Document:

THIS WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

WARRANT TO PURCHASE COMMON STOCK

	

Number of Shares:

	

Up to 33,333 shares (subject to adjustment)

	

Warrant Price:

	

$1.02 per share

	

Issuance Date:

	

June 16, 2005

	

Expiration Date:

	

June 16, 2008

		

 

THIS WARRANT CERTIFIES THAT for value received, Mercator Momentum Fund, LP., or its registered assigns (hereinafter called the “Holder”) is entitled to purchase from M-Wave, Inc. (hereinafter called the “Company”), the above referenced number of fully paid and nonassessable shares (the “Shares”) of common stock (the “Common Stock”), of Company, at the Warrant Price per Share referenced above; the number of shares purchasable upon exercise of this Warrant referenced above being subject to adjustment from time to time as described herein. This Warrant is issued in connection with that certain Promissory Note of even date herewith (the “Note”), by and between the Company and Holder. The exercise of this Warrant shall be subject to the provisions, limitations and restrictions contained herein.

1.             Term and Exercise.

1.1           Term.  This Warrant is exercisable in whole or in part (but not as to any fractional share of Common Stock), at any time and from time to time after the date hereof prior to 6:00 p.m. on the Expiration Date set forth above.  

1.2           Warrant Price.  The Warrant shall be exercisable at the Warrant Price described above.  

1.3           Maximum Number of Shares.  The maximum number of Shares of Common Stock exercisable pursuant to this Warrant is 33,333 Shares.  However, notwithstanding anything herein to the contrary, in no event shall the Holder be permitted to exercise this Warrant for a number of Shares greater than the number that would cause the aggregate beneficial ownership of the Company’s Common Stock (calculated pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of (a) the Holder and its affiliates or (b) M.A.G Capital, LLC, and its affiliates, to equal 9.99% of the Company’s Common Stock then outstanding. 

1.4           Procedure for Exercise of Warrant.  Holder may exercise this Warrant by delivering the following to the principal office of the Company in accordance with Section 5.1 hereof: (i) a duly executed Notice of Exercise in substantially the form attached as Schedule A, (ii) payment of the Warrant Price then in effect for each of the Shares being purchased, as designated in the Notice of Exercise, and (iii) this Warrant.  Payment of the Warrant Price may be in cash, certified or official bank check payable to the order of the Company, or wire transfer of funds to the Company’s account (or any combination of any of the foregoing) in the amount of the Warrant Price for each share being purchased.  

1.5           Delivery of Certificate and New Warrant.  In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the shares of Common Stock so purchased, registered in the name of the Holder or such other name or names as may be designated by the Holder, together with any other securities or other property which the Holder is entitled to receive upon exercise of this Warrant, shall be delivered to the Holder hereof, at the Company’s expense, within a reasonable time, not exceeding fifteen (15) calendar days, after the rights represented by this Warrant shall have been so exercised; and, unless this Warrant has expired, a new Warrant representing the number of Shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder hereof within such time.  The person in whose name any certificate for shares of Common Stock is issued upon exercise of this Warrant shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant was surrendered and payment of the Warrant Price was received by the Company, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is on a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such Shares at the close of business on the next succeeding date on which the stock transfer books are open.

1.6           Restrictive Legend.  Each certificate for Shares shall bear a restrictive legend in substantially the form as follows, together with any additional legend required by (i) any applicable state securities laws and (ii) any securities exchange upon which such Shares may, at the time of such exercise, be listed:

 

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.

Any certificate issued at any time in exchange or substitution for any certificate bearing such legend shall also bear such legend unless, in the opinion of counsel for the Holder thereof (which counsel shall be reasonably satisfactory to the Company), the securities represented thereby are not, at such time, required by law to bear such legend.

1.7           Fractional Shares.  No fractional Shares shall be issuable upon exercise or conversion of the Warrant.  In the event of a fractional interest, the number of Shares to be issued shall be rounded down to the nearest whole Share.  

2.             Representations, Warranties and Covenants.

2.1           Representations and Warranties.

(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has all necessary power and authority to perform its obligations under this Warrant;

(b) The execution, delivery and performance of this Warrant has been duly authorized by all necessary actions on the part of the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms; and

(c) This Warrant does not violate and is not in conflict with any of the provisions of the Company’s Articles of Incorporation or Certificate of Determination, Bylaws and any resolutions of the Company’s Board of Directors or stockholders, or any agreement of the Company, and no event has occurred and no condition or circumstance exists that might (with or without notice or lapse of time) constitute or result directly or indirectly in such a violation or conflict.

