REGISTRATION RIGHTS AGREEMENT
 
This Registration Rights Agreement (“Agreement”) is entered into as of December
_, 2006 by and among U.S. Dry Cleaning Corporation, a Delaware corporation (the
“Company”), and Craig M. Rankin, as agent for himself and the other Holders (the
“Lead Investor”) of the Company’s Series A Convertible Debentures pursuant to
that certain Subscription Agreement of even date herewith (the “Subscription
Agreement”) and named in Exhibit A hereto.
 
WHEREAS, in connection with the Company’s issuance of Series A Convertible
Debenture pursuant to the Subscription Agreement, the Company has agreed to
enter into this Registration Rights Agreement as a condition to the Closing
thereunder;
 
NOW THEREFORE, in consideration of the mutual agreements and covenants contained
herein, the Company and the Lead Investor hereby agree as follows:
 
1.  Definitions. As used herein:
 
1.1  The term “Holder” means any person owning or having the right to acquire
Registrable Shares or any assignee thereof in accordance with Section 2.8
hereof.
 
1.2  The terms “register,” “registered,” and “registration” refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (as defined below) and the applicable rules
and regulations thereunder, and the declaration or ordering of the effectiveness
of such registration statement.
 
1.3  For the purposes hereof, the term “Registrable Shares” means and includes
(i) the shares of common stock of the Company issued or issuable upon conversion
of the Series A Convertible Debenture (the “Series A Debentures”), (ii) the
common stock issued to the Holder of the Series A Debentures pursuant to the
subscription of the Series A Debenture, and (iii) any common stock of the
Company issued, or issuable upon the conversion or exercise of any warrant,
right or other security which is issued, as a result of a stock split, dividend
or other distribution with respect to or in exchange for or in replacement of
the shares referenced in (i) above, excluding in all cases, however, any
Registrable Shares sold by a person in a transaction in which his or her rights
under Section 2 are not assigned and that any particular shares of Common Stock
shall cease to be Registrable Shares when: (i) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, (iii) they shall have been otherwise transferred, new certificates for them
shall have been delivered by the Company and subsequent disposition of them
shall not require registration or qualification of them under the Securities Act
or any similar state law then in force, (iv) they shall have ceased to be
outstanding, or (v) at such time as all of the Common Stock otherwise
constituting Registrable Securities of such Holder may be sold within a three
month period under Securities and Exchange Commission Rule 144.
 
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1.4  The term “Securities Act” means the Securities Act of 1933, as amended.
 
2.  Registration Rights.
 
2.1  Filing. The Company will use its best efforts to file, on or before two
hundred seventy days (270) following the closing of the initial sale of the
Series A Debentures, a registration statement under the Securities Act covering
the registration of the sale of the Registrable Securities by the Holders. The
Holders shall fully cooperate with the Company in preparation of the
registration statement and provide all necessary information regarding the
Holders, the underwriters, the manner of distribution and other material
information reasonably requested by the Company.
 
2.2  Effectiveness.
 
(a)  Following effectiveness of the registration statement, the Company will use
its best efforts to maintain the effectiveness for up to three (3) months;
provided, however, that such three-month period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of common stock
(or other securities) of the Company.
 
(b)  The Company will from time to time amend or supplement such registration
statement and the prospectus contained therein as and to the extent necessary to
comply with the Securities Act and any applicable state securities statute or
regulation.
 
(c)  Each Holder selling Registrable Shares agrees that, upon receipt of any
notice from Company of the happening of any event of the kind described in
Section 2.6(c), such Holder will immediately discontinue disposition of
Registrable Shares pursuant to the Registration Statement until such Holder’s
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 2.6(c), and, if so directed by Company, each such Holder will deliver to
Company (at Company’s expense) all copies, other than permanent file copies then
in such Holder’s possession, of the prospectus covering such Registrable Shares
current at the time of receipt of such notice.
 
