Document:

Exhibit 10.2

Exhibit 10.2 

 

FIFTH
AMENDMENT TO CREDIT AGREEMENT

THE
STEAK N SHAKE COMPANY,
an Indiana corporation (the "Company") and FIFTH
THIRD BANK (CENTRAL INDIANA),
a Michigan banking corporation, formerly known as Fifth Third Bank, Indiana
(Central) (the "Bank"), being parties to that certain Credit Agreement dated as
of November 16, 2001, as previously amended (collectively, the "Agreement")
agree to further amend the Agreement by this Fifth Amendment to Credit Agreement
(this "Amendment") as follows.

1. 
  DEFINITIONS.
All defined terms used herein not otherwise defined in this Amendment shall have
their respective meanings set forth in 

                the Agreement.

	 	
      (a)
	
      Amended
      Definitions.
      The following definitions appearing under Section 1 of the Agreement are
      hereby amended and restated in their respective entireties as
      follows:

	·  	
      "Interest
      Period"
      means each consecutive seven (7), thirty (30), sixty (60), ninety (90), or
      one hundred twenty (120) day period for which the Company shall have
      selected the LIBOR-based Rate, effective as of the first day of each
      Interest Period and ending on the last day of each Interest Period;
      provided, that if any Interest Period is selected to end on a date for
      which there is no numerical equivalent to the date on which the Interest
      Period commenced, then the Interest Period shall end instead on the last
      day of such calendar month.

	·  	
      "Revolving
      Loan Maturity Date"
      means January 30, 2008.

	 	
      (b)
	
      New
      Definition.
      The following new definition is hereby added to Section 1 of the Agreement
      as follows:

	
      
	
      
	
      

	·  	
      "Fifth
      Amendment"
      means that certain agreement entitled "Fifth Amendment to Credit
      Agreement" entered into by and between the Company and the Bank dated as
      of January 30, 2005, for the purpose of amending this
      Agreement.

2. 
  THE
LOAN.
Section 2(a)(i) and the first sentence of Section 2(a)(ii) of the Agreement are
hereby amended and restated in their 

                respective entireties
as follows:

	
      
	
      
	
      (i)
	
      The
      Commitment -- Use of Proceeds.
      From this date and until the Revolving Loan Maturity Date, the Bank agrees
      to make Advances (collectively, the "Revolving Loan") under a revolving
      line of credit from time to time to the Company of amounts not exceeding
      in the aggregate at any time outstanding Fifty Million and No/100 Dollars
      ($50,000,000.00) (the "Commitment"). Proceeds of the Revolving Loan may be
      used by the Company only to fund general corporate
    purposes.

	
      
	
      
	
      (ii)
	
      Method
      of Borrowing.
      The obligation of the Company to repay the Revolving Loan shall be
      evidenced by a Promissory Note of the Company in the form of Exhibit
      "A"
      attached hereto (the "Revolving Note").

3. 
  FINANCIAL
COVENANTS.
Section 5(g)(ii) of the Agreement pertaining to the maintenance of a minimum
debt service coverage ratio 

                is hereby deleted,
and Section 5(g)(i) is hereby amended and restated in its entirety as
follows:

	
      
	
      
	
      (i)
	
      Maximum
      Ratio of Funded Debt to EBITDA.
      For each period of four (4) consecutive fiscal quarters commencing with
      the period of four (4) consecutive fiscal quarters ending on December 28,
      2004, maintain a ratio of Funded Debt to EBITDA of not more than 4.00 to
      1.00.

4. 
  REPRESENTATIONS
AND WARRANTIES.
In order to induce the Bank to enter into this Amendment, the Company affirms
that 

                the representations
and warranties contained in the Agreement are correct as of the date of this
Amendment, except that (i) they shall be 

                deemed to also refer
to this Amendment as well as all documents named herein and, (ii) Section 3(d)
of the Agreement shall be deemed 

                also to refer to the
most recent audited and unaudited financial statements of the Company delivered
to the Bank.

5. 
  EVENTS
OF DEFAULT.
The Company certifies to the Bank that no Event of Default or Unmatured Event of
Default under the 

                Agreement, as amended
by this Amendment, has occurred and is continuing as of the date of this
Amendment.

