CSG Inc. (fka CYSG)

[seeclear]

CYSG ...Important... Accordingly, we have received a total of $2,250,000 pursuant to the
Securities Purchase Agreement. The funds from the sale of the secured
convertible notes will be used for business development purposes, working
capital needs, pre-payment of interest, payment of consulting and legal fees and
short-term borrowing repayment.

50% of the secured convertible notes bear interest at 10%, mature two
years from the date of issuance, and are convertible into our common stock, at
the investors' option, at the lower of (i) $0.30 or (ii) 60% of the average of
the three lowest intraday trading prices for the common stock on a principal
market for the 20 trading days before but not including the conversion date. The
other 50% of the secured convertible notes bear interest at 10%, mature two
years from the date of issuance, and are convertible into our common stock, at
the investors' option, at the lower of (i) $0.30 or (ii) 55% of the average of
the three lowest intraday trading prices for the common stock on a principal
market for the 20 trading days before but not including the conversion date. The
full principal amount of the secured convertible notes is due upon default under
the terms of secured convertible notes.---->***** The warrants are exercisable until five
years from the date of issuance at a purchase price of $0.11 per share.*****<----- In
addition, we have granted the investors a security interest in substantially all
of our assets and intellectual property and registration rights.

Since the conversion price will be less than the market price of the
common stock at the time the secured convertible notes are issued, we anticipate
recognizing a charge relating to the beneficial conversion feature of the
secured convertible notes during the quarter in which they are issued, including
the third quarter of fiscal 2004 when 2, 250,000 of secured convertible notes
were issued.

(vii) In connection with the sale of the convertible notes and warrants as
described above, we and MidMark have entered into an *******Investment Restructuring
Agreement on May 26, 2004****** whereby:

1. All warrants held by MidMark for the purchase of our common stock have
been exercised by applying the $281,287 owed by us to MidMark under the Grid
Note at March 31, 2004, as described above, in complete satisfaction of the
exercise price for such warrants, resulting in the issuance of 5,569,980 shares
of our common stock to MidMark.

2. The warrants held by MidMark for 60,000 shares of XeQute Solutions, PLC
have been converted into a warrant for 240,000 shares of our common stock,
exercisable at $0.01 per share, which has been exercised by reducing the amount
of indebtedness owed by us to MidMark in the amount of $2,400 resulting in the
issuance of 240,000 shares to MidMark.

3. In connection with this transaction, we will exchange 997 shares of
class C preferred stock held by MidMark for class C-1 convertible preferred
stock on a 1:1 basis whereby the class C-1 preferred stock provides conversion
rights at least as favorable as the conversion rights under the secured
convertible notes.

4. We authorized a class of convertible preferred shares (class D)
providing for a liquidation preference equal to the amount paid for such shares
together with a 10% per annum return and conversion rights on the same terms as
the conversion rights under the secured convertible notes. We will issue
approximately 7,391 shares of class D convertible preferred stock to MidMark
eliminating the rest of the indebtedness owed by us to MidMark.

5. We and MidMark entered into a Redemption Agreement providing for the
redemption of such class D preferred stock which may be redeemed for payment of
an amount equal to $504,713; which redemption shall occur upon the earlier of
(x) December 31, 2004, or (y) the receipt by us of a tax refund, which refund is
expected in the third quarter of fiscal year 2004.

6. We granted registration rights to MidMark with respect to any
unregistered shares of our common stock
SC..This would free CYSG of any future dilution as the warrants and convertibles have expired May 26th 2009...SC.