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                                                               EXHIBIT 10.16

                              EMPLOYMENT AGREEMENT

                  THIS AGREEMENT is made as of the 1st day of January, 2000,
by and between Harley-Davidson Financial Services, Inc., a Delaware
corporation (the "Company"), and Donna F. Zarcone of Burr Ridge, Illinois
(the "Executive").

                  WHEREAS,  the Company and the Executive are parties to an
existing  employment  agreement,  dated as of November 14, 1995,  the term of
which expires December 31, 1999;

                  WHEREAS, the Executive is willing to continue to perform
services for the Company for a longer term, and the Company wishes to have
the Executive render such services for such term; and

                  WHEREAS, the parties desire to set forth the terms and
conditions under which the Executive shall be employed and upon which the
Company shall compensate the Executive.

                  NOW, THEREFORE, in consideration of the premises and
promises contained herein, the parties agree as follows:

                  1. EMPLOYMENT. The Company hereby employs the Executive,
and the Executive hereby accepts employment with the Company, as the
President and Chief Operating Officer of the Company. In such capacity, the
Executive will participate in the establishment of the Company's strategies
and policies, as well as the management of the Company's operations and
perform such duties and services of an executive and administrative character
as shall be assigned to the Executive from time to time by the Chairman and
Chief Executive Officer of the Company (the "Services").

                  2. PERFORMANCE. The Executive agrees to devote the
Executive's best efforts, energies and skills on a full time basis during
normal working hours to performance of the Executive's duties hereunder
(except for vacations and reasonable periods of illness or incapacity).
During the term of this Agreement, the Executive shall not engage in any
other business or business activity, whether or not such business activity is
pursued for gain, profit or other pecuniary advantage; provided, however,
that the Executive shall be not prevented from (i) investing the Executive's
assets in such form or manner as will not require any substantial amount of
time or services on the part of the Executive in the operation of the affairs
of the enterprises in which such investments are made or (ii) engaging in
limited outside business activities, such as serving on the board of
directors of an entity or organization which will not conflict with the
Executive's duties hereunder. The principal place for performance of the
Services shall be Chicago, Illinois, and the Company will permit the
Executive to perform substantially all of the Services therefrom. The
Executive may be obliged, from time to time, and for reasonable periods of
time, to travel in the performance of the Services.

                  3. BASE SALARY. For all duties to be performed by the
Executive hereunder, the Executive shall receive an annual base salary (the
"Base Salary") of Three Hundred Six Thousand Seventy-Five Dollars ($306,075),
payable by the Company in equal semi-monthly


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installments (prorated for any partial year). The Base Salary shall be
subject to adjustment from time to time by the Chairman and Chief Executive
Officer of the Company.

                  4. BONUS. In addition to Base Salary, the Executive shall
be eligible to participate in incentive programs offered to senior management
of the Company, including consideration for an annual bonus (the "Bonus").

                  5. VACATION. The Executive shall be entitled to annual paid
vacation in accordance with the Company's policy applicable to executive
employees of the Company, which may be taken at such times as are consistent
with good business practices.

                  6. FRINGE BENEFITS. The Executive shall be entitled to receive
such fringe benefits as are available to executive employees of the Company
generally, including participation in the Company's retirement and deferred
compensation programs.

                  7. INSURANCE. The Executive shall be enrolled in the
Company's group insurance program, including life, accidental death and
officer group medical insurance program. The cost of all insurance coverage
shall be paid by the Company and the Executive in accordance with the
Company's standard practice.

                  8. EXPENSES. The Executive is authorized to incur reasonable
expenses in rendering Services hereunder and in the performance of the
Executive's duties hereunder. The Company will reimburse the Executive in a
timely manner at least monthly for all such expenses upon presentation of an
itemized written accounting therefor (together with such vouchers and other
verifications as the Company may require) within thirty (30) days after they
have been incurred.

