EXHIBIT 10.3(b)


                              EMPLOYMENT AGREEMENT


    This Agreement,  made and dated as of December 12, 1996 ("Effective  Date"),
by and between Starcraft Corporation,  an Indiana corporation ("Employer"),  and
Kelly L. Rose, a resident of Elkhart County, Indiana ("Employee").

                               W I T N E S S E T H

    WHEREAS,  Employee is employed by Employer as its  Chairman of the Board and
Chief  Executive  Officer,  for  itself  and  each  of  its  subsidiaries  ("Job
Responsibilities") and Employee has made valuable contributions to the strategic
planning, business operations, and financial strength of Employer;

    WHEREAS, Employer desires to encourage Employee to continue to make valuable
contributions  to  Employer's  business  operations  and not to  seek or  accept
employment elsewhere;

    WHEREAS,  Employee  desires to be assured of a secure  minimum  compensation
from Employer for his services over a defined term;

    WHEREAS,  Employer  desires to assure the continued  services of Employee on
behalf of Employer on an objective and impartial  basis and without  distraction
or  conflict  of  interest  in the event of an  attempt  by any person to obtain
control of Employer;

    WHEREAS, Employer recognizes that when faced with a proposal for a change of
control of Employer,  Employee will have a significant role in helping the Board
of  Directors  assess the options and advising the Board of Directors on what is
in the best interests of Employer and its shareholders,  and it is necessary for
Employee to be able to provide this advice and counsel without being  influenced
by the uncertainties of his own situation; and

    WHEREAS,  Employer  desires  to  provide  fair and  reasonable  benefits  to
Employee on the terms and subject to the conditions set forth in this Agreement.

    NOW, THEREFORE, in consideration of these premises, the mutual covenants and
undertakings  herein  contained  and the  continued  employment  of  Employee to
perform Job Responsibilities for Employer, Employer and Employee, each intending
to be legally bound, covenant and agree as follows:

     1.  Upon  the  terms  and  subject  to the  conditions  set  forth  in this
Agreement,  Employer  employs  Employee  to  perform  Job  Responsibilities  for
Employer, and Employee accepts such employment.

     2.  Employee  agrees to serve as  Employer's  Chief  Executive  Officer for
Employer   and   each  of  its   subsidiaries   in   connection   with  the  Job
Responsibilities;  provided,  however  that such duties shall be performed in or
from the offices of Employer currently located at Goshen,  Indiana, and shall be
of the same character

                                                                  

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as those  previously  performed by Employee and  generally  associated  with the
office held by  Employee.  Employee  shall not be required to be absent from the
location of the  principal  executive  offices of  Employer on travel  status or
otherwise  more than ten (10) days in any  calendar  year.  Employer  shall not,
without  the written  consent of  Employee,  relocate or transfer  Employee to a
location  more than fifteen (15) miles from his  principal  residence.  Employee
shall perform Job  Responsibilities  for Employer as Chief Executive Officer for
Employer and each of its  subsidiaries in  substantially  the same manner and to
substantially  the same extent as  Employee  rendered  his  services to Employer
before the date hereof.  Although  while  employed by Employer,  Employee  shall
devote  substantially  all his business time and efforts to Employer's  business
and  shall  not  engage  in any other  related  business,  Employee  may use his
discretion in fixing his hours and schedule of work  consistent  with the proper
discharge  of his duties.  Employer  shall cause  Employee  to be  nominated  to
successive  terms as a member of Employer's Board of Directors and shall use its
best efforts to cause  Employee to be elected and re-elected as a member of such
Board.

     3. The term of this Agreement shall begin on the "Effective Date" and shall
end on the date which is five (5) years following such date; provided,  however,
that such term  shall be  extended  for  additional  five (5) year terms on each
anniversary of the Effective Date (the "Anniversary Date"),  unless either party
hereto gives  written  notice to the other party not to so extend  within ninety
(90)  days  prior  to each  such  Anniversary  Date,  in which  case no  further
extension  shall occur and the term of this  Agreement  shall end five (5) years
subsequent to the Anniversary Date as of which the notice not to extend is given
(such term,  including any extension  thereof shall herein be referred to as the
"Term").  A notice not to so extend given by either party shall be a termination
of employment  prior to the  expiration of the Term of this  Agreement,  for all
purposes,  including Section 7 and Section 8 of this Agreement.  Such notice not
to extend shall be in the form of the "Notice of Termination" defined in Section
10 hereof and shall contain specific reference to specific provisions of Section
7 hereof  relied  upon  for any  such  termination  on the  Anniversary  Date or
otherwise.

