Exhibit 10(fn)


              AMENDED AND RESTATED PRIVATE EQUITY CREDIT AGREEMENT



                                 BY AND BETWEEN


                                 NCT GROUP, INC.


                                       AND


                                CRAMMER ROAD LLC




                                   Dated as of
                               September 30, 2004




<PAGE>


     THIS AMENDED AND RESTATED  PRIVATE EQUITY CREDIT  AGREEMENT is entered into
as of the 30th day of September 2004 (this "AGREEMENT"),  by and between CRAMMER
ROAD LLC, a limited  liability  company organized and existing under the laws of
The Cayman Islands  ("INVESTOR"),  and NCT GROUP, INC., a corporation  organized
and existing under the laws of the State of Delaware (the "COMPANY").

     WHEREAS,  the  parties  hereto  are  parties  to a  Private  Equity  Credit
Agreement  dated as of July 25,  2002,  and now wish to amend and  restate  such
Private Equity Credit Agreement in its entirety by entering into this Agreement;

     WHEREAS,  the  parties  desire  that,  upon the  terms and  subject  to the
conditions contained herein, the Company shall issue and sell to Investor,  from
time to time as  provided  herein,  and  Investor  shall  purchase,  up to Fifty
Million Dollars ($50,000,000) of the Common Stock (as defined below); and

     WHEREAS,  such  investments will be made in reliance upon the provisions of
Section 4(2) ("SECTION 4(2)") of the Securities Act of 1933, as amended, and the
rules and regulations  promulgated thereunder (the "SECURITIES ACT"), Regulation
D promulgated  under the Securities Act ("REGULATION D"), and/or upon such other
exemption  from the  registration  requirements  of the Securities Act as may be
available  with respect to any or all of the  investments  in Common Stock to be
made hereunder.

     NOW, THEREFORE, the parties hereto agree as follows:


                                    ARTICLE I

                               CERTAIN DEFINITIONS


     Section 1.1 DEFINED TERMS. As used in this  Agreement,  the following terms
shall have the following  meanings  specified or indicated  (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):

     "AGREEMENT" shall have the meaning specified in the preamble hereof.

     "BID PRICE"  shall mean the  closing  bid price of the Common  Stock on the
Principal Market.

     "BLACKOUT  NOTICE"  shall have the meaning  specified  in the  Registration
Rights Agreement.

     "BLACKOUT  PERIOD"  shall have the meaning  specified  in the  Registration
Rights Agreement.

     "BLACKOUT SHARES" shall have the meaning specified in Section 2.6.

     "BUY-IN" shall have the meaning specified in Section 8.3.

     "BUY-IN  ADJUSTMMENT  AMOUNT"  shall have the meaning  specified in Section
8.3.

     "BY-LAWS" shall have the meaning specified in Section 4.8.

     "CERTIFICATE" shall have the meaning specified in Section 4.8.

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<PAGE>


     "CLAIM NOTICE" shall have the meaning specified in Section 9.3(a).

     "CLOSING"  shall mean one of the  closings of a purchase and sale of shares
of Common Stock pursuant to Section 2.3.

     "CLOSING DATE" shall mean,  with respect to a Closing,  the eleventh (11th)
Trading Day following the Put Date related to such Closing, or such earlier date
as the Company and Investor shall agree, provided all conditions to such Closing
have been satisfied on or before such Trading Day.

     "COMMITMENT PERIOD" shall mean the period commencing on the Effective Date,
and ending on the earlier of (i) the date on which Investor shall have purchased
Put Shares  pursuant to this  Agreement for an aggregate  Purchase  Price of the
Maximum Commitment Amount,  (ii) the date this Agreement is terminated  pursuant
to Section 2.5, or (iii) the date occurring thirty six (36) months from the date
of commencement of the Commitment Period.

     "COMMON  STOCK" shall mean the Company's  common stock,  $.01 par value per
share,  and any  shares  of any  other  class of  common  stock  whether  now or
hereafter  authorized,  having the right to participate in the  distribution  of
dividends (as and when declared) and assets (upon liquidation of the Company).

     "COMMON STOCK  EQUIVALENTS"  shall mean any securities that are convertible
into or  exchangeable  for  Common  Stock  or any  options  or other  rights  to
subscribe for or purchase  Common Stock or any such  convertible or exchangeable
securities.

     "COMPANY"  shall  have  the  meaning  specified  in the  preamble  to  this
Agreement.

     "CONDITION  SATISFACTION  DATE" shall mean each of (a) the date of delivery
of the  relevant  Put Notice and (b) the  applicable  Closing  Date for such Put
Notice.

     "CONTROL PERSON" shall mean each director, executive officer, promoter, and
such  other  Persons  as may be deemed in control  of the  Company  pursuant  to
Section 15 of the Securities Act or Section 20 of the Exchange Act.

     "COVERING SHARES" shall have the meaning specified in Section 8.3.

     "DAMAGES" shall mean any loss, claim, damage, liability, costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements and
costs and expenses of expert  witnesses and  investigation)  but excluding  lost
profits, opportunity costs, punitive damages, penalties or fines.

     "DISCOUNT" shall mean nine (9%) percent.

     "DISPUTE PERIOD" shall have the meaning specified in Section 9.3(a).

     "DTC" shall the meaning specified in Section 2.3.

     "DWAC" shall the meaning specified in Section 2.3.

     "EFFECTIVE  DATE"  shall  mean  the date on which  the SEC  first  declares
effective  a  Registration  Statement  registering  resale  of  the  Registrable
Securities as set forth in Section 7.2(a).

     "ESCROW AGENT" shall mean Krieger & Prager, LLP.

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<PAGE>


     "ESCROW  AGREEMENT"  shall mean the Joint Escrow  Instructions  in the form
annexed hereto as Exhibit F.

     "EXCHANGE ACT" shall mean the Securities  Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

     "FAST" shall the meaning specified in Section 2.3.

     "INDEMNIFIED PARTY" shall have the meaning specified in Section 9.3(a).

     "INDEMNIFYING PARTY" shall have the meaning specified in Section 9.3(a).

     "INDEMNITY NOTICE" shall have the meaning specified in Section 9.3(b).

     "HOLDER" shall have the meaning specified in Section 8.3.

     "INVESTMENT  AMOUNT"  shall  mean  the  dollar  amount  (within  the  range
specified in Section 2.2) to be invested by Investor to purchase Put Shares with
respect to any Put Date as notified  by the  Company to  Investor in  accordance
with Section 2.2.

     "INVESTOR"  shall  have  the  meaning  specified  in the  preamble  to this
Agreement.

     "LEGEND" shall have the meaning specified in Section 8.1.

     "MARKET  PRICE" on any given date shall mean the  average of the lowest Bid
Prices (not  necessarily  consecutive) for any three (3) Trading Days during the
ten (10) Trading Day period immediately following the Put Date.

     "MATERIAL   ADVERSE   EFFECT"  shall  mean  any  effect  on  the  business,
operations,  properties, prospects or financial condition of the Company that is
material  and adverse to the  Company or to the Company and such other  entities
controlling  or  controlled  by  the  Company,  taken  as a  whole,  and/or  any
condition,   circumstance,   or  situation  that  would  prohibit  or  otherwise
materially  interfere  with the ability of the Company to enter into and perform
its  obligations  under  either of (a) this  Agreement  or (b) the  Registration
Rights Agreement.

     "MAXIMUM COMMITMENT AMOUNT" shall mean Fifty Million Dollars ($50,000,000).

     "MAXIMUM PUT AMOUNT" shall mean, with respect to any Put, the lesser of (a)
Two Million  Dollars  ($2,000,000),  or (b) the greater of (i) One Hundred Fifty
(150%) percent of the Weighted  Average Volume for the fifteen (15) Trading Days
immediately  preceding each Put Date or (ii) One Hundred Fifty Thousand  Dollars
($150,000).

     "MINIMUM COMMITMENT AMOUNT" shall mean Five Million Dollars ($5,000,000).

     "MINIMUM  PUT AMOUNT"  shall  mean,  with  respect to any Put,  Twenty-Five
Thousand Dollars ($25,000).

     "NASD" shall mean the National Association of Securities Dealers, Inc.

     "NASDAQ"  shall mean The Nasdaq Stock  Market,  Inc.

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<PAGE>


     "NEW BID PRICE" shall have the meaning specified in Section 2.6.

     "NEW COMMON STOCK" shall have the meaning specified in Section 6.14(a).

     "OLD BID PRICE" shall have the meaning specified in Section 2.6.

     "OUTSTANDING"  shall mean, with respect to the Common Stock, at any date as
of which the number of shares of Common  Stock is to be  determined,  all issued
and  outstanding  shares of Common  Stock,  including all shares of Common Stock
issuable  in  respect  of  outstanding  scrip or any  certificates  representing
fractional  interests  in  shares  of  Common  Stock;  provided,  however,  that
Outstanding  shall not  include  any  shares of Common  Stock then  directly  or
indirectly owned or held by or for the account of the Company.

     "PERSON"  shall  mean an  individual,  a  corporation,  a  partnership,  an
association, a trust or other entity or organization,  including a government or
political subdivision or an agency or instrumentality thereof.

     "PRINCIPAL  MARKET" shall mean the market or exchange  which is at the time
the principal trading exchange or market for the Common Stock.

     "PURCHASE  PRICE" shall mean,  with respect to a Put, the Market Price less
the product of the Discount and the Market Price.

     "PUT"  shall mean each  occasion  that the Company  elects to exercise  its
right to tender a Put Notice  requiring  Investor to  purchase  shares of Common
Stock, subject to the terms and conditions of this Agreement.

     "PUT DATE" shall mean the Trading Day during the  Commitment  Period that a
Put Notice is deemed delivered pursuant to Section 2.2(b).

     "PUT  NOTICE"  shall mean a written  notice,  substantially  in the form of
Exhibit B hereto,  to Investor setting forth the Investment  Amount with respect
to which the Company is  requiring  Investor to purchase  shares of Common Stock
pursuant to the terms of this Agreement.

     "PUT  SHARES"  shall mean all  shares of Common  Stock  issued or  issuable
pursuant to a Put that has been exercised or may be exercised in accordance with
the terms and conditions of this Agreement.

     "REGISTRABLE  SECURITIES"  shall mean the (a) Put Shares,  (b) the Blackout
Shares and (c) any  securities  issued or  issuable  with  respect to any of the
foregoing by way of  exchange,  stock  dividend or stock split or in  connection
with a combination of shares,  recapitalization,  merger, consolidation or other
reorganization or otherwise. As to any particular Registrable  Securities,  once
issued such  securities  shall  cease to be  Registrable  Securities  when (i) a
Registration  Statement  has  been  declared  effective  by  the  SEC  and  such
Registrable  Securities  have  been  disposed  of  pursuant  to  a  Registration
Statement,  (ii) such Registrable  Securities have been sold under circumstances
under which all of the  applicable  conditions  of Rule 144 are met,  (iii) such
time as such Registrable  Securities have been otherwise  transferred to holders
who may trade such shares without  restriction under the Securities Act, and the
Company has delivered a new  certificate or other evidence of ownership for such
securities  not bearing a  restrictive  legend or (iv) in the opinion of counsel
for the Company,  such Registrable  Securities may be sold without  registration
under the Securities Act or the need for an exemption from any such registration
requirements and without any time, volume or manner limitations pursuant to Rule
144(k) (or any similar provision then in effect) under the Securities Act.

