NCT GROUP INC
<DOCUMENT>
<TYPE>EX-10.AR
<SEQUENCE>44
<FILENAME>exh-10ar.txt
<TEXT>
Exhibit 10(ar)

THE SECURITIES  REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
CONVERSION  HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.  THE SECURITIES  HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED  OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE  REGISTRATION  STATEMENT
FOR THE SECURITIES  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR AN OPINION
OF COUNSEL IN FORM,  SUBSTANCE AND SCOPE  REASONABLY  ACCEPTABLE TO THE BORROWER
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT. ANY SUCH SALE,  ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH
APPLICABLE STATE SECURITIES LAWS.


                            SECURED CONVERTIBLE NOTE

December 26, 2002                                                  $2,381,486.89


FOR VALUE RECEIVED, NCT GROUP, INC., a Delaware corporation  (hereinafter called
the  "Borrower")  hereby  promises  to pay to the  order of  Carole  Salkind  or
registered  assigns  (the  "Holder")  the  sum  of  Two  Million  Three  Hundred
Eighty-One  Thousand  Four  Hundred  Eighty-Six  Dollars and  Eighty-Nine  Cents
($2,381,486.89)  on  December  26,  2003,  and to  pay  interest  on the  unpaid
principal balance hereof at eight percent (8%) per annum (the "Ordinary Interest
Rate") from the date hereof (the "Issue  Date")  until the same  becomes due and
payable,  whether at maturity or upon  acceleration or otherwise.  Any amount of
principal  of or  interest  on this Note  which is not paid when due shall  bear
interest at the rate of five percent (5%) above the Ordinary  Interest Rate (the
"Default  Interest  Rate")  from the due date  thereof  until  the same is paid.
Interest  shall  commence  accruing  on the Issue  Date and,  to the  extent not
converted  in  accordance  with the  provisions  of Article  II below,  shall be
payable in arrears on the date the  principal  amount in respect of which it has
accrued is paid,  whether at maturity or upon  acceleration  or by prepayment or
otherwise.  All payments of principal  and interest (to the extent not converted
in accordance with the terms hereof) shall be made in lawful money of the United
States of  America.  All  payments  shall be made at such  address as the Holder
shall  hereafter give to the Borrower by written notice made in accordance  with
the provisions of this Note.

The following terms shall apply to this Note:

                                    ARTICLE I

                                  NO PREPAYMENT

     1.1  PREPAYMENT.  This  Note is not  subject  to  prepayment.  This Note is
subject to optional conversion in accordance with Section 2.7 below.

                                   ARTICLE II

         CONVERSION AND PURCHASE RIGHTS; PAYMENT OF EXERCISE PRICE

     2.1  CONVERSION  RIGHT.  The Holder  shall have the right (the  "Conversion
Right") at any time on or prior to the day this Note is paid in full, to convert
at any time all or from  time to time any  part of the  outstanding  and  unpaid
principal  amount of this Note of at least  $50,000,  or such  lesser  amount as
shall remain unpaid at the time of the conversion,  into, at Holder's  election,
(i) fully paid and  non-assessable  shares of common  stock,  par value $.01 per
share, of the Borrower ("Common  Stock"),  at the conversion price determined by
Section 2.2(a) hereof; (ii) if Artera Group International Limited ("Artera") has
made an initial public offering of its common stock,  par value  (pound)1.00 per
share, fully paid and non-assessable shares of such stock owned by the Borrower,
at a conversion  price equal to the initial public offering price of such stock;
(iii) if Distributed Media Corporation International Limited ("DMCI") has made a
public offering of its common stock, par value (pound)1.00 per share, fully paid
and non-assessable  shares of such stock owned by the Borrower,  at a conversion
price equal to the initial public offering price of such stock;  and (iv) if any
other subsidiary of the Borrower (other than Pro Tech Communications,  Inc.) has
made a public offering of its common stock, fully paid and non-assessable shares
of such stock owned by the Borrower,  at a conversion price equal to the initial
public  offering  price  of  such  stock.  Upon  the  surrender  of  this  Note,
accompanied  by a Notice of Conversion of Secured  Convertible  Note in the form
attached hereto as Exhibit 1, properly completed and duly executed by the Holder
(a "Conversion Notice"),  the Borrower shall issue and, within five (5) business
days after such surrender of this Note with the Conversion Notice, deliver to or
upon the order of the Holder (x) that  number of shares of common  stock for the
portion of the Note converted as shall be determined in accordance  herewith and
(y) a new  Note in the form  hereof  for the  balance  of the  principal  amount
hereof, if any.