                  9. CONFIDENTIAL INFORMATION. The Executive acknowledges that
(i) the Executive holds a senior management position with the Company, (ii) in
connection with the Services being rendered under this Agreement, the Executive
will acquire and make use of confidential information and trade secrets of the
Company and its affiliates ("Confidential Information"), including, but not
limited to, financial statements, client lists, project reports, software design
and documentation, internal memoranda, marketing programs, reports and other
materials or records of a proprietary nature which are not generally known to
the public, (iii) the Confidential Information constitutes a unique and valuable
asset of the Company, (iv) maintenance of the proprietary character of such
information, to the full extent feasible, is important to the Company, (v) the
Confidential Information is sufficiently secret as to derive economic value from
not being generally known to others who could obtain economic value from its
disclosure or use, and (vi) the Confidential Information is currently the
subject of efforts to maintain its secrecy or confidentiality. Therefore, in
order to protect the Confidential Information, the Executive agrees as follows:

                    (a) to hold the Confidential Information in strictest
           confidence and not to use or disclose such Confidential
           Information without the written authorization of the Company,
           except in connection with the Services being rendered under
           this Agreement, for so long as any such Confidential
           Information may remain confidential, secret or otherwise
           wholly or partially protectable;

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                    (b) to take all appropriate steps to safeguard any
           Confidential Information and to protect it against disclosure,
           misuse, espionage, loss and theft; and

                    (c) to return to the Company upon termination of
           employment all materials relating to the Company or its
           business, including all Confidential Information, coming into
           the Executive's possession during the term of the Executive's
           employment with the Company or while employed by a predecessor
           to the Company's business.

                  10. COVENANTS NOT TO COMPETE OR SOLICIT.

                 10.1 So long as the Executive is employed by the Company and
for a period of one (1) year thereafter, the Executive shall not, directly or
indirectly, by or for the Executive or as the agent of another, or through
others as the Executive's agent:

                    (a) promote or sell leisure product financial
           services anywhere in those states or territories (the
           "Territory") in which the Company has rendered services or
           provided financing within the eighteen (18) months immediately
           preceding the termination of employment (the "Relevant
           Period") in competition with those of the Company; or

                    (b) own, manage, operate, be compensated by,
           participate in or have any right to or interest in any other
           business that promotes or sells leisure product financial
           services in the Territory in competition with those of the
           Company.

                  10.2 So long as the Executive is employed by the Company and
for a period of one (1) year thereafter, the Executive shall not (except in
connection with the rendering of services hereunder), directly or indirectly, by
or for the Executive or as the agent of another, or through others as the
Executive's agent:

                     (a) solicit or accept any business from customers of
            the Company, or request, induce or advise customers of the
            Company to withdraw, curtail or cancel their business with the
            Company;

                     (b) solicit for employment or employ or become
            employed by any past, present or future employee of the
            Company, or request, induce or advise any employee to leave
            the employ of the Company; or

                     (c) use or disclose any nonpublic information
            concerning the Company or its businesses and affairs,
            including Confidential Information.

                  10.3 The Executive agrees that if the Executive shall violate
any of the provisions of this Section 10, the Company shall be entitled to an
accounting and repayment of all profits, compensation, commission, renumeration
or other benefits that the Executive, directly or indirectly, may realize
arising from or related to any such violation. These remedies shall be in
addition to, and not in limitation of, any injunctive relief or other rights to
which the Company may be entitled.

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                  10.4 The parties agree and acknowledge that the duration,
scope and geographic areas applicable to the covenant not to compete
described in this Section are fair, reasonable and necessary, that adequate
compensation has been received by the Executive for such obligations, and
that these obligations do not prevent the Executive from earning a
livelihood. If, however, for any reason any court determines that the
restrictions in this Section 10 are not reasonable, that consideration is
inadequate or that the Executive has been prevented from earning a
livelihood, such restrictions shall be interpreted, modified or rewritten to
include as much of the duration, scope and geographic area identified in this
Section as will render such restrictions valid and enforceable.

                  10.5 Nothing herein shall prohibit the Executive from owning
in the aggregate not more than 1% of the outstanding stock of any corporation
which is publicly traded, so long as the Executive has no active participation
in the business of such corporation.

