STOCK PURCHASE AGREEMENT

EXHIBIT 10.1

STOCK PURCHASE AGREEMENT

by and between

Sterling Hallmark, Inc.
(“Purchaser”)

and

Digital Angel Corporation
(“Seller”)

July 10, 2008

TABLE OF CONTENTS

				Page
1.		PURCHASE AND SALE OF THE SHARES			1
2.		CONSIDERATION			1
2.1		Purchase Price			1
3.		CLOSING			1
3.1		Closing			1
4.		TAXES AND PREPAID ITEMS			2
5.		REPRESENTATIONS AND WARRANTIES OF SELLER			2
5.1		Organization and Corporate Power			2
5.2		Due Authorization; Effect of Transaction			2
5.3		Financial Statements			2
5.4		Accounts Receivable			3
5.5		Liabilities			3
5.6		Capitalization			3
5.7		Dividends and Distributions			3
5.8		Subsidiaries			3
5.9		Real Property			4
5.10		Leases			4
5.11		Personal Properties			4
5.12		Employment Arrangements			4
5.13		Material Contracts and Arrangements			5
5.14		Ordinary Course of Business			5
5.15		Litigation and Compliance with Laws			6
5.16		Tax Returns			6
5.17		Environmental Matters			7
5.18		Trademarks, Licenses, Etc			7
5.19		Insurance Policies			8
5.20		Extraordinary Events			8
5.21		Adverse Restrictions			8
5.22		Material Information			8
5.23		Omitted			9
5.24		Certain Transactions			9
5.25		No Governmental Authorizations or Approvals Required			9
5.26		Employee Benefit Plans			9
5.27		Continuing Representations			10
6.		REPRESENTATIONS, WARRANTIES, AND AGREEMENTS OF PURCHASER			10

6.1		Organizational and Corporate Power			10
6.2		Due Authorization: Effect of Transaction			10
6.3		Sufficient Funds			11
6.4		Continuing Representation			11
7.		COVENANTS AND AGREEMENTS			11
7.1		Seller's Covenants and Agreements Pending Closing			11
8.		CONDITIONS OF PURCHASER'S OBLIGATIONS			12
8.1		Opinion of Seller's Counsel			12
8.2		No Opposition			12
8.3		Noncompetition Agreement			13
8.4		Permits, Etc.			13
8.5		Insurance			13
8.6		Representations and Covenants			13
8.7		Satisfaction of Counsel			13
8.8		Instruments of Transfer			13
8.9		Taxes			13
8.10		Verizon Settlement			14
8.11		Intercompany Loans			14
8.12		Diligence			14
8.13		Releases			14
8.14		Consents			14
8.15		Terminations			15
9.		CONDITIONS OF SELLER'S OBLIGATIONS			15
9.1		Representations and Covenants			15
9.2		No Opposition			15
9.3		Noncompetition Agreement			15
9.4		Consent			15
9.5		Verizon			15
10.		INDEMNIFICATION			15
10.1		Indemnification by Seller			15
10.2		Indemnification by Purchaser			16
10.3		Notice of Claim			16
10.4		Set-Off or Reimbursement			17
10.5		Limitations			17
11.		OMITTED			17
12.		BROKERAGE FEE			17
13.		AMENDMENTS; WAIVERS			18
14.		ASSIGNMENT; SUCCESSORS AND ASSIGNS			18

15.		SEVERABILITY			18
16.		COUNTERPARTS			19
17.		SECTION AND OTHER HEADINGS			19
18.		NOTICES			19
19.		GENDER			20
20.		LAW TO GOVERN			20
21.		COURTS			20
22.		ATTORNEYS FEES			20

EXHIBITS

A INTENTIONALLY OMITTED
B ENVIRONMENTAL DEFINITIONS
C OPINION OF COUNSEL
D NONCOMPETITION AGREEMENT
E VERIZON SETTLEMENT DOCUMENTS
F PROMISSORY NOTE
G SECURITY AGREEMENT

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “ Agreement ”), entered into this 10 ^th day of July, 2008, by and between Sterling Hallmark, Inc., a California corporation (“ Purchaser ”), and Digital Angel Corporation, dba Digital Angel, a Delaware corporation (“ Seller ”).

