NCT GROUP INC
FUNDS ESCROW AGREEMENT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>16
<FILENAME>exh-10g.txt
<DESCRIPTION>FUNDS ESCROW AGREEMENT
<TEXT>
Exhibit 10(g)


                             FUNDS ESCROW AGREEMENT


     This Agreement is dated as of the 11th day of March,  2002 among NCT Group,
Inc., a Delaware corporation (the "Company"),  Alpha Capital  Aktiengesellschaft
("Subscriber"), and Grushko & Mittman, P.C. (the "Escrow Agent"):

                              W I T N E S S E T H:
                               - - - - - - - - - -

     WHEREAS,  the Company  and  Subscriber  have  entered  into a  Subscription
Agreement ("Subscription  Agreement") calling for the sale by the Company to the
Subscriber of Convertible  Notes ("Notes") in the aggregate  principal amount of
$400,000; and

     WHEREAS,  the  parties  hereto  require  the  Company to deliver  the Notes
against  payment  therefor,  with such Notes and payment to be  delivered to the
Escrow Agent to be held in escrow and released by the Escrow Agent in accordance
with the terms and conditions of this Agreement; and

     WHEREAS,  the Escrow Agent is willing to serve as escrow agent  pursuant to
the terms and conditions of this Agreement;

     NOW THEREFORE, the parties agree as follows:

                                    ARTICLE I

                                 INTERPRETATION

     1.1.  Definitions.  Whenever used in this  Agreement,  the following  terms
shall have the following respective meanings:

          (a)  "Agreement"  means this Agreement and all amendments  made hereto
     and thereto by written agreement between the parties;

          (b) "Escrowed Payment" means the sum of $400,000 which is the Purchase
     Price, as defined in the Subscription Agreement.

          (c)  "Finder's  Fees" means the Finder's Fees to be paid to the Finder
     as described in Section 6 of the Subscription Agreement.

          (d) "Legal Opinion" means the original  signed legal opinion  referred
     to in Section 3 of the Subscription Agreement.

          (e) "8% Convertible  Notes" shall mean the 8% Convertible Notes of the
     Company as defined in the Subscription Agreement.

          (f)  "Subscription  Agreement" means the Subscription  Agreement to be
     entered  into by the  parties in  reference  to the Notes and the  exhibits
     thereto.

          (g) Collectively,  the executed Subscription Agreement,  Finder's Fee,
     Legal Opinion, and Notes are referred to as "Company Documents."

          (h) Collectively,  the Escrowed Payment and Subscription Agreement are
     referred to as "Subscriber Documents."

     1.2. Entire  Agreement.  This Agreement  constitutes  the entire  agreement
between the parties hereto pertaining to the escrow of the Company Documents and
Subscriber  Documents  and  supersedes  all  prior  agreements,  understandings,
negotiations  and  discussions,  whether  oral or written,  of the parties  with
respect thereto.  There are no warranties,  representations and other agreements
made by the parties in  connection  with the  subject  matter  hereof  except as
specifically set forth in this Agreement.

     1.3.  Extended  Meanings.  In this Agreement  words  importing the singular
number include the plural and vice versa;  words importing the masculine  gender
include  the  feminine  and  neuter  genders.  The  word  "person"  includes  an
individual,  body  corporate,  partnership,  trustee or trust or  unincorporated
association, executor, administrator or legal representative.

     1.4.  Waivers and  Amendments.  This  Agreement  may be amended,  modified,
superseded,  cancelled, renewed or extended, and the terms and conditions hereof
may be waived,  only by a written  instrument signed by all parties,  or, in the
case of a waiver,  by the party waiving  compliance.  Except as expressly stated
herein,  no delay on the part of any party in  exercising  any  right,  power or
privilege  hereunder shall operate as a waiver thereof,  nor shall any waiver on
the part of any party of any right,  power or privilege  hereunder  preclude any
other or future exercise of any other right, power or privilege hereunder.

