ASSET SALE AND TRANSITION AGREEMENT

THIS ASSET SALE AND TRANSITION AGREEMENT (“ Agreement ”), dated as of October 21, 2005 (the “ Effective Date ”), is entered into between M-WAVE, INC. , a Delaware corporation (“ M-Wave ”), and AMERICAN STANDARD CIRCUITS, INC. , an Illinois Corporation (“ American Standard ”).

M-Wave and American Standard are parties to that certain Amended and Restated Agreement for Strategic Operating Alliance, dated December 31, 2004 (“ SOA Agreement ”), pursuant to which, among other things, M-Wave obtained orders for high performance circuit boards for Radio Frequency (“ RF ”) and Digital applications, and American Standard fulfilled such orders;

M-Wave desires to sell, and American Standard desires to purchase, all rights related to that certain list of customers for the RF business (the “ Customer List ”), attached hereto as Exhibit A , in exchange for the consideration and covenants set forth herein.

In connection with the transactions contemplated hereby, American Standard desires to appoint M-Wave as its exclusive representative through December 31, 2006 with regard to those customers on the Customer List.

In connection with the transactions contemplated hereby, the parties wish to terminate and extinguish certain agreements and reaffirm certain obligations.

M-Wave is the tenant under, and AMI Partners, LLC is the landlord under, that certain Industrial Loft Lease (the “ Lease ”), dated January 28, 2004, as amended, in respect of the second floor of an industrial building located at 475 Industrial Way, West Chicago, Illinois 60185 (the “ Leased Facility ”).

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises and covenants herein set forth, the parties hereto agree as follows:

1.    Sale of Assets . M-Wave hereby sells, conveys and transfers, and American Standard hereby purchases, the Customer List for RF products, the Customers on it and all of M-Wave’s right, title and interest in the name “Poly Circuits” (but only to the extent any rights therein exist) in exchange for the consideration and covenants set forth herein; provided, however, M-Wave provides no representations or warranties with respect to the name “Poly Circuits,” including, without limitation, with regard to its availability, suitability, general commercial use or value. In the event that M-Wave or its present or past affiliates has registered the name “Poly Circuits” with the United States or any state agency as a trademark, it agrees to execute any and all documents necessary to transfer the registration to American Standard.

2.    Consideration . In consideration of the agreements and covenants set forth herein, the parties hereto agree as follows:

(a)    Except as otherwise provided herein, the SOA Agreement shall be terminated in its entirety and extinguished as of the Effective Date, and after the Effective Date the parties thereto shall have no further liability or obligation under the SOA Agreement to any other party thereto;

(b)    On the Effective Date, American Standard shall issue the promissory note, attached hereto as Exhibit B , in the principal amount of $205,000 (the “Note”), to M-Wave. After termination of the Representation Term (as defined below), and once all commissions due under this Agreement have been paid, and as long as no Event of Default (as defined in the Note) or Breach (as defined below) of this Agreement has occurred, which Breach has not been cured within 30 days following written notice from M-Wave to American Standard to do so, M-Wave shall forgive the unpaid balance due under the Note, including all interest accrued thereon, and the Note shall be cancelled. American Standard’s Breach for purposes of this paragraph shall not constitute an Event of Default if M-Wave is in material Breach under this Agreement.

(c)    If M-Wave is in Breach of this Agreement, which Breach has not been cured within 30 days, and as long as an Event of Default has not occurred, and American Standard is not itself in Breach of this Agreement, M-Wave shall forgive the unpaid balance due under the Note, including all interest accrued thereon, and the Note shall be cancelled. “ Breach ” shall mean (i) with respect to M-Wave, any material breach by M-Wave of its obligations set forth in Section 5 hereof, and (ii) with respect to American Standard, the failure of American Standard to make any payment with regard to any commissions due and owing to M-Wave as provided in this Agreement.

(d)    After the Effective Date, American Standard shall purchase from M-Wave, at cost, any inventory outstanding on the Effective Date, as more particularly described on Exhibit C attached hereto, that is to be sold, directly or indirectly, to those customers set forth on the Customer List. The purchase price for each item of inventory purchased pursuant to the Section 2(d) shall be paid within thirty (30) business days following the date such item is delivered by American Standard to its customer. American Standard shall use such outstanding inventory to satisfy orders from customers set forth on the Customer List whenever possible. Prior to any payment to M-Wave for such inventory, M-Wave agrees to have any lien on such inventory released by any party having a lien on it.

(e)    American Standard shall cause the Lease to be terminated and extinguished as of October 31, 2005, and after October 31, 2005 the parties thereto shall have no further liability or obligation under the Lease to any other party thereto; provided, however, M-Wave shall leave at the Leased Premises, furniture and fixtures currently located at the Leased Premises. M-Wave will be required to vacate the premises no later than December 31, 2005. M-Wave will pay to American Standard the amount of $7857.50 per month or a prorated amount of $258.33 for every day of occupancy after October 31, 2005.

