EXHIBIT 4.26

                   SERIES A PREFERRED STOCK PURCHASE AGREEMENT


         THIS SERIES A PREFERRED STOCK PURCHASE  AGREEMENT (the  "Agreement") is
dated for reference  purposes only as of July 21, 1999, by and between VALUESTAR
CORPORATION, a Colorado corporation (the "Corporation"), and those investors set
forth on Annex 1 attached hereto (individually,  a "Purchaser" and collectively,
the "Purchasers").

                                R E C I T A L S:
                                ----------------

         A.  The  Corporation,  through  its  subsidiary,   Valuestar,  Inc.,  a
California  corporation,  is in the business of rating and  certifying  customer
satisfaction of commercial businesses.

         B.  The  Purchasers   are  interested  in  investing   capital  in  the
Corporation and the Corporation desires to obtain capital from the Purchasers on
the terms and conditions hereinafter set forth.

                               A G R E E M E N T:
                               ------------------

         NOW,  THEREFORE,  in consideration of the above recitals and the mutual
agreements,  covenants,  representations and warranties  contained below in this
Agreement, the parties agree as follows:

1.       DEFINITIONS.

         "Agreement"  means, and the words "herein",  "hereof",  "hereunder" and
words of similar import refer to, this instrument and any amendments hereto.

         "Act" means the Small  Business  Investment Act of 1958, as amended and
in effect from time to time, and the regulations promulgated thereunder.

         "Affiliate"  means  any  Person  directly  or  indirectly  controlling,
controlled by, or under common  control with,  the Person in question.  A Person
shall be deemed to control a corporation if such Person  possesses,  directly or
indirectly,  the power to direct or cause the  direction of the  management  and
policies  of  such   corporation,   whether  through  the  ownership  of  voting
securities, by contract, or otherwise.

         "Certificate  of  Designation"  means the Certificate of Designation of
the  Corporation  attached  hereto as Exhibit  A,  which sets forth the  rights,
privileges and preferences of the Series A Convertible Preferred Stock.

         "Code"  means the  Internal  Revenue  Code of 1986,  as amended  and in
effect from time to time, and the regulations promulgated thereunder.

         "Controlled Group" means any group of organizations  within the meaning
of Section  414(b),  (c), (m) or (o) of the Code of which the  Corporation  is a
member.

         "Employee  Benefit Plan" means any employee benefit plan, as defined in
Section 3(3) of ERISA,  which is,  previously has been or will be established or
maintained by any member of a Controlled Group.

         "Environmental   Laws"  means  all  federal,   state,  or  local  laws,
ordinances,  rules,  regulations,   interpretations  and  orders  of  courts  or
administrative  agencies or  authorities  relating to pollution or protection of
the environment  (including,  without  limitation,  ambient air,  surface water,
ground water, land surface,  and subsurface strata),  and other laws relating to
(a) Polluting Substances or (b) the manufacture,  processing, distribution, use,
treatment,   handling,   storage,   disposal,  or  transportation  of  Polluting
Substances.

         "Exchange Act" means the  Securities  Exchange Act of 1934, as amended,
or any similar  Federal  statute which  replaces said Exchange Act and the rules
and regulations of the SEC thereunder, all as the same shall be in effect at the
time.

         "GAAP" means generally  accepted  accounting  principles,  applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American  Institute of Certified Public  Accountants and/or in statements of
<PAGE>

the Financial Accounting Standards Board and/or their respective  successors and
which are applicable in the circumstances as of the date in question;  provided,
that the  Corporation  may not change the use or  application  of any accounting
method,  practice or principle  without the prior written  consent of Purchaser,
which shall not be  unreasonably  withheld,  such  consent  may require  that an
adjustment  be  made to any and all  the  financial  covenants  and the  capital
expenditure  covenant set forth herein.  Accounting  principles are applied on a
"consistent basis" when the accounting  principles  observed in a current period
are comparable in all material respects to those accounting  principles  applied
in a preceding period.

         "Indebtedness"  means for any Person: (a) all indebtedness,  whether or
not represented by bonds, debentures,  notes, securities,  or other evidences of
indebtedness,  for  the  repayment  of  money  borrowed,  (b)  all  indebtedness
representing  deferred payment of the purchase price of property or assets,  (c)
all indebtedness  under any lease which, in conformity with GAAP, is required to
be capitalized  for balance sheet purposes and leases of property or assets made
as a part of any sale and lease-back  transaction if required to be capitalized,
(d) all  indebtedness  under  guaranties,  endorsements,  assumptions,  or other
contractual obligations,  including any letters of credit, or the obligations in
respect of, or to purchase or otherwise acquire, indebtedness of others, (e) all
indebtedness secured by a Lien existing on property owned, subject to such Lien,
whether or not the  indebtedness  secured thereby shall have been assumed by the
owner  thereof,  (f) trade  accounts  payable more than one hundred twenty (120)
days past due,  (g) all  amendments,  renewals,  extensions,  modifications  and
refundings of any  indebtedness or obligations  referred to in clauses (a), (b),
(c), (d), (e) or (f).

         "Intellectual  Property"  means  all  patents,  patent  rights,  patent
applications,   licenses,   inventions,  trade  secrets,  know-how,  proprietary
techniques  (including  processes and  substances),  trademarks,  service marks,
trade names and copyrights.

         "Lien" means any lien, mortgage,  security interest,  tax lien, pledge,
encumbrance,  financing  statement,  or  conditional  sale  or  title  retention
agreement, or any other interest in property designed to secure the repayment of
Indebtedness or any other obligation, whether arising by agreement, operation of
law, or otherwise.

         "Material  Adverse Effect" means (a) a material adverse effect upon the
business,  operations,  properties, assets or condition (financial or otherwise)
of the Corporation or, as the case may be, Corporation and the Subsidiary, taken
as a whole or (b) the  impairment  of the  ability  of any party  other than any
Purchaser to perform its  obligations  under this  Agreement or any of the Other
Agreements to which it is a party. In determining  whether any individual  event
would result in a Material Adverse Effect,  notwithstanding that such event does
not of itself have such  effect,  a Material  Adverse  Effect shall be deemed to
have occurred if the cumulative effect of such event and all other then existing
events would result in a Material Adverse Effect.

         "Other  Agreements"  means the  Registration  Rights  Agreement and all
other  agreements,  instruments  and  documents  and all  renewals,  amendments,
modifications  and  extensions  thereof,  whether  heretofore,  now or hereafter
executed by or on behalf of the  Corporation  or Subsidiary and delivered to and
for the benefit of Purchaser  under this  Agreement  or any of the  transactions
contemplated by this Agreement.

         "Party" or "parties" means the Corporation and/or any Purchaser.

         "Pension Plan" means any employee  pension  benefit plan, as defined in
Section 3(2) of ERISA, which is, was or will be established or maintained by any
member of the Controlled Group.

