HARLEYSVILLE GROUP INC
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>doc2.txt
<TEXT>


Exhibit  10.1
                             HARLEYSVILLE GROUP INC.
                       DIRECTORS' DEFERRED STOCK UNIT PLAN
                      -------------------------------------
              Approved by the Board of Directors on February 23, 2005
                    Approved by Shareholders on April 27, 2005

1.   PURPOSE
     ---------

     Harleysville  Group  Inc.  (the  "Company")  has  established  the  Plan
to  further  its  long-term  financial  success  by  providing  stock  units  to
Non-Employee  Directors  of  the  Company  and  of  its  Parent,  Harleysville
Mutual  Insurance  Company,  (the  "Parent")  whereby  such  directors  can
share  in  achieving  and  sustaining  such  success.  The  Plan  also  provides
a  means  to  attract  and  retain  the  Non-Employee  Directors  needed  to
achieve  the  Company's  and  the  Parent's  long-term  growth  and
profitability  objectives.

2.   DEFINITIONS
  --------------

     The  following  terms, when used with an initial capital letter, shall have
the  following  meanings:

     "Annual  Meeting"  means  the  annual shareholders meeting held in April of
      ---------------
each  year.

     "April  Board  Meeting"  means  the  meeting of the Board of Directors held
      ---------------------
in  April  of  each  year.

     "Board"  means  the  Board  of  Directors  of  the Company and the Board of
     ------
Directors  of  the  Parent.

     "Committee"  means  the  Nominating  and  Corporate Governance Committee of
--------------------------------------------------------------------------------
the  Board.
-----------

     "Company"  means  Harleysville  Group  Inc.,  a  Pennsylvania  corporation.
      -------

     "Deferred  Stock  Unit"  means  a  right  to  receive,  without
      --------------------
 payment  to  the  Company,  one  (1)  Share  as  further  described  in
Section  4.
<PAGE>

     "Effective  Date"  means  January  1, 2005, contingent upon approval of the
     ---------------
Company's  shareholders  at  the  first  Annual Meeting of the shareholders held
after  the  adoption  of  the  Plan  by  the  Board.

     "Fair  Market  Value"  means,  with respect to a given day, (i) the closing
     ------------------
sales price of a Share as reported on the principal securities exchange on which
Shares  are  then listed or admitted to trading, or (ii) if not so reported, the
closing  sales  price  on  the  immediately preceding business day of a Share as
published  in the NASDAQ National Market Issues report in the Eastern Edition of
The  Wall  Street  Journal,  or  (iii)  if  not  so  reported,  the
-------------------------
average  of  the  closing  bid  and  asked  prices  on the immediately preceding
business day as reported on the NASDAQ National Market System, or (iv) if not so
reported,  as  furnished by any member of the National Association of Securities
Dealers,  Inc.  selected  by  the  Board.

     "Grant"  means  a  grant  of  Deferred Stock Units which are subject to the
     ------
terms  and  conditions  of  this  Plan.

     "Grant  Date"  means  the  date  on which a Deferred Stock Unit is granted.
      -----------

     "Non-Employee  Director"  means  a  member  of  the  Company's  Board  of
     ----------------------
Directors or a member of the Parent's Board of Directors, who is not an employee
of  the  Company  or  the  Parent.

     "Parent"  means  Harleysville  Mutual  Insurance  Company.
     --------

     "Plan"  means  the  Harleysville  Group  Inc.  2005  Non-Employee
     -----
Directors  Deferred  Stock  Unit  Plan,  as  set  forth  herein  and  as amended
from  time  to  time.

     "Share"  means  a  share  of  common  stock  of  the  Company,
     ------
par  value  $1  per  share

     "Termination  of  Service"  means  the  termination  of  an  individual's
      -----------------------
status  as  a Non-Employee Director for any reason whatever, whether voluntarily
or  involuntarily,  including  disability or death of the Non-Employee Director.

<PAGE>
3.   AUTHORIZATION  OF  SHARES  SUBJECT  TO  DEFERRED  STOCK  UNIT
     -------------------------------------------------------------

     The  maximum number of Shares for which Deferred Stock Units may be granted
during  the  entire  duration  of  the  Plan  is  110,000.  This number shall be
adjusted  if  the  number  of  outstanding  Shares  is  increased  or reduced by
split-up,  reclassification,  stock  dividend  or  similar event.  The number of
Shares  subject  to  outstanding  Deferred  Stock  Units  shall also be adjusted
whenever  the  number  of  outstanding  Shares  is  so  increased  or  reduced.

