<PAGE>
                                                                    EXHIBIT 10.1

                               FUNDING AGREEMENT


     THIS FUNDING AGREEMENT (this "Agreement") is made and entered into as of
March 21, 2000 (the "Effective Date"), by and between ULTRACARD, INC. a Nevada
corporation (the "Borrower"), and UPGRADE INTERNATIONAL CORPORATION, a Florida
corporation (the "Lender").

     WHEREAS, the Borrower desires, from time to time, to borrow additional
funds from the Lender for general working capital, and the Lender is willing,
subject to and upon the terms and conditions herein set forth, to advance and
lend such additional funds to Borrower;

     Now, therefore, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

     1.        Funding Commitment.  Lender hereby acknowledges its firm
               ------------------
commitment to secure or provide additional funding for Borrower, not to exceed
in the aggregate the sum of Twenty Million Dollars ($20,000,000), upon
satisfaction of all of the following conditions precedent:

               (a) Borrower shall have provided Lender with a copy of Borrower's
budget for the current fiscal year, which budget has been provided and approved
by Lender.

     2.        Note.  All funds which may be advanced by Lender to Borrower
               ----
under this Agreement shall be evidenced by a promissory note payable to the
order of the Lender substantially in the form of Exhibit A attached hereto (the
                                                 ---------
"Note"), duly executed by the Borrower. The terms of the Note shall provide that
all principal and accrued interest thereon shall be due and payable in
accordance with the following terms and conditions: (a) repayment shall be made
prior to the payment of any dividends to shareholders of Borrower; and (b)
subject to the terms of Section 8 below, all principal and accrued interest
shall be due and payable upon the effectiveness of a registration statement
under the Securities Act of 1933 (the "Act") of an initial public offering by
Borrower of its Common Stock which results in net proceeds to the Company of not
less than Thirty Five Million Dollars ($35,000,000) (an "IPO"), or upon the
occurrence of any merger, acquisition or other reorganization of Borrower which
results in a change in control of Borrower. Notwithstanding the foregoing
provisions, the outstanding principal balance on any Note(s), together with all
accrued interest thereon, shall be due and payable in full on March 31, 2004.

     3.        Transferability of Notes. The Lender may transfer or assign any
               ------------------------
such Note(s).

     4.        Interest. Notwithstanding anything herein or in the Note(s) to
               --------
the contrary, it is not the intention of the parties hereto to charge, nor at
any time shall there be charged or become due and/or payable hereunder or under
the Note(s) any interest which would result in a rate of interest being charged
which is in excess of the maximum rate permitted to be charged by law, and in
the event that any sum in excess of the maximum legal rate of interest is paid
or charged, the same shall, immediately upon discovery thereof, be deemed to
have been a prepayment of principal (which prepayment shall be permitted, and be
without premium or penalty) as of the date of such receipt, and all payments
made thereafter shall be appropriately reapplied to interest and principal to
give effect to the maximum rate permitted by law, and after such reapplication,
any excess payment shall be immediately refunded to Borrower.

               5.  Use of Proceeds.  The proceeds of any funds advanced or
                   ----------------
loaned to Borrower by Lender under this Agreement shall be used for operating
expenses and working capital in the business of Borrower. The Borrower
acknowledges that any funds advanced or loaned to Borrower pursuant to this
Agreement are made expressly and only for business and commercial purposes.

               6.  Affirmative Covenants. The Borrower covenants and agrees
                   ---------------------
that, until all Notes, together with any accrued and unpaid interest thereon,
and all of Borrower's other indebtedness to the Lender under this Agreement or
otherwise are paid in full, unless specifically waived by the Lender in

                                       1
<PAGE>

writing, the Borrower shall furnish the Lender, if requested, annual statements
itemizing the income and expenses of the operations of the Borrower and
Borrower's projects, copies of all written instruments affecting the Borrower's
operations, together with complete and accurate balance sheets prepared at the
expense of the Borrower.

          7.   Negative Covenants. The Borrower covenants and agrees that, until
               ------------------
all Notes, together with any accrued and unpaid interest thereon, and all of
Borrower's other indebtedness to the Lender are paid in full, the Borrower shall
not, without the prior written consent of the Lender, which consent shall not be
unreasonably withheld, enter into any transaction of merger, or transfer, sell,
assign, lease, or otherwise dispose of all or a substantial part of its
properties or assets, or any interest in its operations, or change the nature of
its business or its company name, or wind up, liquidate, or dissolve, or agree
to do any of the foregoing, without the prior written consent of the Lender.

