newcardio_ex1026.htm


    Exhibit
10.26

    


    First
Montauk Securities Corp.

    


    


    June 27,
2008

    


    


    


     NewCardio,
Inc.

    2350
Mission College Boulevard, Suite 1175

    Santa
Clara, California 95054

    


    


    Attn:
Mr. Branislav Vajdic,
CEO

    


    


    Re: Advisory Services

    


    Dear Mr.
Vajdic:

    


    This letter confirms the engagement of
First Montauk Securities Corp., an NASD member firm (“Montauk”), as a
non-exclusive financial advisor to NewCardio, Inc., and its subsidiaries and
affiliates (together, referred to as the “Company”) for a period of 12 months
commencing upon the date of your acceptance of this letter.  In this
regard, the parties agree to the following terms and conditions:

    


    1.           Engagement.  The
Company hereby engages and retains Montauk as a non-exclusive financial advisor
for and on behalf of the Company to perform the Services as defined in Section
2.  Montauk hereby accepts this engagement on the terms and conditions
set forth in this agreement.

    


    2.           Services.  In
connection with its engagement pursuant to this agreement, Montauk agrees to
perform the following services for the Company:

    


    A.           Advisory Services. As
requested from time to time by the Company, Montauk shall provide financial
advisory services to the Company pertaining to the Company’s business
affairs.  Without limiting the foregoing, Montauk will assist the
Company in developing, studying and evaluating a financing plan, strategic and
financial alternatives, and merger and acquisition proposals and will assist in
negotiations and discussions pertaining thereto. Additionally, Montauk will
assist the Company in preparing an offering document or presentation materials
describing the Company, its operations, its historical performance and future
prospects.

    


    B.           Business
Combinations.  Montauk will use its best efforts to coordinate
the introduction of the Company to one or more individuals, firms or other
entities (the “Candidates”) that may have an interest in pursuing some form of
Business Combination with the Company and in analyzing, structuring, negotiating
and effecting such a Business Combination.  As used in this letter,
the term “Business Combination” means (i) any merger, consolidation,
reorganization or other business combination pursuant to which any portion of
the business of the Company is combined with that of another entity, including
without limitation any joint venture, licensing agreement, or product sale or
marketing distribution agreement or (ii) the acquisition, directly or
indirectly, of beneficial ownership of more than 50% of any class of capital
stock of the Company or substantially all of the assets of the Company. Nothing
contained herein shall be deemed or construed as an agreement by First Montauk
to issue any “fairness opinion” with respect to a Business Combination. In the
event that the Company desires First Montauk to issue a fairness opinion, the
parties shall negotiate the terms of a separate agreement with respect
thereto.


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    


    


    C.           Montauk
agrees to use its best efforts to make itself available to the Company’s
officers, at such mutually agreed upon place and time during normal business
hours for reasonable periods of time for the purpose of advising and assisting
the Company in preparing reports, summaries, corporate and/or transaction
profiles, due diligence packages and/or other material and documentation as
shall be necessary, in the opinion of Montauk.  Such availability will
be subject to reasonable advance notice and mutually convenient
scheduling.  In addition, Montauk shall make its Investment Banking
personnel available for telephone conferences with the Company’s principal
financial sales and/or operating officers during normal business hours upon
reasonable advance notice and mutually agreed upon dates and times to assist
with, and evaluate proposals.

    


    3.           Compensation.  As
compensation for the services rendered by Montauk to the Company pursuant to
this agreement and in addition to the expense allowance set forth in Section 4
(“Expenses”) below, the Company shall pay to Montauk as set forth
below:

    


    Advisory
Services:  A total fee of 50,000 restricted shares of the
Company’s common stock (“Shares”) and warrants to purchase 50,000 shares of the
Company’s common stock (“Warrants”) at an exercise price of $2.00 and 50,000
Warrants at an exercise price of $4.00.  The Shares and Warrants will
be issued and delivered to Montauk upon execution of this
Agreement.  The Company will not include any Warrants or Shares on any
registration statement without the written permission of
Montauk.  Montauk will deliver instructions to the Company to
designate the Shares and Warrants to certain employees and affiliates and the
Company shall deliver the Shares and Warrants pursuant to Montauk’s
instructions, upon execution of this Agreement. The Warrants shall have a 3 year
life with a cashless exercise feature. The Company shall deliver to Montauk an
opinion letter to each designee in order to free up the Shares and the shares
underlying the Warrants when the 144 holding period permits including any
assignments from third parties.  The Warrants shall vest 1/12th each
month over 12 months and be limited by exercise volumes and shareholder of
record thresholds described below:

     

    Exercise limitations:

     

    
      	
              a.  

