EXHIBIT 10.10

                             SECURITY AGREEMENT

       This SECURITY AGREEMENT is made as of the 18th day of August, 1998
  by SEPRAGEN CORPORATION., a California corporation, with its principal
  place of business at 30689 Huntwood Avenue, Hayward, California 94544
  ("Debtor"), in favor of K. CHARLES JANAC, with an address at 651 River
  Oaks Parkway, San Jose, CA 95134, c/o Smart Machines (the "Secured
  Party").

       1.   DEFINITIONS.

       As used in this Agreement,

       "Agreement" means this Security Agreement, as it may be amended,
  modified or supplemented from time to time.

       "Business Day" means a day other than Saturday or Sunday on which
  banks are open for business in California.

       "Collateral" means all personal property and interests in personal
  property now owned or hereafter acquired by Debtor in or upon which a
  security interest, lien or mortgage has been, or is now or hereafter,
  granted to Secured Party, whether under this Agreement or under any of
  the other Loan Documents.

       "Default" means the occurrence or existence of any of the events
  listed in Section 4 of this Agreement.

       "Lien" means any mortgage, pledge, lien, hypothecation, security
  interest or other charge, encumbrance or preferential arrangement,
  including, without limitation, the retained security title of a
  conditional vendor or lessor.

       "Loan Documents" means, collectively, this Agreement; the Note; the
  Subscription Agreement between Debtor and Secured Party (the
  "Subscription Agreement"); the Patent Mortgage; and Form UCC-1, each
  executed of even date herewith, and all other agreements, instruments
  and documents now or hereafter executed and/or delivered by Debtor to
  the Secured Party, in order to evidence or secure the Obligations, as
  each may be amended, modified or supplemented from time to time.

       "Note" means the Convertible Promissory Note, dated as of August
  18, 1998, executed by Debtor as may be amended, modified or supplemented
  or modified from time to time.

       "Obligations" means all of Debtor s liabilities, obligations and
  indebtedness to the Secured Party of any and every kind and nature,
  whether heretofore, now or hereafter owing, arising, due or payable and
  howsoever evidenced, created, incurred, acquired, or owing, whether
  primary, secondary, direct, contingent, fixed or otherwise (including,
  without limitation, obligations of performance) and whether arising or
  existing under written agreement, oral agreement or by operation of law,
  including, without limitation, all Debtor s indebtedness and obligations
  to the Secured Party under (i) the Subscription Agreement; (ii) the
  Note; (iii) the other Loan Documents. The term includes, without
  limitation, all interest, charges, expenses, fees, reasonable attorneys 
  fees and disbursements and any other sum chargeable under this
  Agreement, the Note, and the other Loan Documents.

       The foregoing definitions shall be equally applicable to both the
  singular and plural forms of the defined terms. Terms used in this
  Agreement and not defined herein or in the Note shall have the meanings
  given such terms in the Code, as defined in Section 2.1 below.
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       2.   SECURITY INTEREST.

       2.1  Grant of Security Interest. To secure payment and performance
  of the Obligations, Debtor hereby grants to the Secured Party a right of
  setoff against and a continuing security interest in and to all of
  Debtor s now existing or owned and hereafter arising or acquired: (a)
  all accounts (including, without limitation, all accounts receivable),
  chattel paper, claims, contract rights, leases and rental income
  thereunder, leasehold interests, letters of credit, instruments and
  documents ("Accounts"), and all goods sold, leased or otherwise disposed
  of by Debtor which have given rise to Accounts and which have been
  returned to or repossessed or stopped in transit by Debtor; (b) all
  patents, copyrights and trademarks, and all applications for and
  registrations of the foregoing, all franchise rights, trade names,
  goodwill, beneficial interests, rights to tax refunds and all other
  general intangibles of any kind or nature whatsoever ("General
  Intangibles"); (c) all inventory and goods of the Debtor, wherever
  located, whether in transit, held by others for the Debtor s account,
  covered by warehouse receipts, purchase orders or contracts, or in the
  possession of any carriers, forwarding agents, truckers, warehousemen,
  vendors or other persons, including, without limitation, all raw
  materials, work-in-process, finished merchandise, supplies, goods,
  incidentals, office supplies, packaging materials and all materials used
  or consumed in Debtor s business ("Inventory"); (d) goods (other than
  Inventory), including all returned, reconsigned and repossessed goods,
  machinery, equipment, vehicles, appliances, furniture, furnishings and
  fixtures ("Equipment"); (e) monies, reserves, deposits, certificates of
  deposit and deposit accounts and interest or dividends thereon,
  guaranties, securities, cash, cash equivalents and other property
  whether or not in the possession or under the control of, Secured Party
  or their respective bailee; (f) all books, records, computer records,
  ledger cards, programs and other computer materials, customer and
  supplier lists, invoices, orders and other property and general
  intangibles at any time evidencing or relating to the contents thereof
  ("Records"); (g) all accessions to any of the foregoing and all
  substitutions, renewals, improvements and replacements of and additions
  thereto; (h) all other property of Debtor, real and personal; and (i)
  all products and proceeds of the foregoing (whether such proceeds are in
  the form of cash, cash equivalents, proceeds of insurance policies,
  Accounts, General Intangibles, Inventory, Equipment, Records or
  otherwise). Debtor further assigns to Secured Party the Debtor s right
  of stoppage in transit and Debtor s right to reclaim goods from
  customers and Account Debtors (as hereinafter defined) under Section 2-
  702 of the Illinois Uniform Commercial Code, as amended (the "Code").
  Debtor and the Secured Party hereby acknowledge their mutual intention
  that the security interest granted herein will attach to Collateral when
  Debtor executes and delivers this Agreement or, in the case of any
  Collateral acquired by Debtor after the execution and delivery hereof,
  upon Debtor first acquiring rights therein. Debtor hereby acknowledges
  and agrees, subject hereto, that Debtor has rights in the Collateral and
  that value has been given.