 

6. 
  CONDITIONS
PRECEDENT.
As conditions precedent to the effectiveness of this Amendment, the Bank shall
have received the 

                following
contemporaneously with execution and delivery of this Amendment, each duly
executed, dated and in form and substance 

                satisfactory to the
Bank:

	
      
	
      (i)
	
      This
      Amendment duly executed by the Company.

	
      
	
      (ii)
	
      The
      Revolving Note in the form of Exhibit
      "A"
      attached hereto duly executed by the
Company.

	
      
	
      (iii)
	
      The
      Reaffirmation of Guaranty Agreement in the form attached hereto as
      Exhibit
      "B"
      duly executed by Steak n Shake Operations,
Inc.

	
      
	
      (iv)
	
      The
      Reaffirmation of Guaranty Agreement in the form attached hereto as
      Exhibit
      "C"
      duly executed by Steak
      n Shake, L.P.

	
      
	
      (v)
	
      The
      Reaffirmation of Guaranty Agreement in the form attached hereto as
      Exhibit
      "D"
      duly executed by SnS Investment Company.

	
      
	
      (vi)
	
      Resolutions
      of the Board of Directors of the Company authorizing the execution,
      delivery and performance, respectively, of this Amendment and all other
      Loan Documents provided for in this Amendment to which the Company is a
      party certified by the Secretary of the Board of Directors of the Company
      as being in full force and effect and duly adopted as of the date
      hereof.

	
      
	
      (vii)
	
      The
      Certificate of the Secretary of the Board of Directors of the Company
      certifying the names of the officer or officers authorized to execute this
      Amendment and all other Loan Documents provided for in this Amendment to
      which the Company is a party, together with a sample of the true signature
      of each such officer, dated as of the date of this
    Amendment.

	
      
	
      (viii)
	
      Resolutions
      of the Board of Directors of Steak n Shake Operations, Inc., an Indiana
      corporation, authorizing the execution, delivery and performance,
      respectively, of its Reaffirmation of Guaranty Agreement and all other
      Loan Documents provided for in this Amendment to which Steak n Shake
      Operations, Inc. is a party certified by the Secretary of the Board of
      Directors of Steak n Shake Operations, Inc. as being in full force and
      effect and duly adopted as of the date
hereof.

	
      
	
      (ix)
	
      The
      Certificate of the Secretary of the Board of Directors of Steak n Shake
      Operations, Inc. certifying the names of the officer or officers
      authorized to execute its Reaffirmation of Guaranty Agreement and all
      other Loan Documents provided for in this Amendment to which Steak n Shake
      Operations, Inc. is a party, together with a sample of the true signature
      of each such officer, dated as of the date of this
    Amendment.

	
      
	
      (x)
	
      Resolutions
      of the Board of Directors of Steak n Shake, L.P., an Indiana limited
      partnership, authorizing the execution, delivery and performance,
      respectively, of its Reaffirmation of Guaranty Agreement and all other
      Loan Documents provided for in this Amendment to which Steak n Shake, L.P.
      is a party certified by the Secretary of the Board of Directors of Steak n
      Shake, L.P. as being in full force and effect and duly adopted as of the
      date hereof.

	
      
	
      (xi)
	
      The
      Certificate of the Secretary of the Board of Directors of Steak n Shake,
      L.P. certifying the names of the officer or officers authorized to execute
      its Reaffirmation of Guaranty Agreement and all other Loan Documents
      provided for in this Amendment to which Steak n Shake, L.P. is a party,
      together with a sample of the true signature of each such officer, dated
      as of the date of this Amendment.

	
      
	
      (xii)
	
      Resolutions
      of the Board of Directors of SnS Investment Company, an Indiana
      corporation, authorizing the execution, delivery and performance,
      respectively, of its Reaffirmation of Guaranty Agreement and all other
      Loan Documents provided for in this Amendment to which SnS Investment
      Company is a party certified by the Secretary of the Board of Directors of
      SnS Investment Company as being in full force and effect and duly adopted
      as of the date hereof.

