CONFIDENTIAL
 
THIS SUBSCRIPTION IS EXECUTED IN RELIANCE UPON THE EXEMPTION PROVIDED BY SECTION
4(2) THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) AND REGULATION D, RULE
506 FOR TRANSACTIONS NOT INVOLVING A PUBLIC OFFERING UNDER THE SECURITIES ACT.
THIS OFFERING IS BEING MADE ONLY TO ACCREDITED INVESpTORS.
 

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SUBSCRIPTION FOR SERIES A CONVERTIBLE DEBENTURE
 

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THIS SUBSCRIPTION (this “Subscription”) has been executed by the undersigned
(“Purchaser”) in connection with the purchase of a Series A Convertible
Debenture in the amount set forth on the signature page of this Subscription
(the “Debenture”), due and payable by U.S. Dry Cleaning Corporation, a Delaware
corporation (the “Corporation”), in accordance with the terms of Exhibit A. This
Subscription will be accepted by the Corporation as part of a private placement
consisting of (1) a series of Series A Convertible Debentures (hereinafter
referred to collectively as the “Debentures”) having an aggregate, principal
amount not to exceed Three Million Nine Hundred Thousand Dollars ($3,900,000),
and (2) common stock of the Corporation in the amount of 16,666 shares for every
$100,000 of Subscription Funds (defined below) paid. As used herein, the term
“Unit” shall mean (1) a Debenture, and (2) 16,666 shares of common stock of the
Corporation for every $100,000 of Subscription Funds paid. The offer and sale of
the Units being subscribed for pursuant to this Subscription have not been
registered under the Securities Act. The offer of the Units and, if this
Subscription is accepted by the Corporation, the sale of the Units to Purchaser,
is being made in reliance upon Rule 506 of Regulation D, promulgated under
Section 4(2) of the Securities Act. (All dollar amounts in this Subscription are
expressed in U.S. Dollars).
 
The undersigned Purchaser is:
 
NAME: _____________________________          
 
ADDRESS: _____________________________        
 
if applicable, a company organized under the laws of ______________
 
ARTICLE 1
SUBSCRIPTION
 
1.1  Purchase of Unit. Purchaser desires to subscribe for and agrees to purchase
the Debenture payable to Purchaser on or before twelve months following the date
of the note, with no interest, payable according to the terms and conditions set
forth in Exhibit A to this Subscription, and the number of shares of common
stock within the Unit as set forth on the signature page. The Debenture shall be
convertible into shares of the Corporation’s common stock, in accordance with
the terms of Exhibit A. The shares of common stock of the Corporation that may
be issued upon conversion of the Debenture shall hereinafter be referred to as
the “Common Stock.” Upon acceptance of this Subscription, the Corporation shall
execute and deliver to Purchaser the Debenture evidencing the indebtedness in
the form attached as Exhibit A. The subscription price set forth on the
signature page (the “Subscription Funds”) shall be paid by Purchaser by delivery
of Purchaser’s check to the Corporation concurrently with the execution of this
Subscription. The Corporation shall negotiate Purchaser’s check into an interest
bearing account and hold same in escrow until this Subscription is accepted.
Purchaser understands the Corporation has the right to reject all or any part of
this Subscription in its sole discretion.
 
1.2  Minimum; Maximum Subscription. For this Subscription to be effective, a
minimum dollar amount of no less than $1,000,000 must be raised from the sale of
the Units. Until this minimum amount is reached, all funds raised in this
Subscription will be held in escrow by the Corporation. Should the minimum
amount not be reached in the Offering, all monies will be promptly returned to
Purchasers along with accrued interest, if any. The maximum dollar amount which
may be raised through this Subscription is $3,000,000.00. The maximum principal
amount of all of the Debentures in the aggregate will be $3,900,000. Any offers
by Purchasers to participate in this Subscription after the maximum dollar
amount is raised will be refused by the Corporation.
 
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1.3  Use of Proceeds. The Units are issued by the Corporation to provide working
capital for the Corporation and consummation of the Corporation’s acquisition of
other assets and businesses, in the Corporation's sole and absolute discretion. 
 
ARTICLE 2
PURCHASER’S REPRESENTATIONS, WARRANTIES AND CERTIFICATIONS
 
2.1  Accredited Investor.  Purchaser acknowledges and understands that the offer
and sale of the Units has not been registered under the Securities Act of 1933,
or the securities laws of any state, and that the Units are being offered and
sold to Purchaser by the Corporation under the exemption from registration
provided by Rule 506 of Regulation D, promulgated under Section 4(2) of the
Securities Act of 1933, and consequently, the Corporation’s issuance of the
Units to Purchaser is based on Purchaser’s representation that Purchaser is an
“accredited investor” as defined under Regulation D. But for Purchaser
qualifying as an “accredited investor,” the Corporation would not issue the
Units to Purchaser. Accordingly, Purchaser represents, warrants and certifies to
the Corporation that Purchaser is an “accredited investor” under Regulation D of
the Securities Act of 1933. The following information is requested to enable the
Corporation to make that determination as to Purchaser's investment. Individual
Purchasers must answer every question applicable to the Purchaser. The person
making the investment decision on behalf of a non-individual investor should
answer the applicable questions below as well, unless otherwise indicated. The
Purchaser represents and warrants to the Corporation and to its agents and
employees that the information provided below is accurate and complete in all
respects.