     4. During the Term,  Employee  shall  receive an annual  salary of not less
than Three Hundred Thousand Dollars ($300,000.00) ("Base Compensation")  payable
at regular  intervals in accordance with Employer's normal payroll practices now
or  hereafter  in effect.  Employer  may  consider and declare from time to time
increases  in the salary it pays  Employee  and  thereby  increases  in his Base
Compensation.  Any and all  increases  in  Employee's  salary  pursuant  to this
section shall cause the level of Base Compensation to be increased by the amount
of each such increase for purposes of this  Agreement.  The  increased  level of
Base  Compensation  as provided in this  section  shall become the level of Base
Compensation  for the remainder of the Term of this  Agreement  until there is a
further increase in Base Compensation as provided herein.

     5. So long as Employee is employed by Employer  pursuant to this Agreement,
he shall be  included  as a  participant  in all  present  and  future  employee
benefit,  retirement, and compensation plans generally available to employees of
Employer,  consistent with his Base Compensation,  his Job  Responsibilities and
his  position  as  Chief   Executive   Officer  of  Employer  and  each  of  its
subsidiaries,  including,  without  limitation,  Employer's  401(k) plan,  stock
incentive plan,  Executive Bonus Plan, split dollar life insurance program,  and
group life insurance plans

                                                                    

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(collectively,  "Benefit  Plans"),  each of which Employer agrees to continue in
effect on terms no less favorable than those  currently in effect as of the date
hereof (as permitted by law) during the Term of this Agreement.

     6. So long as Employee is employed by Employer  pursuant to this Agreement,
Employee shall receive  reimbursement from Employer for all reasonable  business
expenses  incurred in the course of his employment by Employer,  upon submission
to Employer of written vouchers and statements for reimbursement. Employee shall
attend, at his discretion,  those  professional  meetings,  conventions,  and/or
similar  functions that he deems  appropriate and useful for purposes of keeping
abreast of current  developments in the industry and/or  promoting the interests
of Employer.  So long as Employee is employed by Employer  pursuant to the terms
of  this  Agreement,   Employer  shall  continue  in  effect  vacation  policies
applicable  to  Employee  no less  favorable  from his point of view than  those
written vacation  policies in effect on the date hereof.  So long as Employee is
employed by Employer  pursuant to this Agreement,  Employee shall be entitled to
office space and working  conditions  no less  favorable  from his point of view
than were in effect for him on the date hereof.  So long as Employee is employed
by Employer pursuant to this Agreement, employee shall be entitled to the use of
a company  car  provided  by the  Employer.  So long as  Employee is employed by
Employer pursuant to this Agreement, Employee shall be entitled to membership in
the  Elcona  Country  Club,  and  Employer  shall  continue  to pay the dues and
assessments for such membership.

     7.  Subject  to the  respective  continuing  obligations  of  the  parties,
including but not limited to those set forth in subsections 8(A), 8(B), 8(C) and
8(D) hereof,  Employee's  employment by Employer may be terminated  effective on
any  Anniversary  Date or otherwise  prior to the expiration of the Term of this
Agreement as follows:

    (A) Employer, by action of its Board of Directors and upon written notice to
Employee,  may  terminate  Employee's  employment  with Employer at any time for
cause. For purposes of this subsection 7(A), "cause" shall be defined as:

             (i)      the willful,  flagrant and repeated failure of Employee to
                      perform  his  duties  or to  comply  with  the  reasonable
                      directions  of  the  Board  of  Directors   which  failure
                      continues  after the Board of Directors  has given written
                      notice to Employee  specifying  in  reasonable  detail the
                      manner in which Employee has failed to perform such duties
                      or comply with such directions;

             (ii)     the  conviction  of the  Employee  for a felony  which the
                      Board  of  Directors  determines  in the  exercise  of its
                      reasonable  judgment  could be expected to have a material
                      adverse impact on the Employer.

