Exhibit 10.1


    
      
        

      


      M-Wave,
        Inc.

       

      Shares
        of Series B Convertible Preferred Stock

       

      SUBSCRIPTION
        AGREEMENT

       

      
        	 	
                March
                  1, 2006

              
	
                M.A.G.
                  Capital, LLC

              	 
	
                Mercator
                  Momentum Fund, LP

              	 
	
                Mercator
                  Momentum Fund III, LP

              	 
	
                Monarch
                  Pointe Fund, Ltd. 

              	 
	
                555
                  South Flower Street, Suite 4200

              	 
	
                Los
                  Angeles, California 90071

              	 


      

      


      Ladies
        and Gentlemen:

       

      M-Wave,
        Inc., a Delaware corporation (the "Company"),
        hereby
        confirms its agreement with Mercator Momentum Fund, LP ("MMF"),
        Mercator Momentum Fund III, LP ("MMF
        III"),
        and
        Monarch Pointe Fund, Ltd. ("Monarch"
        and,
        together with MMF and MMF III, the "Purchasers"),
        and
        M.A.G. Capital, LLC ("MAG")
        as set
        forth below.

       

      1.     The
        Securities.  
        Subject to the terms and conditions herein contained, the Company proposes
        to
        issue and sell to the Purchasers an aggregate of: (a) 64,648 shares (the
"Shares")
        of its
        Series B Convertible Preferred Stock (the "Series
        B Stock"),
        which
        shall be convertible into shares (the "Conversion
        Shares")
        of the
        Company's Common Stock (the "Common
        Stock")
        in
        accordance with the formula set forth in the Certificate of Designations
        further
        described below. The rights, preferences and privileges of the Series B
        Stock are as set forth in the Certificate of Designations of Series B
        Preferred Stock as filed with the Secretary of State of the State of Delaware
        (the "Certificate
        of Designations")
        in the
        form attached hereto as Exhibit
        A.
        The
        numbers of Conversion Shares that any Purchaser may acquire at any time are
        subject to limitation in the Certificate of Designations, so that the aggregate
        number of shares of Common Stock of which such Purchaser and all persons
        affiliated with such Purchaser have beneficial ownership (calculated pursuant
        to
        Rule 13d-3 of the Securities Exchange Act of 1934, as amended) does not at
        any
        time exceed 9.99% of the Company's then outstanding Common Stock. 

       

      The
        Shares are sometimes herein referred to as the "Securities."
        This
        Agreement, the Certificate of Designations and the Registration Rights
        Agreement, in the form attached hereto as Exhibit
        B
        (the
"Registration
        Rights Agreement")
        are
        sometimes herein collectively referred to as the "Transaction
        Documents."

       

      The
        Securities will be offered and sold to the Purchasers without such offers
        and
        sales being registered under the Securities Act of 1933, as amended (together
        with the rules and regulations of the Securities and Exchange Commission
        (the
"SEC")
        promulgated thereunder, the "Securities
        Act"),
        in
        reliance on exemptions therefrom.

       

      Each
        Purchaser and MAG acknowledges that notwithstanding the terms of the
        Registration Rights Agreement, the Company may issue the Conversion
        Shares in unregistered form; provided, however, that the immediately preceding
        clause shall not affect the obligations of the Company under this Agreement
        and
        under Section 2 and Section 3 of the Registration Rights Agreement to file
        the
        Registration Statement and to use its best efforts to cause the Registration
        Statement to become effective with the SEC within the applicable periods
        described herein and in the Registration Rights Agreement.

       

      
        
          
          

        

        
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      In
        connection with the sale of the Securities, the Company has made available
        (including electronically via the SEC's EDGAR system) to Purchasers its periodic
        and current reports, forms, schedules, proxy statements and other documents
        (including exhibits and all other information incorporated by reference)
        filed
        with the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange
        Act").
        These
        reports, forms, schedules, statements, documents, filings and amendments,
        are
        collectively referred to as the "Disclosure
        Documents."
        All
        references in this Agreement to financial statements and schedules and other
        information which is "contained," "included" or "stated" in the Disclosure
        Documents (or other references of like import) shall be deemed to mean and
        include all such financial statements and schedules, documents, exhibits
        and
        other information which is incorporated by reference in the Disclosure
        Documents.

       

      2.     Representations
        and Warranties of the Company. 
         Except as set forth in the Disclosure Documents and on the Disclosure
        Schedule contained in Schedules A through D attached hereto and made a part
        hereof (the "Disclosure
        Schedule"),
        the
        Company represents and warrants to and agrees with Purchasers and MAG as
        follows: 

       

      (a)     The
        Disclosure Documents as of their respective dates did not and will not as
        of the
        Closing Date (after giving effect to any updated disclosures therein), contain
        any untrue statement of a material fact or omit to state a material fact
        necessary to make the statements therein, in the light of the circumstances
        under which they were made, not misleading. The Disclosure Documents and
        the
        documents incorporated or deemed to be incorporated by reference therein,
        at the
        time they were filed or hereafter are filed with the SEC, complied and will
        comply, at the time of filing, in all material respects with the requirements
        of
        the Securities Act and/or the Exchange Act, as the case may be, as
        applicable.

       

      (b)     Schedule
        A attached hereto sets forth a complete list of the subsidiaries of the Company
        (the "Subsidiaries"). Except as set forth in the Disclosure Documents or
        on
Schedule
        A,
        each of
        the Company and its Subsidiaries has been duly incorporated and each of the
        Company and the Subsidiaries is validly existing in good standing as a
        corporation under the laws of its jurisdiction of incorporation, with the
        requisite corporate power and authority to own its properties and conduct
        its
        business as now conducted as described in the Disclosure Documents and is
        duly
        qualified to do business as a foreign corporation in good standing in all
        other
        jurisdictions where the ownership or leasing of its properties or the conduct
        of
        its business requires such qualification, except where the failure to be
        so
        qualified would not, individually or in the aggregate, have a material adverse
        effect on the business, condition (financial or other), properties, prospects
        or
        results of operations of the Company and the Subsidiaries, taken as a whole
        (any
        such event, a "Material
        Adverse Effect");
        as of
        the Closing Date, the Company will have the authorized, issued and outstanding
        capitalization set forth in on Schedule
        B
        attached
        hereto (the "Company
        Capitalization");
        except
        as set forth in the Disclosure Documents or on Schedule
        A,
        the
        Company does not have any subsidiaries or own directly or indirectly any
        of the
        capital stock or other equity or long-term debt securities of or have any
        equity
        interest in any other person; all of the outstanding shares of capital stock
        of
        the Company and the Subsidiaries have been duly authorized and validly issued,
        are fully paid and non-assessable and were not issued in violation of any
        preemptive or similar rights and are owned free and clear of all liens,
        encumbrances, equities, and restrictions on transferability (other than those
        imposed by the Securities Act and the state securities or "Blue Sky" laws)
        or
        voting; except as set forth in the Disclosure Documents, all of the outstanding
        shares of capital stock of the Subsidiaries are owned, directly or indirectly,
        by the Company; except as set forth in the Disclosure Documents, no options,
        warrants or other rights to purchase from the Company or any Subsidiary,
        agreements or other obligations of the Company or any Subsidiary to issue
        or
        other rights to convert any obligation into, or exchange any securities for,
        shares of capital stock of or ownership interests in the Company or any
        Subsidiary are outstanding; and except as set forth in the Disclosure Documents
        or on Schedule
        C,
        there
        is no agreement, understanding or arrangement among the Company or any
        Subsidiary and each of their respective stockholders or any other person
        relating to the ownership or disposition of any capital stock of the Company
        or
        any Subsidiary or the election of directors of the Company or any Subsidiary
        or
        the governance of the Company's or any Subsidiary's affairs, and, if any,
        such
        agreements, understandings and arrangements will not be breached or violated
        as
        a result of the execution and delivery of, or the consummation of the
        transactions contemplated by, the Transaction Documents.

