit losses, prepayment speeds and discount rates. The impact of changes to key assumptions is shown in Note 4 to the Consolidated Financial Statements.

Gains on current year securitizations from the sale of retail loans are recorded as a component of financial services income and are based in part on certain assumptions including expected credit losses, prepayment speed, and discount rates. Gains on sales of retail loans also depend on the original carrying amount of the retail loans, which is allocated between the assets sold and the retained interests based on their relative fair value at the date of transfer.

Finance Receivable Credit Losses - The allowance for uncollectible accounts is maintained at a level management believes is adequate to cover the losses of principal and accrued interest in the existing finance receivables portfolio. Management’s periodic evaluation of the adequacy of the allowance is generally based on HDFS’ past loan loss experience, known and inherent risks in the portfolio, current economic conditions, specific borrower’s ability to repay and the estimated value of any underlying collateral.

Pensions and Other Postretirement Benefits - - Retirement Plan (Pension, SERPA and Postretirement health care) obligations and costs are developed from actuarial valuations.  The valuation of projected benefit obligations and net periodic benefit costs relies on key assumptions including discount rates, long-term expected return on plan assets, future compensation and medical trend rates.  The Company evaluates and updates all of its assumptions annually in conjunction with its September 30 actuarial measurement date.  As of its most recent measurement date the Company lowered its discount rate assumption from 6.50% to 6.25%, while the assumption for medical trend rates was not changed from prior year.  The lower discount rate resulted in an immediate increase to the projected benefit obligation and will be amortized into net periodic benefits costs over future periods, resulting in an increase in future service and interest costs.

The discount rate and medical trend rate assumptions are impacted by short-term changes in external economic factors and as result, can be volatile. The Company’s 2005 Retirement Plan costs have already been determined in connection with the September 30, 2004 measurement process.  However, a change in either of these two assumptions could have an impact on the valuation of costs as of the Company’s next measurement date, September 30, 2005.  The following information is provided to illustrate the sensitivity of these obligations and costs to changes in these major assumptions (in thousands).

30

	Amounts based on Current Assumptions		Impact of a 1% decrease in the Discount Rate		Impact of a 1% increase in the Medical Trend Rate
2004 Net periodic benefit costs
Pension and SERPA	$	40,748	$	17,554	n/a
Postretirement healthcare	$	31,027	$	2,766	$	1,518
2004 Projected benefit obligations
Pension and SERPA	$	816,998	$	133,805	n/a
Postretirement healthcare	$	241,345	$	27,248	$	11,418

This information is provided to illustrate the sensitivity of these amounts to certain assumptions and not as a means to predict future amounts.  The calculation of Retirement Plan obligations and costs is based on many factors in addition to those discussed here.  This information should be considered in combination with the information provided in Note 7 to the Consolidated Financial Statements.

Contractual Obligations

A summary of the Company’s expected payments for significant contractual obligations as of December 31, 2004 is as follows (in thousands):

	2005		2006- 2007		2008- 2009		Thereafter		Total
Finance Debt	$	495,441	$	405,015	$	394,985	$	—	$	1,295,441
Operating Leases	5,971		5,524		4,373		7,669		23,537
	$	501,412	$	410,539	$	399,358	$	7,669	$	1,318,978

As of December 31, 2004, the Company had no material purchase obligations other than those created in the ordinary course of business related to inventory and property, plant and equipment which generally have terms of less than 90 days.  The Company also has long-term obligations related to its pension and postretirement plans which are discussed in detail in Note 7 to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements

As part of its securitization program, HDFS transfers retail motorcycle loans to a special purpose bankruptcy-remote wholly-owned subsidiary.  The subsidiary sells the retail loans to a securitization trust in exchange for the proceeds from asset-backed securities issued by the securitization trust.  The asset-backed securities, usually notes with various maturities and interest rates, are secured by future collections of the purchased retail installment loans.  Activities of the securitization trust are limited to acquiring retail loans, issuing asset-backed securities and making payments on securities to investors.  Due to the nature of the assets held by the securitization trust and the limited nature of its activities, the securitization trusts are considered QSPEs as defined by SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.”  In accordance with SFAS No. 140, assets and liabilities of the QSPEs are not consolidated in the financial statements of the Company.

HDFS does not guarantee securities issued by the securitization trusts or projected cash flows from the related loans purchased from HDFS.  Recourse against HDFS related to each securitization transaction is limited to the respective investment in retained securitization interests, excluding servicing rights. Total investment in retained securitization interests at December 31, 2004 is $282.2 million. The securitization trusts have a limited life and generally terminate upon final distribution of amounts owed to the investors in the asset-backed securities.  See Note 4 to the Consolidated Financial Statements for further discussion of HDFS’ securitization program.

31

Commitments and Contingencies

The Company is subject to lawsuits and other claims related to environmental, product and other matters. In determining required reserves related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss.  The required reserves are monitored on an ongoing basis and are updated based on new developments or new information in each matter.

In January 2001, the Company, on its own initiative, notified each owner of 1999 and early-2000 model year Harley-Davidson^® motorcycles equipped with Twin Cam 88 and Twin Cam 88B engines that the Company was extending the warranty for a rear cam bearing to 5 years or 50,000 miles. Subsequently, on June 28, 2001, a putative nationwide class action was filed against the Company in state court in Milwaukee County, Wisconsin, which was amended by a complaint filed September 28, 2001. The complaint alleged that this cam bearing is defective and asserted various legal theories. This complaint and a second lawsuit filed on April 12, 2002 in state court in Milwaukee County, Wisconsin were dismissed as reported in more detail in Note 6 to the Consolidated Financial Statements included in this report (Note 6).  On April 12, 2004, the same attorneys filed a third action in state court in Milwaukee County on behalf of the same plaintiffs from the action dismissed by the Wisconsin Supreme Court.  This third action was dismissed by the court on July 26, 2004.  In addition, the plaintiffs in the original case moved to reopen that matter and amend the complaint to add new causes of action, which was denied on August 23, 2004.  A notice of appeal to the Wisconsin Court of Appeals from the latter dismissal was filed by the plaintiffs and the appeal is currently pending.  The Company intends to continue to vigorously defend this matter.  The Company believes that the 5-year/50,000-mile warranty extension it announced in January 2001 adequately addresses the condition for affected owners.

The Company is involved with government agencies and groups of potentially responsible parties in various environmental matters, including a matter involving the cleanup of soil and groundwater contamination at its York, Pennsylvania, facility. The York facility was formerly used by the U.S. Navy and AMF prior to the purchase of the York facility by the Company from AMF in 1981. Although the Company is not certain as to the full extent of the environmental contamination at the York facility, it has been working with the Pennsylvania Department of Environmental Protection since 1986 in undertaking environmental investigation and remediation activities, including an ongoing site-wide remedial investigation/feasibility study (RI/FS).  Note 6 includes a discussion of the history of this matter in more detail.

Although the RI/FS is still under way and substantial uncertainty exists concerning the nature and scope of the additional environmental investigation and remediation that will ultimately be required at the York facility, the Company estimates that its share of the future costs associated with environmental investigation and remediation activities at the York facility (Response Costs) will be approximately $6.7 million. The Company has established reserves for this amount, which are included in Accrued Expenses and Other Liabilities in the Consolidated Balance Sheets.

The estimate of the Company’s future Response Costs that will be incurred at the York facility is based on reports of independent environmental consultants retained by the Company, the actual costs incurred to date, and the estimated costs to complete the necessary investigation and remediation activities.  Response Costs related to the remediation of soil are expected to be incurred over a period of several years ending in 2010.  Response Costs related to ground water remediation may continue for some time beyond 2010.  However, these Response Costs are expected to be much lower than those related to the remediation of soil.

Additionally, the Company is involved in product liability suits related to the operation of its business. The Company accrues for claim exposures which are probable of occurrence and can be reasonably estimated.  The Company also maintains insurance coverage for product liability exposures.  The Company believes that its accruals and insurance coverage are adequate and that product liability will not have a material adverse effect on the Company’s consolidated financial statements.

32

Liquidity and Capital Resources as of December 31, 2004

Operating Activities

The Company’s main source of liquidity is cash from operating activities which consists of net income adjusted for noncash items and other operating cash flows.

The Company has concluded that certain prior year balances in the Consolidated Statements of Cash Flows should be reclassified to appropriately present net cash provided by operating activities and net cash used in investing activities.

The Company’s previous policy was to classify all the cash flow effects of providing wholesale loans to its independent motorcycle dealers by its Financial Services segment as an investing activity in its Consolidated Statements of Cash Flows.  This policy, when applied to the financing of inventory sales, had the effect of presenting an investing cash outflow and an operating cash inflow even though there was no cash inflow or outflow on a consolidated basis.  The Company has changed its policy to eliminate this intersegment activity from its Consolidated Statements of Cash Flows and, as a result of this change, all cash flow effects related to wholesale loans are reflected in the operating activities section of the Consolidated Statement of Cash Flows for 2004.  All prior years’ amounts have been reclassified to conform to this presentation.

In addition, the Company previously classified collections of retained securitization interests as operating cash flows.  Since these retained securitization interests have many of the characteristics of, and are accounted for like, investments available for sale, the Company has concluded that the cash inflow from these collections should be classified as investing cash flows and has reflected this reclassification in its 2004 Consolidated Statement of Cash Flows.  All prior years’ amounts have been reclassified to conform to this presentation.

The effect of the reclassification of both of these changes on prior year net cash provided by operating activities and net cash used in investing activities is summarized in Note 1 to the Consolidated Financial Statements.

The Company generated $969.7 million of cash from operating activities during 2004 compared to $662.7 million in 2003.  The increase in cash from operations in 2004 was driven by higher net income.  In addition, cash from operations in 2003 included a $192 million cash outflow for pension plan contributions; no amounts were contributed to the pension plans in 2004.  As discussed in Note 7 to the Consolidated Financial Statements the Company expects to begin pre-funding its postretirement healthcare plans in 2005 and is currently planning to contribute approximately $100 million to the plans during the first half of 2005.(1)  The Company is also currently planning to contribute a minimum of $20 million to its pension plans during 2005. (1)

Net changes in current assets and liabilities included in net cash provided by operating activities during 2004 and 2003 consisted of the following (in millions):

	2004			2003
Accounts receivable, net	$	(8.9	)	$	(3.7	)
Inventories	(19.2		)	10.4
Finance receivables – accrued interest and other	(27.4		)	(54.8		)
Accounts payable/Accrued expenses	39.5			15.6
Other	(8.9		)	13.9
	$	(24.9	)	$	(18.6	)

A net increase in accounts receivable during 2004 resulted in an $8.9 million negative adjustment to operating cash flow.  The change in accounts receivable relates primarily to an increase in the Company’s international accounts receivable balances in Europe and Japan.

The increase in Company inventory resulted in a negative adjustment of $19.2 million to operating cash flow during 2004.  Net increases in inventory were due primarily to higher finished goods inventory, partially offset by lower raw materials and work-in-process inventory.  Finished goods increases were driven by an increase in motorcycle units on hand.

33

During 2004, the increase in finance receivables - accrued interest and other resulted in a $27.4 million reduction to operating cash flow.  The change in this balance was due primarily to the increase in total finance receivables.

Accounts payable and accrued expenses increased $39.5 million during 2004, resulting in a positive adjustment to operating cash flow.  The net increase was driven by higher accounts payable in connection with higher motorcycle production volumes.

Investing Activities

The Company’s investing activities consist primarily of capital expenditures, finance receivables activity and net changes in marketable securities.  Net cash used in investing activities was $707.8 million and $606.4 million during 2004 and 2003, respectively.

Capital expenditures were $213.6 million and $227.2 million during 2004 and 2003, respectively.  The Company estimates that total capital expenditures required in 2005 will be in the range of $225 to $275 million.(1)  The Company anticipates it will have the ability to fund all capital expenditures in 2005 with internally generated funds.(1)

Investing activity related to finance receivables resulted in a cash outflow of $272.1 million during 2004 compared to a cash outflow of $113.4 million during 2003. The change in net investing cash flow related to finance receivables was due primarily to the fact that HDFS did not complete a securitization transaction during the fourth quarter of 2004. During the fourth quarter of 2003 HDFS completed a $300 million securitization transaction.  The Company plans to complete a $730 million securitization transaction in the first quarter of 2005. This compares to a $625 million transaction completed in the first quarter of 2004.

The Company increased its investment in marketable securities by $349.0 million in 2004 and $393.5 million in 2003.

Financing Activities

The Company’s financing activities consist primarily of stock transactions, dividend payments and finance debt activity.  Net cash (used in)/provided by financing activities during 2004 and 2003 was $(316.1) million and $80.6 million, respectively.

During 2004 the Company repurchased 10.6 million shares of its common stock at a total cost of $564.1 million.  The Company repurchased 7.8 million shares under a general authorization from the Company’s Board of Directors.  The remaining 2.8 million shares were repurchased under an authorization from the Company’s Board of Directors that is designed to provide the Company with continuing authority to repurchase shares to offset dilution caused by the exercise of stock options.

During 2004, the Company’s Board of Directors declared four cash dividends totaling $.405 per share or $119.2 million, compared to a total of $.195 per share or $59.0 million, during 2003.

In addition to operating cash flow and asset-backed securitizations, HDFS is financed by the issuance of commercial paper, borrowings under the revolving credit facility, medium-term notes, senior subordinated debt and borrowings from the Company.  HDFS’ outstanding debt consisted of the following as of December 31 (in millions):

	2004		2003
Commercial paper	$	702.1	$	406.9
Borrowings under credit facilities	168.3		158.5
Medium-term notes	395.0		398.9
Senior subordinated debt	30.0		30.0
Total finance debt	$	1,295.4	$	994.3

34

Credit Facilities -During September 2004, HDFS entered into a $1.1 billion revolving credit facility (Global Credit Facility) due September 2009.  This facility replaced $750 million in domestic credit facilities and a $200 million European credit facility.  The primary use of the Global Credit Facility is to provide liquidity to the unsecured commercial paper program and to fund domestic and foreign operations.  Subject to certain limitations, HDFS has the option to borrow in various currencies.  Interest is based on London interbank offered rates (LIBOR), European interbank offered rates or other short-term indices, depending on the type of advance.  The Global Credit Facility is a committed facility and HDFS pays a fee for its availability.

Commercial Paper - Subject to limitations, HDFS may issue up to $1.1 billion of short-term commercial paper with maturities up to 270 days. Outstanding commercial paper may not exceed the unused portion of the Global Credit Facility. As a result, the combined total of commercial paper and borrowings under the Global Credit Facility was limited to $1.1 billion as of December 31, 2004.

Medium-Term Notes - During November 2003, HDFS issued $400 million of 3.63% medium-term notes (Notes) due in December 2008. The Notes provide for semi-annual interest payments and principal due at maturity. At December 31, 2004, the Notes included a fair value adjustment reducing the balance by $5.0 million due to interest rate swap agreements designated as fair value hedges. The effect of the interest rate swap agreements is to convert the interest rate on the Notes from a fixed to a floating rate, which is based on 3-month LIBOR.

Senior Subordinated Debt - HDFS has $30 million of 10 year senior subordinated notes, due in 2007. Intercompany Borrowing - HDFS has a revolving credit line with the Company whereby HDFS may borrow up to $210 million from the Company at a market interest rate. As of December 31, 2004 and December 31, 2003, HDFS had no outstanding borrowings owed to the Company under this agreement.

The Company has a support agreement with HDFS whereby, if required, the Company agrees to provide HDFS with financial support in order to maintain certain financial covenants. Support may be provided at the Company’s option as capital contributions or loans. Accordingly, certain debt covenants may restrict the Company’s ability to withdraw funds from HDFS outside the normal course of business.  No amount has ever been provided to HDFS under the support agreement.

In connection with its debt agreements, HDFS has various operating and financial covenants and remains in compliance at December 31, 2004.

The Company expects that future activities of HDFS will be financed from funds internally generated by HDFS, the sale of loans through securitization programs, issuance of commercial paper and medium term notes, borrowings under revolving credit facilities, advances or loans from the Company and subordinated debt. (1)

Risk Factors

The Company’s ability to meet the targets and expectations noted in this Form 10-K depends upon, among other factors, the Company’s ability to (1) continue to realize production efficiencies at its production facilities through the implementation of innovative manufacturing techniques and other means, (2) successfully implement production capacity increases in its facilities, (3) successfully introduce new products and services, (4) avoid unexpected supply chain issues, (5) sell all of the Harley-Davidson motorcycles it plans to produce, (6) continue to develop the capacity of its distributor and dealer network, (7) avoid unexpected changes in the regulatory environment for its products, (8) successfully adjust to foreign currency exchange rate fluctuations, interest rate fluctuations, and commodity prices, (9) adjust to worldwide economic and political conditions, and (10) successfully manage changes in the credit quality of HDFS’s loan portfolio.  In addition, the Company could experience delays in the operation of manufacturing facilities as a result of work stoppages, difficulty with suppliers, natural causes, terrorism or other factors. These risks, potential delays and uncertainties regarding the costs could also adversely impact the Company’s capital expenditure estimates (see “Liquidity and Capital Resources” section).

35

Item 7a.  Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from changes in foreign exchange rates and interest rates.  To reduce such risks, the Company selectively uses derivative financial instruments.  All hedging transactions are authorized and executed pursuant to regularly reviewed policies and procedures, which prohibit the use of financial instruments for trading purposes.  Sensitivity analysis is used to manage and monitor foreign exchange and interest rate risk.

A discussion of the Company’s accounting policies for derivative financial instruments is included in the Summary of Significant Accounting Policies in Note 1 to the Consolidated Financial Statements and further disclosure relating to the fair value of derivative financial instruments is included in Note 11 to the Consolidated Financial Statements.

The Company sells its products internationally and in most markets those sales are made in the foreign country’s local currency.  As a result, the Company’s earnings can be affected by fluctuations in the value of the U.S. dollar relative to foreign currency.  The Company utilizes foreign currency contracts to mitigate the effect of these fluctuations on earnings. The foreign currency contracts are entered into with banks and allow the Company to exchange a specified amount of foreign currency for U.S. dollars at a future date, based on a fixed exchange rate.  At December 31, 2004 these contracts represented a combined U.S. dollar equivalent of approximately $284.7 million.  The Company estimates that a uniform 10% weakening in the value of the dollar relative to the currency underlying these contracts would result in a decrease in the fair value of the contracts of approximately $31.9 million.

The Company’s exposure to the Japanese yen is substantially offset by the existence of a natural hedge, which is sustained through offsetting yen cash inflows from sales with yen cash outflows for motorcycle component purchases and other operating expenses.

HDFS’ earnings are affected by changes in interest rates.  HDFS utilizes interest rate swaps to reduce the impact of fluctuations in interest rates on its securitization transactions and debt.  As of December 31, 2004, HDFS had interest rate swaps outstanding with a notional value of $923.0 million.  HDFS estimates that a 10% increase in interest rates would result in a $1.5 million decrease in the fair value of the agreements.

(1) Note regarding forward-looking statements

The Company intends that certain matters discussed are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995.  These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the Company “believes,” “anticipates,” “expects,” “plans,” “targets” or “estimates” or words of similar meaning.  Similarly, statements that describe the Company’s future plans, objectives, outlooks, targets or goals are also forward-looking statements.  Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report.  Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report.  Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.  The forward-looking statements included herein are only made as of the date of this report, and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

36

Item 8.  Consolidated Financial Statements and Supplementary Data

Supplementary data

Quarterly financial data (unaudited)

37

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2004. Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Jeffrey L. Bleustein	James L. Ziemer
Chairman and Chief Executive Officer	Vice President and Chief Financial Officer

MANAGEMENT CERTIFICATIONS

The Company has filed as exhibits to its Annual Report on Form 10-K for the fiscal year ended 2004, filed with the Securities and Exchange Commission, the certifications of the Chief Executive Officer and the Chief Financial Officer of the Company required by Section 302 of the Sarbanes-Oxley Act.

The Company has submitted to the New York Stock Exchange the Annual CEO Certification required by Section 303A.12(a) of the New York Stock Exchange Listed Company Manual.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board of Directors reviews the Company’s financial reporting process, the audit process and the process for monitoring compliance with the laws and regulations.  All of the Audit Committee members are independent in accordance with the Audit Committee requirements of the New York Stock Exchange, Inc.

The Audit Committee of the Board of Directors has reviewed and discussed with Management its assessment of the effectiveness of the Company’s internal control system over financial reporting as of December 31, 2004. Management has concluded that the internal control system was effective.  This assessment was also audited by Ernst & Young LLP, the Company’s independent auditors for the 2004 fiscal year.  The audited financial statements of the Company for the 2004 fiscal year were also reviewed and discussed with Management as well as with representatives of Ernst & Young LLP.  The Audit Committee has also discussed with Ernst & Young LLP, the matters required to be discussed by Statement of Auditing Standards No. 61, other professional standards and regulatory requirements currently in effect.  The Audit Committee has received the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1, as currently in effect, and has discussed with representatives of Ernst & Young LLP the independence of Ernst & Young LLP.  Based on the review and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited financial statements for the 2004 fiscal year be included in the Company’s Annual Report.

Audit Committee of the Board of Directors

Richard I. Beattie	Judson C. Green
George L. Miles, Jr.	James A. Norling, Chairman

38

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL
CONTROL OVER FINANCIAL REPORTING

To the Board of Directors and Shareholders of Harley-Davidson, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Controls over Financial Reporting, that Harley-Davidson, Inc. maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Harley-Davidson, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Harley-Davidson, Inc. maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria.  Also, in our opinion, Harley-Davidson, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Harley-Davidson, Inc. as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2004 of Harley-Davidson, Inc. and our report dated February 10, 2005 expressed an unqualified opinion thereon.

Ernst & Young LLP

Milwaukee, Wisconsin

February 10, 2005

39

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Harley-Davidson, Inc.:

We have audited the accompanying consolidated balance sheets of Harley-Davidson, Inc. as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2004.  Our audits also included the financial statement schedule listed in the index at item 15(a).  These financial statements and schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Harley-Davidson, Inc. at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.  Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Harley-Davidson, Inc.’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 10, 2005 expressed an unqualified opinion thereon.

Ernst & Young LLP

Milwaukee, Wisconsin

February 10, 2005

40

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2004, 2003 and 2002

(In thousands, except per share amounts)

	2004			2003			2002
Net revenue	$	5,015,190		$	4,624,274		$	4,090,970
Cost of goods sold	3,115,655			2,958,708			2,673,129
Gross profit	1,899,535			1,665,566			1,417,841
Financial services income	305,262			279,459			211,500
Financial services expense	116,662			111,586			107,273
Operating income from financial services	188,600			167,873			104,227
Selling, administrative and engineering expense	726,644			684,175			639,366
Income from operations	1,361,491			1,149,264			882,702
Investment income, net	23,101			23,088			16,541
Other, net	(5,106		)	(6,317		)	(13,416		)
Income before provision for income taxes	1,379,486			1,166,035			885,827
Provision for income taxes	489,720			405,107			305,610
Net income	$	889,766		$	760,928		$	580,217
Basic earnings per common share	$	3.02		$	2.52		$	1.92
Diluted earnings per common share	$	3.00		$	2.50		$	1.90
Cash dividends per common share	$	.405		$	.195		$	.135

The accompanying notes are an integral part of the consolidated financial statements.

41

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2004 and 2003

(In thousands, except share amounts)

	2004			2003
ASSETS
Current assets:
Cash and cash equivalents	$	275,159		$	329,329
Marketable securities	1,336,909			993,331
Accounts receivable, net	121,333			112,406
Current portion of finance receivables, net	1,207,124			1,001,990
Inventories	226,893			207,726
Deferred income taxes	60,517			51,156
Prepaid expenses and other current assets	38,337			33,189
Total current assets	3,266,272			2,729,127
Finance receivables, net	905,176			735,859
Property, plant and equipment, net	1,024,665			1,046,310
Goodwill	59,456			53,678
Other assets	227,724			358,114
	$	5,483,293		$	4,923,088
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	244,202		$	223,902
Accrued expenses and other liabilities	433,053			407,566
Current portion of finance debt	495,441			324,305
Total current liabilities	1,172,696			955,773
Finance debt	800,000			670,000
Other long-term liabilities	90,846			86,337
Postretirement healthcare benefits	149,848			127,444
Deferred income taxes	51,432			125,842
Commitments and contingencies (Note 6)
Shareholders’ equity:
Series A Junior participating preferred stock, none issued	—			—
Common stock, 329,908,165 and 326,489,291 shares issued in 2004 and 2003, respectively	3,300			3,266
Additional paid-in capital	533,068			419,455
Retained earnings	3,844,571			3,074,037
Accumulated other comprehensive (loss) income	(12,096		)	47,174
	4,368,843			3,543,932
Less:
Treasury stock (35,597,360 and 24,978,798 shares in 2004 and 2003, respectively), at cost	(1,150,372		)	(586,240		)
Total shareholders’ equity	3,218,471			2,957,692
	$	5,483,293		$	4,923,088

The accompanying notes are an integral part of the consolidated financial statements.

42

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2004, 2003 and 2002

(In thousands)

	2004			2003			2002
Cash flows from operating activities:
Net income	$	889,766		$	760,928		$	580,217
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	214,112			196,918			175,778
Provision for long-term employee benefits	62,806			76,422			57,124
Provision for finance credit losses	3,070			4,076			6,167
Gain on current year securitizations	(58,302		)	(82,221		)	(56,139		)
Net change in wholesale finance receivables	(154,124		)	(154,788		)	(140,107		)
Contributions to pension plans	—			(192,000		)	(153,636		)
Tax benefit from the exercise of stock options	51,476			13,805			14,452
Deferred income taxes	(41,513		)	42,105			38,560
Other	27,301			16,051			7,057
Net changes in current assets and current liabilities	(24,866		)	(18,644		)	16,089
Total adjustments	79,960			(98,276		)	(34,655		)
Net cash provided by operating activities	969,726			662,652			545,562
Cash flows from investing activities:
Capital expenditures	(213,550		)	(227,230		)	(323,866		)
Finance receivables acquired or originated	(2,394,644		)	(2,090,201		)	(1,731,169		)
Finance receivables collected	274,670			252,705			230,153
Proceeds from securitizations	1,847,895			1,724,060			1,246,262
Collection of retained securitization interests	125,732			118,113			89,970
Purchase of marketable securities	(1,091,326		)	(1,538,548		)	(1,508,285		)
Sales and redemptions of marketable securities	742,284			1,145,000			1,253,719
Purchase of remaining interest in joint venture	(9,500		)	—			—
Other, net	10,689			9,690			22,813
Net cash used in investing activities	(707,750		)	(606,411		)	(720,403		)
Cash flows from financing activities:
Proceeds from issuance of medium term notes	—			399,953			—
Net increase (decrease) finance credit facilities and commercial paper	305,047			(175,835		)	165,528
Dividends paid	(119,232		)	(58,986		)	(41,457		)
Purchase of common stock for treasury	(564,132		)	(103,880		)	(56,814		)
Issuance of common stock under employee stock option plans	62,171			19,378			12,679
Net cash (used) provided by financing activities	(316,146		)	80,630			79,936
Net increase (decrease) in cash and cash equivalents	(54,170		)	136,871			(94,905		)
Cash and cash equivalents:
At beginning of year	329,329			192,458			287,363
At end of year	$	275,159		$	329,329		$	192,458

The accompanying notes are an integral part of the consolidated financial statements.

43

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Years ended December 31, 2004, 2003 and 2002

(In thousands, except share amounts)

	Common Stock			Additional
	Issued			paid-in		Retained			Other comprehensive			Treasury			Unearned
	Shares	Balance		capital		Earnings			income(loss)			Balance			compensation			Total
Balance December 31, 2001	324,340,432	$	3,242	$	359,165	$	1,833,335		$	(13,728	)	$	(425,546	)	$	(185	)	$	1,756,283
Comprehensive income:
Net income	—	—		—		580,217			—			—			—			580,217
Other comprehensive income (loss):
Foreign currency translation adjustment	—	—		—		—			14,545			—			—			14,545
Minimum pension liability adjustment, net of tax benefit of $29,896	—	—		—		—			(48,985		)	—			—			(48,985		)
Change in net unrealized gains (losses):
Investment in retained securitizationinterests, net of taxes of $(6,113)	—	—		—		—			11,108			—			—			11,108
Derivative financial instruments, net of tax benefit of $5,929	—	—		—		—			(9,824		)	—			—			(9,824		)
Marketable securities, net of taxes of $(377)	—	—		—		—			618			—			—			618
Comprehensive income																		547,679
Dividends	—	—		—		(41,457		)	—			—			—			(41,457		)
Repurchase of common stock	—	—		—		—			—			(56,814		)	—			(56,814		)
Amortization of unearned compensation	—	—		—		—			—			—			93			93
Exercise of stock options	957,972	12		12,667		—			—			—			—			12,679
Tax benefit of stock options	—	—		14,452		—			—			—			—			14,452
Balance December 31, 2002	325,298,404	$	3,254	$	386,284	$	2,372,095		$	(46,266	)	$	(482,360	)	$	(92	)	$	2,232,915
Comprehensive income:
Net income	—	—		—		760,928			—			—			—			760,928
Other comprehensive income (loss):
Foreign currency translation adjustment	—	—		—		—			19,609			—			—			19,609
Minimum pension liability adjustment, net of taxes of $(45,383)	—	—		—		—			74,361			—			—			74,361
Change in net unrealized gains (losses):
Investment in retained securitizationinterests, net of taxes of $(3,266)	—	—		—		—			6,220			—			—			6,220
Derivative financial instruments,net of tax benefit of $3,057	—	—		—		—			(4,596		)	—			—			(4,596		)
Marketable securities, net of tax benefit of $1,333	—	—		—		—			(2,154		)	—			—			(2,154		)
Comprehensive income																		854,368
Dividends	—	—		—		(58,986		)	—			—			—			(58,986		)
Repurchase of common stock	—	—		—		—			—			(103,880		)	—			(103,880		)
Amortization of unearned compensation	—	—		—		—			—			—			92			92
Exercise of stock options	1,190,887	12		19,366		—			—			—			—			19,378
Tax benefit of stock options	—	—		13,805		—			—			—			—			13,805
Balance December 31, 2003	326,489,291	$	3,266	$	419,455	$	3,074,037		$	47,174		$	(586,240	)	$	—		$	2,957,692
Comprehensive income:
Net income	—	—		—		889,766			—			—			—			889,766
Other comprehensive income (loss):
Foreign currency translation adjustment	—	—		—		—			9,399			—			—			9,399
Minimum pension liability adjustment, net of tax benefit of $38,230	—	—		—		—			(62,110		)	—			—			(62,110		)
Change in net unrealized gains (losses):
Investment in retained securitizationinterests, net of tax benefit of $367	—	—		—		—			(691		)	—			—			(691		)
Derivative financial instruments,net of tax benefit of $1,766	—	—		—		—			(2,479		)	—			—			(2,479		)
Marketable securities, net of tax benefit of $2,075	—	—		—		—			(3,389		)	—			—			(3,389		)
Comprehensive income																		830,496
Dividends	—	—		—		(119,232		)	—			—			—			(119,232		)
Repurchase of common stock	—	—		—		—			—			(564,132		)	—			(564,132		)
Exercise of stock options	3,418,874	34		62,137		—			—			—			—			62,171
Tax benefit of stock options	—	—		51,476		—			—			—			—			51,476
Balance December 31, 2004	329,908,165	$	3,300	$	533,068	$	3,844,571		$	(12,096	)	$	(1,150,372	)	$	—		$	3,218,471

The accompanying notes are an integral part of the consolidated financial statements.

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HARLEY-DAVIDSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Summary of significant accounting policies

Principles of consolidation and basis of presentation - - The consolidated financial statements include the accounts of Harley-Davidson, Inc. and all of its subsidiaries (the Company), including the accounts of the groups of companies doing business as Harley-Davidson Motor Company (HDMC), Buell Motorcycle Company (BMC) and Harley-Davidson Financial Services (HDFS).

All of the Company’s subsidiaries are wholly owned and are included in the consolidated financial statements. Prior to January 2004, the Company participated in a joint venture with Porsche AG, of which the Company owned a 51% share. The accounts of the joint venture with Porsche AG were included in the Company’s 2003 and 2002 consolidated financial statements, adjusted to reflect Porsche AG’s interest in operating results and net assets.  In January 2004, the Company increased its ownership share to 100% by purchasing Porsche AG’s 49% interest in the joint venture.  See Note 3 for additional detail.

Prior to August 2002, HDFS participated in a joint venture with Transamerica Distribution Finance to provide inventory financing to the Company’s European dealers.  While HDFS owned 67% of the venture, the joint venture partner managed the business and had equal representation on the board of directors. Accordingly, HDFS recorded its interest using the equity method of accounting.  In August 2002, following the termination of its joint venture relationship with Transamerica Distribution Finance, HDFS began servicing the wholesale needs of many of the Company’s European dealers directly.

In connection with securitization transactions, HDFS utilizes Qualifying Special Purpose Entities (QSPEs) as defined by Statement of Financial Accounting Standards (SFAS) No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” Assets and liabilities of the QSPEs are not consolidated in the financial statements of the Company.  For further discussion of QSPEs and securitization transactions see “Finance receivable securitizations,” which follows.

The Company operates in two principal business segments:  Motorcycles and Related Products (Motorcycles) and Financial Services (Financial Services).  All intercompany accounts and material transactions are eliminated, except for amounts related primarily to: (1) interest paid by HDMC to HDFS on behalf of HDMC’s independent dealers as an incentive to purchase inventory during winter months; and (2) reimbursements paid by HDMC to HDFS for certainEuropean wholesale finance receivables credit losses.  See Note 4 for additional detail related to these items.

Statements of Cash Flows Reclassifications - After considering the concerns raised by the staff of the Securities and Exchange Commission, the Company has concluded that certain prior year balances in the Consolidated Statements of Cash Flows should be reclassified to appropriately present net cash provided by operating activities and net cash used in investing activities.

The Company’s previous policy was to classify all the cash flow effects of providing wholesale loans to its independent motorcycle dealers by its Financial Services segment as an investing activity in its Consolidated Statements of Cash Flows.  This policy, when applied to the financing of inventory sales, had the effect of presenting an investing cash outflow and an operating cash inflow even though there was no cash inflow or outflow on a consolidated basis.  The Company has changed its policy to eliminate this intersegment activity from its Consolidated Statements of Cash Flows and, as a result of this change, all cash flow effects related to wholesale loans are reflected in the operating activities section of the Consolidated Statement of Cash Flows for 2004.  All prior years’ amounts have been reclassified to conform to this presentation.

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In addition, the Company previously classified collections of retained securitization interests as operating cash flows.  Since these retained securitization interests have many of the characteristics of, and are accounted for like, investments available for sale, the Company has concluded that the cash inflow from these collections should be classified as investing cash flows and has reflected this reclassification in its 2004 Consolidated Statement of Cash Flows.  All prior years’ amounts have been reclassified to conform to this presentation.

The effect of the reclassification of both of these changes, as well as the effect of a reclassification of certain marketable securities, on prior year net cash provided by operating activities and net cash used in investing activities is summarized below (in millions):

	2003			2002
Net cash provided by operating activities, previous presentation	$	935.6		$	775.6
Reclassifications:
Wholesale loan activity	(154.8		)	(140.1		)
Collection of retained securitization interests	(118.1		)	(90.0		)
Net cash provided by operating activities, revised presentation	$	662.7		$	545.5
Net cash used in investing activities, previous presentation	$	(484.7	)	$	(1,014.1	)
Reclassifications:
Wholesale loan activity	154.8			140.1
Collection of retained securitization interests	118.1			90.0
Marketable securities	(394.6		)	63.6
Net cash used in investing activities, revised presentation	$	(606.4	)	$	(720.4	)

Use of estimates - The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.

Cash and cash equivalents - The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Marketable securities - The Company has investments in marketable securities consisting primarily of investment-grade debt instruments such as corporate bonds and government backed securities of $522.8 million and $510.2 million at December 31, 2004 and 2003, respectively, with contractual maturities of approximately 3 years.  Marketable securities also include auction rate securities of $814.1 million and $483.1 million at December 31, 2004 and 2003, respectively, with contractual maturities of up to 30 years.  The auction rate securities have interest re-set dates that occur every 90 days or less and can be actively marketed at ongoing auctions that occur every 90 days or less.  The Company classifies its investments in marketable securities as available for sale, thus requiring the Company to carry them at their fair value with any unrealized gains or losses reported in other comprehensive income.

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Finance receivables credit losses - The provision for credit losses on finance receivables is charged to earnings in amounts sufficient to maintain the allowance for uncollectible accounts at a level HDFS believes is adequate to cover the losses of principal and accrued interest in the existing portfolio. HDFS’ periodic evaluation of the adequacy of the allowance is generally based on HDFS’ past loan loss experience, known and inherent risks in the portfolio, and current economic conditions.  HDFS’ wholesale and other large loan charge-off policy is based on a loan-by-loan review which considers the specific borrower’s ability to repay and the estimated value of any collateral.

Retail loans are generally charged-off at 120 days contractually past due.  All finance receivables accrue interest until either collected or charged-off.  Accordingly, as of December 31, 2004 and 2003, all finance receivables were accounted for as interest-earning receivables.

Finance receivable securitizations - HDFS sells retail motorcycle loans through securitization transactions.  Under the terms of securitization transactions, HDFS sells retail loans to a securitization trust.  The securitization trust issues notes to investors, with various maturities and interest rates, secured by future collections of purchased retail loans.  The proceeds from the issuance of the asset-backed securities are utilized by the securitization trust to purchase retail loans from HDFS.

Upon sale of the retail loans to the securitization trust, HDFS receives cash and also retains an interest in excess cash flows, servicing rights, and the right to receive cash reserve account deposits in the future, collectively referred to as “investment in retained securitization interests.”  The investment in retained securitization interests is included with finance receivables in the consolidated balance sheets.

The interest in excess cash flows equals the present value of projected cash flows arising from retail loans sold to the securitization trust less contracted payment obligations due to securitization trust investors.  Key assumptions in determining the present value of projected cash flows are prepayments, credit losses and discount rate.  Servicing rights entitle HDFS to service retail loans sold to the securitization trust for a fee.  The servicing fee is considered adequate compensation for the services provided and is therefore recorded as earned and is included in financial services income.

Reserve account deposits held by the securitization trust represent interest-earning cash deposits collateralizing trust securities.  The funds are not available for use by HDFS until the reserve account balances exceed thresholds specified in the securitization agreement.  Accordingly, they are carried at the present value of the amounts expected to be received in the future.

Gains on current year securitizations on the sale of the retail loans are recognized in the period in which the sale occurs and depend on the proceeds received and the original carrying amount of the transferred retail loans, allocated between the assets sold and the retained interests based on their relative fair value at the date of transfer.

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Investments in retained securitization interests are recorded at fair value and are periodically reviewed for impairment.  Market quotes of fair value are generally not available for retained interests; therefore HDFS estimates fair value based on the present value of future expected cash flows using HDFS’ best estimates of key assumptions for credit losses, prepayments and discount rate commensurate with the risks involved.  Unrealized gains and losses on investments in retained securitization interests are recorded in other comprehensive income, and as of December 31, 2004 and 2003 were $58.1 million and $59.1 million, or $37.6 million and $38.3 million net of taxes, respectively.

HDFS does not guarantee securities issued by the securitization trusts or projected cash flows from the retail loans purchased from HDFS.  Recourse against HDFS related to securitization transactions is limited to the investment in retained securitization interests excluding servicing rights.

HDFS utilizes a two-step process to transfer retail loans to a securitization trust. Loans are initially transferred to a special purpose, bankruptcy remote, wholly owned subsidiary which in turn sells the retail loans to the securitization trust. HDFS has surrendered control of retail loans sold to the securitization trust. Securitization transactions have been structured such that: (1) transferred assets have been isolated from HDFS by being put presumptively beyond the reach of HDFS and its creditors, even in bankruptcy or other receivership, (2) each holder of a beneficial interest in the securitization trust has the right to pledge or exchange their interest; and (3) HDFS does not maintain effective control over the transferred assets through either (a) an agreement that both entitles and obligates HDFS to repurchase or redeem the transferred assets before their maturity other than for breaches of representations and warranties relating to the transferred assets or (b) the ability to unilaterally cause the holder to return specific assets, other than through a customary cleanup call.

Activities of the securitization trust are limited to acquiring retail loans, issuing asset-backed securities and making payments on securities to investors. Securitization trusts have a limited life and generally terminate upon final distribution of amounts owed to the investors in the asset-backed securities.  Historically, the life of securitization trusts purchasing retail loans from HDFS has approximated four years.

Due to the overall structure of the securitization transaction, the nature of the assets held by the securitization trust and the limited nature of its activities, the securitization trusts are considered QSPEs.  Accordingly, gain on sale is recognized upon transfer of retail loans to a QSPE and assets and liabilities of the QSPEs are not consolidated in the financial statements of HDFS.  See Note 4 to the consolidated financial statements for further discussion of HDFS’ securitization program.

Inventories – Inventories are valued at the lower of cost or market.  Substantially all inventories located in the United States are valued using the last-in, first-out (LIFO) method. Other inventories totaling $79.2 million in 2004 and $74.9 million in 2003 are valued at the lower of cost or market using the first-in, first-out (FIFO) method.

Property, plant and equipment - Depreciation of property, plant and equipment is determined on the straight-line basis over the estimated useful lives of the assets. The following useful lives are used to depreciate the various classes of property, plant and equipment:  buildings - 30 years; building equipment and land improvements - 7 years; and machinery and equipment - 3 to 10 years.  Accelerated methods of depreciation are used for income tax purposes.

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Internal-use software - - The Company’s policy is to capitalize costs incurred in connection with developing or obtaining software for internal use.  The Company’s policy explicitly excludes certain types of costs from capitalization, such as costs incurred for enhancements, maintenance, project definition, data conversion, research and development, and training.  Costs capitalized by the Company include amounts paid to outside consulting firms for materials or services used in developing or obtaining computer software for internal use, wages and benefits paid to employees who are directly associated with and who devote time to developing or obtaining computer software for internal use, and interest costs incurred during the period of development of software for internal use.  During 2004, 2003 and 2002 the Company capitalized $15.0 million, $16.5 million and $16.0 million, respectively, of costs incurred in connection with developing or obtaining software for internal use.  The Company depreciates costs capitalized in connection with developing or obtaining software for internal use on a straight-line basis over three years.

Goodwill – Goodwill represents the excess of acquisition cost over the fair value of the net assets purchased.  Goodwill is tested for impairment at least annually.  During 2004 and 2003, the Company tested its goodwill balances for impairment and no adjustments were recorded to goodwill as a result of those reviews.

Long-lived assets - The Company periodically evaluates the carrying value of long-lived assets to be held and used and long-lived assets held for sale, when events and circumstances warrant such review. If the carrying value of a long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset for assets to be held and used, or the amount by which the carrying value exceeds the fair market value less cost to sell for assets held for sale. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved.

Product warranty - The Company provides a standard limited warranty on all new motorcycles sold. The warranty coverage includes parts and labor, and begins when the motorcycle is sold to a retail customer. Beginning with shipments of 2004 model year motorcycles (in September 2003), the Company extended its warranty coverage from one year to two years in all of its markets except Europe, where the term had already been extended to two years in 2002 to comply with European regulations.  The Company maintains reserves for future warranty claims using an estimated cost per unit sold, which is based on historical Company claim information.  Changes in the Company’s warranty liability were as follows (in thousands):

	2004			2003			2002
Balance, beginning of period	$	30,475		$	28,890		$	21,608
Warranties issued during the period	41,434			35,324			30,250
Settlements made during the period	(33,842		)	(32,701		)	(27,568		)
Changes to the liability for pre-existingwarranties during the period	1,931			(1,038		)	4,600
Balance, end of period	$	39,998		$	30,475		$	28,890

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Derivative financial instruments – The Company uses derivative financial instruments to manage foreign currency exchange rate and interest rate risk. The Company’s policy specifically prohibits the use of derivatives for speculative purposes.  The fair values of the Company’s derivative financial instruments are discussed in Note 11 to the Consolidated Financial Statements.

All derivative instruments are recognized on the balance sheet at fair value.  Changes in the fair value of derivatives that are designated as fair value hedges, along with the gain or loss on the hedged item, are recorded in current period earnings.  For derivative instruments that are designated as cash flow hedges, the effective portion of gains and losses that result from changes in the fair value of derivative instruments is initially recorded in other comprehensive income and subsequently reclassified into earnings when the hedged transaction affects income.  Any ineffective portion is immediately recognized in earnings.  No component of a hedging derivative instrument’s gain or loss is excluded from the assessment of hedge effectiveness.

The Company sells its products internationally and in most markets those sales are made in the foreign country’s local currency.  As a result, the Company’s earnings can be affected by fluctuations in the value of the U.S. dollar relative to foreign currency.  The Company utilizes foreign currency contracts to mitigate the effect of these fluctuations on earnings. The foreign currency contracts are entered into with banks and allow the Company to exchange a specified amount of foreign currency for U.S. dollars at a future date, based on a fixed exchange rate.  The Company’s foreign currency contracts, which generally have maturities of less than one year, are designated as cash flow hedges.  The effectiveness of these hedges is measured based on changes in the fair value of the contract attributable to changes in the forward exchange rate and are highly effective.

HDFS enters into interest rate swap agreements to reduce the impact of fluctuations in interest rates on its securitization transactions. HDFS originates fixed-rate retail loans on an ongoing basis.  Eligible loans are pooled and sold through securitization transactions on a periodic basis.  HDFS utilizes interest rate swap agreements to hedge anticipated cash flows from the securitization of retail motorcycle loans.

In addition, HDFS enters into interest rate swap agreements to reduce the impact of fluctuations in interest rates on its fixed and floating rate debt.

At inception, HDFS designates each interest rate swap as a hedge of the fair value of a recognized asset or liability (fair value hedge) or a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge).

Revenue recognition – Sales are generally recorded when products are shipped to customers (independent dealers and distributors) and ownership is transferred.  The Company offers sales incentive programs to its dealers and distributors.  The total costs of these programs are recognized as revenue reductions and are accrued at the later of the date the related sales are recorded or the date the incentive program is both approved and communicated.

Financial services income recognition - Interest income on finance receivables is recorded as earned and is based on the average outstanding daily balance for wholesale and retail receivables. Accrued interest is classified with finance receivables.  Loan origination payments made to dealers for certain retail loans are deferred and amortized over the estimated life of the contract.

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Research and development expenses - Research and development expenses were $170.7 million, $150.3 million and $139.7 million for 2004, 2003 and 2002, respectively.

Advertising costs - The Company expenses the production cost of advertising the first time the advertising takes place.  During 2004, 2003 and 2002 the Company incurred $48.8 million, $50.8 million and $57.8 million in advertising costs, respectively.

Shipping and Handling costs – The Company classifies shipping and handling costs as a component of cost of goods sold.

Stock Options - The Company has stock option plans under which the Board of Directors may grant to employees nonqualified stock options with or without appreciation rights.  The Company accounted for those plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations.  No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.  For purposes of pro forma disclosures under SFAS No. 123, “Accounting for Stock-Based Compensation,” (SFAS No. 123) the estimated fair value of the options is amortized to expense over the options’ vesting period.  The Company’s pro forma information for the years ended December 31 is as follows (in thousands, except per share amounts):

	2004			2003			2002
Net income, as reported	$	889,766		$	760,928		$	580,217
Deduct: Total stock-based employee compensation expense determined under fair value based method for all option awards, net of related tax effects	(13,932		)	(13,415		)	(12,191		)
Pro forma net income	$	875,834		$	747,513		$	568,026
Earnings per share:
Basic as reported	$	3.02		$	2.52		$	1.92
Basic pro forma	$	2.97		$	2.47		$	1.88
Diluted as reported	$	3.00		$	2.50		$	1.90
Diluted pro forma	$	2.96		$	2.46		$	1.86

In determining the effect of SFAS No. 123, the Black-Scholes option pricing model was used with the following weighted-average assumptions for 2004, 2003 and 2002: risk-free interest rate of approximately 3%, 3% and 4% respectively; dividend yield of 0.6%, 0.3% and 0.3%, respectively; expected common stock market volatility factor of 0.3, 0.4 and 0.4, respectively; and a weighted-average expected life of the options of 4.9, 4.7 and 4.4 years, respectively.  Forfeitures are recognized as they occur.

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Reclassifications – Certain prior years’ amounts have been reclassified to conform to the current year presentation.