     "REGISTRATION   RIGHTS  AGREEMENT"  shall  mean  the  registration   rights
agreement in the

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<PAGE>


form of Exhibit A hereto.

     "REGISTRATION  STATEMENT"  shall mean a registration  statement on Form S-1
(if use of such form is then  available to the Company  pursuant to the rules of
the SEC and,  if not,  on such other form  promulgated  by the SEC for which the
Company then qualifies and which counsel for the Company shall deem  appropriate
and which form shall be available for the resale of the  Registrable  Securities
to be registered  thereunder in accordance with the provisions of this Agreement
and the Registration Rights Agreement and in accordance with the intended method
of  distribution  of such  securities),  for the  registration  of the resale by
Investor of the Registrable Securities under the Securities Act.

     "REGULATION  D" shall have the meaning  specified  in the  recitals of this
Agreement.

     "REMAINING PUT SHARES" shall have the meaning specified in Section 2.6.

     "RULE  144"  shall mean Rule 144 under the  Securities  Act or any  similar
provision then in force under the Securities Act.

     "SEC" shall mean the Securities and Exchange Commission.

     "SECTION  4(2)" shall have the meaning  specified  in the  recitals of this
Agreement.

     "SECURITIES  ACT" shall have the meaning  specified in the recitals of this
Agreement.

     "SEC DOCUMENTS"  shall mean, as of a particular date, all reports and other
documents  filed by the Company  pursuant to the Securities Act or Section 13(a)
or 15(d) of the Exchange  Act since the  beginning  of the  Company's  then most
recently  completed fiscal year as of the time in question (provided that if the
date in question is within ninety days of the beginning of the Company's  fiscal
year,  the term shall  include all  documents  filed since the  beginning of the
second preceding fiscal year).

     "SOLD SHARES" shall have the meaning specified in Section 8.3.

     "SUBSCRIPTION DATE" shall mean the date on which this Agreement is executed
and delivered by the Company and Investor.

     "THIRD PARTY CLAIM" shall have the meaning specified in Section 9.3(a).

     "TRADING  CUSHION"  shall mean a minimum of two (2) Trading  Days between a
Closing Date and the next Put Date.

     "TRADING DAY" shall mean any day during which the Principal Market shall be
open for business.

     "TRANSACTION  DOCUMENTS"  means this  Amended and Restated  Private  Equity
Credit Agreement,  the Registration Rights Agreement,  Closing Certificate,  and
the Transfer Agent instructions described in Section 8.1.

     "TRANSFER AGENT" shall mean the transfer agent for the Common Stock (and to
any  substitute  or  replacement  transfer  agent for the Common  Stock upon the
Company's appointment of any such substitute or replacement transfer agent).

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<PAGE>


     "UNDERWRITER"  shall mean any underwriter  participating in any disposition
of the Registrable  Securities on behalf of Investor  pursuant to a Registration
Statement.

     "VALUATION  EVENT"  shall  mean an event in which the  Company  at any time
during a Valuation Period takes any of the following actions:

          (a) subdivides or combines the Common Stock;

          (b) pays a  dividend  in  shares  of  Common  Stock or makes any other
     distribution  of shares of Common  Stock,  except for  dividends  paid with
     respect to any preferred stock of the Company;

          (c) issues any options or other  rights to  subscribe  for or purchase
     shares of Common  Stock and the price per share for which  shares of Common
     Stock may at any time  thereafter  be issuable  pursuant to such options or
     other rights shall be less than the Bid Price in effect  immediately  prior
     to  such  issuance  (other  than  such  shares  issued  pursuant  to and in
     accordance  with the terms of a stock  option plan in effect prior to March
     1, 2002);

          (d) issues any securities  convertible into or exchangeable for shares
     of Common Stock and the  consideration per share for which shares of Common
     Stock may at any time thereafter be issuable  pursuant to the terms of such
     convertible or exchangeable  securities shall be less than the Bid Price in
     effect immediately prior to such issuance;

          (e) issues  shares of Common Stock  otherwise  than as provided in the
     foregoing  subsections  (a) through (d), at a price per share less,  or for
     other  consideration  lower, than the Bid Price in effect immediately prior
     to such issuance, or without consideration;

          (f) makes a distribution of its assets or evidences of indebtedness to
     the  holders of Common  Stock as a  dividend  in  liquidation  or by way of
     return of capital or other than as a dividend  payable  out of  earnings or
     surplus  legally  available  for  dividends  under  applicable  law  or any
     distribution  to  such  holders  made  in  respect  of the  sale  of all or
     substantially   all  of  the   Company's   assets  (other  than  under  the
     circumstances provided for in the foregoing subsections (a) through (e); or

          (g) takes any action  affecting  the  number of shares of  Outstanding
     Common  Stock,  other  than an  action  described  in any of the  foregoing
     subsections (a) through (f) hereof, inclusive,  which in the opinion of the
     Company,  determined in good faith,  would have a materially adverse effect
     upon the rights of Investor at the time of a Put.

     "VALUATION  PERIOD"  shall  mean  the  period  of  ten  (10)  Trading  Days
immediately  following the date on which the  applicable Put Notice is deemed to
be delivered and during which the Purchase  Price of the Common Stock is valued;
provided, however, that if a Valuation Event occurs during any Valuation Period,
a new  Valuation  Period  shall begin on the Trading Day  immediately  after the
occurrence  of such  Valuation  Event and end on the tenth  (10th)  Trading  Day
thereafter  (and, in such event,  the Put Date for the most recently  issued Put
Notice shall be  automatically  revised to be the date of the occurrence of such
Valuation Event for all purposes of this Agreement).

     "WEIGHTED  AVERAGE  VOLUME" shall mean the average of the Weighted  Volumes
for the relevant Trading Days.

     "WEIGHTED VOLUME" shall mean the product of (a) the Bid Price times (b) the
volume on the

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Principal Market.


                                   ARTICLE II

                        PURCHASE AND SALE OF COMMON STOCK


     Section 2.1  INVESTMENTS.  Upon the terms and  conditions  set forth herein
(including,  without limitation, the provisions of Article VII), on any Put Date
the Company may  exercise a Put by the  delivery of a Put Notice.  The number of
Put Shares that Investor shall receive  pursuant to such Put shall be determined
by dividing the  Investment  Amount  specified in the Put Notice by the Purchase
Price with respect to such Put Date.

     Section 2.2 MECHANICS.

     (a) PUT NOTICE. At any time during the Commitment  Period,  the Company may
deliver a Put Notice to Investor, subject to the conditions set forth in Section
7.2; provided,  however, the Investment Amount for each Put as designated by the
Company in the  applicable Put Notice shall be neither less than the Minimum Put
Amount nor more than the Maximum Put Amount.

     (b) DATE OF DELIVERY OF PUT NOTICE.  A Put Notice shall be deemed delivered
on (i) the Trading Day it is received by  facsimile  or otherwise by Investor if
such  notice is  received  on or prior to 12:00 noon New York time,  or (ii) the
immediately  succeeding  Trading Day if it is received by facsimile or otherwise
after  12:00 noon New York time on a Trading Day or at anytime on a day which is
not a Trading Day.

     Section 2.3  CLOSINGS.  On or prior to each Closing Date for a Put, (a) the
Company shall deliver to Escrow Agent one or more certificates, representing the
Put  Shares  to be  purchased  by  Investor  pursuant  to  Section  2.1  herein,
registered in the name of Investor and (b) Investor  shall deliver to the Escrow
Agent the  Investment  Amount  specified  in the Put Notice by wire  transfer of
immediately  available funds to an account  designated by the Escrow Agent on or
before  the  Closing  Date.  In  lieu  of   delivering   physical   certificates
representing  the Common Stock  issuable in  accordance  with clause (a) of this
Section 2.3, and provided that the Transfer Agent then is  participating  in the
Depository  Trust Company ("DTC") Fast Automated  Securities  Transfer  ("FAST")
program,  upon  request of  Investor,  the  Company  shall use its  commercially
reasonable efforts to cause the Transfer Agent to electronically transmit, prior
to the Closing  Date,  the Put Shares by  crediting  the account of the holder's
prime broker with DTC through its Deposit  Withdrawal Agent Commission  ("DWAC")
system, and provide proof satisfactory to the Escrow Agent of such delivery.  In
addition,  on or prior to such  Closing  Date,  each of the Company and Investor
shall  deliver to the  Escrow  Agent all  documents,  instruments  and  writings
required to be delivered or  reasonably  requested by either of them pursuant to
this  Agreement in order to implement and effect the  transactions  contemplated
herein.  On the Closing Date and provided  all  conditions  to Closing have been
satisfied by the Company,  the Escrow Agent shall wire  transfer to the Company,
the Investment Amount, less any applicable fees and expenses.

     Section 2.4 [INTENTIONALLY OMITTED]

     Section  2.5  TERMINATION  OF  INVESTMENT  OBLIGATION.  The  obligation  of
Investor pursuant to this Agreement to purchase shares of Common Stock shall, at
Investor's option,  terminate  permanently  (including with respect to a Closing
Date that has not yet occurred) in the event that (a) there shall

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<PAGE>


occur any stop order or  suspension  of the  effectiveness  of any  Registration
Statement  for an aggregate  of thirty (30)  Trading Days during the  Commitment
Period,  for any reason  other than  deferrals or  suspension  during a Blackout
Period in accordance  with the  Registration  Rights  Agreement,  as a result of
corporate  developments  subsequent  to,  or  made  public  subsequent  to,  the
Subscription Date that would require such  Registration  Statement to be amended
to reflect such event in order to maintain its  compliance  with the  disclosure
requirements  of the Securities Act or (b) the Company shall at any time fail to
comply with the  requirements of Section 6.3, 6.4, or 6.6 and such failure shall
continue for more than thirty (30) days.