     The number of shares of common stock to be issued upon each  conversion  of
this Note shall be determined by dividing (i) the sum of (A) that portion of the
principal  amount  of the Note to be  converted  plus (B) the  "Conversion  Date
Interest" (as defined below), by (ii) the Conversion Price (as defined below) in
effect on the date the  Conversion  Notice is  delivered  to the Borrower by the
Holder.  Conversion Date Interest means the product of (i) the principal  amount
of the Note to be converted,  multiplied by (ii) a fraction (A) the numerator of
which is the number of days elapsed  since the date of issuance of this Note and
(B) the  denominator of which is 365,  multiplied by the Ordinary  Interest Rate
(iii) or, a  fraction  (A) the  numerator  of which is the number of days in the
period  of  time  after  the  occurrence  of an  Event  of  Default  and (B) the
denominator of which is 365, multiplied by the Default Interest Rate.

     2.2 CONVERSION PRICE.

          (a) The per share "Conversion  Price" for conversion of this Note into
     the Borrower's Common Stock shall be $0.042; provided, however, that if, on
     the date hereof and the three  Trading Days (as defined  below)  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 such 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 at the  beginning of this Section  2.2(a),  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 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
     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 Borrower) 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 (the "1934 Act")).  The Conversion  Price shall also be
     subject  to  equitable  adjustments  for  stock  splits,  stock  dividends,
     combinations,  recapitalization,  reclassifications and similar events. The
     Artera and DMCI  "Conversion  Price"  shall be equal to the initial  public
     offering price of such stock and shall be subject to adjustment as provided
     in Section 2.2(b) hereof.

          (b) The  Conversion  Price  for NCT,  Artera  and DMCI  shall  also be
     subject  to  equitable  adjustments  for  stock  splits,  stock  dividends,
     combinations, reclassifications and similar events.

          (c) Borrower shall promptly  notify each Holder of any adjustment (and
     event that requires  adjustment) to the Conversion Price of NCT, Artera and
     DMCI pursuant to this Section 2.2.

     2.3 AUTHORIZED  SHARES.  The Borrower  covenants that during the period the
Conversion Right exists,  the Borrower will use its best efforts to 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.
The Borrower represents that upon issuance; such shares will be duly and validly
issued,  fully paid and  non-assessable.  The Borrower (i) acknowledges  that it
will  irrevocably  instruct its transfer  agent as soon as  practicable to issue
certificates for the Common Stock issuable upon conversion of this Note and (ii)
agrees that its  issuance of this Note shall  constitute  full  authority to its
officers  and  agents,  who  are  charged  with  the  duty  of  executing  stock
certificates,  to execute  and issue the  necessary  certificates  for shares of
Common Stock upon the  conversion  of this Note.  In the event that a sufficient
number of shares cannot be reserved,  Borrower agrees to use its best efforts to
call an annual  meeting of the Borrowers  shareholders  and seek approval for an
increase in the authorized  shares of the Borrowers  Common Stock to a number of
shares sufficient to provide for the full conversion of this Note.

     2.4 METHOD OF  CONVERSION.  Except as  otherwise  provided  in this Note or
agreed to by the Holder,  this Note may be  converted  by the Holder in whole at
any time or in part (provided such partial  conversion is at least $50,000) from
time to time by (i) submitting to the Borrower a Conversion Notice (by facsimile
dispatched on the  Conversion  Date and confirmed by U.S. mail or overnight mail
service sent within two Trading Days thereafter) and (ii) surrendering this Note
with the mailed confirmation of the Conversion Notice at the principal office of
the Borrower.  Upon partial exercise of the conversion rights provided hereby, a
new Note containing the same date and provisions as this Note shall be issued by
the  Borrower to the Holder for the  principal  balance of this Note which shall
not have been converted.  This Note has been issued by the Borrower  pursuant to
the exemption from  registration  provided either by Section 4.2 or Regulation D
under the Securities Act of 1933, as amended (the "Act").