     1.5.  Headings.  The division of this Agreement  into  articles,  sections,
subsections  and  paragraphs  --------  and the  insertion  of headings  are for
convenience  of  reference  only  and  shall  not  affect  the  construction  or
interpretation of this Agreement.

     1.6. Law Governing this Agreement.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws.  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
the state of New York. Both parties and the individuals executing this Agreement
and  other  agreements  on  behalf  of  the  Company  agree  to  submit  to  the
jurisdiction of such courts and waive trial by jury. The prevailing party (which
shall be the party which receives an award most closely resembling the remedy or
action  sought) shall be entitled to recover from the other party its reasonable
attorney's  fees and costs. In the event that any provision of this Agreement or
any other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative  to the extent that it may  conflict  therewith  and shall be deemed
modified to conform with such statute or rule of law. Any such  provision  which
may prove invalid or  unenforceable  under any law shall not affect the validity
or enforceability of any other provision of any agreement.

     1.7.  Specific  Enforcement,  Consent  to  Jurisdiction.  The  Company  and
Subscriber  acknowledge  and agree that  irreparable  damage  would occur in the
event  that  any of the  provisions  of this  Agreement  were not  performed  in
accordance  with  their  specific  terms  or  were  otherwise  breached.  It  is
accordingly  agreed  that the  parties  shall be  entitled  to an  injuction  or
injunctions  to prevent or cure breaches of the provisions of this Agreement and
to enforce  specifically the terms and provisions hereof or thereof,  this being
in addition  to any other  remedy to which any of them may be entitled by law or
equity. Subject to Section 1.6 hereof, each of the Company and Subscriber hereby
waives,  and agrees not to assert in any such suit,  action or  proceeding,  any
claim that it is not personally  subject to the jurisdiction of such court, that
the suit,  action or proceeding is brought in an inconvenient  forum or that the
venue of the suit,  action or  proceeding  is improper.  Nothing in this Section
shall affect or limit any right to serve  process in any other manner  permitted
by law.

     1.8.  Fees.  The  Company  shall  pay the  Subscriber's  attorney  the fees
described  in  Section 6 of the  Subscription  Agreement.  These  fees  shall be
payable by deduction from the cash portion of the Escrowed Payment,  but only if
the  corresponding  balance of the cash portion of the Escrowed Payment is to be
released to or on behalf of the Company pursuant to this Agreement.

                                   ARTICLE II

                         DELIVERIES TO THE ESCROW AGENT

     2.1.  Delivery of Company  Documents to Escrow Agent.  On or about the date
hereof, the Company shall deliver to the Escrow Agent the Company Documents.

     2.2 Delivery of Subscriber  Documents to Escrow Agent. On or about the date
hereof,  the  Subscriber  shall  deliver  to the  Escrow  Agent  the  Subscriber
Documents. The Escrowed Payment will be delivered pursuant to the following wire
transfer instructions:

                                 Citibank, N.A.
                             ABA Number: 0210-00089
              For Credit to: Grushko & Mittman, IOLA Trust Account
                            Account Number: 45208884

     2.3.  Intention to Create  Escrow Over  Company  Documents  and  Subscriber
Documents.  The  Subscriber  and Company  intend that the Company  Documents and
Subscriber  Documents  shall be held in escrow by the Escrow  Agent  pursuant to
this Agreement for their benefit as set forth herein.

     2.4.  Escrow Agent to Deliver Company  Documents and Subscriber  Documents.
The Escrow  Agent shall hold and release the Company  Documents  and  Subscriber
Documents only in accordance with the terms and conditions of this Agreement.