W I T N E S S E T H T H A T:

WHEREAS, Purchaser desires to purchase and Seller desires to sell and convey to Purchaser all of the issued and outstanding stock of Computer Equity Corporation, a Delaware corporation (“CEC”) consisting of one hundred shares of $.001 par value common stock (the “Shares”) upon the terms and subject to the conditions set forth herein;

WHEREAS, Government Telecommunications, Inc., a Virginia corporation (“ GTI ”), is a wholly owned subsidiary CEC; and

NOW, THEREFORE, in consideration of the agreements of the parties hereto, and intending to be legally bound hereby, the parties hereto agree as follows:

1.  PURCHASE AND SALE OF THE SHARES .

Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the parties set forth herein, the Seller hereby agrees to sell to Purchaser, and Purchaser hereby agrees to purchase from the Seller, the Shares on the Closing Date (as defined in Section 3 ) for the consideration set forth in Section 2 .

2.  CONSIDERATION .

2.1 Purchase Price . The purchase price shall be Six Hundred Thousand Dollars ($600,000) (the “Purchase Price”). The Purchase Price shall be payable as follows:

(a) At the Closing, Purchaser shall tender to Seller the sum of $400,000.00 in cash.

(b) The balance of the Purchase Price of $200,000 shall be payable according to a promissory note (the “Promissory Note”) executed by Purchaser in the form attached hereto as Exhibit F.

(c) Contemporaneous with Closing, Purchaser shall, as security for Purchaser’s payment obligations arising under the Promissory Note, execute a security agreement, a copy of which is attached hereto as Exhibit G, pledging the Shares being acquired hereunder as collateral.

2.2 Intentionally Omitted .

3.  CLOSING .

3.1 Closing . The closing of the sale and purchase (the “ Closing ”) shall take place at the offices of Weintraub Law Group PC, 12687 Carroll Canyon Road, Suite 230, San Diego, CA 92131, at 10:00 a.m. on July 10, 2008, or at such other time and place as may be mutually agreed upon (the “ Closing Date ”).

4.  TAXES AND PREPAID ITEMS .

Except as otherwise provided herein, Seller will pay all sales, use, franchise, and other taxes and charges, including, without limitation, ad valorem, or other taxes on any real estate owned by CEC and GTI, which may become payable in connection with the sale of the Shares pursuant to the terms of this Agreement, and any and all other taxes and charges accruing out of the operation of CEC or GTI’s businesses prior to the Closing Date.

5.  REPRESENTATIONS AND WARRANTIES OF SELLER .

Seller represents, warrants, covenants and agrees that:

5.1 Organization and Corporate Power . Seller, CEC and GTI are corporations duly organized, validly existing, and in good standing under the laws of their jurisdictions of incorporation and is duly qualified and in good standing as foreign corporations in each other jurisdiction in which it owns or leases properties, conducts operations, or maintains a stock of goods, with full power and authority (corporate and other) to carry on the business in which it is engaged (a true and correct list of each such jurisdiction is set forth in Schedule 5.1 of the Disclosure Schedule) except where the failure to be so qualified would not have a material adverse effect on Seller, CEC or GTI, and to execute and deliver and carry out the transactions contemplated by this Agreement.

5.2 Due Authorization; Effect of Transaction . No provisions of the Certificate of Incorporation or Bylaws of CEC or GTI, or of any agreement, instrument, or understanding, or any judgment, decree, rule, or regulation, to which Seller, CEC or GTI is a party or by which Seller, CEC or GTI are bound, has been or will be violated by the execution and delivery by Seller of this Agreement or the performance or satisfaction of any agreement or condition herein contained upon its part to be performed or satisfied, and all requisite corporate and other authorizations for such execution, delivery, performance, and satisfaction have been duly obtained. Upon execution and delivery, this Agreement will be a legal, valid, and binding obligation of Seller, enforceable in accordance with its terms, except to the extent that enforceability may be limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting any rights, powers, privileges, remedies and interests of creditors generally, (ii) principles of equity affecting the enforcement of obligations generally (regardless of whether enforceability is considered in a proceeding in equity, at law or otherwise), or (iii) the discretionary power of the court or other authority before which may be brought any proceeding seeking equitable or other remedies, including (without limitation) specific performance, injunctive relief and indemnification. Seller, CEC and GTI are not in default in the performance, observance, or fulfillment of any of the terms or conditions of its Certificate of Incorporation or Bylaws.

5.3 Financial Statements . Except as set forth on Schedule 5.3 of the Disclosure Schedule, Seller has delivered to Purchaser consolidated balance sheets of GTI as at the close of its fiscal year for each of the three years ending December 31, 2005, 2006 and 2007, respectively, together with related consolidated statements of operations, consolidated statements of changes in stockholders’ equity, and consolidated statements of cash flows for the respective years then ended. Seller has also delivered to Purchaser the consolidated trial balance for the month of March 2008 for GTI.