2.2           Issuance of Shares.  The Company covenants and agrees that all shares of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof.  The Company further covenants and agrees that it will pay when due and payable any and all federal and state taxes which may be payable in respect of the issue of this Warrant or any Common Stock or certificates therefor issuable upon the exercise of this Warrant.  The Company further covenants and agrees that the Company will at all times have authorized and reserved, free from preemptive rights, a sufficient number of shares of Common Stock to provide for the exercise in full of the rights represented by this Warrant.  If at any time the number of authorized but unissued shares of Common Stock of the Company shall not be sufficient to effect the exercise of the Warrant in full, subject to the limitations set forth in Section 1.3 hereto, then the Company will take all such corporate action as may, in the opinion of counsel to the Company, be necessary or advisable to increase the number of its authorized shares of Common Stock as shall be sufficient to permit the exercise of the Warrant in full, subject to the limitations set forth in Section 1.3 hereto, including without limitation, using its best efforts to obtain any necessary stockholder approval of such increase.  The Company further covenants and agrees that if any shares of capital stock to be reserved for the purpose of the issuance of shares upon the exercise of this Warrant require registration with or approval of any governmental authority under any federal or state law before such shares may be validly issued or delivered upon exercise, then the Company will in good faith and as expeditiously as possible endeavor to secure such registration or approval, as the case may be.  If and so long as the Common Stock issuable upon the exercise of this Warrant is listed on any national securities exchange or the Nasdaq Stock Market, the Company will, if permitted by the rules of such exchange or market, list and keep listed on such exchange or market, upon official notice of issuance, all shares of such Common Stock issuable upon exercise of this Warrant.

3.             Other Adjustments.

3.1           Subdivision or Combination of Shares.  In case the Company shall at any time subdivide its outstanding Common Stock into a greater number of shares, the Warrant Price in effect immediately prior to such subdivision shall be proportionately reduced, and the number of Shares subject to this Warrant shall be proportionately increased, and conversely, in case the outstanding Common Stock of the Company shall be combined into a smaller number of shares, the Warrant Price in effect immediately prior to such combination shall be proportionately increased, and the number of Shares subject to this Warrant shall be proportionately decreased.

3.2           Dividends in Common Stock, Other Stock or Property.  If at any time or from time to time the holders of Common Stock (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received or become entitled to receive, without payment therefor:

(a) Common Stock, Options or any shares or other securities which are at any time directly or indirectly convertible into or exchangeable for Common Stock, or any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution (other than options awarded in the ordinary course of business to employees, directors or consultants with a fair market value exercise price);

(b) any cash paid or payable otherwise than as a regular cash dividend; or

(c) Common Stock or additional shares or other securities or property (including cash) by way of spin-off, split-up, reclassification, combination of shares or similar corporate rearrangement (other than Common Stock issued as a stock split or adjustments in respect of which shall be covered by the terms of Section 3.1 above) and additional shares, other securities or property issued in connection with a Change (as defined below) (which shall be covered by the terms of Section 3.4 below), then and in each such case, the Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of stock and other securities and property (including cash in the cases referred to in clause (b) above and this clause (c)) which such Holder would hold on the date of such exercise had such Holder been the holder of record of such Common Stock as of the date on which holders of Common Stock received or became entitled to receive such shares or all other additional stock and other securities and property.

3.3           Reorganization, Reclassification, Consolidation, Merger or Sale.  If any recapitalization, reclassification or reorganization of the share capital of the Company, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its shares and/or assets or other transaction (including, without limitation, a sale of substantially all of its assets followed by a liquidation) shall be effected in such a way that holders of Common Stock shall be entitled to receive shares, securities or other assets or property (a “Change”), then, as a condition of such Change, lawful and adequate provisions shall be made by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares, securities or other assets or property as may be issued or payable with respect to or in exchange for the number of outstanding Common Stock which such Holder would have been entitled to receive had such Holder exercised this Warrant immediately prior to the consummation of such Change.  The Company or its successor shall promptly issue to Holder a new Warrant for such new securities or other property.  The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to give effect to the adjustments provided for in this Section 3 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant.  The provisions of this Section 3.3 shall similarly apply to successive Changes. 