    (B)      Employee,  by  written  notice  to  Employer,   may  terminate  his
             employment  with  Employer at any time for cause.  For  purposes of
             this subsection 7(B), "cause" shall be defined as (i) any action by
             Employer's Board of Directors to remove the Employee as Chairman of
             the Board or Chief  Executive  Officer  of  Employer  or any of its
             subsidiaries,  except  where  the  Employer's  Board  of  Directors
             properly  acts to remove  Employee  from such office for "cause" as
             defined in  subsection  7(A) hereof,  (ii) any action by Employer's
             Board

                                                                  

<PAGE>



                  of  Directors  to  materially  limit,   increase,   or  modify
                  Employee's Job  Responsibilities  and/or authority as Chairman
                  of the Board or Chief Executive  Officer of Employer or any of
                  its   subsidiaries   (including  his  authority,   subject  to
                  corporate controls no more restrictive than those in effect on
                  the date hereof,  to hire and discharge  employees who are not
                  bona fide officers of Employer), (iii) any failure of Employer
                  to obtain the  assumption  of the  obligation  to perform this
                  Agreement by any successor, assignee, or distributee of all or
                  substantially  all of  Employer's  assets  (on a  consolidated
                  basis with those of its subsidiaries), or the reaffirmation of
                  such obligation by such successor,  assignee,  or distributee,
                  as contemplated in Section 16 hereof; (iv) any material breach
                  by  Employer  of  a  term,   condition  or  covenant  of  this
                  Agreement;   or  (v)   adoption  or  approval  of  a  plan  of
                  liquidation,  dissolution,  or reorganization  for Employer or
                  any of its subsidiaries by the Employer's Board of Directors.

         (C)      Except as otherwise provided in Section 3 regarding nonrenewal
                  on any Anniversary Date, and in addition thereto, Employee, at
                  any time and upon sixty (60) days written  notice to Employer,
                  may terminate his employment with Employer without cause.

         (D)      Employee's  employment  with Employer  shall  terminate in the
                  event  of  Employee's  death  or  permanent  disability.   For
                  purposes hereof,  "disability"  shall be defined as Employee's
                  permanent  inability by reason of illness or other physical or
                  mental  incapacity to perform duties  reasonably  required for
                  employment  for any  consecutive  one hundred eighty (180) day
                  period,  provided that notice of any  termination  by Employer
                  because of  Employee's  "disability"  shall have been given to
                  Employee   prior  to  the  full   resumption  by  him  of  the
                  performance of such duties.

     8. In the event of  termination  of  Employee's  employment  with  Employer
pursuant to Section 7 hereof, which shall include a nonrenewal of this Agreement
on any  Anniversary  Date as  provided in Section 3 hereof,  compensation  shall
continue to be paid by Employer to Employee as follows:

         (A)      In the event of  termination  for cause by Employer or without
                  cause  by  Employee  pursuant  to  subsection  7(A)  or  7(C),
                  respectively, compensation provided for herein (including Base
                  Compensation)  shall  continue to be paid,  and Employee shall
                  continue  to  participate  in  the  Benefit  Plans  and  other
                  perquisites  as provided  in Sections 5 and 6 hereof,  through
                  the  date  of   termination   specified   in  the   notice  of
                  termination.  Any benefits payable under such Benefit Plans as
                  a result of  Employee's  participation  in such plans  through
                  such date shall be paid when due under those  plans.  The date
                  of termination specified in any notice of termination pursuant
                  to  subsection  7(A) shall be no later than the last  business
                  day of the month in which such notice is provided to Employee.

         (B)      In the event of termination with cause by Employee pursuant to
                  subsection 7(B),  compensation  provided for herein (including
                  Base  Compensation)  shall  continue to be paid,  and Employee
                  shall  continue to  participate in the Benefit Plans and other
                  perquisites  as provided  in Sections 5 and 6 hereof,  through
                  the  date  of   termination   specified   in  the   notice  of
                  termination.