     Section 2.6 BLACKOUT  SHARES.  Subject to Section 6.2 herein,  in the event
that,  (a) within  fifteen (15) Trading Days  following  any Closing  Date,  the
Company gives a Blackout  Notice to Investor of a Blackout  Period in accordance
with the Registration Rights Agreement, and (b) the Bid Price on the Trading Day
immediately preceding such Blackout Period ("OLD BID PRICE") is greater than the
Bid Price on the first Trading Day following such Blackout  Period that Investor
may  sell its  Registrable  Securities  pursuant  to an  effective  Registration
Statement ("NEW BID PRICE"), then the Company shall issue to Investor the number
of additional shares of Registrable  Securities (the "BLACKOUT SHARES") equal to
the  difference  between  (i) the  product of the  number of Put Shares  held by
Investor  immediately  prior to the Blackout Period that were issued on the most
recent  Closing  Date (the  "REMAINING  PUT SHARES")  multiplied  by the Old Bid
Price, divided by the New Bid Price, and (ii) the Remaining Put Shares.

     Section 2.7 [INTENTIONALLY OMITTED]

     Section  2.8  LIQUIDATED   DAMAGES.   Each  of  the  Company  and  Investor
acknowledges  and agrees that the  requirement  to issue  Blackout  Shares under
Section 2.6 shall give rise to liquidated damages and not penalties. Each of the
Company and Investor further acknowledges that (a) the amount of loss or damages
likely to be incurred is incapable or is  difficult to precisely  estimate,  (b)
the amounts specified in such Section 2.6 bears a reasonable  proportion and are
not  plainly or  grossly  disproportionate  to the  probable  loss  likely to be
incurred by Investor in connection with a Blackout Period under the Registration
Rights  Agreement,  and (c) each of the Company and Investor  are  sophisticated
business parties and have been  represented by sophisticated  and able legal and
financial counsel and negotiated this Agreement at arm's length.


                                   ARTICLE III

                   REPRESENTATIONS AND WARRANTIES OF INVESTOR


     Investor represents and warrants to the Company that:

     Section 3.1 INTENT.  Investor is entering  into this  Agreement for its own
account and Investor has no present arrangement (whether or not legally binding)
at any time to sell the  Common  Stock  to or  through  any  person  or  entity;
provided, however, Investor reserves the right to dispose of the Common Stock at
any time in accordance with federal and state securities laws applicable to such
disposition.

     Section 3.2 SOPHISTICATED  INVESTOR.  Investor is a sophisticated  investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited  investor
(as defined in Rule 501 of  Regulation  D), and Investor has such  experience in
business and financial  matters that it is capable of evaluating  the merits and
risks of an  investment  in the  Common  Stock.  Investor  acknowledges  that an
investment  in the Common  Stock is  speculative  and  involves a high degree of
risk.

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<PAGE>


     Section 3.3  AUTHORITY.  Investor has the requisite  power and authority to
enter into and perform its obligations under this Agreement and the transactions
contemplated hereby in accordance with its terms;

     (a) the  execution  and  delivery of this  Agreement  and the  Registration
Rights  Agreement,  and the consummation by it of the transactions  contemplated
hereby and thereby  have been duly  authorized  by all  necessary  action and no
further consent or authorization of Investor or its partners is required; and

     (b) this  Agreement  has been duly  authorized  and  validly  executed  and
delivered  by  Investor  and  is a  valid  and  binding  agreement  of  Investor
enforceable  against  it in  accordance  with its terms,  subject to  applicable
bankruptcy,  insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable  principles
of general application.

     Section  3.4 NOT AN  AFFILIATE.  Investor  is not an  officer,  director or
"affiliate"  (as that term is defined in Rule 405 of the Securities  Act) of the
Company.

     Section 3.5  ORGANIZATION  AND  STANDING.  Investor is a limited  liability
company duly organized,  validly existing and in good standing under the laws of
the Cayman Islands,  and has all requisite power and authority to own, lease and
operate its  properties  and to carry on its  business  as now being  conducted.
Investor is duly  qualified  as a foreign  corporation  to do business and is in
good  standing  in  every  jurisdiction  in which  the  nature  of the  business
conducted or property owned by it makes such qualification necessary, other than
those in which the  failure  so to  qualify  would not have a  material  adverse
effect on Investor.

     Section  3.6  ABSENCE OF  CONFLICTS.  The  execution  and  delivery of this
Agreement and any other  document or  instrument  contemplated  hereby,  and the
consummation of the transactions contemplated hereby and thereby, and compliance
with the  requirements  hereof and thereof,  will not (a) violate any law, rule,
regulation,  order,  writ,  judgment,  injunction,  decree or award  binding  on
Investor,  (b) violate any  provision of Investor's  Memorandum of  Association,
Articles  of  Association,  Certificate  of  Incorporation  or other  applicable
charter document, any indenture,  instrument or agreement to which Investor is a
party or is  subject,  or by which  Investor  or any of its assets is bound,  or
conflict with or  constitute a material  default  thereunder,  (c) result in the
creation or imposition of any lien pursuant to the terms of any such  indenture,
instrument  or agreement,  or constitute a breach of any fiduciary  duty owed by
Investor to any third  party,  or (d) require  the  approval of any  third-party
(that has not been  obtained)  pursuant to any  material  contract,  instrument,
agreement,  relationship or legal  obligation to which Investor is subject or to
which any of its assets, operations or management may be subject.

     Section 3.7 DISCLOSURE;  ACCESS TO  INFORMATION.  Investor has received all
documents,  records,  books  and  other  information  pertaining  to  Investor's
investment  in the Company that has been  requested  by  Investor.  Investor has
reviewed or received copies of the SEC Documents.

     Section  3.8  MANNER OF SALE.  At no time was  Investor  presented  with or
solicited  by or through any leaflet,  public  promotional  meeting,  television
advertisement  or any other form of general  solicitation  or  advertising as it
relates in any manner to this Agreement.

     Section 3.9  FINANCIAL  CAPABILITY.  Investor  presently  has the financial
capacity and the  necessary  capital to perform its  obligations  hereunder  and
shall and has provided to the Company such financial and other  information that
the Company has requested to demonstrate such capacity.

                                       9
<PAGE>


                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY


     The Company  represents and warrants to Investor that,  except as disclosed
in the SEC Documents:

     Section 4.1 ORGANIZATION OF THE COMPANY.  The Company is a corporation duly
organized,  validly existing and in good standing under the laws of the State of
Delaware,  and has all requisite  power and authority to own,  lease and operate
its properties and to carry on its business as now being conducted.  The Company
is  duly  qualified  as a  foreign  corporation  to do  business  and is in good
standing in every  jurisdiction in which the nature of the business conducted or
property  owned by it makes such  qualification  necessary,  other than those in
which the failure so to qualify would not have a Material Adverse Effect.

     Section 4.2 AUTHORITY.  (a) The Company has the requisite  corporate  power
and authority to enter into and perform its obligations under this Agreement and
the  Registration  Rights Agreement and to issue the Put Shares and the Blackout
Shares,  if any;  (b) the  execution  and  delivery  of this  Agreement  and the
Registration  Rights  Agreement by the Company and the consummation by it of the
transactions  contemplated  hereby and thereby have been duly  authorized by all
necessary  corporate  action and no  further  consent  or  authorization  of the
Company or its Board of Directors or stockholders  is required;  and (c) each of
this Agreement and the Registration  Rights Agreement has been duly executed and
delivered by the Company and  constitute  valid and binding  obligations  of the
Company  enforceable  against the Company in  accordance  with their  respective
terms,  except as such  enforceability may be limited by applicable  bankruptcy,
insolvency,  or similar laws relating to, or affecting generally the enforcement
of, creditors'  rights and remedies or by other equitable  principles of general
application.

     Section  4.3  CAPITALIZATION.  As  of  the  date  of  this  Agreement,  the
authorized capital stock of the Company consists of 645,000,000 shares of Common
Stock,  of which,  as of June 30,  2004,  641,970,392  shares  were  issued  and
outstanding, and 10,000,000 shares of preferred stock, par value $.10 per share,
of  which,  as of  June  30,  2004,  1,752  Series  H  shares  were  issued  and
outstanding.  Except for options to purchase 504,923,944 shares of Common Stock,
warrants to purchase  897,054,087  shares of Common Stock, and conversion rights
and  exchange  rights to purchase  2,624,773,281  shares of Common Stock and any
rights to  purchase  shares of Common  Stock  existing  under the July 25,  2002
Private  Equity Credit  Agreement  between the Company and the  Investor,  there
were,  as of June 30, 2004,  no options,  warrants,  or rights to subscribe  to,
securities, rights or obligations convertible into or exchangeable for or giving
any right to subscribe  for any shares of capital  stock of the Company.  All of
the outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable.

     Section  4.4 COMMON  STOCK.  The Company has  registered  the Common  Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all  reporting  requirements  of the  Exchange  Act,  and the  Company  has
maintained all requirements for the continued listing or quotation of the Common
Stock,  and such Common  Stock is  currently  listed or quoted on the  Principal
Market.  As of the  date of this  Agreement,  the  Principal  Market  is the OTC
Bulletin Board.

     Section 4.5 SEC  DOCUMENTS.  The Company has delivered or made available to
Investor  true and  complete  copies of the SEC  Documents  (including,  without
limitation,  proxy  information  and  solicitation  materials).  To the  best of
Company's  knowledge,  the Company has not provided to Investor any  information
that,  according  to  applicable  law,  rule or  regulation,  should  have  been
disclosed  publicly  prior to the date hereof by the Company,  but which has not
been so disclosed.  As of their respective dates, the SEC

                                       10
<PAGE>


Documents  complied  in all  material  respects  with  the  requirements  of the
Securities Act or the Exchange Act, as the case may be, and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC  Documents  contained  any untrue  statement  of a  material  fact or
omitted to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents  comply as to form and  substance in all material  respects
with applicable accounting  requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto.  Such
financial  statements have been prepared in accordance  with generally  accepted
accounting  principles applied on a consistent basis during the periods involved
(except (a) as may be otherwise  indicated in such  financial  statements or the
notes thereto or (b) in the case of unaudited interim statements,  to the extent
they may not include  footnotes or may be condensed or summary  statements)  and
fairly present in all material respects the financial position of the Company as
of the dates  thereof  and the  results  of  operations  and cash  flows for the
periods  then ended  (subject,  in the case of unaudited  statements,  to normal
year-end audit adjustments).

     Section 4.6 EXEMPTION FROM  REGISTRATION;  VALID ISSUANCES.  To the best of
Company's  knowledge,  the sale and  issuance of the Put Shares and the Blackout
Shares,  if  any,  in  accordance  with  the  terms  and  on  the  bases  of the
representations  and  warranties set forth in this  Agreement,  may and shall be
properly issued by the Company to Investor pursuant to Section 4(2),  Regulation
D and/or any applicable  state law. When issued and paid for as herein provided,
the Put  Shares,  and the  Blackout  Shares,  if any,  shall be duly and validly
issued,  fully paid, and  nonassessable.  Neither the sales of the Put Shares or
the Blackout Shares, if any,  pursuant to, nor the Company's  performance of its
obligations under, this Agreement or the Registration Rights Agreement shall (a)
result in the  creation or  imposition  of any liens,  charges,  claims or other
encumbrances  upon the Put Shares or the Blackout Shares,  if any, or any of the
assets of the Company, or (b) entitle the holders of Outstanding Common Stock to
preemptive  or other rights to subscribe to or acquire the Common Stock or other
securities of the Company. The Put Shares and the Blackout Shares, if any, shall
not subject Investor to personal  liability by reason of the ownership  thereof,
except as may be provided by applicable law.