         "Person"  means  any  individual,  sole  proprietorship,   corporation,
business trust, unincorporated organization,  association, company, partnership,
joint  venture,  governmental  authority  (whether a national,  federal,  state,
county,  municipality  or otherwise,  and shall include  without  limitation any
instrumentality, division, agency, body or department thereof), or other entity.

         "Polluting Substances" means all pollutants,  contaminants,  chemicals,
or  industrial,  toxic or  hazardous  substances  or wastes  and shall  include,
without  limitation,  any  flammable  explosives,  radioactive  materials,  oil,
hazardous materials, hazardous or solid wastes, hazardous or toxic substances or
related  materials  defined  in  the   Comprehensive   Environmental   Response,
Compensation   and  Liability  Act  of  1980,   the  Superfund   Amendments  and
Reauthorization Act of 1986, the Resource Conservation and Recovery Act of 1976,
the Hazardous and Solid Waste  Amendments of 1984,  and the Hazardous  Materials
Transportation  Act,  as any of  the  same  are  hereafter  amended,  and



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<PAGE>

in the regulations adopted and publications  promulgated thereto;  provided,  in
the event any of the  foregoing  Environmental  Laws is amended so as to broaden
the  meaning of any term  defined  thereby,  such  broader  meaning  shall apply
subsequent to the effective date of such amendment and,  provided,  further,  to
the  extent  that the  applicable  laws of any state  establish  a  meaning  for
"hazardous  substance,"  "hazardous waste," "hazardous material," "solid waste,"
or  "toxic  substance"  which  is  broader  than  that  specified  in any of the
foregoing Environmental Laws, such broader meaning shall apply.

         "Reportable  Event"  means (i) any of the events set forth in  Sections
4043(b)  (other than a merger,  consolidation  or transfer of assets in which no
Pension Plan involved has any unfunded benefit liabilities),  4068(f) or 4063(a)
of ERISA, (ii) any event requiring any member of the Controlled Group to provide
security  under  Section  401(a)(29)  of the Code,  or (iii) any failure to make
payments required by Section 412(m) of the Code.

         "Securities  Act" means the Securities Act of 1933, as amended,  or any
similar  Federal  statute which  replaces such  Securities Act and the rules and
regulations  of the SEC  thereunder,  all as the same  shall be in effect at the
time.

         "SEC" means the Securities and Exchange Commission.

         "Subsidiary" means Valuestar, Inc., a California corporation.

         "Registration Rights Agreement" means the Restated  Registration Rights
Agreement and Shareholder Agreement Amendment attached hereto as Exhibit B.

         "SBA  Letter"  means  each SBA  letter  attached  hereto in the form of
Exhibit  C to this  Agreement,  executed  by the  Corporation  in  favor of each
Purchaser.

         "Series A Stock"  means the  shares of Series A  Convertible  Preferred
Stock of the Corporation issued to the Purchasers pursuant to this Agreement.

         "Series A  Convertible  Preferred  Stock"  means all shares of Series A
Convertible  Preferred Stock of the Corporation issued and outstanding from time
to time.


2.       SALE AND ISSUANCE OF SERIES A STOCK

         2.1 Purchase and Sale of Series A Stock. The Corporation agrees to sell
to each  Purchaser  meeting the  suitability  standards set forth in Article VI,
and,  subject to the terms and conditions set forth herein,  each such Purchaser
agrees to purchase from the  Corporation,  the Series A Stock set forth opposite
its name in Schedule 1 attached  hereto at a per share  purchase price of $10.00
per share.

         2.2 Issuance  and Payment The initial  closing of the sale and purchase
of at least one hundred seventy five thousand  (175,000)  shares of the Series A
Stock will take place at the offices of BAY VENTURE COUNSEL,  LLP, 1999 Harrison
Street,  Suite 1300, Oakland,  California 94612, at 10:00 a.m. on July 21, 1999,
or such other time and place as the parties  may  mutually  agree (the  "Initial
Closing").  At each "Closing" (as defined in Section 2.3), the Corporation  will
deliver to each Purchaser a duly issued and executed certificate of the Series A
Stock to be purchased by it, registered in the Purchaser's name, against payment
of the purchase price thereof as set forth in Schedule 1, by certified check, by
wire transfer of  immediately  available  funds,  or by any  combination  of the
foregoing.

         2.3 Subsequent  Sale of Series A Preferred  Stock.  The Corporation may
sell up to an additional three hundred twenty-five  thousand (325,000) shares of
Series A Stock,  to such Persons as the  Corporation  may  determine at any time
after the Initial  Closing and on or before  August 31, 1999 upon the same terms
and  conditions  as  those  contained  herein;   provided,   however,  that  the
Corporation  shall not sell  more than an  aggregate  of five  hundred  thousand
(500,000)  authorized but unissued  shares of Series A Stock under all Closings,
including  any  shares  of  Series A Stock  sold and  purchased  in the  Initial
Closing,  without the prior written  consent of the  Purchasers of a majority of
the shares of Series A Stock originally  issued and sold in the Initial Closing.
Any such sale which is upon the same  terms and  conditions  as those  contained
herein  shall  entitle  such  persons  or  entities  to become  parties  to this
Agreement  and the  Registration  Rights  Agreement,  each dated as of even date
herewith,  by and among the Corporation  and the Purchasers,



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<PAGE>

and  shall  have  the  rights  and  obligations  of a  Purchaser  hereunder  and
thereunder. The Initial Closing and each subsequent closing shall be referred to
herein as a "Closing."

3.       CONDITIONS OF THE PURCHASERS' OBLIGATIONS.

         The  obligation  of  each  Purchaser  to  consummate  the  transactions
contemplated  herein at the Closing is subject to the  satisfaction on or before
the date of the Closing of the following conditions,  all or any of which may be
waived in writing by each  Purchaser  as to its  obligation  to  consummate  the
transaction so contemplated:

         3.1  Representations  and Warranties.  Each of the  representations and
warranties of the  Corporation  contained in this Agreement,  including  without
limitation  those in  Article  V, and in any other  documents  delivered  by the
Corporation  to the  Purchasers at or prior to the Initial  Closing will be true
and  correct at and as of the date of the  Initial  Closing as though then made,
except  to  the  extent  of  changes  caused  by  the   transactions   expressly
contemplated  herein; the Corporation's  business and assets shall not have been
adversely  affected in any  material way prior to the Initial  Closing;  and the
Corporation  shall have performed all obligations and conditions herein required
to be  performed  or  observed  by the  Corporation  on or prior to the  Initial
Closing;  and the Corporation shall have delivered a certificate executed by the
President and Secretary of the Corporation to such effect.