 
(a)
Name (individuals only):  ______________________________________________________

 
 
 
Age (individuals only): ___________________________________________________

 
 
 
Marital Status (individuals only): ___________________________________________

 
 
 
Social Security Number or Taxpayer Identification
Number: ________________________

 
 
 (b)
Home Address (individuals only): _______________________________________________
          ________________________________________________________________ 

 
 
  (c)
Business Name: _____________________________________________________________

 
 
 
Nature of Business: _____________________________________________________

 
 
 
Position/Title: _______________________________________________________

 
 
 
Length of Time in Position: ______________________________________________

 
 
 
Business Address: ____________________________________________________

 
 
__________________________________________________________

 
 
 
Business Telephone Number: ___________________________________________

 
 
 (d)
Send Correspondence to:

 
 
 
Home (individuals only): _____ Business: _______

 
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 (e) In which state does the Purchaser currently:

     

    (1) Maintain primary residence (individuals
only)? _______________________________

     

    (2) Maintain secondary residences, if any (individuals
only)? _______________________

     

    (3) Vote (individuals
only)? ________________________________________________

     

    (4) File income tax returns?
________________________________________________

     

    (5) Maintain a driver's license (individuals
only)? ________________________________

 
(f) List any information the Purchaser believes is relevant in showing that he
or she is able to evaluate adequately the risks and merits of this investment or
has knowledge and experience in financial or business matters:
 
 

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(g) Indicate whether the Purchaser has had or currently has a business
relationship with the Corporation or any of its officers, directors or
controlling persons. Please describe such relationship, if any. Please indicate
if there has not been or is not presently such a relationship.
 

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(h) Please check the appropriate description:
 
(1) I have such knowledge and experience in financial and business matters
generally and in securities investments in particular such that I am capable of
evaluating the merits and risks of my investment in the Shares and of making an
important investment decision, and do not wish to utilize a professional advisor
in connection with evaluating the merits and risks of this investment. ____
 
(2) I do not feel comfortable evaluating the merits and risks of my investment
in the Shares and making an important investment decision, and do wish to
utilize a professional advisor in connection with evaluating the merits and
risks of this transaction. I understand the Corporation may require additional
information with respect to my investment advisor and I agree to provide any and
all such information. ____
 
(i) I am an accredited investor within the meaning of Regulation D promulgated
under the Act and hereby initial the specific category or categories of
accredited investor applicable to the undersigned:
 
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A THROUGH L ARE APPLICABLE TO NON-INDIVIDUALS (Please INITIAL applicable
blanks):
 
A. _____      The Purchaser is a bank as defined in Section 3(a)(2) of the Act
acting in its individual or fiduciary capacity.
 
B. _____       Purchaser is a savings and loan association or other institution
as defined in Section 3(a)(5)(A) of the Act acting in its individual or
fiduciary capacity.
 
C. _____       The Purchaser is a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.
 
D. _____     The Purchaser is an insurance company as defined in Section 2(13)
of the Act.
 
E. _____       The Purchaser is an investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of the Act.
 
F. _____       The Purchaser is a Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958.
 
G. _____       The Purchaser is an employee benefit plan within the meaning of
Title I of ERISA and (i) the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of ERISA, which is either a bank, savings and loan
association, insurance company or registered investment advisor, or (ii) the
employee benefit plan has total assets over $5,000,000, or (iii) the employee
benefit plan is self-directed and its investment decisions are made solely by
persons who meet one or more of the criteria set out in this Section 4(j).
 
H. _____       The Purchaser is a plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, and such plan has
assets in excess of $5,000,000.
 
I. _____         The Purchaser is a private business development company as
defined in Section 202(a)(22) of the Investment Advisers Act of 1940.
 
J. _____       The Purchaser is an organization described in Section 501(c)(3)
of the Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Units or
Common Stock, with total assets in excess of $5,000,000.
 
K. _____              The Purchaser is a trust with total assets in excess of
$5,000,000, that was not formed for the specific purpose of purchasing the Units
or Common Stock and whose purchase is directed by a person who has such
knowledge and experience in financial and business mattes that he is capable of
evaluating the merits and risks of investing in the Corporation.
 
L. _____   The Purchaser is an entity in which all of the equity owners meet one
or more of the criteria set out in this Section 4(j). If no other category
applies, a separate questionnaire covering the criteria set forth in this
Section 4(j) must be completed by each such equity owner.
 