	
      
	
      (xiii)
	
      The
      Certificate of the Secretary of the Board of Directors of SnS Investment
      Company certifying the names of the officer or officers authorized to
      execute its Reaffirmation of Guaranty Agreement and all other Loan
      Documents provided for in this Amendment to which SnS Investment Company
      is a party, together with a sample of the true signature of each such
      officer, dated as of the date of this
Amendment.

7. 
  PRIOR
AGREEMENTS.
The Agreement, as amended by this Amendment, supersedes all previous agreements
and commitments 

                made or issued by the
Bank with respect to the Loans and all other subjects of this Amendment,
including, without limitation, any oral or 

                written proposals
which may have been made or issued by the Bank.

8. 
  EFFECT
OF AMENDMENT.
The provisions contained herein shall serve to supplement and amend the
provisions of the Agreement. 

                To the extent that
the terms of this Amendment conflict with the terms of the Agreement, the
provisions of this Amendment shall control 

                in all
respects.

9. 
  REAFFIRMATION.
Except as expressly amended by this Amendment, all of the terms and conditions
of the Agreement shall remain in 

                full force and effect
as originally written and as previously amended.

10. 
  COUNTERPARTS.
This
Amendment may be executed in any number of counterparts, each of which shall be
an original and all of 

                which when taken
together shall be one and the same agreement. 

 

IN
WITNESS WHEREOF,
the Company and the Bank by their respective duly authorized officers have
executed and delivered in Indiana this Fifth Amendment Credit Agreement as of
January 30, 2005.

	
      
	
      
	
      
	
      
	
      
	
      
	
      
	
      THE
      STEAK N SHAKE COMPANY,
      an Indiana corporation

           

                                 By:

 

                                /s/  Jeffrey A.
Blade

                                        Jeffrey
A. Blade,

                                          
Senior Vice President and Chief Financial Officer

FIFTH
THIRD BANK (CENTRAL INDIANA),
a Michigan banking corporation

	 	
      By:
	
       

      /s/ Andrew M. Cardimen

         
      Andrew M. Cardimen, 

         
      Vice President and Senior Relationship
Manager

 

 

 

SCHEDULE
OF EXHIBITS

	
      Exhibit
      "A"
	
      -
	
      Promissory
      Note (Revolving Loan)($50,000,000.00) (The Steak n Shake
      Company)*

	
      Exhibit
      "B"
	
      -
	
      Reaffirmation
      of Guaranty Agreement (Steak n Shake Operations,
Inc.)*

	
      Exhibit
      "C"
	
      -
	
      Reaffirmation
      of Guaranty Agreement (Steak n Shake,
L.P.)*

	
      Exhibit
      "D"
	
      -
	
      Reaffirmation
      of Guaranty Agreement (SnS Investment
Company)*

 

* Exhibits were omitted from filing.EXHIBIT 4.1

THIS  WARRANT  HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS
AMENDED,  OR APPLICABLE  STATE  SECURITIES  LAWS, NOR THE SECURITIES LAWS OF ANY
OTHER  JURISDICTION.  THIS WARRANT MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THOSE SECURITIES LAWS OR AN OPINION
OF COUNSEL, IN FORM AND SUBSTANCE  SATISFACTORY TO THE COMPANY, THAT THE SALE OR
TRANSFER IS PURSUANT TO AN EXEMPTION TO THE  REGISTRATION  REQUIREMENTS OF THOSE
SECURITIES LAWS.
                                _________________

No. CS-108                                          Dated as of January 26, 2005

          Void after 5:00 p.m., New York City time, on January 26, 2010

                                     WARRANT
                                     -------

              for the Purchase of 6,750,000 Shares of Common Stock
              ----------------------------------------------------