4.             Ownership and Transfer.

4.1           Ownership of This Warrant.  The Company may deem and treat the person in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary until presentation of this Warrant for registration of transfer as provided in this Section 4.

4.2           Transfer and Replacement.  This Warrant and all rights hereunder are transferable in whole or in part upon the books of the Company by the Holder hereof in person or by duly authorized attorney, and a new Warrant or Warrants, of the same tenor as this Warrant but registered in the name of the transferee or transferees (and in the name of the Holder, if a partial transfer is effected) shall be made and delivered by the Company upon surrender of this Warrant duly endorsed, at the office of the Company in accordance with Section 5.1 hereof.  Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft or destruction, and, in such case, of indemnity or security reasonably satisfactory to it, and upon surrender of this Warrant if mutilated, the Company will make and deliver a new Warrant of like tenor, in lieu of this Warrant; provided that if the Holder hereof is an instrumentality of a state or local government or an institutional holder or a nominee for such an instrumentality or institutional holder an irrevocable agreement of indemnity by such Holder shall be sufficient for all purposes of this Warrant, and no evidence of loss or theft or destruction shall be necessary.  This Warrant shall be promptly cancelled by the Company upon the surrender hereof in connection with any transfer or replacement.  Except as otherwise provided above, in the case of the loss, theft or destruction of a Warrant, the Company shall pay all expenses, taxes and other charges payable in connection with any transfer or replacement of this Warrant, other than income taxes and stock transfer taxes (if any) payable in connection with a transfer of this Warrant, which shall be payable by the Holder.  Holder will not transfer this Warrant and the rights hereunder except in compliance with federal and state securities laws and except after providing evidence of such compliance reasonably satisfactory to the Company.

5.             Miscellaneous Provisions.

5.1           Notices. Any notice or other document required or permitted to be given or delivered to the Holder shall be delivered or forwarded to the Holder at c/o M.A.G. Capital, LLC, 555 South Flower Street, Suite 4200, Los Angeles, California 90071, Attention:  David F. Firestone (Facsimile No. 213/553‐8285), or to such other address or number as shall have been furnished to the Company in writing by the Holder, with a copy to Sheppard Mullin Richter & Hampton LLP, 333 South Hope Street, 48th Floor, Los Angeles, California 90071-1448 Attention David C. Ulich (Facsimile No. 213/620-1398).  Any notice or other document required or permitted to be given or delivered to the Company shall be delivered or forwarded to the Company at 475 Industrial Drive,West Chicago, Illinois  60185,  Attention Jim Mayer (facsimile No. 630-562-1775), with a copy to Freeborn & Peters, LLP,  Suite 3000, 311 South Wacker Drive, Chicago Illinois 60606, Attention: Carl R. Klein (Facsimile No. 312-360-6571)or to such other address or number as shall have been furnished to Holder in writing by the Company.  

5.2           All notices, requests and approvals required by this Warrant shall be in writing and shall be conclusively deemed to be given (i) when hand-delivered to the other party, (ii) when received if sent by facsimile at the address and number set forth above; provided that notices given by facsimile shall not be effective, unless either (a) a duplicate copy of such facsimile notice is promptly given by depositing the same in the mail, postage prepaid and addressed to the party as set forth below or (b) the receiving party delivers a written confirmation of receipt for such notice by any other method permitted under this paragraph; and further provided that any notice given by facsimile received after 5:00 p.m. (recipient’s time) or on a non-business day shall be deemed received on the next business day; (iii) five (5) business days after deposit in the United States mail, certified, return receipt requested, postage prepaid, and addressed to the party as set forth below; or (iv) the next business day after deposit with an international overnight delivery service, postage prepaid, addressed to the party as set forth below with next business day delivery guaranteed; provided that the sending party receives confirmation of delivery from the delivery service provider.

5.3           No Rights as Shareholder; Limitation of Liability.  This Warrant shall not entitle the Holder to any of the rights of a shareholder of the Company except upon exercise in accordance with the terms hereof.  No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Warrant Price hereunder or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

5.4           Governing Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of California as applied to agreements among California residents made and to be performed entirely within the State of California, without giving effect to the conflict of law principles thereof.

5.5           Binding Effect on Successors.  This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets and/or securities.  All of the obligations of the Company relating to the Shares issuable upon the exercise of this Warrant shall survive the exercise and termination of this Warrant.  All of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the Holder. Assignment of this Warrant in whole or in part is subject to prior written approval of Company, which approval shall not be unreasonably withheld or delayed.