M THROUGH P ARE APPLICABLE TO INDIVIDUALS (Please INITIAL applicable blanks):
 
M. _____    The Purchaser is a director or executive officer of the Corporation.
 
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N. _____       The Purchaser is a natural person and has a net worth, either
alone or with the Purchaser's spouse, of more than $1,000,000.
 
O. _____       The Purchaser is a natural person and had income in excess of
$200,000 during each of the previous two years and reasonably expects to have
income in excess of $200,000 during the current year.
 
P. _____   The Purchaser had joint income with Purchaser's spouse in excess of
$300,000 during each of the previous two years and reasonably expects to have
joint income in excess of $300,000 during the current year.
 
(j) I DO NOT meet any of the categories listed in subsection (i) above and am
therefore NOT an accredited investor within the meaning of Regulation D
promulgated under the Act. ____
 
A Purchaser initialing only certain categories may be required to provide
additional information to the Corporation in order to determine whether he meets
the suitability standards of the Offering of the Shares.
 
In furnishing the above information, the Purchaser acknowledges that the
Corporation will be relying on it in determining (among other things) whether
there are reasonable grounds to believe that the Purchaser qualifies as an
accredited investor under Section 4(2) of, and Rule 506 promulgated under, the
Act for the purposes of the proposed investment.
 
2.2  Financial Suitability. Purchaser also represents and warrants to the
Corporation that Purchaser:
 
(a)  if an individual, has the financial ability to bear the economic risk of
the investment for an indefinite period of time, has adequate means of providing
for Purchaser’s current needs and contingencies and has no need for liquidity in
the investment;
 
(b)  if a fiduciary, the person or entity for whom Purchaser is purchasing the
Units is able to bear the substantial economic risk of the investment and can
afford a complete loss of such investment;
 
(c)  has relied on the independent investigation of the Corporation by
Purchaser’s own tax and legal advisors, with respect to this Subscription and
the nature and effect of any investment in the Units; acknowledges and confirms
that the Units were not offered to Purchaser by means of any general
solicitation or general advertising by the Corporation or any person acting on
its behalf, including, but not limited to: (i) any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio; or (ii) any seminar or meeting to
which Purchaser was invited by any general solicitation or general advertising;
 
(d)  has received and read in its entirety the Debenture attached as Exhibit A
to this Subscription;
 
(e)  has evaluated the risks of investing in the Corporation;
 
(f)  has been given the opportunity (i) to ask questions of and receive answers
from the Corporation management concerning the business of the Corporation and
the terms of the Debenture; and (ii) to obtain additional information necessary
to verify the accuracy of the information provided to or received by Purchaser
in connection with the evaluation of an investment in the Units and Common
Stock; and (iii) has investigated the Corporation’s business, management and
financial condition and has been given the opportunity to have access to such
other financial and other information about the Corporation and its management
as Purchaser has deemed necessary or desirable to reach an informed and
knowledgeable decision with respect to the purchase of the Units and Common
Stock;
 
(g)  has a residence address or has a principal place of business at the address
set forth below;
 
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(h)  understands that the Corporation has made no representations whatsoever
regarding the tax consequences, if any, associated with an investment in the
Units; understands that an investment in the Corporation involves certain risks
and that Purchaser understands those risks;
 
(i)  is subscribing solely for Purchaser’s own account, for investment purposes
only, and not for the purpose of resale, distribution, subdivision or
fractionalization, and no other person has a direct or indirect beneficial
interest in the Units has either:
 
(i)  a preexisting personal relationship or business contacts with the
Corporation and/or its officers and directors of a nature and duration such as
would enable a reasonably prudent individual to be aware of the character,
business acumen and general business and financial circumstances of the person
with whom such relationship exists, or
 
(ii)  by reason of Purchaser’s business or financial experience or that of
Purchaser’s professional advisers who are unaffiliated with and who are not
compensated by the Corporation or any affiliate or selling agent of the
Corporation, directly or indirectly, has the capacity to protect Purchaser’s own
interest in connection with an investment in the Units; is experienced in
evaluating and in other closely-held corporations, is knowledgeable in business
and financial matters generally and is capable of evaluating the merits and
risks of an investment in the Corporation; and
 
(j)  affirms that all of the representations, warranties and covenants of
Purchaser given by Purchaser to the Corporation in this Subscription and
otherwise (i) are true, correct and complete in all respects; (ii) have been
made with the intent that they be relied upon by the Corporation in determining
Purchaser’s suitability as a purchaser of the Units; and (iii) shall survive
Purchaser’s acquisition of the Units.
 
