<PAGE>
 
                      [LETTERHEAD OF ABN-AMRO Bank N.V.]
                                                                    EXHIBIT 10.1

September 28, 1995


Edward J. Kelly
Senior Vice President and Treasurer

Richard Yamashita
Assistant Treasurer

CalMat Co.
3200 San Fernando Road
Los Angeles, California  90065


RE:  Standby Letter of Credit Facility dated September 26, 1995 (the "Facility
     -------------------------------------------------------------------------
     Letter"; capitalized terms used herein are the same as those in the
     -------------------------------------------------------------------
     Facility Letter, unless otherwise indicated).
     ---------------------------------------------

Gentlemen:

This letter is to modify the Facility Letter and the Master Letter of Credit
Agreement executed in connection with the Facility Letter, as follows:

Within the Facility Letter:

Availability section, sub section (iii):  delete the word "July" and substitute
for it the word "June."

Events of Default section, the paragraph numbered 2:  after the last word in
the paragraph, "creditors;" add the following, concluding phrase:  "provided
that it will not be an Event of Default if the Applicant grants other major
creditors security which security equally and ratably secures Applicant's
obligations to the Bank;"

Events of Default section, the paragraph numbered 3:  delete the word
"unsecured".

Within the Master Letter of Credit Agreement:

Section 8, Default; Remedies:  the following wording is to be added to sub
section (i), after the word "Agreement", and before the semi-colon:  "and 
such failure is not remedied by Applicant or waived by the Bank within 5
business days of the failure or 3 business days after the Bank has provided
notice thereof".

Section 8, Default; Remedies:  the sub segment (ii), the following wording
is to be added after the word "Bank" and prior to the semi-colon:  "under
Letter of Credit drawings; on all other payments, within 5 business days of
the failure or 3 business days after the Bank has provided notice thereof".
<PAGE>
 
                      [LETTERHEAD OF ABN-AMRO Bank N.V.]

Section 12 Miscellaneous provisions, sub segment j), the following sentence 
will be added as the concluding sentence of that section j):  "The Bank will
provide the Applicant with notice of its intent not to renew at least 15 days
prior to the date at which the Bank is obligated to provide such notice to a
beneficiary under a Letter of Credit, if any."

If the preceding changes are acceptable, please sign and return this letter to
accompany the executed Facility Letter and Exhibits thereto.

Sincerely,


/s/ David J. Stassel                         /s/ Paul K. Stimpfl
    David J. Stassel                             Paul K. Stimpfl
    Vice President                               Vice President



To indicate CalMat Co.'s acceptance of the preceding changes, please insert the
date where indicated, execute and return an original copy of this letter.


Accepted this 29th day of September, 1995, by:  CalMat Co.
              --

By:  /s/ H. James Gallagher                  By:  /s/ Richard S. Yamashita
   _________________________                      ____________________________
         H. James Gallagher                           Richard S. Yamashita

Title:    Executive Vice President           Title:    Assistant Treasurer
      _____________________________                ___________________________


--------------------------------------------------------------------------------

                                       2
<PAGE>
 
                      [LETTERHEAD OF ABN-AMRO BANK N.V.]


As of September 26, 1995


Edward J. Kelly
Senior Vice President and Treasurer

Richard Yamashita
Assistant Treasurer

CalMat Co.
3200 San Fernando Road
Los Angeles, California 90065


Re: Standby Letter of Credit Facility
    ---------------------------------

Gentlemen:

ABN AMRO Bank N.V., Los Angeles International Branch (the "Bank") is pleased
to extend to CalMat Co. (the "Applicant") a committed line of credit (the
"Credit") in the aggregate amount of up to USD 20,000,000 (the "Limit") to
provide for the issuance by the Bank of irrevocable standby letters of credit
pursuant to insurance policy support needs and the Applicant's other 
performance obligations.  This Credit is available to the Applicant in U.S. 
Dollars under the following terms and conditions outlined in this letter 
(the "Facility Letter") and those terms and conditions contained in the Bank's
Master Letter of Credit Agreement, dated September 26, 1995, attached hereto as
Exhibit 1, which is incorporated herein by this reference (referred to herein,
together with this letter agreement, as the "Agreement").  Capitalized terms
used in Exhibit 1 shall have the same meanings ascribed to them herein unless
stated otherwise.

Credit:        The issuance of irrevocable standby letters of
               credit (each, a "Letter of Credit" and
               collectively, "Letters of Credit") on the
               Applicant's behalf pursuant to insurance policy
               support needs and the Applicant's other
               performance obligations.

Amount:        The aggregate face amount of all Letters of
               Credit, together with the aggregate amounts of all
               Reimbursement Amounts (as defined below)
               outstanding and unpaid shall not exceed the Limit
               at any time.

Applicant:     CalMat Co. 
<PAGE>
 
                      [LETTERHEAD OF ABN-AMRO BANK N.V.]

Availability:  September 26, 1995 through the earlier of (i) the
               stated maturity of (i) that certain credit
               facility evidenced by that certain $125,000,000
               revolving credit facility in which CalMat Co. is
               Borrower and Bank of America is Agent for the
               banks stated therein, (ii) a revolving credit
               facility that replaces the aforementioned
               $125,000,000 revolving credit facility (for both
               (i) and (ii), the "Revolving Maturity Date") or
               (iii) July 30, 1998.

Letter of      Letters of Credit shall expire no later than      
Credit Tenors: one (1) year from the date of issuance; provided, 
               however, that Letters of Credit shall             
               automatically extend for one (1) year unless the  
               Bank states its affirmative intent not to renew.   
               
