**EXHIBIT 10.1**

**RESTRICTED STOCK AGREEMENT**

**OF**

**MERCURY GENERAL CORPORATION**

THIS AGREEMENT (the “Agreement”)is entered into as of                                     ,20     (the “Award Date”) by and between Mercury General Corporation, a California corporation (the “Company”), and                                 (the “Participant”). 

WHEREAS, the Company has adopted the Mercury General Corporation 2005 Equity Incentive Award Plan (as it may be amended from time to time, the“Plan”), the terms of which are hereby incorporated by reference and made a part of this Agreement; and 

WHEREAS,Article 6 of the Plan provides for the issuance of awards of the Company’s common stock, without par value (“Common Stock”), subject to certain restrictions (“Restricted Stock”); and 

WHEREAS, the Committee described in Article 12 of the Plan (the “Committee”) has determined that it would be to the advantage andbest interest of the Company and its stockholders to award shares of Restricted Stock to the Participant pursuant to the terms and conditions set forth herein; 

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows: 

**ARTICLE I**

**RESTRICTED STOCKAWARD**

Section 1.1Award of Restricted Stock. In consideration of the Participant’s agreement to remain inthe employ of the Company, and for other good and valuable consideration which the Committee has determined exceeds the aggregate par value of the shares of Common Stock subject to the Award (as defined below), as of the Award Date the Companyissues to the Participant                      shares of Restricted Stock (the “Award”) upon the terms and conditions setforth in this Agreement. 

Section 1.2Award Subject to Plan. The Award granted hereunder is subject to the terms andprovisions of the Plan, including without limitation, Article 11 thereof. 

**ARTICLE II**

**RESTRICTIONS**

Section 2.1Forfeiture. All shares of Restricted Stock issued to the Participant pursuant to Section 1.1 are initially subject to forfeiture and any portion of the Award which is not vested upon theParticipant’s termination of employment with the Company (as determined in good faith by the Committee) shall thereupon be forfeited immediately and without any further action by the Company. 

 

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Section 2.2Vesting and Lapse of Restrictions. Subject to Sections 2.1 and 2.3,the restrictions on sale or other transfer set forth in Section 3.2 and the exposure to forfeiture set forth in Section 2.1 (the “Restrictions”) shall lapse with respect to            % of the shares of Restricted Stock subject to the Award (rounded down to the next whole number of shares) on each of the first             anniversaries of the Award Date (each such anniversary, a “Vesting Date”), provided in each case that the Participant remains continuously employed inactive service by the Company from the Award Date through such date. 

Section 2.3Legend. Certificates representingshares of Restricted Stock issued pursuant to this Agreement shall, until all Restrictions lapse or shall have been removed and new certificates are issued pursuant to Section 2.4, bear the following legend: 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING REQUIREMENTS AND MAY BE SUBJECT TO FORFEITURE UNDER THE TERMS OF THATCERTAIN RESTRICTED STOCK AGREEMENT, DATED                     , 20        , BY AND BETWEENMERCURY GENERAL CORPORATION AND THE REGISTERED OWNER OF SUCH SHARES, AND SUCH SHARES MAY NOT BE, DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES, EXCEPT PURSUANT TOTHE PROVISIONS OF SUCH AGREEMENT.” 

Section 2.4Issuance of Certificates; Tax Withholding. 

(a) Subject to Section 2.4(b), upon each Vesting Date of the Restricted Stock as provided in Section 2.2, the Company shallcause new certificates to be issued with respect to such vested Shares and delivered to the Participant or his or her legal representative, free from the legend provided for in Section 2.3 and any of the other Restrictions. Such vested sharesshall cease to be considered Restricted Stock subject to the terms and conditions of this Agreement. 

(b) NotwithstandingSection 2.4(a), no such new certificate shall be delivered to the Participant or his legal representative unless and until the Participant or his legal representative shall have paid to the Company, or arranged for payment in accordance withthe Plan, the full amount of all federal and state withholding or other taxes applicable to the taxable income of Participant resulting from the grant of Restricted Stock or the lapse or removal of the Restrictions. 

Section 2.5Certain Changes in Capitalization. If the shares of the Company’s Common Stock as a whole are increased, decreased,changed into or exchanged for a different number or kind of shares or securities of the Company, whether through merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split, combination of shares, exchangeof shares, change in corporate structure or the like, the Committee, in its sole discretion, shall have the discretion and power to determine and to make effective provision for acceleration of the time or times at which any Restrictions shall lapseor be removed. In addition, in the case of the occurrence of any event described in this Section 2.5, the Committee, subject to 

 

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the provisions of the Plan and this Agreement, shall make an appropriate and proportionate adjustment in the number and kind of shares of Restricted Stock,to the end that after such event the Participant’s proportionate interest shall be maintained as before the occurrence of such event. Any such adjustment made by the Committee shall be final and binding upon the Participant, the Company and allother interested persons. In the event that the Participant receives any new or additional or different shares or securities by reason of any transaction or event described in this Section 2.5, such new or additional or different shares orsecurities which are attributable to the Participant in his capacity as the registered owner of the Restricted Stock then subject to Restrictions, shall be considered to be Restricted Stock and shall be subject to all of the Restrictions.