         3.2 Closing  Documents.  The  Corporation  will have  delivered  to the
Purchasers copies of the following  specifically  named documents  referenced in
this  Agreement or the  Schedules  hereto,  including but not limited to a fully
executed Registration Rights Agreement, and all of the following documents:

                  (a) an Officers'  Certificate  from the Corporation  dated the
date of the Initial  Closing,  stating that all the  preconditions  specified in
this Article III have been satisfied;

                  (b) correct and complete copies of the resolutions  adopted by
the board of directors of the  Corporation  certified to such effect on the date
of the Initial  Closing by the  Secretary  of the  Corporation  authorizing  the
execution,  delivery and performance of this Agreement and any other  agreements
contemplated hereby, and authorizing all other transactions contemplated by this
Agreement;

                  (c) correct and complete copies of the  Corporation's  Bylaws,
as amended,  and  Certificate of Designation  and all currently  contemplated or
proposed  amendments  thereto,  as  approved  by  the  board  of  directors  and
shareholders of the Corporation, all certified to such effect on the date of the
Initial Closing by the Secretary of the Corporation;

                  (d) a good standing certificate dated within ten (10) business
days of the Initial Closing issued by the Colorado Secretary of State;

                  (e) an opinion of counsel dated as of the Initial Closing from
the Corporation's  counsel, Bay Venture Counsel,  LLP, reasonably  acceptable to
Purchasers; and

                  (f) such other  documents  referenced  within any  Schedule or
relating to the  transactions  contemplated  by this Agreement as the Purchasers
may reasonably request.

         3.3  Proceedings.  All corporate and other  proceedings  taken or to be
taken in connection with the transactions  contemplated hereby to be consummated
at or prior  to the  Initial  Closing  and all  documents  incident  thereto  or
required to be delivered prior to or at the Closing will be satisfactory in form
and substance to the Purchasers.

         3.4 Examination of Books and Records.  The Corporation  shall have made
available to the  Purchasers  (who may appoint  representatives  to perform such
inspection) during normal business hours, for inspection and copying, all of the
Corporation's  books,  records,  contracts  and  documents of or relating to the
Corporation.

         3.5 Suits/Proceedings.  No action, suit, proceeding or investigation by
or before any court, administrative agency or other governmental authority shall
have been  instituted  or threatened  to restrain,  prohibit or  invalidate  the
transactions contemplated by this Agreement.

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<PAGE>

         3.6  Authorization of Issuance.  The  Corporation's  board of directors
will have  authorized the issuance and sale by it to the Purchasers  pursuant to
this Agreement of the Series A Stock.

         3.7  Reservation of Stock.  The  Corporation's  board of directors will
have reserved  sufficient shares of its authorized but unissued Common Stock for
the exclusive purpose of issuance upon conversion of the Series A Stock.

         3.8 Capital Outstanding.  As of the Initial Closing (but without giving
effect  thereto),  the Corporation will have a total of no more than that number
of shares of Preferred  Stock and Common Stock issued and  outstanding as listed
and described in Schedule  5.14(b).  The  Corporation  will have  outstanding no
options,  convertible  securities or warrants other than as listed and described
on Schedule 5.14(c) as of the Initial Closing.

         3.9 Consent.  The Corporation  shall have obtained any and all consents
(including all governmental or regulatory consents,  approvals or authorizations
required in connection with the valid execution and delivery of this Agreement),
permits  and  waivers   necessary  or  appropriate   for   consummation  of  the
transactions contemplated by this Agreement.

         3.10 SBA Documents.  The Corporation shall have provided each Purchaser
that is a Small  Business  Investment  Company  (a)  with  all  information  and
documentation  that such Purchaser  shall have requested in connection  with the
preparation and completion of the Portfolio  Financing  Report on SBA Form 1031,
and (b)  originals  executed by the  Corporation  of each of (i) the SBA Letter,
(ii) the Size Status  Declaration  on SBA Form 480,  and (iii) the  Assurance of
Compliance on SBA Form 652.

4.       CONDITIONS OF THE CORPORATION'S OBLIGATIONS.

         The  obligation  of the  Corporation  to issue the  Series A Stock with
respect to any one  Purchaser  is subject to the  satisfaction  on or before the
date of the Closing of the following  conditions with respect to such Purchaser,
all or any of which may be waived in writing by the Corporation:

         4.1  Performance.  Each such  Purchaser  shall have duly  performed and
complied  in all  material  respects  with  each of the  terms,  agreements  and
conditions  required by this  Agreement to be  performed or complied  with by it
prior to or at the Closing.

         4.2 Representations and Warranties.  The representations and warranties
of each Purchaser  contained in Article VI and in any other documents  delivered
at or prior to the Closing  shall be true and  accurate on and as of the Closing
with the same effect as though made on and as of the date of the Closing.

         4.3 Instruments and Documents.  All instruments and documents  required
to  carry  out  this  Agreement  or  incidental   thereto  shall  be  reasonably
satisfactory to the Corporation and its counsel.

         4.4  Suits/Proceedngs.  No action, suit, proceeding or investigation by
or before any court, administrative agency or other governmental authority shall
have been  instituted  or threatened  to restrain,  prohibit or  invalidate  the
transactions contemplated by this Agreement.

         4.5 Covenants.  All covenants,  agreements and conditions  contained in
this  Agreement  to be performed  by the  Purchasers  on or prior to the Closing
shall have been performed or complied with in all material respects.

5.       REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.

         Except as set forth on any Schedules  attached hereto and  incorporated
herein by reference,  the  Corporation  hereby  represents  and warrants to each
Purchaser as of the date hereof and as of the Initial Closing as follows:

              Corporate Existence and Authority.

                  (a)  The  Corporation  (i) is a  corporation  duly  organized,
validly existing, and in good standing under the laws of Colorado;  (ii) has all
requisite  corporate  power and  authority  to own its  assets  and carry on its
business  as now  conducted;  and  (iii)  is  qualified  to do  business  in all
jurisdictions  in which the  nature of its  business  makes  such  qualification
necessary and where failure to so qualify would have a Material  Adverse Effect.
The Corporation has the

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<PAGE>


corporate power and authority to execute,  deliver,  and perform its obligations
under this  Agreement and all Other  Agreements to which it is, or in connection
with the transactions contemplated hereby, may become, a party.

                  (b)  The  Subsidiary  (i)  is a  corporation  duly  organized,
validly  existing,  and in good standing under the laws of California;  (ii) has
all requisite  corporate  power and authority to own its assets and carry on its
business  as now  conducted;  and  (iii)  is  qualified  to do  business  in all
jurisdictions  in which the  nature of its  business  makes  such  qualification
necessary and where failure to so qualify would have a Material Adverse Effect.

