THIS
AGREEMENT made as of the _____ day of _____________, 2003 and effective as of
the _______ day of ______________, 2003.
  **BETWEEN:**
 
 **Zi
CORPORATION** , a body
corporate, incorporated under the laws of the Province of Alberta (hereinafter
called the “Corporation”)
  **Michael
Donnell,** an
individual residing in the town of Parker, in the State of Colorado (hereinafter
called “Employee”);
  ****
 **EMPLOYMENT
AGREEMENT**
  **WHEREAS:**   A.
    the
      Corporation is desirous of engaging the management services and expertise
      of the Employee upon the terms, conditions and for the considerations as
      hereinafter set forth; and
 B.
    the
      parties desire to enter into this Agreement to set forth their respective
      rights and obligations.
 ****
 **NOW
THEREFORE THIS AGREEMENT WITNESSETH** that in
consideration of the premises, the mutual covenants and agreements herein
contained and other good and valuable consideration, the parties hereto mutually
covenant and agree as set forth herein.
  **ARTICLE
1.**
 **CONTRACT
FOR SERVICES**
 
 1.01   Subject
to the earlier termination of this Agreement as hereinafter provided and subject
to the condition precedent set forth in paragraph 2.02 hereof, the Corporation
hereby agrees to the services of the Employee on a full-time basis to provide
services to the Corporation and its affiliates in accordance with the terms and
provisions hereof.
 
 1.02   Except as
hereinafter provided, the Employee shall be responsible for and shall have such
authority as is ordinarily consistent with the position of President and Chief
Operating Officer of the Corporation, with full power and authority to supervise
and manage the business and affairs of the Corporation and such other matters as
the directors may authorize from time to time except such matters and duties as
by law must be transacted or performed by the board of directors and/or the
shareholders of the Corporation. All such authority of the Employee shall be
subject to the power, direction and control of the board of directors of the
Corporation.
   
  1.03 Without
limiting the generality of section 1.02 hereof, the Employee’s services
hereunder shall be provided on the basis of the following terms and
conditions:
 
 (a)
    the
      Employee’s title for the first three months shall be President and Chief
      Operating Officer of the Corporation reporting to the Chief Executive
      Officer of the Corporation or such other person as may from time to time
      be designated by the Chief Executive Officer of the Corporation; Pursuant
      to the completion of a three month probationary period, the Employee’s
      title shall be President and Chief Executive Officer, reporting to the
      Chairman of the board and board of directors of the
      Corporation;
 
 (b)
    the
      Employee shall faithfully, honestly and diligently serve the Corporation
      and cooperate with the Corporation and utilize maximum professional skill
      and care to ensure that all services rendered hereunder are to the
      satisfaction of the Corporation, acting reasonably, and shall provide any
      other services not specifically mentioned herein, but which by reason of
      his capability he knows or ought to know to be necessary to ensure that
      the best interests of the Corporation are
maintained;
 
 (c)
    the
      Employee shall assume, obey, implement and execute such duties, directions
      responsibilities, procedures, policies and lawful orders as may be
      determined or given by the board of directors or the Chairman of the
      Corporation from time to time or such other person as may from time to
      time be designated by the Chairman of the
Corporation;
 
 (d)
    the
      Employee shall perform such duties and may exercise such powers as may
      from time to time be assigned to or vested in him by the by-laws of the
      Corporation; and
 
 (e)
    the
      Employee will, when it is deemed by the Corporation to be beneficial, join
      in or participate with organizations, clubs, associations or groups that
      may provide good business contacts and learning facilities for the benefit
      of the Corporation provided, however, that the Corporation shall reimburse
      the Employee for all reasonable expenses incurred in connection
      therewith.
 
 1.04   Subject
to the terms of the Confidentiality and Non-Competition Agreement appended
hereto as Schedule A the Employee agrees to devote his full time and attention
and use his best efforts to further the business and interests of the
Corporation and Affiliates during the period of this Agreement to the exclusion
of all other employment, business opportunities, consulting, investment or
contracting.
  1.05   It is
acknowledged and agreed between the parties hereto that the services to be
provided by the Employee hereunder are of such a nature that regular business
hours may be impossible and that the Employee be required to perform services in
excess of eight hours per day or five days per week. It is also anticipated that
there will be certain evenings, Sundays and holidays during which the Employee
may be required to provide services and that the services to be provided by the
Employee are, *inter
alia,* of a
supervisory nature. The Employee therefore agrees that the consideration herein
set forth shall be in full and complete satisfaction for his work and services
to be provided hereunder, no matter when and how performed and the Employee
releases the Corporation from any additional pay or compensation, whatsoever
which he might have by reason of any existing or future legislation or
otherwise.
   2
  1.06   The
services to be carried out and performed by the Employee shall be initially
carried out and performed in the town of Parker, in the State of Colorado or
such other places as may be mutually agreed between the Employee and the
Corporation, provided that the Employee is in the Calgary office a minimum of
twice per month.
  1.07   The
Corporation acknowledges that it has reviewed the qualifications and experience
of the Employee herein and formed the opinion that the Employee is capable of
carrying out the duties as set forth herein.
 
