ASSET PURCHASE AGREEMENT

Exhibit 10.1

ASSET PURCHASE AGREEMENT

THIS AGREEMENT made as of the 12th day of November, 2008 (the “Effective Date”), by and among Destron Fearing Corporation, a Delaware corporation (“Seller”), Digital Angel Corporation, a Delaware Corporation (“Digital Angel”), and VeriChip Corporation, a Delaware corporation (“Buyer”).

R E C I T A L S

WHEREAS , Seller is the wholly-owned subsidiary of Digital Angel and is the owner of certain proprietary technologies, processes, and other assets relating to and used in the business of manufacturing and selling radio-frequency and visual identification products;

WHEREAS , a component of Seller’s business includes the manufacture and sale of human-implantable passive radio-frequency identification microchips (“Human RFID Product”), which are exclusively sold to Buyer and components related thereto, including readers, transponders, implanters, and packaging devices, and related services (the “Business”);

WHEREAS , Buyer develops, markets, and sells RFID systems used to identify, locate and protect people, including the identification of people in medical emergencies, which systems use the Human RFID Product, and components related thereto, including readers, transponders, implanters, and packaging devices, and which future systems, products, components and services developed by or on behalf of Buyer may use the Human RFID Product or portions thereof (“Human RFID Field”); and

WHEREAS , Seller desires to sell and deliver to Buyer, and Buyer desires to purchase and receive from Seller all, right, title and interest in and to certain Seller’s assets used or useful in connection with the operation of the Business in the Human RFID Field, so as to permit Buyer to independently pursue the development and improvement of the Business in the Human RFID Field.

IT IS THEREFORE AGREED:

ARTICLE I.
ASSETS TO BE PURCHASED

1.1. Description of Assets . Upon the terms and subject to the conditions hereof, on the Closing Date (as defined in Section 9.1) Seller shall sell, transfer, assign and deliver to Buyer, and Buyer shall purchase from Seller, all of Seller’s right, title and interest in and to all of Seller’s assets that are limited to the operation of the Business in the Human RFID Field, excluding the Excluded Assets (as defined below), but including, without limitation, the following assets (collectively referred to as the “Purchased Assets”) which shall be conveyed in the manner described:

(a) The patents and patent applications, including divisions, continuations, renewals, reissuances, and extensions of the foregoing (as applicable) listed on Schedule 1.1(a) shall be transferred and assigned to Buyer (“the Assigned Patents”), pursuant to an Assignment of Patent, annexed hereto as Schedule X , and Seller and Digital Angel shall receive from Buyer a full and irrevocable covenant not to sue for Seller’s or Digital Angel’s use of such patents and patent applications as more fully described in Section 5.4 of this Agreement;

(b) The patents and patent applications, including divisions, continuations, renewals, reissuances, and extensions of the foregoing (as applicable) listed on Schedule 1.1(b) are used or usable by Seller in its business and shall be retained by Seller for use in its business (“Retained Patents”), but Buyer shall receive from Seller and Digital Angel a full and irrevocable covenant not to sue for Buyer’s use of such patents and patent applications in its Business as more fully described in Section 4.7 of this Agreement;

(c) The FDA classification decision issued to Seller on October 12, 2004 (“FDA Decision”) for the Human RFID Product identified as 21 CFR §880.6300 as an “Implantable Radiofrequency Transponder System for Patient Identification and Health Information,” including all records and papers relating to such FDA Decision, shall be assigned and delivered to Buyer;

(d) The goodwill, supplier relationships, licenses, permits, production documents, technical specifications, assembly standards, and packaging instructions, relating to or used in the manufacture and assembly of the Human RFID Product, applicable only to the Human RFID Product, and other general intangibles of Seller relating to the Business, shall be assigned and delivered to Buyer;

(e) All of Seller’s rights, obligations, and interest in that certain Glucose Sensor Development Agreement among Seller, Buyer, and Receptors LLC dated as of January 1, 2008 shall be assigned to Buyer and Seller shall have no further rights relating thereto, except that Buyer’s rights to sue are limited as set forth in the covenant not to sue set forth in Section 5.4 of this Agreement;