       

      
        
          
          

        

        
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      (c)     The
        Company has the requisite corporate power and authority to execute, deliver
        and
        perform its obligations under the Transaction Documents. Each of the Transaction
        Documents has been duly and validly authorized by the Company and, when executed
        and delivered by the Company, will constitute a valid and legally binding
        agreement of the Company, enforceable against the Company in accordance with
        its
        terms except as the enforcement thereof may be limited by (A) bankruptcy,
        insolvency, reorganization, fraudulent conveyance, moratorium or other similar
        laws now or hereafter in effect relating to or affecting creditors' rights
        generally or (B) general principles of equity and the discretion of the
        court before which any proceeding therefore may be brought (regardless of
        whether such enforcement is considered in a proceeding at law or in equity)
        (collectively, the "Enforceability
        Exceptions").

       

      (d)     The
        Shares have been duly authorized and, when issued upon payment thereof in
        accordance with this Agreement, will have been validly issued, fully paid
        and
        non-assessable. The Conversion Shares issuable have been duly authorized
        and
        validly reserved for issuance, and when issued upon conversion of the Shares
        in
        accordance with the terms of the Certificate of Designations, will have been
        validly issued, fully paid and non-assessable. The Common Stock of the Company
        conforms to the description thereof contained in the Disclosure Documents.
        The
        stockholders of the Company have no preemptive or similar rights with respect
        to
        the Common Stock. 

       

      (e)     No
        consent, approval, authorization, license, qualification, exemption or order
        of
        any court or governmental agency or body or third party is required for the
        performance of the Transaction Documents by the Company or for the consummation
        by the Company of any of the transactions contemplated thereby, or the
        application of the proceeds of the issuance of the Securities as described
        in
        this Agreement, except for such consents, approvals, authorizations, licenses,
        qualifications, exemptions or orders (i) as have been obtained on or prior
        to the Closing Date, (ii) as are not required to be obtained on or prior to
        the Closing Date that will be obtained when required, or (iii) the failure
        to obtain which would not, individually or in the aggregate, have a Material
        Adverse Effect.

       

      
        
          
          

        

        
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      (f)     Except
        as
        set forth on Schedule
        D,
        none of
        the Company or the Subsidiaries is (i) in material violation of its
        certificate of incorporation or bylaws (or similar organizational document),
        (ii) in breach or violation of any statute, judgment, decree, order, rule
        or regulation applicable to it or any of its properties or assets, which
        breach
        or violation would, individually or in the aggregate, have a Material Adverse
        Effect, or (iii) except as described in the Disclosure Documents, in
        default (nor has any event occurred which with notice or passage of time,
        or
        both, would constitute a default) in the performance or observance of any
        obligation, agreement, covenant or condition contained in any contract,
        indenture, mortgage, deed of trust, loan agreement, note, lease, license,
        franchise agreement, permit, certificate or agreement or instrument to which
        it
        is a party or to which it is subject, which default would, individually or
        in
        the aggregate, have a Material Adverse Effect.

       

      (g)     The
        execution, delivery and performance by the Company of the Transaction Documents
        and the consummation by the Company of the transactions contemplated thereby
        and
        the fulfillment of the terms thereof will not (a) violate, conflict with or
        constitute or result in a breach of or a default under (or an event that,
        with
        notice or lapse of time, or both, would constitute a breach of or a default
        under) any of (i) the terms or provisions of any contract, indenture,
        mortgage, deed of trust, loan agreement, note, lease, license, franchise
        agreement, permit, certificate or agreement or instrument to which any of
        the
        Company or the Subsidiaries is a party or to which any of their respective
        properties or assets are subject, (ii) the Certificate of Designations or
        bylaws of any of the Company or the Subsidiaries (or similar organizational
        document) or (iii) any statute, judgment, decree, order, rule or regulation
        of any court or governmental agency or other body applicable to the Company
        or
        the Subsidiaries or any of their respective properties or assets or
        (b) result in the imposition of any lien upon or with respect to any of the
        properties or assets now owned or hereafter acquired by the Company or any
        of
        the Subsidiaries; which violation, conflict, breach, default or lien would,
        individually or in the aggregate, have a Material Adverse Effect.

       

      (h)     The
        audited consolidated financial statements included in the Disclosure Documents
        present fairly the consolidated financial position, results of operations,
        cash
        flows and changes in shareholders' equity of the entities, at the dates and
        for
        the periods to which they relate and have been prepared in accordance with
        generally accepted accounting principles applied on a consistent basis; the
        interim un-audited consolidated financial statements included in the Disclosure
        Documents present fairly the consolidated financial position, results of
        operations and cash flows of the entities, at the dates and for the periods
        to
        which they relate subject to year-end audit adjustments and have been prepared
        in accordance with generally accepted accounting principles applied on a
        consistent basis with the audited consolidated financial statements included
        therein; the selected financial and statistical data included in the Disclosure
        Documents present fairly the information shown therein and have been prepared
        and compiled on a basis consistent with the audited financial statements
        included therein, except as otherwise stated therein; and each of the auditors
        previously engaged by the Company or to be engaged in the future by the Company
        is an independent certified public accountant as required by the Securities
        Act.

       

      
        
          
          

        

        
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      (i)     Except
        as
        described in the Disclosure Documents, there is not pending or, to the knowledge
        of the Company, threatened any action, suit, proceeding, inquiry or
        investigation, governmental or otherwise, to which any of the Company or
        the
        Subsidiaries is a party, or to which their respective properties or assets
        are
        subject, before or brought by any court, arbitrator or governmental agency
        or
        body, that, if determined adversely to the Company or any such Subsidiary,
        would, individually or in the aggregate, have a Material Adverse Effect or
        that
        seeks to restrain, enjoin, prevent the consummation of or otherwise challenge
        the issuance or sale of the Securities to be sold hereunder or the application
        of the proceeds therefrom or the other transactions described in the Disclosure
        Documents.

