Document:

EXHIBIT 4.37

                                                                Warrant CC-_____

THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED  (THE  "ACT"),  OR UNDER ANY STATE  SECURITIES  LAWS,  AND MAY NOT BE
OFFERED,  SOLD,  TRANSFERRED,  PLEDGED  OR  HYPOTHECATED  IN THE  ABSENCE  OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR AN OPINION
OF COUNSEL  SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE.

THE  SECURITIES   REPRESENTED  BY  THIS   CERTIFICATE  ARE  SUBJECT  TO  CERTAIN
RESTRICTIONS  ON  TRANSFER  SET  FORTH  HEREIN  AND IN THAT  CERTAIN  SECURITIES
PURCHASE AGREEMENT THEREFOR BETWEEN THE COMPANY AND THE ORIGINAL HOLDER HEREOF.

                              VALUESTAR CORPORATION

                             STOCK PURCHASE WARRANT

         THIS  CERTIFIES  THAT, for value  received,  VALUESTAR  CORPORATION,  a
Colorado  corporation (the "Company"),  hereby grants to  ______________________
("Holder")    the    right    to    purchase    from   the    Company    up   to
__________________________  (_____)  shares of the Common  Stock of the  Company
(the "Warrant Shares"), subject to the following terms and conditions:

         1. Series.  This Warrant is one of a duly authorized series of warrants
of the Company  (which are  identical  except for the  variations  necessary  to
express the identification numbers, names of the holder, number of common shares
issuable  upon exercise  thereof and warrant issue dates)  designated as its "CC
Warrants."

         2. Term.  This Warrant may be exercised in whole at any time during the
period  from the date of issuance of this  Warrant  until 5:00 p.m.,  California
time, on January 16, 2004 (the "Exercise Period").

         3.  Purchase   Price.   The  purchase  price  for  each  Warrant  Share
purchasable  hereunder  shall be Seventy-Five  Cents (U.S.  $0.75) (the "Warrant
Exercise Price").

         4. Exercise of Warrant. The purchase rights represented by this Warrant
may be exercised by the Holder,  in whole or in part,  at any time and from time
to time before the end of the  Exercise  Period by  surrender of this Warrant at
the principal office of the Company in Oakland, California (or such other office
or agency of the Company as may be designated by notice in writing to the Holder
at the address of the Holder  appearing on the books of the  Company),  together
with the Notice of Exercise annexed hereto duly completed and executed on behalf
of the Holder  accompanied  by  payment  in full of the amount of the  aggregate
Warrant  Exercise Price. The Warrant Exercise Price shall be made, at the option
of the Holder,  (i) in immediately  available  funds in United States Dollars or
(ii) if the primary  market for the Warrant  Shares  during the ten (10) Trading
Days (as defined in Section 6 below) immediately  preceding the date of exercise
is the National  Association of Securities Dealers Automated  Quotation System -
National Market System or a national  securities  exchange  registered under the
Exchange Act of 1934, as amended,  cancellation of Warrant Shares, valued at the
average  "Closing Price" (as defined in Section 6 below) of the Company's Common
Stock for the ten (10) consecutive  Trading Days immediately  preceding the date
of exercise.  Certificates for shares purchased  hereunder shall be delivered to
the Holder within thirty (30) business days after the date on which this Warrant
shall have been  exercised as  aforesaid,  but Holder shall be deemed the record
owner of such Warrant Shares as of and from the close of business on the date on
which this Warrant shall be surrendered.

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         5. Fractional Interest.  The Company shall not be required to issue any
fractional shares on the exercise of this Warrant.