     2.5  RESTRICTIONS  ON SHARES.  The  shares of common  stock  issuable  upon
conversion  of this Note may not be sold or  transferred  unless  (i) they first
shall have been registered  under the Act and applicable  state securities laws,
(ii) the Borrower shall have been furnished with an opinion of legal counsel (in
form, substance and scope reasonably  acceptable to Borrower) to the effect that
such sale or transfer is exempt from the registration requirements of the Act or
(iii) they are sold  pursuant to Rule 144 under the Act.  Each  certificate  for
shares of common stock issuable upon  conversion of this Note that have not been
so registered  and that have not been sold pursuant to an exemption that permits
removal of the legend,  shall bear a legend substantially in the following form,
as appropriate:

          THE  SECURITIES   REPRESENTED  BY  THIS   CERTIFICATE  HAVE  NOT  BEEN
          REGISTERED  UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED.   THE
          SECURITIES  HAVE BEEN  ACQUIRED  FOR  INVESTMENT  AND MAY NOT BE SOLD,
          TRANSFERRED  OR ASSIGNED IN THE ABSENCE OF AN  EFFECTIVE  REGISTRATION
          STATEMENT  FOR THE  SECURITIES  UNDER THE  SECURITIES  ACT OF 1933, AS
          AMENDED,  OR AN  OPINION  OF  COUNSEL  IN FORM,  SUBSTANCE  AND  SCOPE
          REASONABLY  ACCEPTABLE  TO  THE  BORROWER  THAT  REGISTRATION  IS  NOT
          REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
          ACT.  ANY SUCH SALE,  ASSIGNMENT  OR  TRANSFER  MUST ALSO  COMPLY WITH
          APPLICABLE STATE SECURITIES LAWS.

     Upon the request of a holder of a  certificate  representing  any shares of
common stock  issuable upon  conversion of this Note,  the Borrower shall remove
the  foregoing  legend  from  the  certificate  or  issue  to such  holder a new
certificate  therefor free of any transfer legend, if (i) with such request, the
Borrower  shall  have  received   either  an  opinion  of  counsel,   reasonably
satisfactory  to the Borrower in form,  substance and scope,  to the effect that
any such legend may be removed  from such  certificate,  or (ii) a  registration
statement under the Act covering such  securities is in effect.  Nothing in this
Note shall affect in any way the Holder's  obligations to comply with applicable
securities laws upon the resale of the securities referred to herein.

     Borrower agrees to use its best efforts to register with the Securities and
Exchange  Commission,  no later  than the end of the term of this  Note  (unless
legally  prohibited  from doing so), a number of shares of Common Stock equal to
the  principal  amount  of this  Note  outstanding  at the time of  registration
divided by the  Conversion  Price with  respect to  Borrower.  Such Common Stock
shall not be used, without permission from the Holder, for any other purposes.

     2.6 EFFECT OF MERGER,  CONSOLIDATION,  ETC. If at anytime when this Note is
issued and outstanding,  there shall be any merger,  consolidation,  exchange of
shares, recapitalization, reorganization, or other similar event, as a result of
which shares of Common Stock of the Borrower shall be changed into the same or a
different number of shares of another class or classes of stock or securities of
the Borrower or another  entity,  or in case of any sale or conveyance of all or
substantially  all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower, then the Holder of this Note shall
thereafter  have the right to receive  upon  conversion  of this Note,  upon the
bases and upon the  terms and  conditions  specified  herein  and in lieu of the
shares of Common Stock then issuable upon  conversion of this Note (assuming the
occurrence of the Amendments whether or not that has then occurred), such stock,
securities  or assets  which the Holder  would have been  entitled to receive in
such  transaction  had  this  Note  been  converted  immediately  prior  to such
transaction,  and in any such  case  appropriate  provisions  shall be made with
respect to the rights and  interests  of the Holder of this Note to the end that
the provisions hereof (including, without limitation,  provisions for adjustment
of the Conversion  Price and of the number of shares issuable upon conversion of
this Note) shall  thereafter be  applicable,  as nearly as may be practicable in
relation to any securities or assets  thereafter  deliverable  upon the exercise
hereof. The Borrower shall not effect any transaction  described in this Section
2.6 unless the  resulting  successor or acquiring  entity (if not the  Borrower)
assumes by written  instrument  the  obligations of this Section 2.6. The Holder
will have the right if a merger or consolidation  occurs to force the payment in
full of this note.