(f) Copies of all papers and records (in paper or electronic format) primarily relating to the Business, and all technical and descriptive materials primarily relating to the Business, shall be delivered to Buyer;

(g) Copies of all manufacturing designs, design specifications (including design logic and flowcharts) technical information, manufacturing instructions, schematic designs, printed circuit board layouts, testing specifications, user guides, processes, improvements, copyrights, mask works, design rights, and know-how relating to, used or useful with respect to the Human RFID Products and components related thereto, including the pocket readers, transponders, implanters, and packaging devices relating thereto, in each case as used in the past and as currently used, (“Know-How”) shall be delivered to Buyer; and

(h) Seller shall, transfer all Know-How and technical expertise to Buyer relating to the manufacture of the Human RFID Products and components related thereto, including the pocket readers, transponders, implanters, and packaging devices for sale in the Human RFID Field, and shall provide Buyer with training, support and continued transfers of such Know-How and technical expertise, as more fully described in Article 10 of this Agreement.

1.2. Excluded Assets . Notwithstanding anything in this Agreement to the contrary, all of the assets owned by Seller relating to any business or venture of Seller that may also have application to the Human RFID Field and related Business (excluding, however, the Purchased Assets listed above) are retained by Seller and are not transferred by this Agreement (collectively, the “Excluded Assets”); however, Seller agrees that the Buyer may use any intellectual property rights of Seller (that exist as of the date of this Agreement) that are included in such Excluded Assets that are necessary to the Business.

1.3. Certain Agreements . Upon Closing, the parties agree to terminate, assign, or enter into certain agreements, as follows:

(a) FDA Decision Assignment . Seller shall assign the FDA Decision regarding the Human RFID Product to Buyer through delivery of an assignment letter in a form substantially similar to that set forth in Exhibit A to this Agreement, which assignment letter shall be delivered by Seller to Buyer at Closing.

(b) 2006 Tax Allocation Agreement . Upon Closing, the 2006 Tax Allocation Agreement dated as of December 21, 2006, between Buyer and Digital Angel, shall immediately terminate and shall be of no further effect.

(c) Letter Agreements between Digital Angel and Buyer . Simultaneously with the Closing, the Letter Agreement dated as of May 15, 2008, between Buyer and Digital Angel, shall be terminated and shall have no further force or effect, except for Sections 8(b) and 8(f) thereunder. Additionally, the Letter Agreement dated as of December 17, 2007 between Buyer and Digital Angel, shall be terminated and shall have no further force or effect.

(d) Resignation of Joseph J. Grillo . Simultaneously with the Closing, Joseph J. Grillo, Digital Angel’s Chief Executive Officer and President, shall resign from Buyer’s Board of Directors.

(e) Benefits Programs . Buyer’s participation in Digital Angel’s health and other employee benefit plans and insurance programs, including medical, hospitalization, dental, vision, disability and life, as well as Buyer’s participation in the Digital Angel 401(k) Plan (the “DA Plan”), shall cease no later than January 1, 2009. Buyer and Digital Angel shall take all action necessary to spin-off the assets of the DA Plan attributable to employees of Buyer into a separate defined contribution plan (the “Spun-Off Plan”), the terms of which will be substantially identical to the DA Plan, as soon as practicable after Closing. No distribution of account balances shall be made to any employees of Buyer solely as a result of the transactions contemplated by this Agreement, including the cessation of Buyer’s status as a participating employer in the DA Plan.

(f) Amended and Restated Supply, License and Development Agreement . Upon Closing, the Amended and Restated Supply, License, and Development Agreement dated as of December 27, 2005 (as amended) between Seller and Buyer, including but not limited to the letter agreement amendment dated December 17, 2007, shall immediately terminate and have no further effect, and all obligations and claims of Buyer and Seller thereunder shall be terminated and released. Notwithstanding the foregoing, Seller agrees that (i) the product warranties under Sections 8(b) of the Amended and Restated Supply, License, and Development Agreement shall continue to apply to products sold to Buyer under such Agreement, subject to the limitations of Section 8(c), (d) and (e) thereof, and (ii) the indemnification provisions of Section 8(f), (g) and (h) of the Amended and Restated Supply, License, and Development Agreement shall survive through March 4, 2013 for claims associated with the products purchased under the Amended and Restated Supply, License, and Development Agreement.