8.   Conversion of Notes to Common Stock of Borrower.
     -----------------------------------------------

          8.1. Conversion Rates.  Effective upon the closing of an IPO, the
outstanding debt of Borrower to Lender (including, but not limited to, any
outstanding principal and interest) under this Agreement as represented by the
Notes shall convert into Common Stock of Borrower at the following rates:

a.             With respect to the first $3,800,000 loaned by Lender to Borrower
hereunder and any interest or other indebtedness accrued with respect thereto,
at a rate of $1.90 per share;

b.             Any additional amounts (over $3,800,000 in principle) loaned to
Borrower up to $10,000,000 loaned to Borrower hereunder and any interest or
other indebtedness accrued with respect thereto, at a rate of $10.00 per share;

a.             Any additional amounts (over $10,000,000 in principle) loaned to
Borrower up to $20,000.000 loaned to Borrower hereunder and any interest or
other indebtedness accrued with respect thereto, at a rate of $15.00 per share.

          8.2. Lock-Up Period.   Lender agrees that any Common Stock of Borrower
               --------------
received as a result of the stock conversion under this section (the "Conversion
Stock ") shall not be re-sold without the consent of Borrower, which consent
shall not be unreasonably withheld or delayed, for a period of two (2) years
after the effective date of the conversion of the debt into Common Stock.

          8.3. Restrictive Legend.  The certificates representing the Conversion
               ------------------
Stock shall contain a legend reflecting the restrictions on transfer contained
herein, and by applicable law.

          8.4. Registration Rights.   Following the IPO and after the Lock-Up
               -------------------
Period has expired, if Borrower undertakes a registered offering of its
securities it agrees to cooperate with Lender and include so much of the
Conversation Stock in such offering as is reasonably practicable, and subject to
the restrictions and conditions, if any, imposed by any underwriter in
connection with such offering.

     9.   Defaults and Remedies.
          ---------------------

          9.1  Events of Default.  If any one or more of the following events
               -----------------
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree, or order of any court or any order, rule, or regulation of any
administrative or governmental body), that is to say:

               (a) If default shall be made in the payment of the principal or
interest of any Note, when and as the same shall become due and payable, whether
at maturity or by acceleration or otherwise, and such default shall continue for
thirty (30) days after written notice of default is given;
<PAGE>

               (b) If default shall be made in the performance or observance of,
or shall occur under, any covenant, agreement, or other provision of this
Agreement or in any instrument or document delivered to the Lender in connection
with or pursuant to this Agreement, or if any such instrument or document shall
terminate or become void or unenforceable without the written consent of the
Lender, and such default shall continue for thirty (30) days after written
notice of default is given;


               (c) If any representation or warranty or any other statement of
fact herein or in any writing, certificate, report, or statement at any time
furnished to the Lender pursuant to or in connection with this Agreement, or
otherwise, shall be intentionally false or misleading in any material respect;

               (d) If the Borrower shall admit in writing its inability to pay
its debts generally as they become due, file a petition in bankruptcy or a
petition to take advantage of any insolvency act; make an assignment for the
benefit of its creditors; commence a proceeding for the appointment of a
receiver, trustee, liquidation, or conservator of itself or of a whole or any
substantial part of its property; file a petition or answer seeking
reorganization or arrangement or similar relief under the federal bankruptcy
laws or any other applicable law or statute of the United States or any state;

               (e) If the Borrower shall be adjudged a bankrupt; or a court of
competent jurisdiction shall enter an order, judgment, or decree appointing a
receiver, trustee, liquidator, or conservator of the Borrower or of the whole or
any substantial part of its respective properties, or approve a petition filed
against the Borrower seeking reorganization or similar relief under the federal
bankruptcy laws or any other applicable law or statute of the United States or
any state, or if, under the provisions of any other law for the relief or aid of
debtors, a court of competent jurisdiction shall assume custody or control of
the Borrower or of the whole or any substantial part of its respective assets;
or if there is commenced against the Borrower any proceeding for any of the
foregoing relief or if a petition in bankruptcy is filed against the Borrower
and such proceeding or petition remains undismissed for a period of 30 days; or
if the Borrower by any act indicates its consent to, approval of or acquiescence
in any such proceeding or petition; or

               (f) If any judgment against the Borrower or any attachment or
execution against any of its property for any amount in excess of $500,000
remains unpaid, unstayed, or undismissed for a period of more than 30 days;

Then and in any such event, and at any time thereafter, if such or any other
Event of Default shall then be continuing, the Lender may, at its option,
declare any outstanding Note(s) to be due and payable, whereupon the maturity of
the then unpaid balance of any and all such Note(s) shall be accelerated and the
same, together with all interest accrued thereon, shall forthwith become due and
payable without presentment, demand, protest, or notice of any kind, all of
which are hereby expressly waived, anything contained herein or in any Note(s)
to the contrary notwithstanding.