The financial statements specified above, including in each case the notes to such financial statements, are hereinafter sometimes collectively referred to as the “ Financial Statements .” All of the Financial Statements are true, correct, and complete, in all material respects, have been prepared in accordance with generally accepted accounting principles consistently followed throughout the periods (except as set forth in such notes or statements) and fairly present the financial condition of GTI and the results of their operations as at the dates thereof and throughout the periods covered thereby. The Financial Statements reflect or provide for all claims against, and all debts and liabilities of, GTI, fixed or contingent, as at the dates thereof, and there has not been any change between the date of the most recent Financial Statements and the date of this Agreement that has materially or adversely affected the business or properties or condition or prospects, financial or other, or results of operations of GTI, and no fact or condition exists or is contemplated or threatened, which might cause any such change at any time in the future.

5.4 Accounts Receivable . Except as set forth in Schedule 5.4 of the Disclosure Schedule, subject to the bad debt reserve shown in the Financial Statements, all customer and trade notes and accounts receivable owned by CEC and GTI on the date of the most recent balance sheet included in the Financial Statements are fully collectible in the aggregate, to the extent of the aggregate face value thereof as indicated on such balance sheet. Since April 30, 2008 to the Closing Date, the Seller has remitted to GTI one hundred (100%) percent of GTI’s Accounts Receivable received on behalf of GTI in a lock-box account administered by the Seller.

5.5 Liabilities . Except as set forth in Schedule 5.5 of the Disclosure Schedule, CEC and GTI have no liabilities of any nature, whether absolute, contingent, or otherwise, except as set forth in the most recent balance sheet included in the Financial Statements, other than liabilities subsequently incurred in the ordinary course of business. CEC and GTI are not in material breach or default or in arrears in respect of the terms or conditions of any such liabilities and no waiver or forbearance has been granted by any holder of any such liability with respect to any such liability. Except as set forth in Schedule 5.5 of the Disclosure Schedule, all liabilities of CEC and GTI will be paid in full on or before the Closing Date.

5.6 Capitalization . The capitalization of CEC and GTI are as set forth in Schedule 5.6 of the Disclosure Schedule; and all of the outstanding capital stock of CEC and GTI are duly authorized and validly issued, fully paid, and nonassessable.

5.7 Dividends and Distributions . From the end of its most recent fiscal year to the date hereof, CEC and GTI have not declared or paid any dividend or declared or made any distribution whatsoever to its stockholders, either in cash, stock, or other property, through purchases or redemptions of stock or otherwise.

5.8 Subsidiaries . CEC and GTI do not own except for CEC owning all of the issued and outstanding shares of GTI), directly or indirectly, any of the capital stock of any corporation, association, trust or similar entity, any interest in the equity of any partnership or similar entity, any share in any joint venture, or any other equity or proprietary interest in any entity or enterprise, however organized and however such interest may be denominated or evidenced.

5.9 Real Property . Neither CEC nor GTI own any real property.

5.10 Leases . The leases listed and described in Schedule 5.10 of the Disclosure Schedule constitute all the leases of real or personal property under which CEC and GTI are bound or to which CEC and GTI are parties. Each lease listed in Schedule 5.10 of the Disclosure Schedule is valid, binding, subsisting, and enforceable in accordance with its terms, and neither CEC or GTI nor any landlord or lessor is in default or in arrears in the performance or satisfaction of any agreement or condition on its part to be performed or satisfied thereunder, and no waiver or indulgence has been granted by any of the landlords or lessors under those leases. Seller is not the landlord or lessor under any leases of real or personal property relating to GTI’s business.

5.11 Personal Properties . CEC and GTI own and have good and marketable title to all the tangible and intangible personal property and assets, other than the leaseholds referred to in Schedule 5.10 of the Disclosure Schedule, reflected upon the most recent balance sheet included in the Financial Statements or used by CEC and GTI in its business if not so reflected, free and clear of all mortgages, liens, encumbrances, equities, claims, and obligations to other persons, of whatever kind and character, except as set forth in Schedule 5.11 of the Disclosure Schedule. Schedule 5.11 of the Disclosure Schedule contains an identification of certain major items of fixed assets and machinery and equipment. The fixed assets and machinery and equipment, taken as a whole, are in a state of good repair and maintenance and are in good operating condition, normal wear and tear excepted; inventory is up to normal commercial standards and no inventory that is obsolete or unmarketable is reflected in the most recent balance sheets included in the Financial Statements. All items included in such inventory are covered on the books of CEC and GTI, and are valued on the Financial Statements at the lower of cost or market and, in any event, at not greater than their net realizable value, on an item by item basis.