       2.2  Preservation of Collateral and Perfection of Security
  Interests Therein. Until all of the Obligations of Debtor shall have
  been indefeasibly paid and satisfied in cash, the Secured Party shall be
  entitled to retain its security interests in and to all existing
  Collateral, and all proceeds and products thereof. Debtor agrees that it
  shall execute and deliver to the Secured Party, concurrently with the
  execution of this Agreement, and at any time or times hereafter at the
  request of the Secured Party, all financing statements or other
  documents (and pay the cost of filing or recording the same in all
  public offices deemed necessary by the Secured Party) as Secured Party
  may request, in a form satisfactory to Secured Party, to perfect and
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  keep perfected the security interests in the Collateral or to otherwise
  protect and preserve the Collateral and Secured Party s security
  interests therein. Should Debtor fail to do so, Secured Party is
  authorized to sign any such financing statements as Debtor s agent.
  Debtor further agrees that a carbon, photographic, photostatic or other
  reproduction of this Agreement or of a financing statement is sufficient
  as a financing statement. Notwithstanding anything herein to the
  contrary, Debtor may sell or license collateral in the ordinary course
  of business.

       2.3  Loss of Value of Collateral. Debtor agrees to notify Secured
  Party promptly of any material loss or depreciation in the value of the
  Collateral, other than loss or depreciation occurring in the ordinary
  course of Debtor s business.

       3.   REPRESENTATIONS, WARRANTIES AND COVENANTS.

       3.1  Recordkeeping. Debtor covenants with Secured Party that Debtor
  shall at all times hereafter keep accurate and complete records of its
  finances, in accordance with sound accounting practices and generally
  accepted accounting principles, all of which records shall be available
  for inspection during Debtor s usual business hours at the request of
  Secured Party.

       3.2  Asset Warranties. Debtor represents and warrants to Secured
  Party that the Collateral is located at the premises of Debtor as
  provided for in the first paragraph hereof is not in transit. None of
  the Collateral will be removed from such locations without prior written
  notice to Secured Party, except for use or sale in the ordinary course
  of business. Except for the security interest held by Pitney Bowes
  Credit Corporation ("Pitney Bowes"), the Collateral is not subject to
  any lien, encumbrance, mortgage or security interest whatsoever except
  for the security interests granted to Secured Party. Debtor shall not
  permit any lien, encumbrance, mortgage or security interest whatsoever
  to attach to any of the Collateral, except in favor of Secured Party.

       3.3  Verification of Accounts. After the occurrence of a Default
  hereunder, Secured Party shall have the right, at any time or times
  hereafter, in Secured Party s or in Debtor s name, to verify the
  validity, amount or any other matter relating to any Accounts, by mail,
  telephone, telegraph or otherwise.

       3.4  Appointment of Secured Party as Debtor s Attorney-in-Fact.
  Debtor hereby irrevocably designates, makes, constitutes and appoints
  Secured Party (and all persons designated by Secured Party in writing to
  Debtor) as Debtor s true and lawful attorney-in-fact, and authorizes
  Secured Party, in Debtor s or Secured Party s name, to do the following:
  at any time after the occurrence of a Default, (i) demand payment of
  Accounts of Debtor; (ii) enforce payment of accounts of Debtor by legal
  proceedings or otherwise; (iii) exercise all of Debtor s rights and
  remedies with respect to proceedings brought to collect any Account;
  (iv) sell or assign any Account of Debtor upon such terms, for such
  amount and at such time or times as Secured Party deems advisable; (v)
  settle, adjust, compromise, extend or renew any Account of Debtor; (vi)
  discharge and release any Account of Debtor; (vii) prepare, file and
  sign Debtor s name on any proof of claim in bankruptcy or other similar
  document against any Account Debtor; (viii) have access to any postal
  box of Debtor and notify the post office authorities to change the
  address for delivery of Debtor s mail to an address designated by
  Secured Party; and (ix) do all other acts and things which are
  necessary, in Secured Party s discretion, to fulfill Debtor s
  Obligations under this Agreement. Secured Party shall not exercise its
  rights arising as a result hereof until after the occurrence of a
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  Default hereunder.