     Section  4.7 NO  GENERAL  SOLICITATION  OR  ADVERTISING  IN  REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor any person acting
on  its  or  their  behalf  (a)  has  conducted  or  will  conduct  any  general
solicitation  (as that term is used in Rule 502(c) of  Regulation  D) or general
advertising  with  respect to any of the Put Shares or the Blackout  Shares,  if
any, or (b) has made any offers or sales of any security or solicited any offers
to buy any security under any circumstances  that would require  registration of
the Common Stock under the Securities Act.

     Section  4.8  CORPORATE  DOCUMENTS.  The  Company  has  furnished  or  made
available to Investor true and correct  copies of the Company's  Certificate  of
Incorporation,  as amended and in effect on the date hereof (the "CERTIFICATE"),
and the  Company's  By-Laws,  as amended  and in effect on the date  hereof (the
"BY-LAWS").

     Section 4.9 NO CONFLICTS.  The execution,  delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Put Shares
and the Blackout  Shares,  if any, do not and will not (a) result in a violation
of the  Certificate  or By-Laws or (b) conflict  with,  or constitute a material
default  (or an event that with  notice or lapse of time or both would  become a
material default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement,  indenture,  instrument
or any "lock-up" or similar  provision of any underwriting or similar  agreement
to which the Company is a party,  or (c) result in a violation  of any  federal,
state,  local or  foreign  law,  rule,  regulation,  order,  judgment  or decree
(including federal and state securities laws and regulations)  applicable to the
Company or by which any

                                       11
<PAGE>


property  or  asset  of the  Company  is  bound  or  affected  (except  for such
conflicts, defaults, terminations, amendments, accelerations,  cancellations and
violations  as would  not,  individually  or in the  aggregate,  have a Material
Adverse  Effect) nor is the Company  otherwise in violation of, conflict with or
in default under any of the foregoing;  provided,  however, that for purposes of
the Company's  representations  and  warranties as to violations of foreign law,
rule or regulation referenced in clause (c), such representations and warranties
are made only to the best of the Company's  knowledge  insofar as the execution,
delivery and  performance of this Agreement by the Company and the  consummation
by the Company of the transactions contemplated hereby are or may be affected by
the status of  Investor  under or  pursuant  to any such  foreign  law,  rule or
regulation.  The business of the Company is not being  conducted in violation of
any law, ordinance or regulation of any governmental entity, except for possible
violations  that either  singly or in the  aggregate  do not and will not have a
Material  Adverse  Effect.  The Company is not required under federal,  state or
local law, rule or regulation to obtain any consent,  authorization or order of,
or make any filing or  registration  with, any court or  governmental  agency in
order for it to execute,  deliver or perform any of its  obligations  under this
Agreement or issue and sell the Common Stock in accordance with the terms hereof
(other than any SEC, NASD or state securities filings that may be required to be
made by the Company subsequent to any Closing,  any registration  statement that
may be filed pursuant hereto, and any shareholder approval required by the rules
applicable  to  companies  whose  common  stock  trades on the Over The  Counter
Bulletin Board);  provided that, for purposes of the representation made in this
sentence,  the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of Investor herein.

     Section 4.10 NO MATERIAL ADVERSE CHANGE.  Since June 30, 2004, no event has
occurred  that would have a Material  Adverse  Effect on the Company,  except as
disclosed in the SEC Documents.

     Section 4.11 NO UNDISCLOSED LIABILITIES.  The Company has no liabilities or
obligations  that are material,  individually or in the aggregate,  and that are
not disclosed in the SEC Documents or otherwise publicly  announced,  other than
those incurred in the ordinary course of the Company's businesses since June 30,
2004 and which,  individually  or in the  aggregate,  do not or would not have a
Material Adverse Effect.

     Section 4.12 NO UNDISCLOSED  EVENTS OR CIRCUMSTANCES.  Since June 30, 2004,
no event or  circumstance  has occurred or exists with respect to the Company or
its businesses,  properties, prospects, operations or financial condition, that,
under  applicable  law,  rule  or  regulation,  requires  public  disclosure  or
announcement  prior to the date  hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents or otherwise.

     Section 4.13 NO INTEGRATED  OFFERING.  Neither the Company,  nor any of its
affiliates,  nor any  person  acting on its or their  behalf  has,  directly  or
indirectly,  made any offers or sales of any security or solicited any offers to
buy any security,  other than pursuant to this  Agreement,  under  circumstances
that would require registration of the Common Stock under the Securities Act.

     Section 4.14 LITIGATION AND OTHER  PROCEEDINGS.  Except as may be set forth
in the SEC  Documents,  there are no lawsuits or  proceedings  pending or to the
best  knowledge  of the Company  threatened,  against the  Company,  nor has the
Company received any written or oral notice of any such action, suit, proceeding
or  investigation,  which would have a Material  Adverse  Effect.  Except as set
forth in the SEC Documents,  no judgment,  order, writ,  injunction or decree or
award has been issued by or, so far as is known by the Company, requested of any
court,  arbitrator or  governmental  agency which would have a Material  Adverse
Effect.

     Section 4.15 NO MISLEADING OR UNTRUE  COMMUNICATION.  The Company,  nor any

                                       12
<PAGE>


Person representing the Company in connection with the transactions contemplated
by this  Agreement,  has not  made,  at any  time,  any  oral  communication  in
connection  with the  offer  or sale of the  same  which  contained  any  untrue
statement of a material fact or omitted to state any material fact  necessary in
order to make the statements, in the light of the circumstances under which they
were made, not misleading.

     Section  4.16  MATERIAL  NON-PUBLIC  INFORMATION.  The  Company  is  not in
possession  of, nor has the Company or its agents  disclosed  to  Investor,  any
material  non-public  information  that (a) if  disclosed,  would  reasonably be
expected to have a materially adverse effect on the price of the Common Stock or
(b) according to applicable law, rule or regulation,  should have been disclosed
publicly  by the  Company  prior to the date  hereof  but  which has not been so
disclosed.


                                    ARTICLE V

                              COVENANTS OF INVESTOR


     Section 5.1 COMPLIANCE WITH LAW. Investor's trading activities with respect
to shares of the Common Stock will be in compliance  with all  applicable  state
and federal securities laws, rules and regulations and the rules and regulations
of the NASD and the Principal Market on which the Common Stock is listed.

     Section 5.2 TRADING IN SECURITIES.  The Company  specifically  acknowledges
that, except to the extent  specifically  provided herein or in any of the other
Transaction Documents (but limited in each instance to the extent so specified),
the Investor  retains the right (but is not otherwise  obligated) to buy,  sell,
engage in hedging  transactions  or  otherwise  trade in the  securities  of the
Company,  including,  but not  necessarily  limited to, the Common Stock, at any
time before,  contemporaneous  with or after the execution of this  Agreement or
from time to time and in any manner whatsoever  permitted by applicable  federal
and state securities laws.


                                   ARTICLE VI

                            COVENANTS OF THE COMPANY


     Section 6.1 REGISTRATION  RIGHTS.  The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all respects with the terms thereof.

     Section  6.2   RESERVATION  OF  COMMON  STOCK.   As  of  the  date  of  the
effectiveness  of the Registration  Statement,  the Company shall have available
and  the  Company  shall  reserve  and  keep  available  at all  times,  free of
preemptive  rights,  shares of Common  Stock for the  purpose  of  enabling  the
Company  to satisfy  any  obligation  to issue the Put  Shares  for the  Minimum
Commitment  Amount and the  Blackout  Shares,  if any;  such amount of shares of
Common  Stock shall be based upon the then  applicable  Market Price as if a Put
Date occurred twelve Trading Days before the last Trading Day of the most recent
fiscal  quarter of the Company  for the Put Shares and a good faith  estimate by
the Company in consultation  with Investor of the number of Blackout Shares,  if
any,  that will need to be issued.  If at any time the Company is  obligated  to
deliver  Blackout  Shares to Investor under Section 2.6 and the Company does not
have a  sufficient  number of  authorized  by unissued  and  reserved  shares to
deliver the requisite  number of Blackout  Shares,  the Company

                                       13
<PAGE>


shall  deliver to Investor  such number of Blackout  Shares that the Company has
authorized by unissued and unreserved. In either case, the Company shall, at its
expense,  promptly seek and use its best efforts to obtain stockholder  approval
as required under the Delaware General Corporation Law to increase the number of
shares of Common Stock it is  authorized  to issue,  in order to meet all of its
obligations  to issue  Put  Shares  and  Blackout  Shares  (if any)  under  this
Agreement  such that the Company  shall have  reserved for  issuance  under this
Agreement at least 125% of the shares  required  for issuance  under the Minimum
Commitment Amount,  based upon the then applicable Market Price as if a Put Date
had occurred within five days prior to the day of the proxy  statement  prepared
by the Company in  connection  with such  authorization,  less the number of Put
Shares that may have been issued under this Agreement. In no circumstances shall
the Company  issue a Put Notice  requiring  Investor to purchase  more shares of
Common Stock than the Company has  authority to issue based upon the then number
of shares of Common Stock  outstanding  or reserved for issuance.  The number of
shares so reserved  from time to time,  as  theretofore  increased or reduced as
hereinafter provided,  may be reduced by the number of shares actually delivered
hereunder.

     Section 6.3 LISTING OF COMMON STOCK. The Company shall maintain the listing
of the Common Stock on a Principal Market, and will cause the Put Shares and the
Blackout  Shares,  if any,  to be listed on the  Principal  Market.  The Company
further  shall,  if the Company  applies to have the Common  Stock traded on any
other  Principal  Market,  include  in such  application  the Put Shares and the
Blackout  Shares,  if any,  and shall take such other  action as is necessary or
desirable in the reasonable  opinion of Investor to cause the Common Stock to be
listed on such other Principal Market as promptly as possible. The Company shall
use its commercially  reasonable  efforts to continue the listing and trading of
the  Common  Stock  on the  Principal  Market  (including,  without  limitation,
maintaining  sufficient  net  tangible  assets) and will use its best efforts to
comply  in  all  respects  with  the  Company's  reporting,   filing  and  other
obligations under the bylaws or rules of the NASD and the Principal Market.

     Section  6.4  EXCHANGE  ACT  REGISTRATION.   The  Company  shall  take  all
commercially  reasonable  steps to cause  the  Common  Stock to  continue  to be
registered  under  Section  12(g)  or 12(b) of the  Exchange  Act,  will use its
commercially  reasonable  efforts to comply in all  material  respects  with its
reporting and filing  obligations  under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange Act or the
rules  thereunder) to terminate or suspend such  registration or to terminate or
suspend its reporting and filing obligations under the Exchange Act.

