Document:

Exhibit 10(fa)

       THIS NOTE AND THE COMMON SHARES  ISSUABLE UPON CONVERSION OF THIS
       NOTE HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933,
       AS  AMENDED.  THIS  NOTE  AND THE  COMMON  SHARES  ISSUABLE  UPON
       CONVERSION  OF THIS  NOTE  MAY NOT BE  SOLD,  OFFERED  FOR  SALE,
       PLEDGED  OR   HYPOTHECATED   IN  THE  ABSENCE  OF  AN   EFFECTIVE
       REGISTRATION  STATEMENT  AS TO THIS  NOTE  UNDER  SAID  ACT OR AN
       OPINION OF COUNSEL  REASONABLY  SATISFACTORY  TO NCT GROUP,  INC.
       THAT SUCH REGISTRATION IS NOT REQUIRED.

                            SECURED CONVERTIBLE NOTE

     FOR  VALUE  RECEIVED,   NCT  GROUP,  INC.,  a  Delaware   corporation  (the
"Borrower"),  hereby  promises  to  pay  to  ALPHA  CAPITAL  AKTIENGESELLSCHAFT,
Pradafant 7, 9490 Furstentums,  Vaduz,  Lichtenstein,  Fax: 011-42-32323196 (the
"Holder") or order,  without demand,  the sum of Four Hundred  Thousand  Dollars
($400,000.00),  with simple interest  accruing at the annual rate of 8%, on July
23, 2006 (the "Maturity Date").

     The following terms shall apply to this Note:

                                   ARTICLE 1
                           PAYMENT RELATED PROVISIONS

1.1. Payment Grace Period.  The Borrower  shall have a ten (10) day grace period
     to pay any monetary amounts due under this Note, after which grace period a
     default  interest  rate of eighteen  percent (18%) per annum shall apply to
     the amounts owed hereunder.

1.2. Conversion  Rights.  The  Conversion  Rights  set forth in  Article 2 shall
     remain in full force and effect  commencing  from the date hereof and until
     the Note is paid in full.

1.3. Interest Rate.  Subject to the Holder's right to convert,  interest payable
     on this Note shall  accrue at the annual rate of eight  percent (8%) and be
     payable on the Maturity Date, accelerated or otherwise,  when the principal
     and  accrued but unpaid  interest  shall be due and  payable,  or sooner as
     described below.

                                   ARTICLE 2
                                CONVERSION RIGHTS

     The  Holder  shall  have the right to  convert  the  principal  amount  and
interest due under this Note into Shares of the  Borrower's  Common Stock as set
forth below.

2.1. Conversion into the Borrower's Common Stock.

     (a)  The Holder shall have the right from and after the  Availability  Date
          (as defined in the Subscription  Agreement) and then at any time until
          this  Note is fully  paid,  to  convert  any  outstanding  and  unpaid
          principal portion of this Note, and/or at the Holder's  election,  the
          interest  accrued  on the Note (the  date of giving of such  notice of
          conversion   being  a   "Conversion   Date")   into   fully  paid  and
          nonassessable  shares of common stock of Borrower as such stock exists
          on the date of issuance of this Note,  or any shares of capital  stock
          of  Borrower  into  which  such stock  shall  hereafter  be changed or
          reclassified   (the  "Common  Stock")  at  the

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          conversion   price,   as  described  in  Section  2.1(b)  hereof  (the
          "Conversion  Price"),  determined as provided herein. Upon delivery to
          the Borrower of a Notice of Conversion,  attached hereto as Exhibit A,
          as described in the  subscription  agreement  entered into between the
          Borrower  and  Holder   relating  to  this  Note  (the   "Subscription
          Agreement"),  all the terms of which are  incorporated  herein by this
          reference,  of the Holder's  written request for conversion,  Borrower
          shall issue and deliver to the Holder  within five (5)  business  days
          from the Conversion Date that number of shares of Common Stock for the
          portion of the Note converted in accordance with the foregoing. At the
          election of the Holder,  the Borrower will deliver  accrued but unpaid
          interest  on the Note  through  the  Conversion  Date  directly to the
          Holder on or before the Delivery Date (as defined in the  Subscription
          Agreement).  The  number of shares of Common  Stock to be issued  upon
          each  conversion  of this Note shall be  determined  by dividing  that
          portion of the principal (and interest, at the election of the Holder)
          of the Note to be converted, by the Conversion Price.

     (b)  Subject to  adjustment  as  provided  in Section  2.1(c)  hereof,  the
          Conversion  Price  shall be the lesser of (i) $0.0232  ("Maximum  Base
          Price"),  and (ii) 80% of the average of the closing bid prices of the
          Common Stock as reported by Bloomberg  L.P. for the OTC Bulletin Board
          for the five trading days preceding the Conversion Date.