4.   GRANTING  OF  DEFERRED  STOCK  UNITS
     -------------------------------------

      (a)  At  the  April  Board  Meeting for 2005, and at each April Board
Meeting thereafter  for  four consecutive years until and including the
April 2009 Board Meeting,  each  individual  who  is  a  Non-Employee
Director on such date shall automatically  receive  a  number of Deferred
Stock Units equal to the result of dividing  (i)  $30,000  by
(ii)  the Fair Market Value of a Share as of the day before  the
date  of  the  April  Board  Meeting  for  that  year.

     (b)  Each  Grant of Deferred Stock Units under the Plan shall be evidenced
by a  written  document which shall indicate (i) the number of Deferred Stock
Units granted  to the Non-Employee Director; (ii) the effective date of the
Grant; and (iii)  any  other terms and conditions the Board deems necessary
or appropriate.

     (c)  All  Grants  shall  be subject to the terms of this Plan and
the written document  evidencing  such  Grant.

5.   TERM  OF  DEFERRED  STOCK  UNITS
     --------------------------------

      Deferred  Stock  Units  shall  be  granted  on  the  following  terms:

     (a)  Deferred  Stock  Units  shall  be  fully  vested  at  all  times.

     (b)  Upon  a Non-Employee Director's Termination of Service, he, or, upon
the Non-Employee's  Director's death, the executor or administrator of his
estate or the  person  or  persons  who shall have acquired a Deferred Stock
Unit directly from the Non-Employee Director by bequest or inheritance, shall
receive a number of  Shares  equal  to  the  number  of  his  Deferred  Stock
Units.

<PAGE>

     (c)  A  Deferred  Stock Unit shall not be transferable otherwise than
by will or  the  laws  of  intestate  distribution.

     (d)  A  Non-Employee  Director  granted a Deferred Stock Unit under
this Plan shall  have only the rights of a general unsecured creditor of
the Company until such  Non-Employee  Director receives Shares equal to the
number of his Deferred Stock  Units  pursuant  to  Section  4.

     (e)  A  Non-Employee Director shall have no voting rights with respect
to any Shares  issuable  pursuant  to  Deferred  Stock  Units until the
date on which a certificate  or  certificates  representing
such  Shares  are  issued.

6.   GRANT  OF  DIVIDEND  EQUIVALENT  RIGHTS
     ----------------------------------------

      Whenever  the  Company  pays  cash  dividends  with  respect  to Shares, a
Non-Employee Director shall receive an amount equal to all or any portion of the
dividends that would be paid on Shares equal to the number of his Deferred Stock
Units.

7.   COMMON  STOCK  SUBJECT  TO  DEFERRED  STOCK  UNITS
     --------------------------------------------------

     Shares  issuable  under  Deferred  Stock  Units  may  be unissued shares or
treasury  shares.  The  Company  at all times during the term of this Plan shall
reserve  for  issuance the number of Shares issuable under Deferred Stock Units.

8.  COMPLIANCE  WITH  LEGAL  REQUIREMENTS
    -------------------------------------

     The  Company  will  not  be obligated to issue Shares if, in the opinion of
its  counsel,  such  issuance  would  violate  any  applicable  federal or state
securities  laws.  The  Company  will  seek  to  obtain  from  each  regulatory
commission  or  agency having jurisdiction, such authority as may be required to
issue  Shares.  Inability  of  the  Company  to  obtain from any such regulatory
commission or agency authority which counsel for the Company deems necessary for
the  lawful  issuance of Shares shall relieve the Company from any liability for
failure  to  issue  such  Shares until the time when such authority is obtained.

<PAGE>

9.   NONASSIGNMENT  OF  DEFERRED  STOCK  UNITS
     -----------------------------------------

     Except  as  otherwise  provided  in Section 5, Deferred Stock Units and the
rights  and  privileges  conferred  hereby  shall  not be transferred, assigned,
pledged  or  hypothecated  in any way (whether by operation of law or otherwise)
and  shall not be subject to execution, attachment or similar process.  Upon any
attempt  to  transfer,  assign,  pledge,  hypothecate  or otherwise dispose of a
Deferred  Stock  Unit,  right or privilege contrary to the provisions hereof, or
upon  the  levy  of  any  attachment  or  similar  process  upon  the rights and
privileges  conferred  hereby,  such  Deferred  Stock  Unit  and  the rights and
privileges  conferred  hereby  shall  immediately  terminate.