Recent Accounting Pronouncements  –  In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004) “Share-Based Payment,” (SFAS No. 123(R)) which requires the cost of all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values.  SFAS No. 123(R) will require that the Company calculate the cost of stock option grants based on their grant date fair value, and recognize that cost in income over the vesting period.  The new rules are effective for the Company beginning with the third quarter of 2005. The Company has elected to early adopt SFAS No. 123(R) under the Modified Prospective Transition (MPT) method, as of January 1, 2005.  Under the MPT method, the cost for awards that were granted prior to, but not vested, as of January 1, 2005 will be recognized in income over their remaining vesting period on a straight-line basis.  The cost of these awards will be based on the grant date fair value estimate used for SFAS No. 123 pro forma disclosure purposes (see “Stock Options” above).  The Company intends to use a lattice model to value stock options granted after January 1, 2005.

The Company expects that total stock compensation expense in 2005, including all types of share based payments, will be similar to the 2004 pro-forma stock compensation expense (see “Stock Options” above).  Statement 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current guidance.  This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption.  While the Company cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of operating cash flows recognized in prior periods for such excess tax deductions were $51.5 million, $13.2 million, and $14.5 million in 2004, 2003 and 2002, respectively.

2.Additional balance sheet and cash flow information

The following information represents additional detail for selected line items included in the consolidated balance sheets at December 31 and the statements of cash flows for the three years ended December 31.

Balance sheet information:

	2004		2003
Accounts receivable, net (in thousands):
Domestic	$	16,485	$	16,542
Foreign	104,848		95,864
	$	121,333	$	112,406

Motorcycle sales in the United States and Canada and a portion of the motorcycle sales in Europe are generally financed by the purchasing dealers through HDFS, and are included in finance receivables in the consolidated balance sheets.  The Company’s remaining foreign motorcycle sales are sold on open account, letter of credit, draft and payment in advance or financed by the purchasing dealers.  The allowance for doubtful accounts deducted from total accounts receivable was $10.3 million and $9.3 million as of December 31, 2004 and 2003, respectively.

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	2004		2003
Inventories, net (in thousands):
Components at the lower of FIFO cost or market:
Raw materials and work in process	$	78,750	$	89,823
Motorcycle finished goods	75,839		57,778
Parts and accessories and general merchandise	93,933		77,417
Inventory at lower of FIFO cost or market:	248,522		225,018
Excess of FIFO over LIFO cost	21,629		17,292
	$	226,893	$	207,726

Inventory obsolescence reserves deducted from FIFO cost were $14.5 million and $17.0 million as of December 31, 2004 and 2003, respectively.

Property, plant and equipment, at cost (in thousands):

	2004		2003
Land and related improvements	$	40,867	$	35,039
Buildings and related improvements	355,479		361,162
Machinery and equipment	1,628,667		1,661,554
Construction in progress	168,389		133,430
	2,193,402		2,191,185
Less accumulated depreciation	1,168,737		1,144,875
	$	1,024,665	$	1,046,310

Accrued expenses and other liabilities (in thousands):

	2004		2003
Payroll, performance incentives and related expenses	$	151,833	$	163,095
Warranty and recalls	45,285		34,069
Sales incentive programs	63,880		50,378
Income taxes	53,547		54,826
Fair value of derivative financial instruments	39,701		32,382
Other	78,807		72,816
	$	433,053	$	407,566

Components of accumulated other comprehensive income (loss), net of tax (in thousands):

	2004			2003
Cumulative foreign currency translation adjustment	$	33,537		$	24,138
Unrealized gain on investment in retained securitization interest	37,633			38,324
Unrealized net loss on derivative financial instruments	(16,231		)	(13,752		)
Unrealized net loss on marketable securities	(4,925		)	(1,536		)
Minimum pension liability adjustment	(62,110		)	—
	$	(12,096	)	$	47,174

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Cash flow information:

Net changes in current assets and current liabilities (in thousands):

	2004			2003			2002
Accounts receivable	$	(8,927	)	$	(3,712	)	$	10,149
Inventories	(19,167		)	10,430			(37,041		)
Finance receivables — accrued interest and other	(27,443		)	(54,796		)	(36,382		)
Accounts payable and accrued liabilities	39,569			15,545			92,430
Other	(8,898		)	13,889			(13,067		)
	$	(24,866	)	$	(18,644	)	$	16,089

Cash paid during the period for interest and income taxes (in thousands):

	2004		2003		2002
Interest	$	21,346	$	17,024	$	15,067
Income taxes	$	469,658	$	370,597	$	241,392

Interest paid represents interest payments of HDFS which are included in financial services expense.

The Company capitalized approximately $3.9 million and $2.7 million of interest expense in 2003 and 2002, respectively, in connection with expansion projects.

3.Acquisition

On January 1, 2004 the Company acquired the remaining interest in its joint venture with Porsche AG, of which the Company previously owned a 51% share.  The purchase price for the remaining interest in the joint venture was approximately $9.5 million. The acquisition was funded with cash on hand.  Goodwill of $4.1 million has been recorded under the Motorcycles segment as a result of this transaction.

4.Financial Services

HDFS is engaged in the business of financing and servicing wholesale inventory receivables and retail loans, primarily for the purchase of motorcycles.  HDFS is responsible for all credit and collection activities for the Motorcycles segment’s domestic dealer receivables and many of its European dealer receivables.  Prior to August 2002, HDFS offered wholesale financing to the Company’s European motorcycle dealers through a joint venture with Transamerica Distribution Finance.  In August 2002, HDFS terminated the joint venture relationship and began directly servicing the wholesale financing needs of many of the Company’s European dealers.  HDFS conducts business in the United States, Canada and Europe.

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The condensed statements of operations relating to the Financial Services segment, for the years ended December 31, were as follows (in thousands):

	2004		2003		2002
Interest income	$	102,177	$	87,048	$	76,078
Income from securitizations	115,104		114,402		74,915
Other income	87,981		78,009		60,507
Financial services income	305,262		279,459		211,500
Interest expense	22,723		17,635		15,149
Operating expenses	93,939		93,951		92,124
Financial services expense	116,662		111,586		107,273
Operating income from financial services	$	188,600	$	167,873	$	104,227

Interest income includes approximately $11.8 million, $9.2 million, and $8.4 million of interest on wholesale finance receivables paid by HDMC to HDFS in 2004, 2003 and 2002, respectively.  This interest is paid on behalf of HDMC’s independent dealers as an incentive to purchase inventory during winter months.  These interest transactions between the Motorcycles and Financial Services segments are not eliminated; however, the net effect had no impact on consolidated net income.

Income from securitizations includes gains on current year securitization transactions of $58.3 million, $82.2 million and $56.1 million during 2004, 2003 and 2002, respectively, and income on investment in retained securitization interests of $56.8 million, $32.2 million and $18.8 million during 2004, 2003 and 2002, respectively.

Finance Receivables:

Finance receivables owned by HDFS at December 31 for the past five years were as follows (in thousands):

	2004		2003		2002		2001		2000
Wholesale
United States	$	870,640	$	690,662	$	574,489	$	527,513	$	414,713
Europe	73,231		91,987		91,137		—		—
Canada	51,945		59,171		42,236		40,793		42,213
Total Wholesale	995,816		841,820		707,862		568,306		456,926
Retail
United States	744,357		580,191		509,094		291,796		168,960
Canada	120,217		92,740		60,921		52,241		49,574
Total Retail	864,574		672,931		570,015		344,037		218,534
	1,860,390		1,514,751		1,277,877		912,343		675,460
Allowance for credit losses	30,277		31,311		31,045		28,684		10,947
	1,830,113		1,483,440		1,246,832		883,659		664,513
Investment in retained securitization interests	282,187		254,409		198,748		152,097		100,437
	$	2,112,300	$	1,737,849	$	1,445,580	$	1,035,756	$	764,950

55

HDFS provides wholesale financing to the Company’s independent dealers and retail financing to end consumers of the Company’s new and used products as well as products of other manufacturers.  Wholesale loans to dealers are generally secured by financed inventory or property and are originated in the U.S., Canada, and Europe.

HDFS provides retail financial services to customers of the Company’s independent dealers in the United States and Canada.  The origination of retail loans is a separate and distinct transaction between HDFS and the retail customer, unrelated to the Company’s sale of product to its dealers.  Retail loans consist of secured promissory notes and installment loans.  HDFS either holds titles or liens on titles to vehicles financed by promissory notes and installment loans.  As of December 31, 2004 and 2003, approximately 10% of gross outstanding finance receivables were originated in California and 10% were originated in Canada, respectively.

At December 31, 2004 and 2003, unused lines of credit extended to HDFS’ wholesale finance customers totaled $700 million and $588 million respectively.  Approved but unfunded retail finance loans totaled $343 million and $289 million at December 31, 2004 and 2003, respectively.

Wholesale finance receivables are related primarily to motorcycles and related parts and accessories sales to independent dealers and are generally contractually due within one year.  Retail finance receivables are primarily related to sales of motorcycles to the dealers’ customers, the end consumers.  On December 31, 2004, contractual maturities of finance receivables were as follows (in thousands):

	United States		Europe		Canada		Total
2005	$	946,044	$	73,231	$	66,602	$	1,085,877
2006	74,437		—		15,757		90,194
2007	82,604		—		17,581		100,185
2008	91,876		—		19,617		111,493
2009	102,198		—		21,890		124,088
Thereafter	317,838		—		30,715		348,553
Total	$	1,614,997	$	73,231	$	172,162	$	1,860,390

As of December 31, 2004, all finance receivables due after one year were at fixed interest rates.

The allowance for credit losses is comprised of individual components relating to wholesale and retail finance receivables.  Changes in the allowance for credit losses for the years ended December 31 are as follows (in thousands):

	2004			2003			2002
Balance at beginning of year	$	31,311		$	31,045		$	28,684
Provision for finance credit losses	3,070			4,076			6,167
Charge-offs, net of recoveries	(4,104		)	(3,810		)	(3,806		)
Balance at end of year	$	30,277		$	31,311		$	31,045

56

Included in charge-offs, net of recoveries are $3.7 million and $1.3 million of recoveries in 2004 and 2003, respectively, received by HDFS from HDMC.  These recoveries relate to certain guarantees provided by HDMC on wholesale loans to European Harley-Davidson dealers.At December 31, 2004 and 2003, HDMC has $3.3 million and $3.5 million, respectively, included in their allowance for doubtful accounts related to outstanding guarantees.

At December 31, 2004, 2003 ,2002 and 2001, the carrying value of retail and wholesale finance receivables contractually past due 90 days or more is (in thousands):

	2004		2003		2002		2001
United States	$	1,906	$	2,012	$	1,724	$	2,262
Canada	994		639		523		365
Europe	3,688		4,126		5,307		—
Total	$	6,588	$	6,777	$	7,554	$	2,627

Securitization Transactions:

During 2004, 2003 and 2002, the Company sold $1.9 billion, $1.7 billion, and $1.3 billion, respectively, of retail motorcycle loans through securitization transactions utilizing QSPEs (see Note 1 to the Consolidated Financial Statements). The Company retains an interest in excess cash flows, servicing rights and cash reserve account deposits, collectively referred to as investment in retained securitization interests.  In conjunction with these and prior sales, HDFS has assets of $282.2 million and $254.4 million representing retained securitization interests at December 31, 2004 and 2003, respectively.  The Company receives annual servicing fees approximating 1% of the outstanding balance.  HDFS serviced $3.1 billion and $2.6 billion of securitized retail loans as of December 31, 2004 and 2003, respectively.

The Company’s retained securitization interests, excluding servicing rights, are subordinate to the interests of securitization trust investors.  Investors and securitization trusts have no recourse to the Company’s other assets.  Recourse is limited to the Company’s rights to future cash flow on retained securitization interests, excluding servicing rights.  Key assumptions in the valuation of the investment in retained securitization interests and in calculating the gain on current year securitizations are credit losses, prepayments and discount rate.

At the date of the transaction, the following key assumptions were used to calculate the gain on securitizations completed in 2004, 2003 and 2002:

	2004		2003		2002
Prepayment speed (Single Monthly Mortality)	2.50	%	2.50	%	2.50	%
Weighted-average life (in years)	1.94		1.93		1.95
Expected cumulative net credit losses	2.60	%	2.60	%	2.38	%
Residual cash flows discount rate	12.00	%	12.00	%	12.00	%

As of December 31, 2004 and 2003, respectively, the following key assumptions were used to value the investment in retained securitization interests:

	2004		2003
Prepayment speed (Single Monthly Mortality)	2.50	%	2.50	%
Weighted-average life (in years)	2.00		1.97
Expected cumulative net credit losses	2.55	%	2.48	%
Residual cash flows discount rate	12.00	%	12.00	%

57

Expected cumulative net credit losses are a key assumption in the valuation of retained securitization interests.  As of December 31, 2004, 2003 and 2002, respectively, weighted average expected net credit losses for all active securitizations were 2.55%, 2.48% and 2.24%.  The table below summarizes, as of December 31, 2004, 2003 and 2002, respectively, expected cumulative net credit losses by year of securitization, expressed as a percentage of the original balance of loans securitized for all securitizations completed during the years noted.

Expected cumulative net Credit Losses (%) as of:	Loans Securitized in
	2004		2003		2002		2001		2000
December 31, 2004	2.60	%	2.60	%	2.39	%	2.30	%	2.38	%
December 31, 2003	—		2.60	%	2.39	%	2.25	%	2.37	%
December 31, 2002	—		—		2.38	%	2.13	%	2.06	%

Detailed below at December 31, 2004 and 2003 is the sensitivity of the fair value to immediate 10% and 20% adverse changes in the weighted average key assumptions for all retained securitization interests (dollars in thousands):

	2004			2003
Carrying amount/fair value of retained interests	$	282,187		$	254,409
Weighted-average life (in years)	2.00			1.97
Prepayment speed assumption (monthly rate)	2.50		%	2.50		%
Impact on fair value of 10% adverse change	$	(7,800	)	$	(7,300	)
Impact on fair value of 20% adverse change	$	(15,100	)	$	(14,200	)
Expected cumulative net credit losses	2.55		%	2.48		%
Impact on fair value of 10% adverse change	$	(14,800	)	$	(11,100	)
Impact on fair value of 20% adverse change	$	(29,600	)	$	(22,300	)
Residual cash flows discount rate (annual)	12.00		%	12.00		%
Impact on fair value of 10% adverse change	$	(5,100	)	$	(4,600	)
Impact on fair value of 20% adverse change	$	(10,100	)	$	(9,000	)

These sensitivities are hypothetical and should not be considered to be predictive of future performance.  Changes in fair value generally cannot be extrapolated because the relationship of change in assumption to change in fair value may not be linear.  Also, in this table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated independently from any change in another assumption.  In reality, changes in one factor may contribute to changes in another, which may magnify or counteract the sensitivities.  Furthermore, the estimated fair values as disclosed should not be considered indicative of future earnings on these assets.

58

The table below provides information regarding certain cash flows received from and paid to all motorcycle loan securitization trusts during the years ended December 31, 2004 and 2003 (in thousands):

	2004			2003
Proceeds from new securitizations	$	1,847,895		$	1,724,060
Servicing fees received	30,504			23,789
Other cash flows received on retained interests	178,181			144,343
10% Clean-up call repurchase option	(36,620		)	(31,779		)

Managed retail motorcycle loans consist of all retail motorcycle installment loans serviced by HDFS including, those held by securitization trusts and those held by HDFS.  As of December 31, 2004 and 2003, managed retail motorcycle loans totaled $3.7 billion and $3.0 billion, respectively, of which $3.1 billion and $2.6 billion, respectively, are securitized.  The principal amount of motorcycle managed loans 60 days or more past due was $40.0 million and $40.7 million at December 31, 2004 and 2003, respectively.  Managed loans 60 days or more past due exclude loans reclassified as repossessed inventory.  Credit losses, net of recoveries, of the motorcycle managed loans were $33.0 million and $27.0 million during 2004 and 2003, respectively.

Finance Debt:

HDFS’ debt as of December 31 consisted of the following (in thousands):

	2004		2003
Commercial paper	$	702,147	$	406,907
Credit facilities	168,309		158,512
	870,456		565,419
Medium-term notes	394,985		398,886
Senior subordinated notes	30,000		30,000
	$	1,295,441	$	994,305

Credit Facilities - During September 2004, HDFS entered into a $1.1 billion revolving credit facility (Global Credit Facility) due September 2009.  This facility replaced $750 million of domestic credit facilities (Domestic Credit Facilities) and the $200 million European credit facility, both described below.  The primary use of the Global Credit Facility is to provide liquidity to the unsecured commercial paper program and to fund domestic and foreign operations.  Subject to certain limitations, HDFS has the option to borrow in various currencies.  Interest is based on London interbank offered rates (LIBOR), European interbank offered rates or other short-term indices, depending on the type of advance.  The Global Credit Facility is a committed facility, and HDFS pays a fee for its availability.

Prior to September 2004, HDFS had agreements with financial institutions providing bank credit facilities totaling $750 million.  The Domestic Credit Facilities consisted of a $350 million revolving term facility due in 2005 and a $400 million 364-day revolving credit facility due September 2004. The primary uses of the Domestic Credit Facilities were to provide liquidity to the unsecured commercial paper program and to fund HDFS’ business operations.

Prior to September 2004, HDFS had a $200 million European revolving credit facility due July 2005. The primary purpose of the facility was to fund HDFS’ European business operations.  Subject to certain limitations, HDFS could borrow in various currencies.  Interest was based on LIBOR or European Interbank Offered Rates based on the currency of the borrowings.

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Commercial Paper - Subject to limitations, HDFS may issue commercial paper of up to $1.1 billion.  Maturities may range up to 270 days from the issuance date.  Outstanding commercial paper may not exceed the unused portion of the Global Credit Facility.  As a result, the combined total of commercial paper and borrowings under the Global Credit Facility was limited to $1.1 billion as of December 31, 2004. The weighted-average interest rate of outstanding commercial paper balances was 2.29% and 1.10% at December 31, 2004 and 2003, respectively.  The December 31, 2004 and 2003 weighted-average interest rate includes the impact of interest rate swap agreements.

Medium-Term Notes - During November 2003, HDFS issued $400 million of 3.63% medium-term notes (Notes) due in December 2008.  The Notes provide for semi-annual interest payments and principal due at maturity.  HDFS entered into a swap agreement, the effect of which is to convert the interest rate on the Notes from a fixed rate to a floating rate, which is based on 3-month LIBOR.  The weighted-average interest rate for the years ended December 31, 2004 and 2003 was 1.6% and 1.3%, respectively, which includes the impact of interest rate swap agreements.  At December 31, 2004 and 2003, the Notes reflect a $5.0 million and a $1.1 million decrease, respectively, due to the fair value adjustment related to the impact of the interest rate swap agreements.

Senior Subordinated Debt - At December 31, 2004, and 2003, HDFS had $30 million of 6.79% senior subordinated notes outstanding due in 2007. The senior subordinated notes provide for semi-annual interest payments and principal at maturity.

Intercompany Borrowings - HDFS has a revolving credit line with the Company whereby HDFS may borrow up to $210 million at market rates of interest.  As of December 31, 2004 and 2003, HDFS had no borrowings owed to the Company under the revolving credit agreement.

The Company has classified the $395.0 million of medium-term notes and the $30.0 million senior subordinated notes as long-term finance debt at December 31, 2004.  Additionally, the Company has also classified $375.0 million related to its Commercial Paper and its Global Credit Facilities as long-term finance debt as of December 31, 2004.  This amount has been excluded from current liabilities because it is supported by the Global Credit Facility and because the Company intends that at least this amount will remain outstanding for an uninterrupted period extending beyond one year from the balance sheet date.

The Company and HDFS have entered into a support agreement wherein, if required, the Company agrees to provide HDFS certain financial support to maintain certain financial covenants.  Support may be provided either as capital contributions or loans at the Company’s option.  No amount has ever been provided to HDFS under the support agreement.

HDFS has met various operating and financial covenants and remains in compliance at December 31, 2004.

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5.Income taxes

Provision for income taxes for the years ended December 31 consists of the following (in thousands):

	2004			2003			2002
Current:
Federal	$	466,476		$	324,960		$	241,915
State	61,982			33,461			20,265
Foreign	2,775			4,581			4,870
	531,233			363,002			267,050
Deferred:
Federal	(38,332		)	39,902			34,048
State	(5,261		)	5,040			5,079
Foreign	2,080			(2,837		)	(567		)
	(41,513		)	42,105			38,560
Total	$	489,720		$	405,107		$	305,610

The provision for income taxes differs from the amount that would be provided by applying the statutory U.S. corporate income tax rate due to the following items for the years ended December 31:

	2004		2003		2002
Provision at statutory rate	35.0	%	35.0	%	35.0	%
Foreign income taxes	0.1		0.1		0.2
Foreign tax credits	(0.1	)	(0.1	)	(0.1	)
State taxes, net of federal benefit	2.5		2.1		1.5
Foreign sales corporation	(0.7	)	(0.5	)	(0.5	)
Research and development credit	(0.5	)	(0.5	)	(0.6	)
Other	(0.8	)	(1.4	)	(1.0	)
Provision for income taxes	35.5	%	34.7	%	34.5	%

Deferred income taxes result from temporary differences between the recognition of revenues and expenses for financial statements and income tax returns.  The principal components of the Company’s deferred tax assets and liabilities as of December 31 include the following (in thousands):

	2004				2003
Deferred tax assets:
Accruals not yet tax deductible	$	76,192			$		69,802
Postretirement healthcare benefit obligation	58,455				49,161
Supplemental employee retirement plan agreements obligation	19,387				16,508
Minimum pension liability	38,230				—
Other, net	19,535				15,088
	211,799				150,559
Deferred tax liabilities:
Depreciation, tax in excess of book	(76,385			)	(82,959			)
Prepaid pension costs	(96,163			)	(109,969			)
Unrealized gain on investment in retained securitization interests	(20,452			)	(20,818			)
Other, net	(9,714			)	(11,499			)
	(202,714			)	(225,245			)
Net deferred tax (liability) asset	$		9,085		$	(74,686		)

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6.Commitments and contingencies

The Company is subject to lawsuits and other claims related to environmental, product and other matters.  In determining required reserves related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss.  The required reserves are monitored on an ongoing basis and are updated based on new developments or new information in each matter.

In January 2001, the Company, on its own initiative, notified each owner of 1999 and early-2000 model year Harley-Davidson motorcycles equipped with Twin Cam 88 and Twin Cam 88B engines that the Company was extending the warranty for a rear cam bearing to 5 years or 50,000 miles.  Subsequently, on June 28, 2001, a putative nationwide class action was filed against the Company in state court in Milwaukee County, Wisconsin, which was amended by a complaint filed September 28, 2001. The complaint alleged that this cam bearing is defective and asserted various legal theories.  The complaint sought unspecified compensatory and punitive damages for affected owners, an order compelling the Company to repair the engines, and other relief.  On February 27, 2002, the Company’s motion to dismiss the amended complaint was granted by the Court and the amended complaint was dismissed in its entirety.  An appeal was filed with the Wisconsin Court of Appeals.  On April 12, 2002, the same attorneys filed a second putative nationwide class action against the Company in state court in Milwaukee County, Wisconsin relating to this cam bearing issue and asserting different legal theories than in the first action.  The complaint sought unspecified compensatory damages, an order compelling the Company to repair the engines and other relief.  On September 23, 2002, the Company’s motion to dismiss was granted by the Court, the complaint was dismissed in its entirety, and no appeal was taken.  On January 14, 2003, the Wisconsin Court of Appeals reversed the trial court’s February 27, 2002 dismissal of the complaint in the first action, and the Company petitioned the Wisconsin Supreme Court for review.  On March 26, 2004, the Wisconsin Supreme Court reversed the Court of Appeals and dismissed the remaining claims in the action.  On April 12, 2004, the same attorneys filed a third action in the state court in Milwaukee County, on behalf of the same plaintiffs from the action dismissed by the Wisconsin Supreme Court.  This third action was dismissed by the court on July 26, 2004.  In addition, the plaintiffs in the original case moved to reopen that matter and amend the complaint to add new causes of action, which motion was denied on August 23, 2004.  A notice of appeal to the Wisconsin Court of Appeals from the latter dismissal was filed by the plaintiffs and the appeal is currently pending.  The Company intends to continue to vigorously defend this matter.  The Company believes that the 5-year/50,000-mile warranty extension it announced in January 2001 adequately addresses the condition for affected owners.

The Company is involved with government agencies and groups of potentially responsible parties in various environmental matters, including a matter involving the cleanup of soil and groundwater contamination at its York, Pennsylvania, facility.  The York facility was formerly used by the U.S. Navy and AMF prior to the purchase of the York facility by the Company from AMF in 1981. Although the Company is not certain as to the full extent of the environmental contamination at the York facility, it has been working with the Pennsylvania Department of Environmental Protection since 1986 in undertaking environmental investigation and remediation activities, including an ongoing site-wide remedial investigation/feasibility study (RI/FS).

In January 1995, the Company entered into a settlement agreement (the Agreement) with the Navy.  The Agreement calls for the Navy and the Company to contribute amounts into a trust equal to 53% and 47%, respectively, of future costs associated with environmental investigation and remediation activities at the York facility (Response Costs). The trust administers the payment of the Response Costs incurred at the York facility as covered by the Agreement.

62

In February 2002, the Company was advised by the U.S. Environmental Protection Agency (EPA) that it considers some of the Company’s remediation activities at the York facility to be subject to the EPA’s corrective action program under the Resource Conservation and Recovery Act (RCRA) and offered the Company the option of addressing corrective action under a RCRA facility lead agreement.  The objectives and procedures for facility lead corrective action under RCRA are consistent with the investigation and remediation already being conducted under the Agreement with the Navy, and the Company agreed to participate in EPA’s corrective action program under a RCRA facility lead agreement.

Although the RI/FS is still under way and substantial uncertainty exists concerning the nature and scope of the additional environmental investigation and remediation that will ultimately be required at the York facility, the Company estimates that its share of the future Response Costs at the York facility will be approximately $6.7 million.  The Company has established reserves for this amount, which are included in Accrued Expenses and Other Liabilities in the Consolidated Balance Sheets.

The estimate of the Company’s future Response Costs that will be incurred at the York facility is based on reports of independent environmental consultants retained by the Company, the actual costs incurred to date, and the estimated costs to complete the necessary investigation and remediation activities.  Response Costs related to the remediation of soil are expected to be incurred over a period of several years ending in 2010.  Response Costs related to ground water remediation may continue for some time beyond 2010.  However, these Response Costs are expected to be much lower than those related to the remediation of soil.

Under the terms of the sale of the Commercial Vehicles Division in 1996, the Company has agreed to indemnify Utilimaster Corporation, until 2008, for certain claims related to environmental contamination present at the date of sale, up to $20 million.  Based on the environmental studies performed as part of the sale of the Transportation Vehicles segment, the Company does not expect to incur any material expenditures under this indemnification.

Additionally, the Company is involved in product liability suits related to the operation of its business.  The Company accrues for claim exposures which are probable of occurrence and can be reasonably estimated.  The Company also maintains insurance coverage for product liability exposures.  The Company believes that its accruals and insurance coverage are adequate and that product liability will not have a material adverse effect on the Company’s consolidated financial statements.

7.Employee benefit plans and other postretirement benefits

The Company has several defined benefit pension plans and several postretirement healthcare benefit plans, which cover substantially all employees of the Motorcycles segment.  The Company also has unfunded supplemental employee retirement plan agreements (SERPA) with certain employees which were instituted to replace benefits lost under the Tax Revenue Reconciliation Act of 1993.

Pension benefits are based primarily on years of service and, for certain plans, levels of compensation.  Employees are eligible to receive postretirement healthcare benefits upon attaining age 55 after rendering at least 10 years of service to the Company.  The Company’s postretirement healthcare plans are currently funded as claims are submitted.  Some of the plans require employee contributions to offset benefit costs.

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Obligations and Funded Status

The information following provides detail of changes in the projected benefit obligations, changes in the fair value of plan assets and funded status as of the Company’s September 30 measurement date (in thousands).

	Pension and SERPA						Postretirement Healthcare Benefits
	2004			2003			2004			2003
Change in benefit obligation:
Benefit obligation, October 1	$	711,357		$	567,216		$	250,863		$	184,996
Service cost	36,863			35,282			11,367			12,145
Interest cost	45,852			41,979			14,994			13,462
Plan amendments	—			—			(22,366		)	—
Actuarial losses (gains)	39,024			77,153			(4,870		)	48,217
Plan participant contributions	6,524			6,738			43			12
Benefits paid	(22,622		)	(17,011		)	(8,686		)	(7,969		)
Benefit obligation, September 30	816,998			711,357			241,345			250,863
Change in plan assets:
Fair value of plan assets, October 1	650,428			309,469			—			—
Actual return on plan assets	76,141			59,116			—			—
Company contributions	1,712			292,116			8,643			7,957
Plan participant contributions	6,524			6,738			43			12
Benefits paid	(22,622		)	(17,011		)	(8,686		)	(7,969		)
Fair value of plan assets, September 30	712,183			650,428			—			—
Funded status of the plans:
Projected benefit obligation over plan assets	(104,815		)	(60,929		)	(241,345		)	(250,863		)
Unrecognized prior service cost	54,959			62,040			(11,841		)	9,500
Unrecognized net loss	257,227			246,759			101,042			111,603
Minimum pension liability:
Intangible asset	(22,043		)	—			—			—
Accumulated other comprehensive loss	(100,340		)	—			—			—
Prepaid (accrued) benefit cost, September 30	84,988			247,870			(152,144		)	(129,760		)
Fourth quarter contributions	155			—			2,296			2,316
Prepaid (accrued) benefit cost, December 31	$	85,143		$	247,870		$	(149,848	)	$	(127,444	)
Amounts recognized in the Consolidated Balance Sheets, December 31:
Accrued benefit liability (other long-term liabilities)	$	(48,179	)	$	(37,311	)	$	(149,848	)	$	(127,444	)
Prepaid benefit cost (other long-term assets)	133,322			285,181			—			—
Net amount recognized	$	85,143		$	247,870		$	(149,848	)	$	(127,444	)

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Benefit Costs

Components of net periodic benefit costs for the years ended December 31 (in thousands):

	Pension and SERPA									Postretirement Health Care Benefits
	2004			2003			2002			2004			2003		2002
Service cost	$	36,863		$	35,282		$	22,158		$	11,367		$	12,145	$	8,411
Interest cost	45,852			41,979			35,723			14,994			13,462		11,539
Expected return on plan assets	(59,193		)	(39,500		)	(29,323		)	—			—		—
Amortization of unrecognized:
Prior service cost	7,081			7,098			7,148			(1,025		)	546		546
Net loss	10,145			9,609			6,320			5,691			4,296		1,766
Net periodic benefit cost	$	40,748		$	54,468		$	42,026		$	31,027		$	30,449	$	22,262

Assumptions

Weighted-average assumptions used to determine benefit obligations as of September 30 and weighted-average assumptions used to determine net periodic benefit cost for the years ended September 30 are as follows:

	Pension and SERPA						Postretirement Health Care Benefits
	2004		2003		2002		2004		2003		2002
Assumptions for benefit obligations
Discount rate	6.25	%	6.50	%	7.25	%	6.25	%	6.50	%	7.25	%
Rate of compensation	3.50	%	4.00	%	5.00	%	n/a		n/a		n/a
Assumptions for net periodic benefit cost
Discount rate	6.50	%	6.50	%	8.00	%	6.50	%	6.50	%	8.00	%
Expected return on plan assets	8.50	%	8.50	%	8.50	%	n/a		n/a		n/a
Rate of compensation increase	4.00	%	5.00	%	5.00	%	n/a		n/a		n/a

Pension and SERPA Accumulated Benefit Obligation

Each of the Company’s pension and SERPA plans has a separately determined accumulated benefit obligation (ABO) and plan asset value.  The ABO is the actuarial present value of benefits based on service rendered and current and past compensation levels.  This differs from the projected benefit obligation (PBO) in that it includes no assumption about future compensation levels.  The total ABO for all the Company’s pension and SERPA plans combined was $719.7 million and $605.6 million as of September 30, 2004 and 2003, respectively.

The following table summarizes information related to Company pension plans with an ABO or PBO in excess of the fair value of plan assets as of September 30 (in millions).

	2004		2003
Plans with ABOs in excess of fair value of plan assets:
ABO	$	270.2	—
Fair value of plan assets	268.2		—
Number of plans	1		0
Plans with PBOs in excess of fair value of plan assets:
PBO	$	510.3	$	209.2
Fair value of plan assets	$	458.9	$	173.5
Number of plans	2		1

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The Company’s SERPA plans, which can only be funded as claims are paid, had projected and accumulated benefit obligations of $56.8 million and $44.8 million, respectively, as of September 30, 2004 and $49.8 and $32.6 million, respectively as of September 30, 2003.

Pension Plan Assets

The Company’s pension plan weighted-average asset allocations at September 30, 2004and 2003, by asset category are as follows (in thousands):

	2004				2003
Equity securities (excluding Company stock)	$	505,548	71	%	$	364,117	56	%
Debt securities	100,984		14		86,117		13
Company stock	75,702		11		61,387		10
Cash	29,949		4		138,807		21
Total	$	712,183	100	%	$	650,428	100	%

The Company employs a total return investment approach whereby a mix of equities and fixed-income investments are used to maximize the long-term return of plan assets for a prudent level of risk.  The intent of this strategy is to minimize plan expenses by maximizing investment returns within that prudent level of risk.  The investment portfolio contains a diversified blend of equity and fixed-income investments.  Furthermore, equity investments are diversified across U.S and non-U.S. stocks as well as growth, value, and small and large capitalizations.  The Company’s targeted asset allocation ranges as a percentage of total market value are as follows: equity securities, 45% to 75%; debt securities, 13% to 17%; and Company stock not to exceed 25%. Additionally, cash balances are maintained at levels adequate to meet near term plan expenses and benefit payments.  The allocation of balances at September 30, 2003 was not reflective of the Company’s targets as a result of a $180 million contribution which had not been completely allocated from cash.  Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews.

The fair value of plan assets were approximately $760 and $700 million as of December 31, 2004 and 2003, respectively.  Included in the plan assets are 1,273,592 shares of the Company’s common stock at December 31, 2004 and 2003.  The market value of these shares at December 31, 2004 and 2003 was $77.4 million and $60.5 million, respectively.  Company policy limits the value of its stock to 25% of the total value of plan assets.

The Company’s overall expected long-term rate of return on assets is 8.50%. The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories.  The return is based on historical returns adjusted to reflect the current view of the long-term investment market.

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Postretirement Healthcare Cost

The weighted average health care cost trend rate used in determining the accumulated postretirement benefit obligation of the health care plans was as follows:

	2004		2003
Healthcare cost trend rate for next year	12.0	%	15.0	%
Rate to which the cost trend rate is assumed to decline (the ultimate rate)	5.0	%	5.0	%
Year that the rate reaches the ultimate trend rate	2007		2007

This healthcare cost trend rate assumption can have a significant effect on the amounts reported.  A one-percentage-point change in the assumed healthcare cost trend rate would have the following effects (in thousands):

	One Percent Increase		One Percent Decrease
Total of service and interest cost components in 2004	$	1,015	$	942
Postretirement benefit obligation as of September 30, 2004	$	11,418	$	10,611

Medicare Changes

On December 8, 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the Act) was signed into law.  The Act introduced a voluntary prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree healthcare plans that provide prescription drug benefits that are at least actuarially equivalent to Medicare.  The Company has determined that prescription drug benefits offered under its plans are at least actuarially equivalent to the benefits that will be provided under Medicare and expects to receive the federal subsidy provided under the Act.  The Company began recognizing the impact of the Act’s provisions in the third quarter of 2004.  As a result, postretirement benefit cost for 2004 was $2.0 million lower than it would have been, had the Company not recognized the impact of the provisions of the Act.  The Company’s recognition of the impact of these provisions also resulted in a decrease of $23.3 million in the accumulated postretirement benefit obligation, related to benefits attributed to past service.

Future Contributions and Benefit Payments

The Company intends to begin pre-funding its postretirement healthcare plans in 2005 and is currently planning to contribute approximately $100 million to the plans during the first half of 2005.  The Company is also currently planning to contribute a minimum of $20 million to its pension plans during 2005.  The expected benefit payments and Medicare subsidy receipts for the next five years and thereafter are as follows (in thousands):

	Pension and SERPA		Postretirement Healthcare Benefits		Medicare Subsidy Receipts
2005	$	53,092	$	11,099	$	0
2006	27,380		12,561		630
2007	30,579		14,793		709
2008	33,425		18,383		790
2009	36,973		19,471		891
2010-2014	235,225		117,769		6,526

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Defined Contribution Plans

The Company has various defined contribution benefit plans that in total cover substantially all full-time employees.  Employees can make voluntary contributions in accordance with the provisions of their respective plan, which includes a 401(k) tax deferral option.  The Company expensed $8.2 million, $7.8 million and $6.9 million for matching contributions during 2004, 2003 and 2002, respectively.

8.Capital stock

As of December 31, 2004 and 2003, the Company was authorized to issue 800,000,000 shares of common stock of $.01 par value and 2,000,000 shares of preferred stock of $1.00 par value.

During 2004 and 2003, the Company repurchased 10.6 million and 2.3 million shares of its common stock at weighted average prices of $53.11 and $44.28, respectively.  These repurchases were made pursuant to the following authorizations:

During 2004 and 2003, 2.8 million and 2.3 million shares, respectively, were repurchased under a continuing authorization from its Board of Directors to repurchase shares of its outstanding common stock under which the cumulative number of shares repurchased, at the time of any repurchase, shall not exceed the sum of (1) the number of shares issued in connection with the exercise of stock options occurring on or after January 1, 2004, plus (2) 1% of the issued and outstanding common stock of the Company on January 1 of the current year, adjusted for any stock split.

The remaining 7.8 million shares repurchased during 2004 were completed under a separate authorization from the Company’s Board of Directors originally approved in 1990.  The original authorization provided for the repurchase of 16 million shares of common stock (adjusted for two 2-for-1 stock splits) and contained no dollar limit or expiration date.  As of the completion of the 2004 repurchases there were no remaining shares available under this authorization.

On April 24, 2004, the Company’s Board of Directors separately authorized the Company to buy back 20 million shares of its common stock with no dollar limit or expiration date.  No repurchases have been made under this authorization as of December 31, 2004.

The Company has designated 500,000 of the 2,000,000 authorized shares of preferred stock as Series A Junior Participating preferred stock (Preferred Stock). The Preferred Stock has a par value of $1 per share.  Each share of Preferred Stock, none of which is outstanding, is entitled to 10,000 votes per share (subject to adjustment) and other rights such that the value of a one ten-thousandth interest in a share of Preferred Stock should approximate the value of one share of common stock.

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The Preferred Stock is reserved for issuance in connection with the Company’s outstanding Preferred Stock purchase rights (Rights). On February 17, 2000, the Board of Directors of the Company declared a dividend of one Right for each outstanding share of common stock payable upon the close of business on August 20, 2000 to the shareholders of record on that date.  Under certain conditions, each Right entitles the holder to purchase one ten-thousandth of a share of Preferred Stock at an exercise price of $175, subject to adjustment.  The Rights are only exercisable if a person or group has: (1) acquired 15% or more of the outstanding common stock or; (2) has announced an intention to acquire 25% or more of the outstanding common stock (either (1) or (2) are a “Triggering Event”). If there is a 15% acquiring party, then each holder of a Right, other than the acquiring party, will be entitled to purchase, at the exercise price, Preferred Stock having a market value of two times the exercise price.

In addition, prior to the acquisition of 50% or more of the outstanding common stock by an acquiring party, the Board of Directors of the Company may exchange the Rights (other than the Rights of an acquiring party which have become void), in whole or in part, at an exchange ratio of one share of common stock or one ten-thousandth of a share of Preferred Stock (or a share of the Company’s preferred stock having equivalent rights, privileges, and preferences) per Right, subject to adjustment.  The Rights expire upon the close of business on August 20, 2010, subject to extension.

9.Stock options

The Company has stock option plans under which the Board of Directors may grant to employees nonqualified stock options with or without appreciation rights.  The options have an exercise price equal to the fair market value of the underlying stock at the date of grant and vest ratably over a four-year period with the first 25% becoming exercisable one year after the date of grant.  The options expire 10 years from the date of grant.  The number of shares of common stock available for future option grants under such plans were 13.8 million and 3.1 million at December 31, 2004 and 2003, respectively.

The following table summarizes the transactions of the stock option plans for the years ended December 31:

	2004					2003					2002
	Options			Price(a)		Options			Price(a)		Options			Price(a)
Options outstanding at January 1	9,029,429			$	30.78	8,682,868			$	27.05	8,528,028			$	22.09
Options granted	1,419,192			$	52.45	1,652,252			$	40.72	1,180,862			$	52.10
Options exercised	(3,418,874		)	$	18.23	(1,190,887		)	$	16.17	(957,972		)	$	13.08
Options forfeited	(134,663		)	$	46.75	(114,804		)	$	43.89	(68,050		)	$	36.93
Options outstanding at December 31	6,895,084			$	41.15	9,029,429			$	30.78	8,682,868			$	27.05
Weighted-average fair value of options granted during the year	$	17.30				$	13.87				$	19.27
Number of options exercisable at end of year	3,481,920			$	34.90	5,560,631			$	22.92	5,438,862			$	17.73

(a) Represents a weighted-average exercise price.

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Options outstanding at December 31, 2004:

Price range	Weighted-Average Contractual life	Options	Weighted-Average Exercise Price
$6.74 to $10	0.9	100,351	$	8.40
$10.01 to $20	2.8	466,435	13.20
$20.01 to $30	4.2	505,730	25.93
$30.01 to $40	5.3	906,905	34.71
$40.01 to $50	7.3	2,466,953	42.19
$50.01 to $60	8.2	2,448,710	52.30
		6,895,084

10.Earnings per share

The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31 (In thousands, except per share amounts):

	2004		2003		2002
Numerator
Net income used in computing basic and diluted earnings per share	$	889,766	$	760,928	$	580,217
Denominator
Denominator for basic earnings per share — weighted-average common shares	295,008		302,271		302,297
Effect of dilutive securities — employee stock option plan	1,844		2,199		2,861
Denominator for diluted earnings per share — adjusted weighted-average shares outstanding	296,852		304,470		305,158
Basic earnings per share	$	3.02	$	2.52	$	1.92
Diluted earnings per share	$	3.00	$	2.50	$	1.90

11.Fair value of financial instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, marketable securities, trade receivables, finance receivables, trade payables, finance debt, foreign currency contracts and interest rate swaps.  The book values of cash and cash equivalents, trade receivables and finance receivables are estimated to approximate their respective fair values.

Marketable Securities

The fair value of marketable securities is based primarily on quoted market prices.  During 2004 and 2003 the Company recorded an after-tax loss of $3.4 million and $2.2 million, respectively, in other comprehensive income to adjust marketable securities to their fair value as of December 31.

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Finance Debt

None of the Company’s debt instruments have readily ascertainable market values; however, the carrying values are considered to approximate their respective fair values.  See Note 4 to the consolidated financial statements for the terms and carrying values of the Company’s various debt instruments.

Foreign Currency Contracts

During 2004 and 2003 the Company utilized foreign currency contracts to hedge its sales transactions denominated in the euro.  The foreign currency contracts were designated as cash flow hedges and generally have lives less than one year.  During 2004 and 2003, these hedges were highly effective throughout the year.  The fair value of foreign currency contracts was based on quoted market prices.  Information related to the Company’s foreign currency contracts as of December 31 is as follows (in millions):

	2004			2003
Euro value	€	235.0		€	240.0
Notional U.S. dollar value	$	284.7		$	268.9
Fair value of contracts recorded as current liabilities	$	(34.7	)	$	(31.0	)
Unrealized loss recorded in accumulated other comprehensive income (loss), net of tax	$	(20.4	)	$	(15.8	)

Unrealized losses, net of taxes, as of December 31, 2003 of $15.8 million were reclassified to earnings during 2004 when the related sales transactions affected income.  The Company expects that the unrealized losses, net of taxes, as of December 31, 2004, of $20.4 million will be reclassified to earnings within one year.

Interest Rate Swaps – Securitization Transactions

During 2004 and 2003, HDFS utilized interest rate swaps to reduce the impact of fluctuations in interest rates on its securitization transactions.  These interest rate derivatives are designated as cash flow hedges and generally have a life of less than six months.  During 2004 and 2003, the hedges were highly effective and, as a result, the amount of hedge ineffectiveness recognized during the year was insignificant.  Information related to these swap agreements as of December 31 is as follows (in millions):

	2004		2003
Notional value	$	323.0	$	251.8
Fair value of swaps recorded as current assets (liabilities)	$	0.9	$	(0.3	)
Unrealized gain (loss) recorded in accumulated other comprehensive income (loss), net of tax	$	0.5	$	(0.2	)

Unrealized losses of $0.2 million, net of taxes, as of December 31, 2003, were reclassified to earnings during 2004 upon the sale of the respective motorcycle loans.  HDFS expects to reclassify $0.5 million of the unrealized gains, net of taxes, as of December 31, 2004, to earnings within one year when HDFS completes a securitization of retail motorcycle loans.

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Interest Rate Swaps – Commercial Paper

During 2004 and 2003, HDFS entered into interest rate swap agreements that effectively convert a portion of its floating-rate debt to a fixed-rate basis for a period of four years.  The differential paid or received on these swaps is recognized on an accrual basis as an adjustment to interest expense.  As of December 31, 2004 and 2003, the agreements were designated as cash flow hedges.  During 2004 and 2003, the hedges were highly effective, and as a result, the amount of hedge ineffectiveness recognized during the year was insignificant.  Information related to the swap agreements as of December 31 is as follows (in millions):

	2004		2003
Notional value	$	200.0	$	150.0
Fair value of swap recorded as current assets	$	5.8	$	3.3
Unrealized gain recorded in accumulated other comprehensive income(loss), net of tax	$	3.7	$	2.2

Unrealized losses of $0.8 million, net of taxes, as of December 31, 2003, were reclassified to earnings during 2004 upon payment of the related interest.  HDFS expects to reclassify $0.8 million of the unrealized gains, net of taxes, as of December 31, 2004, to earnings within one year.  The unrealized gains will be offset by the payment of variable interest associated with the floating rate debt.

Interest Rate Swaps – Medium-Term Notes

During 2003, HDFS also entered into an interest rate swap agreement that effectively converts a portion of its fixed-rate debt to a floating-rate basis for a period of five years.  The differential paid or received on this swap is recognized on an accrual basis as an adjustment to interest expense.  As of December 31, 2004 and 2003, the agreement was designated as a fair value hedge.  During 2004 and 2003, the hedge was highly effective and, as a result, there was no ineffectiveness recognized on this hedge during the year.  Information related to this swap agreement as of December 31 is as follows (in millions):

	2004			2003
Notional value	$	400.0		$	400.0
Fair value of swap recorded as current liabilities	$	(5.0	)	$	(1.1	)

No ready market exists for swaps utilized by HDFS.  The interest rate swaps are valued using broker quotations.

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12.Business segments and foreign operations

Business segments

The Company operates in two business segments: Motorcycles and Financial Services.  The Company’s reportable segments are strategic business units that offer different products and services.  They are managed separately based on the fundamental differences in their operations.

The Motorcycles segment consists primarily of the group of companies doing business as Harley-Davidson Motor Company and Buell Motorcycle Company.  The Motorcycles segment designs, manufactures and sells primarily heavyweight (engine displacement of 651+cc) touring, custom and sport motorcycles and a broad range of related products which include motorcycle parts and accessories and riding apparel.

The Financial Services segment consists of Harley-Davidson Financial Services, Inc.  HDFS is engaged in the business of financing and servicing wholesale inventory receivables and consumer retail installment sales contracts primarily for the purchase of motorcycles.  HDFS conducts business in the United States, Canada and Europe.