5.6           Waiver, Amendments and Headings.  This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by both parties (either generally or in a  particular instance and either retroactively or prospectively).  The headings in this Warrant are for purposes of reference only and shall not affect the meaning or construction of any of the provisions hereof.  

5.7           Jurisdiction.  Each of the parties irrevocably agrees that any and all suits or proceedings based on or arising under this Agreement may be brought only in and shall be resolved in the federal or state courts located in the City of Los Angeles, California and consents to the jurisdiction of such courts for such purpose.  Each of the parties irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding in any such court.  Each of the parties further agrees that service of process upon such party mailed by first class mail to the address set forth in Section 9 shall be deemed in every respect effective service of process upon such party in any such suit or proceeding.  Nothing herein shall affect the right of either party to serve process in any other manner permitted by law.  Each of the parties agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner.  

 

5.8           Attorneys' Fees and Disbursements.  If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party or parties shall be entitled to receive from the other party or parties reasonable attorneys’ fees and disbursements in addition to any other relief to which the prevailing party or parties may be entitled.  

 

	

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer this 16th day of June, 2005.

 

	

COMPANY:

	

M-WAVE, INC.

	

 

	

 

	

 

	

By /s/ Jim Mayer                         

	

 

	

 

	

 

	

Print Name: Jim Mayer             

	

 

	

 

	

 

	

Title: CEO                                   

		

 

 

	

 

 

 

SCHEDULE A

 

FORM OF NOTICE OF EXERCISE

 

[To be signed only upon exercise of the Warrant]

 

TO BE EXECUTED BY THE REGISTERED HOLDER

TO EXERCISE THE WITHIN WARRANT

 

 

The undersigned hereby elects to purchase _______ shares of Common Stock (the “Shares”) of M-Wave, Inc. under the Warrant to Purchase Common Stock dated February __ , 2005, which the undersigned is entitled to purchase pursuant to the terms of such Warrant.   The undersigned has delivered $_________, the aggregate Warrant Price for _____ Shares purchased herewith, in full in cash or by certified or official bank check or wire transfer.  

 

Please issue a certificate or certificates representing such shares of Common Stock in the name of the undersigned or in such other name as is specified below and in the denominations as is set forth below:

                                                                                                                                                                                

[Type Name of Holder as it should appear on the stock certificate]

                                                                                                                                                                                                

[Requested Denominations – if no denomination is specified, a single certificate will be issued]

The initial address of such Holder to be entered on the books of Company shall be:

 

                                                                                                                

 

                                                                                                                

 

                                                                                                                

The undersigned hereby represents and warrants that the undersigned is acquiring such shares for his own account for investment purposes only, and not for resale or with a view to distribution of such shares or any part thereof.

 

By:                                                                                                          

Print Name:                                                                                             

Title:                                                                                                       

Dated:                                                                                                     

 

 

	

 

 

 

FORM OF ASSIGNMENT

(ENTIRE)

 

[To be signed only upon transfer of entire Warrant]

 

TO BE EXECUTED BY THE REGISTERED HOLDER

TO TRANSFER THE WITHIN WARRANT

 

 

FOR VALUE RECEIVED ___________________________ hereby sells, assigns and transfers unto _______________________________ all rights of the undersigned under and pursuant to the within Warrant, and the undersigned does hereby irrevocably constitute and appoint _____________________ Attorney to transfer the said Warrant on the books of ________ _________, with full power of substitution.

 

 

 

 

                                                                                            

[Type Name of Holder]

 

By:                                                                                      

Title:                                                                                   

 

Dated:                                                                                 

 

 

 

NOTICE

The signature to the foregoing Assignment must correspond exactly to the name as written upon the face of the within Warrant, without alteration or enlargement or any change whatsoever.

 

	

 

 

 

 

FORM OF ASSIGNMENT

(PARTIAL)

 

[To be signed only upon partial transfer of Warrant]

 

TO BE EXECUTED BY THE REGISTERED HOLDER

TO TRANSFER THE WITHIN WARRANT

 

 

FOR VALUE RECEIVED ___________________________ hereby sells, assigns and transfers unto ____________________________ (i) the rights of the undersigned to purchase ____________________ shares of Common Stock under and pursuant to the within Warrant, and (ii) on a non-exclusive basis, all other rights of the undersigned under and pursuant to the within Warrant, it being understood that the undersigned shall retain, severally (and not jointly) with the transferee(s) named herein, all rights assigned on such non-exclusive basis.  The undersigned does hereby irrevocably constitute and appoint __________________________ Attorney to transfer the said Warrant on the books of M-Wave, Inc.,  with full power of substitution.