(g) Glucose Sensor Development Agreement . Upon Closing, Seller shall assign to Buyer and Buyer shall accept all of Seller’s rights, obligations, and interest in that certain Glucose Sensor Development Agreement dated January 1, 2008 among Seller, Buyer, and Receptors LLC (the “Glucose Sensor Development Agreement”).

ARTICLE II.
ASSUMPTION OF LIABILITIES AND OBLIGATIONS

2.1 Other than assuming Seller’s obligations to perform under applicable assigned agreements, if any, Buyer shall have no responsibility or liability for any liabilities or other obligations of Seller and Seller shall retain, and be responsible for paying, performing and discharging when due, all liabilities of Seller, regardless of when incurred. Buyer is not, directly or indirectly, assuming any debt, or liability of or claim against Seller of any kind whatsoever, whether known or unknown, actual or contingent, matured or unmatured, currently existing or arising in the future.

ARTICLE III.
PURCHASE PRICE

3.1 Consideration . The aggregate consideration to be paid by Buyer to Seller for the Purchased Assets, the agreement not to compete and Seller Covenant Not to Sue, and the assignment of certain contracts, shall be Five Hundred Thousand Dollars ($500,000.00) payable in cash on the Closing Date (the “Purchase Price”).

3.2 Allocation of Purchase Price . The manner in which the purchase price set forth in Section 3.1 shall be allocated among the Assets shall be as set forth in Schedule 3.2 attached hereto. Seller and Buyer agree that the purchase price allocation set forth in Schedule 3.2 has been determined in good faith and at arm’s length, and that neither party shall take a position in reporting income taxes which is inconsistent with such allocation.

3.3 Transfer Taxes . Seller shall pay any sales, use, excise or other transfer taxes imposed upon Seller by applicable law in connection with the transfer of the Assets. To the extent permitted by applicable law, the parties hereto shall cooperate in minimizing any sales, use, excise or other transfer taxes.

ARTICLE IV.
COVENANTS, REPRESENTATIONS AND WARRANTIES
OF SELLER AND/OR DIGITAL ANGEL

As an inducement to Buyer to enter into and perform its obligations under this Agreement, Seller and Digital Angel, as applicable, hereby represent, warrant and covenant to Buyer as follows:

4.1. Organization; Enforceability . Each of Seller and Digital Angel is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The execution and delivery of this Agreement, and consummation of the transactions contemplated herein, have been duly and validly authorized by the Board of Directors of Seller and by the Board of Directors of Digital Angel. This Agreement will, upon execution and delivery, be a legal, valid and binding obligation of both Seller and Digital Angel, enforceable against Seller and Digital Angel in accordance with its terms, except as may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights generally.

4.2. No Breach or Default . Except as set forth in Schedule 4.2 , the execution and delivery of this Agreement, and the consummation of the transactions herein provided will not:

(a) Result in the breach of any of the terms or conditions of, or constitute a default under, or in any manner release Seller from any obligations under, or accelerate any mortgage, note, bond, contract, indenture, agreement, license or other instrument or obligation of any kind or nature to which Seller is now a party or by which any of its properties or assets may be bound or affected;

(b) Violate any order, writ, injunction or decree of any court, administrative agency or governmental body or require the approval, consent or permission of any governmental body or agency which has not been heretofore obtained; or

(c) Violate any provision of the Certificate of Incorporation or Bylaws of Seller.

4.3. Bankruptcy and Insolvency . No petition in bankruptcy (voluntary or otherwise), assignment for the benefit of creditors or petition seeking reorganization or arrangement or other action under federal or state bankruptcy laws is pending on behalf of or against Seller.

