Upgrade International Corp. Announces Merger Agreement with The Pathways Group, Inc.

Business Editors

SEATTLE--(BUSINESS WIRE)--Sept. 14, 2000

Upgrade International Corporation (OTCBB:UPGD) announced today that it has entered into a definitive merger agreement to acquire ownership of The Pathways Group, Inc. (Nasdaq:PTHW).

The merger agreement provides for the shareholders of The Pathways Group, Inc. to exchange 14.3 Pathways shares for one Upgrade International Corp. share of common stock. The merger is subject to regulatory approval, approval by the Pathways shareholders and satisfaction of certain conditions.

The Pathways Group Inc was founded in 1993 as a successor to Pathways International Ltd., which, in turn was established in 1988. Headed by Carey F. Daly II, President and CEO, The Pathways Group Inc and its subsidiaries design, market and service unique solutions for creating and processing data and ensuring secure electronic transactions by utilising proprietary hardware and application software systems. Pathways provides "turn key" solutions in the smart card arena as a full service hardware integrator, software developer and backroom transactions processor. Pathways systems accommodate credit and debit payment methods, electronic benefit transfer, electronic funds transfer and smart card systems utilising its three-state infrastructure (California, Washington, and Hawaii) of processing centres on a 24by7 basis.

Upon entering into the merger agreement, Mr. Daniel Bland, President of Upgrade International said the following: "Today marks the beginning of the transformation of Upgrade from research and development to a revenue generating group of companies, for the first time since 1998, when we acquired a stake in UltraCard Inc. With Pathways expecting almost US$15 million in revenue over the next 5 months, and expecting more than US$30 million in revenue in 2001, I believe the Pathways acquisition opens up new horizons for all of our subsidiaries, which are now getting ready for rapid market penetration. I am delighted that we are able to welcome Carey Daly and his experts to our group."

Carey Daly, President and CEO of The Pathways Group, Inc. (PTHW) made the following statement: "We decided to embrace Upgrade and the UltraCard technology, because we expect it to replace other microprocessor-based technologies, that have been the carriers of our e-banking and e-commerce applications in the past. We will now be able to deliver a suite of products and services to our clients based on the cost-competitive, state-of-the-art and extensively tested UltraCard platform. Clients such as US West, Western Wireless (VoiceStream), Nordstrom, MyChoice Health Services, of Portland, Oregon, the Deer Valley Resort in Utah, host of the 2002 Winter Olympics, Six Flags, one of the largest amusement parks in North America, the Hawaii Millennium Commission, SeaWorld in San Antonio, and others, stand to enjoy substantial benefits from the integration of our products. Furthermore, in the recent past we acquired an IIN number which allows us to clear transactions using the network of the Association of Credit Card clearers, namely VISA, MASTERCARD, etc. In this area, we have also concluded an agreement with First Data Resources enabling us use their payment network. Effectively, we can now process and clear transactions globally."

Dan Kehoe, President of UltraCard Inc. confirmed that "some of the applications developed and implemented by Pathways reduce the time required for market entry of various UltraCard products. I have no doubt that the Pathways products are likely to penetrate the market more successfully based on the UltraCard platform."

Additional Information on The Pathways Group Inc.

Pathways' products are configurable for diverse communications and security protocols associated with Debit, ATM, Credit and Smart Card transactions. Pathways' products are flexible and technologically capable of performing on-line, off-line or a combination of data and transaction processing.

Automated Card Recharge: a challenge facing many smart card system operators, developers, integrators, issuers and processors is the recharging of smart cards. The lack of sufficient funds would require that a transaction is terminated and the card inserted into an ATM or a special location for recharge. In response to this challenge, Pathways owns exclusive technology that endows smart cards with recharging capability at the point of purchase. This additionally enables connection to electronic banking systems, thus creating an uninterrupted flow of cash-less commercial transactions. The use of the UltraCard platform technology, with its large data storage capacity is expected to enhance both the security features and the sophistication of the software applications in this area.

Automated Claim Adjudication and Settlement through Automated Clearing House: ACH or Automated Clearing House, is a system of electronic funds transfer to which most banks subscribe as an economic substitute for a wire transfer using the Federal Reserve System. The Pathways system has the ability to submit automatically a claim to the operator of the pre-paid funds pool, adjudicate the claim and trigger an ACH transfer of funds to the provider/merchant. Or to use this conventional application of the ACH in reverse, thus causing a reimbursement directly into an account. Pathways provides claims adjudication by means of a System Query Language (SQL) compliant data base that can service substantially all management reporting needs.

MS Digital Call Center System: The MS Digital Call Center System is a customised multimedia communication system for corporate communications, call centres information systems integrated with Lucent phone systems, cable television information systems, point of sale information systems, interactive kiosks, multimedia presentations. Major clients currently using the MS Digital Call Centre System include US West, VoiceStream (Western Wireless), Nordstrom (Catalogue Sales Call Centres), and virtually every major city in western Washington for their municipal television stations for display of programming schedules, community events, election results, emergency and general information.

SPRINGTICKET: SPRINGTICKET is an unattended, all-weather, multi-card capable, networked or stand-alone ticketing solution for businesses that allow consumers to purchase tickets and obtain receipts on a 24/7 schedule. SPRINGTICKET provides unattended ticketing for ski resorts, amusement parks, water parks, aquariums, zoos, sporting events, exhibitions, parking, festivals, movie theatres and transit merchants.