       3.5  Notice to Account Debtors. Following the occurrence of a
  Default under this Agreement, Secured Party may, in its sole discretion,
  at any time or times, without prior notice to Debtor, notify any or all
  Account Debtors that the Accounts of Debtor have been assigned to
  Secured Party, that Secured Party has a security interest therein, and
  that all payments upon such Accounts be made directly to Secured Party
  or as otherwise specified by Secured Party.

       3.6  Safekeeping of Assets and Asset Covenants. Secured Party shall
  not be responsible for: (a) the safekeeping of the Collateral; (b) any
  loss or damage to all or any part of the Collateral; (c) any diminution
  in the value of all or any part of the Collateral; or (d) any act or
  default of any carrier, warehouseman processor, bailee, forwarding
  agency or any other person with respect to all or any part of the
  Collateral. All risk of loss, damage, destruction or diminution in value
  of all or any part of the Collateral of Debtor shall be borne by Debtor.

       3.7  Insurance. Debtor shall insure the Collateral at all times
  against all hazards specified by Secured Party, including, without
  limitation, fire, theft and risks covered by extended coverage
  insurance, and such policies shall be payable to Secured Party as its
  interest may appear. Such policies of insurance shall be satisfactory to
  Secured Party as to form, amount and insurer. Debtor shall furnish
  certificates, policies or endorsements to Secured Party as proof of such
  insurance, and if Debtor fails to do so, Secured Party is authorized but
  not required to obtain such insurance at Debtor s expense. All policies
  shall provide for at least thirty (30) days prior written notice to
  Secured Party of cancellation or non-renewal. Secured Party may act as
  attorney-in-fact for Debtor in making, adjusting and settling any claims
  under any such insurance policies. Debtor hereby assigns to Secured
  Party all of its right, title and interest to any insurance policies
  insuring the Collateral, including, without limitation, all rights to
  receive the proceeds of insurance, and directs all insurers to pay all
  such proceeds directly to Secured Party and authorizes Secured Party to
  endorse Debtor s name on any instrument for such payment.

       3.8  Transfer of Collateral. Debtor shall not sell, lease,
  transfer, assign or otherwise dispose of any of the Collateral or any
  interest therein without the prior written consent of Secured Party in
  each instance, except Inventory sold to buyers in the ordinary course of
  business.

       3.9  Damage to Collateral. Debtor shall immediately notify Secured
  Party in writing of any destruction of, or any substantial damage to,
  any of the Collateral.

       3.10 Change of Place of Business. Debtor shall immediately notify
  Janac in writing of any change in any of its place of business or the
  opening of any new place of business.

       3.11 Inspection. With reasonable prior notice, Debtor shall at all
  times during normal business hours allow Secured Party or its agents to
  examine and inspect the Collateral wherever located as well as Debtor s
  books and records, and to make extracts and copies of them, it being
  understood that Secured Party shall use reasonable efforts in the normal
  course of its operations to keep confidential all such information that
  (a) is not in the public domain, and (b) is not required to be disclosed
  by any court, agency or authority of competent jurisdiction, provided,
  however, that the requirement to keep such information confidential
  shall not apply to the extent necessary in order for Secured Party to
  foreclose on or otherwise deal with the Collateral in the Secured
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  Party s best interests upon the occurrence of a Default.

       3.12 Mergers, Etc. Debtor shall not become a party to any
  consolidation, merger, liquidation or dissolution or organize, purchase,
  assume or acquire any subsidiary or joint venture or partnership
  interest or interest in any other business entity, without the prior
  written consent of Secured Party.

       3.13 Change of Name. Debtor shall notify Secured Party of any
  intended change of Debtor s name, and will notify Secured Party when
  such change becomes effective.

       3.14 Organization. Debtor is a corporation duly organized, validly
  existing and in good standing under the laws of the State of California.
  Debtor is duly qualified and in good standing in each state in which the
  failure to so qualify would have a material adverse effect on its
  business.

       3.15 Authority. Debtor has full corporate right and power to enter
  into and perform its obligations under this Agreement and the other Loan
  Documents to which Debtor is a party. The execution, delivery and
  performance of this Agreement and the other Loan Documents to which
  Debtor is a party have been duly authorized by all necessary corporate
  action of Debtor, and this Agreement and the other Loan Documents to
  which Debtor is a party constitute valid and binding obligations of
  Debtor enforceable against Debtor in accordance with their respective
  terms, subject to applicable bankruptcy, reorganization, insolvency or
  similar laws affecting the enforcement of creditor s rights generally.

       3.16 No Conflicts. The execution, delivery and performance by
  Debtor of this Agreement and each of the other Loan Documents do not and
  shall not:

  (a) contravene or constitute a default (or an event that, with due
  notice or the lapse of time, or both, would constitute a default) under
  or result in any breach of, or cause or permit the acceleration of the
  maturity of any debt or obligation pursuant to, Debtor s Articles of
  Incorporation or any document, commitment or other agreement to which
  Debtor is a party or by which any of Debtor s property is bound; or (b)
  violate any statute or law or any judgment, decree, order, regulation or
  rule of any court or governmental authority applicable to Debtor.