     (c)  The  Maximum  Base  Price  and  number  and  kind of  shares  or other
          securities to be issued upon conversion shall be subject to adjustment
          from time to time upon the  happening  of  certain  events  while this
          conversion right remains outstanding, as follows:

          (i)  Merger,  Sale of Assets,  etc. If the  Borrower at any time shall
               consolidate  with  or  merge  into  or  sell  or  convey  all  or
               substantially all its assets to any other corporation, this Note,
               as to the unpaid  principal  portion thereof and accrued interest
               thereon,  shall  thereafter  be deemed to  evidence  the right to
               purchase such number and kind of shares or other  securities  and
               property as would have been issuable or  distributable on account
               of such consolidation,  merger, sale or conveyance,  upon or with
               respect to the  securities  subject to the conversion or purchase
               right immediately prior to such  consolidation,  merger,  sale or
               conveyance.  The foregoing  provision  shall  similarly  apply to
               successive transactions of a similar nature by any such successor
               or purchaser.  Without  limiting the generality of the foregoing,
               the anti-dilution  provisions of this Section shall apply to such
               securities  of  such  successor  or  purchaser   after  any  such
               consolidation, merger, sale or conveyance.

          (ii) Reclassification,  etc. If the  Borrower  at any time  shall,  by
               reclassification  or otherwise,  change the Common Stock into the
               same or a different number of securities of any class or classes,
               this Note, as to the unpaid principal portion thereof and accrued
               interest  thereon,  shall  thereafter  be deemed to evidence  the
               right to  purchase  such number and kind of  securities  as would
               have been  issuable as the result of such change with  respect to
               the Common Stock  immediately prior to such  reclassification  or
               other change.

          (iii)Stock  Splits,  Combinations  and  Dividends.  If the  shares  of
               Common Stock are subdivided or combined into a greater or smaller
               number of shares of Common Stock, or if a dividend is paid on the
               Common Stock in shares of Common Stock, the Conversion Base Price
               shall be proportionately reduced in case of subdivision of shares
               or stock  dividend or  proportionately  increased  in the case of
               combination  of shares,  in each such case by the ratio which the
               total  number of shares of Common Stock  outstanding  immediately
               after  such event  bears to the total  number of

                                       2
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               shares  of Common  Stock  outstanding  immediately  prior to such
               event.

          (iv) The  Conversion  Price and the  amount of shares of Common  Stock
               issuable  upon  conversion of this Note are subject to adjustment
               as described in the Subscription Agreement.

2.2      Whenever the  Conversion  Price is adjusted  pursuant to Section 2.1(c)
above,  the Borrower shall  promptly  provide notice to the Holder setting forth
the  Conversion  Price after such  adjustment and the amount of shares of Common
Stock issuable and setting forth a brief  statement of the facts  requiring such
adjustment.

2.3      Beginning from and after the  Availability  Date, and for the remaining
period during which the conversion  right under this Note exists,  Borrower will
reserve from its  authorized  and unissued  Common Stock a sufficient  number of
shares to provide for the issuance of Common Stock upon the full  conversion  of
this Note. Borrower represents that upon issuance,  such shares will be duly and
validly issued, fully paid and non-assessable. Borrower agrees that its issuance
of this Note  shall  constitute  full  authority  to its  officers,  agents  and
transfer  agents who are charged  with the duty of executing  and issuing  stock
certificates  to  execute  and issue the  necessary  certificates  for shares of
Common Stock upon the conversion of this Note.

2.4      Method of Conversion. This Note may be converted by the Holder in whole
or in part as described in Section 2.1(a) hereof and the Subscription Agreement.
Upon partial  conversion  of this Note,  if requested by the Holder,  a new Note
containing  the same date and  provisions  of this  Note  shall be issued by the
Borrower  to the Holder  for the  remaining  principal  balance of this Note and
interest which shall not have been converted or paid.

2.5      Maximum  Conversion.  The Holder  shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of shares
of Common  Stock which would be in excess of the sum of (i) the number of shares
of  Common  Stock  beneficially  owned by the  Holder  and its  affiliates  on a
Conversion Date, and (ii) the number of shares of Common Stock issuable upon the
conversion of the Note with respect to which the determination of this provision
is being made on a Conversion Date,  which would result in beneficial  ownership
by the Holder and its affiliates of more than 9.99% of the outstanding shares of
Common Stock of the Borrower on such  Conversion  Date.  For the purposes of the
provision to the immediately  preceding sentence,  beneficial ownership shall be
determined in accordance  with Section 13(d) of the  Securities  Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
Holder shall not be limited to aggregate conversions of only 9.99% and aggregate
conversion by the Holder may exceed  9.99%.  The Holder shall have the authority
and obligation to determine  whether the  restriction  contained in this Section
2.3 will  limit any  conversion  hereunder  and to the  extent  that the  Holder
determines  that  the  limitation   contained  in  this  Section  applies,   the
determination  of  which  portion  of the  Notes  are  convertible  shall be the
responsibility  and obligation of the Holder. The Holder may void the conversion
limitation  described in this Section 2.3 upon 61 days prior  written  notice to
the Borrower. The Holder may allocate which of the equity of the Borrower deemed
beneficially owned by the Holder shall be included in the 9.99% amount described
above and which shall be allocated to the excess above 9.99%.