3.    Appointment of Representative . As of the Effective Date, and through December 31, 2006 (the “ Representation Term ”), American Standard hereby appoints M-Wave as its exclusive sales representative with regard to those customers set forth on the Customer List, and M-Wave accepts the appointment and agrees to sell and promote American Standard’s products to such customers on the terms and conditions set forth herein.

4.    Terms of Representation . M-Wave’s representation of American Standard, in accordance with Section 3 above, shall be subject to the following terms and conditions:

(a)    M-Wave shall receive a commission on each sale of products by American Standard, with regard to the Customers on the Customer List, whether sold through M-Wave or directly by American Standard or any of its affiliates (including affiliated persons), equal to the product of the percentage rate, set forth opposite the applicable Customer’s name on Exhibit A , multiplied by the “net invoice price.” “ Net invoice price ” shall mean the total price at which an order is invoiced to the customer including any increase or decrease in the total amount of the order (even though such increase or decrease takes place after the end of the Representation Term), but excluding shipping and mailing costs, taxes, insurance, COD charges, NRE, Tooling Charges, Testing, returned products for any reason and any commercially reasonable allowances or discounts granted to such customer by American Standard, consistent with historical practice.

(b)    Commissions are due and payable the first week of the month following thirty (30) days after shipment of the respective products. On a monthly basis, American Standard will send M-Wave a detailed commission statement showing the computation of all commissions earned. If the customer fails to pay American Standard within 90 days following the invoice date (a “Delinquent Account”), then the current commission payment due to M-Wave will be debited for commissions paid with respect to the Delinquent Account; provided, however, M-Wave’s commission account shall be credited to the extent any payments on any such Delinquent Account(s) are ultimately received, and American Standard shall use commercially reasonably efforts to collect any Delinquent Account, and provided, further, the commissions otherwise due on products shipped during the last 90 days of this Agreement shall be paid on said monthly basis following the month in which said invoices are paid by the customer.

(c)    M-Wave will coordinate all RFQ’s with American Standard’s sales department. All purchase orders are subject to acceptance or rejection by an authorized officer of American Standard and to the approval of American Standard’s credit department. American Standard shall be solely responsible for all credit risks and collections. If American Standard notifies any customer set forth on the Customer List in writing of its acceptance or rejection of a purchase order, a copy of such written notification shall be simultaneously transmitted to M-Wave. At least once every month, American Standard shall supply M-Wave with copies of all paid invoices and each of the customer purchase orders for the current month.

(d)    All sales shall be at prices and upon terms established by American Standard and it shall have the right, in its sole discretion, from time to time, to establish, change, alter, or amend prices and other terms and conditions of sale. M-Wave shall not accept orders in American Standard’s name or make price quotations or delivery promises without American Standard’s prior approval.

5.    Accounts Receivable . All accounts receivable outstanding in connection with products shipped on or prior to the Effective Date shall remain the sole and exclusive property of M-Wave. Any accounts receivable created in connection with customer purchase orders shipped after the Effective Date shall be the sole and exclusive property of American Standard. Any payment received by M-Wave for products shipped after the Effective Date to customers on the Customer List shall be remitted directly to American Standard within two (2) days after M-Wave’s receipt of each such payment. Notwithstanding anything to the contrary set forth herein, M-Wave shall have the right to retain, and to offset, any payments received by it on behalf of American Standard to the extent of any commissions that have been earned, but which have not yet been paid.

6.    Transition Assistance . Following the Effective Date, and with respect to those customers on the Customer List, M-Wave shall provide commercially reasonable assistance in the transition of customer information and customer relations, including the conversion of all open purchase orders and sharing of pricing information and notifying customers that American Standard is the party manufacturing and selling the product for the Customer in lieu of M-Wave.

7.    Packaging and Labeling . American Standard will package and include Labels, at its own expense, on or with all of its products and packaging as required. As used herein, “ Label(s) ” shall mean all (a) labels and other written, printed or graphic matter placed upon any products, (b) containers and/or wrappers used with the products including, without limitation, product inserts which bear the trademarks or trade dress of American Standard, and (c) other matters designated in any purchase orders, by any customer or on approved prototypes/samples.

8.    Shipments . American Standard shall ship all products to customers, at its own expense, in accordance with the applicable requirements specified in each relevant purchase order.

9.    Customer Complaints . As of and following the Effective Date, American Standard shall handle all customer complaints, Return Material Authorizations and technical problems relating to products shipped to customers; provided however, during the Representation Term, American Standard may request that M-Wave provide a reasonable level of additional customer service or logistical coordination in connection with any customer complaints or technical problems relating to products sold to customers listed on the Customer List and shipped prior to the Effective Date. M-Wave will have no liability, and shall incur no additional cost, in providing any of the foregoing limited customer support.

10.    Transition Issues .

(a)    Engineering . M-Wave will pay American Standard $50 per hour for engineering services requested by M-Wave and provided by American Standard employees.