Maturity Date: No Letter of Credit shall mature later than the
               earlier of (i) the Revolving Maturity Date; or
               (ii) or June 30, 1998.

Operation:     The Bank will issue Letters of Credit on behalf
               and upon the request of the Applicant.  The
               Applicant will request the issuance of each Letter
               of Credit by completing, executing and delivering
               to the Bank an application (an "Application") in
               form and substance satisfactory to the Bank.  The
               Applicant may transmit an executed copy of an
               Application to the Bank by telecopier.  The Bank
               shall be entitled to rely upon the signed
               facsimile copy of the Applicant's Application as
               though the copy was an original Application.  The
               Applicant shall send its original executed
               Application to the Bank by regular U.S. mail.  The
               Bank's form of Application is attached hereto as
               Exhibit 2.

Fees:          The Applicant will pay to the Bank the following
               fees in consideration of the issuance of each
               Letter of Credit:


               Issuance Fee        the greater of $500.00 or
                                   0.10% calculated on the face
                                   amount of the Letter of
                                   Credit, payable quarterly in
                                   advance.

               Amendments          $ 50.00
               Drawing Fee         $100.00
               Telex/Swift Costs   $ 30.00
               Postage             Cost

--------------------------------------------------------------------------------
CalMat Co.

                                       2
<PAGE>
 
                      [LETTERHEAD OF ABN-AMRO BANK N.V.]

Commitment     The Applicant shall pay to the Bank a
Fee:           commitment fee of 0.175% per annum calculated
               against the Limit, payable quarterly in
               arrears and calculated from the Effective
               Date of this Agreement on an actual/actual
               day basis.


Reimbursement  If the Bank is required to make a payment under
Charges:       any Letter of Credit issued pursuant to this
               Agreement, the Bank will make a demand for the
               amount due (the "Reimbursement Amount") from the
               Applicant in satisfaction of the outstanding
               obligation.  The Applicant shall remit the
               Reimbursement Amount due to the Bank within one
               (1) Business Day of the Bank's demand.  If such
               Reimbursement Amount is not received by the Bank
               within one (1) Business Day, the Applicant agrees
               to pay interest to the Bank, pursuant to this
               Agreement, calculated on the Reimbursement Amount
               on an actual/actual day basis, for the period in
               which the Bank has not been reimbursed, at the
               following rates:

               Unreimbursed Period      Interest Rate
               -------------------      -------------
               0 - 30 days              Prime
               Over 30 days             Prime + 1%     

               "Prime" shall mean the rate of interest equal to
               the higher (determined daily) of (i) the per annum
               rate of interest announced by the Bank from time
               to time as its principal office in Chicago as its
               prime rate for U.S. dollar loans (with any change
               in such rate to become effective as and when such
               rate change shall become effective) or (ii) the
               per annum rate of interest at which overnight
               funds are from time to time offered to the Bank by
               any bank in the interbank market in an amount
               equal to the principal amount of the respective
               interest bearing obligation, plus one half of one
               percent (1/2%) per annum.

               As used herein, "Business Day" shall mean a day on
               which banks are open for business in California
               and Chicago, U.S.A.

Events         In addition to the Events of Default set forth on 
of Default:    Exhibit 1, Applicant, without demand or notice of
               any kind, shall be in default under this Agreement
               upon the occurrence of any of the following
               events:

--------------------------------------------------------------------------------
CalMat Co.

                                       3
<PAGE>
 
                      [LETTERHEAD OF ABN-AMRO BANK N.V.]


               1.   A default is declared or notified to
                    Applicant by a lender (or lenders) in the
                    payment or performance by Applicant of any
                    agreement between Applicant and any party
                    other than the Bank, evidencing the borrowing
                    of money or a guaranty where the aggregate
                    amount is equal to or greater than
                    $20,000,000.00 and such lender(s) declares
                    the outstanding amounts immediately due 
                    and payable;
                    
               2.   Applicant shall grant to one of its major
                    creditors, terms and conditions, or security
                    that renders the Bank's claims structurally 
                    subordinate to the claims of that creditors;
                                        
               3.   Applicant shall fail to maintain a committed,
                    unsecured, unrestricted revolving credit
                    facility subject to either (a) or (b) 
                    below:
                                        
                    (a)  The facility amount will equal or exceed
                         One Hundred Twenty Five Million Dollars
                         ($125,000,000.00); and

                    (b)  For a smaller facility, the total unused
                         amount available for credit extensions
                         thereunder will at least equal 100% of
                         the total of outstanding letters of
                         credit.
                                        
               4.   Any Person or two or more Persons acting in
                    concert shall have acquired beneficial
                    ownership (within the meaning of Rule 13d-3
                    of the Securities and Exchange Commission
                    under the Securities and Exchange Act of
                    1934, as amended), directly or indirectly, of
                    securities of the Applicant (or other
                    securities convertible into such securities)
                    representing 20% or more of the combined
                    voting power of all securities of the
                    Applicant entitled to vote in the election of
                    Directors, other than securities having such
                    power only by reason of the happening of a
                    contingency; provided, however, that The Dan
                    Murphy Foundation and Persons acting in
                    concert with The Dan Murphy Foundation may
                    acquire an aggregate beneficial ownership
                    (within the meaning of 13d-3 of the
                    Securities and Exchange Commission under the
                    Securities and Exchange Act of 1934, as
                    amended), directly or indirectly, of
                    securities of the Applicant (or other
                    securities convertible into such securities)
                    representing up to 49% of the combined voting
                    power of all securities of the Applicant
                    entitled to vote in the election of
                    Directors, other than securities having such
                    power only by reason of the happening of a
                    contingency.