         6.  Redemption  of  Warrants.  The Company may elect,  by ten (10) days
prior written notice as provided herein (the "Company Notice"), on any date that
is fixed by the Company  (the  "Redemption  Date") and (1) that is a Trading Day
(as defined below), (2) that is after the second anniversary of the date hereof;
and (3) on which a registration  statement  under the Securities Act of 1933, as
amended,  covering the Warrant Shares is effective and the average Closing Price
(as defined  below) of the Company's  Common Stock for the ten (10)  consecutive
Trading Days (as defined  below)  immediately  preceding the date of the Company
Notice equals or exceeds Three Dollars  ($3.00),  (adjusted for stock splits and
combinations),  to  redeem,  pro rata  among all  holders  of CC  Warrants,  all
outstanding CC Warrants  including this Warrant,  in whole or in part at a price
of $.01 per Warrant Share then  exercisable  under such  outstanding CC Warrants
(the "Redemption Price"); provided,  however, that this Warrant may be exercised
at any time prior to 5:00 p.m., California time, on the business day immediately
preceding the Redemption  Date. After the Redemption Date, all rights to acquire
such Warrant Shares shall terminate.

         For purposes  hereof,  (i) the term "Trading Day" shall mean any day on
which  securities  are traded on the  applicable  securities  exchange or in the
applicable  securities market; and (ii) the term "Closing Price" in respect of a
Trading Day shall mean the reported closing bid prices on the principal national
securities  exchange  on which  the  Common  Stock of the  Company  is listed or
admitted to trading  or, if not listed or  admitted  to trading on any  national
securities exchange, on the National Association of Securities Dealers Automated
Quotation System - National Market System .

         7. Warrant Confers No Rights of Shareholder.  Holder shall not have any
rights as a shareholder  of the Company with regard to the Warrant  Shares prior
to actual exercise resulting in the purchase of the Warrant Shares.

         8.  Investment  Representation.  Neither  this  Warrant nor the Warrant
Shares issuable upon the exercise of this Warrant have been registered under the
Securities  Act of 1933,  as  amended  (the  "Securities  Act"),  or  under  any
applicable  state  securities  laws.  Holder  acknowledges by acceptance of this
Warrant that (a) it has acquired this Warrant for investment and not with a view
toward distribution; (b) it has a pre-existing personal or business relationship
with the Company,  or its  executive  officers,  or by reason of its business or
financial  experience  it has the  capacity  to  protect  its own  interests  in
connection with the transaction; and (c) except as so notified to the Company in
writing,  it is an  accredited  investor as that term is defined in Regulation D
promulgated  under the  Securities  Act.  Holder agrees that any Warrant  Shares
issuable upon exercise of this Warrant will be acquired for  investment  and not
with a view  toward  distribution;  and  acknowledges  that to the  extent  such
Warrant  Shares will not be registered  under the  Securities Act and applicable
state securities laws, that such Warrant Shares may have to be held indefinitely
unless they are  subsequently  registered or qualified  under the Securities Act
and  applicable  state  securities  laws;  or,  based on an  opinion  of counsel
reasonably  satisfactory to the Company, an exemption from such registration and
qualification  is  available.  Holder,  by  acceptance  hereof,  consents to the
placement of the following  restrictive  legends,  or similar  legends,  on each
certificate  to be  issued  to  Holder by the  Company  in  connection  with the
issuance of such Warrant Shares:

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         "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
         SATISFACTORY  TO  THE  COMPANY   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 SECURITIES  REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
         RESTRICTIONS ON TRANSFER SET FORTH IN THAT CERTAIN  PURCHASE  AGREEMENT
         THEREFOR BETWEEN THE CORPORATION AND THE ORIGINAL HOLDER HEREOF."

         9.  Reservation  of Shares.  The Company agrees at all times during the
Exercise  Period to have authorized and reserved,  for the exclusive  purpose of
issuance and delivery  upon  exercise of this  Warrant,  a sufficient  number of
shares of its Common Stock to provide for the exercise of the rights represented
hereby.