 

                                                                                            

[Type Name of Holder]

By:                                                                                      

Title:                                                                                   

 

Dated:                                                                                 

 

 

NOTICE

The signature to the foregoing Assignment must correspond exactly to the name as written upon the face of the within Warrant, without alteration or enlargement or any change whatsoever.Exhibit 10.46

    
      
        

      

      

      

      REGISTRATION
        RIGHTS AGREEMENT

      

      AGREEMENT
        dated
        as of June 16, 2005, between MERCATOR MOMENTUM FUND, L.P., MERCATOR MOMENTUM
        FUND III, L.P, MONARCH POINTE FUND, LTD. (collectively, the "Funds")
        and MERCATOR ADVISORY GROUP, LLC ("MAG") (the Funds and MAG are referred
        to
        individually as a "Holder" and collectively as the "Holders"),
        and M-Wave, Inc. a Delaware corporation (the "Company").

      

      WHEREAS,
        each
        Fund and MAG have acquired Warrants (together, the "Warrants")
        from the Company, pursuant to which the Holders have the right to purchase
        in
        the aggregate up to 601,450 shares of the Common Stock through the exercise
        of
        the Warrants; and

      

      WHEREAS,
        the
        Company desires to grant to the Holders the registration rights set forth
        herein
        with respect to the shares of Common Stock issuable upon exercise of the
        Warrants.

      

      NOW,
        THEREFORE, the
        parties hereto mutually agree as follows:

      

      1.            Registrable
        Securities. As
        used herein the terms "Registrable
        Security"
        means each of the shares of Common Stock issued upon exercise of the Warrants
        (the "Warrant Shares"),
        provided, however, that with respect to any particular Registrable Security,
        such security shall cease to be a Registrable Security when, as of the date
        of
        determination that (a) it has been effectively registered under the Securities
        Act of 1933, as amended (the "Securities
        Act"), and disposed of pursuant thereto, or (b) registration under the
        Securities Act is no longer required for the immediate public distribution
        of
        such security. The term "Registrable Securities"
        means any and/or all of the securities falling within the foregoing definition
        of a "Registrable
        Security." In the event of any merger, reorganization, consolidation,
        recapitalization or other change in corporate structure affecting the Common
        Stock, such adjustment shall be made in the definition of "Registrable Security"
        as is appropriate in order to prevent any dilution or enlargement of the
        rights
        granted pursuant to this Section 1.

      

      2.            Registration.

      

      (a)          The
        Holders shall have the right to demand, on or after February 1, 2006, that
        the
        Company shall file a registration statement (the "Registration
        Statement")
        with the Securities and Exchange Commission (the "SEC")
        in order to register the resale of the Registrable Securities under the
        Securities Act. The Company shall file the Registration Statement with the
        SEC
        within thirty (30) days after receipt of written demand. Once effective,
        the
        Company shall maintain the effectiveness of the Registration Statement until
        the
        earlier of (i) the date that all of the Registrable Securities have been
        sold,
        or (ii) the date that the Company receives an opinion of counsel to the Company
        that all of the Registrable Securities may be freely traded without registration
        under the Securities Act, under Rule 144 promulgated under the Securities
        Act or
        otherwise.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (b)
                  The Company will
        initially include in the Registration Statement as Registrable Securities
        Six
        Hundred One Thousand Four Hundred Fifty (601,450) shares of Common
        Stock.

      

      3.            Covenants
        of the Company with Respect to Registration.

      

      The
        Company covenants and agrees as follows:

      

      (a)          The
        Company shall use best efforts to cause the Registration Statement to become
        effective with the SEC as promptly as possible and in no event more than
        90 days
        after filing the Registration Statement with the SEC. If any stop order
        shall
        be issued by the SEC in connection therewith, the Company shall use best
        efforts
        to obtain promptly the removal of such order. Following the effective date
        of
        the Registration Statement, the Company shall, upon the request of any Holder,
        forthwith supply such reasonable number of copies of the Registration Statement,
        preliminary prospectus and prospectus meeting the requirements of the Securities
        Act, and any other documents necessary or incidental to the public offering
        of
        the Registrable Securities, as shall be reasonably requested by the Holder
        to
        permit the Holder to make a public distribution of the Holder's Registrable
        Securities. The obligations of the Company hereunder with respect to the
        Holder's Registrable Securities are subject to the Holder's furnishing to
        the
        Company such appropriate information concerning the Holder, the Holder's
        Registrable Securities and the terms of the Holder's offering of such
        Registrable Securities as the Company may reasonably request in
        writing.

