Exhibit 10.3

SEPARATION AGREEMENT

AND GENERAL RELEASE OF ALL CLAIMS

This Separation Agreement and General Release of All Claims (“Separation
Agreement”) is made by and between IdentiPHI, Inc. (“Company”) and John E.
Atkinson (“Employee”) with respect to the following facts:

A. Employee is currently employed by Company as its President pursuant to the
terms of an employment agreement dated February 12, 2008 (the “Employment
Agreement”).

B. Employee has decided to resign from his employment with Company effective as
of September 30, 2008 (the “Separation Date”). Company wishes to reach an
amicable separation with Employee and assist Employee’s transition to other
employment. Employee’s last day of employment with Company is the Separation
Date.

C. The parties desire to settle all claims and issues that have, or could have
been raised, in relation to Employee’s employment with Company and arising out
of or in any way related to the acts, transactions or occurrences between
Employee and Company to date, including, but not limited to, Employee’s
employment with Company or the termination of that employment, on the terms set
forth below.

THEREFORE, in consideration of the promises and mutual agreements hereinafter
set forth, it is agreed by and between the undersigned as follows:

1. Subject to the execution of this Separation Agreement, Company will provide
Employee with certain benefits that he would not otherwise be entitled to
receive as a result of his resignation from employment and to resolve any claims
that Employee has or may have against Company.

2. Subject to Employee’s compliance with the terms of this Separation Agreement,
Company shall provide Employee with gross compensation of $7,692.31, net of
applicable taxes and withholdings, as cash in lieu of 80 hours of accrued and
unused PTO as of the Separation Date. Employee acknowledges that, following the
payment of such sum, as of the Separation Date, Employee has been paid all
wages, including salary, bonuses, commissions, and cash in lieu of any accrued,
unused PTO earned during employment with Company and has been reimbursed by
Company for all reimbursable business expenses incurred by him through the
Separation Date. Employee acknowledges that he was never denied any federal
Family Medical Leave Act (“FMLA”) or any similar state law right or benefits by
Company, including but not limited to Company’s denial of any request by
Employee for leave under FMLA or any similar state law. Employee further
acknowledges that he has no pending claims under FMLA or any similar state law
against the Company.

3. Employee has been granted an aggregate of 219,548 shares of restricted stock
(the “Restricted Stock Award”), 192,104 of which remain unvested as of the
Separation Date (the “Unvested Shares”). Employee and Company agree that
Employee’s resignation from employment with Company shall constitute Employee’s
voluntarily ceasing to provide Services to the Participating Company Group
without Good Reason (as such terms are defined in the Restricted Stock Purchase
Agreement) as of the Separation Date for purposes of the Restricted Stock Award.
Accordingly, as set forth in the terms of the Notice of Grant of Stock Purchase
Right, the Restricted Stock Purchase Agreement and Company’s 2007 Equity
Incentive Plan pursuant to which the Restricted Stock Award was granted to
Employee, effective on the Separation Date the Unvested Shares shall cease to
vest and Company shall have the right to repurchase the Unvested Shares under
the terms and subject to the conditions set forth in the Restricted Stock
Purchase Agreement. Notwithstanding any provision to the contrary in any prior
agreement

 

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between Company and Employee with respect to the Restricted Stock Award,
including but not limited to the Restricted Stock Purchase Agreement, the
aggregate purchase price for the Unvested Shares being repurchased by Company
shall be $0.01. This Separation Agreement shall constitute written notice to
Employee of Company’s exercise of its repurchase right pursuant to Section 5.3
of the Restricted Stock Purchase Agreement with respect to all of the Unvested
Shares.