     2.7  OPTIONAL  CONVERSION.  So long as no Event of Default  (as  defined in
Article III below)  shall have  occurred  and be  continuing  the Holder has the
right to require the conversion of the note into stock.

                                   ARTICLE III

                                EVENTS OF DEFAULT

     If of any of the following  events of default (each, an "Event of Default")
shall occur:

     3.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower fails (i) to pay the
principal hereof when due, whether at maturity upon acceleration or otherwise or
(ii) to pay any installment of interest hereon when due and, in the case of this
clause (ii) only, such failure continues for a period of five (5) days after the
due date thereof;

     3.2  CONVERSION.  The Borrower fails to issue shares of common stock to the
Holder  upon  exercise by the Holder of the  conversion  rights of the Holder in
accordance  with the terms of this Note,  and any such  failure  shall  continue
uncured for five (5) business  days after the Borrower  shall have been notified
thereof in writing by the Holder;

     3.3 BREACH OF  COVENANT.  The Borrower  breaches  any material  covenant or
other  material  term or  condition  of this Note  (other  than as  specifically
provided in Sections 3.1 and 3.2 hereof), and such breach continues for a period
of ten (10) business days after written  notice thereof to the Borrower from the
Holder.

     3.4  BREACH  OF  REPRESENTATIONS  AND  WARRANTIES.  Any  representation  or
warranty  of  the  Borrower  made  herein  or in  any  agreement,  statement  or
certificate given in writing pursuant hereto or in connection  herewith shall be
false or  misleading  in any material  respect when made and the breach of which
would have a material  adverse  effect on the  Borrower or the  prospects of the
Borrower or a material  adverse effect on the Holder or the rights of the Holder
with respect to this Note or the shares of common stock issuable upon conversion
of this Note;

     3.5  RECEIVER OR TRUSTEE.  The Borrower or any  subsidiary  of 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;

     3.6 JUDGMENTS. Any money judgment, writ or similar process shall be entered
or filed  against the Borrower or any  subsidiary  of the Borrower or any of its
property or other assets for more than  $250,000,  and shall  remain  unvacated,
unbonded or unstayed for a period of twenty (20) days unless otherwise consented
to by the Holder; or

     3.7  BANKRUPTCY.  Bankruptcy,  insolvency,  reorganization  or  liquidation
proceedings or other  proceedings for relief under any bankruptcy law or any law
for the relief of debtors  shall be instituted by or against the Borrower or any
subsidiary of the Borrower.

     3.8 MATERIAL LOSS OR THEFT.  Material loss of theft,  substantial damage or
destruction or unauthorized  sale or encumbrance of any material  portion of the
Collateral  (as defined in Article IV hereof) in excess of  reasonably  expected
recoveries under insurance policies, or the making of any levy on, or seizure or
attachment  of or  entry  of a  judgment  against  a  material  portion  of  the
Collateral.

     3.9 REPORTS.  A material  omission or  misstatement  in any of the Debtor's
previously or hereafter filed reports  pursuant to the  requirements of the 1934
Act or the rules and regulations promulgated thereunder.

     Then,  upon the  occurrence  and  during the  continuation  of any Event of
Default specified in Sections 3.1, 3.2, 3.3, 3.4, 3.6, 3.8 or 3.9 hereof, at the
option of the Holder  hereof,  and upon the  occurrence  of any event of default
specified in Sections 3.5 or 3.7 hereof,  the Borrower  shall pay to the Holder,
in  satisfaction of its obligation to pay the  outstanding  principal  amount of
this Note and accrued and unpaid interest thereon, an amount equal to the sum of
(i) the  product  of (x) the then  outstanding  principal  amount  of this  Note
multiplied  by (y) 110% plus (ii)  accrued  and  unpaid  interest  on the unpaid
principal amount of this Note to the date of payment (the "Default  Amount") and
such Default Amount, together with all other ancillary amounts payable hereunder
shall  immediately  become due and payable,  all without demand,  presentment or
notice,  all of which  hereby are  expressly  waived,  together  with all costs,
including,  without limitation,  legal fees and expenses of collection,  and the
Holder shall be entitled to exercise all other rights and remedies  available at
law or in equity.