2.3  No Registration. Purchaser understands, represents, warrants and agrees
that the offer and sale of the Units and Common Stock have not been registered
under the Securities Act of 1933 or any applicable “Blue Sky” laws and shall not
be offered for sale, sold, delivered after sale, pledged, hypothecated,
transferred, or subsequently disposed of by Purchaser and must be held
indefinitely, unless they are subsequently registered under the Securities Act
of 1933 or the Corporation receives an opinion of qualified counsel satisfactory
to the Corporation that an exemption from such registration is available.
Purchaser understands that any certificate or other instrument evidencing the
Units and Common Stock shall bear a conspicuous legend or legends to the
foregoing effect. As a result of the above restrictions, Purchaser understands
and agrees that the investment in the Units and Common Stock is not liquid and
that Purchaser may have to bear the economic risk of purchase for an indefinite
period of time.
 
2.4  Joint and Several. If more than one person is signing this Subscription,
each of them makes every representation, warranty and covenant set forth in this
Subscription on a joint and several basis.
 
2.5  Authority. If Purchaser is a partnership, corporation, trust, limited
liability company or other entity, Purchaser represents and warrants that the
individual signing on behalf of Purchaser has the authority to do so, the entity
involved has the legal right and power and all authority and approval to execute
and deliver this Subscription and all necessary documents in connection with an
investment in the Units and Common Stock. Purchaser represents that it has not
been formed for the specific purpose of acquiring the Units or Common Stock.
 
2.6  Disclosure. Purchaser has received and reviewed the Corporation's public
reports filed with the Securities and Exchange Commission pursuant to the
Securities and Exchange Act of 1934 over the last twelve months, including the
Corporation's Form 10-KSB for the year ended September 30, 2006.
 
ARTICLE 3
DEBENTURE AND STOCK CERTIFICATES
 
3.1  Subject to the accuracy of Purchaser’s representations and warranties set
forth above, upon (i) the execution and delivery of this Subscription by
Purchaser; (ii) the receipt by the Corporation of the Subscription Funds; and
(iii) the acceptance of all or part of the Subscription by the Corporation, the
Corporation shall issue the Units to Purchaser representing the subscriptions
accepted. Any Subscription Funds not accepted by the Corporation will be
refunded to Purchaser by the Corporation’s return of Purchaser’s check. The
Debenture and common stock certificates issued to Purchaser shall bear the
following legend conditions:
 
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The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the “Act”), or the securities laws of
any state, and may not be offered, sold, transferred, pledged, hypothecated or
otherwise disposed of except pursuant to (i) an effective registration statement
under the Act and any applicable state laws, or valid exception thereto, or (ii)
an available exemption to registration under the Act; provided that (a) to the
extent applicable, such transfer is in accordance with Rule 144 under the Act
(or any similar rule under the Act relating to the disposition of securities),
and (b) an opinion of counsel, reasonably satisfactory to counsel to the issuer,
that an exemption from registration under the Act and applicable state law, is
available.
 
ARTICLE 4
PURCHASER’S COVENANTS
 
4.1  No Transfer. Purchaser shall not transfer, assign, pledge, hypothecate,
encumber or in any way dispose of the Unit or any right or interest in the Unit,
including any Debenture, common stock issued therewith or Common Stock issued
upon conversion of the Debenture, whether voluntarily or by operation of law, by
gift or otherwise, without complying with the Securities Act and any applicable
state securities law.
 
4.2  Compliance with Securities Act. Each Purchaser shall acknowledge that the
Units and Common Stock have not been registered under the Securities Act of 1933
or any other applicable securities laws, by reason of their issuance in a
transaction that does not require registration thereunder (based in part on the
accuracy of the representations and warranties of the Purchasers contained in
the Subscription Agreement), and that the securities must be held indefinitely
unless a subsequent disposition is registered as required or is exempt from such
registration. Each Purchaser shall acknowledge that the Securities and Exchange
Commission currently takes the position that coverage of short sales of shares
of the Corporation’s common stock “against the box” prior to the effective date
of a Registration Statement for the sale of the Common Stock is a violation of
Section 5 of the Securities Act of 1933, as set forth in Item 65, Section 5
under Section A, of the Manual of Publicly Available Telephone Interpretations,
dated July 1997, compiled by the Office of Chief Counsel, Division of
Corporation Finance of the Securities and Exchange Commission. Accordingly, each
Purchaser shall agree not to use any of the Common Stock to cover any short
sales made prior to the effective date of such a registration statement or the
date on which the shares are permitted to be sold under Rule 144, as promulgated
by the Securities and Exchange Commission.
 