4. Except with respect to the obligations created by this Separation Agreement,
Employee and his successors release Company, its parents, subsidiaries and
affiliated entities, and each of their respective shareholders, investors,
directors, officers, employees, agents, attorneys, insurers, legal successors
and assigns (the “Released Parties”) of and from any and all claims, actions and
causes of action, whether now known or unknown, which Employee now has, or at
any other time had, or shall or may have against those released parties based
upon or arising out of any matter, cause, fact, thing, act or omission
whatsoever occurring or existing at any time up to and including the date on
which Employee signs this Separation Agreement, including, but not limited to,
any claims that are based upon or arise out of Employee’s employment with
Company or the termination of that employment, and any claims of breach of
contract, wrongful termination, retaliation, fraud, defamation, infliction of
emotional distress or national origin, race, age, sex, sexual orientation,
disability or other discrimination or harassment under the Civil Rights Act of
1964, the Age Discrimination In Employment Act of 1967, the Americans with
Disabilities Act or any other applicable law. However, the release contained in
this paragraph 4 (the “Release of Claims”) is not intended to bar any claims
that, by statute, may not be waived, such as claims for workers’ compensation
benefits, unemployment insurance benefits, and any challenge to the validity of
the Release of Claims under the Age Discrimination in Employment Act of 1967, as
amended. The Release of Claims is also not intended to bar any claims to
indemnification under applicable statutes, Company’s certificate of
incorporation or bylaws, or an indemnification agreement between Company and
Employee. Employee acknowledges that Employee may discover facts or law
different from, or in addition to, the facts or law that Employee knows or
believes to be true with respect to the claims released in this Separation
Agreement and agrees, nonetheless, that this Separation Agreement and the
release contained in it shall be and remain effective in all respects
notwithstanding such different or additional facts or the discovery of them.
Employee declares and represents that Employee intends this Separation Agreement
to be complete and not subject to any claim of mistake, and that the release
herein expresses a full and complete release and Employee intends the release
herein to be final and complete. Employee executes this release with the full
knowledge that this release covers all possible claims against the Released
Parties, to the fullest extent permitted by law. Employee expressly waives
Employee’s right to recovery of any type, including damages or reinstatement, in
any administrative or court action, whether state or federal, and whether
brought by Employee or on Employee’s behalf, related in any way to the matters
released herein. Except with respect to the obligations created by this
Separation Agreement and any agreements described in paragraph 6, Company and
its successors and assigns forever release and absolutely discharge Employee and
his successors and assigns from any and all claims, demands, damages, debts,
liabilities, actions and causes of action, whether now known or unknown, which
Company now has, or at any other time had, or shall or may have against Employee
based upon, arising out of or relating to any matter, cause, fact, thing, act or
omission whatsoever occurring or existing at any time to and including the date
this Separation Agreement is signed (collectively referred to as the “Company
Released Matters”). Notwithstanding the above release, Company Released Matters
shall exclude any hereafter discovered breach by Employee of his legal and
professional duties as Chief Executive Officer and director to Company.

5. This Separation Agreement is intended to satisfy the requirements of the
Older Workers’ Benefit Protection Act, 29 U.S.C. sec. 626(f). Employee, by this
Separation Agreement, is advised to consult with an attorney before executing
this Separation Agreement. Employee acknowledges and agrees that (a) Employee
has read and understands the terms of this Separation Agreement; (b) Employee
has been advised in writing to consult with an attorney before executing this
Separation Agreement;

 

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(c) that Employee has obtained and considered such legal counsel as Employee
deems necessary; (d) that Employee has been given up to twenty-one (21) days to
consider whether or not to enter into this Separation Agreement (although
Employee may elect not to use the full 21-day period at Employee’s option); and
(e) that by signing this Separation Agreement, Employee acknowledges that
Employee does so freely, knowingly, and voluntarily. This Separation Agreement
shall not become effective or enforceable until the eighth day after Employee
signs this Separation Agreement. In other words, Employee may revoke Employee’s
acceptance of this Separation Agreement within seven (7) days after the date
Employee signs it. Employee’s revocation must be in writing and received by the
Company’s Chief Executive Officer or Chief Financial Officer by 5:00 p.m.
Eastern time on the seventh day in order to be effective. If Employee does not
revoke acceptance within the seven-day period, Employee’s acceptance of this
Separation Agreement shall become binding and enforceable on the eighth day.

6. Employee acknowledges and agrees that he shall continue to be bound by and
comply with the terms of any proprietary rights, assignment of inventions and/or
confidentiality agreements between Company and Employee. On or before the
Separation Date, Employee will return to Company, in good working condition, all
Company property and equipment that is in Employee’s possession or control,
including, but not limited to, any files, records, computers (unless separately
agreed to purchase from the Company) , computer equipment, credit cards, keys,
programs, manuals, business plans, financial records, and all documents (and any
copies thereof) that Employee prepared or received in the course of his
employment with Company or otherwise came into his possession. Employee agrees
in response to reasonable requests made by Company to cooperate fully and assist
Company in any matter in which Employee has been involved during the course of
Employee’s employment. Such assistance shall include providing information,
preparing or reviewing documents, submitting to depositions, providing testimony
and general cooperation to assist Company in explaining its position with
respect to any matter in which Employee may have been involved as an employee of
Company. In the event Employee incurs reasonable out-of-pocket expenses in
providing such assistance during his lifetime, including reasonable attorneys’
fees, Company shall reimburse such eligible expenses in accordance with
Company’s policy for reimbursement of senior executive officer expenses,
including the requirements of such policy for documentation of such expenses.
The contractual right to reimbursement shall not apply to any matter for which
Employee has sought advancement of expenses and/or indemnification pursuant to
Company’s bylaws, any indemnification agreement to which Employee is a party or
reimbursement under any applicable directors and officers liability insurance
policy. Company shall pay the reimbursement of eligible expenses on or before
the last day of Employee’s taxable year following the taxable year in which the
applicable expense was incurred by Employee. The amount of such expenses
eligible for reimbursement during a taxable year of Employee shall not affect
the expenses eligible for reimbursement in any other taxable year of Employee.