       

      (j)     The
        Company and the Subsidiaries own or possess adequate licenses or other rights
        to
        use all patents, trademarks, service marks, trade names, copyrights and know-how
        that are necessary to conduct their businesses as described in the Disclosure
        Documents. None of the Company or the Subsidiaries has received any written
        notice of infringement of (or knows of any such infringement of) asserted
        rights
        of others with respect to any patents, trademarks, service marks, trade names,
        copyrights or know-how that, if such assertion of infringement or conflict
        were
        sustained, would, individually or in the aggregate, have a Material Adverse
        Effect.

       

      (k)     Each
        of
        the Company and the Subsidiaries possesses all licenses, permits, certificates,
        consents, orders, approvals and other authorizations from, and has made all
        declarations and filings with, all federal, state, local and other governmental
        authorities, all self-regulatory organizations and all courts and other
        tribunals presently required or necessary to own or lease, as the case may
        be,
        and to operate its respective properties and to carry on its respective
        businesses as now or proposed to be conducted as set forth in the Disclosure
        Documents ("Permits"),
        except
        where the failure to obtain such Permits would not, individually or in the
        aggregate, have a Material Adverse Effect and none of the Company or the
        Subsidiaries has received any notice of any proceeding relating to revocation
        or
        modification of any such Permit, except as described in the Disclosure Documents
        and except where such revocation or modification would not, individually
        or in
        the aggregate, have a Material Adverse Effect.

       

      (l)     Subsequent
        to the respective dates as of which information is given in the Disclosure
        Documents and except as described therein, (i) the Company and the
        Subsidiaries have not incurred any material liabilities or obligations, direct
        or contingent, or entered into any material transactions not in the ordinary
        course of business or (ii) the Company and the Subsidiaries have not
        purchased any of their respective outstanding capital stock, or declared,
        paid
        or otherwise made any dividend or distribution of any kind on any of their
        respective capital stock or otherwise (other than, with respect to any of
        such
        Subsidiaries, the purchase of capital stock by the Company), (iii) there
        has not been any material increase in the long-term indebtedness of the Company
        or any of the Subsidiaries, (iv) there has not occurred any event or
        condition, individually or in the aggregate, that has a Material Adverse
        Effect,
        and (v) the Company and the Subsidiaries have not sustained any material
        loss or interference with respect to their respective businesses or properties
        from fire, flood, hurricane, earthquake, accident or other calamity, whether
        or
        not covered by insurance, or from any labor dispute or any legal or governmental
        proceeding.

       

      
        
          
          

        

        
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      (m)     There
        are
        no material legal or governmental proceedings nor are there any material
        contracts or other documents required by the Securities Act to be described
        in a
        prospectus that are not described in the Disclosure Documents. Except as
        described in the Disclosure Documents, none of the Company or the Subsidiaries
        is in default under any of the contracts described in the Disclosure Documents,
        has received a notice or claim of any such default or has knowledge of any
        breach of such contracts by the other party or parties thereto, except for
        such
        defaults or breaches as would not, individually or in the aggregate, have
        a
        Material Adverse Effect.

       

      (n)     Each
        of
        the Company and the Subsidiaries has good and marketable title to all real
        property described in the Disclosure Documents as being owned by it and good
        and
        marketable title to the leasehold estate in the real property described therein
        as being leased by it, free and clear of all liens, charges, encumbrances
        or
        restrictions, except, in each case, as described in the Disclosure Documents
        or
        such as would not, individually or in the aggregate, have a Material Adverse
        Effect. All material leases, contracts and agreements to which the Company
        or
        any of the Subsidiaries is a party or by which any of them is bound are valid
        and enforceable against the Company or any such Subsidiary, are, to the
        knowledge of the Company, valid and enforceable against the other party or
        parties thereto and are in full force and effect.

       

      (o)     Each
        of
        the Company and the Subsidiaries has filed all necessary federal, state and
        foreign income and franchise tax returns, except where the failure to so
        file
        such returns would not, individually or in the aggregate, have a Material
        Adverse Effect, and has paid all taxes shown as due thereon; and other than
        tax
        deficiencies which the Company or any Subsidiary is contesting in good faith
        and
        for which adequate reserves have been provided in accordance with generally
        accepted accounting principles, there is no tax deficiency that has been
        asserted against the Company or any Subsidiary that would, individually or
        in
        the aggregate, have a Material Adverse Effect.

       

      (p)     None
        of
        the Company or the Subsidiaries is, or immediately after the Closing Date
        will
        be, required to register as an "investment company" or a company "controlled
        by"
        an "investment company" within the meaning of the Investment Company Act
        of
        1940, as amended (the "Investment
        Company Act").

       

      (q)     None
        of
        the Company or the Subsidiaries or, to the knowledge of any of such entities'
        directors, officers, employees, agents or controlling persons, has taken,
        directly or indirectly, any action designed, or that might reasonably be
        expected, to cause or result in the stabilization or manipulation of the
        price
        of the Common Stock.

       

      (r)     None
        of
        the Company, the Subsidiaries or any of their respective Affiliates (as defined
        in Rule 501(b) of Regulation D under the Securities Act) directly, or
        through any agent, engaged in any form of general solicitation or general
        advertising (as those terms are used in Regulation D under the Securities
        Act) in connection with the offering of the Securities or engaged in any
        other
        conduct that would cause such offering to be constitute a public offering
        within
        the meaning of Section 4(2) of the Securities Act. Assuming the accuracy of
        the representations and warranties of the Purchasers in Section 6 hereof,
        it is not necessary in connection with the offer, sale and delivery of the
        Securities to the Purchasers in the manner contemplated by this Agreement
        to
        register any of the Securities under the Securities Act.

       

      
        
          
          

        

        
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      (s)     There
        is
        no strike, labor dispute, slowdown or work stoppage with the employees of
        the
        Company or any of the Subsidiaries which is pending or, to the knowledge
        of the
        Company or any of the Subsidiaries, threatened.

       

      (t)     Each
        of
        the Company and the Subsidiaries carries general liability insurance coverage
        comparable to other companies of its size and similar business.

       

      (u)     Each
        of
        the Company and the Subsidiaries maintains internal accounting controls which
        provide reasonable assurance that (A) transactions are executed in
        accordance with management's authorization, (B) transactions are recorded
        as necessary to permit preparation of its financial statements and to maintain
        accountability for its assets, (C) access to its material assets is
        permitted only in accordance with management's authorization and (D) the
        values and amounts reported for its material assets are compared with its
        existing assets at reasonable intervals.

       

      (v)     The
        Company does not know of any claims for services, either in the nature of
        a
        finder's fee or financial advisory fee, with respect to the offering of the
        Shares and the transactions contemplated by the Transaction
        Documents.

       

      (w)     The
        Common Stock is traded on the NASDAQ Small Cap Market. Except as described
        in
        the Disclosure Documents, the Company currently is not in violation of, and
        subject to approval of the Company's shareholders, the consummation of the
        transactions contemplated by the Transaction Documents will not violate,
        any
        rule of the NASDAQ Small Cap Market. 