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2.3  Indemnification.
(a)  Indemnification of Holders. In the event that the Company registers any of
the Registrable Shares under the Securities Act, the Company will indemnify and
hold harmless each Holder and each underwriter of the Registrable Shares so
registered (including any broker or dealer through which such shares may be
sold) and each person, if any, who controls such Holder or any such underwriter
within the meaning of Section 15 of the Securities Act from and against any and
all losses, claims, damages, expenses or liabilities (or any action in respect
thereof), joint or several, to which they or any of them become subject under
the Securities Act or under any other statute or at common law or otherwise,
and, except as hereinafter provided, will reimburse each such Holder, each such
underwriter and each such controlling person, if any, for any legal or other
expenses reasonably incurred by them or any of them, as such expenses are
incurred, in connection with investigating or defending any actions whether or
not resulting in any liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon (i) any untrue
statement of a material fact contained in the registration statement, in any
preliminary or amended preliminary prospectus or in the prospectus (or the
registration statement or prospectus as from time to time amended or
supplemented by the Company); (ii) any omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; or (iii) any violation by the Company of the Securities
Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), a
state securities law or any rule or regulation under the Securities Act, the
Exchange Act or any state securities law; provided, however, that the indemnity
contained in this Section 2.3(a) will not apply where such untrue statement or
omission was made in such registration statement, preliminary or amended,
preliminary prospectus or prospectus in reliance upon and in conformity with
information furnished in writing to the Company in connection therewith by such
Holder of Registrable Shares, any such underwriter or any such controlling
person expressly for use therein or arises from such Holder’s breach of its
obligations under this Agreement. Promptly after receipt by any Holder of
Registrable Shares, any underwriter or any controlling person of notice of the
commencement of any action in respect of which indemnity may be sought against
the Company, such Holder of Registrable Shares, or such underwriter or such
controlling person, as the case may be, will notify the Company in writing of
the commencement thereof, and, subject to the provisions hereinafter stated, the
Company shall assume the defense of such action (including the employment of
counsel, who shall be counsel reasonably satisfactory to such Holder of
Registrable Shares, such underwriter or such controlling person, as the case may
be), and the payment of expenses insofar as such action shall relate to any
liability in respect of which indemnity may be sought against the Company. Such
Holder of Registrable Shares, any such underwriter or any such controlling
person shall have the right to employ separate counsel in any such action and to
participate in the defense thereof in the event the representation of such
Holder, underwriter or controlling person by counsel retained by or on the
behalf of the Company would be inappropriate due to conflicts of interest
between any such person and any other party represented by such counsel in such
proceeding or action, in which case the Company shall pay, as incurred, the
reasonable fees and expenses of such separate counsel. The Company shall not be
liable to indemnify any person under this Section 2.3(a) for any settlement of
any such action effected without the Company’s consent (which consent shall not
be unreasonably withheld). The Company shall not, except with the approval of
each party being indemnified under this Section 2.3(a) (which approval will not
be unreasonably withheld), consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the parties being so indemnified of a release from
all liability in respect to such claim or litigation.
 
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(b)  Indemnification of Company. In the event that the Company registers any of
the Registrable Shares under the Securities Act, each Holder of the Registrable
Shares so registered will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
underwriter of the Registrable Shares so registered (including any broker or
dealer through which any of such shares may be sold) and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
and all other Holders and their respective officers, directors and controlling
persons from and against any and all losses, claims, damages, expenses or
liabilities (or any action in respect thereof), joint or several, to which they
or any of them may become subject under the Securities Act or under any other
statute or at common law or otherwise, and, except as hereinafter provided, will
reimburse the Company and each such director, officer, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
or any of them, as such expenses are incurred, in connection with investigating
or defending any actions whether or not resulting in any liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based upon any untrue statement of a material fact contained in the
registration statement, in any preliminary or amended preliminary prospectus or
in the prospectus (or the registration statement or prospectus as from time to
time amended or supplemented) or arise out of or are based upon the omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, but only insofar as any
such statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company in connection therewith by such
Holder, expressly for use therein; provided, however, that such Holder’s
obligations hereunder shall be limited to an amount equal to the proceeds to
such Holder of the Registrable Shares sold in such registration. Promptly after
receipt of notice of the commencement of any action in respect of which
indemnity may be sought against such Holder of Registrable Shares, the Company
will notify such Holder of Registrable Shares in writing of the commencement
thereof, and such Holder of Registrable Shares shall, subject to the provisions
hereinafter stated, assume the defense of such action (including the employment
of counsel, who shall be counsel reasonably satisfactory to the Company) and the
payment of expenses insofar as such action shall relate to the liability in
respect of which indemnity may be sought against such Holder of Registrable
Shares. The Company and each such director, officer, underwriter or controlling
person shall have the right to employ separate counsel in any such action and to
participate in the defense thereof in the event the representation of the
Company, any of its officers or directors or any underwriter or controlling
person by counsel retained by or on the behalf of such Holder would be
inappropriate due to conflicts of interest between any such person and any other
party represented by such counsel in such proceeding or action, in which case
such Holder shall pay, as incurred, the reasonable fees and expenses of such
separate counsel. Such Holder shall not be liable to indemnify any person for
any settlement of any such action effected without such Holder’s consent (which
consent shall not be unreasonably withheld). Such Holder shall not, except with
the approval of the person being indemnified (which approval shall not be
unreasonably withheld), consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the party being so indemnified of a release from
all liability in respect to such claim or litigation.
 