         5.2  Financial  Statements.  The  Corporation  has  delivered  to  each
Purchaser (a) audited consolidated financial statements of the Corporation as at
and for the  fiscal  year  ended  June 30,  1998,  and (b)  unaudited  financial
statements  of the  Corporation  for the nine month period ended March 31, 1999,
and for the two  month  period  ended May 31,  1999.  The  financial  statements
referred to in clauses  (a) and (b) of this  Section 5.2 are true and correct in
all material  respects,  have been prepared in  accordance  with GAAP (except as
otherwise  noted  therein  or on  Schedule  5.2),  and fairly  present  both the
financial  condition of the  Corporation  and the  Subsidiary on a  consolidated
basis as of the  respective  dates  indicated  therein  and the  results  of the
Corporation's  and  the  Subsidiary's  operations  for  the  respective  periods
indicated  therein.  At May 31, 1999, neither the Corporation nor the Subsidiary
has any liabilities or obligations (absolute,  accrued, contingent or otherwise)
of a nature required by GAAP to be reflected in such financial  statements which
are, individually or in the aggregate,  material to the condition,  financial or
otherwise,  or operations of the  Corporation  or the Subsidiary as of that date
which are not  reflected on such  financial  statements or disclosed on Schedule
5.2. There has been no material  adverse  change in the condition,  financial or
otherwise,  or operations of the  Corporation  or the  Subsidiary  since May 31,
1999, nor has there otherwise occurred a Material Adverse Effect.

         5.3  Default.   Except  as  disclosed  on  Schedule  5.3,  neither  the
Corporation  nor  the  Subsidiary  is  in  default  under  any  loan  agreement,
indenture,  mortgage, security agreement,  lease, franchise,  permit, license or
other  agreement  or  obligation  to which it is a party or by which  any of its
properties may be bound which default would cause a Material Adverse Effect. The
Corporation is paying its debts as they become due.

         5.4  Authorization  and Compliance  with Laws and Material  Agreements.
Except as set forth on Schedule 5.4, the execution,  delivery and performance by
the Corporation of this Agreement and the Other Agreements to which it is or may
in connection with the  transactions  contemplated  hereby become a party,  have
been or prior to the consummation of such  transactions  will be duly authorized
by all requisite  action on the part of the  Corporation and do not and will not
violate  the  Certificate  of  Designation,  or the  Corporation's  Articles  of
Incorporation  or  Bylaws  or any law or any  order of any  court,  governmental
authority or arbitrator,  and do not and will not upon the  consummation  of the
transactions  contemplated  hereby  conflict  with,  result  in a breach  of, or
constitute a default  under,  or result in the  imposition  of any Lien upon any
assets of the  Corporation  pursuant to the  provisions  of any loan  agreement,
indenture,  mortgage,  security agreement,  franchise,  permit, license or other
instrument  or agreement by which the  Corporation  or any of its  properties is
bound.  Except as set forth on  Schedule  5.4,  no  authorization,  approval  or
consent  of,  and no  filing  or  registration  with,  any  court,  governmental
authority or third Person is or will be necessary for the execution, delivery or
performance by the  Corporation  of this  Agreement and the Other  Agreements to
which  it is a  party  or the  validity  or  enforceability  thereof.  All  such
authorizations,  approvals,  consents,  filings and  registrations  described in
Schedule 5.4 have been obtained. The Corporation is not in violation of any term
of its Articles of Incorporation or Bylaws or any contract,  agreement, judgment
or decree and is in full  compliance with all applicable  laws,  regulations and
rules where such violation would cause a Material  Adverse Effect.  All officers
of the  Corporation  to the  best of  their  knowledge  have  complied  with all
material applicable laws, regulations and rules in the course and scope of their
employment with the Corporation.

         5.5  Environmental  Condition of the  Property.  Except as disclosed on
Schedule 5.5:

                  (a) The location,  construction,  occupancy, operation and use
of the  Corporation's  properties do not violate any  applicable  law,  statute,
ordinance,  rule,  regulation,   order  or  determination  of  any  governmental
authority  or  other  body  exercising  similar  functions,  or any  restrictive
covenant or deed restriction  (recorded or otherwise) affecting such properties,
including,  without  limitation,  all applicable  zoning ordinances and building
codes,  flood disaster,  occupational  health and safety laws and  Environmental
Laws  and  regulations  (as  referred  to in  this  Section  5.5,  collectively,
"applicable laws") where such violation would cause a Material Adverse Effect;

                  (b)  Without  limitation  of clause (a) of this  Section  5.5,
neither the  Corporation,  the Subsidiary nor such properties are subject to any
existing,  pending or threatened  investigation  or inquiry by any  governmental

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authority or subject to any remedial obligations due to violations of applicable
laws;

                  (c) Neither the  Corporation  nor the Subsidiary is subject to
any liability or obligation  relating to (i) the  environmental  conditions  on,
under or about such  properties,  including,  without  limitation,  the soil and
ground  water  conditions  at such  properties,  or (ii)  the  use,  management,
handling,  transport,  treatment,  generation,  storage,  disposal,  release  or
discharge  of any  Polluting  Substance  which  would  cause a Material  Adverse
Effect;

                  (d) There is no Polluting  Substance or other  substance  that
may pose any risk to safety,  health or the  environment  on, under or about any
such properties which would cause a Material Adverse Effect;

                  (e)  The  Corporation  and/or  the  Subsidiary,  whichever  is
applicable,  have taken reasonable steps to determine and hereby  represents and
warrants  that no  Polluting  Substances  have  been  disposed  of or  otherwise
released on, onto,  into,  or from their  properties by the  Corporation  or the
Subsidiary,  and the use which the Corporation  and/or the Subsidiary  makes and
intends to make of such  properties does not and will not result in the disposal
or other  release  of any  Polluting  Substances  on,  onto,  into or from  such
properties; and

                  (f)  The  Corporation  and/or  the  Subsidiary,  whichever  is
applicable,  have been issued all required  federal,  state and local  licenses,
certificates or permits relating to, and their properties, the Corporation,  the
Subsidiary and the  Corporation's  and the  Subsidiary's  facilities,  business,
assets,  leaseholds and equipment are all in compliance in all material respects
with all  applicable  federal,  state and  local  laws,  rules  and  regulations
relating to, air emissions,  water discharge,  noise emissions,  solid or liquid
waste disposal,  Polluting Substances, or other environmental,  health or safety
matters where non-compliance would have a Material Adverse Effect.

         5.6  Litigation  and  Judgments.  Except as disclosed on Schedule  5.6,
there  is no  action,  suit,  proceeding  or  investigation  before  any  court,
governmental  authority  or  arbitrator  pending,  or to  the  knowledge  of the
Corporation  threatened,  against or affecting the Corporation,  the Subsidiary,
this Agreement and/or the Other Agreements. Except as disclosed on Schedule 5.6,
there are no outstanding  judgments  against the  Corporation or the Subsidiary.
None of the matters listed on Schedule 5.6 could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.