          9.2  Suits for Enforcement.   In case any one or more Events of
               ---------------------
Default shall occur and be continuing, the Lender may proceed to protect and
enforce its rights or remedies, whether for the specific performance of any
covenant, agreement, or other provision contained herein, in any Note(s), or in
any document or instrument delivered in connection with or pursuant to this
Agreement, or to enforce the payment of any Note(s) or any other legal or
equitable right.

          9.3  Rights and Remedies Cumulative.  No right or remedy herein
               ------------------------------
conferred upon the Lender is intended to be exclusive of any other right or
remedy contained herein, in any Note(s), or in any instrument or document
delivered in connection with or pursuant to this Agreement, and every such right
or remedy shall be cumulative and shall be in addition to every other such right
or remedy contained herein and therein, or now or hereafter existing at law or
in equity or by statute, or otherwise.
<PAGE>

          9.4  Rights and Remedies Not Waived.  No course of dealing between the
               ------------------------------
Borrower and the Lender or any failure or delay on the part of the Lender in
exercising any rights or remedies hereunder shall operate as a waiver of any
rights or remedies of the Lender, and no single or partial exercise of any
rights or remedies hereunder shall operate as a waiver or preclude the exercise
of any other rights or remedies hereunder.

     10.  Representations and Warranties.  In order to induce the Lender or the
          ------------------------------
Borrower, as the case may be, to enter into this Agreement and to make any loans
as herein provided for, the Borrower makes the following representations and
warranties which shall survive the execution and delivery of this Agreement and
any Note(s), and any inspection or examination at any time made by or on behalf
of the Lender and the Borrower.

          10.1 Corporate Status.  The Borrower is a duly organized corporation
               ----------------
in good standing under the laws of the State of Nevada, and has the power and
authority to own its properties and to transact the business in which it is
engaged or presently proposes to engage.  The Borrower is duly qualified as a
foreign company and is in good standing in all states where the nature of its
business or the ownership or use of property requires such qualification.

          10.2 Corporate Power and Authority.  The Borrower and the Lender each
               -----------------------------
has the power to borrow and to execute, deliver, and carry out the terms and
provisions of this Agreement, any Note(s), and all instruments and documents
delivered by it pursuant to this Agreement, and the Borrower and the Lender will
each have taken or caused to be taken all necessary corporate action (including
but not limited to, the obtaining of any consent of its shareholders as required
by law or by the Articles of Incorporation of the Borrower and the Lender) to
authorize the execution, delivery, and performance of this Agreement, any
borrowing hereunder, the making and delivery of any Note(s), and the execution,
delivery, and performance of the instruments and documents delivered by it
pursuant to this Agreement.

          10.3 No Violation of Agreements.  The Borrower is not in default
               --------------------------
under any debenture, mortgage, deed of trust, agreement, or other instrument to
which it is a party or by which it may be bound. Neither the execution and
delivery of this Agreement, any Note(s), or any of the instruments and documents
to be delivered pursuant to this Agreement, nor the consummation of the
transactions herein and therein contemplated, nor compliance with the provisions
hereof or thereof will violate any law or regulation, or any order or decree of
any court or governmental instrumentality, or will conflict with, or result in
the breach of, or constitute a default under, any indenture, mortgage, deed of
trust, agreement, or other instrument to which the Borrower is a party or by
which it may be bound, or result in the creation or imposition of any lien,
charge, or encumbrance upon any of the property of the Borrower thereunder, or
violate any provision of the Articles of Incorporation or Bylaws.

     11.  Miscellaneous.
          -------------

          11.1 Collection Costs.  In the event that the Lender shall retain or
               ----------------
engage an attorney or attorneys to collect, enforce, or protect its interests
with respect to this Agreement, any Note(s), or any instrument or document
delivered pursuant to this Agreement, or as to any collateral securing any
Note(s), the Borrower shall pay all of the costs and expenses of such
collection, enforcement, or protection, including reasonable attorneys' fees,
and the Lender may take judgment for all such amounts, in addition to the unpaid
principal balance of any Note(s) and accrued interest thereon.  Such amounts
shall be deemed additional indebtedness under the Note(s) and shall bear
interest at the Note interest rate from the date such costs are incurred by
Borrower.  In the event Borrower shall retain or engage an attorney to collect,
enforce, or protect its interests with respect to this Agreement, in the event
of a breach by Lender, Lender shall pay the costs, including reasonable
attorneys' fees of Borrower in connection therewith.