Information by industry segment is set forth below for the years ended December 31 (in thousands):

	2004			2003			2002
Motorcycles net revenue and Financial Services income:
Motorcycles net revenue	$	5,015,190		$	4,624,274		$	4,090,970
Financial Services income	305,262			279,459			211,500
	$	5,320,452		$	4,903,733		$	4,302,470
Income from operations:
Motorcycles	$	1,189,519		$	996,889		$	791,121
Financial Services	188,600			167,873			104,227
General corporate expenses	(16,628		)	(15,498		)	(12,646		)
	$	1,361,491		$	1,149,264		$	882,702

Information by industry segment is set forth below as of December 31 (in thousands):

	Motorcycles		Financial Services		Corporate		Consolidated
2004
Identifiable assets	$	1,646,251	$	2,223,796	$	1,613,246	$	5,483,293
Depreciation	206,420		7,536		156		214,112
Net capital expenditures	188,122		25,171		257		213,550
2003
Identifiable assets	$	1,778,566	$	1,821,142	$	1,323,380	$	4,923,088
Depreciation	191,118		5,555		245		196,918
Net capital expenditures	219,592		7,263		375		227,230
2002
Identifiable assets	$	1,541,110	$	1,523,542	$	796,565	$	3,861,217
Depreciation	171,389		4,261		128		175,778
Net capital expenditures	318,048		5,728		90		323,866

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Geographic information

Included in the consolidated financial statements are the following amounts relating to geographic locations for the years ended December 31 (in thousands):

	2004		2003		2002
Motorcycles net revenue(a):
United States	$	4,097,882	$	3,807,707	$	3,416,432
Europe	477,962		419,052		337,463
Japan	192,720		173,547		143,298
Canada	136,721		134,319		121,257
Other foreign countries	109,905		89,649		72,520
	$	5,015,190	$	4,624,274	$	4,090,970
Financial Services income(a):
United States	$	283,837	$	260,551	$	199,380
Europe	9,538		8,834		4,524
Canada	11,887		10,074		7,596
	$	305,262	$	279,459	$	211,500
Long-lived assets(b):
United States	$	1,246,808	$	1,400,772	$	1,151,702
Other foreign countries	44,300		41,804		36,138
	$	1,291,108	$	1,442,576	$	1,187,840

(a)  Net revenue and income is attributed to geographic regions based on location of customer.

(b)  Long-lived assets include all long-term assets except those specifically excluded under SFAS No. 131, such as deferred income taxes and finance receivables.

13.Related party transactions

The Company has recorded the following material related party transactions.  A director of the Company is Chairman and Chief Executive Officer and an equity owner of Fred Deeley Imports Ltd. (Deeley Imports), the exclusive distributor of the Company’s motorcycles in Canada.  During 2004, 2003 and 2002, the Company recorded revenue and financial services income from Deeley Imports of $137.6 million, $135.2 million and $120.3 million, respectively and had accounts receivables balances due from Deeley Imports of $13.1 million and $19.4 million at December 31, 2004 and 2003, respectively.  All such products were provided in the ordinary course of business at prices and on terms and conditions determined through arm’s-length negotiation.

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SUPPLEMENTARY DATA

Quarterly financial data (unaudited)

(In millions, except per share data)

	1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
	Mar 28, 2004		Mar 30, 2003		June 27, 2004		June 29, 2003		Sep 26, 2004		Sep 28, 2003		Dec 31, 2004		Dec 31, 2003
Net revenue	$	1,165.7	$	1,113.7	$	1,327.8	$	1,218.9	$	1,300.7	$	1,133.6	$	1,221.0	$	1,158.1
Gross profit	440.1		403.0		503.4		443.2		494.6		403.3		461.4		416.0
Income before taxes	317.2		284.3		383.3		308.8		355.0		290.2		323.9		282.8
Net income	$	204.6	$	186.2	$	247.2	$	202.2	$	229.0	$	190.1	$	209.0	$	182.4
Earnings per common share:
Basic	$	.69	$	.62	$	.84	$	.67	$	.78	$	.63	$	.71	$	.60
Diluted	$	.68	$	.61	$	.83	$	.66	$	.77	$	.62	$	.71	$	.60

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Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None

Item 9A.  Controls and Procedures  

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this Annual Report on Form 10-K, the Company’s management evaluated, with the participation of the Company’s Chairman and Chief Executive Officer and Vice President and Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).  Based upon their evaluation of these disclosure controls and procedures, the Chairman and Chief Executive Officer and the Vice President and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the date of such evaluation to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Annual Report on Form 10-K was being prepared.

Management’s Report on Internal Control over Financial Reporting

The report of management required under this Item 9A is contained in Item 8 of Part II of this Annual Report on Form 10-K under the heading “Management’s Report on Internal Control over Financial Reporting”

Attestation Report of Independent Registered Public Accounting Firm

The attestation report required under this Item 9A is contained in Item 8 of Part II of this Annual Report on Form 10-K under the heading “Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting.”

Changes in Internal Controls

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART III

Item 10.  Directors and Executive Officers of the Registrant

The information included or to be included in the Company’s definitive proxy statement for the 2005 annual meeting of shareholders, which will be filed on or about March 21, 2005 (the Proxy Statement) under the captions “Election of Directors”, “Section 16(a) Beneficial Ownership Reporting Compliance” and “Audit Committee Report” is incorporated by reference herein.

The Company has adopted the Harley-Davidson, Inc. Financial Code of Ethics applicable to the Company’s chief executive officer, the chief financial officer, the principal accounting officer and the controller and other persons performing similar functions. The Company has posted a copy of the Harley-Davidson, Inc. Financial Code of Ethics on the Company’s website at www.harley-davidson.com. The Company intends to satisfy the disclosure requirements under Item 10 of Form 8-K regarding amendments to, or waivers from, the Harley-Davidson, Inc. Financial Code of Ethics by posting such information on its website at www.harley-davidson.com.  The Company is not including the information contained on or available through its website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K.

Item 11.  Executive Compensation

The information included or to be included in the Proxy Statement under the caption “Executive Compensation” up to, but not including the caption “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated by reference herein.

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Item 12.  Security Ownership of Certain Beneficial Owners and Management

Information included or to be included in the Proxy Statement under the caption “Common Stock Ownership of Certain Beneficial Owners and Management” is incorporated by reference herein.

The following table provides information about the Company’s equity compensation plans (including individual compensation arrangements) as of December 31, 2004.

Plan category	Number of securities to be issued upon the exercise of outstanding options	Weighted-average exercise price of outstanding options		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by shareholders:
Management employees	6,662,455	$	41.26	13,567,562
Equity compensation plans not submitted to shareholders:
Union employees -
Kansas City, MO	11,709	$	21.19	24,634
York, PA	191,620	$	38.88	50,875
Non employees -
Board of Directors	29,300	$	38.27	130,202
	232,629	$	37.91	205,711
Total all plans	6,895,084	$	41.15	13,773,273

Plan documents for each of the Company’s equity compensation plans have been filed with the Securities and Exchange Commission on a timely basis and are included in the list of exhibits to this annual report on Form 10-K.  Equity compensation plans not submitted to shareholders for approval were adopted prior to current regulations requiring such approval and have not been materially altered since adoption.

The material features of the union employees’ stock option awards are the same as those of the management employees’ stock option awards.  Under the Company’s management and union plans, stock options have an exercise price equal to the fair market value of the underlying stock at the date of grant, expire ten years from the date of grant and vest ratably over a four-year period, with the first 25 percent becoming exercisable one year after the date of grant.

Effective December 31, 2002, non-employee directors of the Company’s Board of Directors were no longer eligible to receive stock options.  Prior to December 31, 2002, under the Board of Directors’ plan, each non-employee director who served as a member of the Board immediately following the annual meeting of shareholders was automatically granted an immediately exercisable stock option for the purchase of such number of shares of Common Stock equal to three times the annual retainer fee for directors divided by the fair market value of a share of Common Stock on the day of grant (rounded up to the nearest multiple of 100). Board of Director stock options have an exercise price equal to the fair market value of the underlying stock at the date of grant and expire ten years from the date of grant.

78

In addition, a non-employee Director may elect to receive 50% or 100% of the annual fee to be paid in each calendar year in the form of Common Stock based upon the fair market value of the Common Stock at the time of the annual meeting of shareholders. Directors must receive a minimum of one-half of their annual retainer in Company Common Stock until the Director reaches the Director stock ownership guidelines, defined below.

In August 2002, the Board approved “Director and Senior Executive Stock Ownership Guidelines” (Ownership Guidelines) which were revised in August 2004.  The Ownership Guidelines stipulate that all directors hold 5,000 shares of the Company’s Common Stock and senior executives hold from 5,000 to 30,000 shares of the Company’s Common Stock depending on their level.  The directors and senior executives have five years from January 2003 or the date they are elected a director or promoted to a senior executive to accumulate the appropriate number of shares of the Company’s Common Stock.

Item 13.  Certain Relationships and Related Transactions

The information included or to be included in the Proxy Statement under the caption “Certain Transactions” is incorporated by reference herein.

Item 14.  Principal Accounting Fees and Services

The information included or to be included in the Proxy Statement under the caption “Fees Paid to Ernst & Young LLP” is incorporated by reference herein.

79

PART IV

Item 15.  Exhibits and Financial Statement Schedules

(a)	1.	Financial statements - The financial statements listed in the accompanying Index to Consolidated Financial Statements and Financial Statement Schedules are filed as part of this annual report and such Index to Consolidated Financial Statements and Financial Statement Schedules is incorporated herein by reference.
	2.	Financial statement schedules - The financial statement schedule listed in the -accompanying Index to Consolidated Financial Statements and Financial Statement Schedules is filed as part of this annual report and such Index to Consolidated Financial Statements and Financial Statement Schedules is incorporated herein by reference.
	3.	Exhibits - The exhibits listed on the accompanying List of Exhibits are filed as part of this annual report and such List of Exhibits is incorporated herein by reference.

80

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES

[Item 15(a) 1 and 2]

Consolidated statements of income for each of the three years in the period ended December 31, 2004

Consolidated balance sheets at December 31, 2004 and 2003

Consolidated statements of cash flows for each of the three years in the period ended December 31, 2004

Consolidated statements of shareholders’ equity for each of the three years in the period ended December 31, 2004

Notes to consolidated financial statements

Consolidated financial statement schedules for each of the three years in the period ended December 31, 2004

All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedules.

81

LIST OF EXHIBITS

[Items 15(a)(3) and 15(c)]

Exhibit No.	Description
3.1	Restated Articles of Incorporation
3.2	By-Laws as amended February 15, 2005
4.1	Form of Rights Agreement between the Registrant and Firstar Bank, N.A. dated February 17, 2000
4.2	Form of Rights Agent Agreement between the Registrant and Computershare Investor Services, LLC
4.3	Harley-Davidson Financial Services $1.1 Billion Five-Year Revolving Credit Facility (the Registrant has instruments that define the rights of holders of long-term debt that are not being filed with this Annual Report in reliance upon Item 601(b)(4)(iii) of Regulation S-K. The Registrant agrees to furnish to the Securities and Exchange Commission, upon request, copies of these instruments)
10.1*	Form of Employment Agreement between the Registrant and Mr. Bleustein
10.2*	Harley-Davidson, Inc. 1990 Stock Option Plan as amended through December 9, 1998
10.3*	Harley-Davidson, Inc 1995 Stock Option Plan as amended through December 8, 1999
10.4*	Harley-Davidson, Inc. Director Stock Plan
10.5*	Form of Transition Agreement between the Registrant and each of Messrs. Bleustein, Brostowitz, Flickinger, Dannehl, Hevey, Hutchinson, McCaslin, Sutton and Ziemer, Ms. Lione and Ms. Zarcone.
10.6*	Deferred Compensation Plan
10.7*	Form of Life Insurance Agreement between the Registrant and each of Messrs. Bleustein, Brostowitz, Hutchinson, McCaslin and Ziemer and Ms. Lione
10.8*	Harley-Davidson, Inc. Corporate Short Term Incentive Plan as amended April 24, 2004
10.9*	Form of Restricted Stock Agreement between the Registrant and Mr. McCaslin

*  Represents a management contract or compensatory plan, contract or arrangement in which a   director or named executive officer of the Company participated.

82

Exhibit No.	Description
10.10*	Form of Severance Benefits Agreement between the Registrant and each of Messrs. Bleustein, Brostowitz, Flickinger, Dannehl, Hevey, Hutchinson, McCaslin, Sutton and Ziemer and Ms. Lione.
10.11*	Form of Supplemental Executive Retirement Plan Agreement between the Registrant and each of Mssrs. Bleustein, Ziemer and McCaslin.
10.12*	Harley-Davidson Pension Benefit Restoration Plan
10.13*	Description of Post-Retirement Life Insurance Equivalent
10.14	Harley-Davidson, Inc. 1998 Non-Exempt Employee Stock Option Plan
10.15*	Employment Agreement between the Registrant and Ms. Zarcone
10.16	2001 York Hourly- Paid Employees Stock Option Plan
10.17*	Deferred Long-Term Incentive Plan approved May 4, 2002
10.18*	Director Compensation Policy effective May 3, 2003
10.19*	Deferred Compensation Plan for Nonemployee Directors initially effective May 1, 1995 amended and restated May 1, 2001 and amended May 3, 2003
10.20*	Split Dollar Agreement between HDFS and the Donna Josephine Frett Zarcone Irrevocable Trust dated March 30, 1999
10.21*	Amendment to Split Dollar Agreement between HDFS and the Donna Josephine Frett Zarcone Irrevocable Trust dated December 19, 2002
10.22*	Harley-Davidson, Inc. 2004 Incentive Stock Plan
10.23*	Form of Notice of Grant of Stock Options and Option Agreement of Harley-Davidson, Inc. under the Harley-Davidson Inc. 1995 Stock Option Plan and the Harley-Davidson, Inc. 2004 Incentive Stock Plan
10.24*	Form of Notice of Special Grant of Stock Options and Option Agreement of Harley-Davidson, Inc under the Harley-Davidson Inc. 1995 Stock Option Plan and the Harley-Davidson, Inc. 2004 Incentive Stock Plan

*Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated.

83

Exhibit No.	Description
10.25*	Form of Notice of Award of Restricted Stock and Restricted Stock Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2004 Incentive Stock Plan
10.26*	Form of Notice of Special Award of Restricted Stock and Restricted Stock Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2004 Incentive Stock Plan
21	List of Subsidiaries
23	Consent of Independent Registered Public Accounting Firm
31.1	Chief Executive Officer Certification pursuant to Rule 13a-14(a)
31.2	Chief Financial Officer Certification pursuant to Rule 13a-14(a)
32	Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. §1350

*Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated.

84

Schedule II

HARLEY-DAVIDSON, INC.

CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

Years ended December 31, 2004, 2003 and 2002

(In thousands)

Classification	Balance at Beginning of year		Additions charged to expense		Deductions(1)			Balance at end of year
Accounts receivable- Allowance for doubtful accounts:
2004	$	9,368	$	2,462	$	(1,535	)	$	10,295
2003	4,259		6,485		(1,376		)	9,368
2002	2,619		1,782		(142		)	4,259
Finance receivables- Allowance for doubtful accounts:
2004	$	31,311	$	3,070	$	(4,104	)	$	30,277
2003	31,045		4,076		(3,810		)	31,311
2002	28,684		6,167		(3,806		)	31,045
Inventories- Allowance for obsolescence(2):
2004	$	16,956	$	8,410	$	(10,915	)	$	14,451
2003	17,150		8,311		(8,505		)	16,956
2002	13,037		7,283		(3,170		)	17,150

(1)Deductions represent amounts written off to the reserve, net of recoveries.  Included in the Finance receivables recoveries are $3.7 million and $1.3 million of recoveries in 2004 and 2003, respectively, received by HDFS from HDMC.  These recoveries relate to certain guarantees provided by HDMC on wholesale loans to European Harley-Davidson dealers.   At December 31, 2004 and 2003, HDMC has $3.3 million and $3.5 million, respectively, included in the accounts receivable allowance for doubtful accounts related to outstanding guarantees.

(2)Stated in last-in, first-out (LIFO) cost.

85

SIGNATURES

Pursuant to the requirements of Section 13, or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 11, 2005.

HARLEY-DAVIDSON, INC.

By:	/S/ Jeffrey L. Bleustein
Jeffrey L. Bleustein
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 11, 2005.

Name	Title
/S/ Jeffrey L. Bleustein	Chairman, Chief Executive Officer and Director
Jeffrey L. Bleustein	(Principal executive officer)
/S/ James L. Ziemer	Vice-President and Chief Financial Officer and Director
James L. Ziemer	(Principal financial officer)
/S/ James M. Brostowitz	Vice-President and Treasurer
James M. Brostowitz	(Principal accounting officer)
/S/ Barry K. Allen	Director
Barry K. Allen
/S/ Richard I. Beattie	Director
Richard I. Beattie
/S/ George H. Conrades	Director
George H. Conrades
/S/ Judson C. Green	Director
Judson C. Green
/S/ Donald A. James	Director
Donald A. James
/S/ Sara L. Levinson	Director
Sara L. Levinson
/S/ George L. Miles	Director
George L. Miles
/S/ James A. Norling	Director
James A. Norling

86

INDEX TO EXHIBITS

[Items 15(a)(3) and 15(c)]

Exhibit No	Description
3.1	Restated Articles of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Annual Report on form 10-K for the year ended December 31, 1999 (File No. 1-9183))
3.2	By-Laws as amended February 15, 2005 (incorporated herein by reference to Exhibit 99.5 to the Registrant’s Current Report on form 8-K filed February 22, 2005 (File No. 1-9183))
4.1	Form of Rights Agreement between the Registrant and Firstar Bank, N.A. dated February 17, 2000 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-A dated February 18, 2000 (File No. 1-9183))
4.2	Form of Rights Agent Agreement between the Registrant and Computershare Investor Services, LLC (incorporated herein by reference to Exhibit 4.2 to the Registrant’s Annual Report on form 10-K for the year ended December 31, 2000 (File No. 1-9183))
4.3	Harley-Davidson Financial Services $1.1 Billion Five-Year Revolving Credit Facility (the Registrant has instruments that define the rights of holders of long-term debt that are not being filed with this Annual Report in reliance upon Item 601(b)(4)(iii) of Regulation S-K. The Registrant agrees to furnish to the Securities and Exchange Commission, upon request, copies of these instruments)
10.1*	Form of Employment Agreement between the Registrant and Mr. Bleustein (incorporated by reference from Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1 (File No. 33-5871))
10.2*	Harley-Davidson, Inc. 1990 Stock Option Plan as amended through December 9, 1998 (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Annual Report on form 10-K for the year ended December 31, 2000 (File No. 1-9183))
10.3*	Harley-Davidson, Inc. 1995 Stock Option Plan as amended through December 8, 1999 (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Annual Report on form 10-K for the year ended December 31, 2000 (File No. 1-9183))
10.4*	Harley-Davidson, Inc. Director Stock Plan (incorporated by reference to Exhibit 10.1 to the Registrants’ Quarterly Report on Form 10-Q for the quarter ended June 29, 2003 (File No. 1-9183))

*Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated

87

Exhibit No.	Description
10.5*	Form of Transition Agreement between the Registrant and each of Messrs. Bleustein, Brostowitz, Flickinger, Dannehl, Hevey, Hutchinson, McCaslin, Sutton and Ziemer, Ms. Lione and Ms. Zarcone. (incorporated herein by reference to Exhibit 10.7 to the Registrants’ Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-9183))
10.6*	Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.7 to the Registrant’s Annual Report on form 10-K for the year ended December 31, 2000 (File No. 1-9183))
10.7*	Form of Life Insurance Agreement between the Registrant and each of Messrs. Bleustein, Brostowitz, Hutchinson, McCaslin and Ziemer and Ms. Lione (incorporated herein by reference from Exhibit 10.10 to the Registrants’ Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-9183))
10.8*	Harley-Davidson, Inc. Corporate Short Term Incentive Plan as amended April 24, 2004 (incorporated herein by reference from Exhibit 10.2 to the Registrants’ Quarterly Report on Form 10-Q for the period ended March 28, 2004 (File No. 1-9183))
10.9*	Form of Restricted Stock Agreement between the Registrant and Mr. McCaslin (incorporated herein by reference to Exhibit 10.11 to the Registrants’ Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-9183))
10.10*	Form of Severance Benefits Agreement between the Registrant and each of Messrs. Bleustein, Brostowitz, Flickinger, Dannehl, Hevey, Hutchinson, McCaslin, Sutton and Ziemer and Ms. Lione. (incorporated herein by reference to Exhibit 10.12 to the Registrants’ Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-9183))
10.11*	Form of Supplemental Executive Retirement Plan Agreement between the Registrant and each of Messrs. Bleustein, McCaslin and Ziemer (incorporated herein by reference from Exhibit 10.2 to the Registrants’ Quarterly Report on Form 10-Q for the period ended March 31, 1996 (File No. 1-9183))
10.12*	Harley-Davidson Pension Benefit Restoration Plan (incorporated herein by reference from Exhibit 10.1 to the Registrants’ Quarterly Report on Form 10-Q for the period ended March 31, 1996 (File No. 1-9183))
10.13*	Description of Post-Retirement Life Insurance Equivalent (incorporated herein by reference to Exhibit 10.15 to the Registrants’ Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-9183))

*Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated

88

Exhibit No.	Description
10.14	Harley-Davidson, Inc. 1998 Non-Exempt Employee Stock Option Plan
	(incorporated by reference to Exhibit 4.1 to the Registrants’ Registration Statement on Form S-8 (File No. 333-75347))
10.15*	Employment Agreement between the Registrant and Ms. Zarcone (incorporated herein by reference to Exhibit 10.15 to the Registrants’ Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-9183))
10.16	2001 York Hourly- Paid Employees Stock Option Plan (incorporated herein by reference to Exhibit 10.7 to the Registrant’s Annual Report on form 10-K for the year ended December 31, 2000 (File No. 1-9183))
10.17*	Deferred Long-Term Incentive Plan approved May 4, 2002 (incorporated herein by reference from Exhibit 10.1 to the Registrants’ Quarterly Report on Form 10-Q for the period ended June 30, 2002 (File No. 1-9183))
10.18*	Director Compensation Policy effective May 3, 2003
10.19*	Deferred Compensation Plan for Nonemployee Directors initially effective May 1, 1995 amended and restated May 1, 2001 and amended May 3, 2003 (incorporated herein by reference from Exhibit 10.2 to the Registrants’ Quarterly Report on Form 10-Q for the period ended June 29, 2003 (File No. 1-9183))
10.20*	Split Dollar Agreement between HDFS and the Donna Josephine Frett Zarcone Irrevocable Trust dated March 30, 1999 (incorporated herein by reference from Exhibit 10.4 to the Registrants’ Quarterly Report on Form 10-Q for the period ended June 30, 2002 (File No. 1-9183))
10.21*	Amendment to Split Dollar Agreement between HDFS and the Donna Josephine Frett Zarcone Irrevocable Trust dated December 19, 2002 (incorporated herein by reference to Exhibit 10.22 to the Registrant’s Annual Report on form 10-K for the year ended December 31, 2002 (File No. 1-9183))
10.22*	Harley-Davidson, Inc. 2004 Incentive Stock Plan (incorporated herein by reference from Exhibit 10.1 to the Registrants’ Quarterly Report on Form 10-Q for the period ended March 28, 2004 (File No. 1-9183))

*Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated.

89

Exhibit No.	Description
10.23*	Form of Notice of Grant of Stock Options and Option Agreement of Harley-Davidson, Inc. under the Harley-Davidson Inc. 1995 Stock Option Plan and the Harley-Davidson, Inc. 2004 Incentive Stock Plan (incorporated herein by reference to Exhibit 99.1 to the Registrant’s Current Report on form 8-K filed February 22, 2005 (File No. 1-9183))
10.24*	Form of Notice of Special Grant of Stock Options and Option Agreement of Harley-Davidson, Inc under the Harley-Davidson Inc. 1995 Stock Option Plan and the Harley-Davidson, Inc. 2004 Incentive Stock Plan (incorporated herein by reference to Exhibit 99.2 to the Registrant’s Current Report on form 8-K filed February 22, 2005 (File No. 1-9183))
10.25*	Form of Notice of Award of Restricted Stock and Restricted Stock Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2004 Incentive Stock Plan (incorporated herein by reference to Exhibit 99.3 to the Registrant’s Current Report on form 8-K filed February 22, 2005 (File No. 1-9183))
10.26*	Form of Notice of Special Award of Restricted Stock and Restricted Stock Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2004 Incentive Stock Plan (incorporated herein by reference to Exhibit 99.4 to the Registrant’s Current Report on form 8-K filed February 22, 2005 (File No. 1-9183))
21	List of Subsidiaries
23	Consent of Independent Registered Public Accounting Firm
31.1	Chief Executive Officer Certification pursuant to Rule 13a-14(a)
31.2	Chief Financial Officer Certification pursuant to Rule 13a-14(a)
32	Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. §1350

*Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated.

90

EX-4.3

EXHIBIT 4.3

EXECUTION COPY

CREDIT AGREEMENT

Dated as of September 16, 2004

among

HARLEY-DAVIDSON FUNDING CORP., as the U.S. Borrower,

HARLEY-DAVIDSON FINANCIAL SERVICES EUROPE LIMITED, as the U.K.
Borrower,

and

THE TO BE DESIGNATED CANADIAN BORROWER, as the Canadian Borrower,

HARLEY-DAVIDSON FINANCIAL SERVICES, INC.,

HARLEY-DAVIDSON FINANCIAL SERVICES INTERNATIONAL, INC. and

HARLEY-DAVIDSON CREDIT CORP.,
as Guarantors,

THE INSTITUTIONS FROM TIME TO TIME PARTY HERETO,
as Lenders,

JPMORGAN CHASE BANK,
as Global Administrative Agent and Global Swing Line Lender,

CITIBANK, N.A.,
as Syndication Agent and

BNP PARIBAS,
as Documentation Agent

J.P. MORGAN SECURITIES INC. AND CITIGROUP GLOBAL MARKETS, INC.,
as Co-Lead Arrangers and Joint Book Runners

TABLE OF CONTENTS

ARTICLE I		DEFINITIONS
	1.1	Certain Defined Terms
	1.2	Currency Equivalents
ARTICLE II		THE CREDITS
	2.1	Syndicated Global Loans
	2.2	Syndicated Canadian Advances
	2.3	Payments of Loans
	2.4	Reduction/Increase of Commitments
	2.5	Method of Borrowing Advances
	2.6	Method of Selecting Types and Interest Periods; Determination of Applicable Margins
	2.7	Minimum Amount of Each Syndicated Global Advance and Syndicated Canadian Advance
	2.8	Method of Selecting Types and Interest Periods for Conversion and Continuation of Syndicated Global Advances, Syndicated Canadian Advances and Swing Line Loans
	2.9	Swing Line Loans
	2.10	The Bid Rate Advances
	2.11	Default Rate
	2.12	Method of Payment
	2.13	Notes, Telephonic Notices
	2.14	Promise to Pay; Interest and Fees; Interest Payment Dates; Interest and Fee Basis; Loan Accounts
	2.15	Notification of Advances, Interest Rates, Prepayments and Aggregate Commitment Reductions
	2.16	Lending Installations
	2.17	Non-Receipt of Funds by the Global Administrative Agent
	2.18	Termination Date
	2.19	Judgment Currency
	2.20	Intentionally Omitted
	2.21	Canadian Borrower as Borrower
	2.22	Termination as Borrower
ARTICLE III		CHANGE IN CIRCUMSTANCES
	3.1	Yield Protection
	3.2	Changes in Capital Adequacy Regulations
	3.3	Availability of Types of Advances
	3.4	Funding Indemnification

i

	3.5	Taxes
	3.6	Mitigation; Lender Statements; Survival of Indemnity
	3.7	Non-U.S. Reserve Costs or Fees
	3.8	Replacement of Affected Lenders
ARTICLE IV		CONDITIONS PRECEDENT
	4.1	Initial Loans
	4.2	Each Loan
	4.3	Initial Advance to the Canadian Borrower
ARTICLE V		REPRESENTATIONS AND WARRANTIES
	5.1	Corporate Existence and Standing
	5.2	Authorization and Validity
	5.3	No Conflict; Government Consent
	5.4	Financial Statements
	5.5	Material Adverse Change
	5.6	Taxes
	5.7	Litigation and Contingent Liabilities
	5.8	Subsidiaries
	5.9	ERISA
	5.10	Accuracy of Information
	5.11	Securities Activities
	5.12	Material Agreements
	5.13	Compliance with Laws
	5.14	Assets and Properties
	5.15	Statutory Indebtedness Restrictions
	5.16	Foreign Employee Benefit Matters
ARTICLE VI		COVENANTS
	6.1	Reporting
	6.2	Affirmative Covenants
	6.3	Negative Covenants
	6.4	Financial Covenants
ARTICLE VII		DEFAULTS
	7.1	Defaults
ARTICLE VIII		ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS AND REMEDIES
	8.1	Remedies
	8.2	Defaulting Lender
	8.3	Amendments
	8.4	Preservation of Rights

ii

ARTICLE IX		GENERAL PROVISIONS
	9.1	Survival of Representations
	9.2	Governmental Regulation
	9.3	Headings
	9.4	Entire Agreement
	9.5	Several Obligations; Benefits of this Agreement
	9.6	Expenses; Indemnification
	9.7	Numbers of Documents
	9.8	Accounting
	9.9	Severability of Provisions
	9.10	Nonliability of Lenders
	9.11	CHOICE OF LAW
	9.12	WAIVER OF JURY TRIAL
	9.13	No Strict Construction
	9.14	USA PATRIOT ACT
ARTICLE X		THE GLOBAL ADMINISTRATIVE AGENT
	10.1	Appointment; Nature of Relationship
	10.2	Powers
	10.3	General Immunity
	10.4	No Responsibility for Loans, Creditworthiness, Recitals, Etc.
	10.5	Action on Instructions of Lenders
	10.6	Employment of the Global Administrative Agent and Counsel
	10.7	Reliance on Documents; Counsel
	10.8	The Global Administrative Agent’s Reimbursement and Indemnification
	10.9	Rights as a Lender
	10.10	Lender Credit Decision
	10.11	Successor Global Administrative Agent
	10.12	Co-Agents, Documentation Agent, Syndication Agent, etc.
ARTICLE XI		SETOFF; RATABLE PAYMENTS
	11.1	Setoff
	11.2	Ratable Payments
ARTICLE XII		GUARANTEE
ARTICLE XIII		BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
	13.1	Successors and Assigns
	13.2	Participations
	13.3	Assignments
	13.4	Confidentiality
	13.5	Dissemination of Information

iii

	13.6	Non-Use of HDFS’ Licensed Marks
ARTICLE XIV		NOTICES
	14.1	Giving Notice
	14.2	Change of Address
ARTICLE XV		COUNTERPARTS
	15.1	Counterparts

iv

EXHIBITS AND SCHEDULES

Exhibits

EXHIBIT A	—	Commitments (Definitions)
EXHIBIT B-1	—	Form of Syndicated Global Note (Definitions)
EXHIBIT B-2	—	Form of Bid Rate Note (Definitions)
EXHIBIT C	—	Form of Assignment Agreement (§13.3)
EXHIBIT D	—	List of Closing Documents (§ 4.1)
EXHIBIT E	—	Form of Officer’s Certificate (§§ 4.2, 6.1(A)(iv))
EXHIBIT F	—	Form of Compliance Certificate (§§ 4.2, 6.1(A)(iv))
EXHIBIT G	—	Form of Syndicated Canadian Addendum (Definitions)
EXHIBIT H	—	Form of Assumption Letter (Definitions)
EXHIBIT I	—	Form of Commitment and Acceptance (§ 2.4(b))

v

Schedules

Schedule I	—	Funding Protocols re: Syndicated Global Loans and Syndicated Canadian Loans (Definitions, § 2.6)
Schedule II	—	Funding Protocols re: Swing Line Loans (§ 2.9)
Schedule III	—	Mandatory Cost (Definitions)
Schedule 1.1.3	—	Permitted Existing Liens (Definitions)
Schedule 5.6	—	Taxes (§ 5.6)
Schedule 5.8	—	Subsidiaries (§ 5.8)
Schedule 6.3	—	Intercompany Subordination Terms (§ 6.3)

vi

CREDIT AGREEMENT

This Credit Agreement dated as of September 16, 2004 is entered into among Harley-Davidson Funding Corp., a Nevada corporation, Harley-Davidson Financial Services Europe Limited, a company incorporated under the laws of England and Wales, the to be designated Canadian Borrower, if any, Harley-Davidson Financial Services, Inc., a Delaware corporation, Harley-Davidson Financial Services International, Inc., a Delaware corporation, Harley-Davidson Credit Corp., a Nevada corporation, the to be designated Canadian Guarantor, if any, the institutions from time to time a party hereto as Lenders, whether by execution of this Agreement or an assignment and acceptance pursuant to Section 13.3, JPMorgan Chase Bank, as the Global Administrative Agent and the Global Swing Line Lender, Citibank, N.A., in its capacity as Syndication Agent and BNP Paribas, in its capacity as Documentation Agent.  The parties hereto agree as follows:

ARTICLE I  DEFINITIONS

1.1  Certain Defined Terms.  In addition to the terms defined in other sections of this Agreement, the following terms used in this Agreement shall have the following meanings, applicable both to the singular and the plural forms of the terms defined:

As used in this Agreement:

“Absolute Rate Auction” has the meaning specified in Section 2.10(b)(i) hereof.

“Acquisition” means any transaction, or any series of related transactions, by which any Borrower or any of its Subsidiaries (a) acquires any going business or all or substantially all of the assets of any firm, corporation or division thereof which constitutes a going business, whether through purchase of assets, merger or otherwise or (b) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding partnership interests of a partnership or a majority (by percentage or voting power) of the outstanding ownership interests of a limited liability company.

“Advance” means a Bid Rate Advance, Syndicated Canadian Advance or Syndicated Global Advance.

“Affiliate” of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person.  A Person shall be deemed to control another Person if the controlling Person is the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of greater than five percent (5%) or more of any class of voting securities (or other voting interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, membership, ownership or other equity interests, by contract or

otherwise.  In addition, each director of any of the Companies or any Subsidiary of any of the Companies shall be deemed to be an Affiliate of each Borrower.

“Agreed Currencies” means  (i) Dollars, (ii) euro, (iii) so long as each such currency remains an Eligible Currency, Pounds Sterling, Canadian Dollars and Swiss Francs and (iv) any other Eligible Currency which any Global Borrower requests the Global Administrative Agent to include as an Agreed Currency hereunder and which is acceptable to each Syndicated Global Lender; provided that the Global Administrative Agent shall promptly notify each Syndicated Global Lender of each such request and each Syndicated Global Lender shall be deemed not to have agreed to each such request unless its written consent thereto has been received by the Global Administrative Agent within five (5) Business Days from the date of such notification by the Global Administrative Agent to such Syndicated Global Lender.

“Aggregate Commitment” means the aggregate of the Commitments of all the Syndicated Global Lenders, as reduced or increased from time to time pursuant to the terms hereof.  The initial Aggregate Commitment is $1,100,000,000.00.

“Aggregate Outstanding Credit Exposure” is defined in Section 2.4(b)(ii) hereof.

“Agreement” means this Credit Agreement, as it may be amended, restated or otherwise modified and in effect from time to time.

“Agreement Accounting Principles” means generally accepted accounting principles as in effect as of the date of this Agreement in the United States, applied in a manner consistent with that used by Harley, when applied to Harley and otherwise HDFS in its preparation of its audited financial statements for the year ended December 31, 2003.

“Alternate Base Rate” means, for any day, a fluctuating interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) as shall be in effect from time to time, which rate per annum shall at all times be equal to the greatest of (a) the Prime Rate in effect on such day; and (b) the sum of one-half of one percent (0.50%) and the Federal Funds Effective Rate in effect on such day.  For purposes hereof, “Prime Rate” shall mean the rate of interest per annum announced from time to time by JPMorgan Chase Bank or its parent as its prime rate (which is not necessarily the lowest rate charged to any customers) in effect at its principal office in New York City, changing when and as said prime rate changes; provided that, with respect to Base Rate Loans and Base Rate Advances made by the Syndicated Canadian Banks to the Canadian Borrower, “Prime Rate” shall mean the rate of interest per annum announced from time to time by JPMorgan Chase Bank as its prime rate (which is not necessarily the lowest rate charged to any customers) in effect at its principal office in Toronto, Ontario for loans in Dollars in Canada, changing when and as said prime rate changes.  Each change in the Prime Rate shall be effective on the date such change is announced as being effective. “Federal Funds Effective Rate” shall mean, for any day, a fluctuating interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with

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members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Global Administrative Agent from three Federal funds brokers of recognized standing selected by the Global Administrative Agent.  If for any reason the Global Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability of the Global Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to clause (b) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist.  Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change.

“Applicable Agreed Currency” means (i) Dollars, euro and, so long as such currency remains an Eligible Currency, Canadian Dollars, Pounds Sterling and Swiss Francs in the case of Syndicated Global Loans to the U.S. Borrower, (ii) Dollars, euro and so long as such currency remains an Eligible Currency, Pounds Sterling and Swiss Francs in the case of Syndicated Global Loans to the U.K. Borrower and (iii) any other Agreed Currency described in clause (iv) of the definition of Agreed Currency.

“Applicable Facility Fee” as at any date of determination, shall be the rate per annum then applicable in the determination of the amount payable under Section 2.14(C) with respect to the Aggregate Commitment, determined in accordance with the provisions of Section 2.6(b).

“Applicable Margin” is defined in Section 2.6(b) hereof.

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Arranger” means J.P. Morgan Securities Inc. or Citigroup Global Markets, Inc. and “Arrangers” means, collectively, J.P. Morgan Securities Inc. and Citigroup Global Markets, Inc.

“Assumption Letter” means a letter of the Canadian Borrower or the Canadian Guarantor addressed to the Lenders in substantially the applicable form of Exhibit H hereto pursuant to which the Canadian Borrower or Canadian Guarantor, as applicable, agrees to become a Borrower or Guarantor (as applicable) and agrees to be bound by the terms and conditions hereof as if originally a party hereto.

“Authorized Officer” means any of the chief executive officer, chief financial officer, any vice president, controller, treasurer or any other officer of the relevant

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Borrower from time to time designated by an Authorized Officer in writing to the Global Administrative Agent as an Authorized Officer, acting singly.

“Bankers’ Acceptance Advance”is defined in the Syndicated Canadian Addendum.

“Bankers’ Acceptance Loan”is defined in the Syndicated Canadian Addendum.

“Bankruptcy Code” is defined in Article XII hereof.

“Base Rate Advance” means a Syndicated Global Advance or Syndicated Canadian Advance which bears interest at the Alternate Base Rate.

“Base Rate Loan” means a Syndicated Global Loan or Syndicated Canadian Loan, or portion thereof which bears interest at the Alternate Base Rate.

“Benefit Plan” means a defined benefit plan as defined in Section 3(35) of ERISA (other than a Multiemployer Plan) that is subject to Title IV of ERISA in respect of which any of the Companies or any other member of the Controlled Group is, or within the immediately preceding six (6) years was, an “employer” as defined in Section 3(5) of ERISA.

“Bid Rate Advance” means a borrowing consisting of simultaneous Bid Rate Loans to a Global Borrower in the same currency from each of the Syndicated Global Lenders whose offer to make a Bid Rate Loan as part of such borrowing has been accepted by such Global Borrower under the applicable auction bidding procedure described in Section 2.10.

“Bid Rate Advance Borrowing Notice” is defined in Section 2.10(b)(i) hereof.

“Bid Rate Loan” means a loan by a Syndicated Global Lender to a Global Borrower as part of a Bid Rate Advance resulting from the applicable auction bidding procedure described in Section 2.10.

“Bid Rate Note”  means a promissory note of a Global Borrower payable to the order of any Syndicated Global Lender, in substantially the form of Exhibit B-2 hereto, evidencing the indebtedness of such Global Borrower to such Syndicated Global Lender resulting from the Bid Rate Loans made by such Syndicated Global Lender to such Global Borrower.

“Bid Rate Reduction” means the reduction in availability under the Aggregate Commitment as a result of outstanding Bid Rate Loans.

“Borrower” means the U.S. Borrower, the U.K. Borrower or the Canadian Borrower, if any, and “Borrowers” means, collectively, the U.S. Borrower, the U.K. Borrower and the Canadian Borrower, if any.

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“Borrowing Date” means a date on which an Advance or a Loan is made hereunder.

“Borrowing Notice” means a Syndicated Global Advance Borrowing Notice, a Syndicated Canadian Borrowing Notice, a Bid Rate Advance Borrowing Notice, a Canadian Swing Line Borrowing Notice, a U.K. Swing Line Borrowing Notice or a USD Swing Line Borrowing Notice.

“Business Day” means (i) with respect to any borrowing, payment or rate selection of Loans bearing interest at the Eurocurrency Rate, a day (other than a Saturday or Sunday) on which banks are generally open for commercial banking business in New York, New York and on which dealings in United States Dollars and the other Agreed Currencies are carried on in the London interbank market; (ii) with respect to any borrowing or payment of any Canadian Dollar denominated Loan (or any other Loan made by a Syndicated Canadian Bank to the Canadian Borrower), a day (other than a Saturday or Sunday) on which banks are generally open for commercial banking business in Toronto, Ontario; (iii) with respect to any borrowing or payment of any euro denominated Loan, a Target Settlement Day, (iv) with respect to any borrowing or payment of any Loan denominated in a currency other than Dollars, Canadian Dollars and Pounds Sterling, a day on which the applicable Eurocurrency Payment Office related to such currency is open for the transaction of domestic and foreign exchange business and (v) for all other purposes a day (other than a Saturday or Sunday) on which banks are generally open for commercial banking business in New York, New York.

“Buying Lender” is defined in Section 2.4(b)(ii) hereof.

“Calculation Date” means (i) with respect to any Loan in any currency other than Dollars, the Business Day of the making of such Loan with respect to the Agreed Currency in which such Loan is being made and (ii) with respect to Loans, any other Business Day selected at the option of the Global Administrative Agent or at the direction of the Required Lenders.

“Canadian Borrower” means a direct or indirect Subsidiary of HDFS, and its successors and permitted assigns, which is organized under the laws of a jurisdiction located in Canada and which is designated as the Canadian Borrower pursuant to and in accordance with Section 2.21.

“Canadian Dollars” and “Cdn. $” means the lawful currency of Canada.

“Canadian Guarantor” means, if the Canadian Borrower is a Subsidiary of a parent company organized under the laws of a jurisdiction located in Canada, such parent company and its successors and permitted assigns.

“Canadian Dollar Sublimit” means $400,000,000.

“Canadian Prime Rate” means, as of any day, the higher of (i) the rate of interest per annum publicly announced from time to time by the Global Administrative Agent at is principal office in Toronto, Ontario, as its “prime rate” for loans in Canadian

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Dollars in Canada, as in effect on such day, which rate may not be the lowest rate charged by the Global Administrative Agent to any of its customers and which Canadian Prime Rate shall change simultaneously with any change in such announced rate and (ii) the sum of one percent (1%) plus one-month CDOR in effect on such day.

“Canadian Prime Rate Advance” means an Advance which bears interest at the Canadian Prime Rate.

“Canadian Prime Rate Loan” means a Loan which bears interest at the Canadian Prime Rate.

“Canadian Swing Line Borrowing Notice” is defined in Section 2.9.2 hereof.

“Canadian Swing Line Commitment” means the obligation of the Global Swing Line Lender to make Canadian Swing Line Loans to the Canadian Borrower and the U.S. Borrower, as requested by the Canadian Borrower or the U.S. Borrower pursuant to Section 2.9, up to a maximum principal amount of Cdn. $20,000,000 in the aggregate and on a cumulative basis at any one time outstanding.

“Canadian Swing Line Loan” means a Canadian Dollar denominated loan or Bankers’ Acceptance Loan made available to the Canadian Borrower or the U.S. Borrower by the Global Swing Line Lender pursuant to Section 2.9.2.

“Capitalized Lease” of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.

“Capitalized Lease Obligations” of a Person means the amount of the obligations of such Person under Capitalized Leases which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.

“Cash Equivalents” means (i) marketable direct obligations issued or unconditionally guaranteed by the government of the United States or an instrumentality or agency thereof; (ii) domestic and Eurocurrency certificates of deposit and time deposits, bankers’ acceptances and base rate certificates of deposit issued by any commercial bank (a) organized under the laws of the United States, any state thereof or the District of Columbia, or any of such entities’ respective branches or agencies and having capital and surplus in an aggregate amount not less than $200,000,000 (fully protected against currency fluctuations for any such deposits with a term of more than ten (10) days) or (b) organized under the laws of Canada, Japan, or any country which is a member of the European Economic Community, or its branches or agencies, and having capital and surplus in an aggregate amount not less than $200,000,000 (fully protected against currency fluctuations for any such deposits with a term of more than ten (10) days) provided the items under this clause (b) shall constitute “Cash Equivalents” only to the extent the Dollar Amount thereof does not exceed $10,000,000 in the aggregate; (iii) shares of money market, mutual or similar funds having net assets in excess of $500,000,000 maturing or being due or payable in full not more than one hundred eighty

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(180) days after a Borrower’s acquisition thereof and the investments of which are limited to investment grade securities (i.e., securities rated at least Baa by Moody’s Investors Service, Inc. or at least BBB by Standard & Poor’s Ratings Group) and (iv) commercial paper rated A-1 (or better) by Standard & Poor’s Ratings Group or P-1 (or better) by Moody’s Investors Services, Inc.; provided that the maturities of such Cash Equivalents shall not exceed 365 days.

“CDOR” means the “CDOR Rate” (as such term is defined in the Syndicated Canadian Addendum).

“CDOR Advance” means a Canadian Dollar denominated Syndicated Canadian Advance which is a Bankers’ Acceptance Advance.

“CDOR Loan” means a Canadian Dollar denominated Syndicated Canadian Loan or Canadian Swing Line Loan (which is in each case a Bankers’ Acceptance Loan) to the Canadian Borrower, or a portion thereof.

“Change” is defined in Section 3.2 hereof.

“Change of Control” means any transaction or event as a result of which:  (i) Harley shall cease to own of record and beneficially, with sole voting and dispositive power, in the aggregate, at least fifty-one percent (51%) of the issued and outstanding class or classes of Capital Stock of HDFS pursuant to which the holders thereof have, at the time of determination, the general voting power under ordinary circumstances to elect the board of directors (or similar governing body) (such percentage measured by voting power rather than number of shares), (ii) HDFS shall cease to own of record and beneficially, with sole voting and dispositive power, all of the issued and outstanding Capital Stock of HDCC, (iii) HDFS and HDCC shall cease to own of record and beneficially, with sole voting and dispositive power, all of the issued and outstanding Capital Stock of the U.S. Borrower or (iv) HDFS, directly or through one or more Subsidiaries, shall cease to own of record and beneficially, with sole voting and dispositive power, all of the issues and outstanding Capital Stock of any Foreign Borrower.

“Closing Date” means September 16, 2004.

“Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.

“Commission” means the Securities and Exchange Commission and any Person succeeding to the functions thereof.

“Commitment” means, for each Syndicated Global Lender, the obligation of such Syndicated Global Lender to make Syndicated Global Loans and to purchase participations in Swing Line Loans and Syndicated Canadian Loans in an amount not exceeding the Dollar Amount set forth on Exhibit A to this Agreement opposite its name thereon under the heading “Commitment” or contained in the Assignment and Acceptance by which it became a Lender, as such amount may be modified from time to

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time pursuant to the terms of this Agreement or to give effect to any applicable Assignment and Acceptance.

“Commitment Increase Notice” is defined in Section 2.4(b)(i) hereof.

“Company” means any Borrower or Guarantor, individually, and “Companies” means each of the Borrowers and Guarantors, collectively.

“Compliance Certificate” means a certificate substantially in the form of Exhibit F delivered to the Global Administrative Agent and each Lender by the U.S. Borrower pursuant to the provisions of this Agreement and covering, among other things, its compliance with the financial covenants contained in Section 6.4 and certain other provisions of this Agreement.

“Consolidated Debt” is defined in Section 6.4(A) hereof.

“Consolidated Equity” is defined in Section 6.4(A) hereof.

“Consolidated Net Income” of any Person for any period means the net income (or loss) of such Person for such period, as shall be determined in accordance with Agreement Accounting Principles.

“Consolidated Net Worth” of any Person means such Person’s consolidated shareholder’s equity, as shall be determined in accordance with Agreement Accounting Principles.

“Consolidated Tangible Net Worth” is defined in Section 6.4(A) hereof.

“Contaminant” means any waste, pollutant, hazardous substance, toxic substance, hazardous waste, special waste, petroleum or petroleum-derived substance or waste, asbestos, polychlorinated biphenyls (“PCBs”), or any constituent of any such substance or waste, and includes but is not limited to these terms as defined in Environmental, Health or Safety Requirements of Law.

“Contingent Obligation”, as applied to any Person, means any Contractual Obligation, contingent or otherwise, of that Person with respect to any Indebtedness of another or other obligation or liability of another, including, without limitation, any such Indebtedness, obligation or liability of another directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable, including Contractual Obligations (contingent or otherwise) arising through any agreement to purchase, repurchase, or otherwise acquire such Indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, or other financial condition, or to make payment other than for value received.