         5.7 Rights in Properties;  Liens.  Except as disclosed on Schedule 5.7,
the  Corporation  and the  Subsidiary  have  good  and  marketable  title to all
properties  and  assets  reflected  on their  balance  sheets,  and none of such
properties or assets is subject to any Liens. The Corporation and the Subsidiary
enjoy peaceful and  undisturbed  possession  under all leases  necessary for the
operation of their other properties,  assets, and businesses and all such leases
are valid and  subsisting  and are in full  force and  effect.  There  exists no
default  under  any  provision  of any  lease  which  would  permit  the  lessor
thereunder  to  terminate  any such lease or to exercise  any rights  under such
lease which, individually or together with all other such defaults, could have a
Material  Adverse Effect.  The Corporation and the Subsidiary have the exclusive
right to use all of the  Intellectual  Property  necessary to their  business as
presently  conducted,  and the  Corporation's  and the  Subsidiary's  use of the
Intellectual  Property does not infringe on the rights of any other Person where
such nonexclusivity or infringement would not have a Material Adverse Effect. To
the best of the  Corporation's  knowledge,  no other  Person is  infringing  the
rights of the Corporation or the Subsidiary in any of the Intellectual Property.
Neither the Corporation nor the Subsidiary owe any royalties,  honoraria or fees
to any Person by reason of its use of the Intellectual Property.

         5.8  Enforceability.  This Agreement and the Other  Agreements to which
the Corporation is a party,  when delivered,  shall constitute the legal,  valid
and binding obligations of the Corporation,  enforceable against the Corporation
in accordance with their respective terms.

         5.9  Indebtedness.  Except as  disclosed  on the  financial  statements
identified in Section 5.2 and on Schedule 5.9,  neither the  Corporation nor the
Subsidiary have any  Indebtedness.  All Indebtedness  owed by the Corporation or
the Subsidiary to any Affiliate is set forth on Schedule 5.9.

         5.10 Taxes.  Except as set forth on Schedule 5.10, the  Corporation and
the Subsidiary  have timely filed all tax returns  (federal,  state,  and local)
required to be filed,  including,  without  limitation,  all income,  franchise,
employment,  property,  and sales  taxes,  and have timely paid all of their tax
liabilities, other than immaterial amounts and taxes that are being contested by
the  Corporation  or the  Subsidiary  in good  faith by  appropriate  actions or
proceedings  diligently  pursued,  and for which adequate reserves in conformity
with GAAP with respect  thereto have

                                       7
<PAGE>

been established. Neither the Corporation nor the Subsidiary know of any pending
investigation  of the  Corporation or the Subsidiary by any taxing  authority or
pending but  unassessed  tax  liability of the  Corporation  or the  Subsidiary,
except as disclosed on Schedule 5.10. The  Corporation  and the Subsidiary  have
made no presently  effective waiver of any applicable  statute of limitations or
request  for an  extension  of  time  to  file a tax  return,  and  neither  the
Corporation nor the Subsidiary are a party to any tax-sharing agreement.

         5.11 Use of Proceeds;  Margin  Securities.  Neither the Corporation nor
the Subsidiary are engaged principally,  or as one of its important  activities,
in the business of extending  credit for the purpose of  purchasing  or carrying
margin  stock  (within  the  meaning  of  Regulations  T, U or X of the Board of
Governors  of the Federal  Reserve  System),  and no part of the proceeds of any
extension of credit under this  Agreement  will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing or
carrying margin stock.  Neither the  Corporation,  the Subsidiary nor any Person
acting on their  behalf has taken any action that might  cause the  transactions
contemplated by this Agreement or any Other Agreements to violate Regulations T,
U or X or to violate the Securities Exchange Act of 1934, as amended.

         5.12 ERISA.  All members of any Controlled Group have complied with all
applicable  minimum funding  requirements  and all other applicable and material
requirements of ERISA and the Code,  applicable to the Employee Benefit Plans it
or they sponsor or  maintain,  and there are no existing  conditions  that would
give rise to material liability thereunder. With respect to any Employee Benefit
Plan,  all  members  of any  Controlled  Group  have made all  contributions  or
payments to or under each Employee Benefit Plan required by law, by the terms of
such  Employee  Benefit  Plan or the  terms of any  contract  or  agreement.  No
Termination  Event has occurred in connection  with any Pension Plan,  and there
are no unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA,
with  respect to any  Pension  Plan  which  poses a risk of causing a Lien to be
created on the assets of the  Corporation or which will result in the occurrence
of a Reportable  Event.  No member of any Controlled  Group has been required to
contribute to a multiemployer  plan, as defined in Section  4001(a)(3) of ERISA,
since September 2, 1974. No material  liability to the Pension Benefit  Guaranty
Corporation  has  been,  or is  expected  to be,  incurred  by any  member  of a
Controlled  Group.  The term  "liability",  as referred to in this Section 5.12,
includes any joint and several liability.  No prohibited transaction under ERISA
or the Code has occurred  with respect to any Employee  Benefit Plan which could
have a Material  Adverse  Effect or a material  adverse effect on the condition,
financial  or  otherwise,  of an Employee  Benefit  Plan.

         5.13 Disclosure.  No representation or warranty made by the Corporation
in this Agreement or in any of the documents,  instruments, or other information
furnished to the Purchaser by the Corporation,  contains any untrue statement of
a material fact or omits to state any material  fact  necessary in order to make
any statements  made therein not misleading.  No  representation,  warranty,  or
statement made by the Corporation in this  Agreement,  the  Registration  Rights
Agreement, or in any document, certificate,  exhibit or schedule attached hereto
or thereto or delivered in connection  herewith or  therewith,  contains or will
contain any untrue  statement of a material fact, or omits or will omit to state
a material  fact  necessary  to make any  statements  made herein or therein not
misleading. There is no fact that materially and adversely affects the condition
(financial  or  otherwise),  results of  operations,  business,  properties,  or
prospects  of the  Corporation  or any of its  Subsidiaries  that  has not  been
disclosed in the documents provided to Purchaser.

         5.14   Subsidiaries   and   Capitalization.   The  Corporation  has  no
Subsidiaries,  other than the  Subsidiary.  The Subsidiary  has no  Subsidiaries
except  as  otherwise  set  forth on  Schedule  5.14  (a).  All the  issued  and
outstanding  shares of capital  stock of the  Corporation  are duly  authorized,
validly  issued,  fully  paid  and  nonassessable.  The  capitalization  of  the
Corporation  on the Initial  Closing Date is set forth on Schedule  5.14 (b). No
violation  of any  preemptive  rights of  shareholders  of the  Corporation  has
occurred by virtue of the transactions  contemplated under this Agreement or any
Other  Agreement.  There  are  no  outstanding  contracts,   options,  warrants,
instruments,  documents or agreements  binding upon the Corporation  granting to
any Person or group of Persons any right to  purchase  or acquire  shares of the
Corporation's capital stock other than as set forth on Schedule 5.14(c).

         5.15 Current Locations.  Schedule 5.15 identifies (a) the Corporation's
principal  place of business and chief executive  office,  (b) all the locations
where the  Corporation  maintains  any books or records  relating  to any of its
assets,  (c) all other  locations where the Corporation has a place of business,
and (d) each address where any of the Corporation's assets are located. Schedule
5.15 accurately indicates whether each such location is owned or leased, and, if
leased,  identifies  the  owner  of such  location.  No  Person  other  than the
Corporation  has  possession  of  any  material  amount  of  the  assets  of the
Corporation except as disclosed on Schedule 5.15.

