<PAGE>
 
                                                                    EXHIBIT 10.1

                    [LETTERHEAD OF CALMAT CO APPEARS HERE]


                              September 22, 1998


Mr. Edward J. Kelly
3200 San Fernando Road
Los Angeles, California 90065


Dear Ed:

          It is with a great deal of pleasure that I am extending to you an
offer to enter into an employment agreement with CalMat in your position as
Senior Vice President, Corporate Development. This letter will outline the terms
of CalMat's offer. We ask that you signify your acceptance of these terms by
signing the duplicate copy of this letter that is enclosed, and returning it to
me as soon as possible.

     I.   Base Salary
          -----------

          Your current base salary of $17,064 per month (which annualizes to 
$204,765 a year) will be reviewed from time to time in accordance with the 
CalMat Executive Compensation Program.

     II.  Bonus
          -----

          You will continue to be eligible for bonus consideration for fiscal 
year 1998 and future years in accordance with the Company's program for senior 
executive bonuses.

     III. Stock Options          
          -------------

          You will continue to be eligible to participate in the Company's 
existing stock option plans. Any future grants would be made in accordance with 
the CalMat Executive Compensation & Stock Option program.

     IV.  Pension/401-K          
          -------------

          You will continue to be eligible to participate in the CalMat 
Retirement Savings Program for Salaried Employees.
<PAGE>
 
Mr. Edward J. Kelly                                [LOGO OF CALMAT APPEARS HERE]
September 22, 1998                                         
Page 2



     V.    Supplemental Executive Retirement Plan (SERP)
           ---------------------------------------------

               You will also continue to be eligible to participate in the
CalMat Supplemental Executive Retirement Plan (SERP).

     VI.   Nonqualified Deferred Compensation Plan 
           ---------------------------------------

           You will continue to be eligible to participate in the Nonqualified
Deferred Compensation Plan and have the option of deferring salary and bonus.

     VII.  Health and Welfare
           ------------------

           You will continue to be eligible to participate in the CalMat health 
and welfare plans for salaried employees and receive medical, dental and vision 
benefits. In addition, the Company will continue to provide, in accordance with 
each plan, life insurance in the amount of three times annual base salary; 
accidental death and dismemberment insurance in the amount of two times annual 
base salary; travel accident insurance; and long-term disability insurance 
providing for 60% of base salary. You may purchase supplemental life and/or 
accident insurance.

     VIII. At-Will Employment and Severance Arrangements
           ---------------------------------------------

           By accepting employment on the terms set forth in this offer letter, 
you agree that your employment and compensation are at-will and therefore can be
terminated, with or without cause, at any time, and without prior notice, at 
your option or the Company's option. Terminations for cause, as determined by 
CalMat, are of course without severance. This at-will employment relationship 
will remain in effect throughout your employment with the Company, unless it is 
specifically modified by an express written employment agreement, authorized by 
the Company's Board of Directors.

           No CalMat employment policy, nor any written or oral statement or 
promise, nor any course of conduct, practice, award, promotion, transfer, or 
length of service creates an express or implied contract modifying this at-will 
relationship. Your acceptance of at-will employment with CalMat is a material 
part of this offer of employment and is an express condition of your employment.

           In the event that CalMat at any time chooses to exercise its right to
terminate you without cause, you will receive a lump-sum payment equal to two
years of your then-existing base salary, less legally required deductions and
withholdings, as severance pay. In addition, CalMat will waive payment of costs
of continued health coverage under COBRA for up to twenty-four months.
 
<PAGE>
 
Mr. Edward J. Kelly                               [LOGO OF CALMAT APPEARS HERE] 
September 22, 1998
Page 3                                                       

These will be the only payments to which you will be entitled in the event of
termination without cause.

     IX.  Change in Control
          -----------------

          We are also prepared to enter into a Change in Control Agreement, in 
the form attached as Annex A to this letter, to offer you certain additional 
benefits in the event of a change in control of CalMat.

                                 *  *  *  *  *

                                        
                                        Very truly yours,

                                        /s/ A. Frederick Gerstell
                                        A. Frederick Gerstell

Acceptance:

I hereby accept the terms and conditions stated above.