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2.4  Contribution. If the indemnification provided for in Section 2.3 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue statement of
a material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties’
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
 
2.5  Exchange Act Registration. With a view to making available to the Holders
the benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the Securities Exchange Commission (the “SEC”) that may at any
time permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to:
 
(a)  make and keep public information available, as those terms are understood
and defined in SEC Rule 144, at all times after ninety (90) days after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public until termination of this
Agreement;
 
(b)  file on a timely basis with the Securities and Exchange Commission all
information that the Commission may require under either of Section 13 or
Section 15(d) of the Exchange Act and, so long as it is required to file such
information, take all action that may be required as a condition to the
availability of Rule 144 under the Securities Act (or any successor exemptive
rule hereinafter in effect) with respect to the Company’s common stock; and
 
(c)  furnish to any Holder forthwith upon request (i) a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, (ii) a
copy of the most recent annual or quarterly report of the Company as filed with
the Securities and Exchange Commission, and (iii) any other reports and
documents that a Holder may reasonably request in order to avail itself of any
rule or regulation of the Securities and Exchange Commission allowing a Holder
to sell any such Registrable Shares without registration.
 
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2.6  Further Obligations of the Company. Whenever the Company is required
hereunder to register Registrable Shares, it agrees that it shall also do the
following:
 
(a)  Furnish to each selling Holder such copies of each preliminary and final
prospectus and any other documents that such Holder may reasonably request to
facilitate the public offering of its Registrable Shares;
 
(b)  Use its best efforts to register or qualify the Registrable Shares to be
registered pursuant to this Agreement under the applicable securities or “blue
sky” laws of such jurisdictions as any selling Holder may reasonably request;
provided, however, that the Company shall not be obligated to qualify to do
business in any jurisdiction where it is not then so qualified or to take any
action that would subject it to the service of process in suits other than those
arising out of the offer or sale of the securities covered by the registration
statement in any jurisdiction where it is not then so subject;
 
(c)  Notify each Holder of Registrable Shares covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
 
(d)  Cause all such Registrable Shares registered hereunder to be listed on each
securities exchange on which similar securities issued by the Company are then
listed if such listing is then permitted under the rules of the exchange;
 
(e)  Provide a transfer agent and registrar for all Registrable Shares
registered pursuant hereunder and a CUSIP number for all such Registrable
Shares, in each case not later than the effective date of such registration;
 
(f)  In the event of any underwritten public offering, enter into and perform
its obligations under an underwriting agreement, in usual and customary form,
with the managing underwriter of such offering. Each Holder participating in
such underwriting shall also enter into and perform its obligations under such
an agreement;
 
(g)  Furnish, at the request of any Holder requesting registration of
Registrable Shares pursuant to this Section 2, on the date that such Registrable
Shares are delivered to the underwriters for sale in connection with a
registration pursuant to this Section 2, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective:
 
(i)  an opinion, dated such date, of the counsel representing the Company for
the purposes of such registration, in form and substance as is customarily given
to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Shares; and
 
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(ii)  “comfort” letters signed by the Company’s independent public accountants
who have examined and reported on the Company’s financial statements included in
the registration statement, to the extent permitted by the standards of the
American Institute of Certified Public Accountants, covering substantially the
same matters with respect to the registration statement (and the prospectus
included therein) and (in the case of the accountants’ comfort letters) with
respect to events subsequent to the date of the financial statements, as are
customarily covered in opinions of issuer’s counsel and in accountants’ comfort
letters delivered to the underwriters in underwritten public offerings of
securities, but only if and to the extent that the Company is required to
deliver or cause the delivery of such opinion or comfort letters to the
underwriters in an underwritten public offering of securities;
 
(h)  Permit each selling Holder or his counsel or other representatives upon the
receipt of commercially reasonable confidentiality agreements, to inspect and
copy such corporate documents and records as may reasonably be requested by
them; and
 
(i)  Furnish to each selling Holder, upon request, a copy of all documents filed
and all correspondence from or to the Securities and Exchange Commission in
connection with any such offering unless confidential treatment of such
information has been requested of the Securities and Exchange Commission.
 