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“Contractual Obligation”, as applied to any Person, means any provision of any equity or debt securities issued by that Person or any indenture, mortgage, deed of trust, security agreement, pledge agreement, guaranty, contract, undertaking, agreement or instrument, in any case in writing, to which that Person is a party or by which it or any of its properties is bound, or to which it or any of its properties is subject.

“Controlled Group” means the group consisting of (i) any corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as any of the Companies and (ii) a partnership or other trade or business (whether or not incorporated) which is under common control (within the meaning of Section 414(c) of the Code) with any of the Companies.

“Conversion/Continuation Notice” is defined in Section 2.8(D) hereof.

“Cure Loan” is defined in Section 8.2 hereof.

“Customary Permitted Contingent Obligations” means (i) recourse obligations resulting from endorsement of negotiable instruments for collection in the ordinary course of business; (ii) obligations, warranties, and indemnities, not relating to Indebtedness of any Person, which have been or are undertaken or made in the ordinary course of business; (iii) Contingent Obligations of the Companies or any of their Subsidiaries with respect to any Indebtedness permitted by this Agreement; (iv) Contingent Obligations with respect to surety, appeal and performance bonds obtained by any of the Companies or any of their Subsidiaries in the ordinary course of business; (v) Permitted Securitization Recourse Obligations and (vi) Contingent Obligations under credit, loan and other financing agreements which by their express terms continue after the repayment in full of the financing provided pursuant thereto, including without limitation all such Contingent Obligations under the Existing Credit Agreements.

“Customary Permitted Liens” means:

(i)  Liens with respect to the payment of taxes, assessments or governmental charges in all cases which are not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by Agreement Accounting Principles;

(ii)  statutory or common law Liens of landlords and Liens of suppliers, mechanics, carriers, materialmen, warehousemen or workmen and other similar Liens imposed by law created in the ordinary course of business for amounts not yet due (having regard to the custom in the relevant jurisdiction for settlement of such amounts) or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by Agreement Accounting Principles;

(iii) Liens incurred or deposits made in the ordinary course of business in connection with worker’s compensation, unemployment insurance or other types of social security benefits or to secure the performance of bids, tenders, sales, contracts

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(other than for the repayment of borrowed money), surety, appeal and performance bonds; provided that (A) all such Liens do not in the aggregate materially detract from the value of assets or Property of the Companies and their Subsidiaries taken as a whole or materially impair the use thereof in the operation of their businesses taken as a whole, and (B) all Liens securing bonds to stay judgments or in connection with appeals that do not secure at any time an aggregate amount exceeding $30,000,000;

(iv) Permitted Real Property Encumbrances;

(v)  Liens of attachment or judgment with respect to judgments, writs or warrants of attachment, or similar process against any of the Companies or any of their Subsidiaries which do not constitute a Default under Section 7.1(h);

(vi)  Liens arising from leases, subleases or licenses granted to others which do not interfere in any material respect with the business of the Companies or any of their Subsidiaries;

(vii) any interest or title of the lessor in the Property subject to any operating lease entered into by any of the Companies or any of their Subsidiaries in the ordinary course of business.

(viii) Liens in respect of an agreement to dispose of any asset, to the extent such disposal is permitted by this Agreement;

(ix) Liens arising under any retention of title arrangements entered into in the ordinary course of business or over goods or documents of title to good arising in the ordinary course of documentary credit transactions;

(x) Liens arising due to any cash pooling, netting or composite accounting arrangements between any one or more of the Borrowers and any of their Subsidiaries or between any one or more of such entities and one or more banks or other financial institutions where any such entity maintains deposits;

(xi) customary rights of set off, revocation, refund or chargeback or similar rights under deposit disbursement, concentration account agreements or under the UCC (or comparable foreign law) or arising by operation of law of banks or other financial institutions where any Borrower or any of its Subsidiaries maintains deposit, disbursement or concentration accounts in the ordinary course of business; and

(xii) Liens securing obligations not constituting Indebtedness so long as the amount of such obligations secured thereby do not exceed $10,000,000 at any time.

“Default” means an event described in Article VII hereof.

“DOL” means the United States Department of Labor and any Person succeeding to the functions thereof.

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“Dollar” and “$” means dollars in the lawful currency of the United States of America.

“Dollar Amount” of any currency at any date shall mean (i) the amount of such currency if such currency is Dollars or (ii) the Equivalent Amount of Dollars if such currency is any currency other than Dollars.

“Effective Commitment Amount” is defined in Section 2.4(b)(i) hereof.

“Eligible Currency” means any currency other than Dollars or euro that is readily available, freely traded, in which deposits are customarily offered to banks in the London interbank market, convertible into Dollars in the international interbank market and as to which an Equivalent Amount may be readily calculated.  If, after the designation by the Lenders of any currency as an Agreed Currency, currency control or other exchange regulations are imposed in the country in which such currency is issued with the result that different types of such currency are introduced, such country’s currency is, in the determination of the Global Administrative Agent, no longer readily available or freely traded or as to which, in the determination of the Global Administrative Agent, an Equivalent Amount is not readily calculable, then the Global Administrative Agent shall promptly notify the Syndicated Global Lenders and each Global Borrower, and such country’s currency shall no longer be an Agreed Currency until such time as all of the Lenders (in the case of an Agreed Currency) agree to reinstate such country’s currency as an Agreed Currency and promptly, but in any event within five (5) Business Days of receipt of such notice from the Global Administrative Agent, the applicable Borrower shall repay all Loans in such affected currency or convert such Loans into Loans in Dollars or another Agreed Currency, subject to the other terms contained in Article II.

“Environmental, Health or Safety Requirements of Law” means all Requirements of Law derived from or relating to federal, state, provincial and local laws and relevant foreign laws or regulations relating to or addressing pollution or protection of the environment, or protection of worker health or safety, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., the Occupational Safety and Health Act of 1970, 29 U.S.C. § 651 et seq., and the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq., in each case including any amendments thereto, any successor statutes, and any regulations or guidance promulgated thereunder, and any state or local equivalent thereof.

“Equivalent Amount” of any currency at any date shall mean the equivalent in Dollars of such currency, calculated on the basis of the arithmetic mean of the buy and sell spot rates of exchange of the Global Administrative Agent or an Affiliate of the Global Administrative Agent, as applicable, in the London interbank market (or other market where the Global Administrative Agent’s foreign exchange operations in respect of such currency are then being conducted) for such other currency at or about 11:00 a.m. (local time applicable to the transaction in question) on the date on which such amount is to be determined, rounded up to the nearest amount of such currency as determined by the Global Administrative Agent from time to time; provided, however, that if at the time

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of any such determination, for any reason, no such spot rate is being quoted, the Global Administrative Agent or an Affiliate of the Global Administrative Agent, may use any reasonable method it reasonably deems appropriate to determine such amount, and such determination shall be conclusive absent manifest error.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time including (unless the context otherwise requires) any rules or regulations promulgated thereunder.

“ERISA Default Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Benefit Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Benefit Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the incurrence by any member of the Controlled Group of any liability under Title IV of ERISA with respect to the termination of any Benefit Plan; (d) the receipt by any member of the Controlled Group from the PBGC or a plan administrator of any notice relating to an intention to terminate any Benefit Plan or to appoint a trustee to administer any Benefit Plan; (e) the incurrence by the any member of the Controlled Group of any liability with respect to the complete withdrawal or partial withdrawal from any Benefit Plan or Multiemployer Plan; or (f) the receipt by any member of the Controlled Group of any notice, or the receipt by any Multiemployer Plan from the any member of the Controlled Group of any notice, concerning a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“EURIBOR” means the applicable interest rate per annum determined by the Banking Federation of the European Union for deposits in euro appearing on the applicable EURIBOR Reference Page on such day (or if such day is not a Business Day, on the immediately preceding Business Day)  as of the applicable EURIBOR Fixing Time, in the approximate amount of the pro rata share of the Global Administrative Agent (or any of its Affiliates) of such Eurocurrency Rate Advance or Swing Line Loan, and, in each case, having a maturity approximately equal to the requested Interest Period, provided that, (i) if the applicable EURIBOR Reference Page is not available to the Global Administrative Agent at or about the EURIBOR Fixing Time for any reason, the applicable EURIBOR for the relevant Interest Period shall instead be the applicable rate for deposits in euro offered to leading banks in the euro-zone interbank market as reported by any other generally recognized financial information service specified by the Global Administrative Agent as of the applicable EURIBOR Fixing Time, and having a maturity approximately equal to such Interest Period, and (ii) if no such rate is available, the applicable EURIBOR for the relevant Interest Period shall instead be the interest rate per annum equal to the arithmetic mean determined by the Global Administrative Agent (rounded upwards to the nearest .001%) of the rates per annum at which deposits in euro are offered by three (3) leading banks in the euro-zone interbank market at the applicable EURIBOR Fixing Time to other leading banks in the euro-zone interbank market in the approximate amount of JPMorgan Chase Bank’s (or any of its Affiliates) relevant

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Eurocurrency Rate Loan, Swing Line Loan or Syndicated Canadian Loan having a maturity approximately equal to such Interest Period.

“EURIBOR Fixing Time” means the relevant currency fixing date and/or time described in Schedule I and Schedule II.

“EURIBOR Reference Page” means the relevant page on the relevant screen described in Schedule I and Schedule II, including in each case any successor or substitute screen, as applicable, providing rate quotations comparable to those currently provided on such screen, as determined by the Global Administrative Agent from time to time for purposes of providing quotations of interest rates at which deposits in euro are offered to leading banks in the euro-zone interbank market.

“euro” means the single currency of the participating member states of the European Union.

“Eurocurrency Base Rate” means, with respect to any Eurocurrency Rate Advance or any Swing Line Loan for any specified Interest Period, or a Bid Rate Advance pursuant to an Indexed Rate Auction for an Interest Period designated by the relevant Borrower, in each case with respect to an applicable Agreed Currency, (i) LIBOR with respect to any such currency other than euro and (ii) EURIBOR solely with respect to euro.

“Eurocurrency Payment Office” of the Global Administrative Agent shall mean, for each of the Agreed Currencies, the office, branch or affiliate of the Global Administrative Agent, as it may from time to time specify to the U.S. Borrower and each Syndicated Global Lender as its Eurocurrency Payment Office.

“Eurocurrency Rate” means, with respect to a Swing Line Loan, a Eurocurrency Rate Loan and a Eurocurrency Rate Advance for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurocurrency Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (ii) the Applicable Margin, plus (iii) in the case of Loans and Advances by a Lender from its office or branch in England, the Mandatory Cost.  The Eurocurrency Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate is not such a multiple.

“Eurocurrency Rate Advance” means a Syndicated Global Advance or Syndicated Canadian Advance which bears interest at the Eurocurrency Rate.

“Eurocurrency Rate Loan” means a Swing Line Loan, Syndicated Global Loan or Syndicated Canadian Loan, or portion thereof, which bears interest at the Eurocurrency Rate.

“Exchange Rate” means with respect to any Eligible Currency on a particular date, the rate at which such Eligible Currency may be exchanged into Dollars, calculated on the basis of the arithmetical mean of the buy and sell spot rates of exchange of the Global Administrative Agent in the London interbank market (or other market where the

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Global Administrative Agent’s foreign currency exchange operations in respect of such Eligible Currency are then being conducted) for such Eligible Currency at or about 1:00 p.m. local time, on such date for the purchase of Dollars with such Eligible Currency; provided, however, that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Global Administrative Agent may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error.

“Excluded Taxes” means, in the case of each Lender or applicable Lending Installation and the Global Administrative Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Global Administrative Agent is incorporated or organized or (ii) the jurisdiction in which the Global Administrative Agent’s or such Lender’s principal executive office or such Lender’s applicable Lending Installation is located.

“Existing Credit Agreements” means (i) that certain Amended and Restated Long Term Credit Agreement dated as of September 27, 2000 among the U.S. Borrower, HDFS, HDCC, the lenders party thereto and Bank One, NA as administrative agent, as such agreement has been amended or otherwise modified prior to the Closing Date, (ii) that certain Short Term Credit Agreement dated as of September 27, 2000 among the U.S. Borrower, HDFS, HDCC, the lenders party thereto and Bank One, NA as administrative agent, as such agreement has been amended or otherwise modified prior to the Closing Date and (iii) the Credit Facility for Harley-Davidson Financial Services Europe Limited dated July 2002 between U.K. Borrower, HDFS, HDFSI, BNP Paribas and Salomon Brothers International Limited, as “Mandated Lead Arrangers”, the financial institutions party thereto as “Original Lenders” and Citibank International PLC, as “Facility Agent”, as such agreement has been amended or otherwise modified prior to the Closing Date.

“Federal Funds Effective Rate” shall have the meaning assigned to that term in the definition of Alternate Base Rate above.

“Finance Receivables” means dealer wholesale receivables, retail installment contracts, retail leases, charge accounts or other receivables or chattel paper originated, acquired or serviced in the ordinary course of business by any of the Companies or their Subsidiaries and shall include all related collateral and assets and any retained assets in respect of any of the foregoing.

“Finance Receivables Subsidiary” means a special purpose, bankruptcy remote corporation, partnership or limited liability company which is wholly-owned, directly or indirectly, by the Companies, and which is formed for the sole and exclusive purpose of (i) purchasing or otherwise acquiring Finance Receivables from one or more of the Companies or their respective Subsidiaries, (ii) financing such purchases or otherwise facilitating a Permitted Finance Receivables Securitization and (iii) activities related thereto.

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“Fixed Rate Advance” means a Eurocurrency Rate Advance or a CDOR Advance.

“Fixed Rate Loan” means a Eurocurrency Rate Loan or a CDOR Loan, as applicable.

“Fixed Rate Swing Line Loan” means a U.K. Swing Line Loan which bears interest at the Eurocurrency Rate or a Canadian Swing Line Loan which bears interest at CDOR.

“Floating Rate Advance” means a Canadian Prime Rate Advance or Base Rate Advance, as applicable.

“Floating Rate Loan” means a Syndicated Global Loan or Syndicated Canadian Loan, or portion thereof, or a Swing Line Loan, in each case which bears interest at the Alternate Base Rate, the Canadian Prime Rate or any other floating rate, as applicable.

“Foreign Borrower” means the Canadian Borrower, if any, or the U.K. Borrower and “Foreign Borrowers” means, collectively, the Canadian Borrower, if any, and the U.K. Borrower.

“Foreign Employee Benefit Plan” means any employee benefit plan as defined in Section 3(3) of ERISA which is maintained or contributed to for the benefit of the employees of any of the Companies or any other member of the Controlled Group and is not covered by ERISA pursuant to ERISA Section 4(b)(4).

“Foreign Pension Plan” means any Foreign Employee Benefit Plan that, under applicable local law, is required to be funded through a trust or other funding vehicle.

“Global Administrative Agent” means JPMorgan Chase Bank (including any office, branch or affiliate of JPMorgan Chase Bank) in its capacity as contractual representative for itself and the Lenders pursuant to Article X hereof and any successor Global Administrative Agent appointed pursuant to Article X hereof.

“Global Borrower” means the U.S. Borrower or the U.K. Borrower and “Global Borrowers” means, collectively, the U.S. Borrower and the U.K. Borrower, in each case together with its respective successors and permitted assigns.

“Global Rate Option” means the Eurocurrency Rate or Alternate Base Rate.

“Global Swing Line Lender” means JPMorgan Chase Bank (including any office, branch or affiliate of JPMorgan Chase Bank); provided that the Global Swing Line Lender in respect of Canadian Swing Line Loans to the Canadian Borrower shall mean JPMorgan Chase Bank or any of its offices, branches and affiliates, in each case, resident in Canada within the meaning of the Income Tax Act (Canada).

“Governmental Authority” means any nation or government, any monetary authority, any federal, state, provincial, local or other political subdivision thereof and

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any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Gross Negligence” means recklessness, or actions taken or omitted with conscious indifference to or the complete disregard of consequences.  Gross Negligence does not mean the absence of ordinary care or diligence, or an inadvertent act or inadvertent failure to act.  If the term “gross negligence” is used with respect to the Global Administrative Agent, either Arranger or any Lender or any Indemnitee in any of the other Loan Documents, it shall have the meaning set forth herein.

“Guarantee” is defined in Article XII hereof.

“Guarantor” means any of HDFS, HDCC, HDFSI or the Canadian Guarantor, if any and “Guarantors” means each of HDFS, HDCC, HDFSI and the Canadian Guarantor, if any and in each such case their respective successors and permitted assigns.

“Harley” means Harley-Davidson, Inc., a Wisconsin corporation, and its successors and assigns.

“HDCC” means Harley-Davidson Credit Corp., a Nevada corporation, and its successors and permitted assigns.

“HDFS” means Harley-Davidson Financial Services, Inc., a Delaware corporation, and its successors and permitted assigns.

“HDFSI” means Harley-Davidson Financial Services International, Inc., a Delaware corporation, and its successors and permitted assigns.

“Hedging Obligations” of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, commodity prices, exchange rates or forward rates applicable to such party’s assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts and warrants, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any of the foregoing.

“Indebtedness” of any Person means (i) any indebtedness of such Person, contingent or otherwise, (a) in respect of borrowed money including all principal, interest, fees and expenses with respect thereto (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), or (b) evidenced by bonds, notes, acceptances, debentures or other instruments or letters of credit (or reimbursement obligations with respect thereto) or representing the balance deferred and unpaid of the purchase price of any Property (including pursuant to Capitalized Leases) or services, if and to the extent any of the foregoing indebtedness would appear as a

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liability upon a balance sheet of such Person prepared in accordance with Agreement Accounting Principles (except that any such balance that constitutes a trade payable and/or an accrued liability arising in the ordinary course of business shall not be considered Indebtedness); (ii) to the extent not otherwise included in clause (i) above, (a) interest accruing after the commencement of any bankruptcy, insolvency, receivership or similar proceedings and other interest that would have accrued but for the commencement of such proceedings, (b) any Capitalized Lease Obligations, (c) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person (excluding in any event obligations in respect of Permitted Finance Receivables Securitizations), (d) Contingent Obligations and (e) Hedging Obligations.  The amount of Indebtedness of any Person at any date shall be without duplication (i) the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any such Contingent Obligations at such date and (ii) in the case of Indebtedness of others secured by a Lien to which the Property or assets owned or held by such Person is subject, the lesser of the fair market value at such date of any asset subject to a Lien securing the Indebtedness of others and the amount of the Indebtedness secured.

“Indemnified Matters”  is defined in Section 9.6(B) hereof.

“Indemnitees” is defined in Section 9.6(B) hereof.

“Indexed Rate Auction” is defined in Section 2.10(b)(i) hereof.

“Interest Coverage Ratio” is defined in Section 6.4(A) hereof.

“Interest Period” means, (a) with respect to a Eurocurrency Rate Loan, a period of one (1), two (2), three (3) or six (6) months commencing on a Business Day selected by the applicable Borrower pursuant to this Agreement and (b) with respect to a CDOR Loan, a period selected by the Canadian Borrower in accordance with the Syndicated Canadian Addendum.  For Eurocurrency Rate Loans, such Interest Period shall end on (but exclude) the day which corresponds numerically to such date one (1), two (2), three (3) or six (6) months thereafter; provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month.  If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that for Eurocurrency Rate Loans, if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day.

“IRS” means the Internal Revenue Service and any Person succeeding to the functions thereof.

“Lenders” means the lending institutions listed on the signature pages of this Agreement or a Syndicated Canadian Addendum, including each Syndicated Global

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Lender, the Global Swing Line Lender, each Syndicated Canadian Bank and their respective successors and assigns.

“Lender Increase Notice” is defined in Section 2.4(b)(i) hereof.

“Lending Installation” means, with respect to a Lender or the Global Administrative Agent, any office, branch, subsidiary or affiliate of such Lender or the Global Administrative Agent.

“Leverage Ratio” is defined in Section 6.4(A) hereof.

“LIBOR” means the applicable British Bankers’ Association Interest Settlement Rate for deposits in the applicable Agreed Currency or U.K. Swing Line Currency appearing on the applicable LIBOR Reference Page for such Agreed Currency or U.K. Swing Line Currency as of the applicable LIBOR Fixing Time, in the approximate amount of the pro rata share of the Global Administrative Agent (or any of its Affiliates) of such Eurocurrency Rate Loan or Swing Line Loan or in the case of an Indexed Rate Auction in an amount equal to $1,000,000, and, in each case, having a maturity approximately equal to the requested Interest Period or interest period, provided that, (i) if the applicable LIBOR Reference Page for such Agreed Currency or U.K. Swing Line Currency is not available to the Global Administrative Agent for any reason at or about the LIBOR Fixing Time, the applicable LIBOR for the relevant Interest Period or interest period shall instead be the applicable British Bankers’ Association Interest Settlement Rate for deposits in the applicable Agreed Currency or U.K. Swing Line Currency are offered to leading banks as reported by any other generally recognized financial information service specified by the Global Administrative Agent as of the applicable LIBOR Fixing Time, and having a maturity approximately equal to such Interest Period or interest period, and (ii) if no such British Bankers’ Association Interest Settlement Rate is available, the applicable LIBOR for the relevant Interest Period or interest period shall instead be the rate determined by the Global Administrative Agent to be the rate at which JPMorgan Chase Bank offers to place deposits in the applicable Agreed Currency or U.K. Swing Line Currency with first-class banks in the London interbank market at the applicable LIBOR Fixing Time, in the approximate amount of JPMorgan Chase Bank’s (or any of its Affiliates) relevant Eurocurrency Rate Loan, Swing Line Loan or Syndicated Canadian Loan or in the case of an Indexed Rate Auction in an amount equal to $1,000,000 and, in each case, having a maturity approximately equal to such Interest Period or interest period.

“LIBOR Fixing Time” means the relevant currency fixing date and/or time described in Schedule I and Schedule II.

“LIBOR Reference Page” means the relevant page on the relevant screen described in Schedule I and Schedule II, including in each case any successor or substitute screen, as applicable, providing rate quotations comparable to those currently provided on such screen, as determined by the Global Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to deposits in the London interbank market in the relevant currency.

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“Lien” means any security interest, lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement).

“Loan” means a Syndicated Global Loan, a Bid Rate Loan, a Syndicated Canadian Loan or a Swing Line Loan.

“Loan Account” is defined in Section 2.15(E) hereof.

“Loan Documents” means this Agreement, the Syndicated Canadian Addendum, the Assumption Letter, the Notes, the Support Agreement and all other documents, instruments and agreements executed in connection therewith or contemplated thereby, in each case as the same may be amended, restated or otherwise modified and in effect from time to time.

“Mandatory Cost” is described in Schedule III hereto.

“Margin Stock” shall have the meaning ascribed to such term in Regulation U promulgated by the Board of Governors of the Federal Reserve System, as from time to time in effect.

“Material Adverse Effect” means any event, development or circumstance that has had or could reasonably be expected to have a material adverse effect on (a) the financial condition of Harley, HDFS, HDCC, the Borrowers and their Subsidiaries taken as a whole or (b) the validity or enforceability of any of the Loan Documents or the ability of the Lenders or any of the Global Administrative Agent to enforce their rights or remedies thereunder.

“Material Subsidiary” means, at any time, any Subsidiary of HDFS with a Net Worth equal to or greater than 5% of Consolidated Net Worth of Harley or Net Income (for the period of four consecutive fiscal quarters then most recently ended) equal to or greater than 5% of Consolidated Net Income (for such period) of Harley (it being understood and agreed that if Subsidiaries of HDFS that are not Material Subsidiaries have in the aggregate Net Worth equal to or greater than 15% of the Consolidated Net Worth of Harley or Net Income (for such period) equal to or greater than 15% of the Consolidated Net Income (for such period) of Harley, then HDFS shall designate one or more Subsidiaries as Material Subsidiaries such that, after giving effect to such designations, the Subsidiaries of HDFS that are not Material Subsidiaries have in the aggregate Net Worth less than 15% of the Consolidated Net Worth of Harley and Net Income (for such period) less than 15% of the Consolidated Net Income (for such period) of Harley).

“Multiemployer Plan” means a “Multiemployer Plan” as defined in Section 4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years was, contributed to by any of the Companies or any other member of the Controlled Group.

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“Net Income” of any Person for any period means the net income (or loss) of such Person for such period, as shall be determined in accordance with Agreement Accounting Principles.

“Net Worth” of any Person means such Person’s consolidated shareholder’s equity, as shall be determined in accordance with Agreement Accounting Principles.

“New Currency” is defined in Section 2.12 hereof.

“Non Pro Rata Loan” is defined in Section 8.2 hereof.

“Non-U.S. Lender” is defined in Section 3.5(iv) hereof.

“Notes” means the Syndicated Global Notes, the Syndicated Canadian Notes and the Bid Rate Notes.

“Notice of Assignment” is defined in Section 13.3(B) hereof.

“Obligations” means all Loans, advances, debts, liabilities, obligations, covenants and duties owing by any Borrower to the Global Administrative Agent, either Arranger, any Lender, the Global Swing Line Lender, any Syndicated Canadian Bank, any Affiliate of any of the foregoing or any Indemnitee, of any kind or nature, present or future, arising under this Agreement, the Notes or any other Loan Document, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, guaranty, indemnification, or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired.  The term includes, without limitation, all interest, charges, expenses, fees, attorneys’ fees and disbursements, paralegals’ fees (in each case whether or not allowed), and any other sum chargeable to any Borrower under this Agreement or any other Loan Document.

“Original Currency” is defined in Section 2.12 hereof.

“Other Taxes” is defined in Section 3.5 hereof.

“Outstanding Credit Exposure” is defined in Section 2.4(b)(ii) hereof.

“Overnight Foreign Currency Rate” means, for any amount payable in a currency other than Dollars, the rate of interest per annum as determined by the Global Administrative Agent (or in the case of any amount payable on a Swing Line Loan, the Global Swing Line Lender) at which overnight or weekend deposits in the relevant currency (or if such amount due remains unpaid for more than three Business Days, then for such other period of time as the Global Administrative Agent or Global Swing Line Lender (as applicable) may elect) for delivery in immediately available and freely transferable funds would be offered by the Global Administrative Agent or Global Swing Line Lender (as applicable) to major banks in the interbank market upon request of such

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major banks for the relevant currency as determined above and in an amount comparable to the unpaid principal amount of the related Loan.

“Participants” is defined in Section 13.2(A) hereof.

“Payment Date” means the first Business Day of each calendar month.

“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

“Permitted Acquisition” means any Acquisition made by any one of the Companies or any of their Subsidiaries provided that:  (a) as of the date of such Acquisition, no Default or Unmatured Default shall have occurred and be continuing or would result from such Acquisition or from the incurrence of any Indebtedness in connection with such Acquisition; (b) the business being acquired consists of a business or portfolio which shall be substantially similar, related or incidental to the businesses or activities engaged in by the Companies on the Closing Date; (c) the Acquisition is consummated pursuant to a negotiated acquisition agreement on a non-hostile basis; (d) prior to the date of such Acquisition, such Acquisition shall have been approved by the board of directors and, if applicable, the shareholders of the Person whose stock or assets are being acquired (the “Target”) in connection with such Acquisition and no claim or challenge has been asserted or threatened by any shareholder or director of such Target which could reasonably be expected to have a material adverse effect on such Acquisition or a Material Adverse Effect; (e) as of the date of any such Acquisition, all approvals required in connection with such Acquisition shall have been obtained; and (f) if such Acquisition constitutes a stock acquisition, substantially contemporaneously with the consummation of such Acquisition, the Target shall have been merged with and into one of the Companies.

“Permitted Existing Liens” means the Liens on assets of the Companies or their Subsidiaries identified as such on Schedule 1.1.3 to this Agreement.

“Permitted Finance Receivables Securitization” means any receivables financing program providing for the sale, conveyance, pledge or other transfer of Finance Receivables by any of the Companies or their respective Subsidiaries to a trust or to one or more limited purpose finance companies, special purpose entities or financial institutions, either directly or through one or more Subsidiaries.

“Permitted Real Property Encumbrances” means (i) as to any particular real property at any time, such easements, encroachments, covenants, rights of way, subdivisions, parcelizations, minor defects, irregularities, encumbrances on title (including leasehold title) or other similar charges or encumbrances which do not materially detract from the value of such real property for the purpose for which it is held by the owner thereof, (ii) municipal and zoning ordinances and other land use and environmental regulations, which are not violated in any material respect by the existing improvements and the present use made by the owner thereof of the premises, (iii) the reservations, limitations, provisos and conditions, if any, expressed in any original grants

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from the Crown in Canada, or in comparable grants in jurisdictions other than Canada and (iv) such other items to which the Global Administrative Agent may consent.

“Permitted Securitization Recourse Obligations” of a Person means recourse obligations of such Person with respect to Finance Receivables sold, pledged or otherwise transferred pursuant to a Permitted Finance Receivables Securitization, if and only if such recourse obligations constitute performance guarantees and/or indemnification or repurchase obligations arising as a result of the breach by such Person of a representation, warranty or covenant in respect of such Finance Receivables or otherwise in respect of losses, costs or expenses arising as a result of such Permitted Finance Receivables Securitizations, in each case other than (A) recourse for Finance Receivables uncollectible because of bankruptcy, insolvency, lack of creditworthiness or other mere failure to pay on the part of the obligor with respect to such Finance Receivable, and (B) indemnification or repurchase obligations arising from a representation, warranty or covenant relating to the payment of any Indebtedness incurred or securities issued in connection with such Permitted Finance Receivables Securitization.

“Person” means any natural person, corporation, firm, company, joint venture, partnership, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.

“Plan” means an employee benefit plan defined in Section 3(3) of ERISA in respect of which the any of the Companies or any member of the Controlled Group is, or within the immediately preceding six (6) years was, an “employer” as defined in Section 3(5) of ERISA.

“Pounds Sterling” means the lawful currency of Great Britain.

“Prime Rate” shall have the meaning assigned to that term in the definition of Alternate Base Rate above.

“Pro Rata Share” means, with respect to any Syndicated Global Lender, the percentage obtained by dividing (A) such Syndicated Global Lender’s Commitment at such time (in each case, as adjusted from time to time in accordance with the provisions of this Agreement) by (B) the Aggregate Commitment at such time; provided, however, that, if the Commitments have been terminated pursuant to the terms of this Agreement, “Pro Rata Share” means, with respect to any Syndicated Global Lender, the percentage obtained by dividing (A) the Dollar Amount of such Syndicated Global Lender’s (i) Syndicated Global Loans plus (ii) share of the obligation to purchase participations in Swing Line Loans and Syndicated Canadian Loans by (B) the aggregate outstanding principal Dollar Amount of all Syndicated Global Loans, Swing Line Loans and Syndicated Canadian Loans.

“Property” of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.

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“Proposed New Lender” is defined in Section 2.4(b)(i) hereof.

“Purchasers” is defined in Section 13.3(A) hereof.

“Qualifying Lender” means (a) a “building society” (as defined for the purpose of section 477A of the Taxes Act) or (b) a Lender which is beneficially entitled to interest payable to that Lender in respect of an Advance or Loan and such Lender is:

(i)a Lender:

(I)which is a “bank” (as defined for the purpose of section 349 of the Taxes Act) making an Advance or Loan; or

(II)in respect of an Advance or Loan made by a Person that was a “bank” (as defined for the purpose of section 349 of the Taxes Act) at the time that such Advance or Loan was made,

and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that Advance or Loan; or

(ii)a Lender which is:

(I)a company resident in the United Kingdom for United Kingdom tax purposes;

(II)a partnership each member of which is:

(a)a company resident in the United Kingdom; or

(b)a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (for the purposes of section 11(2) of the Taxes Act) the whole of any share of interest payable in respect of that advance that falls to it by reason of sections 114 and 115 of the Taxes Act;

(III)a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (for the purposes of section 11(2) of the Taxes Act) of that company; or

(iii)a Treaty Lender.

“Register” is defined in Section 13.3(C) hereof.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other

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regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.

“Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including the movement of Contaminants through or in the air, soil, surface water or groundwater.

“Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Benefit Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days after such event occurs, provided, however, that a failure to meet the minimum funding standards of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.

“Required Lenders” means Lenders whose Pro Rata Shares, in the aggregate, are greater than fifty percent (50%); provided, however, that, if any of the Lenders shall have failed to fund its Pro Rata Share of any Loan requested by the applicable Borrower which such Lenders are obligated to fund under the terms of this Agreement and any such failure has not been cured, then for so long as such failure continues, “Required Lenders” means Lenders (excluding all Lenders whose failure to fund their respective Pro Rata Shares of such Loans has not been so cured) whose Pro Rata Shares represent greater than fifty percent (50%) of the aggregate Pro Rata Shares of such Lenders; provided, further, however, that, if the Commitments have been terminated pursuant to the terms of this Agreement, “Required Lenders” means Lenders (without regard to such Lenders’ performance of their respective obligations hereunder) whose Pro Rata Shares, in the aggregate, are greater than fifty percent (50%).

“Required Syndicated Canadian Banks” means Syndicated Canadian Banks whose Syndicated Canadian Pro Rata Shares, in the aggregate, are greater than fifty percent (50%); provided, however, that, if any of the Lenders shall have failed to fund its Syndicated Canadian Pro Rata Share of any Syndicated Canadian Loan requested by the Canadian Borrower which such Syndicated Canadian Banks are obligated to fund under the terms of this Agreement and the Syndicated Canadian Addendum and any such failure has not been cured, then for so long as such failure continues, “Required Syndicated Canadian Banks” means Syndicated Canadian Banks (excluding all Syndicated Canadian Banks whose failure to fund their respective Syndicated Canadian Pro Rata Shares of such Syndicated Canadian Loans has not been so cured) whose Syndicated Canadian Pro Rata Shares represent greater than fifty percent (50%) of the aggregate Syndicated Canadian Pro Rata Shares of such Syndicated Canadian Banks; provided, further, however, that, if the Commitments have been terminated pursuant to the terms of this Agreement or the Syndicated Canadian Commitments have been terminated pursuant to the terms of this Agreement and the Syndicated Canadian Addendum, “Required Syndicated Canadian Banks” means Syndicated Canadian Banks (without regard to such Syndicated Canadian Banks’ performance of their

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respective obligations hereunder) whose Syndicated Canadian Pro Rata Shares, in the aggregate, are greater than fifty percent (50%).

“Requirements of Law” means, as to any Person, the charter and by-laws or other organizational or governing documents of such Person, and any law, rule or regulation, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject including, without limitation, the Securities Act of 1933, the Securities Exchange Act 1934, Regulations T, U and X promulgated by the Board of Governors of the Federal Reserve System, ERISA, the Fair Labor Standards Act, the Worker Adjustment and Retraining Notification Act, Americans with Disabilities Act of 1990, and any certificate of occupancy, zoning ordinance, building, environmental or land use requirement or Permit or environmental, labor, employment, occupational safety or health law, rule or regulation, including Environmental, Health or Safety Requirements of Law.

“Reserve Requirement” means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities.

“Reset Date” is defined in Section 1.2 hereof.

“Risk-Based Capital Guidelines” is defined in Section 3.2 hereof.

“Selling Lender” is defined in Section 2.4(b)(ii) hereof.

“Stamping Fee” is defined in the Syndicated Canadian Addendum.

“Subordinated Indebtedness” is defined in Section 6.4(A) hereof.

“Subordinated Indebtedness Documents” means any instruments and documents evidencing, or entered into in connection with, Subordinated Indebtedness.

“Subordinated Intercompany Indebtedness” is defined in Section 6.3(A)(2) hereof.

“Subsidiary” of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any company, partnership, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled.  Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a direct or indirect Subsidiary of the U.S. Borrower.

“Support Agreement” means the Support Agreement dated as of September 26, 1996 between Harley and HDFS evidencing Harley’s agreement to support certain debts of HDFS and its Subsidiaries, together with and as supplemented by the letter agreement

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dated as of September 16, 2004 to the Global Administrative Agent from Harley and HDFS pursuant to which certain modifications to the above-referenced Support Agreement were agreed to for the benefit of the Global Administrative Agent and the Lenders.

“Swing Line Commitment” means the Canadian Swing Line Commitment, U.K. Swing Line Commitment or USD Swing Line Commitment, as applicable.

“Swing Line Loan” means a Canadian Swing Line Loan, U.K. Swing Line Loan or USD Swing Line Loan, as applicable, made available to the applicable Borrower by the Global Swing Line Lender pursuant to Section 2.9.

“Swiss Francs” means the lawful currency of Switzerland.

“Syndicated Canadian Addendum” means an addendum substantially in the form of Exhibit G with such modifications thereto as shall be approved by the Global Administrative Agent.

“Syndicated Canadian Advance” means a borrowing consisting of simultaneous Syndicated Canadian Loans (of the same Type, currency and, if relevant, for the same Interest Period) made to the Canadian Borrower by the Syndicated Canadian Banks pursuant to Section 2.2.

“Syndicated Canadian Bank” means any Lender (or any Affiliate, branch or agency thereof) to the extent it is party to a Syndicated Canadian Addendum.  If any agency, branch or Affiliate of any Lender shall be a party to the Syndicated Canadian Addendum, such agency, branch or Affiliate shall, to the extent of any commitment extended and any Loans made by it, have all the rights of such Lender hereunder; provided, however, that such Lender shall, to the exclusion of such agency, branch or Affiliate, continue to have all the voting rights vested in it by the terms hereof.

“Syndicated Canadian Borrowing” means any borrowing consisting of a Loan made to the Canadian Borrower.

“Syndicated Canadian Borrowing Notice” has the meaning specified in Section 2.6(a) hereof.

“Syndicated Canadian Commitment” means, for any Syndicated Canadian Bank, the obligation of such Syndicated Canadian Bank to make Syndicated Canadian Loans not exceeding the Dollar Amount set forth in Exhibit A to this Agreement, as such amount may be modified from time to time pursuant to the terms of this Agreement and/or the Syndicated Canadian Addendum.

“Syndicated Canadian Loan” means any loan or Bankers’ Acceptance Loan made by a Syndicated Canadian Bank to the Canadian Borrower pursuant to Section 2.2 and the Syndicated Canadian Addendum.

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“Syndicated Canadian Note” means, to the extent requested, a promissory note of the Canadian Borrower payable to the order of any requesting Syndicated Canadian Bank, in substantially the form attached to the Syndicated Canadian Addendum, evidencing the aggregate indebtedness of the Canadian Borrower to such Syndicated Canadian Bank resulting from the Syndicated Canadian Loans made by such Syndicated Canadian Bank to the Canadian Borrower.

“Syndicated Canadian Pro Rata Share” means, with respect to any Syndicated Canadian Bank, the percentage obtained by dividing (A) such Syndicated Canadian Bank’s Syndicated Canadian Commitment at such time (in each case, as adjusted from time to time in accordance with the provisions of this Agreement and the Syndicated Canadian Commitment) by (B) the aggregate of the Syndicated Canadian Commitments at such time; provided, however, that, if the Syndicated Canadian Commitments have been terminated pursuant to the terms of this Agreement or the Syndicated Canadian Addendum, “Syndicated Canadian Pro Rata Share” means, with respect to any Syndicated Canadian Bank, the percentage obtained by dividing (A) the amount of such Syndicated Canadian Bank’s (i) Syndicated Canadian Loans plus (ii) share of the obligation to purchase participations in Canadian Swing Line Loans to the Canadian Borrower by (B) the aggregate outstanding principal amount of all Syndicated Canadian Loans and Canadian Swing Line Loans to the Canadian Borrower.

“Syndicated Global Advance” means a borrowing consisting of simultaneous Syndicated Global Loans of the same Type made to a Global Borrower by each of the Syndicated Global Lenders pursuant to Section 2.1, and in the case of Eurocurrency Rate Advances, denominated in the same currency and for the same Interest Period.

“Syndicated Global Advance Borrowing Notice” has the meaning specified in Section 2.6(a) hereof.

“Syndicated Global Lender” means any Lender (or any Affiliate, branch or agency thereof) party hereto with a commitment to make Syndicated Global Loans to each Global Borrower.

“Syndicated Global Loan” means a loan by a Syndicated Global Lender to a Global Borrower as part of a Syndicated Global Advance.

“Syndicated Global Note” means, to the extent requested, a promissory note of a Global Borrower payable to the order of any requesting Syndicated Global Lender, in substantially the form of Exhibit B-1 hereto, evidencing the aggregate indebtedness of such Global Borrower to such Syndicated Global Lender resulting from the Syndicated Global Loans made by such Syndicated Global Lender to such Global Borrower.

“TARGET Settlement Day” means any day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open.

“Taxes” means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes.

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“Tax Credit” means a credit against, relief or remission of, or repayment of any Taxes or Other Taxes.

“Taxes Act” means the Income and Corporation Taxes Act 1988 as in effect in the United Kingdom.

“Termination Date” means the earlier of (a) September 16, 2009 and (b) the date of termination of the Commitments pursuant to Section 2.4 or Section 8.1.

“Transferee” is defined in Section 13.5 hereof.

“Treaty Lender” means a Lender which:

(i)is treated as a resident of a Treaty State for the purposes of the Treaty; and

(ii)does not carry on a business in the United Kingdom through a permanent establishment with which that Lender’s participation in a Loan or Advance is effectively connected or to which payments under this Agreement are attributable.

“Treaty State” means a jurisdiction having a double taxation agreement (a “Treaty”) with the United Kingdom which makes provision for full exemption from tax imposed by the United Kingdom on interest.

“Type” means, (a) with respect to any Syndicated Global Loan, its nature as a Base Rate Loan or Eurocurrency Rate Loan, (b) with respect to any Syndicated Global Advance, its nature as a Base Rate Advance or Eurocurrency Rate Advance, (c) with respect to any Swing Line Loan, its nature as a Eurocurrency Rate Loan, Canadian Prime Rate Loan or CDOR Loan, (d) with respect to any Syndicated Canadian Loan, its nature as a CDOR Loan, Eurocurrency Rate Loan, Base Rate Loan or Canadian Prime Rate Loan and (e) with respect to any Syndicated Canadian Advance, its nature as a CDOR Advance, Eurocurrency Rate Advance, Base Rate Advance or Canadian Prime Rate Advance.

“U.K. Borrower” means Harley-Davidson Financial Services Europe Limited, a company incorporated under the laws of England and Wales, and its successors and permitted assigns.

“U.K. Swing Line Borrowing Notice” is defined in Section 2.9.3 hereof.

“U.K. Swing Line Commitment” means the obligation of the Global Swing Line Lender to make U.K. Swing Line Loans to the Global Borrowers up to a maximum principal Dollar Amount of $20,000,000 in the aggregate and on a cumulative basis at any one time outstanding, as such amount may be adjusted from time to time in accordance with the provisions of Section 2.9.3.

“U.K. Swing Line Currency” means Dollars, euro, and so long as such currencies remain in effect, Pounds Sterling and Swiss Francs.

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“U.K. Swing Line Loan” means a loan denominated in any U.K. Swing Line Currency made available to a Global Borrower by the Global Swing Line Lender pursuant to Section 2.9.3.

“Unfunded Liabilities” means the amount, if any, by which the present value of all accumulated benefit obligations under each Benefit Plan exceeds the fair market value of the assets of such Benefit Plan, determined as of the date of the most recent financial statements reflecting such amounts using assumptions for purposes of Statement of Financial Accounting Standards No. 87.

“Unmatured Default” means an event which, but for the lapse of time or the giving of notice, or both, would constitute a Default.

“U.S. Borrower” means Harley-Davidson Funding Corp., a Nevada corporation, and its successors and permitted assigns.

“USD Swing Line Borrowing Notice” is defined in Section 2.9.1 hereof.

“USD Swing Line Commitment” means the obligation of the Global Swing Line Lender to make USD Swing Line Loans up to a maximum principal amount of $25,000,000 in the aggregate at any one time outstanding.

“USD Swing Line Loan” means a Dollar denominated Loan made available to the U.S. Borrower by the Global Swing Line Lender pursuant to Section 2.9.1.

“Utilization Fee” means the per annum rate constituting the Utilization Fee determined in accordance with schedule set forth in Section 2.6(b).

The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.  Any accounting terms used in this Agreement which are not specifically defined herein shall have the meanings customarily given them in accordance with generally accepted accounting principles in existence as of the date hereof consistently applied.

1.2  Currency Equivalents.  Not later than 1:00 p.m., New York time or local time, as applicable, on each Calculation Date, the Global Administrative Agent shall (i) determine the Exchange Rate as of such Calculation Date with respect to each Agreed Currency and (ii) give notice thereof to the U.S. Borrower and the Syndicated Global Lenders.  The Exchange Rates so determined shall become effective immediately with respect to any new Loans being made on any Calculation Date and any Loans being repaid on any Calculation Date and otherwise on the fifth Business Day immediately following the relevant Calculation Date (a “Reset Date”), shall remain effective until the next succeeding Reset Date and shall during the period of their effectiveness be employed in making any computation of currency equivalents required to be made under this Agreement (other than pursuant to Section 2.19).

ARTICLE II  THE CREDITS

2.1  Syndicated Global Loans.  Upon the satisfaction of the conditions precedent set forth in Sections 4.1 and 4.2 hereof, from and including the date of this Agreement and prior to the

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Termination Date, each Syndicated Global Lender severally and not jointly agrees, on the terms and conditions set forth in this Agreement, to make Syndicated Global Loans to the Global Borrowers from time to time, in the Applicable Agreed Currency, in a Dollar Amount not to exceed in the aggregate at any one time outstanding an amount equal to such Syndicated Global Lender’s Pro Rata Share of the Aggregate Commitment; provided, however

(i)  that the sum of (a) the aggregate Dollar Amount of the Syndicated Global Loans then outstanding, (b) the aggregate Dollar Amount of the Bid Rate Loans then outstanding, (c) the aggregate amount of the USD Swing Line Loans then outstanding, (d) the aggregate Dollar Amount of the Canadian Swing Line Loans then outstanding, (e) the aggregate Dollar Amount of the U.K. Swing Line Loans then outstanding and (f) the aggregate Dollar Amount of Syndicated Canadian Loans then outstanding, shall not exceed the Aggregate Commitment;

(ii)  that the aggregate outstanding Dollar Amount of Syndicated Global Loans in Canadian Dollars, Syndicated Canadian Loans in Canadian Dollars and Canadian Swing Line Loans at any time shall not exceed the Canadian Dollar Sublimit;

(iii)  that the aggregate outstanding Dollar Amount of all Loans at any time shall not exceed the Aggregate Commitment; and

(iv)  that, notwithstanding anything contained in this Agreement or the Syndicated Canadian Addendum, the aggregate Dollar Amount of all Syndicated Global Loans made by a Syndicated Global Lender, when aggregated with the Syndicated Canadian Loans made by its affiliated Syndicated Canadian Bank, shall not at any time exceed the amount of such Syndicated Global Lender’s Commitment.

Each Syndicated Global Advance under this Section 2.1 shall consist of Syndicated Global Loans made by each Syndicated Global Lender ratably in proportion to such Syndicated Global Lender’s respective Pro Rata Share; provided that, the Global Administrative Agent may allocate any Syndicated Global Advance on a non-pro rata basis to the extent the failure to so allocate would cause a Syndicated Global Lender’s Loans, when aggregated with its affiliated Syndicated Canadian Bank’s Loans, to exceed such Syndicated Global Lender’s Commitment.  Subject to the terms of this Agreement, each Global Borrower may borrow, repay and reborrow Syndicated Global Loans at any time prior to the Termination Date.  Each Global Borrower may select, in accordance with Sections 2.6 and 2.8 and subject to the other conditions and limitations therein set forth and set forth in this Article II, Global Rate Options and Interest Periods applicable to portions of the Syndicated Global Advances.  On the Termination Date, the outstanding principal balance of the Syndicated Global Loans shall be paid in full by the Global Borrowers.