                                       3
<PAGE>

                                   ARTICLE 3
                                EVENT OF DEFAULT

     The  occurrence  of any of the  following  events  of  default  ("Event  of
Default") shall, at the option of the Holder hereof,  make all sums of principal
and  interest  then  remaining  unpaid  hereon  and all  other  amounts  payable
hereunder  immediately  due and  payable,  all without  demand,  presentment  or
notice, or grace period, all of which hereby are expressly waived, except as set
forth below:

3.1. Failure  to Pay  Principal  or  Interest.  The  Borrower  fails  to pay any
     installment  of  principal  or interest  hereon  when due and such  failure
     continues  for a period of ten (10) days  after the due date.  The ten (10)
     day period  described  in this  Section 3.1 is the same ten (10) day period
     described in Section 1.1 hereof.

3.2. Breach of Covenant.  The Borrower  breaches any material  covenant or other
     term or condition of this Note in any material respect and such breach,  if
     subject to cure,  continues  for a period of seven (7) days  after  written
     notice to the Borrower from the Holder.

3.3. Breach of Representations  and Warranties.  Any material  representation or
     warranty of the Borrower made herein, in the Subscription Agreement entered
     into by the Holder and  Borrower in  connection  with this Note,  or in any
     agreement,  statement or certificate given in writing pursuant hereto or in
     connection therewith shall be false or misleading in any material respect.

3.4. Receiver or Trustee.  The Borrower shall make an assignment for the benefit
     of creditors,  or apply for or consent to the  appointment of a receiver or
     trustee for it or for a  substantial  part of its property or business;  or
     such a receiver or trustee shall otherwise be appointed.

3.5. Judgments.  Any money  judgment,  writ or similar  final  process  shall be
     entered or filed  against  Borrower or any of its  property or other assets
     for more than  $50,000,  and shall remain  unpaid,  unvacated,  unbonded or
     unstayed for a period of sixty (60) days.

3.6. Bankruptcy.   Bankruptcy,   insolvency,   reorganization   or   liquidation
     proceedings or other  proceedings or relief under any bankruptcy law or any
     law for the  relief  of  debtors  shall be  instituted  by or  against  the
     Borrower  and if  instituted  against  Borrower  are not  dismissed  within
     seventy-five (75) days of initiation.

3.7. Default.  A default  by the  Borrower,  after  applicable  notice  and cure
     periods,  under any one or more obligations in an aggregate monetary amount
     in excess of $100,000.

3.8. Stop  Trade.  A  Securities  and  Exchange  Commission  stop trade order or
     Principal  Market  (as  defined  in  the  Subscription  Agreement)  trading
     suspension with respect to the Common Stock that lasts for five (5) or more
     consecutive trading days.

3.9. Failure to Deliver Common Stock or Replacement Note.  Borrower's failure to
     timely  deliver  Common  Stock to the  Holder  pursuant  to and in the form
     required by this Note and Section 9 of the  Subscription  Agreement,  or if
     required, a replacement Note.

3.10.Non-Registration  Event.  The  occurrence  of a  Non-Registration  Event as
     described in Section 10.4 of the Subscription Agreement.

                                       4
<PAGE>

3.11.Cross  Default.  A  default  by  Borrower  of a  material  term,  covenant,
     warranty or undertaking of any other agreement to which Borrower and Holder
     are parties as of the date hereof, or the occurrence of a material event of
     default under any such other agreement.

3.12.Delisting.  Delisting of the Common  Stock from the OTC  Bulletin  Board or
     other  Principal  Market;  failure  to  comply  with the  requirements  for
     continued  listing  on the OTC  Bulletin  Board  for a period  of three (3)
     consecutive  trading days; or  notification  from the OTC Bulletin Board or
     any  Principal  Market  that the  Borrower  is not in  compliance  with the
     conditions  for such  continued  listing on the OTC Bulletin Board or other
     Principal  Market  and  the  Common  Stock  does  not at the  time  of such
     notification  comply with the  continued  listing  requirements  of the OTC
     Bulletin Board.