            	
              The
      vested Warrants may be exercised and/or sold subject to certain trading
      volume limitations. The average trading volume of NewCardio’s common stock
      for the 20 trading days prior to the exercise/sales notice must exceed
      $250,000.00 or the Warrants remain subject to this
  lock-up.

            


    

     

    
      	
              b.  

            	
              There
      are currently 72 holders of record as of the filing of NewCardio’s first
      quarter 2008 SEC Form 10-Q on May 15, 2008.  The lock-up on
      exercise of the Warrants remains in place until the number of shareholders
      of record increases to 400, and that minimum remains in place at the time
      of exercise/sales notice by
consultant.

            


    


    
      
         


      

      
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    4.           Expenses.  In
addition to the compensation in Section 4, “Compensation” above, The Company
agrees to reimburse Montauk, upon request made from time to time, for its
reasonable out-of-pocket expenses incurred by Montauk in connection with its
activities under this agreement; provided, however, Montauk shall not incur any
expense in excess of $500 without the prior written consent of the
Company.  These expenses include but are not limited to long distance
phone charges, airfare, hotel lodging and meals, transportation, outside
consultants, printing, and overnight express mail incurred by Montauk in
fulfilling its duties under this agreement.

    


    5.           Confidentiality and Non-
Disclosure.  The Company is prepared to make available to
Montauk certain information concerning the business, financial condition,
operations, assets and liabilities of the Company in connection with the
performance of its duties hereunder.  As a condition to such
information being furnished to Montauk and its employees or agents, Montauk
agrees to treat any information concerning the Company (whether prepared by the
Company, its advisors, investors or otherwise and irrespective of the form of
communication) which is furnished to Montauk or to its employees or agents now
or in the future by or on behalf of the Company (herein collectively referred to
as the “Evaluation
Material”) in accordance with the provisions of this Agreement, and to
take or abstain from taking certain other actions hereinafter set
forth.  The term “Evaluation Material”
also shall be deemed to include all notes, analyses, compilations, studies,
interpretations or other documents prepared by Montauk, its employees or agents
which contain, reflect or are based upon, in whole or in part, the information
furnished to Montauk, its employees or agents pursuant hereto.  The
term “Evaluation
Material” does not include information which (i) is or becomes generally
available to the public other than as a result of a disclosure by Montauk, its
employees or agents, or (ii) becomes available to Montauk on a non-confidential
basis from a source other than the Company (including without limitation any of
the Company’s directors, officers, employees or agents), or any of its
attorneys, accountants, investors, consultants, bankers and financial advisors
(collectively, the “Representatives”),
provided that such source is not bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligation of confidentiality to the
Company or any other party with respect to such information.

    


    Montauk hereby agrees that Montauk, its
employees and agents shall use the Evaluation Material solely for the purposes
contemplated by this Agreement, that the Evaluation Material will be kept
confidential and that Montauk, its employees and agents will not disclose any of
the Evaluation Material in any manner whatsoever; provided, however, that Montauk
may make any disclosure of such information to which the Company give its prior
written consent.

    



    
      
         


      

      
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    5.           Indemnification.  The
Company agrees to indemnify Montauk and its affiliates and their respective
directors, officers, employees, agents and controlling persons (each such person
being an “Indemnified Party”) from and against any and all losses, claims,
damages and liabilities, joint or several, related to or arising out of any
Business Combination, or the engagement of Montauk pursuant to, and the
performance by Montauk of the services contemplated by, this Agreement and will
reimburse any Indemnified party for all expenses (including fees and costs of
counsel) as they are incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party
and whether or not such claim, action or proceeding is initiated or brought by
or on behalf of the Company.  If the indemnification of an Indemnified
Party provided for in this agreement is for any reason held unenforceable, the
Company agrees to contribute to the losses, claims, damages and liabilities for
which such indemnification is held unenforceable is such proportion as is
appropriate to reflect the relative benefits to the Company, on the one hand,
and Montauk, on the other hand; provided, however, that in no event shall the
Indemnified Parties be required to contribute an aggregate amount in excess of
the aggregate fees actually paid to Montauk under this agreement.  The
Company agrees that it will not settle, compromise or consent to the entry of
any judgment in any pending or threatened claim, action or proceeding in respect
of which indemnification could be sought under the indemnification provision of
this agreement (whether or not Montauk or any other Indemnified Party is an
actual or potential party to such claim, action or proceeding), unless such
settlement, compromise or consent includes an unconditional release of each
Indemnified Party from all liability arising out of such claim, action or
proceeding.