                                       8
<PAGE>

         5.16  Investment   Corporation  Act.   Neither  the  Corporation,   the
Subsidiary  nor any company  controlling  the  Corporation  or the Subsidiary is
required to be registered as an "investment  company"  within the meaning of the
Investment Corporation Act of 1940, as amended.

         5.17 Public Utility Holding  Corporation  Act.  Neither the Corporation
nor the  Subsidiary  is a  "holding  company"  or a  "subsidiary  company"  of a
"holding company" or an "affiliate" of a "holding company" or a "public utility"
within the meaning of the Public  Utility  Holding  Corporation  Act of 1935, as
amended.

         5.18 Securities  Laws.  Assuming the  truthfulness and accuracy of each
Purchaser's  representations  and warranties in Article 6, the  Corporation  has
complied  with  or  is  exempt  from  the  registration   and/or   qualification
requirements of all federal and state  securities or blue sky laws applicable to
the issuance or sale of the Series A Stock.

         5.19 No Labor  Disputes.  Neither the Corporation nor the Subsidiary is
involved in any labor dispute.  The Corporation is not a party to any collective
bargaining agreement, and there are no strikes or walkouts or union organization
of any of the  Corporation's  or the  Subsidiary's  employees  threatened  or in
existence  and no labor  contract is scheduled to expire during the term of this
Agreement.

         5.20  Brokers.  Except as  described  in  Schedule  5.20,  Neither  the
Corporation  nor any of its  shareholders  has dealt  with any  broker,  finder,
commission agent or other Person in connection with the transactions  referenced
in or  contemplated  by this  Agreement,  nor is the  Corporation  or any of its
shareholders  under any  obligation  to pay any  broker's fee or  commission  in
connection with such transactions.

         5.21  Insurance.  The  amount  and types of  insurance  carried  by the
Corporation  and the  Subsidiary,  and the terms  and  conditions  thereof,  are
substantially  similar to the  coverage  maintained  by companies in the same or
similar business as the Corporation and the Subsidiary and similarly situated.

         5.22 Conduct of Business.  On the Initial Closing Date, the Corporation
and the  Subsidiary  are engaged  only in  businesses  of the type  described in
Schedule 5.22.

         5.23  Small  Business  Concern.  The  Subsidiary  is a "small  business
concern"  as defined in Section  103(5) of the Act,  which for  purposes of size
eligibility  meets the  applicable  criteria set forth in Section  121.301(c) of
Title 13 of the Code of Federal Regulations.

         5.24  Survival  of  Representations.  All  representations  made by the
Corporation  in or under this  Agreement  shall be true and  accurate  as of the
Initial  Closing and shall  survive the Initial  Closing for a period of two (2)
years thereafter  (except for those changes  contemplated in and provided for by
this Agreement).

         6.       REPRESENTATIONS AND WARRANTIES OF PURCHASERS

                  As of the Closing,  each Purchaser  represents and warrants to
the Corporation as to itself that:

                  6.1 Investment.  The Purchaser is acquiring the Series A Stock
and any  Common  Stock  issuable  upon  conversion  of the  Series  A Stock  for
investment  purposes  only for its own  account,  and not with a view to, or for
resale in  connection  with,  any  distribution  thereof,  and it has no present
intention of selling or distributing any such securities.  Purchaser understands
that the Series A Stock (and any shares of Common Stock  issued upon  conversion
of the Series A Stock)  have not been  registered  under the  Securities  Act by
reason  of  a  specific  exemption  from  the  registration  provisions  of  the
Securities Act which depends upon,  among other things,  the bona fide nature of
the  investment  as  expressed  herein.  All  such  securities  are  hereinafter
collectively referred to as the "Securities".

                  6.2 Rule 144.  The  Purchaser  acknowledges  that  because the
Securities  have not been  registered  under the Securities  Act, the Securities
must be held indefinitely  unless  subsequently  registered under the Securities
Act or an exemption  from such  registration  is  available.  It is aware of the
provisions  of Rule 144  promulgated  under the  Securities  Act  which  permits
limited  resale  of  shares  purchased  in a  private  placement  under  certain
circumstances.

                  6.3 Access to Data.  The Purchaser has had an  opportunity  to
discuss the  Corporation's  business,  management and financial affairs with its
management and to obtain any additional information necessary or appropriate for
deciding whether or not to purchase the Securities.

                                       9
<PAGE>

                  6.4 Knowledge And Experience. Purchaser has such knowledge and
experience in financial and business  matters,  including  investments  in other
companies  that  are  in a  financial  condition  substantially  similar  to the
Corporation's financial condition immediately prior to the Initial Closing, that
it is  capable of  evaluating  the  merits  and risks of the  investment  in the
Securities,  and it is able  to  bear  the  economic  risk  of such  investment.
Further,  the  individual  executing  this  Agreement  has  such  knowledge  and
experience  in  financial  and  business  matters  that he or she is  capable of
utilizing the  information  made available to him or her in connection  with the
offering of the Securities,  of evaluating the merits and risks of an investment
in the Securities and of making an informed  investment decision with respect to
the Securities.

                  6.5 Requisite Power. The Purchaser has all requisite power and
authority  necessary  to  enter  into and to carry  out the  provisions  of this
Agreement and the transactions contemplated hereby.

                  6.6 Duly  Authorized.  All action on the part of the Purchaser
necessary  for the  purchase  of its Series A Stock and the  performance  of the
Purchaser's  obligations  hereunder has been taken or will be taken prior to the
Closing.  This  Agreement  is a  legal,  valid  and  binding  obligation  of the
Purchaser  enforceable in accordance with its terms,  except as such enforcement
may be limited by bankruptcy,  insolvency,  reorganization,  moratorium or other
laws and  equitable  principles  relating to or  affecting  the  enforcement  of
creditors' rights in general and by general principles of equity.

