EXHIBIT 10.12

                          (ALL AMOUNTS IN U.S. DOLLARS)

                              VALUESTAR CORPORATION

                        15% SUBORDINATED PROMISSORY NOTE

                                Due June 30, 1999

Note Date: November 15, 1998                                      US $300,000.00
Alameda, California

         FOR VALUE RECEIVED,  ValueStar  Corporation,  the undersigned  Colorado
corporation  (together with all successors,  the "Company"),  hereby promises to
pay to the order of

         Payee:            DAVRIC CORPORATION
                           (a Nevada corporation)
                           or its successors or assigns
                           (collectively, "Noteholder") at

         Address:          980 American Pacific Drive, #111
                           Henderson, Nevada 89014

or at such other address or addresses as Noteholder may  subsequently  designate
in writing to the  Company,  the  principal  sum of Three  Hundred  Thousand and
NO/100  Dollars  ($300,000.00),  due and payable in one  installment on June 30,
1999  ("Maturity  Date"),  plus simple  interest  thereon at the rate of fifteen
percent  (15.00%) per annum,  in lawful  monies of the United States of America.
Interest shall accrue and be computed on a 360 day year and 30 day months and be
payable  monthly on the fifteenth day of each month,  commencing on the 15th day
of  December  1998,  until this Note is paid in full  ("Interest  Date").  If an
Interest Date or the Maturity Date should fall on a weekend or national holiday,
payment shall be due on the following business day.

         1. Any payment  shall be deemed  timely made if received by  Noteholder
within  fifteen (15) calendar days of the due date.  Payments  received shall be
imputed  first to late or penalty  charges,  if any,  then due, next to interest
payments then due, and next to the remaining unpaid principal balance.

         An  "Event of  Default"  occurs  if (a) the  Company  does not make the
payment of  interest  or  principal  of this Note when the same  becomes due and
payable and such default  shall  continue for a period of fifteen (15)  calendar
days,  (b) the Company fails to comply with any of its other  agreements in this
Note that do not otherwise have separate remedies or provisions and such failure
continues for the period and after the notice  specified  below, (c) pursuant to
or within the  meaning  of any  Bankruptcy  Law (as  hereinafter  defined),  the
Company:  (i) commences a voluntary case; (ii) consents to the entry of an order
for relief against it in an involuntary  case; (iii) consents to the appointment
of a Custodian (as hereinafter defined) of it or for all or substantially all of
its property or (iv) makes a general assignment for the benefit of its creditors
or (v) a court of  competent  jurisdiction  enters an order or decree  under any
Bankruptcy  Law that:  (A) is for relief  against the Company in an  involuntary
case; (B) appoints a Custodian of the Company or for all or substantially all of
its  property or (C) orders the  liquidation  of the  Company,  and any order or
decree  remains  unstayed and in effect for a period of sixty (60) days. As used
herein,  the term  "Bankruptcy  Law" means Title 11 of the United States Code or
any similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee,  liquidator or similar official under any
Bankruptcy Law.

         A  default  above is not an  Event  of  Default  until  the  Noteholder
notifies  the Company of such  default  and the Company  does not cure it within
fifteen (30) days after receipt of such notice,  which must specify the default,
demand that it be  remedied  and state that it is a "Notice of  Default."  If an
Event of Default  occurs and is continuing,  the Noteholder  hereof by notice to
the Company,  may declare the principal of and accrued  interest on this Note to
be due and payable immediately.



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         2. The  Company may prepay this Note at any time and from time to time,
in whole or in part,  without  any  penalty or  premium  and  without  the prior
written  agreement of  Noteholder.  Any prepayment of this Note shall be applied
first against any accrued interest and then against  principal.  Upon payment in
full of the principal amount of this Note and interest  thereon,  the Noteholder
shall surrender this Note for cancellation.

         3. "Senior  Indebtedness"  means the principal of and premium,  if any,
and  interest  on  indebtedness  of  the  Company  or  any  subsidiary,  whether
outstanding on the date of issuance of this Note or thereafter created, incurred
or assumed for money  borrowed from (a) banks,  insurance  companies,  financial
institutions or other persons which regularly  engage in the business of lending
money,  unless the  instrument  creating such  indebtedness  shall  specifically
designate  such  indebtedness  as not being  senior in right of  payment  to the
Notes, or (b) such other persons as to which indebtedness the Board of Directors
of the Company shall designate as senior in right of payment to the Note.

         The Company agrees,  and the Noteholder,  by acceptance hereof likewise
agrees,  expressly  for the benefit of the present and future  holders of Senior
Indebtedness,  that, except as otherwise  provided herein,  upon (i) an event of
default under any Senior  Indebtedness,  or (ii) any dissolution,  winding up or
liquidation  of  the  Company,  whether  or  not in  bankruptcy,  insolvency  or
receivership proceeding, the Company shall not pay, and the Noteholder shall not
be entitled to receive,  any amount in respect of the  principal and interest of
this Note  unless  and until the  Senior  Indebtedness  shall  have been paid or
otherwise   discharged.   Upon  (A)  an  event  of  default   under  any  Senior
Indebtedness, or (B) any dissolution,  winding up or liquidation of the Company,
any payment or distribution of assets of the Company, which the Noteholder would
be  entitled  to receive  but for the  provisions  hereof,  shall be paid by the
Custodian  directly to the holders of Senior  Indebtedness  ratably according to
the  aggregate  amounts  remaining  unpaid on Senior  Indebtedness  after giving
effect to any concurrent  payment or  distribution  to the holders of any Senior
Indebtedness.  Subject to the  payment in full of the  Senior  Indebtedness  and
until  this Note is paid in full,  the  Noteholder  shall be  subrogated  to the
rights of the holders of the Senior  Indebtedness  (to the extent of payments or
distributions  previously  made to the holders of Senior  Indebtedness  pursuant
hereto) to receive payments or distributions of assets of the Company applicable
to the Senior Indebtedness.