2.2  Syndicated Canadian Advances.

(A)  Making of Syndicated Canadian Loans.  Upon the satisfaction of the conditions precedent set forth in Article IV hereof and set forth in the Syndicated Canadian Addendum, from and including the later of the date of this Agreement and the date of execution of the Syndicated Canadian Addendum and prior to the Termination Date (unless an earlier termination

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date shall be specified in or pursuant to the Syndicated Canadian Addendum), each Syndicated Global Lender shall cause its affiliated Syndicated Canadian Bank, on the terms and conditions set forth in this Agreement and in the Syndicated Canadian Addendum, to make its Syndicated Canadian Pro Rata Share of Syndicated Canadian Loans to the Canadian Borrower from time to time in Dollars (solely with respect to Base Rate Loans and Eurocurrency Rate Loans) and Canadian Dollars (solely with respect to Canadian Prime Rate Loans, Eurocurrency Rate Loans and CDOR Loans), in an amount not to exceed each such Syndicated Canadian Bank’s Syndicated Canadian Commitment (provided that the Global Administrative Agent may allocate any Syndicated Canadian Advance on a non-pro rata basis to the extent the failure to so allocate would cause a Syndicated Canadian Bank’s Loans, when aggregated with its affiliated Syndicated Global Lender’s Loans, to exceed such Syndicated Canadian Bank’s Syndicated Canadian Commitment); provided, however, at no time shall (i) the Dollar Amount of the outstanding principal amount of Syndicated Canadian Loans exceed the Syndicated Canadian Commitments set forth in the Syndicated Canadian Addendum or the Dollar Amount of all Syndicated Canadian Loans denominated in Canadian Dollars, when aggregated with the Dollar Amount of all Canadian Swing Line Loans and Syndicated Global Loans denominated in Canadian Dollars, exceed the Canadian Dollar Sublimit, in each case other than as a result of currency fluctuations and then only to the extent permitted in Section 2.3(B) and (ii) the Dollar Amount of the outstanding principal amount of the Loans exceed the Aggregate Commitment other than as a result of currency fluctuations and then only to the extent permitted in Section 2.3(B).  Subject to the terms of this Agreement and the Syndicated Canadian Addendum, the Canadian Borrower may borrow, repay and reborrow Syndicated Canadian Loans at any time prior to the Termination Date (unless an earlier termination date shall be specified in or pursuant to the Syndicated Canadian Addendum).  On the Termination Date (unless an earlier termination date shall be specified in or pursuant to the Syndicated Canadian Addendum), the outstanding principal balance of the Syndicated Canadian Loans shall be paid in full by the Canadian Borrower and prior to Termination Date (unless an earlier termination date shall be specified in or pursuant to the Syndicated Canadian Addendum), prepayments of the Syndicated Canadian Loans shall be made by the Canadian Borrower if and to the extent required in Section 2.3(B).  By its execution and delivery hereof, each Syndicated Global Lender agrees that it shall cause its affiliated Syndicated Canadian Bank with a Syndicated Canadian Commitment to execute and deliver to (or as directed by) the Global Administrative Agent, on such Business Day as is reasonably requested by the Global Administrative Agent, an executed counterpart to such Syndicated Canadian Bank’s signature page to the Syndicated Canadian Addendum.

(B)  Borrowing Notice.  When the Canadian Borrower desires to borrow under this Section 2.2, the Canadian Borrower shall deliver to the Global Administrative Agent a Syndicated Canadian Advance Borrowing Notice, signed by it, as provided in Section 2.6(a)(ii) specifying that the Canadian Borrower is requesting a Syndicated Canadian Loan pursuant to this Section 2.2.  Any Syndicated Canadian Advance Borrowing Notice given pursuant to Section 2.6(a)(ii) shall be irrevocable.

(C)  Termination.  Except as otherwise required by applicable law, in no event shall a Syndicated Canadian Bank have the right to accelerate the Syndicated Canadian Loans outstanding or to terminate its commitments (if any) thereunder to make Syndicated Canadian Loans prior to the stated termination date in respect thereof, except that such Syndicated

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Canadian Bank shall have such rights upon an acceleration of the Loans and a termination of the Commitments pursuant to Article VII.

(D)  Statements.  The Global Administrative Agent shall furnish to the U.S. Borrower not less frequently than monthly, and at any other time at the reasonable request of the U.S. Borrower, a statement setting forth the outstanding Syndicated Canadian Loans made and repaid during the period since the last such report under the Syndicated Canadian Addendum.

(E)  Risk Participation.  Immediately and automatically upon the occurrence of a Default under Sections 7.1(f) or (g), all Syndicated Canadian Loans shall be converted to and redenominated in Dollars equal to the Dollar Amount of each such Syndicated Canadian Loan determined as of the date of such conversion and each Syndicated Global Lender shall be deemed to have automatically, irrevocably and unconditionally purchased and received (to the extent of its unused Commitment) from each other Lender an undivided interest and participation in and to each Loan in such amounts as are necessary such that, after giving effect thereto, each Syndicated Global Lender shall hold its Pro Rata Share of each Loan; provided, that to the extent such conversion shall occur other than at the end of an Interest Period, the Borrowers shall pay to the Global Administrative Agent for the ratable benefit of each applicable Lender, all losses and breakage costs related thereto in accordance with Section 3.4 and, upon the written request of the Global Administrative Agent, each of the Syndicated Global Lenders shall pay to the Global Administrative Agent for the ratable benefit of each applicable Lender not later than two (2) Business Days following a request for payment from such Lender, in Dollars, an amount equal to the undivided interest in and participation in the applicable Loan purchased by such Syndicated Global Lender pursuant to this Section 2.2(E).  In the event that any Syndicated Global Lender fails to make payment to the Global Administrative Agent of any amount due under this Section 2.2(E), the Global Administrative Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Syndicated Global Lender hereunder until the Global Administrative Agent receives from such Syndicated Global Lender an amount sufficient to discharge such Syndicated Global Lender’s payment obligation as prescribed in this Section 2.2(E) together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of demand by the applicable Lender and ending on the date such obligation is fully satisfied.  The Global Administrative Agent will promptly remit all payments received as provided above to each relevant Lender.

(F)  Other Provisions Applicable to Syndicated Canadian Loans.  The specification of payment of Syndicated Canadian Loans in Dollars or Canadian Dollars (as applicable) at a specific place pursuant to this Agreement and the Syndicated Canadian Addendum is of the essence.  Dollars or Canadian Dollars (as applicable) shall be the currency of account and payment of such Loans under this Agreement and the Syndicated Canadian Addendum.  Notwithstanding anything in this Agreement, the obligation of the Canadian Borrower in respect of such Loans shall not be discharged by an amount paid in any other currency or at another place, whether pursuant to a judgment or otherwise, to the extent the amount so paid, on prompt conversion into Dollars or Canadian Dollars (as applicable) and transfer to such Syndicated Canadian Bank under normal banking procedure, does not yield the amount of Dollars or Canadian Dollars (as applicable) due under this Agreement and the Syndicated Canadian Addendum.  In the event that any payment, whether pursuant to a judgment or otherwise, upon conversion and transfer, does not result in payment of the amount of Dollars or Canadian Dollars

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(as applicable) due under this Agreement or the Syndicated Canadian Addendum, such Syndicated Canadian Bank shall have an independent cause of action against each of the Borrowers for the currency deficit.

2.3  Payments of Loans.

(A)  Optional Payments. Subject to Section 3.4 and the requirements of Section 2.7, each relevant Global Borrower may (a) prepay Dollar denominated Floating Rate Loans following irrevocable notice given to the Global Administrative Agent by such Borrower, by not later than 12:00 noon (New York time) on the date of the proposed prepayment, such notice specifying the aggregate principal amount of and the proposed date of the prepayment, and if such notice is given such Borrower shall, prepay the outstanding principal amounts of the specified Dollar denominated Floating Rate Loans comprising part of the same Syndicated Global Advance in whole or ratably in part and (b) prepay non-Dollar denominated Floating Rate Loans or Fixed Rate Loans following notice given to the Global Administrative Agent by such Borrower by not later than 12:00 noon (New York time) on the date that is not less than one (1) Business Day preceding the date of the proposed prepayment, such notice specifying the Syndicated Global Advance to be prepaid and the proposed date of the prepayment, and, if such notice is given, such Borrower shall, prepay the outstanding principal amounts of the non-Dollar denominated Floating Rate Loans or the Fixed Rate Loans comprising an Advance in whole (and not in part), together with accrued interest to the date of such prepayment on the principal amount prepaid.  With respect to Floating Rate Advances, each partial prepayment shall be in an aggregate principal Dollar Amount not less than $1,000,000 and integral multiples of $100,000.  Subject to Section 3.4 and the requirements of Section 2.7, the Canadian Borrower may, upon prior written notice to the Global Administrative Agent as prescribed in the Syndicated Canadian Addendum and specifying that it is prepaying all or a portion of its Syndicated Canadian Advances, prepay its Syndicated Canadian Advances in whole at any time, or from time to time in part as specified in the Syndicated Canadian Addendum by paying the principal amount to be paid together with all accrued and unpaid interest thereon to and including the date of payment.

(B)  Mandatory Prepayments.

(i)  Mandatory Prepayments of Loans Generally.  If at any time, other than as a result of fluctuations in currency exchange rates, (a) the Dollar Amount of all Loans exceed the Aggregate Commitment, the applicable Borrowers shall, within five Business Days’ notice from the Global Administrative Agent, prepay the applicable Loans in an aggregate amount such that after giving effect thereto the Dollar Amount of all Loans is less than or equal to the Aggregate Commitment and (b) the Dollar Amount of Syndicated Canadian Loans exceeds the Syndicated Canadian Commitments, the Canadian Borrower shall, within five Business Days’ notice from the Global Administrative Agent, prepay the Syndicated Canadian Loans in an aggregate amount such that after giving effect thereto the Dollar Amount of Syndicated Canadian Loans is less than or equal to the Syndicated Canadian Commitments.

(ii)  Mandatory Prepayments of Canadian Dollar Denominated Loans.  If at any time other than as a result of fluctuations in currency exchange rates, the Dollar Amount of all Canadian Swing Line Loans denominated in Canadian Dollars, Syndicated

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Canadian Loans denominated in Canadian Dollars and Syndicated Global Loans denominated in Canadian Dollars exceeds the Canadian Dollar Sublimit, the applicable Borrowers (as determined by the U.S. Borrower) shall, within five Business Days’ notice from the Global Administrative Agent, prepay such Canadian Swing Line Loans, Syndicated Canadian Loans or Syndicated Global Loans (subject to Section 3.4) in an aggregate amount such that after giving effect thereto the Dollar Amount of all remaining Canadian Swing Line Loans, Syndicated Canadian Loans and Syndicated Global Loans, in each case to the extent denominated in Canadian Dollars, is less than or equal to the Canadian Dollar Sublimit.  Prepayments of CDOR Loans under clauses (i), (ii) or (iii) of this Section 2.3(B) shall be governed by the terms set forth in the Syndicated Canadian Addendum.

(iii)  Mandatory Prepayments due to Currency Fluctuations.  If, solely as a result of fluctuations in currency exchange rates, on any Reset Date, (a) the Dollar Amount of the sum of (i) the outstanding principal amount of the Syndicated Global Loans at such time, plus (ii) the outstanding principal amount of the Syndicated Canadian Loans at such time, plus (iii) the outstanding principal amount of the Swing Line Loans at such time, plus (iv) the aggregate Dollar Amount of the Bid Rate Loans then outstanding, exceeds 105% of the Aggregate Commitments, (b) the Dollar Amount of all Canadian Swing Line Loans, Syndicated Canadian Loans and Syndicated Global Loans, in each case to the extent denominated in Canadian Dollars, exceeds the Canadian Dollar Sublimit, (c) the amount of the outstanding Canadian Swing Line Loans at such time exceeds the Canadian Swing Line Commitment, (d) the Dollar Amount of the outstanding U.K. Swing Line Loans at such time exceeds the U.K. Swing Line Commitment or (e) the Dollar Amount of the Syndicated Canadian Loans exceeds the Syndicated Canadian Commitments, the applicable Borrower shall on such Reset Date prepay the applicable Loans (subject to Section 3.4 if applicable) in an aggregate amount such that after giving effect thereto: (v) the Dollar Amount of the sum of (i) the outstanding principal amount of the Syndicated Global Loans at such time, plus (ii) the outstanding principal amount of the Syndicated Canadian Loans at such time, plus (iii) the outstanding principal amount of the Swing Line Loans at such time, plus (iv) the aggregate amount of the Bid Rate Loans at such time, is less than or equal to the Aggregate Commitment, (w) the Dollar Amount of all Canadian Swing Line Loans, Syndicated Canadian Loans and Syndicated Global Loans, in each case to the extent denominated in Canadian Dollars, is less than or equal to the Canadian Dollar Sublimit, (x) the amount of the outstanding Canadian Swing Line Loans is less than or equal to the Canadian Swing Line Commitment, (y) the Dollar Amount of the outstanding U.K. Swing Line Loans is less than or equal to the U.K. Swing Line Commitment and (z) the Dollar Amount of the Syndicated Canadian Loans is less than or equal to the Syndicated Canadian Commitments.

2.4  Reduction/Increase of Commitments.

(a)  Reduction of Commitments.  The U.S. Borrower may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders, in an aggregate minimum amount of $10,000,000 and integral multiples of $5,000,000 in excess of that amount, upon at least five Business Days’ prior written notice to the Global Administrative Agent, which notice shall specify the amount of any such reduction; provided, however, that the amount of the

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Aggregate Commitment may not be reduced below the sum of the aggregate principal Dollar Amount of the outstanding Advances (including Syndicated Canadian Advances) and the Swing Line Loans.  In addition, the Canadian Borrower may, upon three (3) Business Days’ prior written notice to the Global Administrative Agent, terminate entirely at any time or reduce from time to time, by an aggregate amount of $5,000,000 or any larger multiple of $1,000,000 (or as otherwise set forth in the Syndicated Canadian Addendum), the unused portions of the Syndicated Canadian Commitments as specified by the Canadian Borrower in such notice to the Global Administrative Agent; provided, however, that at no time shall the Syndicated Canadian Commitments be reduced to a figure less than the total of the outstanding principal amount of all Syndicated Canadian Loans and Canadian Swing Line Loans owing by the Canadian Borrower.  All accrued facility fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder.  The Global Administrative Agent shall promptly distribute to the relevant Lenders any notices received by it under this Section 2.4(a).

(b)  Increase in Aggregate Commitment.

(i)  At any time prior to the Termination Date, the U.S. Borrower may request that the Aggregate Commitment be increased; provided that, without the prior written consent of all of the Lenders, (A) the Aggregate Commitment shall at no time exceed $1,400,000,000 and (B) each such request shall be in a minimum amount of at least $10,000,000.  Each request shall be made in a written notice given to the Global Administrative Agent and the Lenders by the U.S. Borrower not less than twenty (20) Business Days prior to the proposed effective date of such increase, which notice (a “Commitment Increase Notice”) shall specify the amount of the proposed increase in the Aggregate Commitment and the proposed effective date of such increase.  In the event of such a Commitment Increase Notice, each of the Syndicated Global Lenders shall be given the opportunity to participate in the requested increase ratably in the proportions that their respective Commitments bear to the Aggregate Commitment under this Agreement.  On or prior to the date that is fifteen (15) Business Days after receipt of the Commitment Increase Notice, each Syndicated Global Lender shall submit to the Global Administrative Agent a notice indicating the maximum amount by which it is willing to increase its Commitment in connection with such Commitment Increase Notice (any such notice to the Global Administrative Agent being herein a “Lender Increase Notice”).  Any Syndicated Global Lender which does not submit a Lender Increase Notice to the Global Administrative Agent prior to the expiration of such fifteen (15) Business Day period shall be deemed to have denied any increase in its Commitment.  In the event that the increases of Commitments set forth in the Lender Increase Notices exceed the amount requested by the U.S. Borrower in the Commitment Increase Notice, the Global Administrative Agent and the Arrangers shall have the right, with the consent of the U.S. Borrower, to allocate the amount of increases necessary to meet the Commitment Increase Notice.  In the event that the Lender Increase Notices are less than the amount requested by the Commitment Increase Notice, not later than three (3) Business Days prior to the proposed effective date of the requested increase, the U.S. Borrower may notify the Global Administrative Agent of any financial institution that shall have agreed to become a “Lender” party hereto (a “Proposed New Lender”) in connection with the Commitment Increase Notice.  Any Proposed New Lender shall be subject to the consent of the Global Administrative Agent (which consent shall not be unreasonably withheld).  If the U.S. Borrower shall not have arranged any Proposed New Lender(s) to commit to the shortfall from the Lender Increase Notices, then the U.S. Borrower shall be deemed to have reduced the amount of the Commitment

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Increase Notice to the aggregate amount set forth in the Lender Increase Notices.  Based upon the Lender Increase Notices, any allocations made in connection therewith and any notice regarding any Proposed New Lender, if applicable, the Global Administrative Agent shall notify the U.S. Borrower and the Syndicated Global Lenders on or before the Business Day immediately prior to the proposed effective date of the amount of each Syndicated Global Lender’s and Proposed New Lenders’ Commitment (the “Effective Commitment Amount”) and the amount of the Aggregate Commitment, which amounts shall be effective on the following Business Day.  Any increase in the Aggregate Commitment shall be subject to the following conditions precedent: (I) as of the date of the Commitment Increase Notice and as of the proposed effective date of the increase in the Aggregate Commitment, no event shall have occurred and then be continuing which constitutes a Default or Unmatured Default, (II) the U.S. Borrower, the Global Administrative Agent and each Proposed New Lender or Syndicated Global Lender that shall have agreed to provide a “Commitment” in support of such increase in the Aggregate Commitment shall have executed and delivered a “Commitment and Acceptance” substantially in the form of Exhibit I hereto, (III) counsels for the Borrowers and for the Guarantors shall have provided to the Global Administrative Agent supplemental opinions in form and substance reasonably satisfactory to the Global Administrative Agent and (IV) the Borrowers, the Guarantors and the Proposed New Lender shall otherwise have executed and delivered such other instruments and documents as the Global Administrative Agent shall have reasonably requested in connection with such increase.  If any fee shall be charged by the Lenders in connection with any such increase, such fee shall be in accordance with then prevailing market conditions, which market conditions shall have been reasonably documented by the Global Administrative Agent to the U.S. Borrower.  No less than two (2) Business Days prior to the effective date of the increase of the Aggregate Commitment, the Global Administrative Agent shall notify the U.S. Borrower of the amount of the fee to be charged by the Lenders, and the U.S. Borrower may, at least one (1) Business Day prior to such effective date, cancel its request for the commitment increase.  Upon satisfaction of the conditions precedent to any increase in the Aggregate Commitment, the Global Administrative Agent shall promptly advise the U.S. Borrower and each Syndicated Global Lender of the effective date of such increase.  Upon the effective date of any increase in the Aggregate Commitment that is supported by a Proposed New Lender, such Proposed New Lender shall be a party to this Agreement as a Lender and shall have the rights and obligations of a Lender hereunder.  Nothing contained herein shall constitute, or otherwise be deemed to be, a commitment on the part of any Lender to increase its Commitment hereunder at any time.

(ii)  For purposes of this clause (ii), (A) the term “Buying Lender(s)” shall mean (1) each Syndicated Global Lender the Effective Commitment Amount of which is greater than its Commitment prior to the effective date of any increase in the Aggregate Commitment and (2) each Proposed New Lender that is allocated an Effective Commitment Amount in connection with any Commitment Increase Notice and (B) the term “Selling Lender(s)” shall mean each Syndicated Global Lender whose Commitment is not being increased from that in effect prior to such increase in the Aggregate Commitment.  Effective on the effective date of any increase in the Aggregate Commitment pursuant to clause (i) above, each Selling Lender hereby sells, grants, assigns and conveys to each Buying Lender, without recourse, warranty, or representation of any kind, except as specifically provided herein, an undivided percentage in such Selling Lender’s right, title and interest in and to the sum of (i) the aggregate principal amount of its Syndicated Global Loans outstanding at such time, plus (ii) an amount equal to its actual

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participation interest of its Pro Rata Share of the aggregate principal amount of Swing Line Loans and Syndicated Canadian Loans outstanding at such time (“Outstanding Credit Exposure”) in the respective Dollar Amounts and percentages necessary so that, from and after such sale, each such Selling Lender’s Outstanding Credit Exposure shall equal such Selling Lender’s Pro Rata Share (calculated based upon the Effective Commitment Amounts) of the Aggregate Outstanding Credit Exposure.  Effective on the effective date of the increase in the Aggregate Commitment pursuant to clause (i) above, each Buying Lender hereby purchases and accepts such grant, assignment and conveyance from the Selling Lenders. Each Buying Lender hereby agrees that its respective purchase price for the portion of the Aggregate Outstanding Credit Exposure purchased hereby shall equal the respective Dollar Amount necessary so that, from and after such payments, each Buying Lender’s Outstanding Credit Exposure shall equal such Buying Lender’s Pro Rata Share (calculated based upon the Effective Commitment Amounts) of the aggregate of the Outstanding Credit Exposure of all the Syndicated Global Lenders (“Aggregate Outstanding Credit Exposure”).  Such amount shall be payable on the effective date of the increase in the Aggregate Commitment by wire transfer of immediately available funds to the Global Administrative Agent.  The Global Administrative Agent, in turn, shall wire transfer any such funds received to the Selling Lenders, in same day funds, for the sole account of the Selling Lenders.  Each Selling Lender hereby represents and warrants to each Buying Lender that such Selling Lender owns the Outstanding Credit Exposure being sold and assigned hereby for its own account and has not sold, transferred or encumbered any or all of its interest in such Outstanding Credit Exposure, except for participations which will be reduced or extinguished (as applicable) upon payment to Selling Lender of an amount equal to the portion of the Aggregate Outstanding Credit Exposure being sold by such Selling Lender.  Each Buying Lender hereby acknowledges and agrees that, except for each Selling Lender’s representations and warranties contained in the foregoing sentence, each such Buying Lender is buying such interest without recourse to the Selling Lender and has entered into its Commitment and Acceptance with respect to such increase on the basis of its own independent investigation and has not relied upon, and will not rely upon, any explicit or implicit written or oral representation, warranty or other statement of the Lenders or the Global Administrative Agent concerning the authorization, execution, legality, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the other Loan Documents.  The U.S. Borrower hereby agrees to compensate each Selling Lender for all losses, expenses and liabilities incurred by such Selling Lender in connection with the sale and assignment of any Eurocurrency Rate Loan hereunder on the terms and in the manner as set forth in Section 3.4.

2.5  Method of Borrowing Advances.

(a)  Syndicated Global Advances.  The Global Administrative Agent shall, promptly upon receipt of a Syndicated Global Advance Borrowing Notice, notify each Syndicated Global Lender of such Syndicated Global Advance Borrowing Notice and, not later than such time as is reasonably requested by the Global Administrative Agent on each Borrowing Date, each Syndicated Global Lender shall make available its Syndicated Global Loan or Loans, in funds immediately available to the Global Administrative Agent at its address specified pursuant hereto, unless the Global Administrative Agent has notified the Syndicated Global Lenders that such Loan is to be made available to a Global Borrower at the Global Administrative Agent’s Eurocurrency Payment Office, in which case each Syndicated Global Lender shall make available its Syndicated Global Loan or Loans, in funds immediately

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available to the Global Administrative Agent at its Eurocurrency Payment Office, not later than 4:00 p.m. (local time in the city of the Global Administrative Agent’s Eurocurrency Payment Office) in the Agreed Currency designated by the Global Administrative Agent.  The Global Administrative Agent will promptly make the funds so received from the Syndicated Global Lenders available to the relevant Global Borrower.

(b)  Syndicated Canadian Advances.  Subject to any alternate procedures set forth in the Syndicated Canadian Addendum, the Global Administrative Agent shall, promptly upon receipt of a Syndicated Canadian Borrowing Notice, notify each relevant Syndicated Canadian Bank of such Syndicated Canadian Borrowing Notice and, not later than such local time as is reasonably requested by the Global Administrative Agent on each Borrowing Date, each such Syndicated Canadian Bank shall make available its Syndicated Canadian Loan(s), in funds immediately available in Canadian Dollars, to the Global Administrative Agent at its address specified pursuant to Article XIV hereof.  The Global Administrative Agent will promptly make the funds so received from the Syndicated Canadian Banks available to the Canadian Borrower.

2.6  Method of Selecting Types and Interest Periods; Determination of Applicable Margins.

(a)  Method of Selecting Types and Interest Periods for Advances.  Each Borrower shall select the Type of Syndicated Global Advance or Syndicated Canadian Advance and, in the case of each Eurocurrency Rate Advance or CDOR Advance, the Interest Period and permitted currency applicable to each Syndicated Global Advance, Syndicated Canadian Advance and CDOR Advance from time to time.

(i)  Syndicated Global Advances.  Each Global Borrower shall give the applicable office of the Global Administrative Agent or its applicable Affiliate (in each case as previously directed by the Global Administrative Agent to such Global Borrower) irrevocable notice (a “Syndicated Global Advance Borrowing Notice”), at its applicable office as previously specified to such Borrower, not later than the applicable time described in Schedule I, specifying:  (i) the Borrowing Date of such Advance (which shall be a Business Day); (ii) the aggregate amount of such Advance; (iii) the Type of Advance selected and (iv) in the case of each Eurocurrency Rate Advance, the Interest Period and Agreed Currency applicable thereto.  Each Syndicated Global Advance in an Agreed Currency other than Dollars must be a Eurocurrency Rate Advance; provided that each Syndicated Global Advance in euro must be a Eurocurrency Rate Advance based on EURIBOR.  Each Syndicated Global Advance in Canadian Dollars shall only be a Eurocurrency Rate Advance.  There shall be no more than ten (10) Interest Periods in effect with respect to all of the Syndicated Global Advances to any one Global Borrower at any time.  Each Floating Rate Advance shall bear interest from and including the date of the making of such Advance to (but not including) the date of repayment thereof at the applicable Floating Rate, changing when and as such Floating Rate changes.  Changes in the rate of interest on that portion of any Syndicated Global Advance maintained as a Floating Rate Loan will take effect simultaneously with each change in the Alternate Base Rate or Canadian Prime Rate, as applicable.  Each Eurocurrency Rate Advance shall bear interest from and including the first day of the Interest Period applicable

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thereto to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Eurocurrency Rate Advance.

(ii)  Syndicated Canadian Advances.  The Canadian Borrower shall give the Global Administrative Agent irrevocable notice (an “Syndicated Canadian Advance Borrowing Notice”) not later than the applicable time described in Schedule I, specifying:  (i) the Borrowing Date of such Advance (which shall be a Business Day); (ii) the aggregate amount of such Advance; (iii) the Type of Advance selected; (iv) in the case of each CDOR Advance and Eurocurrency Rate Advance, the Interest Period applicable thereto and (v) the permitted currency applicable thereto.  Each Syndicated Canadian Advance shall be a CDOR Advance denominated in Canadian Dollars, Eurocurrency Rate Advance denominated in Dollars or Canadian Dollars, Base Rate Advance denominated in Dollars or a Canadian Prime Rate Advance denominated in Canadian Dollars.  There shall be no more than ten (10) Interest Periods in effect with respect to all of the Syndicated Canadian Advances at any time.  Each Canadian Prime Rate Advance shall bear interest from and including the date of the making of such Advance to (but not including) the date of repayment thereof at the applicable Canadian Prime Rate, changing when and as such Canadian Prime Rate changes.  Each Syndicated Canadian Advance which is a Base Rate Advance shall bear interest from and including the date of the making of such Advance to (but not including) the date of repayment thereof at the applicable Alternate Base Rate, changing when and as such Alternate Base Rate changes.  Each Syndicated Canadian Advance which is a CDOR Advance shall be discounted over the relevant Interest Period at CDOR.  Each Syndicated Canadian Advance which is a Eurocurrency Rate Advance shall bear interest from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Eurocurrency Rate Advance.

(b)  Determination of Applicable Margin and Applicable Facility Fee.

(i)  Definitions.  As used in this Section 2.6(b) and in this Agreement, the following terms shall have the following meanings:

“Applicable Margin” and  “Applicable Facility Fee” shall mean the per annum rates constituting the Applicable Margin and Applicable Facility Fee, respectively, determined in accordance with the provisions of this Section 2.6(b) by reference to the U.S. Borrower’s Status (or, in the circumstances described in clause (ii) below, Harley’s Status) and established by reference to the following:

Applicable Pricing	Level I		Level II		Level III		Level IV		Level V
Applicable Margin for Relevant Loans	0.14	%	0.18	%	0.22	%	0.26	%	0.375	%
Applicable Facility Fee	0.06	%	0.07	%	0.08	%	0.09	%	0.1250	%
Utilization Fee (>50%)	0.05	%	0.05	%	0.10	%	0.10	%	0.125	%
All in Drawn Cost (<50%)	0.20	%	0.25	%	0.30	%	0.35	%	0.50	%
All in Drawn Cost (>50%)	0.25	%	0.30	%	0.40	%	0.45	%	0.625	%

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“Level I Status” exists at any date if, on such date, the U.S. Borrower’s Moody’s Rating is Aa3 or better or the U.S. Borrower’s S&P Rating is AA- or better (or in the circumstances described in clause (ii) below, the Moody’s Rating and S&P Rating of Harley).

“Level II Status” exists at any date if, on such date, (i) the U.S. Borrower has not qualified for Level I Status and (ii) the U.S. Borrower’s Moody’s Rating is A1 or better or the U.S. Borrower’s S&P Rating is A+ or better (or in the circumstances described in clause (ii) below, the Moody’s Rating and S&P Rating of Harley).

“Level III Status” exists at any date if, on such date, (i) the U.S. Borrower has not qualified for Level I Status or Level II Status and (ii) the U.S. Borrower’s Moody’s Rating is A2 or better or the U.S. Borrower’s S&P Rating is A or better (or in the circumstances described in clause (ii) below, the Moody’s Rating and S&P Rating of Harley).

“Level IV Status” exists at any date if, on such date, (i) the U.S. Borrower has not qualified for Level I Status, Level II Status or Level III Status and (ii) the U.S. Borrower’s Moody’s Rating is A3 or better or the U.S. Borrower’s S&P Rating is A- or better (or in the circumstances described in clause (ii) below, the Moody’s Rating and S&P Rating of Harley).

“Level V Status” exists at any date if, on such date, the U.S. Borrower (or in the circumstances described in clause (ii) below, Harley) has not qualified for Level I Status, Level II Status, Level III Status or Level IV Status.

“Moody’s Rating” means, at any time, the rating issued by Moody’s Investor Service, Inc., and then in effect with respect to the U.S. Borrower’s senior unsecured long-term debt securities, without third-party credit enhancement.

“Relevant Loans” means (1) Eurocurrency Rate Loans, (2) Eurocurrency Rate Advances, (3) CDOR Loans, (4) CDOR Advances, (5) Swing Line Loans which are Fixed Rate Loans and (6) USD Swing Line Loans described in Section 2.9.1(b)(y).

“S&P Rating” means, at any time, the rating issued by Standard and Poor’s Rating Services, a division of The McGraw Hill Companies, Inc., and then in effect with respect to the U.S. Borrower’s senior unsecured long-term debt securities, without third-party credit enhancement.

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“Status” means either Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status.

(ii)  Determination of Applicable Margin and Applicable Facility Fee.  The Applicable Margin in respect of any Loan and the Applicable Facility Fee payable under Section 2.14(C) shall be determined by reference to the table set forth in clause (i) above, as applicable, on the basis of the U.S. Borrower’s Status as determined from its then-current Moody’s Rating and S&P Rating, to change as and when such Moody’s Rating or S&P Rating changes.  The credit rating in effect on any date for the purposes of this Section is that in effect at the close of business on such date.  Notwithstanding the foregoing, (i) if at any time the U.S. Borrower has no Moody’s Rating or S&P Rating, then Harley’s S&P Rating and Moody’s Rating shall be used to determine Status and if at any time neither the U.S. Borrower nor Harley has any Moody’s Rating or S&P Rating, Level V Status shall exist and (ii) if the U.S. Borrower (or in the circumstance described above, Harley) is split-rated and the ratings differential is two levels or more, the intermediate rating at the midpoint will apply and if there is no midpoint, the higher of the two intermediate ratings will apply.

2.7  Minimum Amount of Each Syndicated Global Advance and Syndicated Canadian Advance.  Each Syndicated Global Advance and Syndicated Canadian Advance shall be in the applicable minimum amounts specified in Schedule I or, in the case of a Syndicated Canadian Advance, such other amounts as may be specified in the Syndicated Canadian Addendum; provided, however, that any Base Rate Advance may be in the amount of the unused Aggregate Commitment and any Canadian Prime Rate Advance or Base Rate Advance to the Canadian Borrower may be in the amount of the unused Syndicated Canadian Commitments.

2.8  Method of Selecting Types and Interest Periods for Conversion and Continuation of Syndicated Global Advances, Syndicated Canadian Advances and Swing Line Loans.

(A)  Right to Convert.  The applicable Borrower may elect from time to time, subject to the provisions of Section 2.6, Section 2.7 and this Section 2.8, to convert all or any part of an Advance of any Type into any other Type or Types of Advance; provided that any conversion of any Fixed Rate Advance or Fixed Rate Loan shall be made on, and only on, the last day of the Interest Period applicable thereto.

(B)  Automatic Conversion and Continuation.  Floating Rate Loans shall continue as Floating Rate Loans of the same Type unless and until such Floating Rate Loans are converted into Fixed Rate Loans.  Fixed Rate Loans shall continue as Fixed Rate Loans until the end of the then applicable Interest Period therefor, at which time such Fixed Rate Loans (other than Fixed Rate Loans in Agreed Currencies other than Dollars) shall be automatically converted into Base Rate Loans unless the applicable Borrower shall have given the Global Administrative Agent notice in accordance with Section 2.8(D) requesting that, at the end of such Interest Period, such Fixed Rate Loans continue as a Fixed Rate Loan.  Fixed Rate Loans, including, without limitation, Swing Line Loans, in a currency other than Dollars and Syndicated Canadian Loans (other than CDOR Loans which shall be converted to Canadian Prime Rate Loans in accordance with the Syndicated Canadian Addendum) shall, upon the expiry of the then current Interest Period, automatically continue as Fixed Rate Loans in the same currency and of the same Type

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unless the applicable Borrower notifies the Global Administrative Agent otherwise as provided herein.

(C)  No Conversion Post-Default.  Notwithstanding anything to the contrary contained in Section 2.8(A) or Section 2.8(B), no Syndicated Global Loan, Swing Line Loan or Syndicated Canadian Loan may be converted into or continued as a Fixed Rate Loan except with the consent of the Required Lenders when any Default has occurred and is continuing; provided that, absent such consent, any such Syndicated Global Loan, Swing Line Loan or Syndicated Canadian Loan which is a Eurocurrency Rate Loan in a currency other than Dollars or Canadian Dollars shall, upon the expiration of the relevant Interest Period then applicable thereto, bear interest for each subsequent day at a per annum rate equal to the rate applicable to Eurocurrency Rate Loans to the relevant Borrower for such currency for an Interest Period of one month.

(D)  Conversion/Continuation Notice.  The applicable Borrower shall give the Global Administrative Agent irrevocable notice (a “Conversion/Continuation Notice”) of each conversion of a Floating Rate Loan into a Fixed Rate Loan or continuation of a Fixed Rate Loan not later than the time prior to the date of the requested conversion or continuation which is consistent with the requisite time and notice required in connection with Section 2.6(a), specifying:  (1) the requested date (which shall be a Business Day) of such conversion or continuation; (2) the amount and Type of the Syndicated Global Loan, Swing Line Loan or Syndicated Canadian Loan to be converted or continued; and (3) the amounts of Fixed Rate Loan(s) into which such Syndicated Global Loan, Swing Line Loan or Syndicated Canadian Loan is to be converted or continued, the applicable permitted currency and the duration of the Interest Periods applicable thereto.  If no such notice is given with respect to a Fixed Rate Loan (other than CDOR Loans) in a currency other than Dollars, the Interest Period applicable to the automatic continuation of such Loan shall be one month.

(E)  Limitations on Conversions.  Notwithstanding anything herein to the contrary, at the election of the applicable Borrowers under this Section 2.8, (x) Eurocurrency Rate Advances in an Agreed Currency may be converted and/or continued as Eurocurrency Rate Advances only in the same Agreed Currency, (y) U.K. Swing Line Loans in a U.K. Swing Line Currency may be converted and/or continued as U.K. Swing Line Loans only in the same U.K. Swing Line Currency and (z) Syndicated Canadian Loans in a particular permitted currency may be converted and/or continued as Syndicated Canadian Loans only in the same currency.

2.9  Swing Line Loans.

2.9.1  USD Swing Line Loans.  (a)  Amount of USD Swing Line Loans.  Upon the satisfaction of the conditions precedent set forth in Sections 4.1 and 4.2, from and including the date of this Agreement and prior to the Termination Date, the Global Swing Line Lender agrees, on the terms and conditions set forth in this Agreement, to make USD Swing Line Loans in Dollars to the U.S. Borrower from time to time in an amount not to exceed in the aggregate at any one time outstanding the lesser of (i) $25,000,000 or (ii) the amount by which the Aggregate Commitment exceeds the sum of the outstanding principal Dollar Amount of Syndicated Global Advances, Bid Rate Advances, Swing Line Loans and Syndicated Canadian Advances at such time.  Each USD Swing Line Loan shall be in the applicable minimum amounts specified in Schedule II (or such lesser amount as may be agreed to by the Global Swing Line Lender) or an

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integral multiple thereof as specified in Schedule II (or such lesser amount as may be agreed to by the Global Swing Line Lender) in excess thereof, and all interest payable on the USD Swing Line Loans shall be payable to the Global Swing Line Lender for the account of the Global Swing Line Lender.

(b)  Borrowing Notice; Interest on USD Swing Line Loans.  The U.S. Borrower shall deliver to the Global Administrative Agent and the Global Swing Line Lender a notice (a “USD Swing Line Borrowing Notice”) signed by it not later than the applicable time and to the applicable location described in Schedule II on the Borrowing Date of each USD Swing Line Loan specifying (i) the applicable Borrowing Date (which shall be a Business Day) and (ii) the aggregate amount of the requested USD Swing Line Loan.  All USD Swing Line Loans shall bear interest at the election of the U.S. Borrower at a per annum rate equal to (x) the Prime Rate or (y) the sum of (a) a money market rate or fixed rate of interest for an interest period as agreed to by the Global Swing Line Lender and the U.S. Borrower (which interest period shall not in any event exceed thirty (30) days) plus (b) the Applicable Margin then in effect.

(c)  Making of USD Swing Line Loans.  Promptly after receipt of the Borrowing Notice under Section 2.9.1(b), the Global Administrative Agent shall notify the Global Swing Line Lender of the requested USD Swing Line Loan.  Not later than 3:00 p.m. (New York time) on the applicable Borrowing Date, the Global Swing Line Lender shall make available its USD Swing Line Loan in funds immediately available as directed by the U.S. Borrower.

(d)  Repayment of USD Swing Line Loans.  Each USD Swing Line Loan shall be paid in full by the U.S. Borrower on or before the thirtieth day after the Borrowing Date for such USD Swing Line Loan (or if earlier on the last day of the interest period applicable thereto).  Outstanding USD Swing Line Loans may be repaid from the proceeds of Syndicated Global Advances or Bid Rate Advances.  Any repayment or prepayment of a USD Swing Line Loan shall be accompanied by accrued interest thereon and, subject to Section 2.9.1(a), shall be in the minimum amount of $100,000 (or such lesser amount as may be agreed to by the Global Swing Line Lender) and in increments of $100,000 (or such lesser amount as may be agreed to by the Global Swing Line Lender) in excess thereof or the full amount of such USD Swing Line Loan.  If the U.S. Borrower at any time fails to repay a USD Swing Line Loan on the applicable date when due, the U.S. Borrower shall be deemed to have elected to borrow a Syndicated Global Advance which shall be a Base Rate Advance under Section 2.1 as of such date equal in amount to the unpaid amount of such USD Swing Line Loan (notwithstanding the minimum amount of Base Rate Advances as provided in Section 2.7).  The proceeds of any such Advance shall be used to repay such USD Swing Line Loan.  Unless the Global Administrative Agent upon the request of or with the consent of the Required Lenders shall have notified the Global Swing Line Lender prior to such Global Swing Line Lender making any USD Swing Line Loan, that the applicable conditions precedent set forth in Article IV have not then been satisfied, each Syndicated Global Lender’s obligation to make Syndicated Global Loans pursuant to Section 2.1 and this Section 2.9.1(d) to repay such USD Swing Line Loan shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including the inability of the U.S. Borrower to satisfy the conditions precedent set forth in Article IV or the occurrence or continuance of a Default.  In the event that any Syndicated Global Lender fails to make payment to the Global Administrative Agent of any amount due under this Section 2.9.1(d), the Global Administrative Agent shall be entitled to receive, retain and apply against such obligation

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the principal and interest otherwise payable to such Syndicated Global Lender hereunder until the Global Administrative Agent receives such payment from such Syndicated Global Lender or such obligation is otherwise fully satisfied.  In addition to the foregoing, if for any reason any Syndicated Global Lender fails to make payment to the Global Administrative Agent of any amount due under this Section 2.9.1(d), such Syndicated Global Lender shall be deemed, at the option of the Global Administrative Agent, to have unconditionally and irrevocably purchased from the Global Swing Line Lender, without recourse or warranty, an undivided interest in and participation in the applicable USD Swing Line Loan in the amount of the Syndicated Global Loan such Syndicated Global Lender was required to make pursuant to this Section 2.9.1(d), and such interest and participation may be recovered from such Syndicated Global Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of demand by the Global Administrative Agent and ending on the date such obligation is fully satisfied.

2.9.2  Canadian Swing Line Loans.  (a)  Amount of Canadian Swing Line Loans.  Upon the satisfaction of the conditions precedent set forth in Sections 4.1 and 4.2, from and including the date of this Agreement and prior to the Termination Date, the Global Swing Line Lender agrees, on the terms and conditions set forth in this Agreement and pursuant to other arrangements agreed to in writing by the U.S. Borrower and the Global Swing Line Lender, to make Canadian Swing Line Loans in Canadian Dollars to the Canadian Borrower and the U.S. Borrower, in each case from time to time in an amount not to exceed in the aggregate, and on a cumulative basis for the Canadian Borrower and the U.S. Borrower, at any one time outstanding the lesser of (i) the Canadian Swing Line Commitment and (ii) the amount by which the Aggregate Commitment exceeds the sum of the outstanding principal Dollar Amount of Syndicated Global Advances, Bid Rate Advances, Swing Line Loans and Syndicated Canadian Advances at such time.  Each Canadian Swing Line Loan shall be in the applicable minimum amounts specified in Schedule II (or such lesser amount as may be agreed to by the Global Swing Line Lender) or an integral multiple thereof as specified in Schedule II (or such lesser amount as may be agreed to by the Global Swing Line Lender) in excess thereof, and all interest payable on the Canadian Swing Line Loans shall be payable to the Global Swing Line Lender for the account of the Global Swing Line Lender.  In no event shall the number of Interest Periods under Canadian Swing Line Loans outstanding at any time be greater than five (5).

(b)  Borrowing Notice; Interest on Canadian Swing Line Loans.  The relevant Borrower shall (unless such Borrower and the Global Swing Line Lender agree otherwise) deliver to the Global Administrative Agent and the Global Swing Line Lender a notice (a “Canadian Swing Line Borrowing Notice”) signed by it not later than the applicable time and to the applicable location described in Schedule II specifying (i) the applicable Borrowing Date (which shall be a Business Day), (ii) the aggregate amount of the requested Canadian Swing Line Loan, (iii) whether such Canadian Swing Line Loan is to be made to the Canadian Borrower or the U.S. Borrower and (iv) the Type of Loan requested.  All Canadian Swing Line Loans made to the Canadian Borrower shall be Canadian Prime Rate Loans or CDOR Loans and all Canadian Swing Line Loans made to the U.S. Borrower shall be Canadian Prime Rate Loans or Eurocurrency Rate Loans denominated in Canadian Dollars only.  All Canadian Swing Line Loans (x) that are Canadian Prime Rate Loans shall bear interest at the Canadian Prime Rate and (y) that are CDOR Loans or Eurocurrency Rate Loans shall have an Interest Period not in excess of thirty (30) days.

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(c)  Making of Canadian Swing Line Loans.  Unless otherwise agreed by the applicable Borrower and the Global Swing Line Lender, not later than 4:00 p.m. (Toronto time) on the applicable Borrowing Date, (i) if the requested Canadian Swing Line Loan is to be made to the Canadian Borrower, the Global Swing Line Lender shall make available its Canadian Swing Line Loan in funds immediately available at the applicable location described in Schedule II to the Canadian Borrower and (ii) if the requested Canadian Swing Line Loan is to be made to the U.S. Borrower, the Global Swing Line Lender shall make available its Canadian Swing Line Loan in funds immediately available at the applicable location described in Schedule II to the U.S. Borrower.

(d)  Repayment of Canadian Swing Line Loans.  Each Canadian Swing Line Loan shall be paid in full by the applicable Borrower which has received such Canadian Swing Line Loan on or before the thirtieth day after the Borrowing Date for such Canadian Swing Line Loan (or if earlier on the last day of the interest period applicable thereto).  Outstanding Canadian Swing Line Loans may be repaid from the proceeds of Syndicated Global Advances or, if such Canadian Swing Line Loans were made to the Canadian Borrower, Syndicated Canadian Advances.  Any payment or repayment of a Canadian Swing Line Loan shall be accompanied by accrued interest thereon and, subject to Section 2.9.2(a), shall be in the minimum amount of Cdn. $500,000 (or such lesser amount as may be agreed to by the Global Swing Line Lender) and in increments of Cdn. $100,000 (or such lesser amount as may be agreed to by the Global Swing Line Lender) in excess thereof or the full amount of such Canadian Swing Line Loan.  Any prepayment or repayment of a Canadian Swing Line Loan other than at the end of the applicable Interest Period, if any, shall be for the full amount thereof and shall be accompanied by all amounts payable pursuant to Section 3.4.

(e)  Risk Participation by Syndicated Canadian Banks in Canadian Swing Line Loans.  If the Canadian Borrower at any time fails to repay a Canadian Swing Line Loan made to such Borrower on the applicable date when due, such Borrower shall be deemed to have elected to borrow a Syndicated Canadian Advance which shall be a Canadian Prime Rate Advance under Section 2.2 as of such date equal in amount to the unpaid amount of such Canadian Swing Line Loan (notwithstanding the minimum amount of Canadian Prime Rate Advances as provided in Section 2.7).  The proceeds of any such Advance shall be used to repay such Canadian Swing Line Loan.  Other than with respect to Canadian Swing Line Loans, if any, made by virtue of the relevant Borrower’s overdraft facilities with the Global Swing Line Lender, unless the Global Administrative Agent upon the request of or with the consent of the Required Lenders shall have notified the Global Swing Line Lender prior to such Global Swing Line Lender making any Canadian Swing Line Loan, that the applicable conditions precedent set forth in Article IV have not then been satisfied, each Syndicated Canadian Bank’s obligation to make Syndicated Canadian Loans pursuant to Section 2.2 and this Section 2.9.2(e) to repay such Canadian Swing Line Loan shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including the inability of the applicable Borrower to satisfy the conditions precedent set forth in Article IV or the occurrence or continuance of a Default.  In the event that any Syndicated Canadian Bank fails to make payment to the Global Administrative Agent of any amount due under this Section 2.9.2(e), the Global Administrative Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Syndicated Canadian Bank hereunder until the Global Administrative Agent receives such payment from such Syndicated Canadian Bank or such obligation is otherwise fully satisfied.  In

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addition to the foregoing, if for any reason any Syndicated Canadian Bank fails to make payment to the Global Administrative Agent of any amount due under this Section 2.9.2(e), such Syndicated Canadian Bank shall be deemed, at the option of the Global Administrative Agent, to have unconditionally and irrevocably purchased from the Global Swing Line Lender, without recourse or warranty, an undivided interest in and participation in the applicable Canadian Swing Line Loan in the amount of the Syndicated Canadian Loan such Syndicated Canadian Bank was required to make pursuant to this Section 2.9.2(e), and such interest and participation may be recovered from such Syndicated Canadian Bank together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of demand by the Global Administrative Agent and ending on the date such obligation is fully satisfied.