                                                                  

<PAGE>



                  Any benefits  payable  under such Benefit Plans as a result of
                  Employee's participation in such plans through such date shall
                  be paid when due under  those  plans.  In  addition,  Employee
                  shall  at  his  option   exercised   effective   the  date  of
                  termination, be entitled to receive one of the following:

             either,

                  (i)      Employee  shall be  entitled  to  continue to receive
                           from Employer his Base  Compensation  at the rates in
                           effect  at the  time  of  termination  for  five  (5)
                           additional  twelve (12) month  periods.  In addition,
                           during such  periods,  Employer will maintain in full
                           force  and  effect  for  the  continued   benefit  of
                           Employee  and his  dependents  each  Benefit  Plan in
                           which    Employee   was   entitled   to   participate
                           immediately  prior  to the  date of his  termination,
                           unless  an   essentially   equivalent   and  no  less
                           favorable   benefit  is  provided  by  a   subsequent
                           employer  of  Employee.  If the terms of any  Benefit
                           Plan,  or applicable  laws,  do not permit  continued
                           participation  by Employee,  Employer will arrange to
                           provide to Employee a benefit  substantially  similar
                           to, and no less  favorable  than,  the benefit he was
                           entitled to receive  under such Benefit  Plans at the
                           end of the period of coverage;

             or,

                  (ii)     Employee  shall be entitled to receive from  Employer
                           his Base  Compensation  at the rates in effect at the
                           time of termination  for five (5)  additional  twelve
                           (12) month  periods,  payable in one lump sum payment
                           on or before  thirty (30) days  following the date of
                           termination,   and  Employer   will  not   thereafter
                           maintain any Benefit Plan for the  continued  benefit
                           of Employee and his dependents.

         (C)      In the  event of  termination  pursuant  to  subsection  7(D),
                  compensation provided for herein (including Base Compensation)
                  shall  continue to be paid,  and  Employee  shall  continue to
                  participate  in the  Benefit  Plans and other  perquisites  as
                  provided  in  sections  5 and 6  hereof,  (i) in the  event of
                  Employee's  death,  through the date of death,  or (ii) in the
                  event of Employee's permanent disability,  through the date of
                  proper notice of  disability  as required by subsection  7(D).
                  Any benefits  payable  under such Benefit Plans as a result of
                  Employer's participation in such plans through such date shall
                  be paid when due under those plans.

         (D)      Employer    will    permit    Employee    or   his    personal
                  representative(s)  or heirs,  during a period of three  months
                  following  termination  of  Employee's  employment by Employer
                  with  cause as set forth in  subsection  7(A),  or  Employee's
                  termination of his  employment  with Employer for cause as set
                  forth in subsection  7(B), or  Employee's  termination  of his
                  employment  with  Employer  without  cause  as  set  forth  in
                  subsection 7(C), or death or disability of the Employee as set
                  forth in subsection  7(D), to require  Employer,  upon written
                  request and at Employee's option, to purchase all or less than
                  all  of  outstanding  stock  options   previously  granted  to
                  Employee  under any Employer  stock option plan then in effect
                  whether  or not  such  options  are then  exercisable  or have
                  terminated, at a cash purchase

                                                                 

<PAGE>



                  price equal to the amount by which the aggregate  "fair market
                  value" of the  shares  subject  to such  options  exceeds  the
                  aggregate  option price for such shares.  For purposes of this
                  Agreement,  the term "fair market value" shall mean the higher
                  of (1) the average of the highest  asked  prices for  Employer
                  shares  in the  over-the-counter  market  as  reported  on the
                  NASDAQ  system or other  national  exchange  if the shares are
                  traded  on such  system  for the  thirty  (30)  business  days
                  preceding such termination, or (2) the average per share price
                  actually  paid for the most highly  priced one percent (1%) of
                  the Employer  shares acquired in connection with any change of
                  control of the Employer by any person or group  acquiring such
                  control.