(b)    Digital Product Procurement . M-Wave shall provide American Standard with a “first right of refusal” on all Digital product requests for quotes whereby, prior to ordering any Digital product(s) from any other domestic supplier, M-Wave shall provide American Standard an opportunity to see the pricing and material terms of other bids (but not the name of such supplier(s)) and make a competitive offer with regard to such products.

12.    M-Wave Options . M-Wave has previously granted Gordhan Patel (“ Patel ”) options to purchase 104,167 shares of M-Wave’s common stock (the “ Options ”) at an exercise price of $1.35 per share for a term of four (4) years from the date of the SOA Agreement. The Options were fully vested as of December 31, 2004 and shall remain exercisable in full in accordance with the terms hereof; provided that Patel shall not exercise any portion thereof prior to December 31, 2007 until M-Wave has filed the appropriate S-8 registration statement.

13.    Intellectual Property . Unless specifically and expressly granted herein and notwithstanding a party’s use thereof, no license or rights under either party’s intellectual property rights including, without limitation, copyrights, trademarks, trade names, trade secrets, patent or any other proprietary rights issued, honored and/or enforceable under any applicable laws, are implied or granted in this Agreement. Except as otherwise provided herein, each Party shall retain full ownership of all of its intellectual property. M-Wave hereby grants to American Standard, for the life of the patents, a royalty-free, non-exclusive license with regard to any patents held by M-Wave on the Effective Date that are required to be used by American Standard in its production of RF products.

14.    Regulatory Matters .

(a)    American Standard represents and warrants that it currently has all material licenses and permits necessary for the operation of its business as currently conducted.

(b)    American Standard will be responsible for any reporting of matters regarding the manufacture or products, as applicable, to relevant regulatory authorities, in accordance with pertinent laws and regulations and shall notify M-Wave of any occurrence or information that arises out of its manufacturing activities that has adverse regulatory compliance and/or reporting consequences concerning a product.

(c)    American Standard shall be responsible for handling and responding to any governmental agency inspections with respect to manufacturing of products and shall provide to M-Wave copies of any information requested by any governmental agency in connection with any governmental inspection related to the products.

15.    Product Warranty . M-Wave will continue to honor its product warranty obligations to those customers set forth on the Customer List for products shipped prior to the Effective Date; provided, however, that American Standard will bear all costs of repairing any defective product, any products that were determined not to be in accordance with the applicable specifications, and any shortages in shipments of products. M-Wave’s obligation under this Section 15 are subject to and conditioned upon American Standard’s compliance with its obligations under this Section 15 hereof.

16.    Records and Audit .

(a)    During the Representation Term and for a period of one year thereafter, each party shall keep complete and accurate accounts, notes, data and records of all work performed in connection with purchase orders received during the Representation Term from customers on the Customer List and of all work performed under the SOA Agreement (collectively, the “ Records ”). American Standard shall maintain complete and adequate records pertaining to the methods and facilities used by it for the manufacture, processing, testing, packing, labeling, pricing and distribution of the products in accordance with the applicable regulations in the United States and other countries, if applicable.

(b)    During the Representation Term and for a period of one year thereafter, each party shall be permitted, at the expense of the requesting party, to audit and make copies of the Records of the other party to verify the proper allocation and payment of revenue and expenses under this Agreement or the SOA Agreement. Any Confidential Information (as defined below) provided pursuant to this Section shall be subject to the provisions of Section 17 below, provided that a party may disclose such Confidential Information to its advisors and attorneys, as necessary to complete the audit described in this Section. Each audit will be conducted only during normal business hours of the audited party.

17.    Confidentiality .

(a)    Each party acknowledges that any and all Confidential Information disclosed (at any time) or submitted by one party (the “ Disclosing Party ”) to the other (the “ Receiving Party ”) hereunder, including under Section 16 hereof, or previously provided under the SOA Agreement or otherwise, (i) shall be received and maintained by the Receiving Party with at least the same degree of care to avoid disclosure of such Confidential Information as it uses with respect to its own Confidential Information, and (ii) shall not be used for any purposes other than those expressly permitted under this Agreement and shall not be disclosed to any third party without the prior written consent of the Disclosing Party.

(b)    For the purposes of this Agreement, “ Confidential Information ” shall mean any information or material that is special, unique, proprietary, or gives such party or its affiliates a competitive advantage and/or enhances such party’s or its affiliates' goodwill, whether such information or material is designated “confidential” or not, and whether such information or material is written or oral, or obtained by viewing such party’s premises, data or files, including, but not limited to, formulae or revisions thereto, processes and methods, business plans, financial data, customers, product development plans, marketing plans or strategies, distributor or representative lists, manufacturing methodologies, and research data, except to the extent that it can be established by the Receiving Party by competent proof that such Confidential Information: (i) was already known to the Receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the Disclosing Party;