     If the Borrower  fails to pay the Default  Amount  within five (5) business
days of written  notice  that such  amount is due and  payable,  then the Holder
shall have the right at any time, so long as the Borrower remains in default, to
require the Borrower,  upon written notice,  to immediately issue (in accordance
with the terms of Article II hereof),  in lieu of the Default Amount, the number
of shares of Common Stock of the Borrower equal to the Default Amount divided by
the Conversion Price then in effect.

                                   ARTICLE IV

                                   COLLATERAL

     Borrower  hereby  grants to Holder a security  interest  in all  inventory,
machinery,  equipment,  stocks, bonds, notes, accounts receivable, any rights or
claims that they may have against any other  person,  firm, or  corporation  for
monies, choses in action, any bank accounts, checking accounts,  certificates of
deposit or any financial instrument, patents and intellectual property rights or
any  other  assets  owned  by  Borrower  as of the  date of this  agreement,  or
hereafter acquired.

     Borrower hereby represents that none of the collateral encumbered hereunder
has been sold or  assigned  since the  original  promissory  note of Borrower to
Holder  of  January  26,  1999 and that the lien of the  holder  of this note is
uninterrupted  from January 26, 1999 and shall  continue until this note is paid
or otherwise disposed of in accordance with its terms and conditions.

     All  collateral  rights in  intellectual  property is  subordinated  to the
Borrower's current licenses and future licenses  provided,  that with respect to
future  licenses,  the consent of the Holder must be obtained,  but such consent
will not be unreasonably  withheld.  The patents and intellectual property which
are licensed under the cross license  agreement dated September 27, 1997,  among
NXT plc, New Transducers Limited, being related companies,  the Borrower and NCT
Audio Products,  Inc. (or any successor  agreements) are  specifically  excluded
from the collateral.  There are approximately 20 pieces of intellectual property
in which,  under the cross license  agreement,  Borrower may not, and hence does
not herein, grant a security interest.  In addition,  all agreements between NCT
Audio  Products,  Inc. and the Borrower that relate to such  agreement,  and the
stock of NCT Audio  Products,  Inc.  owned by the Borrower,  shall  similarly be
excluded from the security interest granted in this Note.

     If Borrower does not pay the debt or other obligations under this Note when
due, the  collateral may be sold in order to pay such debt and  obligations,  or
same may be transferred  to the name of the Holder,  as Holder in her discretion
decides.  Holder may inspect the  collateral at all reasonable  times.  Borrower
further agrees that it will do anything reasonably  requested by Holder in order
to make Holder's security interest in the collateral legally effective including
the execution of a UCC-1.

                                    ARTICLE V

                                  MISCELLANEOUS

     5.1 FAILURE OR  INDULGENCY  NOT WAIVER.  No failure or delay on the part of
the Holder 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.  Notices,  demands and other  communications  given under this
Note 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 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.
c/o Sills, Cummis, Radin, Tishman,                   Rosen & Avigliano
    Epstein & Gross                                  431 Route 10 East
    One Riverfront Plaza                             Randolph, NJ  07689
    Newark NJ  07102
    Facsimile:  973-643-6500                         Facsimile:  973-361-1644


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

     5.3 AMENDMENT  PROVISION.  This Note and any  provision  hereof may only be
amended by an instrument in writing  signed by the Borrower and the Holder.  The
term "Note" and all references  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.

     5.4  ASSIGNABILITY.  This Note shall be binding  upon the  Borrower and its
successors  and  assigns and shall inure to be the benefit of the Holder and its
successors and assigns;  PROVIDED,  HOWEVER, that so long as no Event of Default
has occurred,  this Note shall only be transferable in whole or in increments of
$100,000 to "Accredited Investors" (as defined in Rule 501(a) under the Act).