--------------------------------------------------------------------------------
CalMat Co.

                                       4
<PAGE>
 
                      [LETTERHEAD OF ABN-AMRO BANK N.V.]

                    Person in the preceding paragraph means and
                    includes natural persons, corporations,
                    limited partnerships, general partnerships,
                    joint stock companies, joint ventures,
                    associations, companies, trusts, banks, trust
                    companies, land trusts or other
                    organizations, whether or not legal entities,
                    and governments and agencies and political
                    subdivisions thereof.
                              
               Upon the occurrence of an event of default set
               forth above or in Exhibit 1, in addition to the
               remedies set forth in Exhibit 1, the Bank shall
               have no obligation to issue Letters of Credit
               hereunder.

Conditions     As a condition precedent to the issuance of any
Precedent:     Letters of Credit, the Applicant shall provide the
               Bank with all such documents as the Bank has
               reasonably requested, including, but not limited
               to:

               1.   A duly executed Master Letter of Credit
                    Agreement in the form attached hereto as
                    Exhibit 1;

               2.   Evidence of authority (certified copy of
                    corporate bank account resolution) and
                    specimen signatures (certificate of
                    incumbency) of the person or persons who are
                    authorized to sign this Agreement on behalf
                    of the Applicant and related documentation,
                    and of those persons who may sign
                    Applications and who are authorized to act on
                    behalf of the Applicant in the operation of
                    this Agreement; and

               3.   Application for Irrevocable Standby Letter of
                    Credit in the form attached hereto as Exhibit
                    2.


Law Governing: This Agreement will be governed in all respects by
               and construed in accordance with the laws of the
               State of California and the United States of
               America.  However, each Letter of Credit will, to
               the extent possible, be governed by the Uniform
               Customs and Practices for Documentary Credits in
               effect from time to time.

If you are in agreement with the foregoing terms and conditions, please date
and sign the enclosed copy of this Agreement together with the other documents
referred to herein, and return it to the attention of the undersigned.


--------------------------------------------------------------------------------
CalMat Co.

                                       5
<PAGE>
 
                      [LETTERHEAD OF ABN-AMRO BANK N.V.]


Very Truly Yours,

ABN AMRO Bank N.V.


By: /s/ David J. Stassel                  
   ________________________________
   David J. Stassel, Vice President


By: /s/ John H. Penfield                 
   ________________________________ 
   John H. Penfield, Vice President


The foregoing terms and conditions are accepted this 26 day of September, 1995.



CALMAT CO.

By: /s/ Edward J. Kelly                      
   ________________________________
   Edward J. Kelly
   
Its: Senior Vice President, Treasurer
    ________________________________
       and Chief Accounting Officer


--------------------------------------------------------------------------------
CalMat Co.

                                       6
<PAGE>
 
                                   EXHIBIT I


                       MASTER LETTER OF CREDIT AGREEMENT
                       ---------------------------------

Date:  September 26, 1995
                

MATURITY DATE:  As set forth in a Facility Letter of even date hereof, as may
                be subsequently amended.

To induce ABN AMRO Bank N.V.(the "Bank") to issue letters of credit (as the
same may be amended, each, a "Letter of Credit" and collectively, "Letters of
Credit") substantially in accordance with the Applications submitted to Bank
in accordance with Paragraph 1 of this Agreement, the undersigned, jointly and
severally if there is more than one of the undersigned (the "Applicant")
agrees as follows:

1.  Applications.
    ------------       

    Each Application to Bank for the issuance of a Letter of Credit shall be
    made by Applicant on the Bank's standard form application (the
    "Application"), either sent by telecopy transmission, by United States mail
    or by a courier service. In connection with such Applications, the Bank and
    the Applicant agree that (i) the Bank is hereby authorized to act on any
    Application which the Bank in good faith believes emanates from authorized
    representatives of the Applicant and shall not be liable for any action
    taken in good faith with respect to Applications from unauthorized persons;
    (ii) the Bank shall not be under any duty to verify the identity of any
    person submitting any Application; and (iii) the Applicant will indemnify
    the Bank from all actions, proceedings, claims, loss, damage, reasonable
    costs and expenses brought against, incurred or suffered by the Bank which
    have arisen directly or indirectly from the acceptance by the Bank of any
    Application.
     
2.  Credit Limit.
    ------------
 
    The aggregate amount of all Letters of Credit at any time issued and
    outstanding hereunder shall not exceed the maximum amount (the "Limit")
    indicated in the Facility Letter.   Bank may (but is under no obligation
    to so act) issue a Letter of Credit or Letters of Credit which would cause
    the aggregate amount of all Letters of Credit to exceed the Limit, and this
    Agreement will govern such Letters of Credit. Bank's books and records shall
    be prima facie evidence of the number and aggregate amount of Letters of
    Credit at any time outstanding and the amounts payable by Applicant
    hereunder.
<PAGE>
 
