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                  THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT


     This Third Amendment to Line of Credit Agreement (the "Amendment") is 
effective as of January 2, 1998, by and between SANWA BANK CALIFORNIA (the 
"Bank") and ZENITH NATIONAL INSURANCE CORP. (the "Borrower") with respect to 
the following:

     This Amendment shall be deemed to be a part of and subject to that 
certain Line of Credit Agreement dated as of December 15, 1994, as heretofore 
amended, and any and all addenda and riders heretofore made (collectively the 
"Agreement").  Unless otherwise defined herein, all terms used in this 
Amendment shall have the same meanings as in the Agreement.  To the extent 
that any of the terms or provisions of this Amendment conflict with those 
contained in the Agreement, the terms and provisions contained herein shall 
control.

     WHEREAS, the Borrower and the Bank mutually desire to extend and/or 
modify the Agreement.

     NOW THEREFORE, for value received and hereby acknowledged, the Borrower 
and the Bank agree as follows:

     1.  CERTAIN DEFINED TERMS.  Unless elsewhere defined in this Third 
Amendment, the following terms shall have the following meaning:

               "AMOUNTS AVAILABLE FOR DIVIDENDS" shall mean, without
     duplication, the amount that is paid or may be paid by  Zenith Insurance
     Company as a dividend at any time during the then current calendar year
     without being an "extraordinary dividend" under Section 1215.5(c) of the
     California Insurance Code.
     
               "CONTINGENT OBLIGATIONS" shall mean any agreement, undertaking
     or arrangement (other than insurance and reinsurance obligations and
     surety bonds, in each case entered into in the ordinary course of
     business) by which any Person guarantees, endorses or otherwise becomes or
     is contingently liable for (by direct or indirect agreement, contingent or
     otherwise, to provide funds for payment, to supply funds to, or otherwise
     to invest in, a debtor, or otherwise to assure a creditor against loss but
     excluding the Borrower's agreement to subordinate debt owed to it by Perma-
     Bilt, a Nevada corporation, to amounts owed to others) the debt,
     obligation or other liability of any other Person (other than by
     endorsements of instruments in the course of collection), or guarantees
     the payment of dividends or other distributions upon the shares of any
     other Person.  The amount of any Person's obligation under any Contingent
     Obligation shall (subject to any limitation set forth therein) be deemed
     to be the outstanding principal amount of the debt, obligation of other
     liability guaranteed thereby.
     
               "DEBT"  shall mean the outstanding principal for which Borrower
     is either directly liable or indirectly liable as a Contingent Obligation
     for (a) all indebtedness for borrowed money (b) all obligations evidenced
     by notes, bonds, debentures or similar instruments, including obligations
     so evidenced incurred in connection with the acquisition of property,
     assets or business, and (c) all obligations with respect to capital
     leases.

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               "FIXED INTEREST CHARGES" shall mean interest paid, or without
     duplication, accrued but unpaid on (i) the Line of Credit, (ii) all
     indebtedness for borrowed money , and (iii) all obligations evidenced by
     notes, bonds, debentures or similar instruments, including obligations so
     evidenced incurred in connection with the acquisition of property, assets,
     or businesses, which shall be determined at the end of each fiscal quarter
     for the four consecutive fiscal quarters then ended."
     
               "GOVERNMENTAL AUTHORITY" means any nation or government, any
     state or other political subdivision thereof, any central bank (or similar
     monetary or regulatory authority) thereof, any entity exercising
     executive, legislative, judicial, regulatory or administrative functions
     of or pertaining to government, and any corporation or other entity owned
     or controlled, through stock or capital ownership or otherwise, by any of
     the foregoing.
     
               "INSURANCE SUBSIDIARY" shall mean any Subsidiary of the Borrower
     (other than Zenith Insurance Management Services, Inc., Zenith Risk
     Management, Inc., and CalFarm Insurance Agency or any other Subsidiary
     which does not issue or underwrite insurance or reinsurance) that is
     authorized or admitted to carry on or transact one or more aspects of the
     business of selling, issuing or underwriting insurance or reinsurance.
     
               "INTEREST COVERAGE RATIO" shall mean the ratio of (a) (i)
     Amounts Available for Dividends, plus (ii) pre-tax income from the Non-
     Insurance Subsidiaries as of the end of each fiscal quarter for the four
     quarters then ended, plus (iii) without duplication, pre-tax, pre-interest
     income of the Borrower as of the end of each fiscal quarter for the four
     quarters then ended to (b) Fixed Interest Charges.
     