       

      (x)     The
        Company is eligible to use SB-2 for the resale of the Conversion Shares by
        Purchasers or their transferees. The Company has no reason to believe that
        it is
        not capable of satisfying the registration or qualification requirements
        (or an
        exemption therefrom) necessary to permit the resale of the Conversion Shares
        under the securities or "blue sky" laws of any jurisdiction within the United
        States. 

       

      
        	 	
                3.

              	
                Purchase,
                  Sale and Delivery of the Shares.
                  

              


      

       

      (a)     On
        the
        basis of the representations, warranties, agreements and covenants herein
        contained and subject to the terms and conditions herein set forth, the Company
        agrees to issue and sell to the Purchasers, and Purchasers agree to purchase
        from the Company on the Closing Date (as defined below), 45,648 Shares of
        Series B Stock as follows: 

       

      (i)     MMF
        agrees to purchase 7,100 Shares of Series B Stock in exchange for tendering
        the
        Promissory Note in the principal amount of $710,000 plus accrued interest
        issued
        by the Company in favor of MMF on June 16, 2005;

       

      (ii)     MMF
        III
        agrees to purchase 25,148 Shares of Series B Stock in exchange for tendering
        the
        Promissory Note in the principal amount of $350,000 plus accrued interest
        issued
        by the Company in favor of MMF III on June 16, 2005 and for the cancellation
        of
        all indebtedness of the Company to MMF III pursuant to the "Loans",
        as such
        term is defined in that certain First Amendment to Loan and Security Agreements
        dated January 25, 2006, among the Company, M-Wave DBS, an Illinois corporation
        and MMF III; and

       

      
        
          
          

        

        
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      (iii)     Monarch
        agrees to purchase 13,400 Shares of Series B Stock in exchange for tendering
        the
        Promissory Note in the principal amount of $1,340,000 plus accrued interest
        issued by the Company in favor of Monarch on June 16, 2005.

       

      (b)     Effective
        as of the Closing, all warrants previously issued by the Company to any of
        the
        Purchasers or to MAG shall be amended such that the Warrant Price (as defined
        in
        the warrants) for each such warrant shall be $0.65 per share. Promptly upon
        delivery of any such warrants by any Purchaser or MAG to the Company, the
        Company shall issue a replacement warrant that shall reflect such amended
        Warrant Price.

       

      (c)     One
        or
        more certificates in definitive form for the Shares that the Purchasers have
        agreed to purchase, shall be delivered by or on behalf of the Company, against
        delivery by or on behalf of each of the Purchasers, of the securities to
        be
        tendered pursuant to Sections 3(a) and 3(b) above, each of the Purchasers,
        MAG
        and the Company shall deliver the Registration Rights Agreement, duly executed
        by such party, and each of MMF III and the Company shall deliver such
        instruments as the other may reasonably request to effect and to evidence
        the
        cancellation of the indebtedness under the Loans pursuant to Section 3(a)(ii)
        above. Such delivery of and payment for the Shares shall be made at the offices
        of M.A.G., LLC, 555 South Flower Street, Suite 4200, Los Angeles, California
        90071, at not later than 5:00 p.m. (Los Angeles Time) on March
        1,
        2006 (the "Closing"),
        or at
        such date as the Purchasers and the Company may agree upon, such time and
        date
        of delivery against payment being herein referred to as the "Closing
        Date."
        On the
        Closing Date, the Company shall deliver by wire transfer of immediately
        available funds to the account or accounts designated by MAG, the aggregate
        amount of interest accrued through the Closing Date on the Promissory Notes
        and
        Loans described in Sections 3(a)(i), (ii) and (iii) above.

       

      (d)     On
        the
        basis of the representations, warranties, agreements and covenants herein
        contained and subject to the terms and conditions herein set forth, the Company
        agrees to issue and sell to the Subsequent Purchasers (as defined below),
        and
        the Subsequent Purchasers agree to purchase from the Company on March 15,
        2006 (the "Second
        Closing Date"),
        an
        aggregate of 19,000 Shares of Series B Stock for an aggregate purchase
        price of $1,900,000 (the "Second
        Purchase Price");
        provided,
        however, that the Subsequent Purchasers shall have no obligation to consummate
        the transactions contemplated to occur on the Second Closing Date unless
        all of
        the following conditions have been met as of the Second Closing Date:
        (i) no Event of Default shall have occurred and remain uncured,
        (ii) there shall have been no breach by the Company of any covenant under
        this Agreement, (iii) the Subsequent Purchasers shall have received
        certificates, dated as of the Second Closing Date and signed by the Chief
        Executive Officer and Chief Financial Officer of the Company, to the effect
        of
        Sections 5(a) and 5(b) hereof, (iv) the Company shall be current in all of
        its public filings, (v) the Subsequent Purchasers shall have received an
        opinion from the Company's counsel with respect to the authorization of the
        securities to be issued to the Subsequent Purchasers and other customary
        matters, and (vi) the Company shall not, after the date of this Agreement
        but prior to the Second Closing Date, have consummated or entered into any
        agreement to effect a transaction that would be regarded as a liquidation,
        dissolution or winding up of the affairs of the Company under the Certificate
        of
        Designations. The term "Subsequent
        Purchasers,"
        means,
        with respect to a given Second Closing Date, the Purchaser or Purchasers
        designated by MAG in writing prior to the Second Closing Date. 

       

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      


      (e)     One
        or
        more certificates in definitive form for the Shares that the Purchasers have
        agreed to purchase pursuant to Section 3(d) above, shall be delivered by
        or on
        behalf of the Company, against delivery by or on behalf of each of the
        Subsequent Purchasers of the Second Purchase Price by wire transfer of
        immediately available funds to the account of the Company previously designated
        by it in writing. Such delivery of and payment for the Shares shall be made
        at
        the offices of M.A.G., LLC, 555 South Flower Street, Suite 4200, Los Angeles,
        California 90071, at not later than 5:00 p.m. (Los Angeles Time) on the Second
        Closing Date.

       

      (f)     The
        proceeds from the Second Purchase Price shall be held in a reserve account
        at
        the bank currently utilized by the Company and shall be released therefrom
        only
        upon a resolution by a majority of the Company's independent directors (as
        defined in the NASD Manual) that the release of such proceeds (or a portion
        thereof) is necessary or appropriate under the Company's budget (as approved
        by
        the Finance Committee of the Company's Board of Directors).

       

      4.     Certain
        Covenants of the Company.  
        The Company covenants and agrees with each Purchaser as follows:

       

      (a)     None
        of
        the Company or any of its Affiliates will sell, offer for sale or solicit
        offers
        to buy or otherwise negotiate in respect of any "security" (as defined in
        the
        Securities Act) which could be integrated with the sale of the Securities
        in a
        manner which would require the registration under the Securities Act of the
        Securities.