3.13.Security  Agreement.  An "Event of  Default"  as  defined  in the  Security
     Agreement  dated at or about the date of this Note delivered by Borrower to
     Holder (the "Security Agreement").

                                    ARTICLE 4
                                SECURITY INTEREST

4.   Security  Interest/Waiver  of  Automatic  Stay.  This Note is  secured by a
     security  interest  granted to the Collateral  Agent for the benefit of the
     Holder  pursuant to the  Security  Agreement,  as  delivered by Borrower to
     Holder.

                                    ARTICLE 5
                                  MISCELLANEOUS

5.1  Failure or Indulgence Not Waiver. No failure or delay on the part of Holder
     hereof in the  exercise of any power,  right or privilege  hereunder  shall
     operate as a waiver  thereof,  nor shall any single or partial  exercise of
     any such  power,  right or  privilege  preclude  other or further  exercise
     thereof or of any other right, power or privilege.  All rights and remedies
     existing  hereunder are  cumulative to, and not exclusive of, any rights or
     remedies otherwise available.

5.2  Notices.  Any notice  herein  required or permitted to be given shall be in
     writing and may be personally served or sent by fax transmission (with copy
     sent by regular, certified or registered mail or by overnight courier). For
     the  purposes  hereof,  the  address and fax number of the Holder is as set
     forth on the  first  page  hereof.  A  Conversion  Notice  shall be  deemed
     delivered  on (i) the business day it is received by facsimile or otherwise
     by the  Borrower  if such notice is  received  prior to 5:00 P.M.  New York
     time, or (ii) the immediately  succeeding business day if it is received by
     facsimile or  otherwise  after 5:00 P.M. New York time on a business day or
     at any time on a day  which is not a  business  day.  The  address  and fax
     number  of the  Borrower  shall be NCT  Group,  Inc.,  20  Ketchum  Street,
     Westport, CT 06880, attn: Chief Financial Officer, telecopier number: (203)
     226-4338,  with a copy by telecopier only to: General Counsel.  Both Holder
     and  Borrower  may change the address and fax number for service by service
     of notice to the other as herein  provided.  Notice of Conversion  shall be
     deemed  given  when  made  to the  Borrower  pursuant  to the  Subscription
     Agreement.

5.3  Amendment  Provision.  The term "Note" and all reference  thereto,  as used
     throughout  this  instrument,  shall  mean this  instrument  as  originally
     executed,  or if later  amended  or  supplemented,  then as so  amended  or
     supplemented.

                                       5
<PAGE>

5.4  Assignability.  This  Note  shall  be  binding  upon the  Borrower  and its
     successors  and  permitted  assigns,  and shall inure to the benefit of the
     Holder and its successors and assigns, and may be assigned by the Holder.

5.5  Cost  of  Collection.  If  default  is made in the  payment  of this  Note,
     Borrower  shall  pay the  Holder  hereof  reasonable  costs of  collection,
     including reasonable attorneys' fees.

5.6  Governing  Law.  This Note shall be governed by and construed in accordance
     with the laws of the State of New York.  Any action brought by either party
     against  the  other  concerning  the  transactions   contemplated  by  this
     Agreement  shall be brought  only in the state courts of New York or in the
     federal  courts  located in New York County in the State of New York.  Both
     parties and the individual signing this Agreement on behalf of the Borrower
     agree to submit to the  jurisdiction of such courts.  The prevailing  party
     shall be entitled to recover from the other party its reasonable attorneys'
     fees and costs.

5.7  Maximum Payments.  Nothing contained herein shall be deemed to establish or
     require the payment of a rate of interest or other charges in excess of the
     maximum permitted by applicable law. In the event that the rate of interest
     required to be paid or other charges hereunder exceed the maximum permitted
     by such law,  any  payments  in excess of such  maximum  shall be  credited
     against amounts owed by the Borrower to the Holder and thus refunded to the
     Borrower.

5.8  Prepayment.  This Note may not be paid prior to the Maturity  Date or after
     the occurrence of an Event of Default without the consent of the Holder.

     IN WITNESS WHEREOF,  Borrower has caused this Note to be signed in its name
by its duly authorized officer as of the 23rd day of July, 2004.

                                 NCT GROUP, INC.

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

                                       6
<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION

(To be executed by the Registered Holder in order to convert the Note)

     The  undersigned  hereby elects to convert  $_________ of the principal and
$_________ of the interest due on the Note issued by NCT GROUP, INC. on July 23,
2004 into Shares of Common Stock of NCT GROUP, INC.  according to the conditions
set forth in such Note, as of the date written below.