5.12 Employment Arrangements . Except as set forth Schedule 5.12 of the Disclosure Schedule, CEC and GTI have no obligation, contingent or otherwise, under any employment agreement, collective bargaining or other labor agreement, any agreement containing severance or termination pay arrangements, deferred compensation agreement, retainer or consulting arrangements, pension or retirement plan, bonus or profit-sharing plan, stock option or purchase plan, or other employee contract or non-terminable arrangement (whether or not that arrangement imposes a penalty for termination), group life, health, medical or hospitalization insurance plan or program, or other employee or fringe benefit plan, including vacation plans or programs and sick leave plans or programs. CEC and GTI or its employees are not now and for the past five years have not been subject to or involved in or, to the best of Seller’s knowledge, threatened with any union elections, petitions therefor or other organizational activities. CEC and GTI have performed all obligations required to be performed under all such written agreements, plans, and arrangements and is not in breach of or in default or arrears under the terms thereof in any material respect.

5.13 Material Contracts and Arrangements . Except as set forth in Schedule 5.13 of the Disclosure Schedule, CEC and GTI have no contract or arrangement, including, without limitation, any commitments or obligations, contingent or otherwise, under any contract or arrangement (i) for the purchase or sale of inventory in excess of $15,000 in any one instance, (ii) for the purchase or sale of supplies, services or other items in excess of $15,000 in any one instance, (iii) for the purchase, sale or lease of any equipment or machinery, (iv) for the performance of service for others in excess of $15,000 in any one instance, or (v) extending beyond December 31, 2008. Each of such contracts and arrangements is valid, binding, subsisting, and enforceable in accordance with its terms and CEC and GTI have performed in all material respects all obligations required to be performed under any such contract or arrangement and is not in breach or default or in arrears in any material respect or in any other respect that would permit the other party to cancel such contract or arrangement under the terms thereof. To the best knowledge of Seller, after due inquiry, each of the contracts, if any, set forth in Schedule 5.13 of the Disclosure Schedule calling for the performance of services or the sale of inventory can be satisfied or performed by CEC and GTI without any material loss to them.

5.14 Ordinary Course of Business . CEC and GTI, from the date of the balance sheet (excluding the consolidated trial balance sheet of March 31, 2008) contained in the most recent Financial Statements to the date hereof,

(a) have operated its business in the normal, usual, and customary manner in the ordinary and regular course of business;

(b) have not sold or otherwise disposed of any of its properties or assets, other than inventory sold in the ordinary course of business;

(c) except in each case in the ordinary course of business,

(i) have not amended or terminated any outstanding lease, contract, or agreement; and

(ii) have not incurred any obligations or liabilities (fixed, contingent, or other).

(d) have not made any transactions outside the ordinary course of business in its inventory or any additions to its property or any purchases of machinery or equipment, except for normal maintenance and replacements;

(e) have not discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent) other than current liabilities or obligations under contracts then existing or thereafter entered into in the ordinary course of business, and commitments under leases existing on that date or incurred since that date in the ordinary course of business;

(f) have not mortgaged, pledged, or subjected to lien or any other encumbrances, any of its assets, tangible or intangible;

(g) have not sold or transferred any tangible asset or cancelled any debts or claims except in each case in the ordinary course of business;

(h) have not sold, assigned, or transferred any patents, trademarks, trade names, trade secrets, copyrights, or other intangible assets;

(i) have not increased the compensation payable or to become payable to any of its officers, employees, or agents;

(j) have not suffered any material damage, destruction, or loss (whether or not covered by insurance) or any acquisition or taking of property by any governmental authority;

(k) have not waived any rights that individually or in the aggregate exceed $5,000;

(l) have not experienced any organized work stoppage or industrial action; or

(m) have not entered into any other transaction or transactions that individually or in the aggregate are material to CEC or GTI, other than in the ordinary course of business.

5.15 Litigation and Compliance with Laws . Schedule 5.15 of the Disclosure Schedule contains a brief description of all pending litigation or legal or other actions, suits, proceedings, or investigations, at law or in equity or admiralty, or before any federal, state, municipal, or other governmental department (including, without limitation, the National Labor Relations Board), commission, board, agency, or instrumentality, domestic or foreign, in which CEC and GTI or any of its officers or directors, in such capacity, is engaged, or, to the knowledge and belief of Seller, with which CEC and GTI or any of its officers or directors is threatened in connection with the business or affairs or properties or assets of CEC and GTI. CEC and GTI are in compliance in all material respects with all laws and governmental rules and regulations, domestic and foreign, and all requirements of insurance carriers, applicable to its business or affairs or properties or assets, including, without limitation, those relating to environmental protection, water or air pollution, and similar matters.