       3.17 Actions or Proceedings. There are no actions or proceedings
  which are pending or threatened against Debtor which might result in any
  material and adverse change in its financial condition or materially
  affect the Collateral pledged hereunder.

       3.18 Violation of Law. Debtor is not in violation of any applicable
  federal, state, municipal or county statue, regulation or ordinance
  which may materially and adversely affect its business, property,
  assets, operations or conditions, financial or otherwise. Except with
  respect to certain employment taxes and FICA obligations, Debtor agrees
  that, so long as any Obligations shall remain unpaid or outstanding,
  Debtor shall comply with all applicable laws, rules, regulations, and
  orders, such compliance to include, without limitation, paying before
  the same become delinquent all taxes~ assessments, and governmental
  charges imposed upon Debtor or upon Debtor s property.

       3.19 Consents. All authorizations, consents, approvals,
  registrations, exemptions and licenses required to be obtained by Debtor
  or which are necessary for the borrowing contemplated by the Note and
  the other Loan Documents and the execution and delivery by Debtor of the
  Note and the Loan Documents to which Debtor is a party, and the
<PAGE>
  performance by Debtor of each of Debtor s obligations hereunder and
  thereunder, if any, have been obtained and are in full force and effect.

       3.20 Use of Proceeds. Debtor will use the proceeds of the Note for
  purposes specified in the Subscription Agreement.

       3.21 Accuracy of Information. All factual information heretofore or
  contemporaneously furnished by or on behalf of Debtor to Secured Party
  for purposes of or in connection with the Note or any transaction
  contemplated hereby is, and all other factual information hereafter
  furnished by or on behalf of Debtor to Secured Party will be, true and
  accurate in every material respect on the date as of which such
  information is dated or certified, and Debtor has not omitted and will
  not omit any material fact necessary to prevent such information from
  being false or misleading. Debtor has disclosed to Secured Party in
  writing all facts which might materially and adversely affect the
  credit, financial condition, affairs or prospects of Debtor, or Debtor s
  ability to perform Debtor s obligations under the Note.

       3.22 Liens. Debtor shall not, without the prior written consent of
  Secured Party, create, incur, assume or suffer to exist any lien,
  security interest, encumbrance or other claim of any nature whatsoever
  on any of its assets, including, without limitation, the Collateral,
  other than the security interest granted in favor of Secured Party or
  Pitney Bowes.

       4.   DEFAULTS: RIGHTS AND REMEDIES OF SECURED PARTY.

       4.1  Defaults. Each of the following occurrences shall constitute a
  "Default" under this Agreement:

       (a)  Debtor s failure to pay when due any of the payment
  obligations under this Agreement or under the Note.

       (b)  The occurrence of any material default by Debtor, or Debtor s
  failure or neglect to perform, keep or observe any of the covenants,
  conditions, promises or agreements contained in one or more of the Loan
  Documents.

       (c)  Any representation or warranty made or deemed made by Debtor
  to Secured Party herein or in any of the other Loan Documents or in any
  written statement or certificate at any time given pursuant to any of
  the Loan Documents is false or misleading in any material respect on the
  date made.

       (d)  A judgment or order is rendered against Debtor the effect of
  which is reasonably likely to reduce the Company ~s ability to repay
  principal or interest under the Note when due.

       (e)  A notice of lien, levy, or assessment is filed or recorded
  with respect to all or a material part of the assets of Debtor or the
  Collateral by the United States, or any department, agency or
  instrumentality thereof, or by any state, county, municipality or other
  governmental agency or any taxes or debts owing at any time or times
  hereafter to any one or more of them become a lien upon all or a
  material part of the Collateral the effect of which is reasonably likely
  to reduce the Company s ability to repay principal or interest under the
  Note when due.

       (f)  All or any part of the Collateral in an amount exceeding
  $10,000.00 is attached, seized, subjected to a writ or distress warrant,
  or is levied upon, or comes within the possession of any receiver,
  trustee, custodian or assignee for the benefit of creditors.
<PAGE>
       (g)  A proceeding under any bankruptcy, reorganization, arrangement
  of debt, insolvency, readjustment of debt or receivership law or statute
  is filed against Debtor, which proceeding is either consented to by
  Debtor or not dismissed, vacated or stayed within thirty (30) days after
  the filing thereof, or a proceeding under any bankruptcy,
  reorganization, arrangement of debt, insolvency, readjustment of debt or
  receivership law or statute is filed by Debtor, or Debtor makes an
  assignment for the benefit of creditors, or Debtor takes any corporate
  action to authorize any of the foregoing.

       (h)  Debtor voluntarily or involuntarily dissolves or is dissolved.