Date of Conversion:
                   -------------------------------------------------------------

Conversion Price:
                 ---------------------------------------------------------------

Shares To Be Delivered:
                       ---------------------------------------------------------

Signature:
          ----------------------------------------------------------------------

Print Name:
           ---------------------------------------------------------------------

Address:
        ------------------------------------------------------------------------

                                       7Exhibit 10(fb)

           THIS NOTE AND THE COMMON SHARES  ISSUABLE UPON CONVERSION OF
           THIS NOTE HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT
           OF  1933,  AS  AMENDED.  THIS  NOTE  AND THE  COMMON  SHARES
           ISSUABLE  UPON  CONVERSION  OF THIS  NOTE  MAY NOT BE  SOLD,
           OFFERED FOR SALE,  PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
           AN  EFFECTIVE  REGISTRATION  STATEMENT AS TO THIS NOTE UNDER
           SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
           NCT GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

                            SECURED CONVERTIBLE NOTE

     FOR  VALUE  RECEIVED,   NCT  GROUP,  INC.,  a  Delaware   corporation  (the
"Borrower"),  hereby promises to pay to LONGVIEW FUND LP, 600 Montgomery Street,
44th Floor,  San  Francisco,  CA 94111,  Fax:  (415)  981-5300 (the "Holder") or
order,  without demand, the sum of Five Hundred Thousand Dollars  ($500,000.00),
with  simple  interest  accruing at the annual rate of 8%, on July 23, 2006 (the
"Maturity Date").

     The following terms shall apply to this Note:

                                   ARTICLE 1
                           PAYMENT RELATED PROVISIONS

1.1. Payment Grace Period.  The Borrower  shall have a ten (10) day grace period
     to pay any monetary amounts due under this Note, after which grace period a
     default  interest  rate of eighteen  percent (18%) per annum shall apply to
     the amounts owed hereunder.

1.2. Conversion  Rights.  The  Conversion  Rights  set forth in  Article 2 shall
     remain in full force and effect  commencing  from the date hereof and until
     the Note is paid in full.

1.3. Interest Rate.  Subject to the Holder's right to convert,  interest payable
     on this Note shall  accrue at the annual rate of eight  percent (8%) and be
     payable on the Maturity Date, accelerated or otherwise,  when the principal
     and  accrued but unpaid  interest  shall be due and  payable,  or sooner as
     described below.

                                   ARTICLE 2
                                CONVERSION RIGHTS

     The  Holder  shall  have the right to  convert  the  principal  amount  and
interest due under this Note into Shares of the  Borrower's  Common Stock as set
forth below.

2.1. Conversion into the Borrower's Common Stock.

     (a)  The Holder shall have the right from and after the  Availability  Date
          (as defined in the Subscription  Agreement) and then at any time until
          this  Note is fully  paid,  to  convert  any  outstanding  and  unpaid
          principal portion of this Note, and/or at the Holder's  election,  the
          interest  accrued  on the Note (the  date of giving of such  notice of
          conversion   being  a   "Conversion   Date")   into   fully  paid  and
          nonassessable  shares of common stock of Borrower as such stock exists
          on the date of issuance of this Note,  or any shares of capital  stock
          of  Borrower  into  which  such stock  shall  hereafter  be changed or
          reclassified   (the  "Common  Stock")  at  the  conversion  price,  as
          described  in  Section   2.1(b)  hereof  (the

                                       1
<PAGE>

          "Conversion  Price"),  determined as provided herein. Upon delivery to
          the Borrower of a Notice of Conversion,  attached hereto as Exhibit A,
          as described in the  subscription  agreement  entered into between the
          Borrower  and  Holder   relating  to  this  Note  (the   "Subscription
          Agreement"),  all the terms of which are  incorporated  herein by this
          reference,  of the Holder's  written request for conversion,  Borrower
          shall issue and deliver to the Holder  within five (5)  business  days
          from the Conversion Date that number of shares of Common Stock for the
          portion of the Note converted in accordance with the foregoing. At the
          election of the Holder,  the Borrower will deliver  accrued but unpaid
          interest  on the Note  through  the  Conversion  Date  directly to the
          Holder on or before the Delivery Date (as defined in the  Subscription
          Agreement).  The  number of shares of Common  Stock to be issued  upon
          each  conversion  of this Note shall be  determined  by dividing  that
          portion of the principal (and interest, at the election of the Holder)
          of the Note to be converted, by the Conversion Price.

     (b)  Subject to  adjustment  as  provided  in Section  2.1(c)  hereof,  the
          Conversion  Price  shall be the lesser of (i) $0.0232  ("Maximum  Base
          Price"),  and (ii) 80% of the average of the closing bid prices of the
          Common Stock as reported by Bloomberg  L.P. for the OTC Bulletin Board
          for the five trading days preceding the Conversion Date.