4.4. Title to Assets . Except as set forth in Schedule 4.2 , all of the Purchased Assets are owned by Seller. On the Closing Date, Seller will convey to Buyer good and marketable title to all of the Purchased Assets, free and clear of all leases, security interests, liens, encumbrances on title, mortgages, pledges, conditional sale and other title-retention agreements, covenants, restrictions, easements, reservations and other burdens or charges of title every kind and nature (collectively, “Liens”).

4.5. Intellectual Property .

(a) Except as set forth on Schedule 4.2 , as of the Closing Date, Seller is the owner of all right, title and interest in and to each of the Assigned Patents and each such Assigned Patent is free and clear of any Liens.

(b) To the Knowledge of Seller and Digital Angel, the use, operation or other exploitation of the Purchased Assets transferred to Buyer hereunder by Seller prior to the date hereof does not infringe or misappropriate any of the intellectual property rights of any other person or entity, and Seller has not received written notice from any person or entity claiming that such Purchased Assets infringes or misappropriates any of the intellectual property rights of any person or entity. To the Knowledge of Seller and Digital Angel, the use, operation or other exploitation of the Purchased Assets in the Human RFID Field does not infringe or misappropriate any of the intellectual property rights of any other person or entity. Seller has not licensed from any third party any intellectual property rights that would be necessary for Buyer’s manufacture, sale and exploitation of the Human RFID Products sold by Buyer as of the date of this Agreement. The term “Knowledge” as used in this Agreement shall mean the actual knowledge of Joseph Grillo, Lorraine Breece, Patricia Petersen, Randy Geissler, and Ezequiel Mejia.

(c) To Seller’s and Digital Angel’s Knowledge, no person or entity is infringing upon the Assigned Patents in the Human RFID Field.

(d) To the Knowledge of Seller and Digital Angel, none of the Assigned Patents is subject to any proceeding or outstanding decree, order, judgment or settlement agreement or stipulation that restricts in any manner the use, transfer or licensing thereof by Seller or may affect the validity, use (as contemplated by this Agreement) or enforceability of such Assigned Patents.

(e) To the Knowledge of Seller and Digital Angel, the Know-How is not subject to any proceeding or outstanding decree, order, judgment or settlement agreement or stipulation that restricts in any manner the use, transfer or licensing thereof by Seller or may affect the use (as contemplated by this Agreement) of such Know-How (as contemplated by this Agreement).

4.6. Litigation and Governmental Action . There are no suits, actions or claims, legal, administrative or arbitration proceedings pending or, to Seller’s or Digital Angel’s Knowledge, threatened against Seller or Digital Angel, or to which Seller or Digital Angel is a party (whether or not covered by insurance) which in any manner relate to or affect the Purchased Assets. To Seller’s and Digital Angel’s Knowledge, no claims or suits will arise as a direct or indirect result of this transaction. To Seller’s and Digital Angel’s Knowledge, there is not outstanding any notice, order, writ, injunction or decree of any court, governmental agency or arbitration tribunal relating to or affecting the Purchased Assets.

4.7. Seller Covenant Not To Sue . As inducement for the purchase of the Purchased Assets by Buyer, Seller and Digital Angel each agrees to the provisions set forth in this Section 4.7.

(a) Definitions . For purposes of this Section 4.7, the following definitions apply:

(i) “Affiliate” means any person or entity controlled by, under common control with, or which controls, another person or entity.

(ii) “Buyer Parties” means Buyer, and any and all manufacturers, suppliers, distributors, sellers, sublicensees, purchasers, contractors, or users of any component, equipment, or product manufactured or sold by or for Buyer for use in the Human RFID Field, or any services relating to the Human RFID Field, and including Buyer’s successors and assigns.

(iii) “Improvements” means any invention, discovery or development, modification, derivative work, enhancement or improvement to the Subject Technology, created by or on behalf of any Buyer Party, Seller or Digital Angel for use with, or otherwise useful with respect to, the Subject Technology, that exist as of the date of this Agreement.

(iv) “Know-How” means the trade secrets and business know-how of Seller, relating to devices and processes which are useful in the Human RFID Field, including specifically the past, present and future information and Know-How (as defined in section 1.1(g) above) used or useful in the manufacture of the Human RFID Product, components related thereto, including readers, transponders,