                  11. REMEDIES. The Executive acknowledges that the Executive
has carefully read and considered the terms of this Agreement and knows them to
be essential to induce the Company to enter into this Agreement and that any
breach of the provisions contained herein will result in serious and irreparable
injury to the Company. The Executive further acknowledges that the Company's
business interests protected hereby are substantial and legitimate. Therefore,
in the event of a breach of any such provisions, the Company shall be entitled
to equitable relief against the Executive by way of injunction (in addition to,
but not in substitution for, any and all other relief to which the Company may
be entitled at law or in equity) to restrain the Executive from such breach and
to compel compliance by the Executive with the Executive's obligations
hereunder. The Company shall also be entitled to seek a protective order to
ensure the continued confidentiality of its trade secrets and proprietary
information. The Executive hereby waives any from such breach and to compel
compliance by the Executive with the Executive's obligations hereunder. The
Company shall also be entitled to seek a protective order to ensure the
continued confidentiality of its trade secrets and proprietary information. The
Executive hereby waives any requirement of proof that such breach will cause
serious or irreparable injury to the Company, or that there is an adequate
remedy at law.

                  12.  TERMINATION.

                  12.1 TERM. Except as provided below, this Agreement shall
remain in full force and effect from the date hereof for an initial term ending
through December 31, 2000 (the "Initial Term"). Thereafter this Agreement shall
continue for successive one year renewal terms (each a "Renewal Term"), unless
either Executive or Company gives the other written notice, not less than ninety
(90) days prior to the end of the Initial Term or any Renewal Term, stating that
this Agreement shall expire at the end of the Initial Term or such Renewal Term,
as the case may be. As used in this Agreement "Term" means the Initial Term
together with any Renewal Term(s).

                  12.2 DEATH. In the event of the death of the Executive during
the term hereof, this Agreement shall terminate at the end of the month in which
the Executive dies. The Company shall pay within thirty (30) days of the date of
death to the Executive's legal representatives or, if the Executive shall have
filed with the Company a designation of a person to receive such payment, such
person, the sum of (i) any unpaid Base Salary through the date of termination,
(ii) any Bonus for the year in which such termination occurs prorated as of the
date of termination, (iii) accrued and unpaid vacation pay, (iv) proceeds,
benefits or other sums due

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under any of the Company's benefit, insurance, retirement or other plans, and
(v) any unreimbursed expenses incurred by the Executive on the Company's
behalf. Items (i) through (v) are hereinafter referred to as the "Termination
Payments".

                  12.3 DISABILITY. If, during the Term, the Executive comes
under such illness, physical or mental disability or other incapacity that the
Board of Directors of the Company determines that the Executive is unable to
perform the Executive's duties under this Agreement for a period in excess of
ninety (90) substantially consecutive days, the Company may terminate this
Agreement by giving notice to the Executive of its intention to terminate due to
disability and this Agreement shall terminate at the end of the month following
the month in which such notice was given. In the event of such termination, the
Company shall pay the Termination Payments to the Executive within thirty (30)
days of such termination and the Executive's Base Salary shall be continued
(offset by any amounts payable to the Executive under the Company's benefit
plans or short or long term disability insurance or social security payable)
until the earliest of (i) one (1) year after termination, (ii) the end of the
Term, or (iii) the death of the Executive.

                  12.4 TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may
terminate this Agreement without cause upon thirty (30) days' prior notice in
accordance with the Company's policies and procedures generally applicable to
the managerial employees of the Company. In the event of such termination, the
Company shall (a) pay the Termination Payments to the Executive within thirty
(30) days of such termination and (b) pay severance pay in a lump sum within
thirty (30) days of such termination in amount equal to the aggregate amount of
the Executive's monthly Base Salary that would have been paid over the one-year
period immediately following termination at the rate in effect on the date of
termination. Additionally, in the event of such termination, during the twelve
(12) consecutive months immediately following the date of termination or the
period beginning on the date of termination and ending on the date the Executive
becomes employed on a substantially full-time basis, whichever is shorter, the
Company shall (a) make available to the Executive coverage under the Company's
medical, dental and life insurance plans on the same terms as such plans are
made available to the Company's managerial employees generally, and (b) maintain
any split-dollar life insurance on the Executive's life owned by the Company and
pay the premiums (for such period) due on any split-dollar life insurance on the
Executive's life owned by the Executive.