4.3  Indemnity and Release. Purchaser hereby agrees to indemnify, defend and
hold harmless the Corporation, its officers, directors, employees and agents
against any and all loss, liability, claim, damage and expense, including, but
not limited to, any and all attorneys fees, costs and expenses incurred in
connection with or arising out of the investigation, preparation or defense
against any litigation commenced or threatened or any claim whatsoever arising
out of or in connection with a breach of any representation or warranty or
failure to fulfill any obligation of Purchaser, whether contained in this
Subscription or in any other document furnished by Purchaser in connection with
the Purchase of the Units
 
ARTICLE 5
GENERAL PROVISIONS
 
5.1  Notices. All notices, requests, demands and other communications required
or permitted under this Subscription shall be in writing and shall be deemed
duly given and received (i) on the date of delivery if personally delivered or
if delivered by telegram or facsimile with electronic confirmation of receipt,
(ii) on the day specified for delivery if sent by nationally recognized
overnight courier service (e.g., UPS, Federal Express, etc.), or (iii) three (3)
business days after depositing with the United States Postal Service if mailed
by certified mail, postage prepaid, return receipt requested, to the parties at
their addresses set forth on the signature page of this Subscription, or such
other address as may be designated from time to time in writing by any party to
all other parties.
 
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5.2  Effect of Headings, Schedules and Exhibits. The subject headings of the
paragraphs of this Subscription are included for purposes of convenience only
and shall not affect the construction or interpretation of any of its
provisions. All schedules and exhibits to this Subscription are incorporated
into and made part of this Subscription as if set forth in their entirety in
this Subscription.
 
5.3  Amendment and Waiver. No provision of this Subscription may be altered,
amended or repealed in whole or in part other than by the written consent of all
the parties to this Subscription. No waiver shall be binding unless executed in
writing by the party granting the waiver. Neither the failure nor delay on the
part of any party to exercise any right, remedy, power, privilege or provision
under this Subscription shall operate as a waiver of such right, remedy, power,
privilege or provision. Waiver of any right, remedy, power, privilege or
provision under this Subscription shall not be deemed or constitute a waiver of
any other right, remedy, power, privilege or provision under this Subscription,
whether or not similar, nor shall such waiver constitute a continuing waiver.
 
5.4  Assignment. Neither party shall have the right to assign or delegate any
rights or obligations under this Subscription without the prior written consent
of the other party.
 
5.5  Successors and Assigns. Subject to the restrictions on assignment under
paragraph 5.4, this Subscription shall be binding upon and inure to the benefit
of the parties and their respective heirs, beneficiaries, legal representatives,
successors and assigns.
 
5.6  Governing Law and Venue. This agreement and the Debenture shall be governed
by and construed in accordance with the laws of the State of California, without
regard to principles of conflicts of law. The Corporation and Purchaser each
irrevocably and unconditionally:
 
(a)  submit to the nonexclusive jurisdiction of the Federal and state courts for
the Central District of California and County of Orange, California,
respectively, for any legal proceeding arising out of or in connection with this
Subscription or the Debenture;
 
(b)  agree that service of process in any legal proceeding may be effected by
mailing a copy thereof by registered or certified mail, postage prepaid, to its
address set forth in this Subscription or at such other address as may be
provided by the parties for such purpose; and
 
(c)  waive, to the maximum extent permitted by law, any right it may have to
claim or recover in any legal proceeding any special, exemplary, punitive or
consequential damages.
 
5.7  Severability. Each provision of this Subscription is independent, separate
and divisible, and in the event any provision of this Subscription is found by
the final order of an arbitrator or a court of competent jurisdiction to be
invalid, unenforceable or in contravention of any applicable federal or state
law or regulation, such provision shall be deemed not to be a part of this
Subscription and shall not affect the validity or enforceability of the
remaining provisions. Nothing contained in this Subscription shall be construed
so as to require the commission of any acts contrary to law, and wherever there
is a conflict between any provision of this Subscription and any present or
future law or regulation, such provision shall be limited to the extent
necessary to make it comply with such law or regulation.
 
5.8  Further Assurances. The parties shall execute such other and further
instruments and documents and shall take such further action as may be
reasonably required to implement and carry out this Subscription.
 
5.9  Entire Agreement. This agreement together with related agreements referred
to in this Subscription and executed concurrently with this Subscription
represent the entire agreement between the parties with respect to the subject
matter set forth in this Subscription and supersede all prior and
contemporaneous oral and written agreements, communications, representations,
commitments or understandings of the parties.
 
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5.10  Counterparts. This agreement may be executed in any number of counterparts
by original or facsimile signature, and each such counterpart shall be deemed to
be an original instrument as to the party whose signature appears on such
counterpart, and all of which together shall constitute one and the same
instrument.
 
5.11  Time. Time is of the essence under this Subscription.
 
IN WITNESS WHEREOF, the undersigned has subscribed to this Subscription as of
the date set forth below.