               "NON-INSURANCE SUBSIDIARY" means any Subsidiary which is not an
     Insurance Subsidiary.
     
               "PERSON" shall mean an individual, partnership, corporation,
     limited liability company, business trust, joint stock company, trust,
     unincorporated association or Governmental Authority.
     
               "SUBSIDIARY" of a person means any corporation, association,
     partnership, limited liability company, joint venture or other business
     entity of which more than 50% of the voting stock, membership interests or
     other equity interests (in case of Persons other than corporations), is
     owned or controlled directly or indirectly by the Person, or one or more
     of the Subsidiaries of the Person, or a combination thereof.  Unless the
     context otherwise clearly requires, references herein to a "Subsidiary"
     refer to a Subsidiary of the Borrower.
     
               "SURETY INSTRUMENTS"  means all letters of credit (including
     standby and commercial), banker's acceptances, surety bonds and similar
     instruments but excluding insurance and reinsurance obligations and surety
     obligations, in each case entered into in the ordinary course of business.
     
               "TOTAL CAPITALIZATION" shall be defined as (a) Debt plus (b)
     Total Shareholder's Equity of the Borrower.
     
               "TOTAL SHAREHOLDER'S EQUITY" shall mean the total shareholder's
     equity as determined in accordance with generally accepted accounting
     principles (calculated excluding unrealized gains (losses) of securities
     as determined in accordance with FASB 115).

     2.  CHANGE IN INTEREST RATE.  Sections 1.02 C. 1, 2 and 3 of the Agreement
are deleted in their entirety and the following is substituted in lieu thereof:

          "1.  REFERENCE RATE ADVANCES.  A variable rate equivalent to an index
     for a variable interest rate which is quoted, published or announced from
     time to time by the Bank as its reference rate and as to

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     which loans may be made by the Bank at, below or above such reference rate
     (the "Reference Rate").  Interest shall be adjusted concurrently with any
     change in the Reference Rate.  An Advance based upon the Reference Rate is
     hereinafter referred to as a "Reference Rate Advance."  Each such Reference
     Rate Advance must be in the minimum amount of $100,000.00.
     
          2.  FED FUNDS ADVANCES.  A variable rate per annum (the "Federal
     Funds Rate"), for each day in which the Advance is based upon the Federal
     Funds Rate (a "Fed Funds Advance"), equivalent to 0.40% in excess of the
     interest rate equal to the weighted average of the rates on overnight
     Federal funds transactions with members of the Federal Reserve System,
     quoted to the Bank on such day by Federal Funds brokers of recognized
     standing which are selected by the Bank in its sole discretion or, if such
     day is not a business day, for the immediately preceding business day.
     With respect to this section 1.02(C)(2), a business day means a day in
     which banks are open generally in Chicago and New York for the conduct of
     substantially all of their commercial lending activities.  Fed Funds
     Advances must be in the minimum amount of $250,000.00.
     
          3.  EURODOLLAR ADVANCES.  A fixed rate quoted by the Bank for 30, 60,
     90, 120, 180 or 360 days or for such other period of time that the Bank
     may quote and offer (provided that any such period of time does not extend
     beyond the Expiration Date) [the "Interest Period"] for Advances in the
     minimum amount of $250,000.00.  Such interest rate shall be a percentage
     equivalent to 0.40% in excess of the Bank's Eurodollar Rate (rounded
     upward, if necessary, to the nearest 1/16th of one per cent (0.0625%)
     which is that rate determined by the Bank's Treasury Desk as being the
     approximate rate at which the Bank could purchase offshore U.S. dollar
     deposits in an amount approximately equal to the amount of the relevant
     Advance and for a period of time approximately equal to the relevant
     Interest Period (adjusted for any and all assessments, surcharges and
     reserve requirements pertaining to the purchase by the Bank of such U.S.
     dollar deposits) [the "Eurodollar Rate"].  An Advance based upon the
     Eurodollar Rate is hereinafter referred to as a "Eurodollar Advance" or
     Eurodollar Rate Advance".
     
          Interest shall be computed on the basis of 360 days per year, but
     charged on the actual number of days elapsed.