       

      (b)     The
        Company will not become, at any time prior to the expiration of three years
        after the Closing Date, an open-end investment company, unit investment trust,
        closed-end investment company or face-amount certificate company that is
        or is
        required to be registered under the Investment Company Act.

       

      (c)     None
        of
        the proceeds of the Series B Stock will be used to reduce or retire any
        insider note or convertible debt held by an officer or director of the
        Company.

       

      (d)     Subject
        to Section 9 of this Agreement, the Conversion Shares will be traded on the
        NASDAQ Small Cap Market, or such market on which the Company's shares are
        subsequently listed or traded, immediately following the later of (i) their
        issuance or (ii) declaration of effectiveness of the Registration Statement
        by the SEC.

       

      (e)     The
        Company will use commercially reasonable efforts to do and perform all things
        required to be done and performed by it under this Agreement and the other
        Transaction Documents and to satisfy all conditions precedent on its part
        to the
        obligations of the Purchasers to purchase and accept delivery of the Securities.
        

       

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      


      (f)     The
        Purchasers shall have a right of first refusal on any financing in which
        the
        Company is the issuer of debt or equity securities between the date of this
        Agreement and the date of effectiveness of the Registration
        Statement.

       

      (g)     For
        so
        long as any shares of Series B Stock are outstanding, the Company shall not
        issue any debt or equity securities with rights or preferences superior to
        those
        of the Series B Stock with respect to the distribution of assets on any
        liquidation, dissolution or winding up of the Company. 

       

      5.     Conditions
        of the Purchasers' Obligations.  
        The obligation of each Purchaser to purchase and pay for the Securities is
        subject to the following conditions unless waived in writing by the
        Purchaser:

       

      (a)     The
        representations and warranties of the Company contained in this Agreement
        shall
        be true and correct in all material respects (other than representations
        and
        warranties with a Material Adverse Effect qualifier, which shall be true
        and
        correct as written) on and as of the Closing Date; the Company shall have
        complied in all material respects with all agreements and satisfied all
        conditions on its part to be performed or satisfied hereunder at or prior
        to the
        Closing Date.

       

      (b)     None
        of
        the issuance and sale of the Securities pursuant to this Agreement or any
        of the
        transactions contemplated by any of the other Transaction Documents shall
        be
        enjoined (temporarily or permanently) and no restraining order or other
        injunctive order shall have been issued in respect thereof; and there shall
        not
        have been any legal action, order, decree or other administrative proceeding
        instituted or, to the Company's knowledge, threatened against the Company
        or
        against any Purchaser relating to the issuance of the Securities or any
        Purchaser's activities in connection therewith or any other transactions
        contemplated by this Agreement, the other Transaction Documents or the
        Disclosure Documents.

       

      (c)     The
        Purchasers shall have received certificates, dated the Closing Date and signed
        by the Chief Executive Officer and the Chief Financial Officer of the Company,
        to the effect of paragraphs 5(a) and (b). 

       

      (d)     The
        Purchasers shall have received an opinion of legal counsel to the Company,
        with
        respect to the authorization of the Shares and other customary matters in
        the
        form attached hereto as Exhibit C.
        

       

      
        	 	
                6.

              	
                Representations
                  and Warranties of the Purchasers and MAG.

              


      

       

      (a)     Each
        Purchaser and MAG represents and warrants to the Company that the Securities
        to
        be acquired by it hereunder (including the Conversion Shares that it may
        acquire
        upon conversion thereof) are being acquired for its own account for investment
        and with no intention of distributing or reselling such Securities (including
        the Conversion Shares that it may acquire upon conversion thereof) or any
        part
        thereof or interest therein in any transaction which would be in violation
        of
        the securities laws of the United States of America or any State. Nothing
        in
        this Agreement, however, shall prejudice or otherwise limit a Purchaser's
        or
        MAG's right to sell or otherwise dispose of all or any part of such Conversion
        Shares under an effective registration statement under the Securities Act
        and in
        compliance with applicable state securities laws or under an exemption from
        such
        registration. By executing this Agreement, each Purchaser and MAG further
        represents that it does not have any contract, undertaking, agreement or
        arrangement with any person to sell, transfer or grant participation to any
        Person with respect to any of the Securities.

       

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      


      (b)    Each
        Purchaser and MAG understands that the Securities (including the Conversion
        Shares that it may acquire upon conversion thereof) have not been registered
        under the Securities Act and may not be offered, resold, pledged or otherwise
        transferred except (a) pursuant to an exemption from registration under the
        Securities Act (and, if requested by the Company, based upon an opinion of
        counsel acceptable to the Company) or pursuant to an effective registration
        statement under the Securities Act and (b) in accordance with all
        applicable securities laws of the states of the United States and other
        jurisdictions.

       

      Each
        Purchaser and MAG agrees to the imprinting, so long as appropriate, of the
        following legend on the Securities (including the Conversion Shares that
        it may
        acquire upon conversion thereof):

       

      The
        shares of stock evidenced by this certificate have not been registered under
        the
        U.S. Securities Act of 1933, as amended, and may not be offered, sold, pledged
        or otherwise transferred ("transferred") in the absence of such registration
        or
        an applicable exemption therefrom. In the absence of such registration, such
        shares may not be transferred unless, if the Company requests, the Company
        has
        received a written opinion from counsel in form and substance satisfactory
        to
        the Company stating that such transfer is being made in compliance with all
        applicable federal and state securities laws.

       

      Further
        with regard to the Series B Stock, the following legend shall be included:


       

      Additional
        restrictions on transfer pursuant to agreements exist and are available upon
        request from the Company. 

       

      The
        legend set forth above may be removed if and when the Conversion Shares are
        disposed of pursuant to an effective registration statement under the Securities
        Act or in the opinion of counsel to the Company experienced in the area of
        United States Federal securities laws such legends are no longer required
        under
        applicable requirements of the Securities Act. The Shares and the Conversion
        Shares shall also bear any other legends required by applicable Federal or
        state
        securities laws, which legends may be removed when in the opinion of counsel
        to
        the Company experienced in the applicable securities laws, the same are no
        longer required under the applicable requirements of such securities laws.
        The
        Company agrees that it will provide each Purchaser, upon request, with a
        substitute certificate, not bearing such legend at such time as such legend
        is
        no longer applicable. Each Purchaser agrees that, in connection with any
        transfer of the Conversion Shares by it pursuant to an effective registration
        statement under the Securities Act, it will comply with all prospectus delivery
        requirements of the Securities Act. The Company makes no representation,
        warranty or agreement as to the availability of any exemption from registration
        under the Securities Act with respect to any resale of the Shares or the
        Conversion Shares.

       

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      


      (c)     Each
        Purchaser and MAG is an "accredited investor" within the meaning of Rule
        501(a)
        of Regulation D under the Securities Act. Neither Purchaser nor MAG learned
        of
        the opportunity to acquire Shares or any other security issuable by the Company
        through any form of general advertising or public solicitation.