         10. Adjustment for  Re-Classification  of Capital Stock. If the Company
at any time during the Exercise  Period shall,  by  subdivision,  combination or
re-classification of securities,  change any of the securities to which purchase
rights under this Warrant exist under the same or different number of securities
of any class or classes,  this Warrant  shall  thereafter  entitle the Holder to
acquire  such  number and kind of  securities  as would have been  issuable as a
result of such change with respect to the Warrant  Shares  immediately  prior to
such subdivision,  combination or re-classification.  If shares of the Company's
common stock are subdivided into a greater number of shares of common stock, the
purchase  price for the Warrant  Shares upon  exercise of this Warrant  shall be
proportionately   reduced  and  the  Warrant  Shares  shall  be  proportionately
increased; and conversely,  if shares of the Company's common stock are combined
into a smaller number of common stock shares, the price shall be proportionately
increased, and the Warrant Shares shall be proportionately decreased.

         11. Public Offering Lock-Up. In connection with any public registration
of this Company's securities,  the Holder (and any transferee of Holder) agrees,
upon the request of the Company or the underwriter(s) managing such underwritten
offering of the Company's securities, not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of this Warrant,  any
of the shares of Common  Stock  issuable  upon  exercise of this  Warrant or any
other  securities  of the Company  heretofore  or  hereafter  acquired by Holder
(other than those  included  in the  registration  and except with  respect to a
cashless  exercise  pursuant  to  Section 4 hereof)  without  the prior  written
consent of the Company and such underwriter(s), as the case may be, for a period
of time not to exceed 30 days before and one hundred eighty (180) days after the
effective date of the registration;  provided,  however, that Jim Stein and each
person that is an officer, director, or beneficial owner of five percent (5%) or
more of the  outstanding  shares of any class of  capital  stock of the  Company
enters into such an  agreement.  Upon  request by the  Company,  Holder (and any
transferee of Holder) agrees to enter into any further agreement in writing in a
form reasonably satisfactory to the Company and such underwriter(s). The Company
may impose stop-transfer  instructions with respect to the securities subject to
the  foregoing  restrictions  until the end of said 180-day  period.  Any shares
issued  upon  exercise  of  this  Warrant  shall  bear  an  appropriate   legend
referencing this lock-up provision.

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         12. Assignment. With respect to any offer, sale or other disposition of
this Warrant or any underlying  securities,  the Holder will give written notice
to the Company prior thereto,  describing  briefly the manner thereof,  together
with a written opinion of such Holder's counsel,  to the effect that such offer,
sale or other distribution may be effected without registration or qualification
(under any applicable federal or state law then in effect). Furthermore, no such
transfer shall be made unless the transferee meets the same investor suitability
standards set forth in Section 8 of this Warrant.  Promptly upon  receiving such
written  notice  and  reasonably  satisfactory  opinion,  if so  requested,  the
Company,  as promptly as practicable,  shall notify such Holder that such Holder
may sell or otherwise dispose of this Warrant or the underlying  securities,  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  12 that  the  opinion  of  counsel  for the  Holder  is not  reasonably
satisfactory  to the Company,  the Company  shall so notify the Holder  promptly
after such determination has been made. Each Warrant thus transferred shall bear
the same legends  appearing on this  Warrant,  and  underlying  securities  thus
transferred shall bear the legends required by Section 8. The Company may impose
stop-transfer instructions in connection with such restrictions.  Subject to any
restrictions on transfer described  elsewhere herein, the rights and obligations
of the Company and the Holder of this Warrant  shall be binding upon and benefit
the successors,  assigns,  heirs,  administrators and transferees of the parties
hereto.

         13.  Notice.  Any  notice,   demand,  consent  or  other  communication
hereunder  shall be in writing  addressed  to the other  party at its  principal
office or, in respect  of  Holder,  as its  address as shown on the books of the
Company, or to such other 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 (i)
when so  personally  delivered,  or (ii) if mailed as  aforesaid,  five (5) days
after  the  same  shall  have  been  posted,  or  (iii)  if  sent  by  facsimile
transmission, as soon as 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 (iv) if delivered by commercial courier,
upon receipt.