       (i)  Debtor is enjoined, restrained, or in any way prevented by the
  order of any court or any administrative or regulatory agency from
  conducting all or any material part of its business affairs the effect
  of which is reasonably likely to reduce the Company s ability to repay
  principal or interest under the Note when due.

       4.2  Rights and Remedies.

       (a)  Rights and Remedies Generally. Upon the occurrence of a
  Default, Secured Party shall issue a Notice of Default to Debtor. Debtor
  shall have thirty (30) days from receipt of such Notice of Default to
  cure the Default; provided however, if an event of default was caused by
  an Act of God, Company shall have sixty (60) days from the date of
  receipt of the Notice of Default to cure the default (the "Cure
  Period"). If Debtor fails to completely cure the Default within the Cure
  Period, all of the Obligations of Debtor shall immediately and
  automatically, without any additional notice of any kind, be immediately
  due and payable in cash. In addition, upon the occurrence of a Default
  and expiration of the Cure Period without a complete cure, Secured Party
  shall have, in addition to any other rights and remedies contained in
  this Agreement, the Note or in any of the other Loan Documents, all of
  the rights and remedies of a secured party under the Uniform Commercial
  Code, as then in effect in California, or other applicable laws, all of
  which rights and remedies shall be cumulative, and non-exclusive, to the
  extent permitted by law. In addition to all such rights and remedies,
  the sale, lease or other disposition of the Collateral, or any part
  thereof, by Secured Party after Default and expiration of the Cure
  Period without a complete cure, may be for cash, credit or any
  combination thereof, and Secured Party may purchase all or any part of
  the Collateral at public or, if permitted by law, private sale, and in
  lieu of actual payment of such purchase price, may set-off the amount of
  such purchase price against the Obligations then owing. Any sales of
  such Collateral may be adjourned from time to time with or without
  notice. Secured Party may, in its sole discretion, cause the Collateral
  to remain on the premises of Debtor, at Debtor s expense, pending sale
  or other disposition of such Collateral. At such times, Secured Party
  shall have the right to repair, process, preserve, protect and maintain
  the Collateral and make such replacements thereof and additions thereto
  as Secured Party may deem advisable. Secured Party shall have the right
  to conduct such sales on the premises of Debtor, at Debtor s expense, or
  elsewhere, on such occasion or occasions as Secured Party may see fit.

       (b)  Entry Upon Premises and Access to Information. Upon the
  occurrence of a Default, Secured Party shall have the right to enter
  upon (to the exclusion of Debtor) the premises of Debtor where the
  Collateral is located (or is believed to be located) without any
  obligation to pay rent to Debtor, or any other place or places where
  such Collateral is believed to be located and kept, and remove such
  Collateral therefrom to the premises of Secured Party or any agent of
  Secured Party, for such time as Secured Party may desire, in order
  effectively to collect or liquidate such Collateral or to retain such
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  Collateral in satisfaction of the Obligations, and/or Secured Party may
  require Debtor to assemble such Collateral and make it available to
  Secured Party at a place or places to be designated by Secured Party.
  Upon the occurrence of a Default, Secured Party shall have the right to
  obtain access to Debtor s data processing equipment, computer hardware
  and software relating to the Collateral and to use all of the foregoing
  and the information contained therein in any manner Secured Party deems
  appropriate; and Secured Party shall have the right to notify post
  office authorities to change the address for delivery of Debtor s mail
  to an address designated by Secured Party and to receive, open and
  process all mail addressed to Debtor.

       (c)  Sale or Other Disposition of Collateral by Secured Party.
  Any notice required to be given by Secured Party of a sale, lease or
  other disposition or other intended action by Secured Party, with
  respect to any of the Collateral, which is deposited in the United
  States mails, postage prepaid and duly addressed to Debtor at the
  address specified below, at least ten (10) days prior to such proposed
  action shall constitute fair and reasonable notice to Debtor of any such
  action. The net proceeds realized by Secured Party upon any such sale or
  other disposition, after deduction for the expense of retaking, holding,
  preparing for sale, selling or the like and the reasonable attorneys 
  and paralegals  fees and legal expenses incurred by Secured Party in
  connection therewith, shall be applied as provided herein toward
  satisfaction of the Obligations. Secured Party shall account to Debtor
  for any surplus realized upon such sale or other disposition, and Debtor
  shall remain liable for any deficiency. The commencement of any action,
  legal or equitable, or the rendering of any judgment or decree for any
  deficiency shall not affect Secured Party s security interest in the
  Collateral until the Obligations are fully paid. Secured Party shall
  have the right to commence, continue or defend proceedings in any court
  of competent jurisdiction in the name of Secured Party, the "Receiver"
  (as hereinafter defined) or Debtor for the purpose of exercising any of
  the rights, powers and remedies set out in this Section 4.2, including,
  without limitation, the institution of proceedings for the appointment
  of a Receiver. Debtor agrees that Secured Party has no obligation to
  preserve rights to the Collateral against any other Person. Secured
  Party is hereby granted a license or other right to use, without charge,
  Debtor s labels, patents, copyrights, rights of use of any name, trade
  secrets, trade names, tradestyles, trademarks, service marks and
  advertising matter, or any property of a similar nature, as it pertains
  to the Collateral, in completing production of, advertising for sale and
  selling any such Collateral, and Debtor s rights under all licenses and
  all franchise agreements shall inure to Secured Party s benefit until
  the Obligations are paid.