3.  Bank's General Obligations.
    --------------------------

    The Bank will issue Letters of Credit hereunder and subject to the terms and
    conditions of the Facility Letter upon the request of Applicant. Upon Bank's
    issuance of a Credit, Bank's obligations to Applicant relative to the Letter
    of Credit include good faith and observance of general banking usage, but
    shall NOT include liability or responsibility of any kind arising out of or
          ---
    in connection with: (a) performance of the underlying contract for sale or
    other transactions between Applicant and the beneficiary or any other
    person; (b) acts, errors, defaults, or omissions of any person other than
    Bank; (c) loss or destruction of any telegram, cable, letter, instrument, or
    document while in transit or in the possession of others; (d) knowledge or
    lack of knowledge of any custom or usage of any particular trade; (e)
    delivery, transmission, translation, or interpretation of any message,
    including any interruption, delay, error or omission therein; (f)
    insufficiency, lack of authorization, invalidity of, or error or fraud in
    any documents presented under the Credit or in any instructions purporting
    to be from the Applicant or Bank's correspondents; (g) validity or
    correctness of any transfer or proper identity of any transferee (if the
    Credit is issued in transferable form); (h) waiver of any requirement which
    exists for Bank's protection and not for the protection of the Applicant, or
    which waiver does not in fact materially prejudice Applicant; or (i) any
    other act or omission for which banks are relieved of responsibility under
    the "Uniform Customs & Practice for Documentary Credits" of the
    International Chamber of Commerce (hereafter, the "UCP") or the Uniform
    Commercial Code, as in effect on the date hereof.
     
4.  Bank's Obligations Concerning Documents.
    ---------------------------------------
     
    a)    Bank's obligations to Applicant relative to any
          Letter of Credit include Bank's examination of
          documents with reasonable care so as to ascertain
          that on their face they appear to comply with the
          terms of the Letter of Credit, but do NOT include
                                                ---
          liability or responsibility of any kind arising out
          of or in connection with: (i) validity,
          sufficiency, truthfulness, genuineness or effect of
          documents which appear on Bank's examination to be
          regular on their face; (ii) honor of drafts or
          demands for payment which appear on Bank's
          examination to be regular on their face; or (iii)
          the ultimate correctness of Bank's decision
          regarding documentary compliance, where Bank's
          decision is based on Bank's examination of the
          documents, or Bank's exercise of judgment, in a
          manner not manifestly unreasonable.
  
    b)    Unless otherwise specified in the Application, Bank
          may, in Bank's discretion, but shall not be
          obligated to, accept or honor as complying with a
          Letter of Credit: (i) drafts or documents signed by
          or issued by the purported executor, agent,
          administrator, liquidator, receiver, trustee in
          bankruptcy, or other legal representative of any
          party designated in the Letter of Credit; (ii)
          drafts or documents which comply under the laws,

                                       2
<PAGE>
 
          rules, regulations, and general banking or trade
          customs and usages of the place of drawing,
          negotiation or presentation; or (iii) drafts or
          documents which comply with the UCP.  
     
5.  Form of Letters of Credit.
    -------------------------
 
    Applicant authorizes Bank to set forth the terms of each Application in the
    Letter of Credit corresponding to such Application in such language as Bank
    deems appropriate, with such variations from such terms as Bank may in its
    discretion determine to be necessary and not materially inconsistent with
    such Application unless specifically instructed otherwise by the Applicant
    in writing. If Applicant does not notify Bank of any inconsistencies in such
    Letter of Credit within ten (10) business days of its issuance, Applicant
    agrees that such Letter of Credit is conclusively presumed to be in proper
    form. Upon its receipt of timely notice of any discrepancy in any Credit,
    Bank will endeavor to obtain the consent of the confirming bank (if any) and
    the beneficiary for an appropriate modification to the Letter of Credit;
    provided, however that Bank shall assume no liability or responsibility for
    its failure to obtain such consent.
     
6.  Payment; Commissions.
    --------------------
 
    a)    With respect to each Letter of Credit, Applicant
          shall pay Bank in United States currency and in
          immediately available funds, by wire transfer or
          otherwise, at the Bank's office identified in the
          Application, the amount paid or to be paid by the
          Bank, the Bank's agent or any other party on the
          Bank's behalf, on each draft or other order,
          instrument or demand drawn or presented or
          purporting to be drawn or presented under a Letter
          of Credit (the "Item") together with all other
          amounts owing to Bank in connection therewith, such
          payment to be made at the time of honor of each
          Item.  In the case of Items in foreign currency,
          such payments shall be at the Bank's current rate
          of exchange for transfers to the place of payment
          in the currency in which such Item is drawn (or, if
          for any reason Bank is unable to establish such a
          rate of exchange, in an amount equal to Bank's
          actual cost of settlement). The Applicant shall
          reimburse the Bank in the same currency in which
          the Item is payable, provided that at the Bank's
          option, Applicant shall reimburse Bank in United
          States dollars for Items payable in a foreign
          currency at the rate at which Bank could sell such
          foreign currency in exchange for United States
          dollars for transfer to the place of payment of the
          Item, or, if there is no such rate, the United
          States dollar equivalent of Bank's actual cost of
          settlement.  Applicant agrees to pay Bank on demand
          in United States dollars such amounts as Bank may
          be required to expend to comply with any and all
          governmental exchange regulations now or hereafter
          applicable to the purchase of foreign currency.