     3.  MODIFICATION OF COMMITMENT FEE.  Section 1.04(ii). of the Agreement is
deleted in its entirety and the following is inserted in lieu thereof:

     "(ii)  from the effective date of this Amendment to the termination of
     this Agreement a fee equal to 0.125% per annum of the daily unused portion
     of the line, payable in arrears for the immediately preceding calendar
     quarter on the 15th day of each January, April, July and October of each
     year, and payable at the termination date of this Agreement for the
     immediately preceding calendar quarter, if not previously paid, and for
     the then current calendar quarter, to be computed on the basis of 360 days
     per year, but charged on the actual number of days elapsed during the
     applicable time period for which the Line of Credit has been in effect."

     4.  SUBSTITUTION OF FINANCIAL COVENANT.   Section 4.10 B is deleted and a
new covenant is inserted to read as follows:

          "4.10 B  DEBT TO TOTAL CAPITALIZATION.  Borrower shall not permit the
     Debt to Total Capitalization Ratio to exceed 0.40 to 1.00 as of the end of
     any fiscal quarter.

     5.  NEW FINANCIAL COVENANT.  Section 4.10 E is deleted and a new
subsection is to be added to read as follows:

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          "4.10 E.  INTEREST COVERAGE RATIO.  Borrower shall not permit
     the Interest Coverage Ratio to be less than 2.00 to 1.00 as of the end of
     any fiscal quarter.
     
     6.  EVENTS OF DEFAULT.  Section 5.02 of the Agreement is deleted in its
entirety and the following is inserted in lieu thereof:
          
          "5.02.
          a)  Performance under this Agreement.  The Borrower shall fail in any
          material respect to perform or observe any material term, covenant or
          agreement contained in this Agreement or any material document,
          instrument or agreement evidencing or relating to any material
          indebtedness of the Borrower to the Bank and any such failure
          (exclusive of the payment of money to the Bank under this Agreement
          or any other document, instrument or agreement, which failure shall
          constitute an immediate Event of Default if not paid within five (5)
          business days after notice from the Bank that the same is past due)
          shall continue for more than 30 days after written notice from the
          Bank to the Borrower of the existence and character of such Event of
          Default or should the default require more than (30) days but less
          than ninety (90) days to correct, the Borrower does not commence
          material corrective action within thirty (30) days and actively
          pursues such corrective action.
          
          b)  Performance With Other Third Parties.  The Borrower shall:
          
               (1)  fail to make any payment in respect of (a) all indebtedness
               of Borrower for borrowed money (b) all obligations of Borrower
               evidenced by notes, bonds, debentures or similar instruments,
               including obligations so evidenced incurred in connection with
               the acquisition of property, assets or businesses or (c) all non-
               contingent reimbursement or payment obligations of Borrower with
               respect to Surety Instruments and (d) all obligations of
               Borrower with respect to capital leases or any Contingent
               Obligations of Borrower related to (a), (b), (c), and (d),
               having an aggregate principal amount (including undrawn
               committed or available amounts and including amounts owing to
               all creditors under any combined or syndicated credit agreement)
               of more than $10,000,000 when due (whether by scheduled
               maturity, required prepayment, acceleration, demand, or
               otherwise) and such failure continues after the applicable grace
               or notice period, if any, specified in the relevant document on
               the date of such failure; or
               
               (2)  fail to perform or observe any other condition or covenant,
               or any other event shall occur or condition exist, under any
               agreement or instrument relating to any such indebtedness or
               Contingent Obligation, and such failure continues after the
               applicable grace or notice period, if any, specified in the
               relevant document on the date of such failure if the effect of
               such failure, event or condition is to cause such indebtedness
               to be declared to be due and payable prior to its stated
               maturity, or such Contingent Obligation to become payable or
               cash collateral in respect thereof to be demanded.
          
     7.  CONFIRMATION OF OTHER TERMS AND CONDITIONS OF THE AGREEMENT.  Except
as specifically provided in this Amendment, all other terms, conditions and
covenants of the Agreement unaffected by this Amendment shall remain unchanged
and shall continue in full force and effect and the Borrower hereby covenants
and agrees to perform and observe all terms, covenants and agreements provided
for in the Agreement, as hereby amended.

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     IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto
as of the date first hereinabove written.

BANK:                                   BORROWER:

SANWA BANK CALIFORNIA                   ZENITH NATIONAL INSURANCE CORP.

By: /s/ DIRK A. PRICE                   By: /s/ STANLEY R. ZAX
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   Dirk A. Price, Vice President           Stanley R. Zax, President & Chairman




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