    


    6.           Independent
Contractor.  The Company acknowledges that Montauk has been
retained to act solely as a financial advisor to the Company.  In such
capacity, Montauk shall act as an independent contractor, and any duties of
Montauk arising out of its engagement pursuant to this agreement shall be owed
solely to the Company.  Montauk shall be responsible for the payment
of all federal, state and local taxes which may be payable in connection with
the receipt of compensation hereunder.

    
       

      7.           Governing
Law.  This Agreement will be interpreted and construed in
accordance with the laws of the State of California and the United States of
America, without regard to conflict of law principles.

    

     

    
      	
              a)  

            	
              Arbitration.  In
      consideration of Montauk’s financial advisory relationship with NewCardio,
      Inc. (the “Company”), its promise to arbitrate all disputes related to
      Montauk’s finacial advisory relationship with the Company and Montauk’s
      receipt of the compensation, and other benefits paid to Montauk by
      Company, at present and in the future, Montauk agrees that any and all
      controversies, claims, or disputes with the Company arising out of,
      relating to, or resulting from Montauk’s financial advisory relationship
      with the Company or the termination of Montauk’s financial advisory
      relationship with the Company, including any breach of this Agreement,
      shall be subject to binding arbitration under the Arbitration Rules set
      forth in California Code of Civil Procedure Section 1280 through 1294.2,
      including section 1281.8 (the "Rules") and pursuant to California
      law.

            


    

    


    



    
      
         


      

      
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    8.           Term and
Termination.  This Agreement shall be effective upon its
execution and shall remain in effect for 12 months from the date of acceptance
by the Company.  Either the Company or Montauk may terminate Montauk’s
engagement and responsibilities hereunder with a 30-day advance written
notice.  However, no termination of this Agreement shall in any way
affect the right of Montauk to receive any fees accrued or vested, up until the
termination date.  The terms of exercise of Warrants remain governed
by the Exercise Limitations detailed in Section 3 a and b under Compensation..
In addition, Section 5, “Indemnification,” Section 6, “Independent Contractor,”
and Section 7, “Governing Law” shall survive any termination of this
Agreement.

    


    9.           Entire
Agreement.  This Agreement contains the entire agreement and
understanding between the parties with respect to its subject matter and
supersedes all prior discussion, agreements and understandings between them with
respect thereto.  This Agreement may not be modified except in a
writing signed by the parties.

    


    10.           Assignment.   Neither
this Agreement nor the rights of either party hereunder shall be assigned by
either party without the prior written consent of the other party.

    


    11.           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 instrument.

    


    12.           No Fiduciary
Relationship. The Company acknowledges and agrees that: (i) this
Agreement is an arm’s-length commercial transaction between the  Company
and Montauk; (ii) in connection therewith and with the process leading
to  any subsequent transaction as referred to hereunder, including any
offering of securities of the Company, Montauk is not acting as a fiduciary of
the  Company; (iii) Montauk has not assumed any fiduciary responsibility in
favor of the Company or any subscriber or investor with respect to any
securities offering contemplated hereby or the process leading thereto,
including any negotiation related to the pricing of any securities; and (iv) the
Company has consulted its own legal and financial advisors to the extent it has
deemed appropriate in connection with this Agreement..

    


    



    
      
         


      

      
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    13.           Press Releases/Public
Announcements. Neither party shall issue any press release or public
announcement of this Agreement or the terms hereof without the prior consent of
the other party; provided, however, the Company may make filings under
applicable federal and state securities laws as required under applicable law
but shall provide Montauk with a reasonable opportunity to review and comments
upon any proposed filing.

    


    
      	 
      	
              Sincerely,

            
	 
      	 
      
	 
      	
              FIRST
      MONTAUK SECURITIES CORP.

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:  /s/ Victor K.
      Kurylak                        
      

            
	 
      	
              Name: 
      Victor K. Kurylak

            
	
              Agreed
      and Accepted:

            	
              Title: 
      President and Chief Executive Officer

            
	 
      	 
      
	
              Date:
      June 27, 2008

            	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	
              By: 
      /s/ Richard
      Brounstein

            	 
      
	
              Name:
      Richard Brounstein

            	 
      
	
              Title:
      CFO, NewCardio, Inc