                                       3
<PAGE>
 
    b)    With respect to each Letter of Credit, the
          Applicant will pay the Bank on demand, in United
          States currency at the Bank's office identified on
          the Application: (i) a non-refundable commission at
          such rates as set forth in the Facility Letter;
          (ii) interest on all amounts due and owing to the
          Bank until payment in full, as set forth in the
          Facility Letter; and (iii) all reasonable charges
          and expenses incurred, including reasonable
          attorney's fees, legal expenses, court costs, and
          any similar costs paid or incurred by Bank in
          connection with issuance or maintenance of the
          Letter of Credit, Bank's performance under the
          Letter of Credit and this Agreement, and all
          transactions (including, without limitation, the
          involvement of the Bank in any court proceedings
          regarding the Letter of Credit) related to or
          contemplated by this Agreement.
     
    c)    If, as a result of any law, regulation, treaty or
          directive, or any change therein, or in the
          interpretation or application thereof or Bank's
          compliance with any request or directive (whether
          or not having the force of law) from any court or
          governmental authority, agency or instrumentality,
          any reserve, capital requirement, premium, special
          deposit, special assessment or similar requirements
          against the Bank's assets, deposits or credit
          extended by the Bank are imposed, modified or
          deemed applicable and the Bank shall determine
          that, by reason thereof, the cost to the Bank of
          issuing or maintaining the Letter of Credit is
          increased, the Applicant agrees to pay the Bank
          upon demand such additional amounts as will
          compensate the Bank for such additional costs that
          are reasonably allocable to this agreement.  A
          certificate signed by an officer of the Bank
          specifying in reasonable detail the amounts, the
          calculation of such amounts and the basis therefor,
          submitted to the Applicant by the Bank of the
          additional amounts required to compensate the Bank
          in respect of the foregoing shall be conclusive,
          absent manifest error.  The Applicant further
          agrees to pay any applicable levies or other taxes
          imposed in connection with the Letter of Credit
          other than net income taxes payable by the Bank,
          and to otherwise comply with all domestic and
          foreign laws and regulations applicable to all
          transactions under or in connection with the Letter
          of Credit.
                     
7.  Assumption of Risk by Applicant; Applicant's Indemnification of Bank;
    --------------------------------------------------------------------
    Subrogation.
    -----------
     
    a)    The Applicant's obligations to the Bank hereunder
          are, and shall remain, absolute and unconditional
          notwithstanding any lack of enforceability of any
          of the Letters of Credit or the existence of any
          claim, counterclaim, defense or right of set off
          the Applicant may have against the Bank.
  

                                       4
<PAGE>
 
    b)    The beneficiary and any other user of a Letter of
          Credit and any other drawer of any draft or the
          presenter of any demand for payment thereunder
          shall be deemed Applicant's agents, and Applicant
          assumes all risk, loss, liability, charges and
          expenses with respect to their acts or omissions
          and also with respect to any error, delay,
          misdelivery or loss in or arising out of the
          transmission of telegrams, cables, letters or other
          communications or documents or items forwarded in
          connection with the drafts or the Credit,
          including, without limitation, any Application. 
          Applicant shall not be relieved from any obligation
          or liability, nor shall the terms of this Agreement
          be affected by the occurrence of any of the
          foregoing.  Any action or inaction by Bank or its
          correspondents in connection with a Letter of
          Credit or with instructions, drafts, or documents,
          relative to a Letter of Credit, shall, if in good
          faith, conclusively be deemed to have been
          authorized by Applicant, and Bank shall have no
          liability thereunder.
     
    c)    Applicant shall indemnify Bank and its
          correspondents and shall defend and hold Bank and
          its correspondents harmless from and against any
          and all claims, damages, loss, costs, expenses
          (including reasonable attorneys' fees) and
          liabilities of any nature whatever, sustained,
          incurred or asserted in connection with any Letters
          of Credit, the payment or acceptance or refusal to
          pay or accept any draft or other demand for
          payment, and any other action or inaction in
          reliance upon the provisions of this Agreement,
          unless and to the extent that any such claims,
          damages, loss, costs, expenses or liabilities shall
          have been determined by a court of competent
          jurisdiction to have been directly caused by the
          willful misconduct or gross negligence of the Bank
          in performing its obligations under the Letter of
          Credit or by the Bank's failure to make payment of
          any drawing or other demand for payment made in
          strict conformity with the Credit.  It is
          understood that in making payment under the Letter
          of Credit the Bank's exclusive reliance on the
          documents presented to the Bank in accordance with
          the terms of the Letter of Credit as to any and all
          matters set forth therein, whether or not any
          statement or any document presented pursuant to the
          Letter of Credit proves to be forged, fraudulent,
          invalid or insufficient in any respect whatsoever
          shall not be deemed willful misconduct or gross
          negligence of the Bank.
     
    d)    Bank shall be subrogated (for purposes of defending
          against Applicant's claims and proceeding against
          others to the extent of Bank's liability to
          Applicant) to Applicant's rights against any person
          who may be liable to Applicant on any underlying
          transaction; to the rights of any holder in due
          course or person with similar status against
          Applicant; and to the rights of any beneficiary or
          its assignee or person with similar status against
          Applicant.
     

                                       5
<PAGE>
 
8.  Default; Remedies.
    -----------------
     
          Applicant shall be in default under this Agreement
          upon the occurrence of any of the following:  (i)
          any failure by Applicant to perform its obligations
          or covenants under this Agreement; (ii) Applicant's
          failure to pay when and as due hereunder any sum
          due Bank; (iii) any material misrepresentation made
          by Applicant in connection with this Agreement or a
          Letter of Credit.
     
    a)    Upon default, all of Applicant's obligations and
          liabilities to Bank, of whatever nature, whether
          contingent or absolute, shall become immediately
          due and payable without presentment, protest,
          notice or demand and without notice of
          acceleration, all of which are hereby waived and,
          without limiting the foregoing and any other rights
          of the Bank hereunder, the Applicant shall
          immediately pay to the Bank an amount equal to the
          available undrawn amount of all outstanding Letters
          of Credit.
     
    b)    All amounts due and payable shall accrue interest,
          from and including the date such amount is paid or
          incurred by the Bank up to but not including the
          date payment is made, at the per annum rate set
          forth in Section 6(b)(ii) hereof.
     