 **ARTICLE
2.**
 **TERM
OF CONTRACT**
 
 2.01   Subject
to section 2.02 hereof and to termination pursuant Article 9 herein, the term of
this Agreement shall commence effective as of July 23, 2003 and shall continue
to and including July 23, 2006.
  2.02   Notwithstanding
anything else provided in this Agreement, this Agreement shall be conditional
upon the completion by the Employee of a three month probationary period,
satisfactory to the Corporation, acting reasonably, such probation period to
terminate effective October 23, 2003. The Corporation agrees to and shall advise
the Employee on or before October 23, 2003 as to whether such probationary
period has been satisfactorily completed.
 
 **ARTICLE
3.**
 **COMPENSATION**
 
 3.01   In
consideration of the services to be provided by the Employee to the Corporation
pursuant to Article 1 hereof, but subject to regulatory approval, the
Corporation shall pay to the Employee an amount equal to TWO HUNDRED AND
TWENTY-FIVE THOUSAND (US$225,000.00) dollars per annum (the “Annual Cash
Remuneration”), payable in bi-monthly instalments on the 15 th and last
working day of each calendar month together with such increments as the board of
directors of the Corporation, in their sole discretion, may from time to time
determine. Pursuant to satisfactory completion of the three month probationary
period, the Corporation shall increase the pay to the Employee to an amount
equal to THREE HUNDRED THOUSAND (US$300,000.00) dollars per annum, payable in
bi-monthly instalments on the 15 th and last
working days of each calendar month.
 
 
 3
 
 3.02   The
Employee shall, subject to the Corporation obtaining necessary regulatory
approval, be granted five (5) year term stock options of the Corporation as
follows:
 
 a)
    An
      option to purchase two hundred and fifty thousand (250,000) shares in the
      Corporation to be granted upon acceptance of this Contract of Employment
      of which one third shall vest after three months of employment, one third
      shall vest after six months of employment and one third shall vest after
      twelve months of employment;
 
 b)
    Upon
      acceptance of the role of President and Chief Executive Officer, an option
      to purchase a further two hundred and fifty thousand (250,000) shares in
      the Corporation to be granted of which one third shall vest twelve months
      after the date of grant, one third shall vest twenty-four months after the
      date of grant and one third thirty months after the date of
      grant;
 
 c)
    Also
      upon acceptance of the role of President and Chief Executive Officer, an
      option to purchase two hundred and forty thousand (240,000) shares in the
      Corporation will be granted as performance options that will be vested
      upon reaching the performance goals as set by the board of
      directors.
 
 3.03   The
Employee shall be reimbursed for all reasonable expenses incurred by him in or
about the execution of his services hereunder, including living expenses while
absent from his city of residence, travel and meeting/entertainment expenses.
All such expenses shall be verified by statements, receipts or other reasonable
evidence satisfactory to the Corporation.
 
 3.04   Subject
to section 2.02 hereof, the Employee shall be entitled to participate in all
medical, dental and other health care, life insurance, group accident, long term
disability benefits up to a maximum amount of US dollars one thousand two
hundred and fifty (US$1,250) per month payable by the Corporation, as well as
savings, profit sharing, share option, share purchase and any other benefit
plans of whatsoever nature which the Corporation may provide from time to
time.
 
 3.05   The
Employee may be granted a bonus of up to one hundred percent (100%) of salary,
as shall be determined in the sole discretion of the board of directors, which
can be earned based upon performance goals set by the board of directors,
payable in cash, Restricted Share Units or options mutually agreed
to.
 
 3.06   The
Corporation shall be entitled to withhold and remit from such amounts payable
hereunder as is required by law from time to time.
 
 **ARTICLE
4.**
 **REVIEW
OF COMPENSATION**
 
 4.01   The
remuneration payable pursuant to section 3.01 hereof may be reviewed annually by
the board of directors of the Corporation on or before the anniversary date
hereof, at which time the board of directors shall consider such matters as it
may consider relevant and shall determine, in its absolute discretion, whether
to increase the annual remuneration payable by the Corporation to the Employee
hereunder, provided always however, that the remuneration payable to the
Employee pursuant to Article 3 hereof shall not, as a result of such review, be
reduced.
 