      

      (b)          The
        Company shall pay all costs, fees and expenses in connection with the
        Registration Statement filed pursuant to Section 2 hereof including, without
        limitation, the Company's legal and accounting fees, printing expenses, and
        blue
        sky fees and expenses; provided, however, that each Holder shall be solely
        responsible for the fees of any counsel retained by the Holder in connection
        with such registration and any transfer taxes or underwriting discounts,
        commissions or fees applicable to the Registrable Securities sold by the
        Holder
        pursuant thereto.

      

      (c)          The
        Company will take all actions which may be required to qualify or register
        the
        Registrable Securities included in the Registration Statement for the offer
        and
        sale under the securities or blue sky laws of such states as are reasonably
        requested by each Holder of such securities, provided that the Company shall
        not
        be obligated to execute or file any general consent to service of process
        or to
        qualify as a foreign corporation to do business under the laws of any such
        jurisdiction.

      

      (d)          In
        the event that the Company fails to (i) file the Registration Statement on
        or
        before thirty (30) days after receipt of written demand (or prior to such
        written demand in the Company's
        sole discretion), or (ii) cause the Registration Statement to be deemed
        effective by the SEC prior to the later of 90 days after filing or May 1,
        2006,
        then the Company shall pay $1,600 for each day until such default is cured.
        The
        default payment shall be allocated among the Holders in accordance with
        instructions received from the Holders. The agreement contained in this Section
        3(d) applies solely to the Registration Statement, and not to any prior
        registration statements filed or agreed to be filed by the Company, and such
        payment shall in no way

      

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

      

      constitute
        evidence of any actual or other damage to the Holders or any other party
        with
        respect to any such prior registration statements.

      

      4.
                    Additional
        Terms.

      

      (a)          The
        Company shall indemnify and hold harmless the Holders and each underwriter,
        within the meaning of the Securities Act, who may purchase from or sell for
        any
        Holder, any Registrable Securities, from and against any and all losses,
        claims,
        damages and liabilities caused by any untrue statement of a material fact
        contained in the Registration Statement, any other registration statement
        filed
        by the Company under the Securities Act with respect to the registration
        of the
        Registrable Securities, any post-effective amendment to such registration
        statements, or any prospectus included therein or caused by any omission
        to
        state therein a material fact required to be stated therein or necessary
        to make
        the statements therein not misleading, except insofar as such losses, claims,
        damages or liabilities are caused by any such untrue statement or omission
        based
        upon information furnished or required to be furnished in writing to the
        Company
        by the Holders or underwriter expressly for use therein, which indemnification
        shall include each person, if any, who controls any Holder or underwriter
        within
        the meaning of the Securities Act and each officer, director, employee and
        agent
        of each Holder and underwriter; provided, however, that the indemnification
        in
        this Section 4(a) with respect to any prospectus shall not inure to the benefit
        of any Holder or underwriter (or to the benefit of any person controlling
        any
        Holder or underwriter) on account of any such loss, claim, damage or liability
        arising from the sale of Registrable Securities by the Holder or underwriter,
        if
        a copy of a subsequent prospectus correcting the untrue statement or omission
        in
        such earlier prospectus was provided to such Holder or underwriter by the
        Company prior to the subject sale and the subsequent prospectus was not
        delivered or sent by the Holder or underwriter to the purchaser prior to
        such
        sale and provided further, that the Company shall not be obligated to so
        indemnify any Holder or any such underwriter or other person referred to
        above
        unless the Holder or underwriter or other person, as the case may be, shall
        at
        the same time indemnify the Company, its directors, each officer signing
        the
        Registration Statement and each person, if any, who controls the Company
        within
        the meaning of the Securities Act, from and against any and all losses, claims,
        damages and liabilities caused by any untrue statement of a material fact
        contained in the Registration Statement, any registration statement or any
        prospectus required to be filed or furnished by reason of this Agreement
        or
        caused by any omission to state therein a material fact required to be stated
        therein or necessary to make the statements therein not misleading, insofar
        as
        such losses, claims, damages or liabilities are caused by any untrue statement
        or omission based upon information furnished in writing to the Company by
        the
        Holder or underwriter expressly for use therein.