         14.  Governing  Law. This Warrant shall be governed by and construed in
accordance  with the laws of the State of  California,  applicable  to contracts
between  California  residents entered into and to be performed  entirely within
the State of California.

         15.  Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Warrant,  the  prevailing  party shall be
entitled to reasonable  attorneys' fees, costs and  disbursements in addition to
any other relief to which such party may be entitled.

         16. Descriptive Headings. The headings used herein are descriptive only
and for the convenience of identifying provisions,  and are not determinative of
the meaning or effect of any such provisions.

         17.  Amendment.  Except as otherwise  expressly  provided  herein,  the
provisions  of all  outstanding  CC Warrants,  including  this  Warrant,  may be
amended and/or waived only with the written  consent of the Company,  First Data
Merchant Services  Corporation ("First Data") and of holders,  including Holder,
holding CC Warrants exercisable into at least fifty percent (50%) of the Warrant
Shares  into which all  outstanding  CC  Warrants,  including  this  Warrant and
Warrants held by First Data, are then exercisable. Notwithstanding the forgoing,
no  amendment  or waiver  may affect  any  holder of CC  Warrants  in any manner
differently  from any other  Holder  without the  written  consent of such first
mentioned Holder.

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         IN WITNESS WHEREOF,  the Company has caused this Warrant to be executed
by its duly authorized officer this ___ day of January, 2001.

                                                 VALUESTAR CORPORATION

                                                 /s/ James Stein
                                                 ------------------------------
                                                 James Stein, President and CEO

                                       5
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                               NOTICE OF EXERCISE
                          COMMON STOCK PURCHASE WARRANT

To:      VALUESTAR CORPORATION

         (1) The  undersigned  hereby elects to purchase ______ shares of Common
Stock of ValueStar  Corporation,  pursuant to the terms of the attached Warrant,
and tenders herewith payment in full of the purchase price for such shares.

         (2) In exercising  this Warrant,  the  undersigned  hereby confirms and
acknowledges  that the shares of Common Stock are being acquired  solely for the
account  of the  undersigned  and not as a  nominee  for any  other  party,  for
investment,  and that the undersigned will not offer,  sell or otherwise dispose
of any such shares of Common  Stock  except  under  circumstances  that will not
result in a violation of the  Securities  Act of 1933, as amended,  or any state
securities laws.

         (3) Please issue a certificate representing said shares of Common Stock
in the name of the undersigned.

         (4)  Please  issue a new  Warrant  for the  unexercised  portion of the
attached Warrant in the name of the undersigned.

         Date:                  , 200_
              ------------------              ----------------------------------
                                              (Name)

                                              ----------------------------------
                                              (Signature)

                                              ADDRESS:

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                                              TELEPHONE AND FAX NUMBERS

                                              Tel:
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                                              Fax:
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                                              Email contact:
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                                       6EXHIBIT 4.38

                       INVESTMENT AND MARKETING AGREEMENT

         THIS  INVESTMENT  AND MARKETING  AGREEMENT  (this  "Agreement")  by and
between  First  Data  Merchant  Services  Corporation,   a  Florida  corporation
("FDMS"), and ValueStar Corporation,  a Colorado Corporation  ("ValueStar"),  is
made this 16th day of January, 2001 (the "Effective Date").

         WHEREAS,  ValueStar  through its wholly  owned  subsidiary,  ValueStar,
Inc.,  a  California  corporation  ("Subsidiary"),  provides a  merchant  rating
service,  a  merchant  benefits  service  and  a  cardholder   benefits  service
(collectively, the "ValueStar System" or "ValueStar Benefits");

         WHEREAS,   FDMS  is  in  the  business  of  providing  certain  payment
processing services for credit and debit card transactions for merchants;

         WHEREAS,  pursuant to a Strategic  Development,  Marketing And Services
Agreement   dated   September  29,  2000  by  and  between  FDMS  and  ValueStar
("Development  Agreement"),  FDMS  is in  the  process  of  enhancing  a  system
proprietary to FDMS that will allow FDMS to match credit card numbers registered
with ValueStar with  transactions  at merchants  registered with ValueStar which
are paid for with registered credit card numbers (the "FDMS System");

         WHEREAS,  FDMS is making an  investment  in  ValueStar  in the  current
financing  round of Series CC Convertible  Preferred  Stock ("Series CC Stock");
and

         WHEREAS, ValueStar recognizes FDMS as a strategic investor important to
the marketing and operation of the ValueStar System.