 
 4
 
 **ARTICLE
5.**
 **INCAPACITY**
 
 5.01   The
Employee shall be entitled to reasonable time from his services, without loss of
compensation, due to sickness or illness or other incapacity.
 
 5.02   In the
event the Employee is insured either personally or through the Corporation or
through a group plan provided by the Corporation for loss of income as a result
of disability and the Employee receives compensation or disability income
pursuant thereto, then the amount of remuneration which the Employee is
otherwise entitled to receive hereunder during the period of illness or
incapacity shall be reduced by the amount of compensation or disability income
paid by such insurer to the Employee and the Employee covenants and agrees that
he shall immediately advise the Corporation from time to time of the receipt of
any such disability income paid by such insurer to the Employee.
 
 **ARTICLE
6.**
 **CONFIDENTIALITY
AND NON-COMPETITION**
 
 6.01   The
Employee covenants and agrees to enter into a Confidentiality and
Non-Competition Agreement substantially in the form appended hereto as Schedule
A.
 
 **ARTICLE
7.**
 **VACATION**
 
 7.01   During
the term hereof, the Employee shall be entitled to four (4) weeks paid vacation
in each calendar year hereof or such other period as shall be determined by the
board of directors with no more than two weeks of vacation being taken at one
time.
 
 **ARTICLE
8.**
 **NON-ASSIGNABILITY**
 
 8.01   This
Agreement and all other rights, benefits, and privileges herein conferred are
strictly applicable to the Employee, and accordingly may not be assigned by the
Employee.
 
 **ARTICLE
9.**
 **TERMINATION**
 
 9.01   This
Agreement shall be terminated prior to the end of the term specified in section
2.01 hereof upon the occurrence of any one of the following events:
 
  5
  
 (a)
    At
      any time during the probationary period;
 
 (b)
    the
      death of the Employee, at which time the Corporation shall have no further
      obligation to the Employee under this
Agreement;
 
 (c)
    the
      Employee becoming bankrupt or making an assignment for the benefit of
      creditors in general, at which time the Corporation shall have no further
      obligation to the Employee under this
Agreement;
 
 (d)
    90
      days written notice by the Employee of his intention to terminate this
      Agreement, at which time the Corporation shall have no further obligation
      to the Employee under this Agreement.
 
 (e)
    incapacity
      due to illness, disability or injury to the Employee that renders the
      Employee unable to perform his duties for a period of longer than six
      consecutive months and, as of such date of termination, the Corporation
      shall have no further obligation to the Employee under this
      Agreement;
 
 (f)
    termination
      of this Agreement without notice by the Corporation for cause, and as of
      such date of termination, the Corporation shall have no further obligation
      to the Employee under this Agreement (“cause” shall mean any of the
      following and without limiting its meaning at common law, breach by the
      Employee of any of the covenants or terms of this Agreement and Schedule A
      hereto; the Employee’s failure to perform adequately his employment
      duties; violation by the Employee of any Corporation policy that may be
      issued from time to time, including but not limited to policies concerning
      harassment and other workplace conduct; the criminal conviction of the
      Employee, a breach by the Employee of any provisions of securities
      legislation or regulations of stock exchanges on which the Corporation’s
      shares are listed and which have application to the
      Corporation);
 
 9.02   If as a
result of a merger, takeover, amalgamation, sale of all or substantially all of
the assets, there is a change of control of the Corporation then the Employee
shall be given notice of such event or events and shall within 30 days after
receipt of such notice, advise the Corporation in writing as to one of the
following:
 
 (a)
    the
      Employee may advise the Corporation in writing to the effect that he shall
      continue to remain in the services of the Corporation and the terms of
      this agreement shall remain in full force and effect;
or
 
 (b)
    the
      Employee shall advise the Corporation that he desires to terminate this
      agreement, in accordance with the provisions of paragraph 9.01(c)
      hereof.
 
  6
 
 **ARTICLE
10.**
 **NOTICES**
 
 10.01   All
notice required or allowed to be given under this agreement shall be made either
personally or by mailing same by prepaid registered post, addressed as
hereinafter set forth or to such other address as may be designated from time to
time by such party in writing, and any notice mailed as aforesaid shall be
deemed to have been received by the addressees thereof on the fifth business day
following the day of mailing:
  Zi CORPORATION
    Michael DonnellSuite 2100, 840 - 7thAvenue S.W.
    5195 Pinyon Jay RoadCalgary, Alberta
    Parker, ColoradoT2P 3G2
    80134
 Any party
may from time to time change its address for service hereunder by written notice
to the other parties. Any notice may be served by hand delivery or by mailing
same by prepaid, registered post, in a properly addressed envelope, addressed to
the party to whom the notice is to be given at its address for service
hereunder.
 