     (c)  The  Maximum  Base  Price  and  number  and  kind of  shares  or other
          securities to be issued upon conversion shall be subject to adjustment
          from time to time upon the  happening  of  certain  events  while this
          conversion right remains outstanding, as follows:

          (i)  Merger,  Sale of Assets,  etc. If the  Borrower at any time shall
               consolidate  with  or  merge  into  or  sell  or  convey  all  or
               substantially all its assets to any other corporation, this Note,
               as to the unpaid  principal  portion thereof and accrued interest
               thereon,  shall  thereafter  be deemed to  evidence  the right to
               purchase such number and kind of shares or other  securities  and
               property as would have been issuable or  distributable on account
               of such consolidation,  merger, sale or conveyance,  upon or with
               respect to the  securities  subject to the conversion or purchase
               right immediately prior to such  consolidation,  merger,  sale or
               conveyance.  The foregoing  provision  shall  similarly  apply to
               successive transactions of a similar nature by any such successor
               or purchaser.  Without  limiting the generality of the foregoing,
               the anti-dilution  provisions of this Section shall apply to such
               securities  of  such  successor  or  purchaser   after  any  such
               consolidation, merger, sale or conveyance.

          (ii) Reclassification,  etc. If the  Borrower  at any time  shall,  by
               reclassification  or otherwise,  change the Common Stock into the
               same or a different number of securities of any class or classes,
               this Note, as to the unpaid principal portion thereof and accrued
               interest  thereon,  shall  thereafter  be deemed to evidence  the
               right to  purchase  such number and kind of  securities  as would
               have been  issuable as the result of such change with  respect to
               the Common Stock  immediately prior to such  reclassification  or
               other change.

          (iii)Stock  Splits,  Combinations  and  Dividends.  If the  shares  of
               Common Stock are subdivided or combined into a greater or smaller
               number of shares of Common Stock, or if a dividend is paid on the
               Common Stock in shares of Common Stock, the Conversion Base Price
               shall be proportionately reduced in case of subdivision of shares
               or stock  dividend or  proportionately  increased  in the case of
               combination  of shares,  in each such case by the ratio which the
               total  number of

                                       2
<PAGE>

               shares of Common Stock  outstanding  immediately after such event
               bears to the total number of shares of Common  Stock  outstanding
               immediately prior to such event.

          (iv) The  Conversion  Price and the  amount of shares of Common  Stock
               issuable  upon  conversion of this Note are subject to adjustment
               as described in the Subscription Agreement.

2.2      Whenever the  Conversion  Price is adjusted  pursuant to Section 2.1(c)
above,  the Borrower shall  promptly  provide notice to the Holder setting forth
the  Conversion  Price after such  adjustment and the amount of shares of Common
Stock issuable and setting forth a brief  statement of the facts  requiring such
adjustment.

2.3      Beginning from and after the  Availability  Date, and for the remaining
period during which the conversion  right under this Note exists,  Borrower will
reserve from its  authorized  and unissued  Common Stock a sufficient  number of
shares to provide for the issuance of Common Stock upon the full  conversion  of
this Note. Borrower represents that upon issuance,  such shares will be duly and
validly issued, fully paid and non-assessable. Borrower agrees that its issuance
of this Note  shall  constitute  full  authority  to its  officers,  agents  and
transfer  agents who are charged  with the duty of executing  and issuing  stock
certificates  to  execute  and issue the  necessary  certificates  for shares of
Common Stock upon the conversion of this Note.

2.4      Method of Conversion. This Note may be converted by the Holder in whole
or in part as described in Section 2.1(a) hereof and the Subscription Agreement.
Upon partial  conversion  of this Note,  if requested by the Holder,  a new Note
containing  the same date and  provisions  of this  Note  shall be issued by the
Borrower  to the Holder  for the  remaining  principal  balance of this Note and
interest which shall not have been converted or paid.

2.5      Maximum  Conversion.  The Holder  shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of shares
of Common  Stock which would be in excess of the sum of (i) the number of shares
of  Common  Stock  beneficially  owned by the  Holder  and its  affiliates  on a
Conversion Date, and (ii) the number of shares of Common Stock issuable upon the
conversion of the Note with respect to which the determination of this provision
is being made on a Conversion Date,  which would result in beneficial  ownership
by the Holder and its affiliates of more than 9.99% of the outstanding shares of
Common Stock of the Borrower on such  Conversion  Date.  For the purposes of the
provision to the immediately  preceding sentence,  beneficial ownership shall be
determined in accordance  with Section 13(d) of the  Securities  Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
Holder shall not be limited to aggregate conversions of only 9.99% and aggregate
conversion by the Holder may exceed  9.99%.  The Holder shall have the authority
and obligation to determine  whether the  restriction  contained in this Section
2.3 will  limit any  conversion  hereunder  and to the  extent  that the  Holder
determines  that  the  limitation   contained  in  this  Section  applies,   the
determination  of  which  portion  of the  Notes  are  convertible  shall be the
responsibility  and obligation of the Holder. The Holder may void the conversion
limitation  described in this Section 2.3 upon 61 days prior  written  notice to
the Borrower. The Holder may allocate which of the equity of the Borrower deemed
beneficially owned by the Holder shall be included in the 9.99% amount described
above and which shall be allocated to the excess above 9.99%.