Section 2.6Section 83(b) Election. Participant understands that Section 83(a) of the Code taxes as ordinaryincome the difference between the amount, if any, paid for the shares of Common Stock and the Fair Market Value of such shares at the time the Restrictions on such shares lapse. Participant understands that, notwithstanding the preceding sentence,Participant may elect to be taxed at the time of the Award Date, rather that at the time the Restrictions lapse, by filing an election under Section 83(b) of the Code (an “83(b) Election”) with the Internal Revenue Servicewithin 30 days of the Award Date. In the event Participant files an 83(b) Election, Participant will recognize ordinary income in an amount equal to the difference between the amount, if any, paid for the shares of Common Stock and the FairMarket Value of such shares as of the Award Date. Participant further understands that an additional copy of such 83(b) Election form should be filed with his or her federal income tax return for the calendar year in which the date of this Agreementfalls. Participant acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to the award of Restricted Stock hereunder, and does not purport to be complete. PARTICIPANT FURTHERACKNOWLEDGES THAT THE COMPANY IS NOT RESPONSIBLE FOR FILING THE PARTICIPANT’S 83(b) ELECTION, AND THE COMPANY HAS DIRECTED PARTICIPANT TO SEEK INDEPENDENT ADVICE REGARDING THE APPLICABLE PROVISIONS OF THE CODE, THE INCOME TAX LAWS OF ANYMUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH PARTICIPANT MAY RESIDE, AND THE TAX CONSEQUENCES OF PARTICIPANT’S DEATH. 

**ARTICLEIII**

**OTHER PROVISIONS**

Section 3.1Escrow. The Secretary of the Company or such other escrow holder as the Committee may appoint shall retain physical custody of the certificates representing Restricted Stock until all of the Restrictions lapseor shall have been removed;*provided, however,* that in no event shall the Participant retain physical custody of any certificates representing unvested Restricted Stock issued to him or her. 

Section 3.2Restricted Stock Not Transferable. No Restricted Stock or any interest or right therein or part thereof shall be liablefor the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition bevoluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any 

 

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attempted disposition thereof shall be null and void and of no effect;*provided, however,* that this Section 3.2 shall not prevent transfers bywill or by applicable laws of descent and distribution. 

Section 3.3Rights as Stockholder. Except as otherwise providedherein, upon delivery of the shares of Restricted Stock to the escrow holder pursuant to Section 3.1, the Participant shall have all the rights of a stockholder with respect to said shares, subject to the Restrictions herein, including the right tovote the shares and to receive all dividends or other distributions paid or made with respect to the shares or Restricted Stock;*provided, however*, that any dividends declared on the Restricted Stock shall be subject to the Restrictions untilthe Restrictions on the underlying shares of Restricted Stock lapse or are removed pursuant to this Agreement, and shall be maintained by the Company pursuant to Section 3.1 and released to the Participant as the Restrictions on the Restricted Stocklapse or are removed pursuant to this Agreement; and, *provided, further,* that any and all shares of Common Stock received by the Participant with respect to such Restricted Stock as a result of stock dividends, stock splits or any other formof recapitalization shall also be subject to the Restrictions until the Restrictions on the underlying shares of Restricted Stock lapse or are removed pursuant to this Agreement. 

Section 3.4Not a Contract of Employment. Nothing in this Agreement or in the Plan shall confer upon the Participant any right tocontinue in the employ of the Company or any of its Subsidiaries or shall interfere with or restrict in any way the rights of the Company or its Subsidiaries, which are hereby expressly reserved, to discharge the Participant at any time for anyreason whatsoever, with or without cause, except as may otherwise be provided by any written agreement entered into by and between the Company and the Participant. 

Section 3.5Governing Law. The laws of the State of California shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of thelaw that might be applied under principles of conflicts of laws. 

Section 3.6Conformity to Securities Laws. TheParticipant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “ExchangeAct”), and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission, including without limitation Rule 16b-3 under the Exchange Act. Notwithstanding anything herein to the contrary, the Planshall be administered, and the Award is granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary toconform to such laws, rules and regulations. 

Section 3.7Amendment, Suspension and Termination. The Award may be whollyor partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board of Directors of the Company*, provided that*, except as may otherwise be provided by the Plan, neither theamendment, suspension nor termination of this Agreement shall, without the consent of the Participant, alter or impair any rights or obligations under the Award. 

Section 3.8Notices. Notices required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail bycertified mail, with postage and fees prepaid, addressed to the Participant to his or her address shown in the Company records, and to the Company at its principal executive office. 

 

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Section 3.9Definitions. Capitalized terms not defined herein shall have the meaningsassigned to such terms in the Plan. 

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. 

 
MERCURY GENERAL CORPORATIONBy:   
Name:
   
Title:
   
 
  
[Participant’s Name]

Residence Address:                                                                 
      
Participant’s Social Security Number:
  
 

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