     Section 6.5 LEGENDS.  The  certificates  evidencing  the Put Shares and the
Blackout  Shares,  if any,  shall be free of legends,  except as provided for in
Article VIII.

     Section 6.6 CORPORATE  EXISTENCE.  The Company shall take all  commercially
reasonable  steps necessary to preserve and continue the corporate  existence of
the Company.

     Section  6.7  ADDITIONAL  SEC  DOCUMENTS.  The  Company  shall  deliver  to
Investor,  promptly  after the  originals  thereof are  submitted to the SEC for
filing, copies of all SEC Documents so furnished or submitted to the SEC.

     Section 6.8 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION;  SUSPENSION OF
RIGHT  TO MAKE A PUT.  The  Company  shall  promptly  notify  Investor  upon the
occurrence of any of the following events in respect of a registration statement
or related prospectus in respect of an offering of Registrable  Securities:  (a)
receipt  of any  request  for  additional  information  by the SEC or any  other
federal or state  governmental  authority  during the period of effectiveness of
the registration  statement or for amendments or supplements to the registration
statement  or  related  prospectus;  (b) the  issuance  by the SEC or any  other
federal  or state  governmental  authority  of any  stop  order  suspending  the
effectiveness of any Registration Statement or the initiation of any proceedings
for that purpose; (c) receipt of any notification with

                                       14
<PAGE>


respect to the suspension of the  qualification or exemption from  qualification
of any  of the  Registrable  Securities  for  sale  in any  jurisdiction  or the
initiation or threatening of any proceeding for such purpose;  (d) the happening
of any event that makes any  statement  made in such  Registration  Statement or
related  prospectus or any document  incorporated  or deemed to be  incorporated
therein by reference  untrue in any material respect or that requires the making
of any changes in the registration statement, related prospectus or documents so
that, in the case of a  Registration  Statement,  it will not contain any untrue
statement of a material  fact or omit to state any material  fact required to be
stated therein or necessary to make the statements  therein not misleading,  and
that in the case of the  related  prospectus,  it will not  contain  any  untrue
statement of a material  fact or omit to state any material  fact required to be
stated therein or necessary to make the statements  therein, in the light of the
circumstances under which they were made, not misleading;  and (e) the Company's
reasonable  determination  that a  post-effective  amendment to the Registration
Statement would be appropriate, and the Company shall promptly make available to
Investor any such supplement or amendment to the related prospectus. The Company
shall not deliver to Investor any Put Notice during the  continuation  of any of
the foregoing events.

     Section 6.9 CONSOLIDATION; MERGER. The Company shall not, at any time after
the date hereof, effect any merger or consolidation of the Company with or into,
or a  transfer  of all or  substantially  all of the assets of the  Company  to,
another  entity unless the resulting  successor or acquiring  entity (if not the
Company)  assumes by written  instrument  the  obligation to deliver to Investor
such shares of Common Stock and/or securities as Investor is entitled to receive
pursuant to this Agreement.

     Section 6.10  ISSUANCE OF PUT SHARES AND BLACKOUT  SHARES.  The sale of the
Put Shares and the issuance of the  Blackout  Shares,  if any,  shall be made in
accordance  with  the  provisions  and   requirements  of  Section  4(2)  and/or
Regulation D and any applicable state law.

     Section 6.11  REIMBURSEMENT.  If (i) Investor,  other than by reason of its
gross negligence or willful misconduct,  becomes involved in any capacity in any
action,  proceeding or investigation  brought by any shareholder of the Company,
in  connection  with or as a  result  of the  consummation  of the  transactions
contemplated  by the Transaction  Documents,  or if Investor is impleaded in any
such action,  proceeding or investigation by any person, or (ii) Investor, other
than by reason of its gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal  under  applicable  law,
becomes  involved in any  capacity in any action,  proceeding  or  investigation
brought by the SEC against or involving the Company or in connection  with or as
a result of the consummation of the transactions contemplated by the Transaction
Documents,  or if  Investor  is  impleaded  in any such  action,  proceeding  or
investigation  by any person,  then in any such case, the Company will reimburse
Investor for its reasonable legal and other expenses  (including the cost of any
investigation  and  preparation)  incurred  in  connection  therewith,  as  such
expenses are incurred.  The reimbursement  obligations of the Company under this
section  shall be in addition to any  liability  which the Company may otherwise
have,  shall  extend upon the same terms and  conditions  to any  affiliates  of
Investor that are actually  named in such action,  proceeding or  investigation,
and partners,  directors, agents, employees and controlling persons (if any), as
the case may be, of Investor and any such  affiliate,  and shall be binding upon
and  inure  to the  benefit  of any  successors,  assigns,  heirs  and  personal
representatives  of the Company,  Investor and any such  affiliate  and any such
person,  except that  officers  and/or  directors  of the Company  shall have no
personal liability for the Company's obligations under this Section.

     Section 6.12 DILUTION. The number of shares of Common Stock issuable as Put
Shares may increase substantially in certain circumstances,  including,  but not
necessarily limited to, the circumstance wherein the trading price of the Common
Stock  declines  during the period between the Effective Date and the end of the
Commitment Period.  The Company's  executive officers and directors have studied
and  fully  understand  the  nature  of the  transactions  contemplated  by this
Agreement and recognize that they have a potential dilutive effect. The board of
directors of the Company has  concluded,  in its good faith  business

                                       15
<PAGE>


judgment,  that such  issuance  is in the best  interests  of the  Company.  The
Company specifically acknowledges that its obligation to issue the Put Shares is
binding  upon the  Company  and  enforceable  regardless  of the  dilution  such
issuance  may  have on the  ownership  interests  of other  shareholders  of the
Company.

     Section  6.13 USE OF PROCEEDS.  The Company will use the proceeds  received
hereunder  (excluding amounts paid by the Company for legal fees,  finder's fees
and escrow  fees in  connection  with the sale of the Common  Stock) for general
corporate purposes. Unless specifically consented to in advance in each instance
by the  Investor,  the  Company  shall not,  directly  or  indirectly,  use such
proceeds for the repayment of any  outstanding  loan or obligation or advance by
the Company to any affiliate or Control Person.

     Section 6.14 CERTAIN  AGREEMENTS.  (a)The Company covenants and agrees that
during the period from the date hereof through the end of the Commitment Period,
it will not,  without the prior written consent of the Investor,  enter into any
subsequent or further offer or sale of Common Stock or Common Stock  Equivalents
(collectively,   "NEW  COMMON  STOCK")  with  any  third  party  pursuant  to  a
transaction  which in any manner  permits the sale of the New Common Stock below
the Market  Price on any date which is thirty (30) days prior or  subsequent  to
any Closing Date.

     (b) The  provisions  of  subparagraph  6.14(a) will not apply to (i) Common
Stock issued  pursuant to an exemption  from  registration  under the Securities
Act; (ii) an underwritten public offering of shares of Common Stock or preferred
stock; (iii) an offering of convertible  preferred stock with a conversion price
at above the Market Price;  or (iv) the issuance of  securities  (other than for
cash) in connection with an acquisition, merger, consolidation,  sale of assets,
disposition  or the  exchange  of the capital  stock for assets,  stock or other
joint venture interests.

     (c) In the event the Company  breaches the provisions of this Section 6.14,
the Discount  shall be amended to be equal to (i) 110% of the Discount set forth
herein and (ii) the Investor may terminate its obligations under this Agreement.


                                   ARTICLE VII

                            CONDITIONS TO DELIVERY OF
                      PUT NOTICES AND CONDITIONS TO CLOSING


     Section 7.1 CONDITIONS  PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL COMMON STOCK. The obligation hereunder of the Company to issue and sell
the  Put  Shares  to  Investor  incident  to  each  Closing  is  subject  to the
satisfaction,  at or before each such  Closing,  of each of the  conditions  set
forth below.

     (a)   ACCURACY  OF   INVESTOR'S   REPRESENTATIONS   AND   WARRANTIES.   The
representations  and  warranties  of  Investor  shall be true and correct in all
material  respects as of the date of this  Agreement  and as of the date of each
such Closing as though made at each such time, except for changes which have not
had a material adverse effect on Investor.

     (b) PERFORMANCE BY INVESTOR.  Investor shall have performed,  satisfied and
complied in all respects with all covenants,  agreements and conditions required
by this Agreement to be performed,  satisfied or complied with by Investor at or
prior to such Closing.

     Section 7.2  CONDITIONS  PRECEDENT TO THE RIGHT OF THE COMPANY TO

                                       16
<PAGE>


DELIVER A PUT NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES.  The
right of the  Company to deliver a Put Notice  and the  obligation  of  Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the  satisfaction,  on  each  Condition  Satisfaction  Date,  of  each of the
following conditions:

     (a)  REGISTRATION  OF REGISTRABLE  SECURITIES WITH THE SEC. As set forth in
the Registration Rights Agreement, the Company shall have filed with the SEC the
Registration  Statement with respect to the resale of the Registrable Securities
by Investor.

     (b)  EFFECTIVE  REGISTRATION  STATEMENT.  As set forth in the  Registration
Rights  Agreement,   a  Registration  Statement  shall  have  previously  become
effective for the resale by Investor of the  Registrable  Securities  subject to
such Put Notice and such  Registration  Statement shall remain effective on each
Condition  Satisfaction Date and (i) neither the Company nor Investor shall have
received  notice  that the SEC has  issued or intends to issue a stop order with
respect to such  Registration  Statement or that the SEC otherwise has suspended
or  withdrawn  the   effectiveness  of  such  Registration   Statement,   either
temporarily  or  permanently,  or intends or has threatened to do so (unless the
SEC's concerns have been addressed and Investor is reasonably satisfied that the
SEC no longer is considering or intends to take such action),  and (ii) no other
suspension of the use or withdrawal of the  effectiveness  of such  Registration
Statement or related prospectus shall exist.

     (c)  ACCURACY  OF  THE  COMPANY'S   REPRESENTATIONS  AND  WARRANTIES.   The
representations  and  warranties of the Company shall be true and correct in all
material respects as of each Condition  Satisfaction Date as though made at each
such time (except for representations  and warranties  specifically made as of a
particular  date)  with  respect  to  all  periods,  and as to  all  events  and
circumstances occurring or existing to and including each Condition Satisfaction
Date,   except   for  any   conditions   which  have   temporarily   caused  any
representations  or  warranties  herein  to be  incorrect  and  which  have been
corrected with no continuing impairment to the Company or Investor.

     (d) PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied
and  complied  in all  material  respects  with all  covenants,  agreements  and
conditions  required by this Agreement and the Registration  Rights Agreement to
be  performed,  satisfied  or  complied  with by the Company at or prior to each
Condition Satisfaction Date.