                                   ARTICLE III

              RELEASE OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS

     3.1.  Release of Escrow.  Subject to the  provisions  of Section  4.2,  the
Escrow Agent shall  release the Company  Documents and  Subscriber  Documents as
follows:

          (a) Upon receipt by the Escrow Agent of the Company  Documents and the
     corresponding  Subscriber  Documents,  the Escrow Agent will simultaneously
     release  the  Company   Documents  to  the   Subscriber   and  release  the
     corresponding  Subscriber  Documents  to the  Company  except  that (i) the
     Finder's  Fees will be delivered to the Finder,  (ii) the fee  described in
     Section 1.8 above will be released to the Subscriber's attorneys, and (iii)
     the Security  Agreement and Collateral  Agent Agreement will be released to
     the Collateral  Agent. At the request of the Escrow Agent, the Company will
     provide written  facsimile or original  instructions to the Escrow Agent as
     to the disposition of all funds releasable to the Company.

          (b) In the event the Escrow Agent does not receive  Company  Documents
     and the  corresponding  Subscriber  Documents prior to April 26, 2002, then
     the Escrow Agent will promptly return the Company Documents to the Company,
     and promptly return the Subscriber Documents to the Subscriber.

          (c) Upon  receipt by the Escrow  Agent of joint  written  instructions
     ("Joint  Instructions") signed by the Company and the Subscriber,  it shall
     deliver the Company  Documents and Subscriber  Documents in accordance with
     the terms of the Joint Instructions.

          (d) Upon  receipt  by the Escrow  Agent of a final and  non-appealable
     judgment,  order,  decree or award of a court of competent  jurisdiction (a
     "Court  Order"),  the Escrow Agent shall deliver the Company  Documents and
     Subscriber  Documents in accordance  with the Court Order.  Any Court Order
     shall be accompanied by an opinion of counsel for the party  presenting the
     Court Order to the Escrow Agent (which opinion shall be satisfactory to the
     Escrow  Agent) to the effect  that the court  issuing  the Court  Order has
     competent   jurisdiction   and  that   the   Court   Order  is  final   and
     non-appealable.

     3.2.  Acknowledgement of Company and Subscriber;  Disputes. The Company and
the Subscriber  acknowledge  that the only terms and  conditions  upon which the
Company  Documents and Subscriber  Documents are to be released are set forth in
Sections 3 and 4 of this  Agreement.  The  Company and the  Subscriber  reaffirm
their  agreement to abide by the terms and  conditions  of this  Agreement  with
respect to the release of the Company  Documents and Subscriber  Documents.  Any
dispute  with  respect to the release of the Company  Documents  and  Subscriber
Documents shall be resolved  pursuant to Section 4.2 or by agreement between the
Company and Subscriber.

                                   ARTICLE IV

                           CONCERNING THE ESCROW AGENT

     4.1. Duties and  Responsibilities  of the Escrow Agent.  The Escrow Agent's
duties  and  responsibilities  shall  be  subject  to the  following  terms  and
conditions:

          (a) The Subscriber and Company  acknowledge  and agree that the Escrow
     Agent  (i)  shall  not be  responsible  for or bound  by,  and shall not be
     required  to  inquire  into  whether  either the  Subscriber  or Company is
     entitled  to receipt of the  Company  Documents  and  Subscriber  Documents
     pursuant to, any other agreement or otherwise; (ii) shall be obligated only
     for the  performance  of such  duties as are  specifically  assumed  by the
     Escrow  Agent  pursuant to this  Agreement;  (iii) may rely on and shall be
     protected  in acting or  refraining  from acting  upon any written  notice,
     instruction,  instrument,  statement,  request or document  furnished to it
     hereunder  and believed by the Escrow Agent in good faith to be genuine and
     to have been signed or  presented  by the proper  person or party,  without
     being  required to determine the  authenticity  or  correctness of any fact
     stated  therein or the propriety or validity or the service  thereof;  (iv)
     may assume that any person  purporting to give notice or make any statement
     or execute any document in connection  with the provisions  hereof has been
     duly  authorized  to do so;  (v)  shall  not be under  any duty to give the
     property  held by Escrow Agent  hereunder  any greater  degree of care than
     Escrow Agent gives its own similar  property;  and (vi) may consult counsel
     satisfactory  to Escrow  Agent,  the opinion of such counsel to be full and
     complete  authorization  and  protection  in respect  of any action  taken,
     suffered  or  omitted  by  Escrow  Agent  hereunder  in good  faith  and in
     accordance with the opinion of such counsel.