Dated:  10/30, 1998


/s/ Edward J. Kelly
-------------------------
    Edward J. Kelly

<PAGE>
 
ANNEX "A"
September 22, 1998

                                   AGREEMENT

     This Agreement ("Agreement") is effective as of September 22, 1998, between
CALMAT CO., a Delaware corporation (hereinafter called "Company") and EDWARD J. 
KELLY (hereinafter called "Executive").

                                   RECITALS

     A.   The Executive presently serves as Senior Vice President, Corporate 
Development, of the Company.

     B.   In the event the Company becomes subject to any proposed or threatened
change in control, it is imperative that the Company and the Board of Directors 
be able to rely upon Executive's advice as to the best interests of the Company 
and its stockholders without concern that the Executive might be distracted by 
the personal uncertainties and risks created by such a proposal or threat.

     C.   In the event the Company receives any such proposal or threat, 
Executive may, in addition to Executive's regular duties, be called upon to 
assist in the assessment of such matters, advise management and the Board of 
Directors as to whether such proposals or other matters would be in the best 
interests of the Company and its stockholders, and to take such other actions as
the Board of Directors might determine to be appropriate.

     D.   Accordingly, the Management Development and Compensation Committee 
(the "Compensation Committee") has authorized the Company to enter into this 
Agreement with Executive to assure the Company that it will have the continued 
dedication of Executive and the availability of Executive's advice and counsel, 
notwithstanding the possibility, threat or occurrence

                                       1
<PAGE>
 
ANNEX "A"
September 22, 1998

of an effort to take over control of the Company, and to induce Executive to 
remain in the employ of the Company.


                                   AGREEMENT


     NOW, THEREFORE, in consideration of the foregoing recitals and the promises
and conditions herein contained, it is agreed that the following terms of 
employment which are set forth in this Agreement shall take effect automatically
without any further action by the Company, Board of Directors or Compensation 
Committee on the day preceding any change in Control of the Company (as defined 
in Section 3.4 below), but such terms of employment shall have no force or 
effect unless a Change in Control occurs.

     This Agreement shall remain in effect unless otherwise terminated by
resolution of the Compensation Committee or the Board of Directors.
Notwithstanding the foregoing, in no event shall this Agreement terminate within
three (3) years after a Change in Control of the Company without the written
consent of Executive. It is the Company's intention to provide to Executive the
benefits set forth herein if the Company is subject to any Change in Control and
the other applicable conditions of this Agreement are satisfied. The Company
shall notify Executive in writing at least three (3) years prior to the
effective date of termination if the Compensation Committee or Board of
Directors determines to terminate this Agreement.

     Unless this Agreement is terminated as provided above, the following terms 
of employment which are set forth in this Agreement shall become effective on 
the day preceding any Change in Control of the Company.

     Until the terms of employment set forth in this Agreement become effective,
the letter agreement with respect to severance benefits in the event of 
termination without cause dated September 22, 1998, previously entered into by 
the Company and Executive, as such agreement may be amended from time to time 
(hereinafter referred to as the "Letter Agreement") shall

                                       2


<PAGE>
 
ANNEX "A"
September 22, 1998


remain in effect. The Letter Agreement shall terminate upon a Change in Control 
of the Company and thereafter shall have no further force or effect. In no event
shall the amounts and benefits under the Letter Agreement and this Agreement be 
additive to one another.


                                   ARTICLE I


                                  EMPLOYMENT


Section 1.1: Position, Duties and Responsibilities of Executive
             --------------------------------------------------


        The Company shall employ the Executive as Senior Vice President,
Corporate Development. In such position, the Executive shall have at least such 
responsibilities and powers as set forth in the Bylaws of the Company in effect 
on the date hereof. During his employment hereunder, the Executive shall devote 
his full energies, interest, abilities and productive time during normal 
business hours to the performance of this Agreement and shall, without the 
Company's prior written consent in each instance, refrain from rendering 
services of any kind to others for compensation or which would materially 
interfere with the performance of his duties under this Agreement. 
Notwithstanding the foregoing, the Executive may serve as a director of other 
companies with the consent of the Company's Board of Directors.
 
Section 1.2: Term of Employment
             ------------------ 


        (a)  The Executive shall be employed for a term commencing on the day 
preceding any Change in Control of the Company, and ending upon such termination
date as is set forth in a written notice given by either party terminating this 
Agreement, provided that such termination date will occur not less than three 
years subsequent to the date upon which such notice is given. For example, this 
Agreement could be terminated on the third anniversary of a Change in Control by
written notice given by either party on the date of the Change in Control.