                  6.7 Accredited Investor. Purchaser is an "accredited investor"
as that term is  defined in  Regulation  D  promulgated  by the  Securities  and
Exchange  Commission.  The term "Accredited  Investor" under Regulation D refers
to:

                           (i) A person or entity who is a director or executive
officer of the Corporation;

                           (ii) Any bank as defined  in  Section  3(a)(2) of the
Securities  Act, or any savings and loan  association  or other  institution  as
defined  in Section  3(a)(5)(A)  of the  Securities  Act  whether  acting in its
individual or fiduciary  capacity;  any broker or dealer registered  pursuant to
Section 15 of the  Exchange  Act;  insurance  Corporation  as defined in Section
2(13)  of the  Securities  Act;  investment  Corporation  registered  under  the
Investment  Corporation  Act of 1940; or a business  development  Corporation as
defined in Section 2(a)(48) of that Act; Small Business  Investment  Corporation
licensed by the U.S. Small Business  Administration  under Section 301(c) or (d)
of the  Small  Business  Investment  Act  of  1958;  any  plan  established  and
maintained  by  a  state,   its  political   subdivisions,   or  any  agency  or
instrumentality of a state or its political  subdivisions for the benefit of its
employees,  if such plan has total  assets  in  excess of  $5,000,000;  employee
benefit plan within the meaning of the Employee  Retirement  Income Security Act
of 1974, if the investment  decision is made by a plan fiduciary,  as defined in
Section 3(21) of such Act, which is either a bank, savings and loan association,
insurance  Corporation,  or registered  investment  adviser,  or if the employee
benefit plan has total  assets in excess of  $5,000,000  or, if a  self-directed
plan,  with  investment  decision  made  solely by persons  that are  accredited
investors;

                           (iii) Any private business development Corporation as
defined in Section 202(a)(22) of the Investment Advisers Act of 1940;

                           (iv) Any organization  described in Section 501(c)(3)
of the Internal  Revenue Code,  corporation,  Massachusetts  or similar business
trust,  or  partnership,  not formed for the specific  purpose of acquiring  the
Securities offered, with total assets in excess of $5,000,000;

                           (v) Any natural person whose individual net worth, or
joint net worth with that person's  spouse,  at the time of his purchase exceeds
$1,000,000;

                           (vi) Any natural person who had an individual  income
in excess of $200,000 during each of the previous two years or joint income with
that  person's  spouse in excess of  $300,000  in each of those  years and has a
reasonable expectation of reaching the same income level in the current year;

                           (vii)  Any  trust,  with  total  assets  in excess of
$5,000,000,  not formed for the  specific  purpose of acquiring  the  Securities
offered,  whose  purchase  is directed  by a person who has such  knowledge  and
experience  in financial  and business  matters that he is capable of evaluating
the merits and risks of the prospective investment; or

                                       10
<PAGE>

                           (viii) Any  entity in which all of the equity  owners
are accredited investors.

                  As used in this  Section  6.8,  the term "net worth" means the
excess of total assets over total liabilities.  For the purpose of determining a
person's net worth,  the principal  residence  owned by an individual  should be
valued at fair market value, including the cost of improvements,  net of current
encumbrances.  As used in this  Section  6.8,  "income"  means  actual  economic
income,  which may differ from  adjusted  gross income for income tax  purposes.
Accordingly, the undersigned should consider whether it should add any or all of
the  following  items to its  adjusted  gross  income for income tax purposes in
order to  reflect  more  accurately  its actual  economic  income:  Any  amounts
attributable to tax-exempt income received,  losses claimed as a limited partner
in any limited partnership,  deductions claimed for depletion,  contributions to
an IRA or Keogh retirement plan, and alimony payments.

                  6.9  Resident.   Purchaser  has  its,  his  or  her  principal
residence in the state indicated on Annex 1.

         7.       RESTRICTIONS ON TRANSFER OF SECURITIES.

                  The Securities are not transferable except upon the conditions
specified  in  this  Article  VII,  which  conditions  are  intended  to  ensure
compliance  with the provisions of the Securities Act and state  securities laws
in  respect  of  the  transfer  of  any  of  such  securities.  Each  instrument
representing the Securities shall be stamped or otherwise imprinted with legends
substantially  in the following form until such time as the conditions set forth
in such legends have been met:

                  "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
                  NOT BEEN  REGISTERED  UNDER  THE  SECURITIES  ACT OF
                  1933,  AS  AMENDED,  OR  QUALIFIED  UNDER  ANY STATE
                  SECURITIES  LAW,  AND MAY NOT BE SOLD,  TRANSFERRED,
                  ASSIGNED  OR   HYPOTHECATED   UNLESS   THERE  IS  AN
                  EFFECTIVE  REGISTRATION  STATEMENT  UNDER  SUCH  ACT
                  COVERING SUCH SECURITIES,  OR THE HOLDER RECEIVES AN
                  OPINION OF COUNSEL FOR THE HOLDER OF THE  SECURITIES
                  STATING  THAT SUCH  SALE,  TRANSFER,  ASSIGNMENT  OR
                  HYPOTHECATION  IS EXEMPT FROM THE  REGISTRATION  AND
                  PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND THE
                  QUALIFICATION REQUIREMENTS UNDER STATE LAW."

         The Corporation shall be entitled to enter stop transfer notices on its
stock books with respect to the Securities  until the conditions as set forth in
the legend above with respect to the transfer of such securities have been met.

         VIII.    AFFIRMATIVE COVENANTS

         The  Corporation  covenants and agrees that so long any Purchaser holds
at least four  percent  (4%) of all shares of the Series A Stock issued and sold
in the Closings, the Corporation shall furnish the following to such Purchaser:

         8.1      Financial Statements.

                  (a) As soon as available,  and in any event within ninety (90)
days after the end of each fiscal year of the  Corporation,  beginning  with the
fiscal year ending June 30,  1999,  (i) a copy of the annual audit report of the
Corporation  for such fiscal  year  containing  a balance  sheet,  statement  of
income,  statement of stockholders' equity, and statement of cash flow as at the
end of such fiscal year and for the fiscal  year then ended,  all in  reasonable
detail and audited and certified by independent  certified public accountants of
recognized standing.

                  (b) As soon as available,  and in any event within  forty-five
(45) days after the end of each fiscal quarter, a copy of an unaudited financial
report  of the  Corporation  as of the end of such  fiscal  quarter  and for the
portion of the fiscal year then ended,  containing  consolidated balance sheets,
statements  of  income,  and  statements  of cash  flow,  (with  notes as to any
consolidating entries).

                  (c)  Corporation  shall provide to any  Purchaser  entitled to
receive financial  information under this Article VIII, on or before thirty (30)
days after receipt by Corporation of written request for such information, which

                                       11
<PAGE>

request  may only be given  during the last  quarter  of any fiscal  year of the
Corporation,  an annual budget or business plan of the  Corporation for the next
fiscal year approved by a majority of the Board of Directors.

         8.2 Books and Records.  The  Corporation  will keep (a) proper books of
record and account in which full,  true and correct  entries will be made of all
dealings or transactions of or in relation to its business and affairs;  (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims;  and (c) on a reasonably  current basis set up on its books from its
earnings allowances against doubtful  receivables,  advances and investments and
all  other  proper  accruals  (including,   without  limitation,  by  reason  of
enumeration,  accruals  for  premiums,  if any,  due on  required  payments  and
accruals for depreciation,  obsolescence, or amortization of properties),  which
should be set aside from such  earnings in  connection  with its  business.  All
determinations  pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied.

         IX.      REGISTRATION RIGHTS AGREEMENT.

         The Corporation shall at the Initial Closing enter into an Registration
Rights  Agreement  in form and  substance  substantially  as attached  hereto as
Exhibit B granting each Purchaser the registration rights set forth therein.