(f)  Risk Participation by Syndicated Global Lenders in Canadian Swing Line Loans.  If the U.S. Borrower at any time fails to repay a Canadian Swing Line Loan made to such Borrower on the applicable date when due, such Canadian Swing Line Loan shall be converted to and redenominated in Dollars equal to the unpaid Dollar Amount of such Canadian Swing Line Loan determined as of the date of such conversion and such Borrower shall be deemed to have elected to borrow a Syndicated Global Advance which shall be a Base Rate Advance under Section 2.1 as of such date in such Dollar Amount (notwithstanding the minimum amount of Base Rate Advances as provided in Section 2.7).  The proceeds of any such Advance shall be used to repay such Canadian Swing Line Loan.  Each Syndicated Global Lender’s obligation to make Syndicated Global Loans pursuant to Section 2.1 and this Section 2.9.2(f) to repay such Canadian Swing Line Loan shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including the inability of the applicable Borrower to satisfy the conditions precedent set forth in Article IV or the occurrence or continuance of a Default.  In the event that any Syndicated Global Lender fails to make payment to the Global Administrative Agent of any amount due under this Section 2.9.2(f), the Global Administrative Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Syndicated Global Lender hereunder until the Global Administrative Agent receives such payment from such Syndicated Global Lender or such obligation is otherwise fully satisfied.  In addition to the foregoing, if for any reason any Syndicated Global Lender fails to make payment to the Global Administrative Agent of any amount due under this Section 2.9.2(f), such Syndicated Global Lender shall be deemed, at the option of the Global Administrative Agent, to have unconditionally and irrevocably purchased from the Global Administrative Agent, without recourse or warranty, an undivided interest in and participation in the applicable Canadian Swing Line Loan in the amount of the Syndicated Global Loan such Syndicated Global Lender was required to make pursuant to this Section 2.9.2(f), and such interest and participation may be recovered from such Syndicated Global Lender together with interest thereon at (1) the Federal Funds Effective Rate in the case of Loans denominated in Dollars and (2) the Overnight Foreign Currency Rate for Canadian Dollars in the case of Loans denominated in Canadian Dollars, in each case for each day during the period commencing on the date of demand by the Global Administrative Agent and ending on the date such obligation is fully satisfied.

2.9.3  U.K. Swing Line Loans.

(a)  Amount of U.K. Swing Line Loans.  Upon the satisfaction of the conditions precedent set forth in Sections 4.1 and 4.2, from and including the date of this Agreement and

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prior to the date that is five (5) Business Days prior to the Termination Date, the Global Swing Line Lender agrees, on the terms and conditions set forth in this Agreement, to make U.K. Swing Line Loans in one or more U.K. Swing Line Currencies to the Global Borrowers from time to time in a Dollar Amount not to exceed in the aggregate at any one time outstanding the lesser of (i) the U.K. Swing Line Commitment at such time and (ii) the amount by which the Aggregate Commitment exceeds the sum of the outstanding principal Dollar Amount of Syndicated Global Advances, Bid Rate Advances, Swing Line Loans and Syndicated Canadian Advances at such time.  Each U.K. Swing Line Loan shall be in the applicable minimum amounts specified in Schedule II (or such lesser amount as may be agreed to by the Global Swing Line Lender) or an integral multiple thereof as specified in Schedule II (or such lesser amount as may be agreed to by the Global Swing Line Lender) in excess thereof, and all interest payable on the U.K. Swing Line Loans shall be payable to the Global Swing Line Lender for the account of the Global Swing Line Lender.  In no event shall the number of U.K. Swing Line Loans outstanding at any time be greater than five (5).

(b)  Borrowing Notice; Interest on U.K. Swing Line Loans.  The relevant Global Borrower shall deliver to the Global Administrative Agent and the Global Swing Line Lender a notice (a “U.K. Swing Line Borrowing Notice”) signed by it not later than the applicable time and to the applicable location described in Schedule II specifying (i) the applicable Borrowing Date (which shall be a Business Day), (ii) the aggregate amount of the requested U.K. Swing Line Loan, (iii) the U.K. Swing Line Currency in which such Loan is requested and (iv) the initial Interest Period in connection therewith.  All of the U.K. Swing Line Loans shall be Eurocurrency Rate Loans with an Interest Period not in excess of thirty (30) days.

(c)  Making of U.K. Swing Line Loans.  Not later than 3:00 p.m. (London time) on the applicable Borrowing Date, the Global Swing Line Lender shall make available its U.K. Swing Line Loan in funds in the applicable U.K. Swing Line Currency immediately available at the applicable location described in Schedule II to the relevant Global Borrower.

(d)  Repayment of U.K. Swing Line Loans.  Each U.K. Swing Line Loan shall be paid in full by the relevant Global Borrower on or before the date that is the last day of the Interest Period applicable to such U.K. Swing Line Loan and shall be prepaid if required in connection with the provisions of Section 2.3(B)(ii).  Outstanding U.K. Swing Line Loans may be repaid from the proceeds of Syndicated Global Advances.  Any repayment or prepayment of a U.K. Swing Line Loan shall be accompanied by accrued interest thereon and, subject to Section 2.9.3(a), shall be in the minimum amount of $50,000 or the Equivalent Amount in the relevant U.K. Swing Line Currency (or such lesser amount as may be agreed to by the Global Swing Line Lender) and in increments of $50,000 or the Equivalent Amount in the relevant U.K. Swing Line Currency (or such lesser amount as may be agreed to by the Global Swing Line Lender) in excess thereof or the full amount of such U.K. Swing Line Loan.  Any prepayment or repayment of a U.K. Swing Line Loan other than at the end of the applicable Interest Period shall be for the full amount thereof and shall be accompanied by all amounts payable pursuant to Section 3.4.  If any Global Borrower at any time fails to repay a U.K. Swing Line Loan on the applicable date when due, such Borrower shall be deemed to have elected to borrow a Syndicated Global Advance which shall be a Eurocurrency Rate Advance in the applicable Agreed Currency under Section 2.1 as of such date equal in amount to the unpaid amount of such U.K. Swing Line Loan (notwithstanding the minimum amount of Eurocurrency Rate Advances).  The proceeds of any

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such Advance shall be used to repay such U.K. Swing Line Loan.  Unless the Global Administrative Agent upon the request of or with the consent of the Required Lenders shall have notified the Global Swing Line Lender prior to such Global Swing Line Lender making any U.K. Swing Line Loan, that the applicable conditions precedent set forth in Article IV have not then been satisfied, each Syndicated Global Lender’s obligation to make Syndicated Global Loans pursuant to Section 2.1 and this Section 2.9.3(d) to repay such U.K. Swing Line Loan shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including the inability of any Borrower to satisfy the conditions precedent set forth in Article IV or the occurrence or continuance of a Default.  In the event that any Syndicated Global Lender fails to make payment to the Global Administrative Agent of any amount due under this Section 2.9.3(d), the Global Administrative Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Syndicated Global Lender hereunder until the Global Administrative Agent receives such payment from such Syndicated Global Lender or such obligation is otherwise fully satisfied.  In addition to the foregoing, if for any reason any Syndicated Global Lender fails to make payment to the Global Administrative Agent of any amount due under this Section 2.9.3(d), such Syndicated Global Lender shall be deemed, at the option of the Global Administrative Agent, to have unconditionally and irrevocably purchased from the Global Swing Line Lender, without recourse or warranty, an undivided interest in and participation in the applicable U.K. Swing Line Loan in the amount of the Syndicated Global Loan such Syndicated Global Lender was required to make pursuant to this Section 2.9.3(d), and such interest and participation may be recovered from such Syndicated Global Lender together with interest thereon at (1) the Federal Funds Effective Rate in the case of Loans denominated in Dollars and (2) the Overnight Foreign Currency Rate in the case of Loans denominated in any other U.K. Swing Line Currency, in each case for each day during the period commencing on the date of demand by the Global Administrative Agent and ending on the date such obligation is fully satisfied.

2.10  The Bid Rate Advances.  (a)  Each Syndicated Global Lender severally agrees that, on the terms and conditions set forth in this Agreement, either Global Borrower may request and receive Bid Rate Advances in Dollars, euro or any Eligible Currency under this Section 2.10 from time to time on any Business Day during the period from the date hereof until the date occurring 30 days prior to the Termination Date in the manner set forth below; provided, however, that, following the making of each Bid Rate Advance, the aggregate Dollar Amount of (i) the Advances, (ii) the Swing Line Loans and (iii) the Syndicated Canadian Loans then outstanding shall not exceed the Aggregate Commitment.

(b)  The procedures for the solicitation and acceptance of Bid Rate Loans are set forth below:

(i)  The applicable Global Borrower may request a Bid Rate Advance under this Section 2.10(b) by giving the Global Administrative Agent irrevocable notice at the office and location specified by the Global Administrative Agent, in the form attached hereto as Exhibit G (a “Bid Rate Advance Borrowing Notice”), specifying the date, currency and aggregate amount of the proposed Bid Rate Advance, the maturity date for repayment of each Bid Rate Loan to be made as part of such Bid Rate Advance (which maturity date may not be earlier than, in the case of an Absolute Rate Auction, the date occurring thirty days, and in the case of an Indexed Rate Auction, the date occurring one

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month after the date of the related Bid Rate Advance or later than, in the case of an Absolute Rate Auction, the earlier of the day occurring 180 days after the date of such Bid Rate Advance and the Termination Date, and in the case of an Indexed Rate Auction, the earlier of the day occurring six months after the date of such Bid Rate Advance and the Termination Date), the interest payment date or dates relating thereto, and any other terms to be applicable to such Bid Rate Advance, not later than 10:00 a.m. (New York time in the case of Bid Rate Advances to the U.S. Borrower and London time in the case of Bid Rate Advances to the U.K. Borrower) (A) one Business Day prior to the date of the proposed Bid Rate Advance, if the applicable Global Borrower shall specify in the Bid Rate Advance Borrowing Notice that the rates of interest to be offered by the Syndicated Global Lenders shall be absolute rates per annum (such type of solicitation being an “Absolute Rate Auction”) and (B) five Business Days prior to the date of the proposed Bid Rate Advance, if the applicable Global Borrower shall specify in the Bid Rate Advance Borrowing Notice that the rates of interest to be offered by the Syndicated Global Lenders shall be based on the Eurocurrency Base Rate with respect to the applicable currency (such type of solicitation being an “Indexed Rate Auction”).  The Global Administrative Agent shall, promptly following its receipt of a Bid Rate Advance Borrowing Notice under this Section 2.10(b), notify each Syndicated Global Lender of such request by sending such Syndicated Global Lender a copy of such Bid Rate Advance Borrowing Notice.

(ii)  Each Syndicated Global Lender may, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more Bid Rate Loans to the applicable Global Borrower as part of such proposed Bid Rate Advance at a rate or rates of interest specified by such Syndicated Global Lender in its sole discretion, by notifying the Global Administrative Agent (which shall give prompt notice thereof to the applicable Global Borrower), before 11:00 a.m. (New York time in the case of Bid Rate Loans to the U.S. Borrower and London time in the case of Bid Rate Loans to the U.K. Borrower) (or if such Syndicated Global Lender is the Global Administrative Agent, before 10:45 a.m. (New York time in the case of Bid Rate Loans to the U.S. Borrower and London time in the case of Bid Rate Loans to the U.K. Borrower)) (A) on the date of such proposed Bid Rate Advance, in the case of an Absolute Rate Auction, and (B) four Business Days before the date of such proposed Bid Rate Advance, in the case of an Indexed Rate Auction of the minimum amount and maximum amount of each Bid Rate Loan which such Syndicated Global Lender would be willing to make as part of such proposed Bid Rate Advance (which amounts may, subject to the proviso to the first sentence of Section 2.10(a), exceed such Syndicated Global Lender’s Commitment), the rate or rates of interest, in the case of an Absolute Rate Auction, or the spread or spreads with respect to the Eurocurrency Base Rate, in the case of an Indexed Rate Auction, therefor and such Syndicated Global Lender’s Lending Installation with respect to such Bid Rate Loan.

(iii)  The applicable Global Borrower shall, in turn, before (A) 12:00 noon (New York time in the case of Bid Rate Advances to the U.S. Borrower and London time in the case of Bid Rate Advances to the U.K. Borrower) on the date of such proposed Bid Rate Advance, in the case of an Absolute Rate Auction, and (B) 11:00 a.m. (New York time in the case of Bid Rate Advances to the U.S. Borrower and London time in the case of Bid Rate Advances to the U.K. Borrower) three Business Days before the date of such

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proposed Bid Rate Advance, in the case of an Indexed Rate Auction for a Bid Rate Advance, either:

(x) cancel such Bid Rate Advance by giving the Global Administrative Agent notice to that effect; or

(y) accept, subject to Section 2.10(d), one or more of the offers made by any Syndicated Global Lender or Syndicated Global Lenders pursuant to Section 2.10(b)(ii), in its sole discretion, by giving notice to the Global Administrative Agent of the amount of each Bid Rate Loan (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the applicable Global Borrower by the Global Administrative Agent on behalf of such Syndicated Global Lender for such Bid Rate Loan pursuant to Section 2.10(b)(ii)) to be made by each Syndicated Global Lender as part of such Bid Rate Advance, and reject any remaining offers made by Syndicated Global Lenders pursuant to Section 2.10(b)(ii) by giving the Global Administrative Agent notice to that effect.

(iv)  If the applicable Global Borrower notifies the Global Administrative Agent that such Bid Rate Advance is canceled pursuant to Section 2.10(b)(iii)(x), the Global Administrative Agent shall give prompt notice thereof to the Syndicated Global Lenders and such Bid Rate Advance shall not be made.

(v)  If the applicable Global Borrower accepts one or more of the offers made by any Syndicated Global Lender or Syndicated Global Lenders pursuant to Section 2.10(b)(iii)(y), the Global Administrative Agent shall in turn promptly notify (A) each Syndicated Global Lender that has made an offer as described in Section 2.10(b)(ii) of the date, and aggregate amount of such Bid Rate Advance and whether or not any offer or offers made by such Syndicated Global Lender pursuant to Section 2.10(b)(ii) have been accepted by the applicable Global Borrower and (B) each Syndicated Global Lender that is to make a Bid Rate Loan as part of such Bid Rate Advance, of the amount of each Bid Rate Loan to be made by such Syndicated Global Lender as part of such Bid Rate Advance.  Each Syndicated Global Lender that is to make a Bid Rate Loan as part of such Bid Rate Advance shall, not later than 3:00 p.m. (New York time) on the date of such Bid Rate Advance specified in the notice received from the Global Administrative Agent pursuant to clause (A) of the preceding sentence, make available for the account of its Lending Installation to the Global Administrative Agent at the relevant Payment Office such Syndicated Global Lender’s portion of such Bid Rate Advance, in same day funds in the currency specified in the applicable Bid Rate Advance Borrowing Notice.  Upon fulfillment of the applicable conditions set forth in Article IV and after receipt by the Global Administrative Agent of such funds, the Global Administrative Agent will make such funds available to the applicable Global Borrower at the Global Administrative Agent’s aforesaid address.  Promptly after each Bid Rate Advance, the Global Administrative Agent will notify each Syndicated Global Lender of the amount of such Bid Rate Advance, the consequent Bid Rate Reduction and the dates upon which such Bid Rate Reduction commenced and will terminate.

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(vi)  Notwithstanding the other provisions of this Section 2.10(b), the applicable Global Borrower may elect at its own discretion to assume the responsibilities of the Global Administrative Agent in connection with the solicitation and acceptance of Bid Rate Loans as described in this section.  In the event that the applicable Global Borrower makes the election described in this subsection, all notices to be given by such Borrower to the Global Administrative Agent pursuant to this Section 2.10(b) shall be given by such Borrower directly to the Global Administrative Agent and the Syndicated Global Lenders, all notices to be given by the Global Administrative Agent to the Syndicated Global Lenders pursuant to this Section 2.10(b) shall be given by such Borrower to the Syndicated Global Lenders, and all notices to be given by the Syndicated Global Lenders to the Global Administrative Agent pursuant to this Section 2.10(b) shall be given by the Syndicated Global Lenders to such Borrower and the Global Administrative Agent.  In addition, any fee payable to the Global Administrative Agent in connection with the Bid Rate Loans in connection with such Bid Rate Loans solicited and accepted by either Global Borrower pursuant to this clause (vi) is hereby waived.

(c)  Each Bid Rate Advance shall be in an aggregate amount not less than the Equivalent Amount of $10,000,000 in the applicable currency or an integral multiple of approximately $1,000,000 in the applicable currency in excess thereof, and, following the making of each Bid Rate Advance, the Borrowers shall be in compliance with the limitation set forth in the proviso to the first sentence of Section 2.10(a).

(d)  Each acceptance by the applicable Global Borrower pursuant to Section 2.10(b)(iii)(y) of the offers made in response to a Bid Rate Advance Borrowing Notice shall be treated as an acceptance of such offers in ascending order of the rates or margins, as applicable, at which the same were made but if, as a result thereof, two or more offers at the same such rate or margin would be partially accepted, then the amounts of the Bid Rate Loans in respect of which such offers are accepted shall be treated as being the amounts which bear the same proportion to one another as the respective amounts of the Bid Rate Loans so offered bear to one another but, in each case, rounded as the Global Administrative Agent (or the applicable Global Borrower in the event such Borrower runs the bid rate process under clause (b)(vi) above) may consider necessary to ensure that the Equivalent Amount of each such Bid Rate Loan is approximately $500,000 or an integral multiple thereof.

(e)  Within the limits and on the conditions set forth in this Section 2.10, each Global Borrower may from time to time borrow under this Section 2.10, repay pursuant to Section 2.10(f), and reborrow under this Section 2.10.

(f)  The applicable Global Borrower shall repay to the Global Administrative Agent, for the account of each Syndicated Global Lender which has made a Bid Rate Loan to it, on the maturity date of such Bid Rate Loan (such maturity date being that specified by such Borrower for repayment of such Bid Rate Loan in the related Bid Rate Advance Borrowing Notice), or, if earlier, the acceleration of the Obligations pursuant to Section 8.1, the then unpaid principal amount of such Bid Rate Loan.  No Borrower shall have the right to prepay any principal amount of any Bid Rate Loan without the consent of the applicable Syndicated Global Lender.

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(g)  The applicable Global Borrower shall pay interest on the unpaid principal amount of each Bid Rate Loan made to it, from the date of such Bid Rate Loan to the date the principal amount of such Bid Rate Loan is repaid in full, at the rate of interest for such Bid Rate Loan specified by the Syndicated Global Lender making such Bid Rate Loan in the related notice submitted by such Syndicated Global Lender pursuant to Section 2.10(b)(ii), payable on the interest payment date or dates specified by such Borrower for such Bid Rate Loan in the related Bid Rate Advance Borrowing Notice and on any date on which such Bid Rate Loan is prepaid, whether by acceleration or otherwise.  In the event the term of any Bid Rate Loan shall be longer than three months, interest thereon shall be payable not less frequently than once each three-month period during such term.  Unless otherwise specified in the applicable Bid Rate Advance Borrowing Notice, interest on Bid Rate Advances shall be calculated (a) for actual days elapsed on the basis of a 365-day year or, when appropriate, 366-day year for Bid Rate Advances made pursuant to an Indexed Rate Auction and (b) for actual days elapsed on the basis of a 360-day year for Bid Rate Advances made pursuant to an Absolute Rate Auction.

(h)  Except as provided in clause (b)(vi) above, in connection with each Bid Rate Loan, the applicable Global Borrower shall pay to the Global Administrative Agent the fee with respect thereto set forth in the relevant fee letter dated as of even date herewith between the Global Borrowers, J.P. Morgan Securities Inc. and the Global Administrative Agent.

2.11  Default Rate.  Notwithstanding anything contained herein to the contrary, if any principal of or interest on any Loan or any fee or other amount payable by any Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided herein or (ii) in the case of any other amount (other than as set forth in the following clause (iii)), 2% plus the rate applicable to Base Rate Advances as provided herein or (iii) in the case of any Syndicated Canadian Loan or Canadian Swing Line Loan, 2% plus the rate applicable to Canadian Prime Rate Loans.

2.12  Method of Payment.  (i)  All payments of principal, interest, and fees hereunder to the Global Administrative Agent shall be made, without setoff, deduction or counterclaim (a) at the Global Administrative Agent’s office at the applicable location at which such Advance was made in immediately available funds with respect to Advances denominated in Dollars and (b) in the Global Administrative Agent’s applicable Eurocurrency Payment Office in immediately available funds with respect to any Advance denominated in an Agreed Currency other than Dollars, in each case, or at any other Lending Installation of the Global Administrative Agent specified in writing (by 11:00 a.m. (New York time) on the day before the date when due) by the Global Administrative Agent to the applicable Borrower, by 12:00 noon local time in New York, New York with respect to Advances denominated in Dollars and 12:00 noon local time in the Global Administrative Agent’s Eurocurrency Payment Office with respect to Advances denominated in an Agreed Currency other than Dollars on the date when due and shall be made ratably among the relevant Lenders (unless such amount is not to be shared ratably in accordance with the terms hereof).  Each Advance shall be repaid or prepaid in the currency in which it was made (the “Advanced Currency”) in the amount borrowed and interest payable thereon shall be paid in such Advanced Currency.  Notwithstanding anything in this Agreement, the obligation of any Borrower in respect of any Advance shall not be discharged by an amount paid in any

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currency other than the Advanced Currency or at another location other than the location designated by the Global Administrative Agent, whether pursuant to a judgment or otherwise, to the extent the amount so paid, on prompt conversion into the Advanced Currency and transfer to the relevant Lenders under normal banking procedure, does not yield the amount of the Advanced Currency due under the Loan Documents.  In the event that any payment, whether pursuant to a judgment or otherwise, upon conversion and transfer, does not result in payment of the amount of the Advanced Currency due under the Loan Documents, such Lender shall have an independent cause of action against each of the Borrowers for the currency deficit.  Each payment delivered to the Global Administrative Agent for the account of any Lender shall be delivered promptly by the Global Administrative Agent to such Lender in the same type of funds which the Global Administrative Agent received at its address specified pursuant to Article XIV or at any Lending Installation specified in a notice received by the Global Administrative Agent from such Lender.

(ii)  All payments to be made by the applicable Borrowers hereunder in respect of any Swing Line Loans and Syndicated Canadian Loans shall be made in the currencies in which such Loans are denominated and in funds immediately available, at the Global Administrative Agent’s office or Global Swing Line Lender’s office (as applicable) office from which such Loan was made not later than 12:00 noon (local time) on the date on which such payment shall become due.

(iii)  Notwithstanding the foregoing provisions of this Section, if, after the making of any Advance or Loan in any currency other than Dollars or euro, currency control or exchange regulations are imposed in the country which issues such currency with the result that different types of such currency (the “New Currency”) are introduced and the type of currency in which the Advance was made (the “Original Currency”) no longer exists or the applicable Borrower is not able to make payment to the Global Administrative Agent or the Global Swing Line Lender, as applicable, in such Original Currency, then all payments to be made by the applicable Borrower hereunder in such currency shall be made in such amount and such type of the New Currency or Dollars as shall be equivalent to the amount of such payment otherwise due hereunder in the Original Currency, it being the intention of the parties hereto that the Borrowers take all risks of the imposition of any such currency control or exchange regulations.  In addition, notwithstanding the foregoing provisions of this Section, if, after the making of any Advance or Loan in any currency other than Dollars or euro, any applicable Borrower is not able to make payment to the Global Administrative Agent or the Global Swing Line Lender, as applicable, in the type of currency in which such Advance or Loan was made because of the imposition of any such currency control or exchange regulation, then such Advance or Loan shall instead be repaid when due in Dollars in a principal amount equal to the Dollar Amount (as of the date of repayment) of such Advance.

2.13  Notes, Telephonic Notices.  Any Lender may request that the Loans made by it each be evidenced by the applicable Notes to evidence such Lender’s Loans.  In such event, each applicable Borrower shall prepare, execute and deliver to such Lender such Note(s) for such Loans payable to the order of such Lender.  Thereafter, such Loans evidenced by such Note(s) and interest thereon shall at all times be represented by one or more Notes, except to the extent that any such Lender subsequently returns any such Note for cancellation.  Each Borrower authorizes the applicable Lenders and the Global Administrative Agent to extend Advances,

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effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons that the Global Administrative Agent or Lender in good faith believes to be acting on behalf of such Borrower.  Each Borrower agrees to deliver promptly to the Global Administrative Agent a written confirmation, signed by an Authorized Officer, if such confirmation is requested by the Global Administrative Agent or any Lender, of each telephonic notice.  If the written confirmation differs in any material respect from the action taken by the Global Administrative Agent and Lenders, (i) the telephonic notice shall govern absent manifest error and (ii) the Global Administrative Agent or Lender, as applicable, shall promptly notify the Authorizing Officer who provided such confirmation of such difference.

2.14  Promise to Pay; Interest and Fees; Interest Payment Dates; Interest and Fee Basis; Loan Accounts.

(A)  Promise to Pay.  Each Borrower unconditionally promises to pay when due the principal amount of each Loan made to it and all other Obligations incurred by it, and to pay all unpaid interest accrued thereon, in accordance with the terms of this Agreement.

(B)  Interest Payment Dates.  Interest accrued on each Floating Rate Loan, each Canadian Prime Rate Loan and USD Swing Line Loan shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof, at maturity (whether by acceleration or otherwise) and, with respect to any USD Swing Line Loans on any date on which a USD Swing Line Loan is prepaid, whether due to acceleration or otherwise.  Interest accrued on each Fixed Rate Loan (other than CDOR Loans which are governed by the Syndicated Canadian Addendum) shall be payable on the last day of its applicable Interest Period, on any date on which the Fixed Rate Loan is prepaid, whether by acceleration or otherwise, and at maturity.  Interest accrued on each Fixed Rate Loan having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period.  Interest accrued on each Bid Rate Loan shall be payable as provided in Section 2.10(g).  Interest accrued on the principal balance of all other Obligations shall be payable in arrears (i) upon repayment thereof in full, (ii) if not theretofore paid in full, at the time such other Obligation becomes due and payable (whether by acceleration or otherwise) and (iii) if not theretofore paid in full, on demand, commencing on the first such day following the date such Obligation became payable pursuant to the terms of this Agreement or the other Loan Documents.

(C)  Fees.  (i)  The relevant Borrowers shall, or shall cause their respective Subsidiaries to, pay to the Global Administrative Agent, for the account of each relevant Lender in accordance with their Pro Rata Shares and Syndicated Canadian Pro Rata Shares (as appropriate), on arrangements satisfactory to the U.S. Borrower and the Global Administrative Agent, a facility fee accruing at the rate of the Applicable Facility Fee per annum from and after the date hereof until the Termination Date on the amounts of the Aggregate Commitment in effect from time to time (calculated without regard to amounts outstanding).  All such facility fees payable under this clause (C) shall be payable quarterly in arrears on the first Business Day of each calendar quarter occurring after the date hereof and, in addition, on the Termination Date.

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(ii)  Utilization Fee.  If, at the end of any fiscal quarter, the average daily aggregate principal amount of outstanding Syndicated Global Loans and Syndicated Canadian Loans during such quarter exceeded fifty percent (50%) of the Aggregate Commitment, the relevant Borrowers shall, or shall cause their respective Subsidiaries to, pay to the Global Administrative Agent, for the ratable account of each relevant Lender in accordance with its Pro Rata Share and Syndicated Canadian Pro Rata Share (as appropriate) on arrangements satisfactory to the U.S. Borrower and the Global Administrative Agent, a utilization fee at a rate per annum equal to the applicable Utilization Fee set forth in Section 2.6(b) on the average daily outstanding principal balance of the Syndicated Global Loans and Syndicated Canadian Loans during such quarter, payable quarterly in arrears on the first Payment Date to occur in each calendar quarter hereafter and on the Termination Date or earlier termination of the Commitments.

(D)  Interest and Fee Basis.  (i)  Interest on all Loans (other than Eurocurrency Rate Loans denominated in Pounds Sterling, Base Rate Loans with respect to which interest is calculated by reference to the Alternate Base Rate and USD Swing Line Loans), including all Syndicated Canadian Loans and all fees shall be calculated for actual days elapsed on the basis of a 360-day year (except as provided otherwise in the Syndicated Canadian Addendum).  Interest on (a) Base Rate Loans with respect to which interest is calculated by reference to the Alternate Base Rate and USD Swing Line Loans and (b) Eurocurrency Rate Loans denominated in Pounds Sterling and Syndicated Canadian Loans shall in each case be calculated for actual days elapsed on the basis of a 365-day year or, when appropriate, 366-day year; provided that Stamping Fees shall be calculated for actual days elapsed on the basis of a 365-day year.  Interest shall be payable for the day an Obligation is incurred but not for the day of any payment on the amount paid if payment is received by the times and in the offices required under Section 2.12.  If any payment of principal of or interest on a Loan or any payment of any other Obligations shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment.

(ii)  For purposes of the Interest Act (Canada), (a) whenever any interest or fee under this Agreement or any of the other Loan Documents is calculated using a rate based on a year of 360 days or 365 days, as the case may be, the rate determined pursuant to such calculation, when expressed as an annual rate, is equivalent to (1) the applicable rate based on a year of 360 days or 365 days, as the case may be, (2) multiplied by the actual number of days in the calendar year in which the period for which such interest or fee is payable (or compounded) ends, and (3) divided by 360 or 365, as the case may be, (b) the principle of deemed reinvestment of interest does not apply to any interest calculation under this Agreement, and (iii) the rates of interest stipulated in this Agreement are intended to be nominal rates and are not effective rates or yields.

(E)  Loan Account.  Each Lender shall maintain in accordance with its usual practice an account or accounts (a “Loan Account”) evidencing the Obligations of the Borrowers to such Lender owing to such Lender from time to time, including the amount of principal and interest payable and paid to such Lender from time to time hereunder.

(F)  Entries Binding.  The entries made in the Register and each Loan Account shall be conclusive and binding for all purposes, absent manifest error, unless any Borrower objects to

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information contained in the Register and each Loan Account within thirty (30) days of such Borrower’s receipt of such information.

2.15  Notification of Advances, Interest Rates, Prepayments and Aggregate Commitment Reductions.  Promptly after receipt thereof, the Global Administrative Agent will notify each relevant Lender of the contents of each Aggregate Commitment reduction notice, Borrowing Notice, Continuation/Conversion Notice and repayment notice received by it hereunder.  The Global Administrative Agent will notify each relevant Lender of the interest rate applicable to each Fixed Rate Loan promptly upon determination of such interest rate.

2.16  Lending Installations.  Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time.  All terms of this Agreement shall apply to any such Lending Installation and any Notes shall be deemed held by each Lender for the benefit of such Lending Installation.  Each Lender may, by written or facsimile notice to the Global Administrative Agent and the U.S. Borrower, designate a Lending Installation through which Loans will be made by it and for whose account Loan payments are to be made.

2.17  Non-Receipt of Funds by the Global Administrative Agent.  Unless a Borrower or a Lender, as the case may be, notifies the Global Administrative Agent prior to the date (or time, in the case of a Floating Rate Loan) on which it is scheduled to make payment to the Global Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of a Borrower, a payment of principal, interest or fees to the Global Administrative Agent for the account of the relevant Lenders, that it does not intend to make such payment, the Global Administrative Agent may assume that such payment has been made.  The Global Administrative Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption.  If such Lender or Borrower, as the case may be, has not in fact made such payment to the Global Administrative Agent, the recipient of such payment shall, on demand by the Global Administrative Agent, repay to the Global Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Global Administrative Agent until the date the Global Administrative Agent recovers such amount at a rate per annum equal to (i) in the case of payment by a Lender (other than in respect of any Loan denominated in Canadian Dollars), the Federal Funds Effective Rate for such day or (ii) in the case of payment by a Lender in respect of any Loan denominated in Canadian Dollars, at the one-month CDOR for such day, or (iii) in the case of payment by a Borrower, the interest rate applicable to the relevant Loan (including without limitation pursuant to Section 2.11 if applicable).

2.18  Termination Date.  This Agreement shall be effective until the Termination Date.  Notwithstanding the termination of this Agreement on the Termination Date, until all of the Obligations (other than contingent indemnity and reimbursement obligations, to the extent such obligations have not accrued) shall have been fully and indefeasibly paid and satisfied and all financing arrangements under the Loan Documents among the Borrowers and the Lenders shall have been terminated, all of the rights and remedies under this Agreement and the other Loan Documents shall survive.

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2.19  Judgment Currency.  If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due from a Borrower hereunder or under the Syndicated Canadian Addendum in the currency expressed to be payable herein or under the Syndicated Canadian Addendum (the “specified currency”) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Global Administrative Agent could purchase the specified currency with such other currency at the Global Administrative Agent’s main office in New York, New York on the Business Day preceding that on which the final, non-appealable judgment is given.  The obligations of each Borrower in respect of any sum due to any Lender or the Global Administrative hereunder or under the Syndicated Canadian Addendum shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Global Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency such Lender or the Global Administrative Agent (as the case may be) may in accordance with normal, reasonable banking procedures purchase the specified currency with such other currency.  If the amount of the specified currency so purchased is less than the sum originally due to such Lender or the Global Administrative Agent, as the case may be, in the specified currency, each Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Global Administrative Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds (a) the sum originally due to any Lender or the Global Administrative Agent, as the case may be, in the specified currency and (b) any amounts shared with other Lenders as a result of allocations of such excess as a disproportionate payment to such Lender under Section 11.2, such Lender or the Global Administrative Agent, as the case may be, agrees to remit such excess to such Borrower.

2.20  Intentionally Omitted.

2.21  Canadian Borrower as Borrower.  The U.S. Borrower may at any time add as a party to this Agreement the Canadian Borrower to be the “Canadian Borrower” in respect of Canadian Swing Line Loans and Canadian Syndicated Loans, in each case by the execution and delivery to the Global Administrative Agent of (a) a duly completed Assumption Letter by each of the Canadian Borrower and the Canadian Guarantor, with the written consent of the U.S. Borrower at the foot thereof (it being understood and agreed that if the Canadian Guarantor does not exist at the time of the Canadian Borrower becoming a party hereto, the U.S. Borrower shall cause the Canadian Guarantor, within 60 days of its formation, to execute and deliver a duly completed Assumption Letter to the Global Administrative Agent, accompanied by the other instruments and documents in respect of the Canadian Guarantor contemplated by the following clause (b)) and (b) any other instruments and documents required by Section 4.3 hereof (in the case of the Canadian Borrower) and comparable instruments and documents for the Canadian Guarantor.  Upon such execution, delivery and consent, each of the Canadian Borrower and the Canadian Guarantor shall for all purposes be a party hereto as the Canadian Borrower and the Canadian Guarantor, respectively, as fully as if it had executed and delivered this Agreement.

2.22  Termination as Borrower.  So long as the principal of and interest on any Loans or Advances made to any Foreign Borrower under this Agreement or the Syndicated Canadian Addendum shall have been repaid or paid in full and all other obligations of such Foreign

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Borrower under this Agreement and the Syndicated Canadian Addendum shall have been fully performed, the U.S. Borrower may, by not less than five (5) Business Days’ prior notice to the Global Administrative Agent (which shall promptly notify the Lenders thereof), terminate such Foreign Borrower’s rights as a “Borrower”.

ARTICLE III  CHANGE IN CIRCUMSTANCES

3.1  Yield Protection.  If any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) adopted after the date of this Agreement and having general applicability to all banks within the jurisdiction in which such Lender operates (excluding, for the avoidance of doubt, the effect of and phasing in of capital requirements or other regulations or guidelines passed prior to the date of this Agreement), or any interpretation or application thereof by any Governmental Authority charged with the interpretation or application thereof, or the compliance of any Lender therewith,

(i)  subjects any Lender or any applicable Lending Installation to any tax, duty, charge or withholding on or from payments due from any Borrower (excluding Excluded Taxes), or changes the basis of taxation of payments to any Lender in respect of its Loans or other amounts due it hereunder, provided, that this clause (i) shall not apply with respect to any Taxes to which Section 3.5 applies, or

(ii)  imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation with respect to its Fixed Rate Loans, or

(iii)  imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining the Fixed Rate Loans or reduces any amount received by any Lender or any applicable Lending Installation in connection with Fixed Rate Loans, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of Loans held or interest or fee received by it, by an amount deemed material by such Lender;

and the result of any of the foregoing is to increase the cost to that Lender of making, renewing or maintaining its Loans or to reduce any amount received under this Agreement, then, within 15 days after receipt by the relevant Borrower of written demand by such Lender pursuant to Section 3.6, such Borrower shall pay such Lender that portion of such increased expense incurred or reduction in an amount received which such Lender determines is attributable to making, funding and maintaining its Loans and its Commitment or Syndicated Canadian Commitment.

3.2  Changes in Capital Adequacy Regulations.  If a Lender determines (i) the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a “Change” (as defined below), and (ii) such increase in capital will result in an increase in the cost to such Lender of maintaining its Loans or its obligation to make Loans hereunder, then, within 15 days

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after receipt by the relevant Borrower of written demand by such Lender pursuant to Section 3.6, such Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender determines is attributable to this Agreement, its Loans or its obligation to make Loans hereunder (after taking into account such Lender’s policies as to capital adequacy).  “Change” means (i) any change after the date of this Agreement in the “Risk-Based Capital Guidelines” (as defined below) excluding, for the avoidance of doubt, the effect of any phasing in of such Risk-Based Capital Guidelines or any other capital requirements, in each case passed prior to the date hereof, or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement and having general applicability to all banks and financial institutions within the jurisdiction in which such Lender operates which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender.  “Risk-Based Capital Guidelines” means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States or Canada (if applicable) implementing the July 1988 report of the Basel Committee on Banking Supervision Entitled “International Convergence of Capital Measurement and Capital Standards,” including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement and including, for the avoidance of doubt, the recommendations set out in the report entitled ‘Basel II:  International Convergence of Capital Measurement and Capital Standards:  A Revised Framework’, which was published by the Basel Committee on Banking Supervision on June 26, 2004 and the European Commission proposal (COM (2004) 486) of July 14, 2004.

Notwithstanding any other provision of this Section 3.2, the U.K. Borrower shall not be obliged to make any increased payment pursuant to this Section 3.2 to the extent that the relevant cost, increased cost, reduction or liability is compensated for by any payment calculated in accordance with the Mandatory Cost or represents Excluded Taxes.

3.3  Availability of Types of Advances.  If (i) any Lender determines that maintenance of any of its Fixed Rate Loans at a suitable Lending Installation would violate any applicable law, rule, regulation or directive, whether or not having the force of law, or (ii) the Required Lenders with respect to Fixed Rate Advances or the Global Swing Line Lender with respect to Swing Line Loans determine that (x) deposits of a type, currency and maturity appropriate to match fund Fixed Rate Advances or Swing Line Loans, as applicable, are not available or (y) the interest rate applicable to a Fixed Rate Advance or Swing Line Loan does not accurately reflect the cost of making or maintaining such a Fixed Rate Advance or Swing Line Loans, then the Global Administrative Agent shall suspend the availability of Fixed Rate Advances or such Swing Line Loans of the affected Type or in the affected currency and, in the case of any occurrence set forth in clause (i), require any affected Fixed Rate Advances or Swing Line Loans to be repaid or, in the case of Eurocurrency Rate Loans in Dollars, at the option of the U.S. Borrower, converted to Base Rate Advances or, in the case of any Loans to the Canadian Borrower, at the option of the Canadian Borrower, converted to Canadian Prime Rate Advances.

3.4  Funding Indemnification.  If any payment of a Fixed Rate Advance, Fixed Rate Swing Line Loan or Bid Rate Advance occurs on a date which is not the last day of the

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applicable Interest Period in the case of a Fixed Rate Advance or Fixed Rate Swing Line Loans, or the applicable maturity date in the case of a Bid Rate Advance, whether because of acceleration, prepayment, assignment (to the extent such assignment is effected pursuant to Section 3.8) or otherwise, or a Fixed Rate Advance, Fixed Rate Swing Line Loan or Bid Rate Advance is not made or continued on the date specified by any Borrower for any reason other than default by the Lenders, the U.S. Borrower and such Borrower agrees to indemnify each Lender for any loss or cost (including lost profits) incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain the Fixed Rate Advance, Fixed Rate Swing Line Loan or Bid Rate Advance, as the case may be.

3.5  Taxes.  (i)  Unless such deduction is required by applicable law, all payments by any Borrower or any Guarantor to or for the account of any Lender or the Global Administrative Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all Taxes.  If any Borrower or any Guarantor shall be required by applicable law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Global Administrative Agent, then, except as otherwise specifically provided in this Section 3.5, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender or the Global Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) such Borrower or Guarantor, as applicable, shall make such deductions, (c) such Borrower or Guarantor, as applicable, shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) such Borrower or Guarantor, as applicable, shall furnish to the Global Administrative Agent the original or a certified copy of a receipt evidencing payment thereof or, in the case of a deduction made under tax legislation in the United Kingdom or England and Wales, evidence reasonably satisfactory to the Global Administrative Agent that the deduction has been made.  Each Syndicated Global Lender which is not otherwise a Qualifying Lender hereby agrees to fund its Syndicated Global Loans to the U.K. Borrower through an office, branch or Affiliate, if any, resident in the United Kingdom for United Kingdom tax purposes.

(ii) In addition, except as otherwise specifically provided in this Section 3.5, each Borrower and Guarantor hereby agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder by the relevant Borrower or Guarantor to the relevant Lender, or under any Note but excluding any such taxes, charges or levies in respect of any assignment, sale or transfer or participation (but excluding any participations and transfers pursuant to Section 2.2(E)) by any Lender or the Global Administrative Agent or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note (“Other Taxes”).

(iii) Each Borrower and Guarantor hereby agree to indemnify the Global Administrative Agent and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Global Administrative Agent or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto; provided that each Borrower and Guarantor shall not be required to so indemnify to the extent any relevant amount is actually compensated for under any other provision of this Agreement.  Payments due under this

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indemnification shall be made within 30 days of the date the Global Administrative Agent or such Lender makes demand therefor pursuant to Section 3.6.

(iv) At least five Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Syndicated Global Lender, such Lender to the extent it is not incorporated under the laws of the United States of America or a state thereof (each a “Non-U.S. Lender”) agrees that it will deliver to each of the U.S. Borrower, each Guarantor and the Global Administrative Agent (1) two duly completed copies of IRS Form W-8BEN or W-8ECI, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes or (2) in the case of a Non-U.S. Lender that is fiscally transparent, a copy of IRS Form W-8IMY together with the applicable accompanying forms, W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States backup withholding tax (such certificate, an “Exemption Certificate”).  Each Non-U.S. Lender further undertakes to deliver to each of the U.S. Borrower and the Global Administrative Agent (i) two renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (ii) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the U.S. Borrower, any Guarantor or the Global Administrative Agent.  All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such Lender advises the U.S. Borrower, the Guarantors and the Global Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax.

(v) For any period during which a Non-U.S. Lender has failed to provide the U.S. Borrower or the Guarantors with an appropriate form or Exemption Certificate pursuant to clause (iv) above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form or Exemption Certificate originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form or Exemption Certificate required under clause (iv), above, the U.S. Borrower or the Guarantors shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes.

(vi) The U.K. Borrower and/or any Guarantor is not required to make an increased payment to the Global Administrative Agent or a Lender under this Section 3.5 with respect to Taxes imposed, nor any deductions required, by the United Kingdom in respect of a payment of interest (including any items classified as interest by the relevant taxing authority) on a Loan, if on the date on which the payment falls due:

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(a)  the payment could have been made to the relevant Lender without a deduction for Taxes if it was a Qualifying Lender, but on that date that Lender is not or has ceased to be a Qualifying Lender other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty, or any published practice or concession of any relevant taxing authority; or

(b)  (1) the relevant Lender is a Qualifying Lender solely under sub-paragraph (ii) of the definition of Qualifying Lender; (2) the Board of the Inland Revenue has given (and not revoked) a direction (a “Direction”) under section 349C of the Taxes Act (as that provision has effect on the date on which the relevant Lender became a Lender) which relates to that payment and that Lender has received from the U.K. Borrower a certified copy of that Direction; and (3) the payment could have been made to the Lender without any deduction for Tax in the absence of that Direction; or

(c)  the relevant Lender is a Treaty Lender and either (1) neither of the following conditions have been satisfied (A) notice under the relevant Treaty has been given by the United Kingdom Inland Revenue to the U.K. Borrower or the relevant Guarantor authorizing the U.K. Borrower or the relevant Guarantor to make such payment without deduction for Tax or (B) the Global Administrative Agent has obtained provisional authority under the PTR Scheme authorizing the relevant Borrower to make such payment without deduction for Tax and such provisional authority has not been withdrawn or revoked or (2) the U.K. Borrower or the relevant Guarantor is able to demonstrate that the payment could have been made to the Lender without deduction for Tax had that Lender complied with its obligations paragraphs (vii) or (viii) below.

(vii) Each Treaty Lender and the U.K. Borrower shall use reasonable efforts to co-operate in completing any procedural formalities necessary for the U.K. Borrower to obtain authorization to make that payment without a deduction for Tax or allow the relevant Treaty Lender to recover such Taxes where any such payment has been made subject to a deduction for Tax.

(viii) PTR Scheme

(a)  Each Treaty Lender:

(1)  irrevocably appoints the Global Administrative Agent to act as syndicate manager under, and authorizes the Global Administrative Agent to operate, and take any action necessary or desirable under, the PTR Scheme in connection with this Agreement;

(2)  shall co-operate with the Global Administrative Agent in completing any procedural formalities necessary under the PTR Scheme, and shall promptly supply to the Global Administrative Agent such information as the Global Administrative Agent may request in connection with the operation of the PTR Scheme;

(3)  without limiting the liability of the U.K. Borrower under this Agreement, shall, within 30 Business Days of demand, indemnify the Global

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Administrative Agent for any liability or loss incurred by the Global Administrative Agent as a result of the Global Administrative Agent acting as syndicate manager under the PTR Scheme in connection with the Treaty Lender’s participation in any Loan (except to the extent that the liability or loss arises directly from the Global Administrative Agent’s gross negligence or willful misconduct); and

(4)  agrees to, indemnify the U.K. Borrower and each Guarantor for any Tax or increased Tax or any interest or penalties associated therewith which the U.K. Borrower or such Guarantor becomes liable to pay in respect of any payments made to such Treaty Lender arising as a result of any incorrect information supplied by such Treaty Lender which results in a provisional authority issued by the U.K. Inland Revenue under the PTR Scheme being withdrawn.  Payments due under this indemnification shall be made within 30 Business Days of demand by U.K. Borrower or the applicable Guarantor.

(b)  The U.K. Borrower acknowledges that it is fully aware of its contingent obligations under the PTR Scheme and shall:

(1)  promptly supply to the Global Administrative Agent such information as the Global Administrative Agent may request in connection with the operation of the PTR Scheme; and

(2)  act in accordance with any provisional notice issued by the U.K. Inland Revenue under the PTR Scheme.

(c)  The Global Administrative Agent agrees to provide, as soon as reasonably practicable, a copy of any provisional authority issued to it under the PTR Scheme in connection with any Loan to the U.K. Borrower.

(d)  All of the parties hereto acknowledge that the Global Administrative Agent:

(1)  is entitled to rely completely upon information provided to it in connection with sub-paragraph (a) or (b) above;

(2)  is not obliged to undertake any enquiry into the accuracy of such information, nor into the status of the Treaty Lender or, as the case may be, U.K. Borrower providing such information; and

(3)  shall have no liability to any person for the accuracy of any information it submits in connection with paragraph (a)(1) above.

(e)  In this Clause “PTR Scheme” means the Provisional Treaty Relief scheme as described in Inland Revenue Guidelines dated January 2003 and administered by the Inland Revenue’s Centre for Non-Residents.

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(ix) At least five Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Syndicated Canadian Bank or the Global Swing Line Lender in respect of Canadian Swing Line Loans to the Canadian Borrower, such Syndicated Canadian Bank or Global Swing Line Lender to the extent it is neither incorporated under the laws of a jurisdiction in Canada nor deemed to be a resident in Canada for purposes of Part XIII of the Income Tax Act (Canada) (each a “Non-Canadian Lender”) agrees that it will deliver to each of the Canadian Borrower and the Global Administrative Agent a certificate of a duly authorized officer of such Non-Canadian Lender to the effect that such Non-Canadian Lender is capable under the provisions of an applicable tax treaty or under the provisions of applicable law of receiving, and enabling the Canadian Borrower under the provisions of the Income Tax Act (Canada) to make, payments of interest or fees with respect to the Syndicated Canadian Loans and Canadian Swing Line Loans to the Canadian Borrower without deduction or withholding of income tax (such certificate, a “Canadian Exemption Certificate”).  Each Non-Canadian Lender further undertakes to deliver to each of the Canadian Borrower and the Global Administrative Agent a replacement certificate of a duly authorized officer of such Non-Canadian Lender before or promptly upon the occurrence of any event requiring a change in the Canadian Exemption Certificate so delivered by it.  All certificates described in the preceding sentences shall certify that such Non-Canadian Lender is entitled to receive interest or fees under this Agreement or the Syndicated Canadian Addendum without deduction or withholding of any applicable income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such certificates inapplicable or which would prevent such Non-Canadian Lender from duly completing and delivering any such certificate with respect to it and such Non-Canadian Lender advises the Canadian Borrower and the Global Administrative Agent that it is not capable of receiving payments without any deduction or withholding of applicable income tax.