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

     5.6  GOVERNING  LAW AND  JURISDICTION.  This Note 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 Note.

     5.7 DAMAGES SHARES.  The shares of Common Stock that may be issuable to the
Holder  pursuant to Article III hereof  ("Damages  Shares")  shall be treated as
Common Stock issuable upon  conversion of this Note for all purposes  hereof and
shall be subject to all of the limitations and afforded all of the rights of the
other shares of Common Stock  issuable  hereunder.  For purposes of  calculating
interest payable on the outstanding principal amount hereof, amounts convertible
into Damages  Shares  ("Damages  Amounts")  shall not bear  interest but must be
converted  prior to the conversion of any outstanding  principal  amount hereof,
until the outstanding  Damages Amount is zero. Damaged Shares can only be issued
after Borrower has received the written notice that the Holder wishes to receive
such shares.

     5.8  DENOMINATIONS.  At the request of the Holder,  upon  surrender of this
Note, the Borrower  shall promptly issue new Notes in the aggregate  outstanding
principal amount hereof, in the form hereof,  in such  denominations of at least
$50,000 as the Holder shall request.

     IN WITNESS WHEREOF,  Borrower has caused this Note to be signed in its name
by its duly authorized officer as of the date first written above.


                  NCT GROUP, INC.


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



<PAGE>


                                                                    EXHIBIT 1


                NOTICE OF CONVERSION OF SECURED CONVERTIBLE NOTE

TO:  NCT Group, Inc.

     (1) Pursuant to the terms of the  attached  Secured  Convertible  Note (the
"Note"),  the undersigned hereby elects to convert $________ principal amount of
the Note into shares of common stock of:

           NCT Group, Inc., a Delaware corporation
-------

           Distributed Media Corporation International Limited, a UK corporation
-------

            Artera Group International Limited, a UK corporation
-------

           Other public subsidiary (identify:------------------------ )1
-------

Capitalized  terms  used  herein  and not  otherwise  defined  herein  have  the
respective meanings provided in the Note.

     (2) Please issue a certificate or certificates  for the number of shares of
common stock into which such principal  amount of the Note is convertible in the
name(s) specified immediately below or, if additional space is necessary,  on an
attachment hereto:

Name:  Carole Salkind                       Name:
       ------------------------                    -----------------------------

Address:                                    Address:

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

SS or Tax ID Number:                        SS or Tax ID Number:

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

     (3) In the event of partial  exercise,  please reissue an appropriate  Note
for the principal balance which shall not have been converted.

     (4) If the shares of common stock issuable upon conversion of the Note have
not been  registered  under the  Securities Act of 1933, as amended (the "Act"),
the undersigned represents and warrants that (i) such shares of common stock are
being acquired for the account of the undersigned for investment, and not with a
present view to, or for resale in connection with, the distribution thereof, and
that the undersigned has no present  intention of distributing or reselling such
securities,  in each case, other than pursuant to a registration statement under
the Act and (ii) the  undersigned  is an  "Accredited  Investor"  as  defined in
Regulation  D under  the  Act.  The  undersigned  further  agrees  that (A) such
securities  shall not be sold or transferred  unless either (i) they first shall
have been registered  under the Act and applicable state securities laws or (ii)
the Borrower first shall have been furnished with either (x) an opinion of legal
counsel (in form,  substance and scope  reasonably  satisfactory to Borrower) to
the  effect  that  such  sale  or  transfer  is  exempt  from  the  registration
requirements of the Act or (y) satisfactory representations from the undersigned
that the undersigned may immediately  sell all of such securities (to the extent
such  securities  are deemed to have been acquired on the same date) pursuant to
Rule 144 under the Act (or a successor thereto) and (B) the Borrower may place a
legend on the certificate(s) for such securities to that effect and place a stop
transfer restriction in its records relating to such securities.


Date
    -------------------------


                           -----------------------------------------------------
                           Signature of Registered Holder
                           (must  be  signed  exactly  as  name  appears  in the
                           Note.  The  signature  must be guaranteed by a member
                           firm of the New York Stock  Exchange or the  National
                           Association   of   Securities   Dealers   or   by   a
                           commercial  bank or trust  having  an  office  in the
                           United States)


    -------------------------
1 May not be Pro Tech Communications, Inc.


</TEXT>
</DOCUMENT>
