<PAGE>

                                                                  Exhibit 10.1



                               October 8, 2002


Charles D. Molloy, Jr.
986 Barnard College Lane
University City, Missouri 63130

Dear Charley:

         The purpose of this letter is to set forth the terms of your
continued employment by Angelica. These terms of employment will remain in
effect until such time as Angelica has determined, to its satisfaction, that
the transition activities relating to the sale of its Manufacturing and
Marketing business segment are substantially complete, or until any earlier
termination of your employment by Angelica.

         1.       EMPLOYMENT AT WILL - To whatever extent your employment by
                  ------------------
                  Angelica may continue, it will do so on an at-will basis.
                  Your employment may be terminated immediately at any time
                  by Angelica, with or without cause, upon 30 days prior
                  notice.

         2.       COMPENSATION - During your continued employment, your base
                  ------------
                  salary will be $16,666.66 per month ($200,000.00 annualized),
                  payable in accordance with Angelica's current payroll
                  practices. Except as otherwise provided in this letter, you
                  will continue to be eligible to participate in such other
                  compensation and benefit plans and programs generally
                  available to other similarly situated executives of Angelica,
                  including participation in Angelica's: Performance Plan
                  (stock options); Retirement Savings Plan (401k); Pension
                  Plan; and Supplemental Plan. You will not be eligible to
                  participate in any incentive compensation plans. It is
                  understood that Angelica may, at any time and in its sole
                  discretion, eliminate, amend, modify or replace any such
                  plan(s).

         3.       DUTIES - You will continue to serve as Vice President of
                  ------
                  Angelica Corporation and as President of Angelica's
                  Manufacturing and Marketing Business Segment (i.e.
                  Angelica Image Apparel and the Canadian operations).
                  However, your duties, authority, title and
                  responsibilities (including, but not limited to, your
                  status, offices and reporting



<PAGE>
<PAGE>

Charles D. Molloy, Jr.
Page 2
October 8, 2002

                  requirements), may be changed and/or diminished by Angelica,
                  in its sole discretion, at any time and from time to time,
                  with or without cause.

                  It is understood that Angelica has sold assets of its
                  Manufacturing and Marketing Business Segment and it is
                  agreed that your support, cooperation and assistance is
                  important to completing the successful transition
                  activities relating to those transactions so as to
                  optimize the proceeds realized by Angelica from the sale
                  and from the disposition of assets not included in the
                  sale. Accordingly, the duties and responsibilities of your
                  employment will include your full support of, as well as
                  your cooperation and assistance with Angelica's efforts to
                  complete those transition activities in a manner that
                  achieves those objectives.

         4.       SEPARATION PAYMENTS - If your employment is terminated by
                  -------------------
                  Angelica without good cause, then subject to the provisions
                  of paragraph 6 below, Angelica will pay you separation
                  payments equal to six (6) months base salary. Also, Angelica
                  will pay you further separation payments equal to an
                  additional six (6) months base salary, provided, however,
                  that these further payments during this additional six (6)
                  month period will be reduced by any amounts earned by you
                  from other employment or other services you may perform
                  during that period. All of these amounts will be paid in
                  equal, semi-monthly payments, less applicable taxes,
                  withholdings and standard deductions. To the extent that the
                  obligation to pay said amounts arises hereunder, such
                  obligation will survive the termination of your employment
                  until such time as said amounts have been paid. For so long
                  as such separation payments continue you will make yourself
                  reasonably available to Angelica for purposes of occasional
                  consultation regarding matters with which you were involved
                  during your employment.

                  For purposes of this letter, "good cause" means: (i) your
                  continued failure to substantially perform your duties
                  with Angelica, including those identified in paragraph 3
                  above, (other than as a result of incapacity due to
                  physical or mental condition); (ii) your commission of an
                  act constituting a criminal offense involving moral
                  turpitude, dishonesty or breach of trust; or (iii) your
                  failure to fulfill or comply with any material term of
                  your employment. You will not be entitled to any
                  separation payments if your employment is terminated by
                  you for any reason, or by Angelica with good cause.

         5.       INCENTIVE FEE - If your employment is terminated by
                  -------------
                  Angelica without good cause, Angelica will pay you, in
                  addition to any separation payments provided for in
                  paragraph 4 above, an incentive payment of $100,000, less
                  applicable taxes, withholdings and standard deductions.


<PAGE>
<PAGE>
Charles D. Molloy, Jr.
Page 3
October 8, 2002

                  Notwithstanding anything to the contrary, it is understood
                  that if your employment is terminated by you for any
                  reason, or by Angelica for good cause, Angelica will have
                  no obligation to pay any such incentive fee.

         6.       SETTLEMENT AGREEMENT AND RELEASE - Any and all payments to
                  --------------------------------
                  be made to you pursuant to this letter agreement, are
                  expressly conditioned upon the negotiation and execution of a
                  mutually acceptable settlement agreement and release by you
                  and Angelica. Such settlement agreement and release shall
                  include, but not be limited to: a release by you of all
                  claims against Angelica; your continuing agreement not to
                  disclose confidential information of Angelica; your agreement
                  not to solicit Angelica's employees for employment by you or
                  by others for a period of not less than one year; your
                  agreement not to disparage Angelica or any of its officers,
                  directors or other employees; and such other terms and
                  conditions as are customarily included in such agreement to
                  which Angelica is a party. Any and all rights of Angelica
                  under said Agreement shall be expressly assignable by
                  Angelica to a third party without your further consent.

         7.       MISCELLANEOUS - The above sets forth the terms of your
                  -------------
                  employment and supersedes any prior written or oral
                  agreements, understandings, discussions or negotiations
                  with respect thereto.

         Please acknowledge your receipt and acceptance of these terms by
signing and returning to me the enclosed copy of this letter.


Very truly yours,

/s/ Don W. Hubble
--------------------------------
Don W. Hubble


RECEIPT AND ACCEPTANCE
ACKNOWLEDGED

/s/ Charles D. Molloy, Jr.
--------------------------------
Charles D. Molloy, Jr.