          11.2 Modification and Waiver.  No modification or waiver of any
               -----------------------
provision of any Note(s) or of this Agreement and no consent by the Lender to
any departure therefrom by the Borrower
<PAGE>

shall be effective unless such modification or waiver shall be in writing and
signed by a duly authorized officer of the Lender, and the same shall then be
effective only for the period, on the conditions and for the specific instances
and purposes specified in such writing. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in similar or other circumstances.

          11.3  Nevada Law.  All Note(s) and this Agreement shall be
                ----------
interpreted, construed and enforced in accordance with and governed by the laws
of the State of Nevada.

          11.4  Notices.  All notices, requests, demands, or other
                -------
communications provided for herein shall be in writing and shall be deemed to
have been given when sent by mail, telex, or other means of electronic
transmission, including telecopiers, to the addresses listed below for each
party, or to such other person or address as either party shall designate to the
other from time to time in writing forwarded in like manner:

          Lender:   UPGRADE INTERNATIONAL CORPORATION
                     435 Martin Street, Suite 1010
                     Blaine, Washington  98231

          Borrower: ULTRACARD, INC.
                     1550 S. Bascom Ave., Ste. 100
                     Campbell, California 95008

          11.5  Captions.  The captions of the various Sections and paragraphs
                --------
of this Agreement have been inserted only for the purposes of convenience.  Such
captions are not a part of this Agreement and shall not be deemed in any manner
to modify, explain, enlarge, or restrict any of the provisions of this
Agreement.

          11.6  Benefit of Agreement.  This Agreement shall be binding upon and
                --------------------
inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, and all subsequent holders of any Note(s).

          11.7  Counterparts.  This Agreement may be executed in two or more
                ------------
counterparts, or by facsimile, any of which shall be deemed an original but all
of which together shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the Borrower and the Lender have caused this Agreement
to be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.


Lender:                               Borrower:

UPGRADE INTERNATIONAL                 ULTRACARD, INC.
CORPORATION, a Florida corporation    a Nevada corporation|


By:  _________________________        By:  ______________________
     Daniel Bland                          Daniel Kehoe
     Its: President                        Its: President
<PAGE>

                                   EXHIBIT A
                                   ---------

THE SECURITIES REPRESENTED BY THIS NOTE (INCLUDING A CONVERSION OF SAME) HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF.  NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACTO OF 1933.

                          CONVERTIBLE PROMISSORY NOTE
                          ---------------------------


Borrower:      ULTRACARD, INC.
--------
               A Nevada Corporation

Lender:        UPGRADE INTERNATIONAL CORPORATION
------
                   A Florida Corporation

Loan Amount:   U.S. $___________________
-----------

Dated:                ________________________
-----


     1.   Borrower's Promise to Pay.  Borrower hereby promises to pay to the
          -------------------------
order of Lender or subsequent holder of this Note, the principal sum of
__________________________________ Dollars (USD $________), hereinafter referred
to as the "principal", plus interest on the principal amount outstanding from
time to time at the rate set forth in Section 4 herein.

     2.   Maturity Date.  Subject to the terms of Section 8, below, all
          -------------
principal and accrued interest thereon shall mature and be due and payable in
accordance with the following terms and conditions: (a) repayment shall be made
prior to the payment of any dividends to shareholders of Borrower; and (b) all
principal and accrued interest shall be due and payable upon the registration of
any shares of Borrower under the Securities Act of 1933 pursuant to an initial
public offering (IPO) of Borrower's Common Stock which results in net proceeds
to the Borrower of not less than Thirty Five Million Dollars ($35,000,000), or
upon the occurrence of any merger, acquisition or other reorganization of
Borrower which results in a change in control of Borrower. Notwithstanding the
foregoing provisions, the outstanding principal balance, together with all
accrued interest thereon, shall be due and payable in full on March 31, 2004.

     3.   Transferability of Note.  The Lender may transfer or assign this Note.
          -----------------------
The Lender or anyone who takes this Note by transfer or assignment and who is
entitled to receive payments under this Note will be called the "Note Holder."

     4.   Interest.  Interest will be charged on that part of principal that has
          --------
not been paid.  Interest will be charged on the outstanding principal balance
beginning on the date hereof and continuing until the full amount of principal
has been paid.  Interest shall accrue on the outstanding principal balance at
the rate of eight percent (8%) per annum.  The Borrower acknowledges this loan
is made expressly and only for business and commercial purposes.