                                       3

<PAGE>
 
ANNEX "A"
September 22, 1998

     (b)  During the term of employment, this Agreement for the Executive's 
employment shall not be subject to termination at the instance of the Company 
for any reason except for Cause pursuant to Section 1.2(c). Except in the event 
of termination of Executive's employment for Cause pursuant to Section 1.2(c), 
the Executive's compensation and other benefits as provided herein shall 
continue unabated during the full term of employment under this Agreement and 
otherwise as provided herein; provided, however, that the Board of Directors of 
the Company shall have the right, acting in accordance with the Bylaws of the 
Company, to remove the Executive from office as Senior Vice President, Corporate
Development, of the Company in the event the Executive acts in any way which has
a direct, substantial and adverse effect upon the reputation or condition of the
Company, in which event the Executive may terminate his employment pursuant to 
Section 1.5. The Board of Directors of the Company may also terminate 
Executive's employment for Cause pursuant to Section 1.2(c).

     (c)  Notwithstanding any other provision of this Agreement, the Board of 
Directors of the Company may terminate Executive's employment for Cause pursuant
to this Section 1.2(c).  The Company shall have the right to terminate
Executive's employment with the Company for Cause (A) immediately upon written 
notice from the Company, if the Board of Directors shall reasonably determine 
that the conduct or cause specified in such notice is not curable, or (B) upon 
thirty days' written notice from the Company, if the Board of Directors shall 
determine that the conduct or cause specified in such notice is curable, unless 
the Executive has commenced to cure the conduct or cause specified in such 
notice within 10 days following the date of such notice and has completed the 
cure within 30 days following the date of such notice.

     For the purposes of this Agreement, "Cause" means: (i) willful malfeasance 
or gross negligence by Executive in the performance of his duties under this 
Agreement, (ii) any act of fraud, insubordination or other conduct by Executive 
which demonstrates gross unfitness for service, or (iii) Executive's conviction 
(or entry of a plea of guilty, nolo contendere or the 

                                       4
<PAGE>
 
ANNEX "A"
September 22, 1998


 equivalent) for any crime involving mortal turpitude, dishonesty or breach of 
trust or any felony which is punishable by imprisonment in the jurisdiction 
involved.
     
     If the Executive's employment is terminated for Cause, the Company will pay
Executive his annual base salary and continue to provide the benefits described 
in Section 3.2 through the date of termination and thereafter will not have 
further obligations under this Agreement. 

Section 1.3:   Termination of Agreement Upon Disability of Executive
               -----------------------------------------------------

     If at the end of any calendar month the Executive is and has, for six (6) 
full months, continuously been unable, due to mental or physical illness or 
injury, to perform his duties under this Agreement in his normal and regular 
manner, this Agreement shall be terminated subject to the provisions of Section 
3.1.

Section 1.4:   Termination of Agreement Upon Death of Executive
               ------------------------------------------------

     If the Executive dies, this Agreement shall be terminated on the last day 
of the calendar month of his death.

Section 1.5:   Termination of Employment by the Executive 
               ------------------------------------------

     If, without the Executive's express written consent, the Company (i) 
significantly reduces the importance of the functions, duties, responsibilities 
or authority of the Executive, (ii) reduces the Executive's compensation or 
benefits, or (iii) relocates the principal executive office of the Company to a 
location outside of Los Angeles County or reassigns the Executive to a location 
other than the principal executive office of the Company (except for required 
travel on the Company's business to an extent substantially consistent with the 
Executive's travel obligations existing on the date of this Agreement), then the
Executive may inform the Company that such action by the Company constitutes 
constructive notification under Section 1.2 that this Agreement

                                       5

<PAGE>
 
ANNEX "A"
September 22, 1998


will be terminated three years thereafter. After any such constructive notice or
actual notice to the Executive of the termination of this Agreement pursuant to 
Section 1.2 other than for Cause, the Executive may at any time terminate his 
employment with the Company. In the event of such a termination of employment 
by the Executive, the Company shall within 72 hours after such termination make
a payment to the Executive of the lump-sum value (without any present-value 
discount or adjustment for inflation) of the salary and benefits that would 
have been provided to the Executive for the period from the date of such 
termination until the date which is three years from the date of such 
constructive or actual notice, and the Executive shall be free to seek and 
obtain other employment or arrangements for the rendition of personal services 
with or to others, notwithstanding the provisions of Section 1.1, and without a
reduction of his compensation and benefits hereunder.