                                       3
<PAGE>

                                   ARTICLE 3
                                EVENT OF DEFAULT

     The  occurrence  of any of the  following  events  of  default  ("Event  of
Default") shall, at the option of the Holder hereof,  make all sums of principal
and  interest  then  remaining  unpaid  hereon  and all  other  amounts  payable
hereunder  immediately  due and  payable,  all without  demand,  presentment  or
notice, or grace period, all of which hereby are expressly waived, except as set
forth below:

3.1. Failure  to Pay  Principal  or  Interest.  The  Borrower  fails  to pay any
     installment  of  principal  or interest  hereon  when due and such  failure
     continues  for a period of ten (10) days  after the due date.  The ten (10)
     day period  described  in this  Section 3.1 is the same ten (10) day period
     described in Section 1.1 hereof.

3.2. Breach of Covenant.  The Borrower  breaches any material  covenant or other
     term or condition of this Note in any material respect and such breach,  if
     subject to cure,  continues  for a period of seven (7) days  after  written
     notice to the Borrower from the Holder.

3.3. Breach of Representations  and Warranties.  Any material  representation or
     warranty of the Borrower made herein, in the Subscription Agreement entered
     into by the Holder and  Borrower in  connection  with this Note,  or in any
     agreement,  statement or certificate given in writing pursuant hereto or in
     connection therewith shall be false or misleading in any material respect.

3.4. Receiver or Trustee.  The Borrower shall make an assignment for the benefit
     of creditors,  or apply for or consent to the  appointment of a receiver or
     trustee for it or for a  substantial  part of its property or business;  or
     such a receiver or trustee shall otherwise be appointed.

3.5. Judgments.  Any money  judgment,  writ or similar  final  process  shall be
     entered or filed  against  Borrower or any of its  property or other assets
     for more than  $50,000,  and shall remain  unpaid,  unvacated,  unbonded or
     unstayed for a period of sixty (60) days.

3.6. Bankruptcy.   Bankruptcy,   insolvency,   reorganization   or   liquidation
     proceedings or other  proceedings or relief under any bankruptcy law or any
     law for the  relief  of  debtors  shall be  instituted  by or  against  the
     Borrower  and if  instituted  against  Borrower  are not  dismissed  within
     seventy-five (75) days of initiation.

3.7. Default.  A default  by the  Borrower,  after  applicable  notice  and cure
     periods,  under any one or more obligations in an aggregate monetary amount
     in excess of $100,000.

3.8. Stop  Trade.  A  Securities  and  Exchange  Commission  stop trade order or
     Principal  Market  (as  defined  in  the  Subscription  Agreement)  trading
     suspension with respect to the Common Stock that lasts for five (5) or more
     consecutive trading days.

3.9. Failure to Deliver Common Stock or Replacement Note.  Borrower's failure to
     timely  deliver  Common  Stock to the  Holder  pursuant  to and in the form
     required by this Note and Section 9 of the  Subscription  Agreement,  or if
     required, a replacement Note.

3.10.Non-Registration  Event.  The  occurrence  of a  Non-Registration  Event as
     described in Section 10.4 of the Subscription Agreement.

                                       4
<PAGE>

3.11.Cross  Default.  A  default  by  Borrower  of a  material  term,  covenant,
     warranty or undertaking of any other agreement to which Borrower and Holder
     are parties as of the date hereof, or the occurrence of a material event of
     default under any such other agreement.

3.12.Delisting.  Delisting of the Common  Stock from the OTC  Bulletin  Board or
     other  Principal  Market;  failure  to  comply  with the  requirements  for
     continued  listing  on the OTC  Bulletin  Board  for a period  of three (3)
     consecutive  trading days; or  notification  from the OTC Bulletin Board or
     any  Principal  Market  that the  Borrower  is not in  compliance  with the
     conditions  for such  continued  listing on the OTC Bulletin Board or other
     Principal  Market  and  the  Common  Stock  does  not at the  time  of such
     notification  comply with the  continued  listing  requirements  of the OTC
     Bulletin Board.

3.13.Security  Agreement.  An "Event of  Default"  as  defined  in the  Security
     Agreement  dated at or about the date of this Note delivered by Borrower to
     Holder (the "Security Agreement").