      

      (b)          if
        for any reason the indemnification provided for in the preceding section
        is held
        by a court of competent jurisdiction to be unavailable to an indemnified
        party
        with respect to any loss, claim, damage, liability or expense referred to
        therein, then the indemnifying party, in lieu of indemnifying such indemnified
        party thereunder, shall contribute to the amount paid or payable by the
        indemnified party as a result of such loss, claim, damage or liability in
        such
        proportion as is appropriate to reflect the relative fault of the indemnified
        party and the indemnifying party, as well as any other relevant equitable
        considerations.

      

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

      

      (c)          Neither
        the filing of a Registration Statement by the Company pursuant to this Agreement
        nor the making of any request for prospectuses by the Holder shall impose
        upon
        any Holder any obligation to sell the Holder's Registrable
        Securities.

      

      (d)          Each
        Holder, upon receipt of notice from the Company that an event has occurred
        which
        requires a Post-Effective Amendment to the Registration Statement or a
        supplement to the prospectus included therein, shall promptly discontinue
        the
        sale of Registrable Securities until the Holder receives a copy of a
        supplemented or amended prospectus from the Company, which the Company shall
        provide as soon as practicable after such notice.

      

      (e)          If
        the Company fails to keep the Registration Statement refen-ed to above
        continuously effective during the requisite period, then the Company shall,
        promptly upon the request of any Holder, use best efforts to update the
        Registration Statement or file a new registration statement covering the
        Registrable Securities remaining unsold, subject to the terms and provisions
        hereof.

      

      (f)          Each
        Holder agrees to provide the Company with any information or undertakings
        reasonably requested by the Company in order for the Company to include any
        appropriate information concerning the Holder in the Registration Statement
        or
        in order to promote compliance by the Company or the Holder with the Securities
        Act.

      

      (g)          The
        Company agrees that it shall cause each of its directors, officers and
        shareholders owning ten percent (10%) or more of the Company's outstanding
        Common Stock to refrain from selling any shares of the Company's Common Stock
        until the Registration Statement has been declared effective.

      

      (h)          Each
        Holder, on behalf of itself and its affiliates, hereby covenants and agrees
        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 A Stock or the exercise of the Warrants.

      

      5.            Governing
        Law. The
        Registrable Securities will be, if and when issued, delivered in California.
        This Agreement shall be deemed to have been made and delivered in the State
        of
        California and shall be governed as to validity, interpretation, construction,
        effect and in all other respects by the internal substantive laws of the
        State
        of California, without giving effect to the choice of law rules
        thereof.

      

      6.            Amendment. This
        Agreement may only be amended by a written instrument executed by the Company
        and the Holders.

      

      7.            Entire
        Agreement. This
        Agreement constitutes the entire agreement of the parties hereto with respect
        to
        the subject matter hereof, and supersedes all prior agreements and
        understandings of the parties, oral and written, with respect to the subject
        matter hereof.

      

      8.            Execution
        in Counterparts. This
        Agreement may be executed in one or more counterparts, each of which shall
        be
        deemed an original, but all of which together shall constitute one and the
        same
        document.

      

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

      

      9.
                    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 at
        the
        addresses set forth below.

      

      
        	 	
                If
                  to the Holders,

              	
                Mercator
                  Advisory Group, LLC 

              

      

      Mercator
        Momentum Fund, L.P.

      Mercator
        Momentum Fund III, L.P.

      Monarch
        Pointe Fund, Ltd.

      555
        South
        Flower Street, Suite 4200

      Los
        Angeles, CA 90071 Attention: David Firestone

      

      
        	 	
                With
                  a copy to

              	
                Sheppard
                  Mullin Richter & Hampton LLP

              

      

      333
        South Hope Street

      48th
        Floor

      Los
        Angeles, CA 90071-1448

      Telephone
        No.: (213) 620-1780

      Facsimile
        No.: (213) 620-1398

      Attention:
        David C. Ulich

      

      
        	 	
                If
                  to the Company,

              	
                M-Wave,
                  Inc.