       

      (d)     Each
        Purchaser and MAG represents and warrants to the Company that it has such
        knowledge, sophistication and experience in business and financial matters
        so as
        to be capable of evaluating the merits and risks of the prospective investment
        in the Securities, having been represented by counsel, and has so evaluated
        the
        merits and risks of such investment and is able to bear the economic risk
        of
        such investment and, at the present time, is able to afford a complete loss
        of
        such investment.

       

      (e)     Each
        Purchaser represents and warrants to the Company that (i) the purchase of
        the Securities to be purchased by it has been duly and properly authorized
        and
        this Agreement has been duly executed and delivered by it or on its behalf
        and
        constitutes the valid and legally binding obligation of the Purchaser,
        enforceable against the Purchaser in accordance with its terms, subject to
        bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
        similar laws of general applicability relating to or affecting creditors'
        rights
        generally and to general principles of equity; (ii) the purchase of the
        Securities to be purchased by it does not conflict with or violate its charter,
        by-laws or any law, regulation or court order applicable to it; and
        (iii) the purchase of the Securities to be purchased by it does not impose
        any penalty or other onerous condition on the Purchaser under or pursuant
        to any
        applicable law or governmental regulation.

       

      (f)     Each
        Purchaser and MAG represents and warrants to the Company that neither it
        nor any
        of its directors, officers, employees, agents, partners, members, or controlling
        persons has taken, or will take, directly or indirectly, any actions designed,
        or that might reasonably be expected to cause or result in, the destabilization
        or manipulation of the price of the Common Stock.

       

      (g)     Each
        Purchaser and MAG acknowledges it or its representatives have reviewed the
        Disclosure Documents and further acknowledges that it or its representatives
        have been afforded (i) the opportunity to ask such questions as it has
        deemed necessary of, and to receive answers from, representatives of the
        Company
        concerning the terms and conditions of the offering of the Securities and
        the
        merits and risks of investing in the Securities; (ii) access to information
        about the Company and the Company's financial condition, results of operations,
        business, properties, management and prospects sufficient to enable it to
        evaluate its investment in the Securities; and (iii) the opportunity to
        obtain such additional information which the Company possesses or can acquire
        without unreasonable effort or expense that is necessary to verify the accuracy
        and completeness of the information contained in the Disclosure
        Documents.

       

      (h)     Each
        Purchaser and MAG represents and warrants to the Company that it has based
        its
        investment decision solely upon the information contained in the Disclosure
        Documents and such other information as may have been provided to it or its
        representatives by the Company in response to its inquiries, and has not
        based
        its investment decision on any research or other report regarding the Company
        prepared by any third party ("Third
        Party Reports").
        Each
        Purchaser and MAG understands and acknowledges that (i) the Company does
        not endorse any Third Party Reports and (ii) its actual results may differ
        materially from those projected in any Third Party Report.

       

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

      


      (i)     Each
        Purchaser and MAG understands and acknowledges that (i) any forward-looking
        information included in the Disclosure Documents is subject to risks and
        uncertainties, including those risks and uncertainties set forth in the
        Disclosure Documents; and (ii) the Company's actual results may differ
        materially from those projected by the Company or its management in such
        forward-looking information.

       

      (j)    Each
        Purchaser and MAG understands and acknowledges that (i) the Securities are
        offered and sold without registration under the Securities Act in a private
        placement that is exempt from the registration provisions of the Securities
        Act
        and (ii) the availability of such exemption depends in part on, and that
        the Company and its counsel will rely upon, the accuracy and truthfulness
        of the
        foregoing representations and Purchaser hereby consents to such
        reliance.

       

      7.     Covenants
        of Purchasers.  
        Purchasers
        and MAG, on behalf of themselves and their affiliates and the permitted assignee
        of any Conversion Shares hereby covenant and agree not to, directly or
        indirectly, offer to "short sell", contract to "short sell" or otherwise
        "short
        sell" any securities of the Company, including, without limitation, shares
        of
        Common Stock that will be received as a result of the conversion of the
        Series B Stock.

       

      
        	 	
                8.

              	
                Termination.

              


      

       

      (a)     This
        Agreement may be terminated in the sole discretion of the Company by notice
        to
        each Purchaser if at the Closing Date:

       

      (i)     the
        representations and warranties made by any Purchaser in Section 6 are not
        true
        and correct in all material respects; or

       

      (ii)     as
        to the
        Company, the sale of the Securities hereunder (i) is prohibited or enjoined
        by any applicable law or governmental regulation or (ii) subjects the
        Company to any penalty, or in its reasonable judgment, other onerous condition
        under or pursuant to any applicable law or government regulation that would
        materially reduce the benefits to the Company of the sale of the Securities
        to
        such Purchaser, so long as such regulation, law or onerous condition was
        not in
        effect in such form at the date of this Agreement.

       

      (b)     This
        Agreement may be terminated by any Purchaser by notice to the Company given
        in
        the event that (i) the Company shall have failed, refused or been unable to
        satisfy all material conditions on its part to be performed or satisfied
        hereunder on or prior to the Closing Date or (ii) if after the date of this
        Agreement but prior to the Closing Date, trading in securities of the Company
        on
        the NASDAQ Small Cap Market shall have been suspended and the Company ceases
        to
        be publicly traded. 

       

      (c)     This
        Agreement may be terminated by mutual written consent of all
        parties.

       

      
        
          
          

        

        
          -13-

          
            

          

        

        
          
          

        

      


      9.     Registration.
        The
        Company shall use its best efforts to prepare and file with the SEC on or
        prior
        to the Filing Deadline (as defined below) a Registration Statement covering
        the
        resale of the maximum number of Conversion Shares issuable upon conversion
        of
        the Shares (collectively, the "Registrable
        Securities"),
        for an
        offering to be made on a continuous basis pursuant to Rule 415 (the "Registration
        Statement")
        based
        on the Conversion Price set forth in the Certificate of Designations. The
        term
        "Filing Deadline" means (i) in the event that within 45 days after the Closing
        Date the Company enters into any agreement (a "Merger
        Agreement")
        to
        effect a merger, reorganization, consolidation, recapitalization, sale of
        substantial assets or similar transaction, the date that is 45 days after
        the
        Company enters into such Merger Agreement, or (ii) in the event that the
        Company
        does not enter into a Merger Agreement within 45 days after the Closing Date,
        the date that is 60 days after the Closing Date. The Company shall use its
        best
        efforts to ensure that the Registration Statement is declared effective by
        the
        SEC (i) in the event that the Company enters into a Merger Agreement within
        45
        days after the Closing Date, not later than 150 days after the date the Company
        enters into such Merger Agreement and (ii) in the event that the Company
        does
        not enter into a Merger Agreement within 45 days after the Closing Date,
        within
        60 days of the date the Registration Statement is filed with the SEC.