                                  ARTICLE II


                                 COMPENSATION


Section 2.1: Salary
             ------

     The Company shall pay a base salary to the Executive from the term hereof 
at the minimum rate which was in effect on the day preceding the Change in 
Control of the Company. During the term hereof, the Executive's salary may be 
increased by the Company's Board of Directors, in which event this Agreement 
shall be deemed amended to reflect such increases.


Section 2.2: Travel and Entertainment Expense 
             --------------------------------     

     The Company shall reimburse the Executive for reasonable travel and 
entertainment expenses incurred in behalf of the Company in the performance of 
his duties hereunder.

                                       6
<PAGE>
 
ANNEX "A"
September 22, 1998

                                  ARTICLE III


                                OTHER BENEFITS

Section 3.1:   Payments on Account of Disability of Executive
               ----------------------------------------------

     If this Agreement is terminated under Section 1.3 after a Change in 
Control of the Company, the Company shall continue to pay to the Executive on 
account of his disability the biweekly or semimonthly salary installments under 
Section 2.1 at the salary rate in effect on the date of said termination 
(subject to adjustment pursuant to Section 3.3) and to provide him with benefits
as described in Section 3.2, until three years after the Executive is given 
notice of such termination; provided, however, that in the event of the 
Executive's death such monthly installments as shall be payable hereunder shall 
terminate. The payments made hereunder will be reduced by any disability 
benefits paid to Executive under disability plans or insurance provided by the 
Company.

Section 3.2:   Participation in Other Company Benefits
               ---------------------------------------

     In addition to the benefits provided in this Agreement the Executive shall 
throughout the term hereof (prior to death) be entitled to and shall receive all
other benefits generally available to other executives of the Company, including
(without limitation) benefits under the Company's medical, health, disability, 
death benefit, profit sharing and bonus and other incentive compensation plans
(other than stock option plans). The Executive shall be entitled to receive 
benefits which are at least as great in scope and amount as those which he 
received immediately prior to the Change in Control. The Executive shall also be
entitled to benefits under the Company's Supplemental Executive Retirement Plan 
("SERP"), whether or not the SERP is available to other executives. If the 
Executive's employment is terminated after a Change in Control pursuant to 
Section 1.2(b), Section 1.3 or Section 1.5: (i) the amount the Executive

                                       7

<PAGE>
 
ANNEX "A"
September 22, 1998

otherwise would have received as bonus payments for the period after the 
termination shall be determined assuming that he would be entitled to an annual 
bonus or bonuses at an annual rate at least equal to the average of his annual 
bonuses for the preceding two years, and that he would be entitled to receive a 
pro-rata portion of such amount for any period shorter than a full calendar
year; (ii) the amount of the profit sharing plan contributions otherwise made on
behalf of the Executive shall be determined assuming that the level of Company
contributions to the plan would equal the average of such levels for the
preceding two years; (iii) the payment for the value of welfare benefits shall
be based on the current cost of such coverage to the Company and shall take into
account the Executive's entitlement to participate in the Company's welfare
benefit plans for retirees (if he would have qualified for such participation
assuming he had an additional three years of service); (iv) the amount to which
the Executive would otherwise be entitled under the SERP shall be determined (A)
based on his age at the date he would otherwise have terminated employment, (B)
taking into account the years of vesting service and the salary and bonuses he
would have earned through such date based on his salary rate in effect at his
actual termination date and assuming that he would be entitled to bonuses as
provided in (i) above, increased using the 6.5% compensation scale assumption
adopted by the SERP for funding the SERP trusts, (C) deeming the amount of the
Executive's Employer Contribution Benefit (as defined in the SERP) to include
the amount in (ii) above, (D) assuming payments of SERP benefits would not have
commenced prior to the date the Executive would otherwise have terminated
employment, and (E) permitting the Executive to elect to receive (without a
penalty) a lump sum payment upon his termination of employment which is the
Actuarial Equivalent (as defined in the SERP) of the lump sum payment which
would have been payable to Executive (if he made a timely election to receive a
lump sum payment) on the date he would have otherwise terminated employment; and
(v) the Executive's vested interest under all Company plans shall be determined
assuming he had an additional three years of service.