 
[signature begins on next page]
 

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PURCHASER:

       
Print or Type Name of Purchaser(s)
 
Date
                 
Signature
 
SSN or Taxpayer Identification Number
 

 
SUBSCRIPTION FUNDS: $___________ PRINCIPAL BALANCE OF DEBENTURE: $__________
 
COMMON STOCK _______________
 
Please print or type information below exactly as you wish it to appear in the
records of the Corporation:

Name and capacity in which subscription is made:
_______________________________________________________________________________________
_______________________________________________________________________________________

Name of Purchaser’s Spouse and Social Security Number (if applicable):

_______________________________________________________________________________________
Name
_______________________________________________________________________________________
SSN

Residence address of Individual Purchaser:

_______________________________________________________________________________________
Street
_______________________________________________________________________________________
City   State    Zip Code

Telephone Number: _____________________   E-mail ______________________________

Business address, if not an individual or if different from Residence address:
_______________________________________________________________________________________
Street
_______________________________________________________________________________________
City   State    Zip Code

Telephone Number: __________________  E-mail ______________________________

Alternate Address:
_______________________________________________________________________________________
Street
_______________________________________________________________________________________
City   State    Zip Code

Telephone Number: _____________________   E-mail ______________________________

Notices to be sent to: o Residence o Business o Alternate
 

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Acceptance of Subscription
 
Principal Balance of Debenture to be   U.S. DRY CLEANING CORPORATION
Issued:

        $ ____________
 By:
       
Robert Y. Lee
   
Its:
   

 
Date: December _, 2006

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Exhibit A

 
Form Series A Convertible Debenture
 
 

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SERIES A CONVERTIBLE DEBENTURE

        US $________________     Palm Springs, California       December 4, 2006

 
U.S. Dry Cleaning Corporation, a Delaware corporation (the “Company”), for value
received, hereby promises to pay to the order of ______________ (the “Holder”),
the sum of ____________________ Dollars ($_____________) plus interest thereon
in lawful currency of the United States of America. Payment for all amounts due
hereunder shall be made by December 3, 2007 (the “Maturity Date”).
 
1.  No Interest. No interest shall accrue on the principal balance of this
Series A Convertible Debenture (this "Note").
 
2.  Late Fee. If the principal amount of this Note is not paid in full or
converted by Holder pursuant to Section 5 below, on or before the Maturity Date,
then the Company shall pay to Holder, in addition to the principal balance
hereunder, five percent (5%) of the principal, unpaid balance of this Note on
the Maturity Date.
 
3.  Security Agreement as Security. This Note is secured by, among other things,
a Security Agreement of even date herewith (the “Security Agreement”) executed
by each of Company and its subsidiaries, as debtor, in favor of an agent of
Holder, as secured party, which encumbers all of the assets of the Company (the
“Collateral”). The Company will cause each of its current operating subsidiaries
(as defined below) to execute the Security Agreements. The “Operating
Subsidiaries” are USDCC CVR Merger Sub, LLC, a California limited liability
company, and Enivel, Inc. Once this Note has been paid in full, all of the
foregoing security interests will be released with respect to the holder hereof.
 
4.  Prepayment. This Note may be prepaid at any time without penalty upon
delivering at least forty-five (45) days advance written notice to Holder.
 
5.  Conversion into Common Stock.
 
5.1  Voluntary Conversion. At the Holder’s option, any portion of this Note
(including the principal and any accrued interest) may be converted into
fully-paid and nonassessable shares of Common Stock of the Company at the
Conversion Price specified below.
 
5.2  Conversion Procedure. At any time prior to the Maturity Date, the Holder
may notify the Company in writing that it intends to convert the Note. Such
notification shall be accompanied by the original of the Note. The Company
shall, as soon as practicable, issue and deliver to the Holder of this Note a
certificate in the name of the Holder for the number of shares of the Common
Stock to which the Holder of this Note shall be entitled. Such conversion shall
be deemed to have been made as of the date of such surrender of the Notes, and
the person or persons entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock on such date.
 
 
Exhibit A - Page 2

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5.3  Mechanics and Effect of Conversion. No fractional shares of capital stock
shall be issued upon conversion of this Note. In lieu of the Company issuing any
fractional shares to the Holder upon the conversion of this Note, the Company
shall pay to the Holder the amount of outstanding principal and interest that is
not so converted. Upon conversion of this Note, the Company shall be forever
released from all its obligations and liabilities under this Note, except that
the Company shall be obligated to pay the Holder, within ten (10) days after the
date of such conversion, any interest accrued and unpaid or unconverted to and
including the date of such conversion, and no more.
 

5.4  
Conversion Price.

 
5.4.1  Definitions. For purposes of this Note, the following terms shall have
the meanings set forth below:
 
(1)  "Common Stock" shall mean the common stock of the Company.
 
(2)  "Common Stock Equivalents" shall mean Convertible Securities and rights
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock without the payment of any consideration by such holder
for such additional shares of Common Stock or Common Stock Equivalents.
 
(3)  "Conversion Price" shall mean the price, determined pursuant to this
Section 5.4, at which shares of Common Stock shall be deliverable upon
conversion of this Note.
 