       (d)  Appointment of Receiver. Upon the occurrence of a Default,
  Secured Party shall have the right to appoint any Person to be an agent
  or any Person to be a receiver, manager or receiver and manager (the
  "Receiver") of the Collateral and to remove any Receiver so appointed
  and to appoint another if Secured Party so desires; it being agreed that
  any Receiver appointed pursuant to the provisions of this Agreement will
  have all of the powers of Secured Party hereunder, and in addition, will
  have the power to carry on the business of Debtor. The Receiver will be
  deemed to be the agent of Debtor for the purpose of establishing
  liability for the acts or omissions of the Receiver and Secured Party
  will not be liable for such acts or omissions and, without restricting
  the generality of the foregoing, Debtor hereby irrevocably authorizes
  Secured Party to give instructions to the Receiver relating to the
  performance of its duties as set forth herein.

       (e)  Advice of Counsel. Debtor acknowledges that it has been
  advised by its counsel with respect to this transaction and this
<PAGE>
  Agreement, including without limitation any waivers contained herein, or
  has voluntarily chosen not to consult counsel.

       5.   MISCELLANEOUS.

       5.1  Waiver. Secured Party s failure, at any time or times
  hereafter, to require strict performance by Debtor of any provision of
  this Agreement shall not waive, affect or diminish any right of Secured
  Party thereafter to demand strict compliance and performance therewith.
  Any suspension or waiver by Secured Party of a Default under this
  Agreement or a default under any of the other Loan Documents shall not
  suspend, waive or affect any other Default under this Agreement or any
  other default under any of the other Loan Documents, whether the same is
  prior or subsequent thereto and whether of the same or of a different
  kind or character. None of the undertakings, agreements, warranties,
  covenants and representations of Debtor contained in this Agreement or
  any of the other Loan Documents, and no Default under this Agreement or
  default under any of the other Loan Documents, shall be deemed to have
  been suspended or waived by Secured Party unless such suspension or
  waiver is in writing signed by an officer of Secured Party, and directed
  to Debtor specifying such suspension or waiver.

       5.2  Costs and Attorneys  Fees. If at any time or times hereafter
  Secured Party employs counsel in connection with protecting or
  perfecting Secured Party s security interest in the Collateral or in
  connection with any matters contemplated by or arising out of this
  Agreement, whether (a) to commence, defend, or intervene in any
  litigation or to file a petition, complaint, answer, motion or other
  pleading, (b) to take any other action in or with respect to any suit or
  proceeding (bankruptcy or otherwise), (c) to consult with officers of
  Secured Party to advise Secured Party with respect to this Agreement or
  the other Loan Documents or the Collateral, (d) to protect, collect,
  lease, sell, take possession of, or liquidate any of the Collateral, or
  (e) to attempt to enforce or to enforce any security interest in any of
  the Collateral, to attempt to enforce or to enforce any rights of
  Secured Party to collect any of the Obligations, then in any of such
  events, all of the reasonable attorneys  fees arising from such
  services, and any expenses, costs and charges relating thereto,
  including without limitation all reasonable fees of the paralegals and
  other staff employed by such attorneys, together with interest at the
  rate prescribed in the Note and shall be part of the Obligations,
  payable on demand and secured by the Collateral. Such interest shall
  accrue at the times, and in the manner, provided for in the Note.

       5.3  Expenditures by Secured Party. If Debtor shall fail to pay
  taxes, insurance, assessments, costs or expenses which Debtor is, under
  any of the terms hereof or of any of the other Loan Documents, required
  to pay, or fails to keep the Collateral free from other security
  interests, liens or encumbrances, except as permitted herein, Secured
  Party may, in its sole discretion, after notice to Debtor, make
  expenditures for any or all of such purposes, and the amount so
  expended, together with interest thereon at the rate prescribed in the
  Note and shall be part of the Obligations, payable on demand and secured
  by the Collateral.

       5.4  Custody and Preservation of Collateral. Secured Party shall be
  deemed to have exercised reasonable care in the custody and preservation
  of any of the Collateral in its possession if it takes such action for
  that purpose as Debtor shall request in writing, but failure by Secured
  Party to comply with any such request shall not of itself be deemed a
  failure to exercise reasonable care, and no failure by Secured Party to
  preserve or protect any right with respect to such Collateral against
  prior parties, or to do any act with respect to the preservation of such
<PAGE>
  Collateral not so requested by Debtor, shall of itself be deemed a
  failure to exercise reasonable care in the custody or preservation of
  such Collateral.