          (b) The  Subscriber and Company  acknowledge  that the Escrow Agent is
     acting solely as a  stakeholder  at their request and that the Escrow Agent
     shall not be liable for any action  taken by Escrow Agent in good faith and
     believed by Escrow  Agent to be  authorized  or within the rights or powers
     conferred upon Escrow Agent by this Agreement.  The Subscriber and Company,
     jointly and  severally,  agree to  indemnify  and hold  harmless the Escrow
     Agent  and  any  of  Escrow  Agent's   partners,   employees,   agents  and
     representatives for any action taken or omitted to be taken by Escrow Agent
     or any of them  hereunder,  including the fees of outside counsel and other
     costs and expenses of defending itself against any claim or liability under
     this  Agreement,  except  in  the  case  of  gross  negligence  or  willful
     misconduct on Escrow Agent's part committed in its capacity as Escrow Agent
     under  this  Agreement.  The  Escrow  Agent  shall  owe a duty  only to the
     Subscriber and Company under this Agreement and to no other person.

          (c)  The  Subscriber  and  Company  jointly  and  severally  agree  to
     reimburse  the  Escrow  Agent  for its  reasonable  out-of-pocket  expenses
     (including  outside  counsel  fees,  to the  extent  authorized  hereunder)
     incurred   in   connection   with  the   performance   of  its  duties  and
     responsibilities hereunder.

          (d) The Escrow Agent may at any time resign as Escrow Agent  hereunder
     by  giving  five  (5) days  prior  written  notice  of  resignation  to the
     Subscriber and the Company.  Prior to the effective date of the resignation
     as specified in such notice,  the  Subscriber and Company will issue to the
     Escrow  Agent a  Joint  Instruction  authorizing  delivery  of the  Company
     Documents and Subscriber Documents to a substitute Escrow Agent selected by
     the  Subscriber and Company.  If no successor  Escrow Agent is named by the
     Subscriber and Company,  the Escrow Agent may apply to a court of competent
     jurisdiction in the State of New York for appointment of a successor Escrow
     Agent, and to deposit the Company  Documents and Subscriber  Documents with
     the clerk of any such court.

          (e) The Escrow  Agent does not have and will not have any  interest in
     the Company  Documents  and  Subscriber  Documents,  but is serving only as
     escrow agent, having only possession thereof. The Escrow Agent shall not be
     liable  for  any  loss  resulting  from  the  making  or  retention  of any
     investment in accordance with this Escrow Agreement.

          (f) This  Agreement  sets forth  exclusively  the duties of the Escrow
     Agent with respect to any and all matters  pertinent thereto and no implied
     duties or obligations shall be read into this Agreement.

          (g) The Escrow  Agent  shall be  permitted  to act as counsel  for the
     Subscriber  or the  Company,  as the case may be, in any  dispute as to the
     disposition of the Company Documents and Subscriber Documents, in any other
     dispute between the Subscriber and Company, whether or not the Escrow Agent
     is  then  holding  the  Company  Documents  and  Subscriber  Documents  and
     continues to act as the Escrow Agent hereunder.

          (h) The  provisions of this Section 4.1 shall survive the  resignation
     of the Escrow Agent or the termination of this Agreement.

     4.2. Dispute  Resolution:  Judgments.  Resolution of disputes arising under
this Agreement shall be subject to the following terms and conditions:

          (a)  If  any  dispute  shall  arise  with  respect  to  the  delivery,
     ownership,  right of possession or disposition of the Company Documents and
     Subscriber  Documents,  or if the  Escrow  Agent  shall  in good  faith  be
     uncertain as to its duties or rights  hereunder,  the Escrow Agent shall be
     authorized,  without  liability  to anyone,  to (i) refrain from taking any
     action other than to continue to hold the Company  Documents and Subscriber
     Documents  pending receipt of a Joint  Instruction  from the Subscriber and
     Company,  or (ii) deposit the Company  Documents and  Subscriber  Documents
     with any court of competent jurisdiction in the State of New York, in which
     event the Escrow Agent shall give written  notice thereof to the Subscriber
     and the Company and shall  thereupon  be relieved and  discharged  from all
     further obligations  pursuant to this Agreement.  The Escrow Agent may, but
     shall be under no duty to, institute or defend any legal  proceedings which
     relate to the Company Documents and Subscriber Documents.  The Escrow Agent
     shall  have the right to  retain  counsel  if it  becomes  involved  in any
     disagreement,  dispute  or  litigation  on  account  of this  Agreement  or
     otherwise determines that it is necessary to consult counsel.

          (b) The Escrow Agent is hereby expressly authorized to comply with and
     obey any Court  Order.  In case the Escrow  Agent obeys or complies  with a
     Court  Order,  the Escrow Agent shall not be liable to the  Subscriber  and
     Company or to any other person,  firm,  corporation  or entity by reason of
     such compliance.

                                    ARTICLE V

                                 GENERAL MATTERS

     5.1.  Termination.  This escrow shall  terminate upon the release of all of
the Company Documents and Subscriber Documents or at any time upon the agreement
in writing of the Subscriber and Company.

     5.2.  Notices.  All  notices,  request,  demands  and other  communications
required or permitted  hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by telecopy (with copy delivered by
overnight courier, regular or certified mail):

(a)      If to the Company, to:

                           NCT Group, Inc.
                           20 Ketchum Street
                           Westport, CT 06880
                           Attn: Chief Financial Officer
                           (203) 226-4338 (Telecopier)

         With a copy to:

                           General Counsel


(b)      If to the Subscriber, to:

                           Alpha Capital Aktiengesellschaft
                           a Lichtenstein corporation
                           Pradafant 7
                           9490 Furstentums
                           Vaduz, Lichtenstein
                           011-423-232-3196 (Telecopier)

(c)      If to the Escrow Agent, to:

                           Grushko & Mittman, P.C.
                           551 Fifth Avenue, Suite 1601
                           New York, New York 10176
                           (212) 697-3575 (Telecopier)

or to such other address as any of them shall give to the others by notice made
pursuant to this Section 5.2.

     5.3.  Interest.  The  Escrowed  Payment  shall  not be held in an  interest
bearing account nor will interest be payable in connection therewith.

     5.4. Assignment; Binding Agreement. Neither this Agreement nor any right or
obligation  hereunder shall be assignable by any party without the prior written
consent of the other parties  hereto.  This Agreement shall enure to the benefit
of  and  be  binding  upon  the  parties  hereto  and  their   respective  legal
representatives, successors and assigns.

     5.5.  Invalidity.  In the  event  that  any one or  more of the  provisions
contained  herein,  or the  application  thereof  in any  circumstance,  is held
invalid,  illegal, or unenforceable in any respect for any reason, the validity,
legality and  enforceability of any such provision in every other respect and of
the  remaining  provisions  contained  herein  shall not be in any way  impaired
thereby,  it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.

     5.6.  Counterparts/Execution.  This Agreement may be executed in any number
of counterparts and by different  signatories  hereto on separate  counterparts,
each of which,  when so  executed,  shall be deemed  an  original,  but all such
counterparts  shall constitute but one and the same  instrument.  This Agreement
may be executed by facsimile transmission.

     5.7.  Agreement.  Each  of the  undersigned  states  that he has  read  the
foregoing Funds Escrow Agreement and understands and agrees to it.

                                  NCT GROUP, INC.
                                  the "Company"


                                  By:___________________________________



                                  _______________________________________
                                  ALPHA CAPITAL AKTIENGESELLSCHAFT
                                  - "Subscriber"


                                  ESCROW AGENT:


                                  ________________________________________
                                  GRUSHKO & MITTMAN, P.C.

</TEXT>
</DOCUMENT>