                                       8
<PAGE>
 
ANNEX"A"
September 22, 1998

Section 3.3: Cost of Living Adjustment
             -------------------------

     The biweekly or semimonthly payments to be paid to or on account of the
Executive in any year under Section 3.1 shall be increased on January 1 of each
year after Executive terminates employment (the "adjustment date") in the same
proportion as the proportional difference between the "Consumer Price Index for
Urban Wage Earners, Clerical Workers, all items (Los Angeles - Long Beach - 
Anaheim areas)," published by the United States Department of Labor, Bureau of 
Labor Statistics (the "CPI"), in effect on the adjustment date and the CPI in 
effect on January of the year in which Executive terminates employment. 
Should the Bureau of Labor Statistics discontinue publication of the CPI, or 
publish the same less frequently, or alter the same in any manner, then the 
Company may adopt a substitute index or substitute procedure which reasonably
reflects and monitors consumer prices. A decline in the CPI shall not serve as a
basis for a reduction in the biweekly or semimonthly payments to be paid to or
on account of the Executive.

Section 3.4: Stock Options
             -------------

     The Company shall amend all outstanding Stock Option Agreements with the 
Executive to provide, and shall provide in future options under the Company's 
Stock Option Plans or future stock option plans, that the Executive may 
accelerate the exercisability of all options to acquire shares covered by such 
Stock Option Agreements, and by future agreements, upon (i) the occurrence of a 
"Change in Control of the Company" (as such term is defined in the Agreement); 
and (ii) the termination of the Executive's employment by the Company for any 
reason other than "Cause" (as such term is defined in this Agreement). For the 
purposes of this Agreement, a "Change in Control of the Company" shall be deemed
to have occurred if (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), 
other than a trustee or other fiduciary holding securities under an employee 
benefit of the Company, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the 
Company representing 50% or more of

                                       9
<PAGE>
 
ANNEX "A"
September 22, 1998

the combined voting power of the Company's then outstanding securities 
regardless of whether or not the Board of Directors shall have approved such 
Change in Control, (ii) the shareholders of the Company approve (a) a merger or 
consolidation of the Company with any other corporation regardless of which 
entity is the surviving company, other than a merger or consolidation which 
would result in the voting securities of the Company outstanding immediately 
prior thereto continuing to represent (either by remaining outstanding or by 
being converted into voting securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of the Company or such 
surviving entity outstanding immediately after such merger or consolidation or 
(b) a plan of complete liquidation of the Company or agreement for the sale or 
disposition by the Company of all or substantially all of the Company's assets, 
or (iii) during any period of two consecutive years, individuals who at the 
beginning of any such period constitute the Directors of the Company cease for 
any reason to constitute at least a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new Director of 
the Company was approved by a vote of at least a majority of such Directors of 
the Company then still in office who were Directors of the Company at the 
beginning of any such period.


                                  ARTICLE IV

                              GENERAL PROVISIONS

Section 4.1:  Assignability of Agreement
              --------------------------

     The rights and duties of the parties hereunder shall not be assignable by 
either party, except that this Agreement and all rights and obligations 
hereunder shall be assigned by the Company and its express assumption in writing
required by any corporation or other business entity which succeeds to all or 
substantially all of the business of the Company through merger, consolidation, 
corporate reorganization, or by acquisition of all or substantially all of the 
assets of the Company.

                                      10
<PAGE>
 
ANNEX "A"
September 22, 1998

Section 4.2:  Integration
              -----------

     Except for the Letter Agreement and as provided in Sections 2.1 and 3.2 
hereof, this Agreement contains the entire agreement between the parties and 
supersedes all prior agreements, understandings, commitments and practices, 
whether written or oral. No amendments to this Agreement may be made except by a
writing signed by both parties. This Agreement shall be construed according to 
the laws of the State of California.

Section 4.3:  Notices
              -------

     Any notice to the Company required or permitted hereunder shall be given in
writing to the Secretary of the Company either by personal service or by 
registered mail, postage prepaid, addressed to the Company at its principal 
place of business. Any such notice to the Executive shall be given in a like
manner and if mailed shall be addressed to the Executive at his home address
then shown in the files of the Company. For the purpose of determining
compliance with any time element herein, a notice shall be deemed given on the
postmarked date.