 **ARTICLE
11.**
 **SEVERABILITY**
 
 11.01   Each
provision of this Agreement is declared to constitute a separate and distinct
covenant and to be severable from all other such separate and distinct
covenants. Without limiting the foregoing, each provision contained in Schedule
A hereof are declared to constitute a separate and distinct covenant in respect
of each capacity and each activity specified in Schedule A, and to be severable
from all other such separate and distinct covenants. If any of the capacities,
activities, or periods specified in Schedule A, are considered by a court of
competent jurisdiction as being unreasonable, the parties hereto agree that the
said court will have authority to limit such capacities, activities, periods or
areas to such capacities, activities, periods or areas as the court deems proper
in the circumstances.
 
 11.02   If any
covenant or provision herein is determined to be void or unenforceable in whole
or in part, it will not be deemed to affect or impair the enforceability or
validity of any other covenant or provision of this agreement or any part
thereof.
 
 **ARTICLE
12.**
 **RELIEF**
 12.01  The
parties to this Agreement recognize that a breach by the Employee of any of the
covenants herein contained would result in damages to the Corporation and that
the Corporation could not adequately be compensated for such damages by monetary
award. Accordingly, the Employee agrees that in the event of any such breach, in
addition to all other remedies available to the Corporation at law or in equity,
the Corporation will be entitled as a matter of right to apply to a court of
competent equitable jurisdiction for relief by way of restraining order,
injunction decree or otherwise, as may be appropriate to ensure compliance with
the provisions of this agreement.
   7
 ****
 **ARTICLE
13.**
 **WAIVER**
 
 13.01   The
parties agree that all restrictions in this agreement are necessary and
fundamental to the protection of the Corporation and are reasonable and valid,
and all defences to the strict enforcement thereof by the Corporation are hereby
waived by the Employee.
 
 **ARTICLE
14.**
 **GENERAL**
 
 14.01   The
parties hereto agree that they have expressed herein their entire understanding
and agreement concerning the subject matter of this Agreement and it is
expressly agreed that no implied covenant, condition, term or reservation or
prior representation or warranty shall be read into this agreement relating to
or concerning the subject matter hereof or any matter or operation provided for
herein.
 
 14.02   The
provisions of this agreement will enure to the benefit of and be binding upon
the heirs, executors, administrators and legal personal representatives of the
Employee and the successors and assigns of the Corporation
respectively.
 
 14.03   Wherever
the singular or masculine or neuter is used in this agreement, the same shall be
construed as meaning the plural or feminine or body politic or corporate and
vice versa where the context of the parties hereto so require.
  14.04   Time is
of the essence hereof.
 
 14.05   This
Agreement shall be construed and interpreted in accordance with the laws of the
Province of Alberta and each of the parties hereto hereby irrevocably attorns to
the jurisdiction of the Courts of such Province.
 
 14.06   The
Employee acknowledges that he has had the opportunity to have his legal counsel
review and participate in settling the terms of this Agreement.
 
 **ARTICLE
15.**
 **SPECIAL**
 
 15.01   The
Employee shall be entitled to participate in the Corporation’s benefits plan immediately
upon three month waiting period.
  8
  
 IN
WITNESS WHEREOF the parties hereto have executed this Agreement effective
as of the date and year first above written.
 
 **Zi
      CORPORATION**per:Michael E. LobsingerChairman**SIGNED, SEALED AND
      DELIVERED in**the presence of:Witness to the signature of the
      Employee
    
    **MICHAEL
    DONNELL**
 
 
 
 
 **AFFIDAVIT
OF EXECUTION**
 
 **UNITED
STATES**    **)**  I,
_________________ of the City of
 **STATE
OF COLORADO**   **)**  _______________,
in the Province of ****
 MAKE OATH
AND SAY:
 
 1.  I WAS
PERSONALLY present and did see MICHAEL DONNELL, is the Employee named in the
within instrument, who is personally known to me to be the person named therein,
duly sign and execute the same for the purposes named therein.
 
 2.  THAT THE
SAME was executed at the City of _______________, in the State/Province of  , and
that I am the subscribing witness thereto.
 
 3.  THAT I
KNOW the said Employee, and he/she is, in my belief, of the full age of eighteen
years.
  SWORN
      BEFORE ME at _______________________,
    )in
      the Province of _______________, this
    )this
      _____ day of ______________, 2003.
    ))))_______________________________________
    
    
    _______________________________________A
      Commissioner for Oaths / Notary Public in andFor
      the Province of ____________________
    
    
    Print
      Name of Witness Below:
   [Note: If
outside of Alberta, Notary Public
 required
and Notary stamp required]