     FOR  VALUE  RECEIVED,   NCT  GROUP,   INC.  (the  "Company"),   a  Delaware
corporation,  on this day of January 26, 2005 (the "Grant  Date")  hereby issues
this warrant (the "Warrant") and certifies that Carole Salkind (the "Holder") is
granted the right,  subject to the  provisions of the Warrant,  to purchase from
the Company,  at any time, or from time to time during the period  commencing at
9:00 a.m. New York City local time on January 26,  2005,  and  expiring,  unless
earlier  terminated as  hereinafter  provided,  at 5:00 p.m. New York City local
time on  January  26,  2010  up to Six  Million  Seven  Hundred  Fifty  Thousand
(6,750,000) fully paid and nonassessable shares of Common Stock, $.01 par value,
of the Company at a price per share (the "Exercise  Price") equal to the closing
sale price of the Common Stock (as defined below) on the Trading Day (as defined
below) immediately preceding the date of this Warrant;  provided,  however, that
if, on the date of this  Warrant  and the three  Trading  Days  thereafter  (the
"Window"), neither the Holder nor any Related Party (as defined below) sells or,
whether in writing or  otherwise,  agrees to sell any shares of Common  Stock or
any  option,  warrant,  instrument  or right to convert  into,  exchange  for or
acquire Common Stock,  then the Exercise Price shall be reduced to a price equal
to the lowest  closing sale price,  if lower than the price  specified  above in
this sentence, of the Common Stock during the Window on the principal securities
exchange  or market on which the  Common  Stock is then  traded as  reported  on
Bloomberg  Financial  Markets.  If any  closing  sale price of the Common  Stock
during the Window is lower than the price specified in the immediately preceding
sentence,  the Holder shall give the Borrower  prompt written notice of any sale
of or agreement to sell any Common Stock or option, warrant, instrument or right
to convert  into,  exchange for or acquire  Common Stock made by the Holder or a
Related  Party during the Window.  "Trading Day" shall mean any day on which the
applicable  common stock is traded for any period on the NASDAQ National Market,
or on the principal  securities exchange or other securities market on which the
applicable  common  stock is then being  traded.  "Related  Party"  shall mean a
member of the Holder's immediate family,  including spouse (even if separated or
not residing with the Holder) and adult  children (even if not residing with the
Holder),  or an entity  (other than the Company) of which the Holder or any such
immediate  family  member is an  officer,  director  or  beneficial  shareholder
(determined  under Rule 13d-3  under the  Securities  Exchange  Act of 1934,  as
amended).

                                       1
<PAGE>

     The term "Common  Stock" means the shares of Common Stock,  $.01 par value,
of the Company constituted on the Grant Date of this Warrant,  together with any
other equity securities that may be issued by the Company in addition thereto or
in  substitution  therefor.  The number of shares of Common Stock to be received
upon  the  exercise  of  this  Warrant  may be  adjusted  from  time  to time as
hereinafter  set  forth.  The  shares  of  Common  Stock  deliverable  upon such
exercise,  and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Stock".

     Upon receipt by the Company of evidence  reasonably  satisfactory  to it of
the loss, theft,  destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender  and  cancellation  of this Warrant,  if mutilated,  the Company shall
execute and  deliver a new Warrant of like tenor and date.  Any such new Warrant
executed and delivered shall constitute an additional  contractual obligation on
the part of the Company,  whether or not this Warrant so lost, stolen, destroyed
or mutilated shall be at any time enforceable by anyone.

     The Holder agrees with the Company that this Warrant is issued, and all the
rights  hereunder shall be held,  subject to all of the conditions,  limitations
and provisions set forth herein.

     1.  Exercise of Warrant.  This Warrant may be exercised in whole or in part
at any time,  or from time to time,  during the period  commencing at 9:00 a.m.,
New York City local time,  on January 26, 2005,  and expiring at 5:00 p.m.,  New
York City local  time,  on January 26,  2010,  or, if such day is a day on which
banking  institutions  in the City of New York are  authorized  by law to close,
then on the next succeeding day that shall not be such a day.

     Subject to the restrictions  and limitations set forth above,  this Warrant
may be  exercised by  presentation  and  surrender  hereof to the Company at its
principal  office with the Warrant  Exercise Form attached  hereto duly executed
and  accompanied  by payment  (either in cash or by certified  or official  bank
check, payable to the order of the Company) of the Exercise Price for the number
of shares  specified in such Form and  instruments of transfer,  if appropriate,
duly executed by the Holder.  If this Warrant  should be exercised in part only,
the Company shall, upon surrender of this Warrant for cancellation,  execute and
deliver a new Warrant  evidencing  the rights of the Holder  thereof to purchase
the balance of the shares purchasable hereunder.  Upon receipt by the Company of
this Warrant, together with the Warrant Exercise Form and the Exercise Price, at
its office,  in proper form for  exercise,  the Holder shall be deemed to be the
holder of record of the  shares of Common  Stock  issuable  upon such  exercise,
notwithstanding  that the stock  transfer  books of the  Company  shall  then be
closed or that  certificates  representing such shares of Common Stock shall not
then be  actually  delivered  to the Holder.  The Company  shall pay any and all
documentary  stamp or similar issue or transfer  taxes payable in respect of the
issue or delivery of shares of Common Stock on exercise of this Warrant.