Section 4.4:  Indemnification Provisions
              --------------------------

     The indemnification provisions set forth in Article VII of the Bylaws of 
the Company in effect on the date hereof are hereby incorporated by reference as
a material term of this Agreement, constitute material consideration for the 
Executive's agreement hereunder and will, as in effect on the date hereof, 
continue to be a material term of this Agreement without regard to their future 
amendment or repeal unless the Executive expressly agrees in writing to accept 
such amendment or repeal as an amendment of this Agreement.

                                      11
<PAGE>
 
ANNEX "A"
September 22, 1998

Section 4.5:  Additional Payments to the Executive
              ------------------------------------

     In the event that any amounts or benefits which are paid to the Executive 
by the Company or any other person or entity pursuant to this Agreement or any 
deferred compensation plan or agreement, stock option plan or other plan, 
agreement or arrangement are subject to the excise tax imposed by Section 4999 
of the Internal Revenue Code of 1986, as amended (the "Code") or any similar 
state tax provision, the Company shall pay the Executive an additional amount 
(the "Gross-Up Payment") such that the net amount of the payments and benefits 
retained by the Executive, after deduction of any excise tax thereon and any 
interest payable with respect to such excise tax, and any federal and state 
income tax and any excise tax upon the Gross-Up Payment, shall be equal to the 
payments and benefits which the Executive would have received absent the 
application of such excise tax. The Gross-Up Payment shall be paid to the 
Executive upon the earlier of (i) the time at which the Company withholds such 
excise tax from any payments to the Executive or (ii) 30 days after the 
Executive notifies the Company that the Executive has filed a tax return which 
takes the position that such excise tax is due and payable in reliance on a 
written opinion of the Executive's tax counsel that it is more likely than not
that such excise tax is due and payable. If the Executive makes any payment with
respect to any such excise tax as a result of an adjustment of the Executive's
tax liability by any federal, state or local authority, the Company will pay
such Gross-Up Payment within 30 days after the Executive notifies the Company of
such payment. Without limiting the obligation of the Company hereunder, the
Executive agrees, in the event the Executive makes any payment pursuant to the
preceding sentence, to negotiate with the Company in good faith with respect to
procedures reasonably requested by the Company which would afford the Company
the ability to contest the imposition of such excise tax; provided, however,
that the Executive will not be required to afford the Company any right to
contest the applicability of any such excise tax to the extent that the
Executive reasonably determines that such contest is inconsistent with the
overall interests of the Executive. The Company agrees to hold in confidence and
not to disclose, without the Executive's prior written consent, any information

                                      12
<PAGE>
 
ANNEX "A"
September 22, 1998

with regard to the Executive's tax position which the Company obtains pursuant 
to this Section 4.5.


Section 4.6:  Rights to Arbitrate
              -------------------

     The Executive shall have the right, in addition to all other rights and 
remedies in law or in equity, at his election, to seek arbitration in Los 
Angeles County, California, under the Employment Dispute Resolution Rules of the
American Arbitration Association, in the event of any dispute concerning this 
Agreement.

Section 4.7:  Attorneys' and Accountants' Fees 
              --------------------------------

     The Company shall pay to the Executive all legal and accounting expenses 
and fees incurred by Executive in seeking to obtain or enforce any right or 
benefit provided by this Agreement after a Change in Control of the Company or 
in connection with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit under this 
Agreement, without regard to whether the Executive prevails in obtaining or 


                                      13
<PAGE>
 
ANNEX "A"
September 22, 1998

enforcing such right or benefit. The Company shall pay to the Executive any 
expenses and fees incurred in any such proceeding promptly after receipt by the 
Company of a written notice by the Executive that he has incurred such fees or 
expenses.

     EXECUTED by the parties this 30th day of October, 1998.

EDWARD J. KELLY                       CALMAT CO.

"Executive"                           "Company"


By /s/ Edward J. Kelly                 By /s/ A. Frederick Gerstell
   -------------------                    -------------------------
                                          Chairman of the Board and
                                          Chief Executive Officer

                                      By /s/ Paul Stanford
                                        ---------------------------
                                          Secretary   

                                      14