(x) For any period during which a Non-Canadian Lender has failed to provide the Canadian Borrower with an appropriate Canadian Exemption Certificate as required pursuant to clause (ix) above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a Canadian Exemption Certificate originally was required to be provided), such Non-Canadian Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the applicable jurisdiction in Canada; provided that, should a Non-Canadian Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a Canadian Exemption Certificate required under clause (ix), above, the Canadian Borrower shall take such steps as such Non-Canadian Lender shall reasonably request to assist such Non-Canadian Lender to recover such Taxes.  In addition, neither any Syndicated Canadian Bank nor the Global Swing Line Lender shall be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the applicable jurisdiction in Canada other than indemnity obligations under this Section 3.5 arising out of a change after the Closing Date in any applicable treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority.

(xi) If a Borrower or Guarantor pays an amount under this Section 3.5, or is required to make a deduction or withholding in relation to a payment hereunder or under any Note and

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account for the same to the relevant tax authority, which gives or may give rise to a Tax Credit for the recipient of that payment (the “Recipient”), the Recipient shall, promptly upon utilisation or receipt of such Tax Credit, pay an amount to such Borrower or the relevant Guarantor which will leave it (after that payment) in the same after-Tax position as it would have been in had the original amount paid under this Section 3.5 (or withheld or deducted pursuant to applicable law) not been required to have been made, withheld or deducted; provided that nothing in this clause (xi) shall require any Lender to make available its tax return (or any other information relating to its taxes which it deems confidential).

(xii) If (i) a Lender or the Global Administrative Agent assigns, transfers or sells all or any portion of its rights and/or delegates all or any portion of its obligations under this Agreement and the other Loan Documents (but excluding any participations and other transfers pursuant to Section 2.2(E)) or changes its Lending Installation for the purposes of this Agreement, and (ii) as a direct result of circumstances existing at the date of the assignment, transfer, sale, delegation or change, any Borrower or Guarantor would be obliged to pay any incremental amount under this Section 3.5, then the transferee or Lender acting through its new Lending Installation shall only be entitled to receive payment under this Section 3.5 to the same extent that the previous Lender or the Lender acting through its previous Lending Installation would have been entitled if no such transaction had taken place.  If a Lender sells a participation in all or any part of its rights or obligations under this Agreement and the other Loan Documents, the participant shall only be entitled to receive payment under this Section 3.5 to the extent that the Lender selling the participation would have been entitled if no such participation had taken place.  Notwithstanding the foregoing or anything else contained in this Section 3.5, in the event of a participation or transfer pursuant to Section 2.2(E), the participant shall be entitled to the indemnification under Sections 3.5(i) and 3.5(iii) in respect of any payments received pursuant to such participation or transfer.

(xiii) Where this Agreement or any Note requires the relevant Borrower or Guarantor to reimburse a Lender or the Global Administrative Agent for any costs or expenses, such Borrower or Guarantor shall also at the same time pay and indemnify the relevant Lender or the Global Administrative Agent (as applicable) against all United Kingdom value added tax (“VAT”) incurred by such Lender or the Global Administrative Agent (as applicable) in respect of the costs or expenses to the extent that such Lender or the Global Administrative Agent (as applicable) reasonably determines that neither it nor any other member of any group of which it is a member for VAT purposes is entitled to credit or repayment from the relevant tax authority in respect of VAT.

3.6  Mitigation; Lender Statements; Survival of Indemnity.  To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Fixed Rate Loans to reduce any liability of the relevant Borrower or the Guarantors to such Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of Advance under Section 3.3, so long as such designation is not materially disadvantageous to such Lender.  Each Lender requiring compensation pursuant to this Article III shall use its reasonable efforts to notify the relevant Borrower and the Global Administrative Agent in writing of any Change, law, policy, rule, guideline or directive giving rise to such demand for compensation not later than one hundred and twenty (120) days following the date upon which the responsible account officer of such Lender knows or should have known of such Change, law, policy, rule, guideline or

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directive.  Any demand for compensation pursuant to this Article III shall be in writing and shall state the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5 and shall set forth in reasonable detail the calculations upon which such Lender determined such amount.  Such written demand shall be rebuttably presumed correct for all purposes. Determination of amounts payable under such Sections in connection with a Fixed Rate Loan shall be calculated as though each Lender funded its Fixed Rate Loan through the purchase of a deposit of the type, currency and maturity corresponding to the deposit used as a reference in determining the applicable fixed rate of interest with respect to such Loan, whether in fact that is the case or not.  The obligations of the Borrowers and the Guarantors under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement.

3.7  Non-U.S. Reserve Costs or Fees.  If, any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive of any jurisdiction outside of the United States of America or any subdivision thereof and outside of England and Wales or any subdivision thereof (whether or not having the force of law), imposes or deems applicable any reserve requirement against or fee with respect to assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than any Tax), and the result of the foregoing is to increase the cost to such Lender or applicable Lending Installation of making or maintaining its Loans to any Foreign Borrower or its Commitment, Swing Line Commitment or Syndicated Canadian Commitment to any Borrower or to reduce the return received by such Lender or applicable Lending Installation in connection with such Loans to any Foreign Borrower or Commitment, Swing Line Commitment or Syndicated Canadian Commitment to any Foreign Borrower, then, within 15 days of demand by such Lender, such Foreign Borrower shall pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction in amount received.

3.8  Replacement of Affected Lenders.  If, any Lender requests compensation under Section 3.1, 3.2 or 3.7, or if any Borrower is required to pay any additional amount pursuant to Section 3.5, or if any Lender defaults in its obligation to fund Loans hereunder, then the U.S. Borrower may, at its sole expense and effort, upon notice to such Lender and the Global Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 13.3), all its interests, rights and obligations under this Agreement (other than any outstanding Bid Rate Loans held by it) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) in the case of an assignment to an assignee which is not a Lender, the U.S. Borrower shall have received the prior written consent of the Global Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans (other than Bid Rate Loans) and participations in the relevant Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the U.S. Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Sections 3.1, 3.2 or 3.7 or payments required to be made pursuant to Section 3.5, such assignment will result in a reduction in such compensation or payments with respect to the assignee Lender.  A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the U.S. Borrower to require such assignment and delegation cease to apply.

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ARTICLE IV  CONDITIONS PRECEDENT

4.1  Initial Loans.  This Agreement shall not become effective nor shall the Lenders be required to make the initial Loans unless the initial Borrowers shall have (a) paid all fees required to be paid in connection with the execution of this Agreement, (b) furnished to the Global Administrative Agent, with sufficient copies (other than in the case of any Notes) for each of the Lenders, such documents as the Global Administrative Agent or any Lender or its counsel may have reasonably requested, including, without limitation, all of the documents reflected on the List of Closing Documents attached as Exhibit D to this Agreement and (c) delivered evidence reasonably satisfactory to the Global Administrative Agent of the payment of all principal, interest, fees and premiums, if any, on all Indebtedness under the Existing Credit Agreements, and the termination of the applicable agreements relating thereto, all taking effect concurrently with the effectiveness of this Agreement.

4.2  Each Loan.  Except as expressly provided in Sections 2.2(E), 2.9.1(d), 2.9.2(e) 2.9.2(f), and 2.9.3(d), no Lender shall be required to make any Loan unless on the applicable Borrowing Date:

(i)  there exists no Default or Unmatured Default; and

(ii)  the representations and warranties contained in Article V are true and correct as of such Borrowing Date, except for representations and warranties made with reference solely to an earlier date, which representations and warranties shall be true and correct as of such earlier date; provided, that the representation set forth in Section 5.5 shall be deemed to be made only (1) on and as of the Closing Date, (2) on and as of each date (if any) on which the Lenders agree to extend the Termination Date and (3) on and as of the effective date of any increase in the Commitments (if any).

Each Borrowing Notice with respect to each Loan or Advance shall constitute a representation and warranty by the applicable Borrower that the conditions contained in Sections 4.2(i) and (ii) will have been satisfied as of the date of such Loan or Advance.

4.3  Initial Advance to the Canadian Borrower.  No Syndicated Canadian Bank shall be required to make any Syndicated Canadian Loans to the Canadian Borrower unless the Canadian Borrower has furnished or caused to be furnished to the Global Administrative Agent with sufficient copies for the Syndicated Canadian Banks:

(A)  The Syndicated Canadian Addendum and the Assumption Letter executed and delivered by the Canadian Borrower and, if requested by the Global Administrative Agent, containing the written consent of the U.S. Borrower thereon.

(B)  Copies of the Certificate of Incorporation (or other comparable constituent document) of the Canadian Borrower, together with all amendments and a certificate of good standing, both certified by the appropriate governmental officer in its jurisdiction of organization.

(C)  Copies, certified by the Secretary or Assistant Secretary of the Canadian Borrower, of its By-Laws (or other comparable governing document) and of its Board of Directors’ (or

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comparable governing body’s) resolutions (and resolutions of other bodies, if any are deemed necessary by the Global Administrative Agent) approving the Assumption Letter and Syndicated Canadian Addendum.

(D)  An incumbency certificate, executed by the Secretary, Assistant Secretary, Director or Authorized Officer of the Canadian Borrower, which shall identify by name and title and bear the signature of the officers of the Canadian Borrower authorized to sign the Assumption Letter, Syndicated Canadian Addendum and the other documents to be executed and delivered by the Canadian Borrower hereunder, upon which certificate the Global Administrative Agent and the Lenders shall be entitled to rely until informed of any change in writing by the U.S. Borrower or the Canadian Borrower.

(E)  An opinion of counsel to the Canadian Borrower, in a form reasonably acceptable to the Global Administrative Agent and its counsel.

(F)  Promissory notes payable to each of the Syndicated Canadian Banks requesting promissory notes;

(G)  Such other instruments, documents or agreements as the Global Administrative Agent or its counsel may reasonably request, all in form and substance reasonably satisfactory to the Global Administrative Agent and its counsel.

ARTICLE V  REPRESENTATIONS AND WARRANTIES

In order to induce the Global Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and the other financial accommodations to the Borrowers, each of the Borrowers and, solely in the case of the representation and warranty set forth in Section 5.4 hereof, each of the Companies represents and warrants as follows to each Lender and the Global Administrative Agent as of the Closing Date and thereafter on each date as required by Section 4.2:

5.1  Corporate Existence and Standing.  Each of the Companies and each of their respective Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except to the extent that the failure to be in good standing or authorized to conduct business in any jurisdiction could not, when taken together with all similar failures, reasonably be expected to have a Material Adverse Effect.

5.2  Authorization and Validity.  Each of the Companies has the corporate power and authority and legal right to execute and deliver the Loan Documents to which it is party and to perform its obligations thereunder.  The execution and delivery by each of the Companies of the Loan Documents to which it is party and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and each Loan Document to which any Company is party constitutes the legal, valid and binding obligation of such Companies, as applicable, enforceable against such Companies, as applicable, in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the

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enforcement of creditors’ rights generally and general principles of equity, regardless of whether the application of such principles is considered in a proceeding in equity or at law.

5.3  No Conflict.  Neither the execution and delivery by each of the Companies of the Loan Documents to which it is party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on any Company or any of their Subsidiaries or any Company’s or any of their Subsidiaries’ articles of incorporation or by-laws or comparable constitutive documents or the provisions of any indenture, instrument or agreement to which any Company or any of their Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on the Property of any of the Companies or any of their Subsidiaries pursuant to the terms of any such indenture, instrument or agreement which violation, conflict or imposition could reasonably be expected to have a Material Adverse Effect.

5.4  Financial Statements.  The December 31, 2003, consolidated financial statements of HDFS and its consolidated Subsidiaries and of Harley and its Subsidiaries, previously delivered to certain of the Lenders, were prepared in accordance with Agreement Accounting Principles in effect on the date such statements were prepared and fairly present the consolidated financial condition of HDFS and its consolidated Subsidiaries and Harley and its consolidated Subsidiaries, as applicable, at the date thereof and the consolidated results of their operations for the period then ended.  The consolidated financial statements of HDFS and its Subsidiaries dated as of June 30, 2004, previously delivered to certain of the Lenders, were prepared in accordance with Agreement Accounting Principles in effect on the date such statements were prepared and fairly present the consolidated financial condition of HDFS and its Subsidiaries at the date thereof and the consolidated results of their operations for the six-month period then ended, subject to normal year-end adjustments.

5.5  Material Adverse Change.  From December 31, 2003 up to the Closing Date, there has been no event, development or circumstance which could reasonably be expected to have a Material Adverse Effect.

5.6  Taxes.  Except as described on Schedule 5.6 hereto, all material tax returns required to be filed by any of the Companies or their respective Subsidiaries in any jurisdiction have, in fact, been filed, all such tax returns have been prepared in accordance with applicable laws, and all taxes, assessments, fees and other governmental charges upon the Companies or any of their Subsidiaries or upon any of their respective properties, income or franchises, which are shown on such returns have been paid except to the extent such tax payments are being contested in good faith by appropriate proceedings or with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with Agreement Accounting Principles.  For all taxable years ending on or before December 31, 2001, the United States Federal income tax liability and the United Kingdom corporation tax liability of the Companies and their respective Subsidiaries has been satisfied and, in the case of United States federal income tax, either the period of limitations on assessment of additional United States Federal income tax has expired or the applicable Company or the applicable Subsidiary has entered into an agreement with the IRS closing conclusively the total tax liability for the taxable year.

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5.7  Litigation. There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting any of the Companies or any of their Subsidiaries which could reasonably be expected to have a Material Adverse Effect.

5.8  Subsidiaries.  Schedule 5.8 hereto contains an accurate list as of the Closing Date of all of the Subsidiaries of each of the Companies, setting forth their respective jurisdictions of incorporation and the percentage of their respective capital stock owned by the Companies or their Subsidiaries.  All of the issued and outstanding shares of capital stock of the Subsidiaries reflected on Schedule 5.8 hereto have been duly authorized and issued and are fully paid and non-assessable and are free and clear of all Liens, except Liens permitted under Section 6.3(B).

5.9  ERISA.  The Unfunded Liabilities of all Benefit Plans are not such that the ongoing funding of such obligations in accordance with ERISA and the Code could reasonably be expected to cause a Material Adverse Effect.  None of the Companies nor any other member of the Controlled Group has incurred, or is reasonably expected to incur, any withdrawal liability to Multiemployer Plans in each case, which could reasonably be expected to have a Material Adverse Effect.  Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Benefit Plan, none of the Companies or any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan in each case, which could reasonably be expected to have a Material Adverse Effect.

5.10  Accuracy of Information.  As of the Closing Date, (i) the information, exhibits and reports furnished by or on behalf of Harley, the Companies and any of their Subsidiaries to the Global Administrative Agent or to any Lender in connection with the negotiation or preparation of the initial Loan Documents, including, without limitation, the Confidential Information Memorandum, if any, prepared in connection herewith, (ii) the representations and warranties of the Companies and their Subsidiaries contained in the initial Loan Documents, and (iii) all certificates and documents delivered on or prior to the Closing Date to the Global Administrative Agent and the Lenders pursuant to the terms thereof do not in each case contain as of the date furnished any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.

5.11  Securities Activities.  None of the Companies nor any of its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock.

5.12  Material Agreements.  None of the Companies nor any of their Subsidiaries is a party to any agreement or instrument or subject to any charter or other contractual or corporate restriction which will have or is reasonably likely to have a Material Adverse Effect.  None of the Companies nor any of their Subsidiaries has received notice or has knowledge that (i) it is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any material Contractual Obligation applicable to it, or (ii) any condition exists which, with the giving of notice or the lapse of time or both, would constitute a default with respect to any such Contractual Obligation, in each case, except where such default or defaults, if any, will not have or are not reasonably likely to have a Material Adverse Effect.

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5.13  Compliance with Laws.  Each of the Companies and their Subsidiaries are in compliance with all Requirements of Law applicable to them and their respective businesses, in each case where the failure to so comply individually or in the aggregate will have or is reasonably likely to have a Material Adverse Effect.

5.14  Assets and Properties.  Each Borrower and each of its Subsidiaries has good and marketable title to all of its assets and properties (tangible and intangible, real or personal) owned by it or a valid leasehold interest in all of its leased assets (except insofar as marketability may be limited by any laws or regulations of any Governmental Authority affecting such assets) except to the extent failure to have such good and marketable title could not reasonably be expected to have a Material Adverse Effect, and all such assets and property are free and clear of all Liens, except Liens permitted under Section 6.3(B).

5.15  Statutory Indebtedness Restrictions.  None of the Companies, nor any of their Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or the Investment Company Act of 1940, or any other federal or state statute or regulation which limits its ability to incur indebtedness.

5.16  Foreign Employee Benefit Matters.  Each Foreign Employee Benefit Plan is in compliance in all respects with all laws, regulations and rules applicable thereto and the respective requirements of the governing documents for such Foreign Employee Benefit Plan, except for any non-compliance the consequences of which, in the aggregate, would not result in a Material Adverse Effect.  The aggregate of the accumulated benefit obligations under all Foreign Pension Plans does not exceed the current fair market value of the assets held in the trusts or similar funding vehicles for such Foreign Pension Plans or reasonable reserves have been established in accordance with prudent business practices or as required by Agreement Accounting Principles with respect to any shortfall.  With respect to any Foreign Employee Benefit Plan maintained or contributed to by any of the Companies or any other member of its Controlled Group (other than a Foreign Pension Plan), reasonable reserves have been established in accordance with prudent business practice or where required by ordinary accounting practices in the jurisdiction in which such Foreign Employee Benefit Plan is maintained.

ARTICLE VI  COVENANTS

Each of the Companies covenants and agrees that so long as any Commitments or Syndicated Canadian Commitments are outstanding and thereafter until payment in full of all of the Obligations (other than contingent indemnity and reimbursement obligations to the extent such obligations have not accrued), unless the Required Lenders shall otherwise give prior written consent, to comply with the following:

6.1  Reporting.  The Companies shall:

(A)  Financial Reporting. Furnish to the Global Administrative Agent for distribution or electronic posting to each Lender:

(i)  Quarterly Reports.  As soon as practicable, and in any event within sixty (60) days after the end of each of the first three fiscal quarters in each fiscal year, the consolidated balance sheet of Harley and the consolidated balance sheet of the

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Companies and their Subsidiaries as at the end of such period and the related consolidated statements of income, operations and retained earnings (deficit) of Harley and the consolidated statements of income or operations, retained earnings (deficit) and cash flow of each of the Companies and their Subsidiaries for such fiscal quarter, for the period from the beginning of the then current fiscal year to the end of such fiscal quarter and with comparative information for the preceding fiscal year, certified by the chief financial officer or treasurer of the U.S. Borrower on behalf of Harley and the Companies as fairly presenting in all material respects the consolidated financial position of Harley and the consolidated financial position of the Companies and their Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in accordance with Agreement Accounting Principles, subject to normal year end adjustments.

(ii)  Annual Reports.  As soon as practicable, and in any event within one hundred and five (105) days after the end of each fiscal year, (a) the consolidated balance sheet of Harley and the consolidated balance sheet of each of the Companies and their consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of income, operations, retained earnings (deficit) and cash flow, and the notes thereto, of Harley and the related consolidated statements of income, operations and retained earnings, and the notes thereto, of each of the Companies and their consolidated Subsidiaries for such fiscal year and, in comparative form the corresponding figures for the previous fiscal year and (b) an audit report on the items listed in clause (a) hereof of independent certified public accountants of recognized national standing, which audit report shall be unqualified and shall state that such financial statements fairly present in all material respects the consolidated financial position of Harley, each of the Companies and their Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with Agreement Accounting Principles and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards.

(iii)  Officer’s Certificate.  Together with each delivery of any financial statement pursuant to clauses (i) and (ii) of this Section 6.1(A), (a) an Officer’s Certificate of the U.S. Borrower, substantially in the form of Exhibit E attached hereto and made a part hereof, stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof and (b) a Compliance Certificate, substantially in the form of Exhibit F attached hereto and made a part hereof, signed by the U.S. Borrower’s chief financial officer or treasurer, setting forth calculations which demonstrate compliance with the provisions of Section 6.4.

(B)  Notice of Default.  Promptly upon any of the chief executive officer, chief operating officer, chief financial officer, treasurer or controller of any of the Companies obtaining knowledge (i) of any condition or event which constitutes a Default or Unmatured Default, or becoming aware that any Lender or Global Administrative Agent has given any written notice with respect to a claimed Default or Unmatured Default under this Agreement, or (ii) that any Person has given any written notice to any of the Companies or any of their Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in Section 7.1(e), deliver to the Global Administrative Agent and the Lenders an Officer’s

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Certificate specifying (a) the nature and period of existence of any such claimed default, Default, Unmatured Default, condition or event, (b) the notice given or action taken by such Person in connection therewith, and (c) what action the Companies have taken, are taking and propose to take with respect thereto.

(C)  Other Information.  Promptly upon receiving a request therefor from the Global Administrative Agent, prepare and deliver to the Global Administrative Agent and the Lenders such other information with respect to the business, Property, prospects, condition (financial or otherwise) or results of operations of any of the Companies and their Subsidiaries as from time to time may be reasonably requested by the Global Administrative Agent.

6.2  Affirmative Covenants.

(A)  Existence, Etc.  Each of the Companies shall, and shall cause each of its respective Subsidiaries to, at all times maintain its existence and preserve and keep, or cause to be preserved and kept, in full force and effect its rights and franchises material to its businesses, except where such failure could not reasonably be expected to have a Material Adverse Effect.

(B)  Powers.  Each of the Companies shall, and shall cause each of its respective Subsidiaries to, qualify and remain qualified to do business in each jurisdiction in which the nature of its business requires it to be so qualified and where the failure to be so qualified will have or is reasonably likely to have a Material Adverse Effect.

(C)  Compliance with Laws, Etc.  Each of the Companies shall, and shall cause its respective Subsidiaries to, (a) comply, and cause its Plans to comply, with all Requirements of Law and all restrictive covenants affecting such Person or the business, properties, assets or operations of such Person, and (b) obtain as needed all material permits, licenses and franchises required for its operations and maintain such permits in good standing, in each case, except to the extent such failure to comply or failure to obtain could not reasonably be expected to have a Material Adverse Effect.

(D)  Payment of Taxes and Claims.  Each of the Companies shall pay, and cause each of its Subsidiaries to pay, (i) all taxes, assessments and other governmental charges imposed upon it or on any of its properties or assets or in respect of any of its franchises, business, income or Property before any material penalty or interest accrues thereon, and (ii) all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien (other than a Lien permitted by Section 6.3(B)) upon any of such Person’s Property or assets, prior to the time when any material penalty or fine shall be incurred with respect thereto; provided, however, that no such taxes, assessments and governmental charges referred to in clause (i) above or claims referred to in clause (ii) above (and interest, penalties or fines relating thereto) need be paid if being contested in good faith by appropriate proceedings diligently instituted and conducted or if such reserve or other appropriate provision, if any, as shall be required in conformity with Agreement Accounting Principles shall have been made therefor.

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(E)  Insurance.  Each of the Companies shall maintain for itself and its Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force and effect insurance policies and programs providing coverage that is reasonably consistent with prudent industry practice.

(F)  Inspection of Property; Books and Records; Discussions.  (i)  If a Default has occurred and is continuing, each of the Companies shall permit, and cause each of the their respective Subsidiaries to permit, any authorized representative(s) designated by the Global Administrative Agent to visit and inspect any of the properties of such Persons, to examine, audit, check and make copies of their respective financial and accounting records, books, journals, orders, receipts and any correspondence and other data relating to their respective businesses or the transactions contemplated hereby, and to discuss their affairs, finances and accounts with their officers and independent certified public accountants, all upon reasonable notice and at such reasonable times during normal business hours, as often as may be reasonably requested; provided, however, in the case of any meeting or discussion with the independent auditors of the Companies, the Companies shall have the right to have their representatives present at any such meeting.  (ii)  Each of the Companies shall keep and maintain, and cause each of its respective Subsidiaries to keep and maintain, in all material respects, proper books of record and account in which entries in conformity with Agreement Accounting Principles shall be made of all dealings and transactions in relation to their respective businesses and activities.  (iii)  If a Default has occurred and is continuing, the Companies, upon the Global Administrative Agent’s request, shall turn over copies of any such records to the Global Administrative Agent or its representatives.

(G)  Maintenance of Property.  Each of the Companies shall cause all Property used or useful in the conduct of its business or the business of any of its Subsidiaries to be maintained and kept in adequate condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, to the extent that the failure to do so could reasonably be expected to have a Material Adverse Effect.

(H)  Use of Proceeds.  Each Borrower shall use the proceeds of the Loans to provide funds for the working capital needs and other general corporate purposes of such Borrower and its Subsidiaries and to repay outstanding Indebtedness (including, without limitation, maturing commercial paper).  No Borrower will, nor will it permit any Subsidiary to, use any of the proceeds of the Loans to purchase or carry any “Margin Stock” or to make any Acquisition other than an Acquisition permitted under the terms of Section 6.3(C).

(I)  Maintenance of Rights.  Each of the Companies shall obtain and maintain, and shall cause each of its Subsidiaries to obtain and maintain, in full force and effect all licenses, franchises, permits other similar rights necessary for the operation of its business, except where the failure to obtain or maintain such rights does not have and could not reasonably be expected to have a Material Adverse Effect.

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6.3  Negative Covenants.

(A)  Indebtedness. The Companies shall not and shall not permit any of their Subsidiaries to directly or indirectly create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except:

(1)  the Obligations and, in the case of the Guarantors, the guaranty of the Obligations;

(2)  (a) Subordinated Indebtedness and (b) Indebtedness arising from intercompany loans; provided if the obligor on such Indebtedness under this clause (b) is one or more of the Companies (whether directly or through Contingent Obligations), such Indebtedness shall be subordinated to the Obligations pursuant to the subordination terms attached as Schedule 6.3 (“Subordinated Intercompany Indebtedness”);

(3)  Customary Permitted Contingent Obligations;

(4)  Contingent Obligations which are included in the calculation of Consolidated Debt;

(5)  unsecured Indebtedness of one or more of the Companies and other liabilities of one or more of the Companies incurred in the ordinary course of business and consistent with past practice, but not incurred through the borrowing of money or the obtaining of credit (other than customary trade terms);

(6)  other unsecured Indebtedness of one or more of the Companies included in the calculation of Consolidated Debt;

(7)  secured Indebtedness of one or more of the Companies included in the calculation of Consolidated Debt, provided that in connection therewith the Obligations of the Companies hereunder shall be secured equally and ratably with (or, at the option of the U.S. Borrower, prior to) such Indebtedness, so long as such Indebtedness shall be so secured pursuant to collateral trust or intercreditor agreements reasonably acceptable to the Global Administrative Agent;

(8)  unsecured Hedging Obligations; and

(9)  other secured Indebtedness of one or more of the Companies in an aggregate outstanding principal amount thereof not at any time in excess of ten percent (10%) of (a) Consolidated Equity of HDFS and its Subsidiaries minus (b) Subordinated Indebtedness (to the extent included in the definition of Consolidated Equity);

provided that, immediately after giving effect to the creation, issuance, assumption, guarantee or incurrence of any such Indebtedness, the Companies are in compliance with the terms of Section 6.4.

(B)  Liens.  None of the Companies nor any of their Subsidiaries shall directly or indirectly create, incur, assume or permit to exist any Lien on or with respect to any of their respective Property or assets except:

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(i)Permitted Existing Liens;

(ii)Customary Permitted Liens;

(iii)Liens (A) consisting of sales, assignments, pledges or other transfers of Finance Receivables in connection with a Permitted Finance Receivables Securitization, and (B) on Finance Receivables and on any interest in Finance Receivables retained by any of the Companies or their Subsidiaries (including a Finance Receivables Subsidiary), whether directly or through the ownership of a certificate or other interest in a trust, provided to secure Permitted Securitization Recourse Obligations of any of the Companies or their Subsidiaries;

(iv)Liens to secure Indebtedness incurred pursuant to clause (7) of Section 6.3(A) provided the other terms and conditions of such clause have been met; and

(v)Liens to secure Indebtedness permitted pursuant to clause (9) of Section 6.3(A).

(C)  Conduct of Business; Acquisitions.  None of the Companies nor any of their Subsidiaries shall engage in any business other than (1) the businesses engaged in by them on the date hereof and any business or activities which are substantially similar, related or incidental thereto, (2) the origination or acquisition of Finance Receivables and (3) engaging in Permitted Finance Receivables Securitizations and other sales, assignments and transfers of Finance Receivables.  The Companies shall not and shall not permit any of their Subsidiaries to consummate any Acquisition other than a Permitted Acquisition.

(D)  Restriction on Fundamental Changes.  None of the Companies nor any of their Subsidiaries shall enter into any merger or consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), and neither HDFS nor the U.S. Borrower shall convey, lease, sell, transfer or otherwise dispose of, in one transaction or series of transactions, all or substantially all of any such Person’s business or Property, whether now or hereafter acquired; provided that (1) in the event any Foreign Borrower conveys, sells, transfers or otherwise disposes of, in one transaction or series of transactions, all or substantially all of any such Person’s business or Property, such Foreign Borrower must have been terminated as a Borrower in accordance with Section 2.22 and (2) any Subsidiary (i) may merge with or liquidate into the U.S. Borrower in a transaction in which the U.S. Borrower is the surviving corporation, (ii) that is not a Borrower may merge into any Guarantor in a transaction in which the surviving entity is a Guarantor, (iii) that is not a Borrower or a Guarantor may merge into any Subsidiary that is not a Borrower or a Guarantor or any Person that becomes a Guarantor simultaneously with such merger, (iv) that is not a Borrower or a Guarantor may merge into any other Person in connection with a Permitted Acquisition, (v) that is not a Borrower or a Guarantor may liquidate or dissolve if the U.S. Borrower determines in good faith that such liquidation or dissolution is in the best interests of the U.S. Borrower and is not materially disadvantageous to the Lenders.

(E)  Margin Regulations.  No Borrower shall use all or any portion of the proceeds of any credit extended under this Agreement to purchase or carry Margin Stock.

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(F)  Fiscal Year.  HDFS shall not change its fiscal year for accounting or tax purposes from a period consisting of the 12-month period ending on December 31 of each calendar year.

(G)  Amendments to Support Agreement.  None of the Companies will allow or suffer to exist any amendment, supplement or other modification to the Support Agreement without the prior written consent of the Required Lenders.

6.4  Financial Covenants.  The Companies shall comply with the following:

(A)  Defined Terms for Financial Covenants.  The following terms used in this Agreement shall have the following meanings (such meanings to be applicable, except to the extent otherwise indicated in a definition of a particular term, both to the singular and the plural forms of the terms defined):

“Consolidated Debt” means, at any time, all Indebtedness of HDFS and its consolidated Subsidiaries as reflected in the most recent consolidated balance sheet of HDFS in accordance with Agreement Accounting Principles; provided, there shall be excluded from such amounts (i) Subordinated Indebtedness and (ii) Subordinated Intercompany Indebtedness.

“Consolidated Equity” means and refers to, as of the end of any period of determination, the sum, without duplication, of (i) Consolidated Tangible Net Worth of HDFS, (ii) preferred stock and (iii) Subordinated Indebtedness.

“Consolidated Tangible Net Worth” of HDFS means its consolidated shareholder’s equity net of intangible assets, as shall be determined in accordance with Agreement Accounting Principles.

“Leverage Ratio” will mean the ratio of (a) Consolidated Debt to (b) Consolidated Equity.

“Subordinated Indebtedness” will mean Indebtedness of HDFS or its Subsidiaries, whether direct or indirect, to non-affiliated Persons which is subordinated to the Obligations on a basis acceptable to the Global Administrative Agent.

(B)  Minimum Consolidated Tangible Net Worth.  HDFS will at all times maintain a minimum Consolidated Tangible Net Worth of $300,000,000.

(C)  Maximum Leverage Ratio.  The Companies shall not permit the Leverage Ratio of HDFS and its consolidated Subsidiaries at any time to exceed 9.00 to 1.00.

ARTICLE VII  DEFAULTS

7.1  Defaults.  Each of the following occurrences shall constitute a Default under this Agreement:

(a)  Failure to Make Payments When Due.  Any Borrower (i) shall fail to pay when due any of the Obligations consisting of principal with respect to the Loans or (ii) shall fail

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to pay within five (5) days of the date when due any of the other Obligations under this Agreement or the other Loan Documents.

(b)  Breach of Certain Covenants.  Any of the Companies shall fail duly and punctually to perform or observe any agreement, covenant or obligation under Section 6.1(A), 6.1(B), 6.2(F)(i), 6.2(F)(iii), 6.2(H), 6.3, or 6.4.

(c)  Breach of Representation or Warranty.  Any representation or warranty made or deemed made by any Company to the Global Administrative Agent or any Lender herein or by any Company or any of their Subsidiaries in any of the other Loan Documents or in any statement or certificate at any time given by any such Person pursuant to any of the Loan Documents shall be false or misleading in any material respect on the date as of which made (or deemed made).

(d)  Other Defaults.  Any of the Companies shall default in the performance of or compliance with any term contained in this Agreement (other than as covered by paragraphs (a), (b) or (c) of this Section 7.1), or any of the Companies or any of their Subsidiaries shall default in the performance of or compliance with any term contained in any of the other Loan Documents, and such default shall continue for twenty (20) days after notice thereof has been given by the Global Administrative Agent to any of the Companies.

(e)  Default as to Other Indebtedness.  Any of HDFS, any Borrower or any Material Subsidiary shall fail to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) with respect to any Indebtedness (other than the Obligations) the outstanding principal amount of which Indebtedness is in excess of $50,000,000; or any breach, default or event of default shall occur, or any other condition shall exist under any instrument, agreement or indenture pertaining to any such Indebtedness, if the effect thereof is to cause an acceleration, mandatory redemption, a requirement that any of HDFS, any Borrower or any such Material Subsidiary offer to purchase such Indebtedness or other required repurchase of such Indebtedness, or permit the holder(s) of such Indebtedness to accelerate the maturity of any such Indebtedness or require a redemption or other repurchase of such Indebtedness; or any such Indebtedness shall be otherwise declared to be due and payable (by acceleration or otherwise) or required to be prepaid, redeemed or otherwise repurchased by any of HDFS, any Borrower or any such Material Subsidiary (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof.

(f)  Involuntary Bankruptcy; Appointment of Receiver, Etc.

(i)  An involuntary case shall be commenced against any of Harley, HDFS, any Borrower or any Material Subsidiary and the petition shall not be dismissed, stayed, bonded or discharged within sixty (60) days after commencement of the case; or a court having jurisdiction in the premises shall enter a decree or order for relief in respect of any such Person in an involuntary case, under any applicable bankruptcy, insolvency or other similar law now or hereinafter in effect; or any other similar relief shall be granted under any applicable federal, state, local or foreign law.

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(ii)  A decree or order of a court having jurisdiction in the premises for the appointment of a receiver, administrator, administrative receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any of Harley, HDFS, any Borrower or any Material Subsidiary or over all or a substantial part of the Property of any such Person shall be entered or any analogous procedure or step is taken in any jurisdiction; or an interim receiver, trustee or other custodian of any such Person or of all or a substantial part of the Property of any such Person shall be appointed or a warrant of attachment, execution or similar process against any substantial part of the Property of any such Person shall be issued and any such event shall not be stayed, dismissed, bonded or discharged within sixty (60) days after entry, appointment or issuance.

(g)  Voluntary Bankruptcy; Appointment of Receiver, Etc.  Any of Harley, HDFS, any Borrower or any Material Subsidiary shall (i) commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, (iii) consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its Property, (iv) make any assignment or arrangement for the benefit of creditors, (v) take any corporate, partnership or comparable action to authorize any of the foregoing or (vi) take any procedure or step in relation to any analogous proceedings in any jurisdiction.

(h)  Judgments and Attachments.  Any money judgment(s) (other than a money judgment covered by insurance as to which the insurance company has not disclaimed or reserved the right to disclaim coverage), writ or warrant of attachment, or similar process in any jurisdiction against any of Harley, HDFS, any Borrower or any Material Subsidiary or any of their respective assets involving in any single case or in the aggregate an amount in excess of $50,000,000 is (are) entered and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days or in any event later than fifteen (15) days prior to the date of any proposed sale thereunder.

(i)  Dissolution.  Any order, judgment or decree shall be entered against Harley, HDFS, any Borrower or any Material Subsidiary decreeing its involuntary dissolution or split up and such order shall remain undischarged and unstayed for a period in excess of sixty (60) days; or any such Person shall otherwise dissolve or cease to exist except as specifically permitted by this Agreement.

(j)  Loan Documents.  At any time, for any reason, any Loan Document ceases to be in full force and effect or Harley, any Company or any of their Subsidiaries party thereto seeks to repudiate its obligations thereunder.

(k)  ERISA Default Event.  Any ERISA Default Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Default Events that have occurred and have not been remedied, could reasonably be expected to result in liability in excess of 15% of the Consolidated Tangible Net Worth of the Companies and their Subsidiaries.

(l)  Change of Control.  A Change of Control shall occur.

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(m)  Guaranty Default.  Any Guarantor shall terminate, revoke, refuse to perform or otherwise breach any its guaranty and other obligations contained in Article XII, or such guaranty shall otherwise become unenforceable for any reason.

(n)  Support Agreement Default.  Harley shall terminate, revoke, refuse to perform or otherwise breach any of its obligations contained in the Support Agreement or such Support Agreement or any part thereof shall otherwise become unenforceable for any reason.

A Default shall be deemed “continuing” until cured or until waived in writing in accordance with Section 8.3.

ARTICLE VIII  ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS AND REMEDIES

8.1  Remedies

(a)  Termination of Commitments; Acceleration.  If any Default described in Section 7.1(f), 7.1(g) or 7.1(i) occurs with respect to any Borrower, the obligations of the Lenders to make Loans (including without limitation Syndicated Canadian Loans) hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Global Administrative Agent or any Lender.  If any other Default occurs, the Required Lenders may (i) terminate the obligations of the Lenders to make Loans (including without limitation Syndicated Canadian Loans) hereunder or (ii) declare the Obligations to be due and payable, or both, and upon any declaration under clause (ii), the Commitments shall terminate and the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which each Borrower expressly waives.

(b)  Rescission.  If, at any time after termination of the Lenders’ obligations to make Loans but before acceleration of the maturity of the Loans, the relevant Borrower shall pay all arrears of interest and all payments on account of principal of the Loans which shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Defaults and Unmatured Defaults (other than nonpayment of principal of and accrued interest on the Loans due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 8.3, then upon the written consent of the Required Lenders and written notice to the U.S. Borrower, the termination of Lenders’ respective obligations to make Loans or the aforesaid acceleration and its consequences may be rescinded and annulled; but such action shall not affect any subsequent Default or Unmatured Default or impair any right or remedy consequent thereon.  The provisions of the preceding sentence are intended merely to bind the Lenders to a decision which may be made at the election of the Required Lenders; they are not intended to benefit any Borrower and do not give any Borrower the right to require the Lenders to rescind or annul any termination of the aforesaid obligations of the Lenders or any acceleration hereunder, even if the conditions set forth herein are met.

8.2  Defaulting Lender.  In the event that any Lender fails to fund its Pro Rata Share or Syndicated Canadian Pro Rata Share (as applicable) of any Syndicated Global Advance or

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Syndicated Canadian Advance requested or deemed requested by the applicable Borrower which such Lender is obligated to fund under the terms of this Agreement (the funded portion of such Advance being hereinafter referred to as a “Non Pro Rata Loan”), until the earlier of such Lender’s cure of such failure and the termination of the Commitments, the proceeds of all amounts thereafter repaid to the Global Administrative Agent by any Borrower and otherwise required to be applied to such Lender’s share of all other Obligations pursuant to the terms of this Agreement shall be advanced to the applicable Borrower by the Global Administrative Agent (“Cure Loans”) on behalf of such Lender to cure, in full or in part, such failure by such Lender, but shall nevertheless be deemed to have been paid to such Lender in satisfaction of such other Obligations.  Notwithstanding anything in this Agreement to the contrary:

(i)  the foregoing provisions of this Section 8.2 shall apply only with respect to the proceeds of payments of Obligations and shall not affect the conversion or continuation of Loans pursuant to Section 2.8;

(ii)  any such Lender shall be deemed to have cured its failure to fund its Pro Rata Share of any Syndicated Global Advance or Syndicated Canadian Pro Rata Share of any Syndicated Canadian Advance at such time as an amount equal to such Lender’s original Pro Rata Share or Syndicated Canadian Pro Rata Share (as applicable) of the requested principal portion of such Advance is fully funded to the applicable Borrower, whether made by such Lender itself or by operation of the terms of this Section 8.2, and whether or not the Non Pro Rata Loan with respect thereto has been repaid, converted or continued;

(iii)  amounts advanced to any Borrower to cure, in full or in part, any such Lender’s failure to fund its Pro Rata Share of any Syndicated Global Advance or Syndicated Canadian Pro Rata Share of any Syndicated Canadian Advance shall be redenominated in the relevant currency and shall bear interest at the rate applicable to Syndicated Global Loans which are Base Rate Loans or Syndicated Canadian Loans which are Canadian Prime Rate Loans (as applicable), in effect from time to time, and for all other purposes of this Agreement shall be treated as if they were Base Rate Loans or Canadian Prime Rate Loans (as applicable);

(iv)  regardless of whether or not a Default has occurred or is continuing, and notwithstanding the instructions of any Borrower as to its desired application, all repayments of principal which, in accordance with the other terms of this Agreement, would be applied to the outstanding Base Rate Loans or Canadian Prime Rate Loans shall be applied first, ratably to all Base Rate Loans or Canadian Prime Rate Loans (as applicable) constituting Non Pro Rata Loans, second, ratably to Base Rate Loans or Canadian Prime Rate Loans (as applicable)  other than those constituting Non Pro Rata Loans or Cure Loans and, third, ratably to Base Rate Loans or Canadian Prime Rate Loans (as applicable) constituting Cure Loans;

(v)  for so long as and until the earlier of any such Lender’s cure of the failure to fund its Pro Rata Share of any Syndicated Global Advance or Syndicated Canadian Pro Rata Share of any Syndicated Canadian Advance and the termination of the Commitments or Syndicated Canadian Commitments (as applicable), (1) the term

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“Required Lenders” for purposes of this Agreement shall mean Lenders (excluding all Lenders whose failure to fund their respective Pro Rata Share of such Advance have not been so cured) whose Pro Rata Shares represent greater than fifty-one percent (51%) of the aggregate Pro Rata Shares of such Lenders and (2) the term “Required Syndicated Canadian Banks” for purposes of this Agreement shall mean Syndicated Canadian Banks (excluding all Syndicated Canadian Banks whose failure to fund their respective Syndicated Canadian Pro Rata Share of such Advance have not been so cured) whose Syndicated Canadian Pro Rata Shares represent greater than fifty-one percent (51%) of the aggregate Syndicated Canadian Pro Rata Shares of such Syndicated Canadian Banks; and

(vi)  for so long as and until any such Lender’s failure to fund its Pro Rata Share of any Syndicated Global Advance or Syndicated Canadian Pro Rata Share of any Syndicated Canadian Advance is cured in accordance with Section 8.2(ii), such Lender shall not be entitled to any fees with respect to its Commitment or Syndicated Canadian Commitment (as applicable), which fees shall accrue in favor of the Lenders which have funded their respective Pro Rata Share or Syndicated Canadian Pro Rata Share (as applicable) of such requested Advance, shall be allocated among such performing Lenders ratably based upon their relative Commitments or Syndicated Canadian Commitments (as applicable).

8.3  Amendments.  Subject to the provisions of this Article VIII, the Required Lenders (or the Global Administrative Agent with the consent in writing of the Required Lenders) and the Borrowers may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that (a) no such supplemental agreement shall, without the consent of each Lender directly affected thereby:

(i)  postpone or extend the Termination Date or any other date fixed for any payment of principal of, or interest on, the Loans or any fees or other amounts payable to such Lender (except with respect to a waiver of the application of the default rate of interest pursuant to Section 2.11 hereof);

(ii)  reduce the principal amount of any Loans, or reduce the rate or extend the time of payment of interest or fees thereon or other amounts payable hereunder;

(iii)  reduce the percentage specified in the definition of Required Lenders or any other percentage of Lenders specified to be the applicable percentage in this Agreement to act on specified matters or amend the definitions of “Required Lenders”, “Required Syndicated Canadian Banks”, “Pro Rata Share” or “Syndicated Canadian Pro Rata Share”;

(iv)  increase the amount of the Commitment of any Syndicated Global Lender or the Syndicated Canadian Commitment of any Syndicated Canadian Bank or increase any Lender’s Pro Rata Share or any Syndicated Canadian Bank’s Syndicated Canadian Pro Rata Share;

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(v)  permit any Borrower to assign its rights under this Agreement;

(vi)  notwithstanding anything to the contrary in the Support Agreement, release Harley from any of its obligations under the Support Agreement or otherwise terminate the Support Agreement;

(vii)  release any Guarantor;

(viii)  alter the manner in which payments or prepayments of principal, interest or other amounts under the Loan Documents shall be applied as among the Lenders;

(ix)  amend this Section 8.3;

and (b) any supplemental agreement amending or modifying any provision of the Syndicated Canadian Addendum only requires the written consent of the Canadian Borrower, the Required Syndicated Canadian Banks and the Global Administrative Agent.

No amendment of any provision of this Agreement relating to the Global Administrative Agent shall be effective without the written consent of the Global Administrative Agent.  No amendment of any provision of this Agreement relative to the Global Swing Line Lender shall be effective without the written consent of the Global Swing Line Lender.  No amendment of any provision of this Agreement relative to the Global Administrative Agent shall be effective without the written consent of the Global Administrative Agent.  The Global Administrative Agent may waive payment of the fee required under Section 13.3(B) without obtaining the consent of any of the Lenders or Borrowers.

8.4  Preservation of Rights.  No delay or omission of the Lenders or the Global Administrative Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Loan notwithstanding the existence of a Default or the inability of any Borrower to satisfy the conditions precedent to such Loan shall not constitute any waiver or acquiescence.  Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.3, and then only to the extent in such writing specifically set forth.  All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Global Administrative Agent and the Lenders until the Obligations have been paid in full.

ARTICLE IX  GENERAL PROVISIONS

9.1  Survival of Representations.  All representations and warranties of the relevant Companies contained in this Agreement shall survive delivery of any Notes and the making of the Loans herein contemplated.

9.2  Governmental Regulation.  Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to any Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation.

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9.3  Headings.  Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents.

9.4  Entire Agreement.  The Loan Documents embody the entire agreement and understanding among the Companies, the Global Administrative Agent and the Lenders and supersede all prior agreements and understandings among the Companies, the Global Administrative Agent and the Lenders relating to the subject matter thereof.

9.5  Several Obligations; Benefits of this Agreement.  The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other.  The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder.  This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns.

9.6  Expenses; Indemnification.

(A)  Expenses.  The Borrowers shall reimburse the Global Administrative Agent, the Global Swing Line Lender and the Arrangers for any reasonable costs, internal charges and out-of-pocket expenses (including attorneys’ and paralegals’ fees and time charges of attorneys and paralegals for each such Person, which attorneys and paralegals may be employees of such Persons) paid or incurred by such Persons in connection with the preparation, negotiation, execution, delivery, syndication, distribution (including via the internet), review, amendment, modification, and administration of the Loan Documents.  The Borrowers also agree to reimburse the Global Administrative Agent, the Global Swing Line Lender and the Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys’ and paralegals’ fees and time charges of attorneys and paralegals for each such Person, which attorneys and paralegals may be employees of such Persons) paid or incurred by each such Person in connection with the collection of the Obligations and enforcement of the Loan Documents; provided that the Borrowers shall not be obligated to so reimburse for more than one law firm (and, in addition to such law firm, any local counsel engaged in each relevant jurisdiction by such law firm) as counsel for the Global Administrative Agent and more than one law firm (and, in addition to such law firm, any local counsel engaged in each relevant jurisdiction by such law firm) as counsel for the Lenders in connection with such collection or enforcement.