     (e) NO INJUNCTION.  No statute, rule, regulation,  executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or adopted by
any court or governmental  authority of competent jurisdiction that prohibits or
directly and materially  adversely affects any of the transactions  contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or materially  adversely affecting any of the transactions
contemplated by this Agreement.

     (f) ADVERSE CHANGES.  Since the date of filing of the Company's most recent
SEC  Document,  no event  that had or is  reasonably  likely to have a  Material
Adverse Effect has occurred.

     (g) NO SUSPENSION  OF TRADING IN OR DELISTING OF COMMON STOCK.  The trading
of the Common  Stock shall not have been  suspended  by the SEC,  the  Principal
Market or the NASD and the Common Stock shall have been  approved for listing or
quotation on and shall not have been delisted from the Principal Market.

     (h) LEGAL  OPINION.  The  Company  shall  have  caused to be  delivered  to
Investor,  within five (5) Trading Days of the effective date of (i) the initial
Put Notice,  an opinion of the Company's  legal counsel in the form of Exhibit C
hereto, addressed to Investor.

                                       17
<PAGE>


     (i) [INTENTIONALLY OMITTED]

     (j) 9.9 PERCENT LIMITATION.  On each Closing Date, the number of Put Shares
then to be  purchased  by  Investor  shall not exceed the number of such  shares
that, when aggregated with all other shares of Registrable Securities then owned
by Investor beneficially or deemed beneficially owned by Investor,  would result
in  Investor  owning no more than 9.9% of all of such  Common  Stock as would be
outstanding on such Closing Date, as determined in accordance with Section 16 of
the Exchange Act and the  regulations  promulgated  thereunder.  For purposes of
this Section 7.2(j), in the event that the amount of Common Stock outstanding as
determined in accordance with Section 16 of the Exchange Act and the regulations
promulgated  thereunder is greater on a Closing Date than on the date upon which
the Put Notice  associated with such Closing Date is given, the amount of Common
Stock  outstanding on such Closing Date shall govern for purposes of determining
whether  Investor,  when aggregating all purchases of Common Stock made pursuant
to this Agreement and Blackout  Shares,  if any, would own more than 9.9% of the
Common Stock following such Closing Date.

     (k) WEIGHTED  AVERAGE VOLUME.  The Weighted Average Volume for the ten (10)
Trading Days immediately preceding the Put Notice shall have equaled or exceeded
$25,000 (as adjusted for stock splits,  stock  dividends,  reverse stock splits,
and similar events).

     (l) NO  KNOWLEDGE.  The Company  shall have no  knowledge of any event more
likely than not to have the effect of causing such Registration  Statement to be
suspended or otherwise ineffective (which event is more likely than not to occur
within the fifteen (15) Trading Days following the Trading Day on which such Put
Notice is deemed delivered).

     (m) TRADING  CUSHION.  The Trading  Cushion  shall have  elapsed  since the
immediately preceding Put Date.

     (n)  SHAREHOLDER  VOTE. The issuance of shares of Common Stock with respect
to the applicable  Closing,  if any, shall not violate the shareholder  approval
requirements, if any, of the Principal Market.

     (o) NO VALUATION  EVENT.  No Valuation  Event shall have occurred since the
Put Date.

     (p)  OTHER.  On each  Condition  Satisfaction  Date,  Investor  shall  have
received  and  been  reasonably  satisfied  with  such  other  certificates  and
documents  as shall have been  reasonably  requested  by  Investor  in order for
Investor to confirm the Company's  satisfaction  of the  conditions set forth in
this Section 7.2, including,  without limitation, a certificate in substantially
the form and substance of Exhibit D hereto,  executed by an executive officer of
the Company and to the effect that all the conditions to such Closing shall have
been satisfied as at the date of each such certificate.

     Section 7.3 DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.

     (a) The Company shall make available for inspection and review by Investor,
advisors to and  representatives  of Investor  (who may or may not be affiliated
with  Investor  and  who  are  reasonably  acceptable  to the  Company),  or any
Underwriter,  any Registration  Statement or amendment or supplement  thereto or
any blue sky, NASD or other filing,  all  financial and other  records,  all SEC
Documents and other filings with the SEC, and all other corporate  documents and
properties of the Company as may be reasonably necessary for the purpose of such
review, and cause the Company's officers,  directors and employees to supply all
such

                                       18
<PAGE>


information reasonably requested by Investor or any such representative, advisor
or  Underwriter  in  connection  with such  Registration  Statement  (including,
without limitation,  in response to all questions and other inquiries reasonably
made or  submitted  by any of them),  prior to and from  time to time  after the
filing and effectiveness of such Registration  Statement for the sole purpose on
enabling Investor and such representatives, advisors, and Underwriters and their
respective  accountants  and  attorneys  to  conduct  initial  and  ongoing  due
diligence  with  respect to the  Company and the  accuracy of such  Registration
Statement.

     (b) Each of the Company,  its  officers,  directors,  employees  and agents
shall in no event disclose  non-public  information to Investor,  advisors to or
representatives of Investor, unless prior to disclosure of such information, the
Company identifies such information as being non-public information and provides
Investor,  such advisors and  representatives  with the opportunity to accept or
refuse to accept such non public  information  for review.  The Company  may, as
condition to disclosing any non-public information hereunder, require Investor's
advisors and  representatives to enter into a confidentiality  agreement in form
and substance reasonably satisfactory to the Company and Investor.

     (c)  Nothing  herein  shall  require  the  Company to  disclose  non-public
information  to Investor or its  advisors  or  representatives,  and the Company
represents that it does not disseminate  non-public information to any investors
who purchase stock in the Company in a public offering,  to money managers or to
securities analysts;  provided, however, that notwithstanding anything herein to
the contrary, the Company shall, as hereinabove provided, immediately notify the
advisors and  representatives  of Investor and any  Underwriters of any event or
the  existence  of any  circumstance  (without  any  obligation  to disclose the
specific  event  or  circumstance)  of  which  it  becomes  aware,  constituting
non-public  information (whether or not requested of the Company specifically or
generally  during  the course of due  diligence  by such  persons or  entities),
which, if not disclosed in the prospectus  included in a Registration  Statement
would  cause such  prospectus  to include a material  misstatement  or to omit a
material  fact  required  to be stated  therein in order to make the  statements
therein,  in light of the circumstances in which they were made, not misleading.
Nothing  contained  in this  Section  7.3 shall be  construed  to mean that such
persons or entities other than Investor (without the written consent of Investor
prior to disclosure of such information) may not obtain  non-public  information
in the course of  conducting  due  diligence  in  accordance  with the terms and
conditions of this  Agreement and nothing  herein shall prevent any such persons
or entities  from  notifying the Company of their opinion that based on such due
diligence by such persons or entities,  any Registration  Statement  contains an
untrue  statement  of a material  fact or omits a material  fact  required to be
stated  in such  Registration  Statement  or  necessary  to make the  statements
contained  therein,  in light of the  circumstances in which they were made, not
misleading.


                                  ARTICLE VIII

                           TRANSFER AGENT INSTRUCTIONS


     Section 8.1 LEGENDS  AND  TRANSFER  AGENT  INSTRUCTIONS.  Unless  otherwise
provided below, each certificate  representing  Registrable Securities will bear
the following legend (the "Legend"):

"The securities  represented by this  certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act") or qualified under
applicable state  securities  laws.  These securities may not be offered,  sold,
pledged,  hypothecated,  transferred or otherwise disposed of except pursuant to
(i) an effective registration statement and qualification in effect with respect
thereto under the Securities Act and under applicable state securities law, (ii)
to the extent applicable, Rule 144 under the Securities Act, or (iii) an opinion
of counsel  reasonable  acceptable  to the Company  that such  registration  and
qualification  is not

                                       19
<PAGE>


required under applicable federal and state securities laws."

As soon as  practicable  after the  execution and delivery  hereof,  the Company
shall issue to the Transfer  Agent  instructions  in  substantially  the form of
Exhibit E hereto. Such instructions shall be irrevocable by the Company from and
after  the date  thereof  or from and  after  the  issuance  thereof  except  as
otherwise  expressly  provided in the Registration  Rights Agreement.  It is the
intent and purpose of such  instructions,  as provided  therein,  to require the
Transfer  Agent to issue to Investor  certificates  evidencing  shares of Common
Stock incident to a Closing,  free of the Legend,  without  consultation  by the
Transfer  Agent with the  Company or its  counsel  and  without the need for any
further advice or instruction or  documentation to the Transfer Agent by or from
the  Company  or its  counsel  or  Investor;  provided  that (a) a  Registration
Statement shall then be effective,  (b) Investor  confirms to the Transfer Agent
and the  Company  that it has or  intends to sell such  Common  Stock to a third
party which is not an affiliate  of Investor or the Company and Investor  agrees
to redeliver  the  certificate  representing  such shares of Common Stock to the
Transfer  Agent to add the legend in the event the Common Stock is not sold, and
(c) if  reasonably  requested  by the Transfer  Agent or the  Company,  Investor
confirms to the Transfer  Agent and the Company that  Investor has complied with
the prospectus delivery requirement under the Securities Act.

     Section 8.2 NO OTHER LEGEND OR STOCK TRANSFER  RESTRICTIONS.  Other than as
specified  in  Section  8.1,  no legend has been or shall be placed on the share
certificates  representing  the  Common  Stock  and  no  instructions  or  "stop
transfers   orders,"  so  called,   "stock  transfer   restrictions,"  or  other
restrictions  have been or shall be given to the  Transfer  Agent  with  respect
thereto other than as expressly set forth in this Article VIII.

     Section 8.3 COVER.  If the Company  fails for any reason to deliver the Put
Shares  on such  Closing  Date and the  holder of the Put  Shares  (a  "HOLDER")
purchases,  in an open market  transaction or otherwise,  shares of Common Stock
(the "COVERING  SHARES") in order to make delivery in  satisfaction of a sale of
Common  Stock by such Holder (the "SOLD  SHARES"),  which  delivery  such Holder
anticipated  to make using the Put Shares (a  "BUY-IN"),  then the Company shall
pay to such  Holder,  in addition  to all other  amounts  contemplated  in other
provisions of the  Transaction  Documents,  and not in lieu thereof,  the Buy-In
Adjustment  Amount (as defined  below).  The "Buy-In  Adjustment  Amount" is the
amount equal to the excess,  if any, of (x) such Holder's  total  purchase price
(including brokerage  commissions,  if any) for the Covering Shares over (y) the
net proceeds  (after  brokerage  commissions,  if any) received by such Investor
from the sale of the Sold Shares.  The Company  shall pay the Buy-In  Adjustment
Amount to such Holder in immediately  available funds immediately upon demand by
such Holder.  By way of illustration and not in limitation of the foregoing,  if
such Holder  purchases  Covering Shares having a total purchase price (including
brokerage  commissions)  of $11,000 to cover a Buy-In with  respect to shares of
Common  Stock that it sold for net  proceeds of $10,000,  the Buy-In  Adjustment
Amount that the Company will be required to pay to such Holder will be $1,000.