2.7  Expenses. The Company shall bear all costs and expenses of the
registration, including, but not limited to, printing, legal and accounting
expenses, Securities and Exchange Commission filing fees and “blue sky” fees and
expenses; provided, however, that the Company shall have no obligation to pay or
otherwise bear (i) any portion of the fees or disbursements of more than one
counsel for the Holders in connection with the registration of their Registrable
Shares, which in no event shall exceed a reasonable fee, (ii) any portion of the
underwriter’s commissions or discounts attributable to the Registrable Shares
being offered and sold by the Holders of Registrable Shares, or (iii) any of
such expenses if the payment of such expenses by the Company is prohibited by
the laws of a state in which such offering is qualified and only to the extent
so prohibited.
 
2.8  Transfer of Registration Rights. The registration rights of a Holder of
Registrable Shares under this Agreement may be transferred as set forth below
(provided (1) the transfer accompanies the transfer of Series A Preferred or
Common Stock in the Company, (2) the transferee is bound by the terms of this
Agreement and (3) the Company is given reasonable advance written notice prior
to such transfer) to any other transferee of the Registrable Shares.
 
2.9  Market Stand-Off Agreement. No Holder shall, to the extent requested by any
managing underwriter of the Company, sell or otherwise transfer or dispose of
(other than to donees who agree to be similarly bound) any Registrable Shares
during a period (the “Stand-Off Period”) beginning ten (10) days prior to and
ending 120 days following the effective date of a registration statement of any
direct offering of the Company under the Securities Act (or in each case such
shorter period as the Company or managing underwriter may authorize), and except
in each case, for securities sold as part of the offering covered by such
registration statement in accordance with the provisions of this Agreement. In
order to enforce the foregoing covenant, the Company may impose stock transfer
restrictions with respect to the Registrable Shares of each Holder until the end
of the Stand-Off Period. Notwithstanding the foregoing, the obligations
described in this Section 2.9 shall not apply to a registration relating solely
to employee benefit plans on Form S-1 or Form S-8 or similar forms which may be
promulgated in the future, or a registration relating solely to an SEC Rule 145
transaction on Form S-4 or similar forms which may be promulgated in the future.
 
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2.10  Termination of Registration Rights. The obligations of the Company to
register any Holder’s Registrable Shares pursuant to this Section 2 shall
terminate at such time as all of the Registrable Securities of such Holder may
be sold within a three month period under Securities and Exchange Commission
Rule 144.
 
3.  Assignability. Subject to the restrictions on transfer set forth in
Section 2.8, this Agreement shall be binding upon and inure to the benefit of
the respective heirs, successors and assigns of the parties hereto.
 
4.  Law. This Agreement 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 application of the laws of any other
jurisdiction to this Agreement, such California law or laws shall be disregarded
with the effect that the remaining laws of the State of California shall
nonetheless apply.
 
5.  Amendment. Any modification, amendment, or waiver of this Agreement or any
provision hereof, either retroactively or prospectively, shall be in writing and
executed by the Company and the Holders of not less than a majority of the
Registrable Shares which shall be binding upon all of the parties hereto.
 
6.  Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
 
7.  Notice. Any notices and other communications required or permitted under
this Agreement shall be effective if in writing and delivered personally or sent
by telecopier, a well-recognized overnight courier service or registered or
certified mail, postage prepaid, addressed as follows:
 

If to the Lead Investor, to:
Craig M. Rankin

 
10250 Constellation Blvd.

 
Ste. 1700

 
Los Angeles, CA 90067

 
Fax: (310) 229-1244

 
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If to the Company, to:
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 J. Giovannone, Esq.

Facsimile: (714) 708-6501

 
Unless otherwise specified herein, such notices or other communications shall be
deemed effective (a)  on the date delivered, if delivered personally, (b) two
business days after being sent, if sent by a well-recognized overnight courier
service, (c) one business day after being sent, if sent by telecopier with
confirmation of good transmission and receipt, and (d) three business days after
being sent, if sent by registered or certified mail, postage prepaid. Each of
the parties herewith shall be entitled to specify another address by giving
notice as aforesaid to each of the other parties hereto.
 
7.1  Severability. In case any provision of this Agreement 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.
 
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.

        COMPANY:       U.S. Dry Cleaning Corporation,
a Delaware corporation
 
   
   
    By:    

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Name:  

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Title:  

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        LEAD INVESTOR:  
   
   
   

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Name: Craig M. Rankin      
Address: 10250 Constellation Blvd.
             Ste 1700
                 Los Angeles, CA 90067
 
Fax:           (310) 229-1244

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