<PAGE>
 
                                                                    EXHIBIT 10.1

[LETTERHEAD OF CALMAT]


                                       May 11, 1998



Mr. George H. Gilmore
631 Blackthorn Road
Winnetka, Illinois 60093

Dear George:

          It is with a great deal of pleasure that I am extending to you an
offer to join CalMat in the position of President and Chief Operating Officer.
This letter will outline the terms of CalMat's offer.  We ask that you signify
your acceptance of employment on 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
          -----------

          From the time you begin work at CalMat your base salary will be
$35,416.67 per month (which annualizes to $425,000 a year).  This salary is to
be reviewed from time to time in accordance with the CalMat Executive
Compensation Program.

     II.  Bonus
          -----

          You will be eligible for bonus consideration for fiscal year 1998 and
future years in accordance with the Company's program for senior executive
bonuses.  Your target bonus under the program will be 50% of your base salary.
In view of the fact that you will be working only for a portion of fiscal 1998,
your bonus for this year will be pro-rated from the commencement of employment.

          As an additional inducement to employment with CalMat, you shall
receive a $75,000 bonus payable in two increments: $37,500.00 upon commencement
of employment; and, $37,500.00 upon the date that you and your family take up
residence in a home in the Los Angeles area.  You may elect to defer some or all
of these payments.
<PAGE>
 
Mr. George H. Gilmore
May 11, 1998
Page 2


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

          Effective upon your employment, you will receive 50,000 shares as an
initial grant of stock options, pursuant to the terms of the Company's existing
stock option plans.  Such options will vest at 25% per year, from date of grant.
Any future grants would be made in accordance with the CalMat Executive
Compensation & Stock Option program, but are anticipated to fall within a
targeted range of 40,000 to 50,000 shares, annually.

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

          You will be eligible to participate in the CalMat Salaried Employees
Thrift and Profit Sharing Retirement Plan.  Please note that this plan has a
one-year waiting period which cannot be waived.  You may elect to roll over any
401-K monies you currently have into the CalMat plan.  You also will be eligible
to participate in the CalMat Supplemental Executive Retirement Plan (SERP).

     V.   Nonqualified Deferred Compensation Plan
          ---------------------------------------

          You will be eligible to participate in the Nonqualified Deferred
Compensation Plan and have the option of deferring salary and bonus, in
accordance with plan rules.

     VI.  Health and Welfare
          ------------------

          You will participate in the CalMat Health and Welfare Plan for
salaried employees, following a 60-day waiting period.  To the extent not paid
by your former employer, the Company will reimburse your current employee COBRA
cost through the duration of the waiting period.  Once you are covered by the
CalMat Health and Welfare Plan, you will receive medical and dental benefits in
accordance with the plan.  In addition, the Company will provide Company-paid
life insurance of three times annual base salary; travel accident insurance; and
long-term disability insurance providing for 60% of base salary after a 90-day
waiting period. You may purchase supplemental accident insurance.

     VII. Other Benefits
          --------------

          You will be reimbursed for the initiation and monthly dues incurred by
you as a member of a downtown Los Angeles club, of your choice, and upon full
relocation a country club, to be mutually agreed upon.  A company car will be
provided to you.
<PAGE>
 
Mr. George H. Gilmore
May 11, 1998
Page 3


     VIII. Relocation
           ----------

          To aid in your relocation you will be entitled to a payment equal to
the sales costs (e.g. broker fees, etc.) attributable to your current home.  You
agree to use your best efforts to sell your home for its estimated value.
However, if you cannot do so by June 30, 1999, CalMat will cause a third party
relocation service selected by it to purchase such home, and will pay the costs
attributable to such service.