              

      

      475
        Industrial Drive West

      Chicago,
        IlIinois 60185

      Telephone
        No.: 630-562-4751

      Facsimile
        No.: 630-562-1775

      Attention:
        Jim Mayer

      

      

      
        	 	
                With
                  a copy to

              	
                Freeborn
                  & Peters, LLP Suite 3000

              

      

      311
        South Wacker Drive

      Chicago,
        Illinois 60606

      Telephone
        No.: 312-360-5769

      Facsimile
        No.: 312-360-5671

      Attention:
        Carl R. Klein

      

      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 4:00 p.m. 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 4:00 p.m. 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.

      

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

       

      10.          Binding
        Effect; Benefits. Any
        Holder may assign its rights hereunder. This Agreement shall inure to the
        benefit of, and be binding upon, the parties hereto and their respective
        heirs,
        legal representatives, successors and assigns. Nothing herein contained,
        express
        or implied, is intended to confer upon any person other than the parties
        hereto
        and their respective heirs, legal representatives and successors, any rights
        or
        remedies under or by reason of this Agreement.

      

      11.          Headings. The
        headings contained herein are for the sole purpose of convenience of reference,
        and shall not in any way limit or affect the meaning or interpretation of
        any of
        the terms or provisions of this Agreement.

      

      12.          Severability. Any
        provision of this Agreement which is held by a court of competent jurisdiction
        to be prohibited or unenforceable in any jurisdiction(s) shall be, as to
        such
        jurisdiction(s), ineffective to the extent of such prohibition or
        unenforceability without invalidating the remaining provisions of this Agreement
        or affecting the validity or enforceability of such provision in any other
        jurisdiction.

      

      13.          Jurisdiction. Each
        of the parties irrevocably agrees that any and all suits or proceedings based
        on
        or arising under this Agreement may be brought only in and shall be resolved
        in
        the federal or state courts located in the City of Los Angeles, California
        and
        consents to the jurisdiction of such courts for such purpose. Each of the
        parties irrevocably waives the defense of an inconvenient forum to the
        maintenance of such suit or proceeding in any such court. Each of the parties
        further agrees that service of process upon such party mailed by first class
        mail to the address set forth in Section 9 shall be deemed in every respect
        effective service of process upon such party in any such suit or proceeding.
        Nothing herein shall affect the right of either party to serve process in
        any
        other manner permitted by law. Each of the parties agrees that a final
        non-appealable judgment in any such suit or proceeding shall be conclusive
        and
        may be enforced in other jurisdictions by suit on such judgment or in any
        other
        lawful manner.

      

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

      

      [The
        balance of this page is intentionally left blank.]

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, this
        Agreement has been executed and delivered by the parties hereto as of the
        date
        first above written.

      

      M-Wave,
        Inc.

       

      By:

      

      /s/
        Jim Mayer

      

      Jim
        Mayer

       

      
        	
                Its:

              	
                CEO

              

      

    

     

    
      

      HOLDERS:

      

      MERCATOR
        MOMENTUM FUND, L.P.

       

      
        	
                By:

              	
                M.A.G.
                  CAPITAL, LLC

              

      

      
        	
                Its:

              	
                General
                  Partner

              

      

      

      
        	
                By:

              	
                /s/
                  David Firestone

              

      

      
        
          	Name:	
                  David
                    Firestone

                

        

        
          	
                  Its:

                	
                  Managing
                    Member

                

        

      

       

       

      
        
          	
                  By:

                	
                  M.A.G.
                    CAPITAL, LLC

                

        

        
          	
                  Its:

                	
                  General
                    Partner

                

        

        

        
          	
                  By:

                	
                  /s/
                    David Firestone

                

        

        
          
            	Name:	
                    David
                      Firestone

                  

          

          
            
              	
                      Its:

                    	
                      Managing
                        Member

                    

            

        

      

      MONARCH
        POINTE FUND

      

      
        	
                By:

              	
                /s/
                  David Firestone

              

      

      
        	
                Its:

              	
                President

              

      

      

      

      MERCATOR
        MOMENTUM FUND III, L.P.

      M.A.G.
        CAPITAL, LLC

      
        

        
          	
                  By:

                	
                  /s/
                    David Firestone

                

        

        
          
            	Name:	
                    David
                      Firestone

                  

          

          
            	
                    Its:

                  	
                    Managing
                      Member

                  

          

        

      

    

     

    -7-

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