10.  RIGHTS  OF  NON-EMPLOYEE  DIRECTOR  IN  STOCK
     ---------------------------------------------

      Neither  the  holder  of  a  Deferred  Stock  Unit,  nor  the  legal
representatives,  heirs, legatees or distributees of any holder, shall be deemed
to  be  the holder of, or to have any of the rights of a holder with respect to,
any  Shares issuable under such Deferred Stock Unit unless and until such Shares
are issued to him or them and such person or persons have received a certificate
or  certificates therefore, except for dividend equivalent rights as provided in
Section  6.

11.  WITHHOLDING  OF  APPLICABLE  TAXES
     ----------------------------------

     The  Company  shall  have  the  right  to  deduct or withhold, or require a
holder of a Deferred Stock Unit to remit to the Company, an amount sufficient to
satisfy  Federal,  state,  and  local  taxes required by law to be withheld with
respect  to  any  grant,  exercise,  or payment made under or as a result of the
Plan.

12.  PLAN  AND  DEFERRED  STOCK  UNITS  NOT  TO  AFFECT  SERVICE
AS  A  DIRECTOR
-------------------------------------------------------------------

      Neither  this  Plan  nor  any  Deferred  Stock  Unit shall confer upon any
Non-Employee  Director  any  right  to  continue  as  a director of the Company.

13.  ADMINISTRATION  AND  INTERPRETATION
     -----------------------------------

      The  Plan  shall be administered by the Committee.  Subject to the express
provisions  of  the  Plan,  the  Committee shall have authority to interpret the
Plan,  to  prescribe,  amend

<PAGE>

and  rescind  rules  and  regulations relating to the Plan and to make all other
determinations  deemed  necessary  or  advisable  in  the  implementation  and
administration  of the Plan; provided, however, that the Committee shall have no
discretion  with respect to the eligibility or selection of Directors to receive
stock units under the Plan, the number of stock units granted under the Plan, or
the  price  thereof,  and provided further that the Committee shall not have the
authority  to  take  any  action or make any determination that would materially
increase the benefits accruing to Participants under the Plan  The determination
of the Committee in the administration of the Plan as described herein, shall be
final,  conclusive  and  binding upon all persons including, without limitation,
the  Company,  its  stockholders  and  the persons granted stock units under the
Plan.  The Secretary of the Company shall be authorized to implement the Plan in
accordance  with  its  terms  and to take such action of a ministerial nature as
shall  be  necessary  to  effectuate  the  intent  and  purposes  thereof.

14.  AMENDMENT  OF  PLAN
     -------------------

     The  Board  shall  have  complete  power  and  authority to amend the Plan,
provided,  however,  that it shall not without shareholder approval (a) increase
the  maximum number of Deferred Stock Units that may be granted or (b) adopt any
other  amendment  which  the  Board determines to be required or advisable to be
approved  by  the  shareholders  of  the  Company under regulations of the U. S.
Securities  and  Exchange  Commission,  the rules of any stock exchange or stock
market  on  which  the  Company's  stock is listed, the Internal Revenue Code of
1986,  as  amended,  or  other  applicable  law  or  regulation.

15.  NOTICES
     --------

     Any  notice  required  or  permitted  hereunder shall be sufficiently given
only  if sent by registered or certified mail, postage prepaid, addressed to the
Company,  355  Maple Avenue, Harleysville, PA 19438-2297, and to the holder of a
Deferred  Stock  Unit  at  the  most  recent  address  on file with the Company.

<PAGE>

16.  SUCCESSORS
     -----------

     The  Plan  shall  be binding upon and inure to the benefit of any successor
or  successors  of  the  Company.

17.  SEVERABILITY
     -------------

     If  any  part of this Plan shall be determined to be invalid or void in any
respect,  such determination shall not affect, impair, invalidate or nullify the
remaining provisions of this Plan which shall continue in full force and effect.

18.  EFFECTIVE  DATE  AND  TERM  OF  PLAN
     ------------------------------------

     The  Plan  shall become effective on the Effective Date and shall expire on
December  31,  2009,  unless  sooner  terminated  by  the  Board.  The Board may
terminate  this  Plan  at  any  time.  The  Board  shall submit this Plan to the
shareholders  of  the  Company for their approval at the first Annual Meeting of
the shareholders held after the adoption of the Plan by the Board.  Any Deferred
Stock Unit granted before the approval of the Plan by the Company's shareholders
shall  be  expressly  conditioned upon, and shall not be exercisable until, such
approval.  If  such  shareholder  approval  is  not received at the first annual
meeting  held  after  the  adoption of the Plan by the Board, all Shares granted
under  the  Plan  shall  automatically  expire.

19.  GENDER  AND  NUMBER
     -------------------

     Unless  clearly indicated by context, the singular shall include the plural
and  the  masculine  shall  include  the  feminine,  and  vice-versa.



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