9.  Waiver by Bank; Acts Not Affecting Agreement.
    --------------------------------------------
     
    Bank shall have no duty to exercise any of its rights hereunder, and Bank
    shall not be liable for any failure to do so or delay in doing so. No such
    failure or delay on the part of Bank or its correspondents shall be deemed a
    waiver, and no notice to or demand by the Bank or its correspondents shall
    be deemed a waiver of Bank's right to take any other or further action
    without notice or demand. Bank's rights and security interests and
    Applicant's obligations and liabilities under this Agreement shall continue
    unimpaired and this Agreement shall remain binding upon each party hereto
    signing as an Applicant, notwithstanding: (a) extension of the maturity or
    time for presentation of drafts, acceptances, or documents; (b) any other
    modification of the terms of any Letter of Credit at the request of any
    party hereto signing as an Applicant, with or without notification to any
    other party; or (c) any increase in the amount of any Letter of Credit at
    the request of any party hereto. No delay, extension of time, renewal,
    compromise or other indulgence which Bank may permit in connection with any
    of Bank's rights hereunder shall impair those rights, and Bank shall not be
    deemed to have waived any rights unless such waiver is in writing and signed
    by Bank or its authorized agent; nor shall any such waiver constitute a
    waiver of any other right or of the same right at any future time. Bank's
    acceptance or honor of drafts or issuance of a Letter of Credit varying from
    the terms of this Agreement will not affect the terms and conditions
    applicable to any other drafts or Letters of Credit, whether such other
    drafts or Letters of Credit are then existing or subsequently arising.
     

                                       6
<PAGE>
 
10. Sole Obligation of Bank. 
    -----------------------
     
    Without limiting any other provision herein, Bank is hereby expressly
    authorized and directed to honor any request for payment which is made under
    and in compliance with the terms of any Letter of Credit without regard to,
    and without any duty on its part to inquire into, the existence of any
    disputes or controversies between the Applicant, the beneficiary of a Letter
    of Credit or any other person, firm or corporation, or the respective
    rights, duties or liabilities of any of them or whether any facts or
    occurrences represented in any of the documents presented under a Letter of
    Credit are true or correct. Furthermore, the Applicant fully understands and
    agrees that the Bank's sole obligation to Applicant shall be limited to
    honoring requests for payment made under and in compliance with the terms of
    any Letter of Credit and this Agreement and the Bank's obligation remains so
    limited even if the Bank may have assisted Applicant in the preparation of
    the wording of any Letter of Credit or any documents required to be
    presented thereunder or that the Bank may otherwise be aware of the
    underlying transaction giving rise to Letter of Credit and this Agreement

11. Duration of Agreement.
    ---------------------
     
    This Agreement shall remain in full force and effect as to each and every
    transaction between Bank and Applicant up to and including the Maturity Date
    set forth above; provided, however no Letter of Credit may have an
    expiration date later than such Maturity Date. All indemnities, covenants,
    agreements, representations and warranties made in this Agreement shall
    survive the issuance by the Bank of the Letters of Credit and shall continue
    in full force and effect so long as any Letter of Credit, or any portion
    thereof shall be unexpired or any sums drawn thereunder or other amounts
    owing hereunder shall remain unpaid, provided, however, that the provisions
    of Section 6(b)(iii), 6(c), 7(c), 12(i) and 12(k), 12(l) and 12(n) shall
    survive the termination of this Agreement.
     
12. Miscellaneous Provisions.
    ------------------------
     
    a)    The Letters of Credit and this Agreement shall be
          governed by and construed in accordance with the
          laws of the State of California applicable to
          contracts made and to be wholly performed within
          such State.  Unless inconsistent with such state
          law or except so far as otherwise expressly stated
          in the Letter of Credit, the Letters of Credit and
          this Agreement are subject to the terms of the UCP
          in effect on the date of the Application; provided,
          however, without limiting the foregoing, Articles
          41 and 43 of the UCP 500 shall have no application
          to the Letters of Credit or this Agreement.  In the
          absence of proof expressly to the contrary, the UCP
          shall serve as evidence of general banking usage.

                                       7
<PAGE>
 
    b)    No party to this Agreement may assign its rights or
          obligations under this Agreement without the prior
          written consent of both the Bank and the Applicant,
          except that the obligations of Bank under this
          Agreement may be provided or fulfilled by any
          affiliate of Bank so long as Bank assumes full
          responsibility for such obligations.
   
    c)    This Agreement and any exhibits hereto constitute
          the entire agreement and contract between the
          parties and supersede any and all prior agreements,
          proposals, negotiations and representations
          pertaining to the obligations and duties to be
          performed under this Agreement.  No amendments or
          modifications of this Agreement shall be valid
          unless evidenced in writing and signed by or on
          behalf of Applicant and Bank. 
     