7. Employee agrees that he shall not directly or indirectly disclose any of the
terms of this Separation Agreement to anyone other than his immediate family or
counsel, except as such disclosure may be required for accounting or tax
reporting purposes or as otherwise may be required by law. Company intends that
income provided to Employee pursuant to this Separation Agreement will not be
subject to taxation under Section 409A of the Internal Revenue Code (the
“Code”). The provisions of this Separation Agreement shall be interpreted and
construed in favor of satisfying any applicable requirements of Section 409A of
the Code. However, Company does not guarantee any particular tax effect for
income provided to Employee pursuant to this Separation Agreement. In any event,
except for Company’s responsibility to withhold applicable income and employment
taxes from compensation paid or provided to Employee, Company shall not be
responsible for the payment of any applicable taxes on compensation paid or
provided to Employee pursuant to this Separation Agreement. Employee represents
that he has consulted his own attorney regarding the application of Section 409A
of the Code to this Separation Agreement.

 

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8. Employee and Company agree to be bound by Section 8 – Mutual
Non-Disparagement of the Employment Agreement.

9. Employee agrees to be bound by Section 9.1 – Non-solicitation of Customers or
Prospects and Section 9.2 - Non-Solicitation and Non-Hire of Company’s Employees
of the Employment Agreement. Employee understands and acknowledges that he has
been privy to and has obtained Company confidential information during his
employment. Employee agrees and understands that he shall not use or disclose in
any manner not authorized in writing by Company any confidential information
obtained by him in connection with his employment.

10. Employee acknowledges and agrees that he is aware of the restrictions
imposed by the United States federal securities laws and other applicable
foreign and domestic laws on a person in possession material non-public
information about a public company and that Employee will comply with such laws.
Specifically, Employee acknowledges and agrees that it is illegal to buy, sell,
purchase options in or otherwise trade in Company’s securities if he possesses
material non-public information about Company.

11. Employee acknowledges and agrees that he is aware of the filing obligations
under Section 13 of the Exchange Act of 1934 with respect to beneficial owners
of more than 5% of Company’s common stock.

12. Each party shall pay all costs and expenses that it incurs with respect to
the negotiation, execution, delivery and performance of this Separation
Agreement. In the event of any legal action relating to or arising out of this
Separation Agreement, the substantially prevailing party shall be entitled to
recover from the losing party its attorneys’ fees and costs incurred in that
action.

13. This Separation Agreement shall be interpreted in accordance with and
governed by the laws of the State of Texas, without regard to the conflict of
laws provisions thereof.

14. This Separation Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations and agreements, whether written or oral, with the exception of
(a) any agreements between the parties with respect to the Restricted Stock
Award, which shall be modified only as set forth in paragraph 3 hereof, and
(b) any agreements described in paragraph 6. This Separation Agreement will be
deemed to supersede and amend in its entirety the Employment Agreement, except
for Sections 8, 9.1 and 9.2 of the Employment Agreement as described above in
paragraph 8 and 9. Employee acknowledges and agrees that the Employee’s
resignation as President does not provide any rights under, and will not be
asserted by Employee as grounds for any benefits under, the Employment
Agreement, nor will Employee assert such resignations otherwise as grounds for
any claim against Company for constructive termination of employment. This
Separation Agreement may not be modified or amended except by a document signed
by an authorized officer of Company and Employee.

15. In the event any provision of this Separation Agreement shall be found
unenforceable, the unenforceable provision shall be deemed deleted and the
validity and enforceability of the remaining provisions shall not be affected
thereby.

16. This Separation Agreement may be pled as a full and complete defense to, and
may be used as a basis for an injunction against, any action, suit or other
proceeding that may be prosecuted, instituted or attempted by any party hereto
in breach hereof.

 

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THE PARTIES TO THIS SEPARATION AGREEMENT HAVE READ THE FOREGOING SEPARATION
AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN.
WHEREFORE, THE PARTIES HAVE EXECUTED THIS SEPARATION AGREEMENT ON THE DATES
SHOWN BELOW.

 

Dated: ________________________     By:             John E. Atkinson        
IDENTIPHI, INC. Dated: ________________________     By:             Christer
Bergman         Chief Executive Officer

 

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