         X.       MISCELLANEOUS.

                  10.1  Remedies.   Any  Person  having  any  rights  under  any
provision   of  this   Agreement   will  be  entitled  to  enforce  such  rights
specifically,  to recover  damages by reason of any breach of any  provision  of
this  Agreement,  and to exercise all other rights  granted by law, which rights
may be exercised cumulatively and not alternatively.

                  10.2  Consent to  Amendments.  Except as  otherwise  expressly
provided  herein,  the  provisions  of this  Agreement  may be  amended  and the
Corporation  may take any action herein  prohibited,  or omit to perform any act
herein  required  to be  performed  by it, only if it has  obtained  the written
consent of Purchasers holding at least seventy-five percent (75%) or more of the
outstanding  shares  of  Series  A Stock.  No  course  of  dealing  between  the
Corporation and any Purchaser or any delay in exercising any rights hereunder or
under the  Corporation's  Articles of Incorporation  will operate as a waiver of
any rights of any such Purchaser.  Notwithstanding  the foregoing,  this Section
10.2 shall not be amended without the consent of all Purchasers holding Series A
Stock.

                  10.3  Survival  of   Representations   and   Warranties.   All
representations and warranties  contained herein or made in writing by any party
in connection herewith will survive the execution and delivery of this Agreement
for a period of two (2) years after the Initial Closing.

                  10.4  Successors  and Assigns.  Except as otherwise  expressly
provided herein, all covenants and agreements  contained in this Agreement by or
on behalf of any of the  parties  hereto  shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not.

                  10.5  Severability.  Each provision of this Agreement shall be
interpreted  in such manner as to be effective and valid under  applicable  law,
but if any  provision of this  Agreement 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.

                  10.6  Counterparts.  This  Agreement may be executed in two or
more counterparts, any one of which need not contain the signatures of more than
one party,  but all such  counterparts  when taken together shall constitute one
and the same Agreement.

                  10.7 Descriptive  Headings.  The descriptive  headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.

                  10.8 Notices.  Except as otherwise  expressly provided herein,
all  communications  provided for hereunder shall be in writing and delivered or
mailed by the United States mails, certified mail, return receipt requested, (a)
if to Purchaser, addressed to each Purchaser at the address specified on Annex I
hereto or to such other address as such Purchaser may in writing  designate,  or
(b) if to the Corporation, addressed to the Corporation at the address set forth
below or to such other  address  as the  Corporation  may in writing  designate.
Notices  shall be deemed to have been



                                       12
<PAGE>

validly  served,  given or  delivered  (and "the date of such notice or words of
similar  effect  shall mean the date) five (5) days after  deposit in the United
States mails,  certified  mail,  return receipt  requested,  with proper postage
prepaid, or upon actual receipt thereof (whether by noncertified mail, telecopy,
telegram, facsimile, express delivery or otherwise), whichever is earlier.

                  If to Purchasers:        To the Addresses set forth on Annex 1

                  With a Copy to:          Patton Boggs LLP
                                                Attn: Charles P. Miller
                                                2200 Ross Avenue, Suite 900
                                                Dallas, Texas 75201
                                                FAX: (214) 871-2688

                  If to the Corporation:   Valuestar Corporation
                                                Attn: Jim Stein
                                                360 22nd Street, Suite 210
                                                Oakland, CA  94612
                                                FAX: (510) 808-1400

                  With a Copy to:          Bay Venture Counsel, LLP
                                                Attn: Donald C. Reinke, Esq.
                                                1999 Harrison Street, Suite 1300
                                                Oakland, CA 94612
                                                FAX: (510) 834-7440

                  10.9 Governing  Law. The validity,  meaning and effect of this
Agreement  shall  be  determined  in  accordance  with  the  laws of  California
applicable to contracts made and to be performed entirely in California as if by
and between California residents.

                  10.10  Schedules and Exhibits.  All schedules and exhibits are
an integral part of this Agreement.

                  10.11  Litigation  Costs. If any legal action,  arbitration or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default, or misrepresentation in connection with any
of the  provisions of this  Agreement,  the  successful  or prevailing  party or
parties  therein  shall be entitled to recover  reasonable  attorneys'  fees and
other  costs  incurred in that  action or  proceeding,  in addition to any other
relief to which it or they may be entitled.

                  10.12 Final  Agreement.  This  Agreement  and the exhibits and
schedules   attached  hereto  constitute  the  only  agreement  of  the  parties
concerning the matters herein, and supersedes, merges and renders void all prior
written/oral,  and/or  contemporaneous  agreements  and  understandings  related
thereto.

                  10.13   Confidentiality.   Each   Purchaser   agrees  to  keep
confidential any information  delivered by the Corporation or Subsidiary to such
Purchaser  under this  Agreement  that the  Corporation  or  Subsidiary  clearly
indicates in writing to be confidential  information;  provided,  however,  that
nothing in this Section 10.13 will prevent such Purchaser from  disclosing  such
information  (a) to any  Affiliate of such  Purchaser or any actual or potential
purchaser,  participant,  assignee,  or transferee of such Purchaser's rights or
obligations  hereunder  that  agrees  to be bound by the  terms of this  Section
10.13,  (b) upon  order  of any  court or  administrative  agency,  (c) upon the
request or demand of any regulatory agency or authority having jurisdiction over
such  Purchaser,  (d) that is in the public  domain,  (e) that has been obtained
from any Person that is not a party to this  Agreement  or an  Affiliate  of any
such party without breach by such Person of a  confidentiality  obligation known
to such  Purchaser,  (f) if necessary  and only to the extent  necessary for the
exercise of any remedy  under this  Agreement,  or (g) to the  certified  public
accountants for such Purchaser.  The Corporation agrees that such Purchaser will
be presumed to have met its  obligations  under this Section 10.13 to the extent
that it exercises the same degree of care with respect to  information  provided
by the  Corporation  or  Subsidiary  as it  exercises  with  respect  to its own
information of similar character.


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<PAGE>

                  IN WITNESS  WHEREOF,  the parties  hereto have  executed  this
Agreement effective as of the respective Closing dates.

         IN WITNESS  WHEREOF,  the  Corporation  and Purchaser  have caused this
Agreement to be executed and delivered by their  respective  officers  thereunto
duly authorized.

                                     CORPORATION:

                                     VALUESTAR CORPORATION

                                     By: /s/ JAMES STEIN
                                         ---------------
                                     Name:  James Stein
                                     Its: President and Chief Executive Officer

                                     PURCHASER:

                                     ---------------------------------------
                                     Name of Investor

                                     ---------------------------------------
                                     Authorized Signature

                                     ---------------------------------------
                                     Print Name and Title of Signatory


                                     ADDRESS

                                     ---------------------------------------

                                     ---------------------------------------

                                     ---------------------------------------

                                     INVESTMENT AMOUNT

                                     $--------------------------------------


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