                  12.5 TERMINATION FOR CAUSE. Notwithstanding any other
provision hereof, the Company may terminate the Executive's employment under
this Agreement without prior notice at any time for "Cause". For purposes of
this Agreement, "Cause" shall mean dishonest, fraudulent or illegal conduct
(with the exception of minor misdemeanors such as traffic violations),
misappropriation of Company funds, substance abuse or the illegal use of
controlled substances, gross incompetence, breach of any statutory or common law
duty of loyalty to the Company, or any conduct that brings the Company into
public ridicule or disrepute. In the event of such termination, the Company
shall pay the Termination Payments to the Executive within thirty (30) days of
such termination; provided, however, that the Company shall have no obligation
to pay any Bonus to the Executive for the year in which such termination occurs.

                  12.6 EFFECT OF TERMINATION. Upon termination of this
Agreement, all obligations of the Company and rights of the Executive under
this Agreement shall cease, except as otherwise provided herein.
Notwithstanding anything to the contrary contained herein, the

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provisions of Sections 9 through 12 shall survive any termination of this
Agreement or employment and shall remain in full force and effect.

                  13. ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or any breach thereof, shall be settled by
arbitration in accordance with the Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. The decision of such
arbitrator(s) shall be conclusive and binding upon the parties hereto. The
Company shall pay on a current basis all legal expenses (including reasonable
attorneys' fees) incurred by the Executive in connection with such
arbitration and the entering and enforcement of such award. Notwithstanding
the foregoing, the Company may, in its discretion, apply to a court of
competent jurisdiction for the purposes of obtaining any relief contemplated
by Section 11.

                  14. NOTICE. Any notice required to be given, served or
delivered to any of the parties hereto shall be sufficient if it is in writing
and sent by certified or registered mail, with proper postage prepaid, addressed
as follows:

                           TO EXECUTIVE:

                           Donna F. Zarcone
                           6002 South Grant
                           Burr Ridge, IL 60521

                           TO COMPANY:

                           Harley-Davidson Financial Services, Inc.
                           c/o Harley-Davidson Inc.
                           3700 West Juneau Avenue
                           Milwaukee, Wisconsin 53208
                           Attn: Chairman and Chief Executive Officer

                           with a copy to:

                           Harley-Davidson, Inc.
                           3700 West Juneau Avenue
                           Milwaukee, WI 53208
                           Attn: Vice President and General Counsel

or to such other  address as a party from time to time may  designate  by
notice to the other.  Notice  shall be deemed  effective  on the date
deposited  for delivery in the U.S. mail.

                  15. ASSIGNMENT. This Agreement shall inure to the benefit of
and be binding upon the Executive, the Executive's administrative executors and
heirs and the Company, its successors and assigns. This Agreement is for
personal services and may not be assigned or pledged by the Executive in any
manner, by operation of law or otherwise, without the written consent of the
Company. This Agreement may not be assigned by the Company; provided however,
that if substantially all of the business or assets of the Company are sold and
the Executive agrees to become an employee of the acquiror, then the Company may
assign this Agreement to such acquiror.

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                  16. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of
Illinois, and the parties hereby consent to the jurisdiction of Illinois courts
over all matters relating to this Agreement.

                  17. ENTIRE AGREEMENT. This Agreement contains the entire
agreement of the parties in regard to the subject matter hereof, supersedes
all prior discussions, agreements and understandings of every kind between
the parties in regard to the subject matter hereof and may be changed only by
a written document signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought. This
Agreement does not supersede the Transition Agreement dated December 1, 1999
between the Executive and Harley-Davidson, Inc. The waiver of any breach of
any provision of this Agreement shall be effective only in the specific
instance and for the specific purpose for which given and shall not operate
or be construed as a waiver of any subsequent breach hereof.

                  18. SEVERABILITY. If any provision of this Agreement shall be
prohibited by or invalid under applicable law, or otherwise determined to be
unenforceable, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement. The headings in this Agreement
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof.

                  IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the date first written above.

EXECUTIVE:                          COMPANY:
                                    HARLEY-DAVIDSON FINANCIAL SERVICES, INC.


                                    By:
------------------------------        -------------------------------------
         Donna F. Zarcone              Jeffrey L. Bleustein
                                       Chairman and Chief Executive Officer

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