         NOW, THEREFORE,  in consideration of the foregoing,  FDMS and ValueStar
hereby agree as follows:

1. Investment.  FDMS has agreed to purchase 44,445 shares of Series CC Stock and
warrants  (the  "Warrants")  to  purchase  1,333,350  shares of Common  Stock of
ValueStar for an aggregate  purchase price of $2,000,000 (the "Purchase  Price")
pursuant to the Series CC Preferred Stock and Warrant  Purchase  Agreement dated
January 16, 2001 by and between ValueStar and the purchasers  named therein (the
"Securities Purchase Agreement"). ValueStar and FDMS agree that, with respect to
FDMS's  obligations  to pay the  Purchase  Price  pursuant to Section 2.2 of the
Securities  Purchase  Agreement,  (i)  $500,000 of the  Purchase  Price shall be
payable in cash, by wire transfer to  ValueStar's  account  concurrent  with the
closing  of the  Securities  Purchase  Agreement;  and  (ii)  $1,500,000  of the
Purchase Price shall be payable by means of a  nonrefundable  credit in favor of
ValueStar,   which  amount  shall  be  credited  against  the  costs,  fees  and
commissions  which  otherwise  would be payable by ValueStar to FDMS pursuant to
Sections 4, 6, 8, 10 and Exhibit E of the Development Agreement.  The securities
purchased  by FDMS as  described  in this  Section 1 shall be  delivered  at the
Initial Closing (as defined in the Securities  Purchase  Agreement) and shall be
fully-paid and  nonassessable.  The parties  further agree that,  solely for tax
purposes,the  cash  portion of the  Purchase  Price  shall be  allocable  to the
purchase of the shares of Series CC  Preferred  Stock,  and the credit under the
Development Agreement described in (ii) above shall be allocable to the purchase
of the Warrants.

1

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2.  Investment  Option.  Pursuant  to  Section  2.3 of the  Securities  Purchase
Agreement, ValueStar is authorized to issue and sell additional shares of Series
CC Stock, up to a maximum  aggregate total of 500,000 shares  (including  shares
issued  at  the  Initial   Closing  (as  defined  in  the  Securities   Purchase
Agreement)). ValueStar hereby agrees to reserve, and grants FDMS or an Affiliate
(as defined in the  Development  Agreement)  designated by FDMS, the option (the
"Option") to  purchase,  for cash up to 177,778  additional  shares of Series CC
Stock and related warrants on the same terms as are set forth in Section 1 above
and the Securities Purchase Agreement up and to the date of March 31, 2001. This
Option may be exercised only one time and in a minimum of $1,000,000.

3. Marketing Exclusivity. Except for Union Bank, for a period of six months from
the  date of this  Agreement,  ValueStar  and its  Subsidiary  shall  not sign a
marketing  agreement  with a merchant bank which is not an FDMS Bank (as defined
in the Development Agreement). Except for First National Bank of Omaha and MBNA,
for a period of six months from the date of this  Agreement,  ValueStar  and its
Subsidiary  shall not sign a marketing  agreement  with an issuing bank which is
not an FDMS Bank or FDR Issuer  (as  defined in the  Strategic  Development  and
Marketing  Agreement dated November 1, 2000 between First Data  Resources,  Inc.
and ValueStar).