       5.5  Assignability; Parties. This Agreement may not be assigned by
  Debtor without the prior written consent of Secured Party. Secured Party
  shall not assign this Agreement without prior written consent of Debtor,
  except for estate planning purposes or through law of decent and
  distribution. Whenever in this Agreement there is reference made to any
  of the parties hereto, such reference shall be deemed to include,
  wherever applicable, a reference to the successors and permitted assigns
  of Debtor and the successors and assigns of Secured Party.

       5.6  Applicable Law of Severability. THIS AGREEMENT SHALL BE
  CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, THE
  INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PRINCIPLES) AND DECISIONS
  OF THE STATE OF CALIFORNIA. Whenever possible, 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 shall
  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 such provisions or the remaining
  provisions of this Agreement.

       5.7  Application of Payments. Notwithstanding any contrary
  provision contained in this Agreement or in any of the other Loan
  Documents, Debtor irrevocably waives the right to direct the application
  of any and all payments at any time or times hereafter received by
  Secured Party from Debtor or with respect to any of the Collateral, and
  Debtor does hereby irrevocably agree that Secured Party shall have the
  continuing exclusive right to apply and reapply any and all payments
  received at any time or times hereafter, whether with respect to the
  Collateral or otherwise, against the Obligations in such manner as
  Secured Party may deem advisable, notwithstanding any entry by Secured
  Party upon any of its books and records.

       5.8  Marshaling; Payments Set Aside. Secured Party shall be under
  no obligation to marshall any assets in favor of Debtor or any other
  Person or against or in payment of any or all of the Obligations. To the
  extent that Debtor makes a payment or payments to Secured Party or
  Secured Party enforces its security interests or exercises its rights of
  setoff, and such payment or payments or the proceeds of such enforcement
  or setoff or any part thereof are subsequently invalidated, declared to
  be fraudulent or preferential, set aside and/or required to be repaid to
  a trustee, receiver or any other party under any bankruptcy law, state,
  federal or foreign law, common law or equitable cause, then to the
  extent of such recovery, the obligation or part thereof originally
  intended to be satisfied shall be revived and continued in full force
  and effect as if such payment had not been made. or such enforcement or
  setoff had not occurred.

       5.9  Section Titles. The section and subsection titles contained in
  this Agreement shall be without substantive meaning or content of any
  kind whatsoever and are not a part of the agreement between the parties.

       5.10 Continuing Effect. This Agreement, Secured Party s security
  interests in the Collateral of Debtor, and all of the other Loan
  Documents shall continue in full force and effect so long as any
  Obligations of Debtor shall be owed to Secured Party.

       5.11 Notices. Except as otherwise expressly provided herein, any
  notice required or desired to be served, given or delivered hereunder
  shall be in writing, and shall be deemed to have been validly served,
<PAGE>
  given or delivered upon the earlier of (a) personal delivery to the
  address set forth below (b) delivery by facsimile or similar means of
  delivery and (c) in the case of mailed notice, three (3) days after
  deposit in the United States mails, with proper postage for certified
  mail, return receipt requested, prepaid, or in the case of notice by
  Federal Express or other reputable overnight courier service, one (1)
  Business Day after delivery to such courier service, addressed to the
  party to be notified as follows:

       (i)  If to Secured Party at:
                 K. Charles Janac
                 c/o Smart Machines
                 651 River Oaks Parkway
                 San Jose, CA 95134

                 Telephone No.: (408) 324-1234 ext. 104
                 Facsimile No.: (408) 324-1966

       (ii) If to Debtor at:
                 Sepragen Corporation
                 30689 Huntwood Avenue
                 Hayward, CA 94544
                 Attention: President
                 Telephone No:  (5l0)-476-0690
                 Facsimile No:  (510)-476-0655

       or to such other address as each party designates to the other in
       the manner herein prescribed.

       5.12 Equitable Relief. Debtor recognizes that, in the event Debtor
  fails to perform, observe or discharge any of its obligations or
  liabilities under this Agreement, any remedy at law may prove to be
  inadequate relief to Secured Party; therefore, Debtor agrees that
  Secured Party, if Secured Party so requests, shall be entitled to
  temporary and permanent injunctive relief.

       5.13 Entire Agreement. This Agreement, together with the Loan
  Documents executed in connection herewith, constitutes the entire
  Agreement among the parties with respect to the subject matter hereof,
  and supersedes all prior written or oral understandings with respect
  thereto. This Agreement may be amended only by mutual agreement of the
  parties evidenced in writing and signed by the party to be charged
  therewith.