     2.  Reservation  of  Shares.  The  Company  will at all times  reserve  for
issuance and delivery  upon  exercise of this Warrant all shares of Common Stock
of the Company from time to

                                       2
<PAGE>

time  receivable  upon exercise of this  Warrant.  All such shares shall be duly
authorized and, when issued upon such exercise,  shall be validly issued,  fully
paid and nonassessable and free of all preemptive rights.

     3. Warrant Stock  Transfer to Comply with the  Securities  Act of 1933. The
Warrant  Stock  may not be sold  or  otherwise  disposed  of  unless  registered
pursuant to the  provisions of the Securities Act of 1933, as amended (the "1933
Act"), or an opinion of counsel in form and content  satisfactory to the Company
is obtained  stating that such sale or other  disposition  is made in compliance
with  an  available  exemption  from  such  registration.   Any  sale  or  other
disposition  of the Warrant  Stock must also comply  with all  applicable  state
securities laws and regulations.

     4. Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant,  but the Company shall
issue one  additional  share of its Common  Stock in lieu of each  fraction of a
share otherwise called for upon any exercise of this Warrant.

     5. Exchange,  Transfer,  Assignment of Loss of Warrant. This Warrant is not
registered  under the 1933 Act nor under any applicable  state securities law or
regulation.  This Warrant cannot be sold,  exchanged,  transferred,  assigned or
otherwise  disposed of unless registered  pursuant to the provisions of the 1933
Act or an opinion of counsel in form and content  satisfactory to the Company is
obtained  stating  that such  disposition  is in  compliance  with an  available
exemption  from  registration.  Any  such  disposition  must  also  comply  with
applicable state securities laws and regulations.

     6.  Rights of the  Holder.  The Holder  shall  not,  by virtue  hereof,  be
entitled  to any rights of a  stockholder  of the  Company,  either at law or in
equity,  and the  rights of the Holder are  limited to those  expressed  in this
Warrant.

     7. Redemption. This Warrant is not redeemable by the Company.

     8. Anti-Dilution Provisions.

     8.1  Adjustment  for  Dividends  in  Other  Securities,   Property,   Etc.:
Reclassification,  Etc. In case at any time or from time to time after the Grant
Date the holders of Common Stock (or any other securities at the time receivable
upon the  exercise  of this  Warrant)  shall have  received,  or on or after the
record date fixed for the  determination  of eligible  stockholders,  shall have
become  entitled to receive without  payment  therefor:  (a) other or additional
securities or property  (other than cash) by way of dividend,  (b) any cash paid
or  payable  except out of earned  surplus  of the  Company at the Grant Date as
increased  (decreased)  by  subsequent  credits  (charges)  thereto  (other than
credits  in respect of any  capital or paid-in  surplus or surplus  created as a
result  of a  revaluation  of  property)  or (c) other or  additional  (or less)
securities  or  property  (including  cash)  by  way of  stock-split,  spin-off,
split-up,   reclassification,   combination  of  shares  or  similar   corporate
rearrangement, then, and in each such case, the Holder of this Warrant, upon the
exercise thereof as provided in Section 1, shall be

                                       3
<PAGE>

entitled to  receive,  subject to the  limitations  and  restrictions  set forth
above,  the  amount of  securities  and  property  (including  cash in the cases
referred  to in clauses (b) and (c) above)  which such Holder  would hold on the
date of such  exercise  if on the Grant Date it had been the holder of record of
the  number  of  shares  of Common  Stock  (as  constituted  on the Grant  Date)
subscribed  for upon such exercise as provided in Section 1 and had  thereafter,
during  the  period  from  the  Grant  Date to and  including  the  date of such
exercise,  retained such shares and/or all other additional (or less) securities
and  property  (including  cash in the cases  referred to in clauses (b) and (c)
above)  receivable by it as aforesaid  during such period,  giving effect to all
adjustments called for during such period by Section 8.2.