4. Director  Appointment.  So long as FDMS and/or its Affiliate own at least 50%
of the  securities  described in Section 1 hereof and purchased  pursuant to the
Securities  Purchase  Agreement  (assuming the exercise of Warrants and adjusted
for stock splits,  combinations,  dividends  and the like),  FDMS shall have the
right, but not the obligation, to designate a nominee,  reasonably acceptable to
the Board of  Directors of  ValueStar,  to be elected as a director of ValueStar
and shall  promptly  notify  ValueStar  of such  designee.  Upon receipt of such
notice,  ValueStar  shall cause FDMS's  nominee to be placed on the slate at the
next annual or special  meeting of  stockholders of the Company for the election
of directors (and each annual or special meeting  thereafter for the election of
directors pursuant to this clause) and shall use its reasonable efforts to cause
such nominee to be elected at such meeting of  stockholders.  If FDMS elects not
to designate a nominee for director,  or if FDMS's nominee is not elected to the
Board of Directors,  FDMS, so long as it is entitled to nominate a nominee for a
directorship  may designate one individual  (the "FDMS  Observer") to attend all
meetings of ValueStar's  Board of Directors  (and any  committees  thereof) in a
non-voting observer capacity. The FDMS Observer shall be entitled to receive all
reports,  presentations  and materials as if such FDMS Observer were a member of
the Company's Board of Directors.  Expenses of attending  meetings shall be paid
by FDMS except  that any FDMS  nominated  director  shall be entitled to receive
directors  fees  and  expense   reimbursement  payable  to  other  directors  of
ValueStar.  Notwithstanding  the  foregoing,  (a)  in the  event  the  Board  of
Directors  intends  to  discuss  or vote  upon any  matter  that is  subject  to
attorney-client  privilege,  or otherwise  involves  confidential or proprietary
information of ValueStar,  the FDMS Observer may be excluded from the portion of
the meeting at which such matter is  discussed  by the vote of a majority of the
directors  present,  and (b) in the event FDMS or any of its  Affiliates  or its
representatives  becomes a direct  competitor of ValueStar,  the Chairman of the
Board of Directors or a majority of the  directors  present may exclude the FDMS
Observer from the meetings of the Board of Directors.

2

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5. Press Release. Neither party shall make a press release or other statement to
the general public regarding this Agreement or the parties' relationship without
first obtaining the prior written approval of such release or statement from the
other party unless  required by law.  Notwithstanding  the foregoing,  it is the
parties' intent to issue a mutually  agreed-upon press release within 10 days of
the Effective Date to disclose the material provisions of FDMS's investment.

6.  Relationship  of  the  Parties.   The  parties  are  acting  as  independent
contractors and not as partners or in the capacity of any type of joint venture.

7. Entire Agreement.  This Agreement,  the Development Agreement, the Securities
Purchase  Agreement and the exhibits  thereto  constitute  the entire  agreement
between  the  parties  hereto  and  there  are no  representations,  warranties,
covenants or obligations  except as set forth herein or therein.  This Agreement
supersedes all prior or contemporaneous agreements, understandings, negotiations
and  discussions,  written  or oral,  of the  parties  hereto,  relating  to any
transaction  contemplated  by  this  Agreement.  Nothing  in this  Agreement  is
intended or shall be  construed  to confer upon or to give any person other than
the parties hereto any rights or remedies under or by reason of this Agreement.

8. Assignment. Neither party shall assign any interest in this Agreement without
the prior  written  consent  of an  authorized  executive  officer of the other,
provided  that FDMS may assign this  Agreement  to an Affiliate  (not  including
Alliances (as defined in the Development  Agreement))  without ValueStar's prior
consent[,  and ValueStar may assign or otherwise transfer this Agreement without
the  consent  of  FDMS  or any  other  party  hereto  pursuant  to any  sale  of
substantially  all of its assets or pursuant to any  merger,  reorganization  or
exchange of shares which might otherwise be deemed an assignment.]

9. Governing Law. The rights and obligations of the parties under this Agreement
shall be governed by law of the State of New York without regard to that state's
choice of law provisions.