       5.14 Indemnity. Debtor agrees to defend, protect, indemnify and
  hold harmless Secured Party and each and all of its respective officers,
  directors, employees, attorneys and agents ("Indemnified Parties") from
  and against any and all liabilities, obligations, losses, damages,
  penalties, actions, judgments, suits, claims, costs, expenses and
  disbursements of any kind or nature whatsoever (including, without
  limitation, the fees and disbursements of counsel for the Indemnified
  Parties in connection with any investigative, administrative or judicial
  proceeding, whether or not the Indemnified Parties shall be designated
  by a party thereto), which may be imposed on, incurred by, or asserted
  against any Indemnified Party (whether direct, indirect or consequential
  and whether based on any federal, state, local or foreign laws or other
  statutory regulations, including without limitation securities,
  environmental and commercial laws and regulations, under common law or
  at equitable cause, or on contract or otherwise) in any manner relating
  to or arising out of this Agreement or the other Loan Documents, or any
  act, event or transaction related or attendant thereto (including any
  liability under federal, state, local or foreign environmental laws or
  regulations); provided, that Debtor shall not have any obligation to any
<PAGE>
  Indemnified Party hereunder with respect to matters caused by or
  resulting from the willful misconduct or gross negligence of such
  Indemnified Party. To the extent that the undertaking to indemnify, pay
  and hold harmless set forth in the preceding sentence may be
  unenforceable because it is violative of any law or public policy,
  Debtor shall contribute the maximum portion which it is permitted to pay
  and satisfy under applicable law, to the payment and satisfaction of all
  matters incurred by the Indemnified Parties. Any liability, obligation,
  loss, damage, penalty, cost or expense incurred by the Indemnified
  Parties shall be paid to the Indemnified Parties on demand, together
  with interest thereon at the rate prescribed for in the Note from the
  date incurred by the Indemnified Parties until paid by Debtor, be added
  to the Obligations and be secured by the Collateral. The provisions of
  and undertakings and indemnifications set out in this Section 5.14 shall
  survive the satisfaction and payment of the Obligations.

       5.15 Representations and Warranties. Notwithstanding anything to
  the contrary contained herein, each representation or warranty contained
  in this Agreement or any of the other Loan Documents shall survive the
  execution and delivery of this Agreement and the other Loan Documents
  and the repayment of the Obligations.

       5.16 Counterparts. This Agreement may be executed in one or more
  counterparts, each of which shall be deemed an original but all of which
  together shall constitute one and the same instrument.

       5.17 Conflict. To the extent that any provision or term of the
  Subscription Agreement or the Note conflict with any provision or term
  herein, the term or provision of this Agreement shall govern.

       IN WITNESS WHEREOF, this Agreement has been duly executed as of the
  day and year above written.

                                     SEPRAGEN CORPORATION

                                     By: /s/ Vinit Saxena
                                     Its: President

                                     /s/ K. Charles Janac
                                     K. CHARLES JANAC
<PAGE>
                   EXHIBIT A TO UCC-1 FINANCING STATEMENT

  Debtor:                            Secured Party: 
  Sepragen Corporation               K. Charles Janac 
  30689 Huntwood Avenue              c/o Smart Machines Inc.
  Hayward, CA 94544                  651 River Oaks Parkway  
                                     San Jose, CA 95134

       This Financing Statement covers all of Debtor's right, title and
  interest in and to the following types of property, whether currently
  existing or owned or hereafter arising or acquired, wheresoever located
  (collectively, the "Collateral"):

       (a)  accounts (including, without limitation, all accounts
       receivable), chattel paper, claims, contract rights, leases and
       rental income thereunder, leasehold interests, letters of credit,
       instruments and documents ("Accounts"), and all goods sold, leased
       or otherwise disposed of by Debtor which have given rise to
       Accounts and which have been returned to or repossessed or stopped
       in transit by Debtor;

       (b)  all patents, copyrights and trademarks, and all applications
       for and registrations of the foregoing, all franchise rights, trade
       names, goodwill, beneficial interests, rights to tax refunds and
       all other general intangibles of any kind or nature whatsoever
       ("General Intangibles");

       (c)  all inventory and goods of the Debtor, wherever located,
       whether in transit, held by others for the Debtor's account,
       covered by warehouse receipts, purchase orders or contracts, or in
       the possession of any carriers, forwarding agents, truckers,
       warehousemen, vendors or other persons, including, without
       limitation, all raw materials, work-in-process, finished
       merchandise, supplies, goods, incidentals, office supplies,
       packaging materials and all materials used or consumed in Debtor's
       business ("Inventory");

       (d)  goods (other than Inventory), including all returned,
       reconsigned and repossessed goods, machinery, equipment, vehicles,
       appliances, furniture, furnishings and fixtures ("Equipment");

       (e)  monies, reserves, deposits, certificates of deposit and
       deposit accounts and interest or dividends thereon, guaranties,
       securities, cash, cash equivalents and other property whether or
       not in the possession or under -the control of Agent, any Secured
       Party or their respective bailee;

       (f)  all books, records, computer records, ledger cards, programs
       and other computer materials, customer and supplier lists,
       invoices, orders and other property and general intangibles at any
       time evidencing or relating to the contents thereof ("Records");

       (g)  all accessions to any of the foregoing and all substitutions,
       renewals, improvements and replacements of and additions thereto;

       (h)  all other property of Debtor, real and personal; and

       (i)  all products and proceeds of the foregoing (whether such
       proceeds are in the form of cash, cash equivalents, proceeds of
       insurance policies, Accounts, General Intangibles, Inventory,
       Equipment, Records or otherwise).