(4)  "Convertible Securities" shall mean any indebtedness or shares of stock
convertible into or exchangeable for Common Stock, including this Note.
 
(5)  "Current Conversion Price" shall mean the Conversion Price immediately
before the occurrence of any event, which, pursuant to this Section 5.4, causes
an adjustment to the Conversion Price.
 
(6)  "Options" shall mean any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
 
5.4.2  Initial Conversion Price. The initial Conversion Price shall be $3.00 per
share of Common Stock. The Conversion Price shall be subject to adjustment from
time to time in certain instances as hereinafter provided.
 
5.4.3  Adjustments to Conversion Price. Subject to 5.4.1(4) below, the
Conversion Price in effect from time to time shall be subject to adjustment in
certain cases as follows:
 
(1)  Stock Splits; Dividends; Distributions and Combinations. If the Company at
any time or from time to time after the date of this Note fixes a record date
for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in additional shares of Common Stock or
Common Stock Equivalents, then, following such record date (or the date of such
dividend, distribution, split or subdivision if no record date is fixed), the
Conversion Price shall be appropriately decreased so that the number of shares
of Common Stock issuable on conversion of this Note shall be increased in
proportion to such increase in the number of outstanding shares of Common Stock
(including for this purpose, Common Stock Equivalents). If the number of shares
of Common Stock outstanding at any time after the date of this Note is decreased
by a combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
this Note shall be decreased in proportion to such decrease in the number of
outstanding shares of Common Stock.
 
 
Exhibit A - Page 3

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(2)  Recapitalizations. If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger, sale of the voting stock of the Company or a sale of assets transaction
provided for elsewhere in this Section 5.4.3), provision shall be made so that
the holder of this Note shall thereafter be entitled to receive upon conversion
of this Note the number of shares of stock or other securities or property of
the Company or otherwise, to which a holder of the number of shares of Common
Stock of the Company which the Holder is then entitled to receive upon
conversion of this Note would have been entitled to on such recapitalization. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 5.4.3 with respect to the rights of the holder of
this Note after the recapitalization to the end that the provisions of this
Section 5.4.3 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of this Note) shall be
applicable after that event in as nearly an equivalent manner as may be
practicable.
 
(3)  Successive Changes. The provisions of this Section shall similarly apply to
successive issuances, sales, dividends or other distributions, subdivisions and
combinations on or of the Common Stock after the date of this Note.
 
(4)  No Impairment. The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
this Section 5.4.3 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holder of this Note
against impairment.
 
(5)  Excluded Events. Notwithstanding any other provision in this Section 5.4.3
which is inconsistent with or contrary to the terms of this paragraph (8), the
Conversion Price shall not be adjusted by virtue of (a) the issuance of
securities in connection with acquisition transactions, (b) the issuance of
securities to financial institutions, suppliers or lessors in connection with
commercial credit arrangements, equipment financings or similar transactions, or
(c) conversion of the Note.
 
 
Exhibit A - Page 4

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(6)  Certificate as to Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Section 5.4.3, the
Company, at its expense and upon request by the holder of this Note, shall
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to the holder of this Note a certificate setting forth such
adjustment or readjustment and showing in reasonable detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of the holder of this Note, furnish or cause to be furnished
to such holder a like certificate setting forth (a) such adjustment and
readjustment, (b) the Current Conversion Price, and (c) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of this Note.
 
5.4.4  Business Combination, Merger; Sale of Company. After the date of this
Note, in the event of any proposed business combination, consolidation or merger
of the Company with or into another corporation (other than a business
combination, consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification of, or change in,
the outstanding shares of Common Stock), in the event of any proposed sale or
transfer to another corporation of all or substantially all of the assets of the
Company, or in the event of any proposed sale of more than fifty percent (50%)
of the voting stock or equity securities of the Company, the holder of this Note
may, upon delivery of this Note and election pursuant to Section 5.2. above,
have this Note treated for all purposes as if it had been converted into Common
Stock on the earlier of (a) the record date, if any, for voting by holders of
Common Stock on such event, and (b) the date of such event.
 
5.5  Reservation of Stock Issuable Upon Conversion. The Company shall ensure
that it has at all times available out of its authorized but unissued shares of
capital stock a sufficient number of shares of stock so that this Note can be
converted into Common Stock, if the Holder elects to do so.
 
6.  Assignment. The rights and obligations of the Company and the Holder of this
Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties. The Holder of this Note may
transfer or assign its rights herein, but only in accordance with the Securities
Act of 1933, as now or hereinafter amended, and any applicable state securities
laws, and by delivering to the Company an opinion of legal counsel, in form and
substance reasonably acceptable to the Company, stating that such transfer or
assignment complies with the Securities Act of 1933 and applicable state
securities laws.
 