     5.   Required Loan Payments:  The Borrower shall make payments to the
          -----------------------
Lender in lawful money of the United States of America, in immediately available
funds, as follows:

          (a) Place of Payments.  All loan payments shall be paid to Lender at:
              -----------------
<PAGE>

               Upgrade International Corporation
               435 Martin Street, Suite 1010
               Blaine, Washington  98231

or at such other place as may be designated by Lender or the Note Holder from
time to time.

          (b) Application of Payments.  Each loan payment shall be applied as
              -----------------------
follows: (i) first, toward payment of any amounts owed under Section 9.3 below,
(ii) second, toward payment of any and all accrued and unpaid interest; and (ii)
third, toward payment of any outstanding principal balance.

          (c) Prepayment of Principal.  This Note may be prepaid in whole or in
              -----------------------
part without premium or penalty subject to the prior written consent of the Note
Holder to such prepayment.

     6.   Acceleration of Debt.  It is expressly agreed that the full amount of
          --------------------
both principal and interest due pursuant to this Note shall become due and
payable at the option of the Note Holder on the happening of any Event of
Default under the terms of the Funding Agreement.

     7.   Funding Agreement.  This Note is issued pursuant to a Funding
          -----------------
Agreement between the Borrower and Lender dated March 22, 2000.  Reference is
made to the Funding Agreement concerning additional terms and conditions
pertaining to Lender's rights as to acceleration.

8.        Conversion into Common Stock of Borrower.
          ----------------------------------------
9.
10.       (a)  The entire principal amount of and accrued interest on this
Note and any other indebtedness accrued with respect to this Note shall be
converted into shares of Common Stock of the Company at a rate of $____ per
share upon the effective date of an IPO by Borrower (as defined in the Funding
Agreement).
11.
12.       (b)  Mechanics and Effect of Conversion.  No fractional shares of the
Borrower's Common Stock will be issued upon conversion of this Note.  In lieu of
any fractional share to which the Note Holder would otherwise be entitled, the
Borrower will pay to the Note Holder in case the amount of the unconverted
principal and interest balance of this Note that would otherwise be converted
into such fractional share.  Upon conversion of this Note pursuant to this
Section 8, the Note Holder shall surrender this Note, duly endorsed, at the
principal offices of the Borrower or any transfer agent of the Borrower.  At its
expense, the Borrower will, as soon as practical thereafter, issue and deliver
to such Note Holder, at such principal office, a certificate or certificates for
the number of shares to which such Note Holder is entitled upon such conversion
under the terms of this Note, including a check payable to the Note Holder for
any cash amounts payable as described herein.  Upon conversion of this Note, the
Borrower will be forever released from all of its obligations and liabilities
under this Note with regard to that portion of the principal amount and accrued
interest being converted including without limitation the obligation to pay such
portion of the principal amount and accrued interest.  The certificates
evidencing the Common Stock issued hereunder may have such legends as Borrower
may reasonably require to comply with applicable securities laws and to
reference the terms of the Funding Agreement.
13.
14.       9.   Miscellaneous.
               -------------
15.
16.            9.1  Borrower and all guarantors and endorsers of this Note,
severally waive diligence, demand, presentment, notice of nonpayment and
protest, and assent to extensions of time of payment, surrender or substitution
of security, or forbearance, or other indulgence, without notice.
17.
18.            9.2  Borrower and all others who may become liable for all or any
part of this obligation, consent to any number of renewals or extensions of the
time of payment hereof and to the release of all or any part of any security
which may be given for the payment hereof.  Any such renewals, extensions or
releases may be made without notice to any of said parties and without affecting
their liability.
<PAGE>

19.
20.            9.3  In the event that the Lender shall retain or engage an
attorney or attorneys to collect, enforce, or protect its interests with respect
to the Funding Agreement or this Note, or any instrument or document delivered
pursuant to this Note or the Funding Agreement, or as to any collateral securing
this Note or any other Notes issued under the Funding Agreement, the Borrower
shall pay all of the costs and expenses of such collection, enforcement, or
protection, including reasonable attorneys' fees, and the Lender may take
judgment for all such amounts, in addition to the unpaid principal balance of
any Note(s) and accrued interest thereon.  Such amounts shall be deemed
additional indebtedness under this Note and shall bear interest at the Note
interest rate from the date such costs are incurred by Borrower.
21.
               9.4  This Note shall be governed by and construed in accordance
with the laws of the State of Nevada.


BORROWER/MAKER:
--------------

ULTRACARD, INC.


By:  ___________________________
     Daniel Kehoe
     Its: President