     Section  8.4  INVESTOR'S  COMPLIANCE.  Nothing in this  Article  VIII shall
affect in any way Investor's  obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.


                                   ARTICLE IX

                            NOTICES; INDEMNIFICATION


     Section 9.1 NOTICES. All notices, demands, requests,  consents,  approvals,
and other

                                       20
<PAGE>


communications  required or permitted  hereunder shall be in writing and, unless
otherwise specified herein, shall be (a) personally served, (b) deposited in the
mail,  registered or certified,  return receipt requested,  postage prepaid, (c)
delivered  by  reputable  air  courier  service  with  charges  prepaid,  or (d)
transmitted by hand  delivery,  telegram,  or facsimile,  addressed as set forth
below or to such other address as such party shall have  specified most recently
by  written   notice  given  in  accordance   herewith.   Any  notice  or  other
communication  required  or  permitted  to be given  hereunder  shall be  deemed
effective  (i) upon hand  delivery  or  delivery  by  facsimile,  with  accurate
confirmation  generated by the transmitting facsimile machine, at the address or
number  designated  below (if delivered on a business day during normal business
hours where such notice is to be received),  or the first business day following
such delivery (if delivered  other than on a business day during normal business
hours where such notice is to be  received)  or (ii) on the second  business day
following  the date of  mailing  by  express  courier  service  or on the  fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address,  or upon actual receipt of such mailing,  whichever shall first
occur. The addresses for such communications shall be:

      If to the Company:
                                         NCT Group, Inc.
                                         20 Ketchum Street
                                         Westport, Connecticut 06880
                                         Telephone No.: (203) 226-4447 Ext. 3522
                                         Telecopier No.: (203) 226-4338
                                         Attn:  Chief Financial Officer

      with a copy (which shall not constitute notice) to:

                                         NCT Group, Inc.
                                         20 Ketchum Street
                                         Westport, Connecticut  06880
                                         Telephone No.: (203) 226-4447 Ext. 3572
                                         Telecopier No.: (203) 226-4338
                                         Attn:  General Counsel

      if to Investor:
                                         Crammer Road  LLC
                                         C/o Navigator Management
                                         P.O.B. 972
                                         ROAD TOWN
                                         TORTOLA
                                         BRITISH VIRGIN ISL.
                                         Telephone No.: 1-284-494-4770
                                         Telecopier No.  1-284-494-4771

      with a copy to:
                                         Krieger & Prager, LLP
                                         Suite 1440
                                         39 Broadway
                                         New York, New York  10006
                                         Telephone:  (212) 363-2900
                                         Facsimile:  (212) 363-2999
                                         Attn:  Samuel M. Krieger, Esq.

                                       21
<PAGE>


Either party hereto may from time to time change its address or facsimile number
for  notices  under this  Section  9.1 by giving at least ten (10)  days'  prior
written  notice of such changed  address or facsimile  number to the other party
hereto.

     Section 9.2  INDEMNIFICATION.  The  Company  agrees to  indemnify  and hold
harmless Investor and its officers,  directors,  employees, and agents, and each
Person or entity, if any, who controls Investor within the meaning of Section 15
of the  Securities  Act or Section 20 of the Exchange  Act, from and against any
Damages,  joint or several, and any action in respect thereof to which Investor,
its partners,  affiliates,  officers, directors,  employees, and duly authorized
agents,  and any such Control Person becomes subject to, resulting from, arising
out  of  or   relating   to  any   misrepresentation,   breach  of  warranty  or
nonfulfillment of or failure to perform any covenant or agreement on the part of
the Company contained in this Agreement, as such Damages are incurred, except to
the extent such Damages result primarily from Investor's  failure to perform any
covenant  or  agreement  contained  in  this  Agreement  or  Investor's  or  its
officer's,  director's,  employee's,  agent's  or Control  Person's  negligence,
recklessness or bad faith in performing its obligations under this Agreement.

     Section  9.3 METHOD OF  ASSERTING  INDEMNIFICATION  CLAIMS.  All claims for
indemnification  by any  Indemnified  Party (as defined below) under Section 9.2
shall be asserted and resolved as follows:

     (a) In the  event  any claim or  demand  in  respect  of which  any  person
claiming  indemnification  under any  provision of Section 9.2 (an  "INDEMNIFIED
PARTY") might seek indemnity under Section 9.2 is asserted  against or sought to
be collected from such  Indemnified  Party by a person other than a party hereto
or an affiliate  thereof (a "THIRD PARTY CLAIM"),  the  Indemnified  Party shall
deliver a written  notification,  enclosing a copy of all papers served, if any,
and  specifying  the nature of and basis for such Third  Party Claim and for the
Indemnified Party's claim for  indemnification  that is being asserted under any
provision of Section 9.2 against any person (the "INDEMNIFYING PARTY"), together
with the amount or, if not then reasonably ascertainable,  the estimated amount,
determined  in good faith,  of such Third Party  Claim (a "CLAIM  NOTICE")  with
reasonable  promptness to the Indemnifying Party. If the Indemnified Party fails
to provide the Claim Notice with  reasonable  promptness  after the  Indemnified
Party receives notice of such Third Party Claim,  the  Indemnifying  Party shall
not be obligated to indemnify the  Indemnified  Party with respect to such Third
Party Claim to the extent that the  Indemnifying  Party's  ability to defend has
been prejudiced by such failure of the Indemnified Party. The Indemnifying Party
shall  notify the  Indemnified  Party as soon as  practicable  within the period
ending thirty (30) calendar days following receipt by the Indemnifying  Party of
either a Claim Notice or an Indemnity  Notice (as defined  below) (the  "DISPUTE
PERIOD") whether the Indemnifying  Party disputes its liability or the amount of
its  liability  to the  Indemnified  Party  under  Section  9.2 and  whether the
Indemnifying  Party  desires,  at its  sole  cost and  expense,  to  defend  the
Indemnified Party against such Third Party Claim.

     (i) If the  Indemnifying  Party notifies the  Indemnified  Party within the
Dispute  Period that the  Indemnifying  Party desires to defend the  Indemnified
Party with  respect to the Third Party Claim  pursuant to this  Section  9.3(a),
then the  Indemnifying  Party  shall  have the  right to  defend,  with  counsel
reasonably  satisfactory to the Indemnified  Party, at the sole cost and expense
of  the  Indemnifying   Party,   such  Third  Party  Claim  by  all  appropriate
proceedings,  which proceedings shall be vigorously and diligently prosecuted by
the  Indemnifying  Party  to a  final  conclusion  or  will  be  settled  at the
discretion  of  the  Indemnifying  Party  (but  only  with  the  consent  of the
Indemnified  Party in the case of any  settlement  that  provides for any relief
other than the payment of monetary  damages or that  provides for the payment of
monetary  damages as to which the Indemnified  Party shall not be indemnified in
full pursuant to Section 9.2). The Indemnifying Party shall have full control of
such defense and  proceedings,  including any compromise or settlement  thereof;
provided,  however, that the Indemnified Party may, at the sole cost and expense
of the

                                       22
<PAGE>


Indemnified Party, at any time prior to the Indemnifying Party's delivery of the
notice  referred to in the first  sentence of this clause (i),  file any motion,
answer or other  pleadings or take any other action that the  Indemnified  Party
reasonably believes to be necessary or appropriate to protect its interests; and
provided further,  that if requested by the Indemnifying  Party, the Indemnified
Party will,  at the sole cost and  expense of the  Indemnifying  Party,  provide
reasonable  cooperation to the Indemnifying  Party in contesting any Third Party
Claim that the Indemnifying  Party elects to contest.  The Indemnified Party may
participate  in, but not control,  any defense or  settlement of any Third Party
Claim  controlled  by the  Indemnifying  Party  pursuant to this clause (i), and
except as provided in the preceding  sentence,  the Indemnified Party shall bear
its own costs and expenses with respect to such  participation.  Notwithstanding
the foregoing,  the Indemnified Party may takeover the control of the defense or
settlement of a Third Party Claim at any time if it irrevocably waives its right
to indemnity under Section 9.2 with respect to such Third Party Claim.

     (ii) If the Indemnifying Party fails to notify the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Third Party
Claim pursuant to Section 9.3(a), or if the Indemnifying Party gives such notice
but fails to  prosecute  vigorously  and  diligently  or settle the Third  Party
Claim, or if the Indemnifying  Party fails to give any notice  whatsoever within
the Dispute Period,  then the Indemnified  Party shall have the right to defend,
at the sole cost and expense of the Indemnifying Party, the Third Party Claim by
all  appropriate  proceedings,  which  proceedings  shall be  prosecuted  by the
Indemnified Party in a reasonable manner and in good faith or will be settled at
the discretion of the  Indemnified  Party (with the consent of the  Indemnifying
Party, which consent will not be unreasonably  withheld).  The Indemnified Party
will have full control of such defense and proceedings, including any compromise
or settlement thereof;  provided,  however, that if requested by the Indemnified
Party,  the  Indemnifying  Party  will,  at the  sole  cost and  expense  of the
Indemnifying Party, provide reasonable  cooperation to the Indemnified Party and
its counsel in contesting any Third Party Claim which the  Indemnified  Party is
contesting. Notwithstanding the foregoing provisions of this clause (ii), if the
Indemnifying  Party has notified the Indemnified Party within the Dispute Period
that  the  Indemnifying  Party  disputes  its  liability  or the  amount  of its
liability  hereunder to the  Indemnified  Party with respect to such Third Party
Claim and if such dispute is resolved in favor of the Indemnifying  Party in the
manner  provided  in clause  (iii)  below,  the  Indemnifying  Party will not be
required  to bear the costs and  expenses  of the  Indemnified  Party's  defense
pursuant  to this  clause  (ii)  or of the  Indemnifying  Party's  participation
therein at the Indemnified  Party's  request,  and the  Indemnified  Party shall
reimburse the  Indemnifying  Party in full for all reasonable costs and expenses
incurred by the  Indemnifying  Party in  connection  with such  litigation.  The
Indemnifying  Party  may  participate  in,  but  not  control,  any  defense  or
settlement controlled by the Indemnified Party pursuant to this clause (ii), and
the  Indemnifying  Party shall bear its own costs and  expenses  with respect to
such participation.