                                    ARTICLE 4
                                SECURITY INTEREST

4.   Security  Interest/Waiver  of  Automatic  Stay.  This Note is  secured by a
     security  interest  granted to the Collateral  Agent for the benefit of the
     Holder  pursuant to the  Security  Agreement,  as  delivered by Borrower to
     Holder.

                                    ARTICLE 5
                                  MISCELLANEOUS

5.1  Failure or Indulgence Not Waiver. No failure or delay on the part of Holder
     hereof in the  exercise of any power,  right or privilege  hereunder  shall
     operate as a waiver  thereof,  nor shall any single or partial  exercise of
     any such  power,  right or  privilege  preclude  other or further  exercise
     thereof or of any other right, power or privilege.  All rights and remedies
     existing  hereunder are  cumulative to, and not exclusive of, any rights or
     remedies otherwise available.

5.2  Notices.  Any notice  herein  required or permitted to be given shall be in
     writing and may be personally served or sent by fax transmission (with copy
     sent by regular, certified or registered mail or by overnight courier). For
     the  purposes  hereof,  the  address and fax number of the Holder is as set
     forth on the  first  page  hereof.  A  Conversion  Notice  shall be  deemed
     delivered  on (i) the business day it is received by facsimile or otherwise
     by the  Borrower  if such notice is  received  prior to 5:00 P.M.  New York
     time, or (ii) the immediately  succeeding business day if it is received by
     facsimile or  otherwise  after 5:00 P.M. New York time on a business day or
     at any time on a day  which is not a  business  day.  The  address  and fax
     number  of the  Borrower  shall be NCT  Group,  Inc.,  20  Ketchum  Street,
     Westport, CT 06880, attn: Chief Financial Officer, telecopier number: (203)
     226-4338,  with a copy by telecopier only to: General Counsel.  Both Holder
     and  Borrower  may change the address and fax number for service by service
     of notice to the other as herein  provided.  Notice of Conversion  shall be
     deemed  given  when  made  to the  Borrower  pursuant  to the  Subscription
     Agreement.

5.3  Amendment  Provision.  The term "Note" and all reference  thereto,  as used
     throughout  this  instrument,  shall  mean this  instrument  as  originally
     executed,  or if later  amended  or  supplemented,  then as so  amended  or
     supplemented.

                                       5
<PAGE>

5.4  Assignability.  This  Note  shall  be  binding  upon the  Borrower  and its
     successors  and  permitted  assigns,  and shall inure to the benefit of the
     Holder and its successors and assigns, and may be assigned by the Holder.

5.5  Cost  of  Collection.  If  default  is made in the  payment  of this  Note,
     Borrower  shall  pay the  Holder  hereof  reasonable  costs of  collection,
     including reasonable attorneys' fees.

5.6  Governing  Law.  This Note shall be governed by and construed in accordance
     with the laws of the State of New York.  Any action brought by either party
     against  the  other  concerning  the  transactions   contemplated  by  this
     Agreement  shall be brought  only in the state courts of New York or in the
     federal  courts  located in New York County in the State of New York.  Both
     parties and the individual signing this Agreement on behalf of the Borrower
     agree to submit to the  jurisdiction of such courts.  The prevailing  party
     shall be entitled to recover from the other party its reasonable attorneys'
     fees and costs.

5.7  Maximum Payments.  Nothing contained herein shall be deemed to establish or
     require the payment of a rate of interest or other charges in excess of the
     maximum permitted by applicable law. In the event that the rate of interest
     required to be paid or other charges hereunder exceed the maximum permitted
     by such law,  any  payments  in excess of such  maximum  shall be  credited
     against amounts owed by the Borrower to the Holder and thus refunded to the
     Borrower.

5.8  Prepayment.  This Note may not be paid prior to the Maturity  Date or after
     the occurrence of an Event of Default without the consent of the Holder.

     IN WITNESS WHEREOF,  Borrower has caused this Note to be signed in its name
by its duly authorized officer as of the 23rd day of July, 2004.

                                 NCT GROUP, INC.

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

                                       6
<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION

(To be executed by the Registered Holder in order to convert the Note)

     The  undersigned  hereby elects to convert  $_________ of the principal and
$_________ of the interest due on the Note issued by NCT GROUP, INC. on July 23,
2004 into Shares of Common Stock of NCT GROUP, INC.  according to the conditions
set forth in such Note, as of the date written below.

Date of Conversion:
                   -------------------------------------------------------------

Conversion Price:
                 ---------------------------------------------------------------

Shares To Be Delivered:
                       ---------------------------------------------------------

Signature:
          ----------------------------------------------------------------------

Print Name:
           ---------------------------------------------------------------------

Address:
        ------------------------------------------------------------------------

                                       7

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