     8.2 Adjustment for Reorganization,  Consolidation,  Merger, Etc. In case of
any reorganization of the Company (or any other  corporation,  the securities of
which are at the time  receivable  on the  exercise of this  Warrant)  after the
Grant  Date  or in  case  after  such  date  the  Company  (or  any  such  other
corporation) shall consolidate with or merge into another  corporation or convey
all or substantially all of its assets to another corporation, then, and in each
such case,  the Holder of this Warrant upon the exercise  thereof as provided in
Section  1  at  any  time  after  the   consummation  of  such   reorganization,
consolidation,  merger or conveyance,  shall be entitled to receive,  in lieu of
the securities and property  receivable  upon the exercise of this Warrant prior
to such consummation, the securities or property to which such Holder would have
been entitled upon such  consummation  if such Holder had exercised this Warrant
immediately  prior  thereto,  all subject to further  adjustment  as provided in
Section 8.1; in each such case, the terms of this Warrant shall be applicable to
the  securities or property  receivable  upon the exercise of this Warrant after
such consummation.

     8.3  Certificate  as to  Adjustments.  In each case of an adjustment in the
number of shares of Common Stock (or other securities or property) receivable on
the exercise of the Warrant,  the Company at its expense will  promptly  compute
such  adjustment  in  accordance  with the terms of the  Warrant  and  prepare a
certificate  setting forth such  adjustment and showing in detail the facts upon
which such adjustment is based,  including a statement of (a) the  consideration
received or to be received  by the Company for any  additional  shares of Common
Stock  issued or sold or deemed to have been  issued or sold,  (b) the number of
shares of Common Stock outstanding or deemed to be outstanding,  and (c) the pro
forma  adjusted  Exercise.  The Company will  forthwith mail a copy of each such
certificate to the holder of this Warrant.

     8.4 Notices of Record Date, Etc.

         In case:

         (a) the Company  shall take a record of the holders of its Common Stock
(or other  securities at the time  receivable  upon the exercise of the Warrant)
for the purpose of  entitling  them to receive any  dividend  (other than a cash
dividend)  or other  distribution,  or any right to subscribe  for,  purchase or
otherwise acquire any shares of stock of any class or any other  securities,  or
to receive any other right; or

                                       4
<PAGE>

         (b) of any capital  reorganization  of the Company  (other than a stock
split or reverse stock split), any  reclassification of the capital stock of the
Company,  any  consolidation  or  merger  of the  Company  with or into  another
corporation  (other  than a merger for  purposes of change of  domicile)  or any
conveyance of all or  substantially  all of the assets of the Company to another
corporation; or

         (c) of  any  voluntary  or  involuntary   dissolution,  liquidation  or
winding-up of the Company,  then,  and in each such case, the Company shall mail
or cause to be mailed to each  holder of the Warrant at the time  outstanding  a
notice  specifying,  as the case may be, (i) the date on which a record is to be
taken for the purpose of such dividend,  distribution or right,  and stating the
amount and character of such dividend,  distribution  or right, or (ii) the date
on  which  such   reorganization,   reclassification,   consolidation,   merger,
conveyance,  dissolution,  liquidation  or winding-up is to take place,  and the
time, if any, is to be fixed,  as to which the holders of record of Common Stock
(or such  other  securities  at the time  receivable  upon the  exercise  of the
Warrant)  shall be entitled to exchange  their  shares of Common  Stock (or such
other  securities)  for  securities  or other  property  deliverable  upon  such
reorganization,    reclassification,    consolidation,    merger,    conveyance,
dissolution,  liquidation  or  winding-up.  Such notice shall be mailed at least
twenty  (20) days prior to the date  therein  specified  and the  Warrant may be
exercised  prior to said date  during the term of the Warrant no later than five
(5) days prior to said date.