       

      10.     Event
        of Default.  
        An
        "Event
        of Default"
        means
        the Company's failure to: (i) file the Registration Statement with the SEC
        on or prior to the Filing Deadline (as defined in Section 9 hereof), (ii)
        maintain trading of the Company's Common Stock on the NASDAQ Small Cap Market
        or
        other publicly traded market, or (iii) deliver to Purchasers, or
        Purchasers' broker, as directed, Common Stock that Purchasers have converted
        within three (3) business days of such conversions. 

       

      11.     Notices.  
        All communications hereunder shall be in writing and shall be hand delivered,
        mailed by first-class mail, couriered by next-day air courier or by facsimile
        and confirmed in writing (i) if to the Company, at the addresses set forth
        below, or (ii) if to a Purchaser or MAG, to the address set forth for such
        party on the signature page hereto, with a copy to Sheppard, Mullin, Richter
        & Hampton, LLP, 333 South Hope Street, Los Angeles, California 90071,
        Attention: David Ulich, Esq. 

       

      If
        to the
        Company:

      


      M-Wave,
        Inc.

      11533
        Franklin Avenue, 2nd
        Floor

      Franklin
        Park, Illinois 60131

      


      Attention:
        Jim Mayer

      Telephone:
        630-562-4751

      Facsimile:
        630-562-1775

      


      with
        a
        copy to:

      


      Ellenoff
        Grossman & Schole LLP

      370
        Lexington Avenue, Floor 19 

      New
        York,
        New York 10017


      
        
          
          

        

        
          -14-

          
            

          

        

        
          
          

        

      


      Attn:
        Barry I. Grossman

      Telephone:
        212-370-1300

      Facsimile:
        212-370-7889

      


      All
        such
        notices and communications shall be deemed to have been duly given:
        (i) when delivered by hand, if personally delivered; (ii) five
        business days after being deposited in the mail, postage prepaid, if mailed
        certified mail, return receipt requested; (iii) one business day after
        being timely delivered to a next-day air courier guaranteeing overnight
        delivery; (iv) the date of transmission if sent via facsimile to the
        facsimile number as set forth in this Section or the signature page hereof
        prior
        to 6:00 p.m. (Pacific time) on a business day, or (v) the business day
        following the date of transmission if sent via facsimile at a facsimile number
        set forth in this Section or on the signature page hereof after 6:00 p.m.
        (Pacific time) or on a date that is not a business day. Change of a party's
        address or facsimile number may be designated hereunder by giving notice
        to all
        of the other parties hereto in accordance with this Section.

       

      12.     Survival
        Clause.  
        The respective representations, warranties, agreements and covenants of the
        Company and the Purchasers set forth in this Agreement shall survive until
        the
        first anniversary of the Closing.

       

      13.     Fees
        and Expenses.  
        Concurrently with the execution of this Agreement, the Company shall pay,
        by
        wire transfer of immediately available funds to an account or accounts
        designated by MAG, $40,000 for Purchasers' and MAG's legal expenses incurred
        in
        connection with the preparation and negotiation of the Transaction Documents.
        

       

      14.     Enforcement.  
        If any action at law or in equity is necessary to enforce or interpret the
        terms
        of this Agreement or the Certificate of Designations, the prevailing party
        or
        parties shall be entitled to receive from the other party or parties reasonable
        attorneys' fees, costs and necessary disbursements in addition to any other
        relief to which the prevailing party or parties may be entitled. 

       

      15.     Successors.  
        This Agreement shall inure to the benefit of and be binding upon Purchasers,
        MAG
        and the Company and their respective successors and legal representatives,
        and
        nothing expressed or mentioned in this Agreement is intended or shall be
        construed to give any other person any legal or equitable right, remedy or
        claim
        under or in respect of this Agreement, or any provisions herein contained;
        this
        Agreement and all conditions and provisions hereof being intended to be and
        being for the sole and exclusive benefit of such persons and for the benefit
        of
        no other person. Neither the Company nor any Purchaser may assign this Agreement
        or any rights or obligation hereunder without the prior written consent of
        the
        other party.

       

      16.     No
        Waiver; Modifications in Writing. 
         No failure or delay on the part of the Company, MAG or any Purchaser in
        exercising any right, power or remedy hereunder shall operate as a waiver
        thereof, nor shall any single or partial exercise of any such right, power
        or
        remedy preclude any other or further exercise thereof or the exercise of
        any
        other right, power or remedy. The remedies provided for herein are cumulative
        and are not exclusive of any remedies that may be available to the Company,
        MAG
        or any Purchaser at law or in equity or otherwise. No waiver of or consent
        to
        any departure by the Company, MAG or any Purchaser from any provision of
        this
        Agreement shall be effective unless signed in writing by the party entitled
        to
        the benefit thereof, provided that
        notice of any such waiver shall be given to each party hereto as set forth
        below. Except as otherwise provided herein, no amendment, modification or
        termination of any provision of this Agreement shall be effective unless
        signed
        in writing by or on behalf of each of the Company, MAG and the Purchasers.
        Any
        amendment, supplement or modification of or to any provision of this Agreement,
        any waiver of any provision of this Agreement, and any consent to any departure
        by the Company, MAG or any Purchaser from the terms of any provision of this
        Agreement shall be effective only in the specific instance and for the specific
        purpose for which made or given. Except where notice is specifically required
        by
        this Agreement, no notice to or demand on the Company in any case shall entitle
        the Company to any other or further notice or demand in similar or other
        circumstances.

       

      
        
          
          

        

        
          -15-

          
            

          

        

        
          
          

        

      


      17.     Entire
        Agreement. 
         This Agreement, together with the other Transaction Documents, constitutes
        the entire agreement among the parties hereto and supersedes all prior
        agreements, understandings and arrangements, oral or written, among the parties
        hereto with respect to the subject matter hereof and thereof. Disclosure
        by the
        Company in any Schedule to this Agreement shall be deemed applicable to all
        applicable provisions hereof.

       

      18.     Severability. 
         If any provision of this Agreement is held to be invalid or unenforceable
        in any respect, the validity and enforceability of the remaining terms and
        provisions of this Agreement shall not in any way be affected or impaired
        thereby.

       

      19.     APPLICABLE
        LAW.  
        THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS
        SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
        LAWS
        OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO PROVISIONS RELATING
        TO
        CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE LAWS OF ANOTHER
        JURISDICTION WOULD BE REQUIRED THEREBY. THE PARTIES HEREBY IRREVOCABLY AND
        UNCONDITIONALLY AGREE THAT ACTIONS, SUITS OR PROCEEDINGS ARISING OUT OF OR
        RELATING TO THIS AGREEMENT MAY BE BROUGHT ONLY IN STATE OR FEDERAL COURTS
        LOCATED IN THE CITY OF LOS ANGELES, CALIFORNIA AND HEREBY SUBMIT TO THE
        EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE. 

       

      20.     Counterparts.  
        This Agreement may be executed in two or more counterparts and may be delivered
        by facsimile transmission, each of which shall be deemed an original, but
        all of
        which together shall constitute one and the same instrument. 