    d)    Except as otherwise provided in this Agreement, all
          notices required to be given pursuant to this
          Agreement shall be effective when received, and
          shall be sufficient if given in writing, hand
          delivered, sent by First Class United States Mail,
          postage prepaid, by telecopier or air courier and
          addressed to the appropriate party at its address
          as shown on the signature page hereof or at such
          other address as the sending party shall have been
          advised in writing.  
           
    e)    Any provision of this Agreement which is prohibited
          or unenforceable in any jurisdiction shall, as to
          such jurisdiction, be ineffective to the extent of
          such prohibition or lack of enforceability without
          invalidating the remaining provisions hereof or
          affecting the validity or enforceability of such
          provision in any other jurisdiction; wherever
          possible, each provision of this Agreement shall be
          interpreted in such manner as to be effective and
          valid under applicable law. 
     
    f)    This Agreement may be executed in any number of
          counterparts and by different parties hereto in
          separate counterparts, each of which when so
          executed and delivered shall be deemed to be an
          original and all of which taken together shall
          constitute but one and the same instrument.  
     
    g)    If this Agreement is signed by two or more
          Applicants, it shall constitute the joint and
          several agreement of such parties, provided that
          the Designated Party (as set forth below) shall
          have the exclusive right to issue all instructions
          relating to the Letters of Credit including,
          without limitation, instructions as to the
          disposition of documents and any unutilized funds,
          waiver of discrepancies and to agree with the Bank
          upon any amendments, modifications, extensions,
          renewals or increases in the Letters of Credit or
          further financing or refinancing of any transaction
          effected hereunder, irrespective of whether the
          same may now or hereafter affect the rights of any
          party hereto or of their legal representatives,
          heirs or assigns.  The Designated Party shall have
          specimen signatures on file

                                       8
<PAGE>
 
          with the Bank and the Bank may give notices
          to the Designated Party without notice to any
          other party.
     
    h)    Any and all payments made to Bank hereunder shall
          be made free and clear of, and without deduction
          for, any present or future taxes, levies, imposts,
          deductions, charges or withholdings of any nature,
          and all liabilities with respect thereto, excluding
          taxes imposed on net income of the Bank and all
          income and franchise taxes of the United States and
          any political subdivision thereof imposed on the
          Bank and any penalties for late taxes due
          thereunder (all such non-excluded taxes, levies,
          imposts, deductions, charges, withholdings and
          liabilities are referred to herein as "Taxes").  If
          the Applicant shall be required by law to deduct
          any Taxes from or in respect to any sum payable
          hereunder (i) the sum payable shall be increased as
          may be necessary so that after making all required
          deductions (including deductions applicable to
          additional sums payable under this Section 12(i),
          the Bank shall receive an amount equal to the sum
          the Bank would have received had no deductions been
          made; (ii) the Applicant shall make all such
          deductions; and (iii) the Applicant shall pay the
          full amount deducted to the relevant taxation
          authority or other authority in compliance with
          applicable law.  The Applicant shall indemnify the
          Bank for the full amount of Taxes (including,
          without limitation, any Taxes imposed by any
          jurisdiction on amounts payable hereunder) paid by
          the Bank and any liability (including penalties,
          interest and expenses) arising therefrom or with
          respect thereto, whether or not such Taxes were
          correctly or legally asserted.  Applicant reserves
          the right to present a claim to the Bank for taxes
          paid that the Applicant believes were incorrectly
          or illegally asserted; provided that, the Bank is
          under no obligation to honor such claim unless the
          Bank has been fully reimbursed for such tax
          payments arising from incorrectly or illegally
          asserted taxes.  Payment upon this indemnification
          shall be made within thirty (30) days from the date
          the Bank makes written demand therefor.  Within
          thirty (30) days after date of the payment of
          Taxes, the Applicant will furnish to the Bank the
          original or certified copy of a receipt evidencing
          payment thereof.
     
    i)    If any of the Letters of Credit shall contain any
          provision for automatic renewal, the Applicant
          acknowledges and agrees that the Bank is under no
          obligation to allow such renewal to occur and any
          such renewal shall remain within the sole and
          absolute discretion of the Bank.  The Applicant
          hereby irrevocably consents to the automatic
          renewal of each such Letter of Credit in accordance
          with its terms should the Bank decide to allow such
          renewal to occur; provided, however, that the
          Applicant shall have the right to request the Bank
          to disallow such renewal on the condition that the
          Applicant shall give the Bank prior written notice
          of such request not

                                       9
<PAGE>
 
          less than thirty (30) days prior to the deadline
          imposed upon the Bank for notification to the
          beneficiary of non-renewal of the Letter of Credit.
     
    j)    Each party signing as Applicant and any guarantor
          thereof agrees that if any amount paid to the Bank
          hereunder is rescinded or must be otherwise
          restored or returned by the Bank due to the
          insolvency, bankruptcy, liquidation or
          reorganization of any party hereto, each party's
          obligations hereunder with respect to each such
          amount shall be reinstated to the same extent as if
          such payment had not been made.
  
    k)    Regardless of the expiration date of any Letter of
          Credit, the Applicant shall remain liable hereunder
          until the Bank is released from liability by every
          person, firm, corporation or other entity which is
          entitled to draw or demand payment under the Letter
          of Credit.
  
    l)    Applicant agrees to indemnify and hold Bank
          harmless from each and every claim, demand,
          liability, loss incurred, cost or expense
          (including, but not limited to, reasonable
          attorneys' fees and court costs) which may arise or
          be created by Bank's acceptance of
          telecommunication instructions in connection with
          the Letters of Credit, including, but not limited
          to, telephone or facsimile instructions in
          connection with any waiver of discrepancies.
     