     9. Legend. In the event of the exercise of this Warrant and the issuance of
any of the Warrant Stock hereunder, all certificates  representing Warrant Stock
shall bear on the face thereof  substantially the following legends,  insofar as
is consistent with Delaware law:

        "The shares of common stock  represented by this certificate have
        not been registered under the Securities Act of 1933, as amended,
        or the Securities  laws of any state or other  jurisdiction,  and
        may not be sold,  offered  for  sale,  assigned,  transferred  or
        otherwise   disposed  of,  unless  registered   pursuant  to  the
        provisions of that Act and of such  Securities laws or an opinion
        of counsel acceptable to the Corporation is obtained stating that
        such  disposition  is in compliance  with an available  exemption
        from such registration."

     10. Governing Law and  Jurisdiction.  This Warrant shall be governed by the
internal  laws of the State of  Delaware,  without  regard to  conflicts of laws
principles.  The parties hereto hereby submit to the exclusive  jurisdiction  of
the United States Federal Courts located in the state of New Jersey with respect
to any dispute arising under this Warrant.

     11. Notices.  Notices,  demands and other  communications  given under this
Agreement  shall be in  writing  and shall be deemed  to have  been  given  when
delivered  (if  personally  delivered),  on the  scheduled  date of delivery (if
delivered  via  commercial  courier),  three  days  after  mailed  (if mailed by
certified  or  registered  mail,  return  receipt  requested)  or  when  sent by
facsimile  (if  sent by  facsimile  with  evidence  of  successful  transmission
retained by the  sender);  provided,  however,  that  failure to give proper and
timely  notice as set forth in the "with a copy to"  provisions  below shall not
invalidate a notice  properly and timely given to the

                                       5
<PAGE>

associated  party.  Unless another  address or facsimile  number is specified by
notice hereunder, all notices shall be sent as follows:

If to the Holder:                           with a copy to:
----------------                            --------------

--------------------------------------------------------------------------------
Ms. Carole Salkind                          Peter Rosen, Esq.
18911 Collins Ave., Apt. 2403               Rosen & Avigliano
Sunny Isles Beach, FL 33160                 431 Route 10 East
                                            Randolph, NJ  07689
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Facsimile:  305-932-2425                    Facsimile:  973-361-1644
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If to the Company:                          with a copy to:
-----------------                           --------------

--------------------------------------------------------------------------------
NCT Group, Inc.                             NCT Group, Inc.
20 Ketchum Street                           20 Ketchum Street
Westport, CT  06880                         Westport, CT  06880
Attention:  Chief Financial Officer         Attention:  General Counsel
--------------------------------------------------------------------------------
Facsimile:  203-226-4338                    Facsimile:  203-226-4338
--------------------------------------------------------------------------------

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its
behalf,  in its corporate name, by its duly authorized  officer,  as of the date
first written above.

                                          NCT GROUP, INC.

                                          By:
                                              ----------------------------------
                                              Michael J. Parrella
                                              Chairman & Chief Executive Officer

                                       6
<PAGE>

                              WARRANT EXERCISE FORM
                              ---------------------

         (To be executed by the Holder in order to Exercise the Warrant)

         TO:         NCT Group, Inc.
                     20 Ketchum Street
                     Westport, CT  06880
                     Attention:  Chief Financial Officer

     The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _________ shares of Common Stock of NCT Group, Inc. and
hereby  makes  payment at the rate of  $______  per share,  or an  aggregate  of
$________, in payment therefor.

     The  undersigned  represents,  warrants and  certifies  that all offers and
sales  of the  Warrant  Stock  shall  be  made:  (i)  pursuant  to an  effective
registration  statement  under the 1933 Act or pursuant to an exemption from, or
in a transaction not subject to, the registration  requirements of the 1993 Act;
and (ii) in compliance  with applicable  state  securities laws and those of any
other applicable jurisdiction.

Dated:
      ------------------------                       ---------------------------
                                                     Name of Warrant Holder

                                                     ---------------------------
                                                     Signature

                ------------------------------------------------

                       INSTRUCTIONS FOR ISSUANCE OF STOCK
                       ----------------------------------

         (if other than to the registered holder of the within Warrant)

Name:     ________________________________________________________
                  (Please type or print in block letters)

Address:  ________________________________________________________

Social Security or Taxpayer Identification Number:  ______________

                                       7

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