(B)  Indemnity.  Each of the Borrowers further agrees to defend, protect, indemnify, and hold harmless the Global Administrative Agent, the Global Swing Line Lender, the Arrangers, each and all of the Lenders, and each of their respective Affiliates, and each of such Person’s respective officers, directors, employees, attorneys and agents (including, without limitation, those retained in connection with the satisfaction or attempted satisfaction of any of the conditions set forth in Article IV) (collectively, the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses of any kind or nature whatsoever (including, without limitation, the fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitees shall be designated a party thereto), imposed on, incurred by, or asserted against such Indemnitees in any manner relating to or arising out of:

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(i)  this Agreement, the other Loan Documents, or any act, event or transaction related or attendant thereto, the making of the Loans hereunder, the management of such Loans or the use or intended use of the proceeds of the Loans; or

(ii)  any liabilities, obligations, responsibilities, losses, damages, personal injury, death, punitive damages, economic damages, consequential damages, treble damages, intentional, willful or wanton injury, damage or threat to the environment, natural resources or public health or welfare, costs and expenses (including, without limitation, attorney, expert and consulting fees and costs of investigation, feasibility or remedial action studies), fines, penalties and monetary sanctions, interest, direct or indirect, known or unknown, absolute or contingent, past, present or future relating to violation of any Environmental, Health or Safety Requirements of Law arising from or in connection with the past, present or future operations of the Companies, their Subsidiaries or any of their respective predecessors in interest, or, the past, present or future environmental, health or safety condition of any respective Property of the Companies or their Subsidiaries, the presence of asbestos-containing materials at any respective Property of the Companies or their Subsidiaries or the Release or threatened Release of any Contaminant into the environment (collectively, the “Indemnified Matters”);

provided, however, no Borrower shall have any obligation to an Indemnitee hereunder with respect to Indemnified Matters caused solely by or resulting solely from the willful misconduct or Gross Negligence of such Indemnitee, as determined by the final non-appealable judgment of a court of competent jurisdiction.  If the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrowers shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees.

(C)  Waiver of Certain Claims; Settlement of Claims.  Each of the Companies further agrees to assert no claim against any of the Indemnitees on any theory of liability for consequential, special, indirect, exemplary or punitive damages.  No settlement shall be entered into by any Company or any of their Subsidiaries with respect to any claim, litigation, arbitration or other proceeding relating to or arising out of the transaction evidenced by this Agreement or the other Loan Documents (whether or not the Global Administrative Agent, any Lender, the Global Swing Line Lender or any Indemnitee is a party thereto) unless such settlement releases all Indemnitees from any and all liability with respect thereto.

(D)  Survival of Agreements.  The obligations and agreements of the Companies under this Section 9.6 shall survive the termination of this Agreement.

9.7  Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Global Administrative Agent with sufficient counterparts so that the Global Administrative Agent may furnish one to each of the relevant Lenders.

9.8  Accounting.  Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles.

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9.9  Severability of Provisions.  Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable.

9.10  Nonliability of Lenders.  The relationship among the Companies and the Lenders, the Global Swing Line Lender and the Global Administrative Agent shall be solely that of borrower or guarantor and lender.  Neither the Global Administrative Agent, nor the Global Swing Line Lender nor any Lender shall have any fiduciary responsibilities to any of the Companies.  Neither the Global Administrative Agent, nor any Lender, nor the Global Swing Line Lender undertakes any responsibility to any of the Companies to review or inform any of the Companies of any matter in connection with any phase of any of the Companies’ business or operations.

9.11  CHOICE OF LAW.  THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO BANKS.

9.12  WAIVER OF JURY TRIAL.  EACH OF THE COMPANIES, THE GLOBAL ADMINISTRATIVE AGENT, THE GLOBAL SWING LINE LENDER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.  EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

9.13  No Strict Construction.  The parties hereto have participated jointly in the negotiation and drafting of this Agreement and the other Loan Documents.  In the event an ambiguity or question of intent or interpretation arises, this Agreement and the other Loan Documents shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the other Loan Documents.

9.14  USA PATRIOT ACT.  Each Lender that is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies each Borrower that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies such Borrower, which information includes the name and address of such Borrower and other information that will allow such Lender to identify such Borrower in accordance with the Act.

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ARTICLE X  THE GLOBAL ADMINISTRATIVE AGENT

10.1  Appointment; Nature of Relationship. JPMorgan Chase Bank is appointed by the Lenders (each reference in this Article X to a Lender being in its capacity either as a Lender or the Global Swing Line Lender, or any or all of the foregoing) as the Global Administrative Agent hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Global Administrative Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents.  The Global Administrative Agent agrees to act as such contractual representative upon the express conditions contained in this Article X.  Notwithstanding the use of the defined term “Global Administrative Agent”, it is expressly understood and agreed that the Global Administrative Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement and that the Global Administrative Agent is merely acting as the representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents.  In its capacity as the Lenders’ contractual representative, the Global Administrative Agent (i) does not assume any fiduciary duties to any of the Lenders, and (ii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents.  Each of the Lenders agrees to assert no claim against the Global Administrative Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender waives.

10.2  Powers.  The Global Administrative Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Global Administrative Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Global Administrative Agent shall have no implied duties or fiduciary duties to the Lenders, or any obligation to the Lenders to take any action hereunder or under any of the other Loan Documents except any action specifically provided by the Loan Documents required to be taken by the Global Administrative Agent.  The Global Administrative Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Global Administrative Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto.  The Global Administrative Agent shall have no implied duties or fiduciary duties to the Lenders, or any obligation to the Lenders to take any action hereunder or under any of the other Loan Documents except any action specifically provided by the Loan Documents required to be taken by the Global Administrative Agent.  Without limiting the foregoing, the Global Administrative Agent hereby agrees to provide the notice contemplated by Section 7.1(d) if so requested by the Required Lenders.

10.3  General Immunity.  Neither the Global Administrative Agent nor any of its directors, officers, agents or employees shall be liable to any of the Borrowers or Lenders for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is found in a final non-appealable judgment by a court of competent jurisdiction to have arisen solely from (i) the Gross Negligence or willful misconduct of such Person or (ii) breach of contract by such Person with respect to the Loan Documents.

10.4  No Responsibility for Loans, Creditworthiness, Recitals, Etc.  Neither the Global Administrative Agent nor any of its directors, officers, agents or employees shall be responsible

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for or have any duty to ascertain, inquire into, or verify (i) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document; (iii) the satisfaction of any condition specified in Article IV; (iv) the existence or possible existence of any Default or (v) the validity, effectiveness or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith.  The Global Administrative Agent shall not be responsible to any Lender for any recitals, statements, representations or warranties herein or in any of the other Loan Documents, for the execution, effectiveness, genuineness, validity, legality, enforceability, collectibility, or sufficiency of this Agreement or any of the other Loan Documents or the transactions contemplated thereby, or for the financial condition of Harley, any guarantor of any or all of the Obligations, any Company or any of their Subsidiaries.

10.5  Action on Instructions of Lenders.  The Global Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders (except with respect to actions that require the consent of all of the Lenders as provided in Section 8.3), and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders and on all holders of Notes.  The Global Administrative Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.

10.6  Employment of the Global Administrative Agent and Counsel.  The Global Administrative Agent may execute any of their respective duties hereunder and under any other Loan Document by or through employees, agents, affiliates and attorneys-in-fact, and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care.  The Global Administrative Agent shall be entitled to advice of counsel concerning the contractual arrangement among the Global Administrative Agent and the Lenders and all matters pertaining to the Global Administrative Agent’s duties hereunder and under any other Loan Document.

10.7  Reliance on Documents; Counsel. The Global Administrative Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Global Administrative Agent, which counsel may be employees of the Global Administrative Agent.

10.8  The Global Administrative Agent’s Reimbursement and Indemnification.  The Lenders agree to reimburse and indemnify the Global Administrative Agent ratably in proportion to their respective Pro Rata Shares (determined at the time such indemnity is sought) (i) for any amounts not reimbursed by any Borrower for which the Global Administrative Agent is entitled to reimbursement or indemnification by any Borrower under the Loan Documents, (ii) for any other expenses incurred by the Global Administrative Agent on behalf of the Lenders in

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connection with the preparation, execution, delivery, administration, distribution (including via the internet) and enforcement of the Loan Documents, including as a result of a dispute among the Lenders or between any Lender and the Global Administrative Agent, and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Global Administrative Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby, or the enforcement of any of the terms thereof or of any such other documents, including as a result of a dispute among the Lenders or between any Lender and the Global Administrative Agent; provided that no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have arisen solely from the Gross Negligence or willful misconduct of the Global Administrative Agent.

10.9  Rights as a Lender.  With respect to its Commitment, Swing Line Commitment or Syndicated Canadian Commitment, Loans made by it and any Notes issued to it, the Global Administrative Agent shall have the same rights and powers hereunder and under any other Loan Document as any Lender and may exercise the same as though it were not the Global Administrative Agent, as applicable, and the term “Lender” or “Lenders”, “Syndicated Canadian Bank” or “Global Swing Line Lender”, as applicable, shall, unless the context otherwise indicates, include the Global Administrative Agent in its individual capacity.  The Global Administrative Agent may accept deposits from, lend money to and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with Harley, any Company or any of their Subsidiaries in which such Person is not prohibited hereby from engaging with any other Person.

10.10  Lender Credit Decision.  Each Lender acknowledges that it has, independently and without reliance upon the Global Administrative Agent or any other Lender and based on the financial statements prepared by the Borrowers and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents.  Each Lender also acknowledges that it will, independently and without reliance upon the Global Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents.

10.11  Successor Global Administrative Agent.  The Global Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrowers.  Upon any such resignation, the Required Lenders shall have the right to appoint, on behalf of the Lenders, a successor Global Administrative Agent.  If no successor Global Administrative Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty days after the retiring Global Administrative Agent’s giving notice of resignation, then the retiring Global Administrative Agent may appoint, on behalf of the Lenders, a successor Global Administrative Agent.  Notwithstanding anything herein to the contrary, so long as no Default has occurred and is continuing, each such successor Global Administrative Agent shall be subject to approval by the U.S. Borrower, which approval shall not be unreasonably withheld.  Such successor Global Administrative Agent shall be a commercial bank (including a branch

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thereof) having capital and retained earnings of at least $500,000,000.  Upon the acceptance of any appointment as the Global Administrative Agent hereunder by a successor Global Administrative Agent, such successor Global Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Global Administrative Agent, and the retiring Global Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents.  After any retiring Global Administrative Agent’s resignation hereunder as the Global Administrative Agent, the provisions of this Article X shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Global Administrative Agent hereunder and under the other Loan Documents.

10.12  Co-Agents, Documentation Agent, Syndication Agent, etc.  None of the Lenders, if any, identified in this Agreement as a “co-agent”, “documentation agent” or “syndication agent” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such.  Without limiting the foregoing, none of such Lenders shall have or be deemed to have a fiduciary relationship with any Lender.  Each Lender hereby makes the same acknowledgments with respect to such Lenders as it makes with respect to the Administrative Agent in Section 10.10.

ARTICLE XI  SETOFF; RATABLE PAYMENTS

11.1  Setoff.  In addition to, and without limitation of, any rights of the Lenders or the Global Swing Line Lender under applicable law, if any Default occurs and is continuing, any indebtedness from any Lender or the Global Swing Line Lender to any Company (including all account balances, whether provisional or final and whether or not collected or available) may be offset and applied toward the payment of the Obligations owing to such Lender or the Global Swing Line Lender and the other Obligations, whether or not the Obligations, or any part hereof, shall then be due.

11.2  Ratable Payments.  (a) If any Syndicated Global Lender, whether by setoff or otherwise, has payment made to it upon its Syndicated Global Loans (other than payments received pursuant to Sections 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Syndicated Global Lender, such Syndicated Global Lender agrees, promptly upon demand, to purchase a portion of the Syndicated Global Loans held by the other Syndicated Global Lenders so that after such purchase each Syndicated Global Lender will hold its ratable proportion of Syndicated Global Loans.  If any Syndicated Global Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Syndicated Global Lender agrees, promptly upon demand, to take such action necessary such that all Syndicated Global Lenders share in the benefits of such collateral ratably in proportion to their Syndicated Global Loans.  In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made.

(b)  If any Syndicated Canadian Bank, whether by setoff or otherwise, has payment made to it upon its Syndicated Canadian Loans (other than payments received pursuant to Sections 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Syndicated Canadian Bank, such Syndicated Canadian Bank agrees, promptly upon demand, to purchase a portion of

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the Syndicated Canadian Loans held by the other Syndicated Canadian Banks so that after such purchase each Syndicated Canadian Bank will hold its ratable proportion of Syndicated Canadian Loans.  If any Syndicated Canadian Bank, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Syndicated Canadian Bank agrees, promptly upon demand, to take such action necessary such that all Syndicated Canadian Banks share in the benefits of such collateral ratably in proportion to their Syndicated Canadian Loans.  In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made.

ARTICLE XII  GUARANTEE

In order to induce the Lenders to extend credit hereunder, each Guarantor fully and unconditionally and irrevocably guarantees, as a primary obligor and not merely as a surety, jointly with the other Guarantors and severally, the Obligations (including, without limitation, interest accruing hereunder after the commencement of any case under the United States Bankruptcy Code or any other bankruptcy-related rules or legislation in any country in which a Company is organized, whether or not allowed as a claim in such case).  The obligations of the Guarantors under this Article XII are sometimes referred to as the “Guarantee”.  Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its Guarantee hereunder notwithstanding any such extension or renewal of any Obligation.

Each Guarantor waives presentment to, demand of payment from and protest to any Borrower of any of the Obligations, and also waives notice of acceptance of its obligations and notice of protest for nonpayment.  The obligations of the Guarantors hereunder shall not be affected by the failure of any Lender or the Global Administrative Agent to assert any claim or demand or to enforce any right or remedy against any Borrower under the provisions of this Agreement or any of the other Loan Documents or otherwise, or, except as specifically provided therein, by any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement, any of the other Loan Documents or any other agreement.

Each Guarantor further agrees that its Guarantee hereunder constitutes a promise of payment when due and not merely of collection, and waives any right to require that any resort be had by any Lender to any balance of any deposit account or credit on the books of any Lender in favor of any Borrower or any other person.

Each Guarantor agrees that its obligations under this Guarantee shall be unconditional, irrespective of:

(i)  the validity, enforceability, avoidance, novation or subordination of any of the Obligations or any of the Loan Documents;

(ii)  the absence of any attempt by, or on behalf of, any Lender or the Global Administrative Agent to collect, or to take any other action to enforce, all or any part of the Obligations whether from or against any Borrower, any other guarantor of the Obligations or any other Person;

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(iii)  the election of any remedy by, or on behalf of, any Lender or the Global Administrative Agent with respect to all or any part of the Obligations;

(iv)  the waiver, consent, extension, forbearance or granting of any indulgence by, or on behalf of, any Lender or the Global Administrative Agent with respect to any provision of any of the Loan Documents;

(v)  the failure of the Global Administrative Agent to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for the Obligations;

(vi)  the election by, or on behalf of, any one or more of the Lenders or the Global Administrative Agent in any proceeding instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C. 101 et seq.) (the “Bankruptcy Code”) or other bankruptcy-related rules or legislation in any country in which a Company is organized, of the application of Section 1111(b)(2) of the Bankruptcy Code;

(vii)  any borrowing or grant of a security interest by any Company, as debtor-in-possession, under Section 364 of the Bankruptcy Code or any other bankruptcy-related rules or regulations in any country in which a Borrower is organized;

(viii)  the disallowance, under Section 502 of the Bankruptcy Code or any other bankruptcy-related rules or regulations in any country in which a Company is organized, of all or any portion of the claims of any of the Lenders or the Global Administrative Agent for repayment of all or any part of the Obligations; or

(ix)  any other circumstance which might otherwise constitute a legal or equitable discharge or defense of any Borrower or any Guarantor.

The obligations of the Guarantors hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever, by reason of the invalidity, illegality or unenforceability of the Obligations, any impossibility in the performance of the Obligations or otherwise.  The Lenders, either themselves or acting through the Global Administrative Agent, are authorized, without notice or demand and without affecting the liability of any Guarantor hereunder, from time to time, (a) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the Obligations, or to otherwise modify, amend or change the terms of any of the Loan Documents; (b) to accept partial payments on all or any part of the Obligations; (c) to take and hold security or collateral for the payment of all or any part of the Obligations, this Guarantee, or any other guaranties of all or any part of the Obligations, (d) to exchange, enforce, waive and release any such security or collateral; (e) to apply such security or collateral and direct the order or manner of sale thereof as in their discretion they may determine; (f) to settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of the Obligations, this Guarantee, any other guaranty of all or any part of the Obligations, and any security or collateral for the Obligations or for any such guaranty.

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The Guarantors consent and agree that none of the Lenders nor the Global Administrative Agent nor any Person acting for or on behalf of the Lenders or the Global Administrative Agent shall be under any obligation to marshall any assets in favor of any Guarantor or against or in payment of any or all of the Obligations.  The Guarantors further agree that, to the extent that any Borrower, any Guarantor or any other guarantor of all or any part of the Obligations makes a payment or payments to any Lender or the Global Administrative Agent, or any Lender or the Global Administrative Agent receives any proceeds of collateral for all or any part of the Obligations, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to any Borrower, such Guarantor, such other guarantor or any other Person, or their respective estates, trustees, receivers or any other party, under any bankruptcy law, state, provincial or federal law, common law or equitable cause, then, to the extent of such payment or repayment, the part of the Obligations which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately preceding such initial payment, reduction or satisfaction.

In furtherance of the foregoing and not in limitation of any other right which the Global Administrative Agent or any Lender may have at law or in equity against the Guarantors by virtue hereof, upon the failure of any Borrower to pay any of the Obligations when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor promises to and will, upon receipt of written demand by the Global Administrative Agent, forthwith pay, or cause to be paid, in cash, the amount of such unpaid Obligations.  The Guarantors further agree, jointly and severally, that if payment in respect of any of the Obligations owed to any Lender shall be due in a currency other than Dollars and/or at a place of payment other than as designated in this Agreement or the Syndicated Canadian Addendum and if, by reason of any Change in Law, disruption of currency or foreign exchange markets, war or civil disturbance or other event, payment of such Obligations in such currency or such place of payment shall be impossible or, in the judgment of such Lender, not consistent with the protection of its rights or interests, then, at the election of such Lender, the Guarantors shall make payment of such Obligation in Dollars (based upon the applicable Exchange Rate in effect on the date of payment) and/or in the applicable place designated in this Agreement or the Syndicated Canadian Addendum, and shall indemnify such Lender against any losses or expenses that it shall sustain as a result of such alternative payment.

Until the Obligations have been indefeasibly paid in full in cash and the Termination Date shall have occurred, the Guarantors (i) shall have no right of subrogation with respect to such Obligations and (ii) waive any right to enforce any remedy which the Lenders or the Global Administrative Agent (or any of them) now have or may hereafter have against any Borrower, any endorser or any guarantor of all or any part of the Obligations or any other Person, and the Guarantors waive any benefit of, and any right to participate in, any security or collateral given to the Lenders and the Global Administrative Agent (or any of them) to secure the payment or performance of all or any part of the Obligations or any other liability of any Borrower to the Lenders or the Global Administrative Agent (or any of them).

This Guarantee shall continue in full force and effect and may not be terminated or otherwise revoked until the Obligations shall have been fully and indefeasibly paid (in cash) and discharged and this Agreement and all financing arrangements between any Borrower, the

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Global Administrative Agent and the Lenders shall have been terminated; provided that if the capital stock of a Guarantor is sold, transferred or otherwise disposed of in a transaction permitted pursuant to the terms of this Agreement (as in effect on the Closing Date), such Guarantor shall be released from its obligations under this Agreement without further action.  If, notwithstanding the foregoing, the Guarantors (or either of them) shall have any right under applicable law to terminate or revoke this Guarantee, the Guarantors agree that such termination or revocation shall not be effective until a written notice of such revocation or termination, specifically referring hereto, signed by the Guarantors, is actually received by the Global Administrative Agent.  Such notice shall not affect the right and power of any of the Lenders or the Global Administrative Agent to enforce rights arising prior to receipt thereof by the Global Administrative Agent.  If any Lender grants loans or takes other action after a Guarantor terminates or revokes this Guarantee but before the Global Administrative Agent receives such written notice, the rights of such Lender with respect thereto shall be the same as if such termination or revocation had not occurred.  The provisions of this Article XII shall remain in full force and effect, notwithstanding any termination of this Agreement, until the Obligations shall have been fully and indefeasibly paid (in cash) and discharged.

Notwithstanding anything contained in this Article XII, the guaranty obligations of the Canadian Guarantor shall only apply to the Obligations of the Canadian Borrower.

ARTICLE XIII  BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

13.1  Successors and Assigns.  The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Companies, the Lenders and the Global Administrative Agent and their respective successors and assigns, except that (i) the Companies shall not have the right to assign their rights or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in compliance with Section 13.3 hereof.  Notwithstanding clause (ii) of this Section 13.1, any Lender may at any time, without the consent of the Borrower or the Global Administrative Agent, assign all or any portion of its rights under this Agreement and any Notes to a Federal Reserve Bank; provided, however, that no such assignment shall release the transferor Lender from its obligations hereunder.  The Global Administrative Agent may treat any Lender as the owner of the Loans for all purposes hereof unless and until such Lender complies with Section 13.3 hereof in the case of an assignment thereof or, in the case of any other transfer, a written notice of the transfer is filed with the Global Administrative Agent.  Any such assignee or transferee agrees by acceptance thereof to be bound by all the terms and provisions of the Loan Documents.  Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the holder of any Loan, shall be conclusive and binding on any subsequent holder, transferee or assignee of such Loan.

13.2  Participations.

(A)  Permitted Participants; Effect.  Subject to the terms set forth in this Section 13.2, any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities (“Participants”) participating interests in any Loan owing to such Lender, any Commitment or Syndicated Canadian Commitment of such Lender or any other interest of such Lender under the Loan Documents on a pro rata basis.  In

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the event of any such sale by a Lender of participating interests to a Participant, such Lender’s obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of all Loans for all purposes under the Loan Documents, all amounts payable by any Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and such Borrower and the Global Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under the Loan Documents except that, for purposes of Article III hereof, the Participants shall be entitled to the same rights as if they were Lenders provided however that no Participant shall be entitled to receive any greater payment under Article III than the Lender would have been entitled to receive with respect to the rights participated.

(B)  Voting Rights.  Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents, other than any amendment, modification or waiver with respect to any Loan or Commitment or Syndicated Canadian Commitment in which such Participant has an interest which involves an amendment, modification or waiver with respect to a matter which, if such Participant were a Lender hereunder, would require the consent of such Lender under clauses (i) through (viii) of Section 8.3 hereof.

(C)  Benefit of Setoff.  The Companies agree that each Participant shall be deemed to have the right of setoff provided in Section 11.1 hereof in respect to its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 hereof with respect to the amount of participating interests sold to each Participant except to the extent such Participant exercises its right of set off.  The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1 hereof, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender.

13.3  Assignments.

(A)  Permitted Assignments.  Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities which is not (i) a competitor of Harley or any Borrower or (ii) a Person that is, or is owned or controlled by, a participant in the transportation industry (“Purchasers”) all or a portion of its rights and obligations under this Agreement (including, without limitation, its Commitment, Syndicated Canadian Commitment, Swing Line Commitment, all Loans owing to it, all of its participation interests in Syndicated Canadian Loans and Swing Line Loans, and its obligation to participate in additional Syndicated Canadian Loans and Swing Line Loans hereunder) in accordance with the provisions of this Section 13.3.  Each assignment shall be of a constant, and not a varying, ratable percentage of all of the rights and obligations of any assigning Lender under this Agreement.  Such assignment shall be substantially in the form of Exhibit C hereto and shall not be permitted hereunder unless such assignment is either for all of such Lender’s rights and obligations under the Loan Documents or, except for assignments to another Lender, an Affiliate thereof or an Approved Fund, involves loans and commitments in an aggregate

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amount of at least $5,000,000.  Notice to the Global Administrative Agent shall be required prior to any assignment becoming effective and the consent of the Global Administrative Agent (which consent will not be unreasonably withheld) shall be required prior to any assignment becoming effective with respect to a Purchaser which is not a Lender and, so long as no Default shall have occurred and be continuing, notice to and consent of the U.S. Borrower (which consent will not be unreasonably withheld) shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender, an Affiliate thereof or an Approved Fund.

(B)  Effect; Effective Date.  Upon (i) delivery to the Global Administrative Agent of a notice of assignment, substantially in the form attached as Appendix I to Exhibit C hereto (a “Notice of Assignment”), together with any consents required by Section 13.3(A) hereof, and (ii) payment of a $3,500 fee to the Global Administrative Agent for processing such assignment, such assignment shall become effective on the effective date specified in such Notice of Assignment.  The Notice of Assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Loans under the applicable assignment agreement are “plan assets” as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be “plan assets” under ERISA.  On and after the effective date of such assignment, such Purchaser, if not already a Lender, shall for all purposes be a Lender party to this Agreement and any other Loan Documents executed by the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no consent or action by any of the Borrower or the Lenders and no further consent or action by the Global Administrative Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Commitment, Loans and the Syndicated Canadian Loan participations and Swing Line Loan participations assigned to such Purchaser.  Upon the consummation of any assignment to a Purchaser pursuant to this Section 13.3(B), the transferor Lender, the Global Administrative Agent and the U.S. Borrower shall, if requested by such transferor Lender or Purchaser, make appropriate arrangements so that replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser.

(C)  The Register.  The Global Administrative Agent shall maintain at its address referred to in Section 14.1 a copy of each assignment delivered to and accepted by it pursuant to this Section 13.3 and a register (the “Register”) for the recordation of the names and addresses of the Lenders and the Commitment of and principal amount of the Loans owing to, each Lender from time to time and whether such Lender is an original Lender or the assignee of another Lender pursuant to an assignment under this Section 13.3.  The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and each Borrower and each of its Subsidiaries, the Global Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement.  The Register shall be available for inspection by any Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.

13.4  Confidentiality.  (i)  Subject to Section 13.5, the Global Administrative Agent and the Lenders shall hold (A) all nonpublic information obtained pursuant to the requirements of this Agreement and identified as such by Harley or any Company and (B) except as otherwise

96

permitted by HDFS, all information related to the Licensed Marks (as defined in Section 13.6)) and all other information which a reasonable person would deem to be confidential and/or proprietary in light of the nature of the information and the manner in which it was disclosed, in accordance with such Person’s customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure reasonably required by a prospective Transferee in connection with the contemplated participation or assignment or as required or requested by any Governmental Authority or representative thereof or pursuant to legal process and shall require any such Transferee or prospective Transferee to agree (and require any of its Transferees to agree) to comply with this Section 13.4.  In no event shall the Global Administrative Agent or any Lender be obligated or required to return any materials furnished by Harley, the Companies or any of their Subsidiaries; provided, however, each prospective Transferee shall be required to agree that if it does not become a participant or assignee it shall return all materials furnished to it by or on behalf of Harley or any Company in connection with this Agreement.

(ii)(A) To the extent that the Gramm-Leach-Bliley Act, Title V/Privacy (collectively with the related implementing regulations, the “GLBA”), shall be applicable to the transactions contemplated herein, each of the parties hereto agrees that (1) it shall use all non-public personal information obtained pursuant to the requirements of this Agreement solely for the purposes for which the information is disclosed or as otherwise permitted in conformance with the requirements of the GLBA and (2) it shall maintain the confidentiality of such information to the same extent as described in Section 13.4(i).  This clause shall survive the termination of this Agreement.

(B)In the event that the Global Administrative Agent or any Lender reasonably believes that any physical and/or electronic safeguards have been breached, and that non-public personal information has been obtained by persons and/or entities without authority to use or view such non-public personal information, the Global Administrative Agent or such Lender, as applicable, will notify HDFS, in writing, as soon as reasonably practicable.  The Global Administrative Agent and each Lender shall also maintain commercially reasonable processes and procedures for the storage, retention, and disposal of documents and storage media containing nonpublic personal information.  Nothing in this clause shall be construed to create any third-party beneficiary rights in any consumer or other holder of nonpublic personal information.  This clause shall survive the termination of this Agreement.

(iii)Each of the parties hereto acknowledges that any breach of the aforesaid confidentiality obligations in this Section 13.4 is likely to cause or threaten irreparable harm to HDFS.  Therefore, HDFS shall be entitled to seek equitable relief to protect its interests, including but not limited to preliminary and permanent injunctive relief, as well as monetary damages. Nothing stated herein will be construed to limit any other remedies available to the parties hereto. This section shall survive the termination of this Agreement.

13.5  Dissemination of Information.  Each of the Companies authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a “Transferee”) and any prospective Transferee any and all information in such Lender’s possession concerning the Companies and their Subsidiaries; provided that prior to any such disclosure, such prospective Transferee shall agree to preserve in

97

accordance with Section 13.4 the confidentiality of any confidential information described therein.

13.6  Non-Use of HDFS’ Licensed Marks.  (i)  HDFS and its affiliates have the licensed right to use certain trademarks, logos, etc. relating to Harley-Davidson Motorcycles, HDFS and their affiliates (the “Licensed Marks”).  Except as permitted by the following sentences, none of the Global Administrative Agent, the Lenders or their Affiliates are authorized to use such Licensed Marks or Harley’s or HDFS’s text name and logo on forms, in legal documents, in advertising, marketing materials, in press releases or any other document or material.  In the event the Global Administrative Agent, any Lender or any of their Affiliates wish to use said Licensed Marks, such Person must obtain HDFS’s prior written approval, which said approval is at HDFS’s sole and absolute discretion and subject to subsequent periodic review of such use and to such reasonable specifications of HDFS to the extent such specifications are directly related to the legal maintenance, whether such is before or after lapse or termination of this Agreement.  The Harley-Davidson text name, logo(s) and registered trademark are not to be used by the Global Administrative Agent, any Lender or any of their Affiliates in any way before, during or after the term of this Agreement, unless prior written consent is obtained from HDFS.  This section shall survive the termination of this Agreement.

(ii)Each of the parties hereto acknowledges that any breach of the aforestated non-use obligations in this Section 13.6 is likely to cause or threaten irreparable harm to HDFS.  Therefore, in the event of any such breach, HDFS shall be entitled to seek equitable relief to protect its interests, including but not limited to preliminary and permanent injunctive relief, as well as monetary damages.  Nothing stated in this Section 13.6 shall be construed to limit any other remedies available to any party hereto.

ARTICLE XIV  NOTICES

14.1  Giving Notice.  Except as otherwise permitted by Article II with respect to Borrowing Notices, all notices and other communications provided to any party hereto under this Agreement or any other Loan Documents shall be in writing or by telex or by facsimile and addressed or delivered to such party at its address set forth below its signature hereto or at such other address as may be designated by such party in a notice to the other parties.  Any notice, if mailed and properly addressed with postage prepaid, shall be deemed given when received; any notice, if transmitted by telex or facsimile, shall be deemed given when transmitted (answerback confirmed in the case of telexes); or, if by courier, one (1) Business Day after deposit with a reputable overnight carrier service; with all charges paid.

14.2  Change of Address.  Any of the Companies, the Global Administrative Agent, the Global Swing Line Lender and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto (or, in the case of any Lender, by notice in writing to the U.S. Borrower and the Global Administrative Agent).

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ARTICLE XV  COUNTERPARTS

15.1  Counterparts.  This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart.

[Remainder of This Page Intentionally Blank]

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IN WITNESS WHEREOF, the Companies, the Lenders and the Global Administrative Agent have executed this Agreement as of the date first above written.

HARLEY-DAVIDSON FUNDING CORP., as the U.S. Borrower
By:
Name:
Title:
Address:
150 South Wacker Drive, Suite 3020
Chicago, IL 60606
Attention: Treasurer
Telephone No.:	(312) 696-5375
Facsimile No.:	(312) 368-4372

HARLEY-DAVIDSON FINANCIAL SERVICES EUROPE LIMITED, as the U.K. Borrower
By:
Name:
Title:
Address:
150 South Wacker Drive, Suite 3020
Chicago, IL 60606
Attention: Treasurer
Telephone No.:	(312) 696-5375
Facsimile No.:	(312) 368-4372

HARLEY-DAVIDSON FINANCIAL SERVICES, INC., as a Guarantor
By:
Name:
Title:
Address:
150 South Wacker Drive, Suite 3020
Chicago, IL 60606
Attention: Treasurer
Telephone No.:	(312) 696-5375
Facsimile No.:	(312) 368-4372

HARLEY-DAVIDSON FINANCIAL SERVICES INTERNATIONAL, INC., as a Guarantor
By:
Name:
Title:
Address:
150 South Wacker Drive, Suite 3020
Chicago, IL 60606
Attention: Treasurer
Telephone No.:	(312) 696-5375
Facsimile No.:	(312) 368-4372

HARLEY-DAVIDSON CREDIT CORP., as a Guarantor
By:
Name:
Title:
Address:
150 South Wacker Drive, Suite 3020
Chicago, IL 60606
Attention: Treasurer
Telephone No.:	(312) 696-5375
Facsimile No.:	(312) 368-4372

JPMORGAN CHASE BANK, as the Global
Administrative Agent, the Global Swing Line
Lender and as a Lender

By:

Name:

Title:

Address:

Attention:

Telephone No.:

Facsimile No.:

CITIBANK, N.A., as Syndication Agent and as a Lender
By:
Name: Mark Chabrel
Title: Vice President
Address:
399 Park Ave.
8th Floor, Zone 12
New York., NY 10043
Attention: Mark Chabrel
Telephone No.:	(212) 559-4637
Facsimile No.:	(212) 826-2375

BNP PARIBAS, as Documentation Agent and as a
Lender

By:

Name:

Title:

Address:

Attention:

Telephone No.:

Facsimile No.:

SCHEDULE I

FUNDING PROTOCOLS re: SYNDICATED GLOBAL LOANS

and SYNDICATED CANADIAN LOANS

Harley-Davidson $1.1billion Global Credit Facility

Location	Tenor	Notice to Ad Agent	Minimum Amounts Borrowing/Increments	Currency fixing	Screen	Comment
US Borrower - Syndicate Borrowing - US or IBF Nassau
US $ Borrowing		Houston Loan & Agency
ABR	overnight	same day/3PM NYT	$5mm/500m	Not Applicable	Not Applicable
Eurodollar	30, 60, 90, 180	2 days/12 noon NYT	$5mm/500m	Not Applicable	Telerate 3750	NY fixing
GBP Sterling		London Loan & Agency
LIBOR	30, 60, 90, 180	3 days/10AM NYT	£2.5mm/250m	funding date	Telerate 3750	11AM London fixing
Euros		London Loan & Agency
EURIBOR	30, 60, 90, 180	3 days/10AM NYT	€5mm/500m	2 days before funding	Reuters EURIBOR 01	11AM Brussels fixing
Canadian $		London Loan & Agency
C$ LIBOR	30, 60, 90, 180	3 days/11AM NYT	C$5mm/500m	2 days before  funding	Telerate 3750
UK Borrower - Syndicate Borrowings in London
GBP Sterling		London Loan & Agency
LIBOR	30, 60, 90, 180	2 days/11am London	£2.5mm/250m	funding date	Reuters LIBOR 01
Euros		London Loan & Agency
EURIBOR	30, 60, 90, 180	3 days/11am London	€5mm/500m	2 days before funding	Reuters EURIBOR 01
US$		London Loan & Agency
LIBOR	30, 60, 90, 180	3 days/11am London	$5mm/500m	2 days before funding	Telerate 3750
CHF		London Loan & Agency
LIBOR	30, 60, 90, 180	3 days/11am London	CHF5mm/500m	2 days before funding	Reuters LIBOR 02
Canadian Borrower - Syndicate Borrowings in Canada
		Toronto Loan & Agency
C$ Prime	overnight	same day/12 noon Toronto	C$500m/100m	notice day	Not Applicable
US$ ABR	overnight	same day/12 noon Toronto	$5mm/500m	Not Applicable	Not Applicable
C$ LIBOR	30, 60, 90, 180	3 days/12 noon Toronto	C$5mm/500m	notice day	Telerate 3750
US$ Eurodollar	30, 60, 90, 180	3 days/12 noon Toronto	$5mm/500m	2 days before funding	Telerate 3750	11AM London fixing
CDOR (BAs)	30, 60, 90, 180	same day/10 am Toronto or 1 day/12 noon Toronto	C$500m/100m	notice day	Reuters CDOR

SCHEDULE II

FUNDING PROTOCOLS re: SWINGLINE LOANS

Harley-Davidson $1.1billion Global Credit Facility

Location	Tenor	Notice to Ad Agent	Minimum AmountsBorrowing/Increments	Currency fixing	Screen	Comment
US Borrower - Swingline Borrowing
US $ Borrowing		Houston Loan & Agency
ABR	overnight	same day/3PM NYT	$1mm/500m	Not applicable	Not applicable
Money Market	less than 30 days	same day/3PM NYT	$1mm/500m	Not applicable	Telerate 3750
GBP Sterling		London Loan & Agency
LIBOR	less than 30 days	1 day/12 noon NYT	£500m/250m	day before funding	Telerate 3750	11AM London fixing
Euros		London Loan & Agency
EURIBOR	less than 30 days	1 day/12 noon NYT	€1mm/500m	day before funding	Reuters EURIBOR 01	11AM Brussels fixing
Canadian $ in U.S.		Houston Loan & Agency
C$ LIBOR	less than 30 days	1 day/12 noon NYT	C$500m/100m	day before funding	Telerate 3750
Canadian $ in Canada		Bank One Toronto Loan & Agency
C$ Prime	overnight	same day/12 noon Toronto	C$500m/100m	notice day	Not applicable
UK Borrower - Swingline Borrowings in London
GBP Sterling		London Loan & Agency
LIBOR	less than 30 days	same day/11am London	£500m/250m	notice day	Reuters LIBOR 01
Euros		London Loan & Agency
EURIBOR	less than 30 days	same day/11am London	€1mm/500m	notice day	JPM Ref Rate
US$		London Loan & Agency
LIBOR	less than 30 days	same day/11am London	$1mm/500m	notice day	JPM Ref Rate
CHF		London Loan & Agency
LIBOR	less than 30 days	1 day/11am London	CHF1mm/500m	notice day	JPM Ref Rate
Canadian Borrower - Swingline Borrowings in Canada
		Bank One Toronto Loan & Agency
C$ Prime	overnight	same day/12 noon Toronto	C$500m/100m	notice day	Not applicable
CDOR	less than 30 days	same day/12 noon Toronto	C$500m/100m	notice day	Not applicable

SCHEDULE III

MANDATORY COST

1.The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

2.On the first day of each Interest Period (or as soon as possible thereafter) the Global Administrative Agent shall calculate, as a percentage rate, a rate (the “Associated Costs Rate”) for each Lender, in accordance with the paragraphs set out below.  The Mandatory Cost will be calculated by the Global Administrative Agent as a weighted average of the Lenders’ Associated Costs Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.

3.The Associated Costs Rate for any Lender lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Global Administrative Agent.  This percentage will be certified by that Lender in its notice to the Global Administrative Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender’s participation in all Loans made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.

4.The Associated Costs Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Global Administrative Agent as follows:

(a)in relation to a Loan in Pounds Sterling:

 per cent. per annum

(b)in relation to a Loan in any currency other than Pounds Sterling:

 per cent. per annum.

Where:

Ais the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.

Bis the percentage rate of interest (excluding the Applicable Margin and the Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of interest specified in Section 2.11 (Default Rate) payable for the relevant Interest Period on the Loan.

Cis the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.

Dis the percentage rate per annum payable by the Bank of England to the Global Administrative Agent on interest bearing Special Deposits.

Eis designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Global Administrative Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Global Administrative Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.

5.For the purposes of this Schedule:

(a)“Eligible Liabilities” and “Special Deposits” have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

(b)“Facility Office” means the office or offices notified by a Lender to the Global Administrative Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days’ written notice) as the office or offices through which it will perform its obligations under this Agreement.

(c)“Fees Rules” means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

(d)“Fee Tariffs” means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate);

(e)“Participating Member State” means any member state of the European Union that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Union relating to economic and monetary union.

(f)“Reference Banks” means, in relation to Mandatory Cost, the principal London offices of JPMorgan Chase Bank and Citibank, N.A. and, in relation to EURIBOR, the principal offices of JPMorgan Chase Bank and Citibank, N.A. in the relevant jurisdiction or such

other banks as may be appointed by the Global Administrative Agent in consultation with the Borrowers.

(g)“Tariff Base” has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

(h)“Unpaid Sum” means any sum due and payable but unpaid by a Borrower under the Loan Documents.

6.In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05).  A negative result obtained by subtracting D from B shall be taken as zero.  The resulting figures shall be rounded to four decimal places.

7.If requested by the Global Administrative Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Global Administrative Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.

8.Each Lender shall supply any information required by the Global Administrative Agent for the purpose of calculating its Associated Costs Rate.  In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:

(a)the jurisdiction of its Facility Office; and

(b)any other information that the Global Administrative Agent may reasonably require for such purpose.

Each Lender shall promptly notify the Global Administrative Agent of any change to the information provided by it pursuant to this paragraph.

9.The percentages of each Lender for the purpose of A and C above and the rates of charge of each Reference Bank for the purpose of E above shall be determined by the Global Administrative Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifies the Global Administrative Agent to the contrary, each Lender’s obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.

10.The Global Administrative Agent shall have no liability to any person if such determination results in an Associated Costs Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.

11.The Global Administrative Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Associated Costs Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 3, 7 and 8 above.

12.Any determination by the Global Administrative Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Associated Costs Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all parties hereto.

13.The Global Administrative Agent may from time to time, after consultation with the relevant Borrowers and Lenders, determine and notify to all parties hereto any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all parties hereto.

EX-10.18

EXHIBIT 10.18

HARLEY-DAVIDSON, INC.

Director Compensation Policy

Effective May 3, 2003

This compensation policy has been developed to compensate non-employee directors (“Directors”) of Harley-Davidson, Inc. (the “Company”) for their time, commitment and contributions to the Board of Directors (the “Board”) of the Company.  The Annual Retainer Fee has been increased based on the following: Directors will no longer receive meeting fees for each Board meeting and Committee meeting attended; Directors will no longer receive annual grants of stock options; and the number of meetings of the Directors, particularly meetings of the Committees of the Board, has increased.  It is expected that Directors will attend all meetings of the Board and of its Committees.

I.Annual Retainer Fee for Non-Employee Directors

Annual Retainer Fee for Non-Employee Directors	$	100,000
Annual Retainer Fee for Audit Committee Chair	10,000
Annual Retainer Fee for Other Committee Chairs	5,000
Annual Retainer Fee for Audit Committee Members	5,000

Annual Retainer Fees paid to Directors of the Board will be paid within ten (10) business days after the first business day following the annual meeting of the shareholders of the Company (“Annual Meeting”).  In the event a Director is elected to the Board at a time other than at the Annual Meeting, the Annual Retainer Fee will be prorated on a quarterly basis based on the quarter a Director is elected to the Board and paid within ten (10) business days after the first business day after the Director’s first Board or committee meeting.

Directors will be eligible to elect to receive Annual Retainer Fees in cash or Company Common Stock (based upon the fair market value of the Common Stock on the first business day after the Annual Meeting or the first business day after the Director’s first Board or committee meeting) and to defer all Annual Retainer Fees paid in cash or Company Common Stock pursuant to plans adopted by the Company from time to time.  Directors must receive a minimum of one-half (½) of their Annual Retainer Fees in Company Common Stock until the Director reaches the stock ownership goals established in the Director and Senior Executive Stock Ownership Guidelines for Harley-Davidson, Inc.

II.Additional Compensation for and Payments to Non-Employee Directors

Clothing Allowance.  Each Director shall receive an annual clothing allowance of $1,500 to purchase Harley-Davidson MotorClothes® apparel and accessories.

Discount on Company Products.   Each Director shall receive the same discount on Company products that is available to all Company employees.

Expenses.  The Company will reimburse reasonable travel and related business expenses that a Director incurs for attendance at all meetings of the Board and committees and in connection with other Board of Directors or Company business.

EX-21

Exhibit 21

HARLEY-DAVIDSON, INC.

SUBSIDIARIES

Name	State/Country Of Incorporation
H-D Michigan, Inc.	Michigan
Harley-Davidson Motor Company Group, Inc.	Wisconsin
Harley-Davidson Motor Company Operations, Inc.	Wisconsin
Harley-Davidson Motor Company, Inc.	Wisconsin
H-D Milwaukee, LLC	Wisconsin
Buell Distribution Company, LLC	Wisconsin
H-D F&R, LLC	Wisconsin
HASC, LLC	Wisconsin
H-D Group LLC	Illinois
Revolution PowerTrain LLC	Delaware
Buell Motorcycle Company, LLC	Wisconsin
Harley-Davidson Transportation Co., Inc.	Delaware
HDWA, LLC	Wisconsin
HDMC, LLC	Illinois
Harley-Davidson Foreign Sales Corporation	Barbados
Harley-Davidson Dealer Systems, Inc.	Ohio
Harley-Davidson International Holding Co., Inc.	Wisconsin
Harley-Davidson Holding Co., Inc.	Delaware
Harley-Davidson Benelux B.V.	Netherlands
Harley-Davidson France SAS	France
Harley-Davidson GmbH	Germany
Harley-Davidson Japan KK	Japan
Harley-Davidson Europe Limited	England
Harley-Davidson do Brazil Ltda.	Brazil
Harley-Davidson Italia S.r.l.	Italy
Harley-Davidson Singapore Inc.	Delaware
Harley-Davidson Australia Pty Limited	Australia
Harley-Davidson Hong Kong Limited	Hong Kong
Lockglade Limited	England
Harley-Davidson Espana S.L.	Spain
Harley-Davidson Switzerland GmbH	Switzerland
Harley-Davidson Asia, Inc.	Wisconsin
Renovation Realty Investment Services, Inc.	Wisconsin
Highland Insurance Service, Inc.	Wisconsin
HR LLC	Indiana
Harley-Davidson Financial Services, Inc.	Delaware
Harley-Davidson Insurance Services, Inc.	Nevada
Harley-Davidson Insurance Services of Illinois, Inc.	Illinois
Harley-Davidson Credit Corp.	Nevada
Harley-Davidson Customer Funding Corp	Nevada
Harley-Davidson Funding Corp.	Nevada
Eaglemark Savings Bank	Nevada
Harley-Davidson Leasing, Inc.	Nevada
Harley-Davidson Mortgage, Inc.	Nevada

Eaglemark Customer Funding Corporation-IV	Nevada
Harley-Davidson Financial Services International, Inc.	Delaware
Harley-Davidson Financial Services Europe Limited	England
Harley-Davidson Financial Services Canada, Inc.	Canada

EX-23

Exhibit  23

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-35311, No. 333-07551, No. 333-51741, No. 333-75347, No. 333-93879 and No. 333-60840) pertaining (a) the Harley-Davidson Retirement Savings Plan for Salaried Employees, the Harley-Davidson Retirement Savings Plan for Milwaukee and Tomahawk Hourly Bargaining Unit Employees, and the Holiday Rambler LLC Employees Retirement Plan; (b) the Harley-Davidson, Inc. 1995 Stock Option Plan; (c) the Harley-Davidson, Inc. Director Stock Plan; (d) the Harley-Davidson, Inc. 1998 Non-Exempt Employee Stock Option Plan (e) the Harley-Davidson Retirement Savings Plan for Salaried Employees, the Harley-Davidson Retirement Savings Plan for Milwaukee and Tomahawk Hourly Bargaining Unit Employees, the Harley-Davidson Retirement Savings Plan for Kansas City Hourly Bargaining Unit Employees, the Harley-Davidson Retirement Savings Plan for York Hourly Bargaining Unit Employees and the Buell Motorcycle Company Retirement Savings Plan, and (f) the Harley-Davidson, Inc. 2001 York Hourly-Paid Employees Stock Option Plan, of our report dated February 10, 2005, with respect to the consolidated financial statements and schedule of Harley-Davidson, Inc., Harley-Davidson, Inc.’s management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Harley-Davidson, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2004.

ERNST & YOUNG LLP

Milwaukee, Wisconsin

March 11, 2005

EX-31.1

Exhibit 31.1

Chief Executive Officer Certification

Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

I, Jeffrey L. Bleustein, certify that:

1.I have reviewed this annual report on Form 10-K of Harley-Davidson, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 11, 2005	/s/ Jeffrey L. Bleustein
	Jeffrey L. Bleustein
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Chief Financial Officer Certification

Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

I, James L. Ziemer, certify that:

1.I have reviewed this annual report on Form 10-K of Harley-Davidson, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

c)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

d)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 11, 2005	/s/ James L. Ziemer
	James L. Ziemer, Vice President and
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Written Statement of the Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. sec. 1350

Solely for the purpose of complying with 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and the Vice President and Chief Financial Officer of Harley-Davidson, Inc. (the “Company”), hereby certify, based on our knowledge, that the Annual Report on Form 10-K of the Company for the year ended December 31, 2004 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 11, 2005

/s/ Jeffrey L. Bleustein

Jeffrey L. Bleustein

Chief Executive Officer

/s/ James L. Ziemer

James L. Ziemer

Vice President and Chief Financial Officer