5.16 Tax Returns . Except as set forth on Schedule 5.16 of the Disclosure Schedule, CEC and GTI have filed, in accordance with applicable law, all federal, state, county, and local income and franchise tax returns and all real and personal property tax returns that are required to be filed, and the provision for taxes shown on the most recent balance sheet included in the Financial Statements is sufficient to satisfy all taxes of any kind of CEC and GTI, including interest and penalties in respect thereof, whether disputed or not, and whether accrued, due, absolute, contingent, or other for all periods ended on or prior to the date of such balance sheet. As of the date hereof no tax liabilities have been assessed or proposed that remain unpaid, and CEC and GTI have not signed any extension agreement with the Internal Revenue Service or any state or local taxing authority, except as relating to those income tax returns listed on Schedule 5.16. CEC and GTI have paid all taxes that have become due pursuant to such returns and have paid all installments of estimated taxes due. All taxes and other assessments and levies that CEC and GTI are required by law to withhold or to collect have been duly withheld and collected, and have been paid over to the proper governmental authorities to the extent due and payable. From the end of its most recent fiscal year to the date hereof CEC and GTI have not made any payment of or on account of any federal, state, or local income, franchise, or any real or personal property taxes, other than state taxes imposed from time to time under $5,000 in the aggregate. Seller is not aware of any basis upon which any assessment for a material amount of additional federal income taxes could be made. The information shown on the federal income tax returns of CEC and GTI heretofore delivered to Purchaser is true, accurate, and complete and fairly presents the information purported to be shown.

5.17 Environmental Matters . Without limiting the generality of Section 5.15 :

(i) CEC and GTI are in compliance in all material respects with all applicable Environmental Laws (as such term is defined in Exhibit B hereto);

(ii) CEC and GTI have obtained all material permits and approvals required under Environmental Laws, including, without limitation, all material environmental, health and safety permits, licenses, approvals, authorizations, variances, agreements, and waivers of federal, state, and local governmental authorities (“ Permits ”) necessary for the conduct of its business and the operation of its facilities, and all such Permits are in good standing and CEC and GTI are in compliance with all terms and conditions of such Permits;

(iii) There are no conditions or circumstances associated with the currently owned or leased properties or operations of CEC and GTI that may give rise to Remedial Action.

(iv) CEC and GTI have not received any written notice or claim to the effect that it is or is reasonably expected to be liable to any person as a result of a Release (as such term is defined in Exhibit B hereto) or threatened Release or any notice letter or request for information under CERCLA (as such term is defined in Exhibit B hereto); and

(v) No Environmental Lien (as such term is defined in Exhibit B hereto) and no unrecorded Environmental Lien of which Seller, CEC and GTI have written notice has attached to any property of CEC and GTI.

5.18 Trademarks, Licenses, Etc . Schedule 5.18 of the Disclosure Schedule sets forth all of the trademarks, trade names, service marks, patents, copyrights, registrations, or applications with respect thereto, and licenses, other than off-the-shelf licenses, or rights under them owned, used, or intended to be acquired or used by CEC and GTI, and, to the extent indicated in Schedule 5.18 of the Disclosure Schedule, they have been duly registered or an application has been filed in such offices as are indicated therein. CEC and GTI are the sole and exclusive owner of the trademarks, trade names, service marks, and copyrights, the holder of the full record title to the trademark registrations and the sole owner of the inventions covered by the patents and patent applications, all as set forth in Schedule 5.18 of the Disclosure Schedule. CEC and GTI have the sole and exclusive right, to the extent listed in Schedule 5.18 of the Disclosure Schedule, to use such trademarks, trade names, service marks, patents and copyrights, and, except to the extent set forth in Schedule 5.18 of the Disclosure Schedule, all of them are free and clear of any mortgages, liens, encumbrances, equities, licenses, claims, and obligations to other persons of whatever kind and character.

5.19 Insurance Policies . The insurance policies listed and described briefly in Schedule 5.19 of the Disclosure Schedule constitute all of the policies in force and effect in respect of the business, properties and assets, including, without limitation, insurance on personnel, of CEC and GTI. CEC and GTI are not in material default under any such policy. The insurance policies so listed and identified are sufficient i