7.  Due on Sale/Encumbrance. The Security Agreement provides in part:
 
Without the prior written consent of Secured Party, Debtor shall not (a)
directly or indirectly sell, transfer, convey, mortgage, pledge, or assign any
interest in the Collateral or any part thereof (including any ownership interest
in Debtor); or (b) further encumber, alienate, grant a lien or grant any other
interest in the Collateral or any part thereof, whether voluntarily or
involuntarily.
 
“[T]ransfer” shall include the sale, transfer, conveyance, mortgage, pledge, or
assignment of a legal or beneficial ownership interest in the Collateral.
“Transfer” shall not include the leasing or subleasing of any portion of the
Collateral, or the sale of Collateral in the ordinary course of business.
 
 
Exhibit A - Page 5

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8.  Waiver and Amendment. The provisions of this Note may only be amended,
waived or modified upon the written consent of the Company and the Holder.
 
9.  Notices. Any notice required or permitted to be given under this Note shall
be in writing and either shall be mailed by certified mail, postage prepaid,
return receipt requested, or sent by overnight courier service, or personally
delivered to a representative of the receiving party, or sent by telecopy.
Notices shall mailed, sent, delivered, addressed as follows or to such other
address as a party may designate by proper notice hereunder:

 
If to the Holder:
 
     
 
     
 
     
Attn.:_____________
     
Facsimile: __________
             
with a copy to:
                             
Attn.: ___________
     
Facsimile: ________
                   
If to the Company:
U.S. Dry Cleaning Corporation
     
125 E. Tahquitz Canyon, Suite 203
     
Palm Springs, CA 92262
     
Attn: Robbie Y. Lee
     
Facsimile: (310) 226-8553
             
With a copy to:
 
     
Greenburg Traurig
     
650 Town Center Drive
     
Suite 1700
     
Costa Mesa, CA 92626
     
Attn: John Giovannone
     
Facsimile: 714-708-6501
 

 
Any communication so addressed and mailed shall be deemed to be given on the
earliest of (a) when actually delivered, (b) on the first business day after
deposit with an overnight courier service, or (c) on the third business day
after deposit in the United States mail, postage prepaid, in each case to the
address of the intended addressee, and any communication so delivered in person
shall be deemed to be given when receipted for by, or actually received by,
Holder or the Company, as the case may be. If given by telecopy, a notice shall
be deemed given and received when the telecopy is transmitted to the party’s
telecopy number and confirmation of complete receipt is received by the
transmitting party during normal business hours or on the next business day if
not confirmed during normal business hours. Any party may designate a change of
address by written notice to the other by giving at least ten (10) days prior
written notice of such change of address.
 
 
Exhibit A - Page 6

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10.  No Shareholder Rights. Nothing contained in this Note shall be construed as
conferring upon the Holder or any other person the right to vote or to consent
or to receive notice as a shareholder in respect of meetings of shareholders for
the election of directors of the Company or any other matters or any rights
whatsoever as a shareholder of the Company.
 
11.  Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of California; provided, however, that if any
California law or laws require or permit the laws of any other jurisdiction to
be applied in any proceeding, such California law or laws shall be disregarded
with the effect that the remaining laws of the State of California shall
nonetheless be applied.
 
12.  Heading: References. All headings used herein are used for convenience only
and shall not be used to construe or interpret this Note.
 
13.  Compliance with Usury Laws. It is the intention of the parties to conform
to applicable laws, and all agreements between the Company and Holder, whether
now existing or hereafter arising, are hereby expressly limited so that in no
event shall the amount paid or agreed to be paid to Holder, or collected by
Holder, for the use, forbearance or detention of the money lent hereunder or
otherwise, exceed the maximum amount permissible under applicable laws. If under
any circumstances fulfillment of any provision hereof or of the Security
Agreement or any other security document, at the time performance of such
provision shall be due, shall involve exceeding the limit of validity prescribed
by law, then the obligation to be fulfilled shall be reduced to the limit of
such validity; and if the Holder shall ever receive an amount deemed interest,
by applicable law, which would exceed the highest lawful rate, such amount that
would be excessive interest under applicable laws shall be applied to the
reduction of the principal amount owing hereunder or to other indebtedness and
not to the payment of interest, or if such excessive interest exceeds the unpaid
principal amount and other indebtedness, the excess shall be deemed to have been
a payment made by mistake and shall be refunded to the Company.
 
14.  Severability. In case any provision of this Note shall be invalid, illegal,
or unenforceable, it shall, to the extent practicable, be modified so as to make
it valid, legal and enforceable and to retain as nearly as practicable the
intent of the parties; and the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
 
 
Exhibit A - Page 7

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IN WITNESS WHEREOF, the Company has caused this Note to be issued on the date
first written above.
 
     
U.S. Dry Cleaning Corporation,
a Delaware corporation
 
   
   
    By:      

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Robert Y. Lee   Title: ________________________

 
Exhibit A - Page 8

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