         9. In order to induce Employer to enter into this  Agreement,  Employee
hereby agrees as follows:

         (A)      Unless otherwise required to do so by law, including the order
                  of a court or governmental agency,  Employee shall not divulge
                  or furnish  any trade  secrets  (as  defined  in IND.  CODEss.
                  24-2-3-2) of Employer or any confidential information acquired
                  by him while  employed by Employer  concerning  the  policies,
                  plans, procedures or customers of Employer to any person, firm
                  or  corporation,  other  than  Employer  or upon  its  written
                  request,   or  use  any  such  trade  secret  or  confidential
                  information  directly or indirectly for Employee's own benefit
                  or for the benefit of any person,  firm or  corporation  other
                  than  Employer,  since such  trade  secrets  and  confidential
                  information are confidential and shall at all times remain the
                  property of Employer.

         (B)      If Employee's  employment  by Employer is  terminated  for any
                  reason by either Employee or Employer, Employee will turn over
                  immediately    thereafter    to    Employer    all    business
                  correspondence,  letters,  papers, reports,  customers' lists,
                  financial  statements,  records,  drawings,  credit reports or
                  other confidential information or documents of Employer or its
                  affiliates in the  possession  or control of Employee,  all of
                  which  writings  are and  will  continue  to be the  sole  and
                  exclusive property of Employer or its affiliates.

         10.  Any   termination  of  Employee's   employment  with  Employer  as
contemplated by Section 3 and Section 7 hereof,  except in the  circumstances of
Employee's  death,  shall be  communicated by written "Notice of Termination" by
the  terminating  party to the other party hereto.  Any "Notice of  Termination"
must  refer  to one or more of  subsections  7(A),  7(B),  7(C) or  7(D),  shall
indicate  the  specific  provisions  of this  Agreement  and one or more of such
subsections of Section 7 relied upon,  and shall set forth in reasonable  detail
the facts and  circumstances  claimed  to  provide a basis for such  termination
under one or more of such subsections of Section 7.

         11. Anything in this Agreement to the contrary notwithstanding, payment
of Base  Compensation  by the  Employer  to or for the  benefit of the  Employee
pursuant to subsection 8(B) hereof shall be inclusive of payment attributable to
the  confidentiality  covenants of subsection 9(A), and shall be payable whether
or not deductible by the Employer for federal income tax purposes.


                                                                   

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    12. If a dispute  arises  regarding  termination  of employment  pursuant to
Section 3 and  Section 7 hereof,  said  dispute  shall be  resolved  by  binding
arbitration  determined in accordance with the rules of the American Arbitration
Association  and if Employee  obtains a final award in his favor or his claim is
settled by Employer prior to the rendering of an award by such arbitration,  all
reasonable  legal fees and  expenses  incurred  by  Employee  in  contesting  or
disputing any such termination or otherwise  pursuing his claim shall be paid by
Employer,  to the extent  permitted by law. If a dispute arises  regarding other
provisions  of this  Agreement,  including  enforcement  of the  confidentiality
provisions hereof, then such shall be heard only by the judge and not by a jury,
in any court of general  jurisdiction in Elkhart County,  Indiana, to which such
sole and exclusive  jurisdiction  each party  irrevocably  consents.  Each party
agrees not to assert and hereby  waives any right of removal,  consolidation  or
joinder with any other action, or any transfer by reason of preferred venue. The
prevailing  party  shall be  entitled  to its  costs,  expenses  and  reasonable
attorney's  fees.  It is provided,  however,  that in either of  arbitration  or
judicial  proceedings,  if it is determined  that  Employer  breached any of the
material  terms or conditions  of this  Agreement,  then as liquidated  damages,
Employee  shall be entitled to receive not less than the Base  Compensation  and
Benefit Plan payments described in subsection 8(B) hereof.

    13. Should  Employee die after  termination of his employment  with Employer
while any amounts are payable to him hereunder,  this  Agreement  shall inure to
the  benefit of and be  enforceable  by  Employee's  executors,  administrators,
heirs,  distributees,  devisees and legatees and all amounts  payable  hereunder
shall be paid in  accordance  with the  terms of this  Agreement  to  Employee's
devisee,  legatee or other  designee  or, if there is no such  designee,  to his
estate.