10.  Waiver.  Any  failure of either  party to  enforce,  at any time or for any
period of time, any of the  provisions of this Agreement  shall not be construed
as a waiver of the right of that party to enforce  such  provisions  unless said
waiver is in writing, and signed by an authorized executive officer.

11. Term. This Agreement shall commence on the Effective Date and continue until
all obligations  provided  hereunder have been performed by the parties or until
September 30, 2005 whichever is earlier.

3

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12.  Notices.  Any notice required or permitted to be given under this Agreement
shall be sent in  writing,  by prepaid,  certified,  return  receipt  requested,
first-class  air mail to the respective  party at the address below,  or to such
other address as each party may hereafter specify in writing to the other.

         If to ValueStar:     Chief Executive Officer
                              360 22nd Street
                              Oakland, CA 94612

         with a copy to:      Mr. Don Reinke
                              Bay Venture Counsel
                              1999 Harrison Street, Suite 1300
                              Oakland, CA 94111
         If to FDMS:

         with a copy to:      General Counsel
                              First Data Merchant Services Corporation
                              12500 East Belford Avenue, Suite M16-S
                              Englewood, CO 80112
                              Fax:  (720) 332-0033

     All such notices shall be deemed to have been given upon receipt.

13.  Severability  of  Provisions.  Each  provision of this  Agreement  shall be
considered  severable and if for any reason any  provision or provisions  herein
are  determined  to be invalid or contrary to any  existing or future law,  such
invalidity  shall not impair the  operation  of this  Agreement  or affect those
portions of this Agreement, which are valid.

14.  Enumerations and Headings.  The enumerations and headings contained in this
Agreement are for convenience of reference only and are not intended to have any
substantive significance in interpreting this Agreement.

15.  Sales Tax Matters.

         a. Payment of Taxes.  ValueStar shall, in addition to the other amounts
payable under the  Development  Agreement,  pay all taxes , federal,  state,  or
otherwise, or duties, imposts, fees or charges,  however designated (hereinafter
`taxes'), which are levied or imposed by any governmental authority by reason of
the sale or license of any services , communication equipment, software or other
goods and products  provided  pursuant to this  Agreements  except for franchise
taxes and income  taxes  payable by FDMS on amounts  earned by FDMS and property
taxes payable by FDMS on property owned by FDMS. Without limiting the foregoing,
ValueStar  shall promptly pay to FDMS an amount equal to any items actually paid
or required to be collected or paid by FDMS.

         b. Calculation of Taxes.  ValueStar hereby authorizes FDMS to calculate
the total  amount of taxes due by  ValueStar  from the monies due FDMS and remit
the amount of taxes to the appropriate  taxing authority on behalf of ValueStar.
FDMS's  remittance of the taxes on behalf of ValueStar shall be computed by FDMS
on the  information  available  to  FDMS.  In the  event  of the  under  or over

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calculation  of any taxes,  ValueStar  shall be  responsible  for any additional
monies due including any  penalties or interest and for  collecting  any refunds
due to ValueStar from the appropriate taxing authority.

         c. Tax  Information.  Prior to FDMS making the tax remittance on behalf
of ValueStar  provided in paragraph  a. above,  ValueStar  agrees to supply FDMS
with any and all current information necessary for FDMS to compute and remit the
taxes,  including any tax exempt  certificate,  ant tax exempt claim letter,  or
evidence satisfactory to FDMS authenticating the exemption.

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         IN WITNESS WHEREOF,  and intending to be legally bound, the undersigned
parties have duly executed this Agreement on the Effective Date.

FIRST DATA MERCHANT SERVICES CORPORATION

By:    /s/ Pamela H. Patsley
       ---------------------
Name:  Pamela H. Patsley
       ---------------------
Title: President
       ---------------------

VALUESTAR CORPORATION

By:    /s/ Jim Stein
       ---------------------
Name:  Jim Stein
       ---------------------
Title: CEO
       ---------------------

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