       

      21.     If
        the
        foregoing correctly sets forth our understanding, please indicate your
        acceptance thereof in the space provided below for that purpose, whereupon
        this
        Agreement shall constitute a binding agreement among the Company, the Purchasers
        and MAG.

       

      
        
           

        

        
          -16-

          
            

          

        

        
           

        

      

       

      
        	 	
                Very
                  truly yours,

              	 
	 	 	 
	 	
                M-Wave,
                  Inc.

              	 
	 	 	 	 
	 	
                By:

              	
                /s/
                  Joseph A. Turek 

              	 
	 	 	
                Name:  
                  Joseph A. Turek

              	 
	 	 	
                Title:    
                  President and COO

              	 
	
                ACCEPTED
                  AND AGREED:

              	 	 	 


      

       

       

      
        
           

        

        
          -17-

          
            

          

        

        
           

        

      

       

      
        
          	
                  Mercator
                    Momentum Fund, LP

                	
                  Mercator
                    Momentum Fund III, LP

                
	 	 	 	 	 	 
	
                  By:

                	
                  M.A.G.
                    Capital, LLC

                	
                  By:

                	
                  M.A.G.
                    Capital, LLC

                
	
                  Its:

                	
                  General
                    Partner

                	
                  Its:

                	
                  General
                    Partner

                
	 	
                  /s/
                    David Firestone 

                	 	 	
                  /s/
                    David Firestone

                	 
	 	
                  David
                    Firestone

                	 	
                  David
                    Firestone

                
	 	
                  Managing
                    Member

                	 	
                  Managing
                    Member

                


        

        


        
          	
                  M.A.G.
                    Capital, LLC 

                	
                  Monarch
                    Pointe Fund, Ltd.

                
	 	 
	
                  /s/
                    David Firestone

                	 	
                  /s/
                    David Firestone

                	 
	
                  By:

                	
                  David
                    Firestone

                	 	
                  By:

                	
                  David
                    Firestone

                	 
	
                  Its:

                	
                  Managing
                    Member

                	 	
                  Its:

                	
                  Managing
                    Member

                	 


        

         

         

        
          	
                  M.A.G.
                    Capital, LLC

                	
                  Addresses
                    for Notice:

                
	 	 	 
	
                  By:

                	
                  /s/
                    David Firestone

                	 	
                  M.A.G.
                    Capital, LLC

                
	 	
                  David
                    Firestone

                	 	
                  555
                    South Flower Street, Suite 4200

                
	 	Managing
                  Member	 	
                  Los
                    Angeles, California 90071

                
	 	
                   

                	 	
                  Attention:
                    David
                    Firestone

                
	 	 	 	
                  Facsimile:
                    (213) 533-8285

                
	 	 	 	 
	 	 	 	
                  with
                    copy to:

                
	 	 	 	 
	 	 	 	
                  David
                    C. Ulich, Esq.

                
	 	 	 	
                  Sheppard,
                    Mullin, Richter & Hampton LLP

                
	 	 	 	
                  333
                    South Hope Street, 48th
                    Floor

                
	 	 	 	
                  Los
                    Angeles, California 90071

                
	 	 	 	
                  Facsimile:
                    (213) 620-1398

                


        

      

       

      
        
          
          

        

        
          -18-

          
            

          

        

        
          
          

        

      


      Schedule
        A

       

      Direct
        and Indirect Subsidiaries of M-Wave, Inc.

       

      


      M-Wave
        DBS, Inc., an Illinois corporation (not in good standing)


      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      


      Schedule
        B

       

      Company
        Capitalization

       

      See
        the
        Balance Sheet of the Company set forth in the Form 10-QSB for the period
        ended
        September 30, 2005 included in the Disclosure Documents. 

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      


      Schedule
        C

       

      Agreements
        regarding ownership or disposition of capital stock

       

      None

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      


      Schedule
        D

       

      Violations/Breaches

       

      None

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      


      Exhibit
        A

       

      Certificate
        of Designations of

      Series
        B
        Convertible Preferred Stock

      of

      M-Wave,
        Inc.

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      


      Exhibit
        B

       

      Registration
        Rights Agreement

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      


      Exhibit
        C

       

      Form
        of
        Legal Opinion

       

      (Delivered
        to Purchasers at the Closing)

       

      1.     The
        Company is a corporation duly incorporated, validly existing and in good
        standing under the laws of the State of Delaware, with corporate power to
        own
        its properties and to conduct its business. 

       

      2.     The
        Company has the corporate power to execute, deliver and perform the transaction
        documents, including the Exhibits thereto (the "Transaction Documents").
        The
        Transaction Documents have been duly authorized by all requisite corporate
        action by the Company and constitute the valid and binding obligations of
        the
        Company, enforceable in accordance with their terms (subject to bankruptcy,
        equitable principles and other customary exceptions). 

       

      (a)     As
        of the
        date hereof, in accordance with its Certificate of Incorporation on file
        with
        the Secretary of State of Delaware, the authorized capital stock of the Company
        consists of 1,000,000 shares of Preferred Stock, and 20,000,000 shares of
        Common
        Stock. 

       

      (b)     The
        shares of the Company's Series B Stock have been duly authorized and, upon
        issuance, delivery, and payment therefor as described in the Subscription
        Agreement, will be validly issued, fully paid and nonassessable. 

       

      (c)     The
        shares of the Company's Common Stock initially issuable upon conversion of
        the
        shares of Series B Stock sold have been duly authorized and reserved for
        issuance and, upon issuance and delivery upon conversion of the Shares as
        described in the Certificate of Designations, will be validly issued, fully
        paid
        and nonassessable. 

       

      3.     The
        Company's execution and delivery of the Transaction Documents and the issue
        and
        sale of the Shares, on the terms and conditions set forth in the Subscription
        Agreement, will not violate any law of the United States or the State of
        Delaware any rule or regulation of any governmental authority or regulatory
        body
        of the United States or the State of Delaware or any provision of the Company's
        Certificate of Incorporation or Bylaws. 

       

      4.     No
        consent, approval, order or authorization of, and no notice to or filing
        with,
        any governmental agency or body or any court is required to be obtained or
        made
        by the Company for the issuance and sale of the Shares pursuant to the
        Transaction Documents or Agreement, except such as have been obtained or
        made
        and such as may be required under applicable securities laws. 

       

      5.     On
        the
        assumption that the representations of the Company and the Purchasers in
        the
        Subscription Agreement are correct and complete, the offer and sale of the
        Shares pursuant to the terms of the Subscription Agreement are exempt from
        the
        registration requirements of Section 5 of the Securities Act of 1933, as
        amended, and, under such securities laws as they presently exist, the issuance
        of the Company's Common Stock upon conversion of the Shares would also be
        exempt
        from such registration.

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

       

      6.     We
        know
        of no pending or overtly threatened action, proceeding or governmental
        investigation with respect to the Company's sale of Series B Stock pursuant
        to the Transaction Documents.

       

       

      -2-