          To aid in your search for new housing in California, the Company will
reimburse you (in accordance with it's customary business travel policies)
travel, meals and hotel costs incurred in a reasonable number of visits to Los
Angeles over the next 12 months.  In addition, if you select a home to purchase
in the Los Angeles area, CalMat will, at your request, guarantee a reasonable
bridge loan to purchase such home and pay up to two points of any loan fees
incurred for such purchase. CalMat will also reimburse you for other costs
directly associated with the purchase of a new home. You will be reimbursed for
the actual moving charges incurred by you in transporting (and temporarily
storing, if necessary) your household effects to your new home. The foregoing
relocation, travel and housing costs reimbursed or paid to you will be "grossed-
up" such that, to the extent possible, you receive such amounts net of income
taxes.  You will also receive a one-time payment of one month's salary for your
assistance in the relocation.

     IX.  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, 
<PAGE>
 
Mr. George H. Gilmore
May 11, 1998
Page 4


CalMat will waive payment of costs of continued health coverage under COBRA for
up to twenty-four months. These will be the only payments to which you will be
entitled in the event of termination without cause.

     X.   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.


                 *          *          *          *          *


          In accordance with our normal employment practice, this offer is
conditioned upon successful completion of the Company's standard pre-employment
physical examination. Also, this offer is conditioned upon approval by the
CalMat Board of Directors.

          We are very excited about your joining CalMat, and we look forward to
having you on board.

                         Very truly yours,

                         /s/ A. Frederick Gerstell

                         A. Frederick Gerstell


Acceptance of offer of employment:

I hereby accept employment with CalMat on the terms and conditions stated above.


Dated: May 19, 1998


/s/ George H. Gilmore, Jr.
________________________________
        George H. Gilmore
<PAGE>
 
                                                                    EXHIBIT 10.1


                                                                         ANNEX A

                          CHANGE IN CONTROL AGREEMENT


     This Change in Control Agreement ("Agreement") is effective as of May 27,
1998, between CALMAT CO., a Delaware corporation (hereinafter called "Company")
and GEORGE H. GILMORE (hereinafter called "Executive").

                                    RECITALS

     A.   The Executive presently serves as President and Chief Operating
Officer 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 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.

                                       1
<PAGE>
 
     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 dated May __, 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 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 President and Chief Operating
Officer.  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

                                       2
<PAGE>
 
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.

     (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 President and Chief Operating
Officer 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 on 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 equivalent) for any crime
involving moral 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 base salary and continue to provide the benefits described in
Section 3.2 through the date of

                                       3
<PAGE>
 
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 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
compensation and benefits hereunder.

                                       4
<PAGE>
 
                                  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
this duties hereunder.


                                  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

                                       5
<PAGE>
 
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 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 (or if terminated prior to
December 31, 1999 at 50% of base salary), 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 (or if termination occurs prior to December
31, 1999, at an amount equal to the annualized 1998 contribution); (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 of 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.


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

                                       6
<PAGE>
 
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 (i) on the termination of
the Executive's employment by the Company after a Change in Control of the
Company for any reason other than Cause (as such terms are defined in this
Agreement) or (ii) the occurrence of a "Change in Control of the Company."   For
the purpose of this Agreement, a "Change in  Control of the Company" or "Change
in Control" 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 and 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 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 other Company cease for
any reason to

                                       7
<PAGE>
 
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.


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

          Except for the Letter Agreement and as provided in Section 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

                                       8
<PAGE>
 
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.


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 la tax
return which take 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 tax interests of the Executive.  The Company
agrees to hold in confidence and not to disclose, without the Executive's prior
written consent, any information with regard to the Executive's tax position
which the Company obtains pursuant to this Section 4.5.

                                       9
<PAGE>
 
Section 4.6:  Right 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 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 26th day of May, 1998


GEORGE H. GILMORE                      CALMAT CO.

"Executive"                            "Company"


                        
/s/ George H. Gilmore, Jr.              By  /s/ A. F. Gerstell
--------------------------                ------------------------------- 
                                           Chairman of the Board and
                                           Chief Executive Officer


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

                                       10