     (iii) If the Indemnifying Party notifies the Indemnified Party that it does
not dispute its  liability  or the amount of its  liability  to the  Indemnified
Party with respect to the Third Party Claim under Section 9.2 or fails to notify
the Indemnified  Party within the Dispute Period whether the Indemnifying  Party
disputes its liability or the amount of its liability to the  Indemnified  Party
with respect to such Third Party Claim,  the amount of Damages  specified in the
Claim Notice shall be conclusively  deemed a liability of the Indemnifying Party
under  Section  9.2 and the  Indemnifying  Party  shall  pay the  amount of such
Damages to the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to such Third
Party Claim, the Indemnifying  Party and the Indemnified  Party shall proceed in
good faith to negotiate a resolution of such dispute; provided, however, that if
the dispute is not resolved within thirty (30) days after the Claim Notice,  the
Indemnifying  Party shall be entitled to institute such legal action as it deems
appropriate.

     (b) In the event any  Indemnified  Party should have a claim under  Section
9.2 against the  Indemnifying  Party that does not involve a Third Party  Claim,
the  Indemnified  Party  shall  deliver  a written  notification  of a claim for
indemnity  under Section 9.2  specifying the nature of and basis for such claim,

                                       23
<PAGE>


together with the amount or, if not then reasonably ascertainable, the estimated
amount,  determined in good faith,  of such claim (an  "INDEMNITY  NOTICE") with
reasonable  promptness to the Indemnifying Party. The failure by any Indemnified
Party  to give the  Indemnity  Notice  shall  not  impair  such  party's  rights
hereunder except to the extent that the Indemnifying  Party demonstrates that it
has been irreparably  prejudiced thereby. If the Indemnifying Party notifies the
Indemnified  Party that it does not dispute the claim or the amount of the claim
described  in such  Indemnity  Notice or fails to notify the  Indemnified  Party
within the Dispute Period whether the  Indemnifying  Party disputes the claim or
the  amount of the claim  described  in such  Indemnity  Notice,  the  amount of
Damages  specified  in the  Indemnity  Notice  will  be  conclusively  deemed  a
liability of the Indemnifying Party under Section 9.2 and the Indemnifying Party
shall pay the amount of such Damages to the Indemnified  Party on demand. If the
Indemnifying  Party has  timely  disputed  its  liability  or the  amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall  proceed in good faith to  negotiate a resolution  of such  dispute;
provided,  however,  that if the dispute is not resolved within thirty (30) days
after the Claim Notice,  the  Indemnifying  Party shall be entitled to institute
such legal action as it deems appropriate.

     (c) The indemnity  agreements  contained herein shall be in addition to (i)
any cause of action or  similar  rights of the  Indemnified  Party  against  the
Indemnifying  Party or others,  and (ii) any liabilities the Indemnifying  Party
may be subject to.


                                    ARTICLE X

                                  MISCELLANEOUS


     Section 10.1 GOVERNING LAW; JURISDICTION.  This Agreement shall be governed
by and  interpreted  in  accordance  with the laws of the  State of New York for
contracts to be wholly  performed in such state and without giving effect to the
principles  thereof regarding the conflict of laws. Each of the parties consents
to the exclusive  jurisdiction of the federal courts whose  districts  encompass
any part of the County of New York or the state  courts of the State of New York
sitting in the County of New York in connection  with any dispute  arising under
this Agreement or any of the other  Transaction  Documents and hereby waives, to
the maximum  extent  permitted by law, any  objection,  including  any objection
based on forum non  conveniens,  to the bringing of any such  proceeding in such
jurisdictions.

     Section 10.2 JURY TRIAL WAIVER. The Company and the Investor hereby waive a
trial by jury in any action, proceeding or counterclaim brought by either of the
parties  hereto  against the other in respect of any matter arising out of or in
connection with the Transaction Documents.

     Section 10.3 SPECIFIC ENFORCEMENT. The Company and the Investor acknowledge
and agree that irreparable  damage would occur to the Investor in the event that
any of the provisions of this  Agreement  were not performed in accordance  with
their specific terms or were otherwise  breached.  It is accordingly agreed that
the Investor  shall be entitled to an  injunction or  injunctions  to prevent or
cure breaches of the  provisions of this  Agreement and to enforce  specifically
the terms and provisions hereof or thereof,  this being in addition to any other
remedy to which any of them may be entitled by law or equity.

     Section 10.4 ASSIGNMENT.  This Agreement shall be binding upon and inure to
the benefit of the Company and  Investor  and their  respective  successors  and
permitted  assigns.  Neither  this  Agreement  nor any rights of Investor or the
Company  hereunder  may  be  assigned  by  either  party  to any  other  Person.
Notwithstanding the foregoing,  (a) the provisions of this Agreement shall inure
to the benefit of, and be  enforceable  by, any affiliate of Investor which is a
transferee  of any  of the  Common  Stock  purchased  or

                                       24
<PAGE>


acquired by Investor  hereunder  with  respect to the Common  Stock held by such
person,  and (b)  Investor's  interest in this  Agreement may be assigned at any
time, in whole but not in part, to any affiliate of Investor.

     Section 10.5 THIRD PARTY BENEFICIARIES.  This Agreement is intended for the
benefit  of the  Company  and  Investor  and  their  respective  successors  and
permitted  assigns,  and is not for the benefit of, nor may any provision hereof
be enforced by, any other Person.

     Section 10.6  TERMINATION.  This  Agreement  shall  terminate at the end of
Commitment  Period or as  otherwise  provided  herein  (unless  extended  by the
agreement of the Company and Investor);  provided,  however, that the provisions
of Articles VI,  VIII,  IX and Sections  10.1,  10.2 and 10.3 shall  survive the
termination of this Agreement.

     Section 10.7 ENTIRE AGREEMENT, AMENDMENT; NO WAIVER. This Agreement and the
instruments  referenced  herein contain the entire  understanding of the Company
and Investor with respect to the matters  covered herein and therein and, except
as  specifically  set forth herein or therein,  neither the Company nor Investor
makes any representation, warranty, covenant or undertaking with respect to such
matters.  No provision of this  Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.

     Section 10.8 FEES AND EXPENSES.  Each of the Company and Investor agrees to
pay its own expenses in connection  with the  preparation  of this Agreement and
performance of its obligations hereunder. In addition, the Company shall pay all
reasonable  fees and expenses  incurred by the Investor in  connection  with any
amendments,  modifications  or waivers  of this  Agreement  or the  Registration
Rights  Agreement  or  incurred  in  connection  with  the  enforcement  of this
Agreement and the Registration Rights Agreement,  including, without limitation,
all reasonable  attorneys fees and expenses.  The Company shall pay all stamp or
other similar  taxes and duties  levied in  connection  with issuance of the Put
Shares and Blackout Shares, if pursuant hereto.

     Section 10.9 NO BROKERS.  Each of the Company and Investor  represents that
it has had no dealings in connection  with this  transaction  with any finder or
broker who will demand  payment of any fee or  commission  from the other party.
The Company on the one hand, and Investor, on the other hand, agree to indemnify
the other against and hold the other  harmless from any and all  liabilities  to
any  persons  claiming  brokerage  commissions  or  finder's  fees on account of
services  purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.

     Section  10.10  COUNTERPARTS  -  TERMINATION  OF  PRIOR  AGREEMENTS.   This
Agreement  may be  executed  in  multiple  counterparts,  each of  which  may be
executed  by less than all of the  Company and shall be deemed to be an original
instrument  which shall be enforceable  against the parties  actually  executing
such  counterparts  and all of which together shall  constitute one and the same
instrument.  This Agreement,  once executed by a party,  may be delivered to the
other  parties  hereto by  facsimile  transmission  of a copy of this  Agreement
bearing the signature of the parties so delivering this  Agreement.  The Private
Equity  Credit  Agreement  between  the  parties  dated July 25,  2002 is hereby
terminated and shall be of no further force or effect.

     Section 10.11  SURVIVAL;  SEVERABILITY.  The  representations,  warranties,
covenants  and  agreements  of the Company  hereto  shall  survive  each Closing
hereunder  for a  period  of one (1)  year  thereafter.  In the  event  that any
provision  of this  Agreement  becomes or is  declared  by a court of  competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that such severability
shall be  ineffective  if it  materially  changes the  economic  benefit of this
Agreement to any party.

                                       25
<PAGE>


     Section 10.12 FURTHER ASSURANCES. Each party shall do and perform, or cause
to be done and  performed,  all such further acts and things,  and shall execute
and deliver all such other agreements, certificates,  instruments and documents,
as the other party may  reasonably  request in order to carry out the intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

     Section 10.13 NO STRICT  CONSTRUCTION.  The language used in this Agreement
will be deemed to be the language  chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.

     Section 10.14 TITLE AND  SUBTITLES.  The titles and subtitles  used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.

     Section 10.15 REPORTING  ENTITY FOR THE COMMON STOCK.  The reporting entity
relied upon for the  determination  of the trading  price of the Common Stock on
any given Trading Day for the purposes of this Agreement shall be Bloomberg L.P.
or any successor thereto. The written mutual consent of Investor and the Company
shall be required to employ any other reporting entity.

     Section 10.17  PUBLICITY.  The Company and Investor shall consult with each
other in issuing any press releases or otherwise  making public  statements with
respect to the  transactions  contemplated  hereby and no party  shall issue any
such press release or otherwise make any such public statement without the prior
written  consent of the other party,  which  consent  shall not be  unreasonably
withheld or  delayed,  except  that no prior  consent  shall be required if such
disclosure  is required by law,  in which such case the  disclosing  party shall
provide   the  other  party  with  prior   notice  of  such  public   statement.
Notwithstanding the foregoing,  the Company shall not publicly disclose the name
of Investor  without the prior written  consent of such Investor,  except to the
extent  required by law.  Investor  acknowledges  that this Agreement and all or
part of the  Transaction  Documents may be deemed to be "material  contracts" as
that term is defined by Item  601(b)(10) of Regulation S-K, and that the Company
may  therefore  be  required  to file such  documents  as exhibits to reports or
registration  statements  filed under the  Securities  Act or the Exchange  Act.
Investor  further  agrees that the status of such  documents  and  materials  as
material  contracts shall be determined  solely by the Company,  in consultation
with its counsel.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       26
<PAGE>


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Private  Equity
Credit Agreement to be executed by the  undersigned,  thereunto duly authorized,
as of the date first set forth above.

                                 NCT GROUP, INC.



                                 By: /s/  Michael J. Parrella
                                     -------------------------------------------
                                     Name:  Michael J. Parrella
                                     Title: Chairman and Chief Executive Officer


                                 CRAMMER ROAD LLC



                                 By: /s/  David Sims
                                     -------------------------------------------
                                     Name:  David Sims
                                     Title: Director
                                            Navigator Management Ltd.

                                       27
<PAGE>


                                    EXHIBITS
                                    --------


     EXHIBIT A                   Registration Rights Agreement

     EXHIBIT B                   Put Notice

     EXHIBIT C                   Opinion to Investor

     EXHIBIT D                   Closing Certificate

     EXHIBIT E                   Transfer Agent Instructions

     EXHIBIT F                   Joint Escrow Instructions

                                       28