         In the event that any Event of Default shall occur and as a result this
Note is  declared  due and  payable,  and such  declaration  shall not have been
rescinded or annulled,  the Company shall not make any payment on account of the
principal  of or interest  on this Note  unless at least  thirty (30) days shall
have elapsed after said  declaration and unless all principal of and interest on
Senior  Indebtedness due at the time of such payment (whether by acceleration of
the maturity  thereof or otherwise)  shall first be paid in full.  Nothing shall
preclude  the  payment  of  this  Note  on its due  date  in the  normal  course
irrespective of Senior Debt being outstanding.

         Nothing  contained  in this Note is intended to impair,  as between the
Company,  its creditors (other than the holders of Senior  Indebtedness) and the
Noteholder  of this Note,  the  unconditional  and  absolute  obligation  of the
Company to pay the principal of and interest on this Note or affect the relative
rights of the holder of this Note and the other creditors of the Company,  other
than the holders of Senior Indebtedness.  Nothing in this Note shall prevent the
holder  of this  Note  from  exercising  all  remedies  otherwise  permitted  by
applicable law upon default under this Note,  subject to the rights,  if any, of
the holders of Senior Indebtedness in respect to cash, property or securities of
the Company received upon the exercise of any such remedy.

         4. If this  Note  becomes  worn,  defaced  or  mutilated  but is  still
substantially intact and recognizable,  the Company or its agent may issue a new
Note in lieu hereof upon its  surrender.  Where the  Noteholder  claims that the
Note has been lost, destroyed or wrongfully taken, the Company shall issue a new
Note of like tenor in place of the original  Note if the  Noteholder so requests
by written  notice to the Company  together with an affidavit of the  Noteholder
setting forth the facts concerning such loss, destruction or wrongful taking and
such  other  information  in such form with such  proof or  verification  as the
Company  may  request.  The  Company  in  addition  may  require,  at  its  sole
discretion, indemnification as the Company deems satisfactory.

         5. If the indebtedness  represented by this Note or any part thereof is
collected in bankruptcy,  receivership or other judicial  proceedings or if this
Note is placed in the hands of  attorneys  for  collection  after  default,  the
Company  agrees to pay,  in  addition  to the  principal  and  interest  payable
hereunder, reasonable attorneys' fees and costs incurred by the Noteholder.

         6. Any notice, demand,  consent or other communication  hereunder shall
be in writing  addressed to the Company at its principal  office or, in the case
of Noteholder, at Noteholder's address appearing above, or to such other



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address as such party  shall have  theretofore  furnished  by like  notice,  and
either served personally,  sent by express,  registered or certified first class
mail, postage prepaid, sent by facsimile transmission, or delivered by reputable
commercial  courier.  Such notice shall be deemed  given (a) when so  personally
delivered,  or (b) if mailed as  aforesaid,  five (5) days  after the same shall
have  been  posted,  or (c) if sent by  facsimile  transmission,  as soon as the
sender  receives  written or telephonic  confirmation  that the message has been
received and such facsimile is followed the same day by mailing by prepaid first
class mail, or (d) if delivered by commercial courier, upon receipt.

         7. The Company hereby waives present, demand for performance, notice of
non-performance,  protest, notice of protest and notice of dishonor. No delay on
the part of  Noteholder  in exercising  any right  hereunder  shall operate as a
waiver of such right or any other right.

         8. With respect to any offer,  sale or other  disposition of this Note,
the Noteholder will give written notice to the Company prior thereto, describing
briefly the manner thereof, together with a written opinion of such Noteholder's
counsel,  to the  effect  that such  offer,  sale or other  distribution  may be
effected without  registration or qualification  (under any federal or state law
then in effect,  including  Securities  Act of 1933,  as amended  (the  "Act")).
Promptly upon receiving such written notice and reasonably satisfactory opinion,
if so  requested,  the Company,  as promptly as  practicable,  shall notify such
Noteholder that such  Noteholder may sell or otherwise  dispose of this Note, as
the  case  may be,  all in  accordance  with the  terms  of the  written  notice
delivered  to the Company.  If a  determination  has been made  pursuant to this
Section 8 that the  opinion  of counsel  for the  Noteholder  is not  reasonably
satisfactory to the Company, the Company shall so notify the Noteholder promptly
after such determination has been made.

         9. This Note shall be governed by and construed in accordance  with the
laws of the State of  California  applicable to contracts  between  residents of
such state entered into and to be performed entirely within such state.

         10. Each  provision of this Note shall be interpreted in such manner as
to be effective  and valid under  applicable  law, but if any  provision of this
Note is held to be prohibited by or invalid under applicable law, such provision
shall be  ineffective  only to the  extent of such  prohibition  or  invalidity,
without invalidating the remainder of this Agreement.

      IN WITNESS WHEREOF, the undersigned Company has executed this Note and has
affixed hereto its corporate seal.

                                    VALUESTAR CORPORATION


                                    By /s/ JAMES A. BARNES
                                      James A. Barnes, Secretary and Treasurer


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