Cash-Free Midway System: In late 1999, Pathways rolled out a smart card product, the Cash-Free Midway Smart Card System, using microprocessor-based smart cards. The system allows fair operators to make the transition to a cash-free midway, something that the industry wanted to do for some time. The Pathways system replaces the need to count out the traditional long stream of tickets used on the midway for rides and games. Ticket booth operators simply enter the dollar amount that a customer wishes to spend into a special terminal that encrypts the money onto the card. The card is then accepted at terminals installed at each of the rides, games and concession booths, thus eliminating the need for cash. The substantial data storage capacity of UltraCard is expected to provide Pathways with a powerful card that will further expand the use of cash-less payment systems, with substantially more sophisticated software.

Alternate Medical Program: Pathways installed one of the first smart card systems for healthcare providers in the USA in the first quarter of 1996. The system provides patient contact and medical history information, provider and payment details and offers discounts for loyalty at certain healthcare providers. In October 1999, Pathways signed a new 3-year agreement to provide smart card transaction processing as well as software and hardware maintenance and support services to MyChoice Health Services Inc., of Portland, Oregon. MyChoice offers technological strategies for the access of alternative medicine network services in Oregon. The MyChoice System is designed to accept payment for healthcare services using smart cards. The use of the UltraCard in conjunction with Pathways software in this field is anticipated to increase both the interest of healthcare providers and of credit card issuers.

Hawaii Millennium Program: Pathways positioned itself as an e-commerce service provider in conjunction with an agreement signed with the Hawaii Millennium Commission in July 1999. As part of the agreement, Pathways developed and implemented a virtual mall that is selling products on the Internet. Another aspect of the web site is to make information available to visitors who have an interest in local events, travel and hotel information, attractions and any other information that will assist Hawaii in enticing expatriates, former visitors and prospective tourists to the State of Hawaii. Pathways also designed a complete, integrated smart card system for use in conjunction with the web site. Smart cards available on the site can be used for both real and virtual e-commerce activities. Pathways furnishes a full suite of services to its clients, including custom applications, card fulfilment, personalisation, and credit card processing. Coupled with the integrated smart card system, Pathways provides centralized transaction processing, database maintenance, record keeping and reporting. The use of the UltraCard platform aided by a multi-vault software program such as EVOS is expected to enhance the use of ease of this type of product.

Business Relationships

Pathways is currently pursuing joint marketing agreements with other organizations to promote further the name of MS Digital products and services in the call center market. The market potential for these systems is approximately US$600 million per year. A joint marketing agreement exists with Design Computer Services and Pathways is in the process of engaging in agreements with Lucent Technologies, which controls a large percentage of the network data that the call centers require and utilise. Pathways is also involved in active discussions with Technical Industries Inc., a division of MCSI, one of the largest audio/video system integrators in the world.

Pathways has concluded recently a series of strategic partnerships, which have enhanced its competitive position. Pathways entered into a license agreement in May 1999 with Proton World, an international open smart card solutions provider based in Brussels, Belgium. Proton World was created by major smart card industry participants including American Express, ERG, InterPay Nederland and Visa International and is currently the largest electronic purse platform with 30 million cards issued and accepted at 230,000 terminals in 15 countries.

In addition, Pathways has entered into a strategic relationship with BankSys Inc., a manufacturer and developer of smart card terminal and processing equipment. The relationship with BankSys is designed to allow Pathways and BankSys to develop jointly certain smart card applications involving the PROTON purse and secure access applications.

Pathways also entered into an agreement with Bull Systems to engineer applications across the entire Bull product line of smart cards.

Upgrade International Corp. (OTCBB:UPGD), through its ownership interests in UltraCard Inc., Efornet Corp, and Centurion Technologies Inc, is engaged in the development and commercialisation of a patented, data storage technology. UltraCard incorporates conventional hard drive storage technology into a standard credit card form factor, which operates in conjunction with a read/write device and operating software. In addition, Upgrade has acquired and is developing application software and systems for specific applications of the UltraCard technology. Management believes that the UltraCard technology potentially will provide numerous industrial users with a combination of high levels of security and a vastly greater amount of personal, transportable data storage at the lowest cost in the industry.

On Behalf of the Board of Directors, Daniel Bland, President

This News Release contains forward-looking statements relating to future results, performance, plans, events or other matters. Words such as "potentially," "will," "anticipates," "believes," "plans," "expects," "future," "intends" and similar expressions are used to identify these forward-looking statements. Such statements involve numerous risks and uncertainties, including, but not limited to, risks and uncertainties pertaining to development of the company's products and services and markets for such products and services, the timing and level of customer orders, competitive products and services and pricing, changes in economic conditions and the markets for the Company's products and services and other risks and uncertainties. Actual results, performance and events may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this News Release. The Company undertakes no obligation to release revisions to these forward-looking statements to reflect events or circumstances after the date of this News Release. Further information about the risks and uncertainties Upgrade faces can be found in its filings with the Securities and Exchange Commission, which can be accessed at www.sec.gov or www.freedgar.com.