    m)    Applicant, or in the case of more than one person
          signing as Applicant, the Designated Party, agrees
          to examine promptly all instruments and documents
          delivered to the Applicant or Designated Party, as
          the case may be, from time to time and in the event
          the Applicant or Designated Party shall have any
          claim of non-compliance with their instructions or
          of discrepancies or other irregularity, the
          Applicant or the Designated Party, as the case may
          be, shall immediately notify the Bank thereof in
          writing.  The Applicant and the Designated Party
          shall conclusively be deemed to have waived any
          such claim against the Bank unless such notice is
          given within 14 business days after the Applicant
          or Designated Party has received constructive
          notice of non-compliance with their instructions or
          of discrepancies or other irregularities.
     
    n)    For multiple parties signing as Applicant, such
          parties may request that the Letter of Credit be
          issued with the name of one of the Applicants, and
          agree that such Applicant shall be the Designated
          Party for the purposes of this Agreement.
     
    o)    The parties hereto each hereby submit to the
          jurisdiction of the courts of the State of
          California, the venue of which shall be in the
          County of Los Angeles and the United States
          District Court located in such County, as well as
          to the jurisdiction of all courts to which an
          appeal may be taken or 

                                       10
<PAGE>
 
          other review sought from the aforesaid courts, for
          the purpose of any suit, action or other proceeding
          arising out of Applicant's obligations under or with
          respect to this Agreement and the Letters of Credit and
          expressly waives any and all objections it may have
          as to venue in any such courts.
  

IN WITNESS WHEREOF, Applicant and Bank have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
  
     CALMAT CO.                                         BANK
  
By: /s/ Edward J. Kelly                         By: /s/ John H. Penfield
   ______________________                          ______________________
   Edward J. Kelly                                 John H. Penfield


Title:  Sr. Vice President, Treasurer           Title: Vice President
        and Chief Accounting Officer
  

By: /s/ Richard S. Yamashita                    By: /s/ David J. Stassel
    ________________________                        ______________________ 
    Richard S. Yamashita                            David J. Stassel    

Title:  Assistant Treasurer                     Title: Vice President
                          

Address:                                        Address:
  
3200 San Fernando                               300 South Grand Avenue
Los Angeles, California 90065                   Suite 1115
                                                Los Angeles, California  90071
  
Attn: Treasury Department                       Attn: David J. Stassel,
                                                      Vice President
  
  

     APPLICANT                                  Address:
                                                3200 San Fernando 
                                                Los Angeles, California

By: /s/ Edward J. Kelly                
   ______________________
   Edward J. Kelly

Title: Sr. Vice President, Treasurer
       and Chief Accounting Officer
  
By:______________________
   Richard S. Yamashita

Title:  Assistant Treasurer
                          

                                       11
<PAGE>
 
                            Exhibit 2
                        Application for a
                     Standby Letter of Credit



September 26, 1995


ABN AMRO Bank N.V.
Los Angeles International Branch
300 South Grand Avenue, Suite 1115
Los Angeles, California  90071

Attn:  Ms. Lily Yang
       Assistant Vice President and
       Manager, Trade Services


Reference:  Request for Standby Letter of Credit to be issued to:
            (Beneficiary name)


Dear Lily:

CalMat Co. hereby authorizes ABN AMRO Bank to issue an Irrevocable Standby 
Letter of Credit by teletransmission (or other means as CalMat determines) to:


Beneficiary:        (Beneficiary name and full address)


          Attn:  (Beneficiary contact plus telephone number)

               Amount:  USD $________________

For the account of: CalMat Co. (and, where applicable, a CalMat subsidiary
                    as Co-applicant).
<PAGE>
 
--------------------------------------------------------------------------------
                         BENEFICIARY NAME
                     Standby Letter of Credit
--------------------------------------------------------------------------------

BEGIN TEXT
----------

We hereby establish our irrevocable Standby Letter of Credit No. ______________
for the account of CalMat Co. as follows:

               insert appropriate text; as an example:






For an amount not to exceed USD ___________________________________________

available by sight draft drawn on us by the Beneficiary in an amount not to
exceed the amount of this Standby Letter of Credit. Such sight draft to be
presented to us at _______________________ (bank location) ______________, 
not later than (insert date), and to be accompanied by this Standby Letter 
of Credit together with the following:

A Certificate executed by an officer of (Beneficiary), reading as follows:

"We are drawing under ___________________ (Bank Name) ______________ Letter of
Credit Number ______________ because .... (insert appropriate language, if
any)."

The sight draft will be honored and payment will be made by us on presentation
to us on or before (insert date), at which time this Standby Letter of Credit
expires, and becomes null and void, whether it is returned to us or not.

END TEXT
--------


--------------------------------------------------------------------------------

                                       2
<PAGE>
 
Expiry Date of Standby Letter of Credit:     (repeated date insertion)


STANDBY LETTER OF CREDIT TEXT ATTACHED
--------------------------------------

In consideration of your issuing this letter of credit pursuant to this 
request/application, or amendment thereto requested by us, we agree with you 
that it is established subject to the Master Letter of Credit Agreement on
file with you.

This letter of credit is subject to the Uniform Customs and Practices for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500.

For questions and clarification of any terms or conditions you may contact
(a CalMat contact) at (213) 258-2777.

Regards,


CalMat Co.

By:________________________
     (authorized signer)



--------------------------------------------------------------------------------

                                       3