    14. For  purposes of this  Agreement,  notices and all other  communications
provided  for herein  shall be in writing and shall be deemed to have been given
when delivered or mailed by United States  registered or certified mail,  return
receipt requested, postage prepaid, addressed as follows:

    If to Employee:                    Kelly L. Rose
                               2703 College Avenue
                               Elkhart, IN 46516

    If to Employer:                    Starcraft Corporation
                               2703 College Avenue
                               Post Office Box 1903
                               Goshen, IN  46526
                               Attention:  Michael H. Schoeffler, President

or to such address as either party hereto may have  furnished to the other party
in writing in  accordance  herewith,  except  that  notices of change of address
shall be effective only upon receipt.

    15. The validity, interpretation, and performance of this Agreement shall be
governed by the laws of the State of Indiana.

    16.  Employer  shall require any successor,  assignee,  distributee or other
transferee of all or substantially all of its or its subsidiaries' assets or

                                                                 

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business  ("Succession")  (whether  direct or  indirect,  by  purchase,  merger,
dissolution,  liquidation,  consolidation or otherwise) by agreement in form and
substance satisfactory to Employee to expressly assume and agree to perform this
Agreement in the same manner and same extent that Employer  would be required to
perform it if no such Succession had taken place.  Failure of Employer to obtain
such agreement  prior to the  effectiveness  of any such  Succession  shall be a
material  intentional  breach of this  Agreement and shall  entitle  Employee to
terminate his  employment  with Employer for cause  pursuant to subsection  7(B)
hereof. As used in this Agreement,  "Employer" shall mean Employer or any of its
subsidiaries  from time to time and any  successor  to its or their  business or
assets as aforesaid.

    17. No provision of this  Agreement  may be modified,  waived or  discharged
unless such waiver,  modification or discharge is agreed to in writing signed by
Employee  and  Employer.  No waiver by  either  party  hereto at any time of any
breach by the other  party  hereto of, or  compliance  with,  any  condition  or
provision of this  Agreement to be performed by such other party shall be deemed
a waiver of  dissimilar  provisions  or  conditions  at the same or any prior or
subsequent time. No agreements or representation,  oral or otherwise, express or
implied,  with  respect to the  subject  matter  hereof have been made by either
party which are not set forth expressly in this Agreement.

    18. The invalidity or  unenforceability  of any provisions of this Agreement
shall not affect the validity or  enforceability of any other provisions of this
Agreement which shall remain in full force and effect.

    19. This  Agreement  may be executed  in one or more  counterparts,  each of
which shall be deemed an original but all of which together shall constitute one
and the same agreement.

    20. This  Agreement is personal in nature and neither  party  hereto  shall,
without consent of the other, assign or transfer this Agreement or any rights or
obligations  hereunder  except as  provided  in Section 13 and Section 16 above.
Without  limiting  the  foregoing,  Employee's  right  to  receive  compensation
hereunder shall not be assignable or transferable,  whether by pledge,  creation
of a security interest or otherwise, other than a transfer by his will or by the
laws of descent or  distribution  as set forth in Section 13 hereof,  and in the
event of any  attempted  assignment  or  transfer  contrary  to this  paragraph,
Employer  shall have no liability to pay any amounts so attempted to be assigned
or transferred.

    IN WITNESS WHEREOF, the parties have caused the Agreement to be executed and
delivered this 18th day of December, 1996.

"Employee"                                              "Employer"
                                                 STARCRAFT CORPORATION


/s/ Kelly L. Rose                             By: /s/ Michael H. Schoeffler
----------------------------                      -----------------------
Kelly L. Rose                                     Michael H. Schoeffler
                                              Its:President


<PAGE>



                                                                       EXHIBIT A


    In Japan,  Europe,  and any of the 48 contiguous States of the United States
of America; it being acknowledged by Employee that the Company conducts business
in all such States,  and also it is  acknowledged  by Employee  that the Company
presently conducts a substantial amount of its business in each of the following
States:


                                       Wisconsin
                                       Michigan
                                       Illinois
                                       Indiana
                                       Ohio
                                       Pennsylvania
                                       New York
                                       Oklahoma
                                       Texas
                                       California