<PAGE>

                                                                    Exhibit 10.1


                                 Bingo.com, Inc.
                        Suite C200 - 4223 Glencoe Avenue
                        Marina del Ray, California 90292



August 17, 2001


Shane Murphy
c/o Suite C200 - 4223 Glencoe Avenue
Marina del Ray, California
90292

Dear Shane:

Re:  Termination Agreement

We provide this letter to confirm the terms and conditions upon which your
employment with Bingo.com, Inc. and Bingo.com (Canada) Enterprises Inc.
(together, "Bingo.com") will be ending by mutual agreement. When you sign and
return a copy of this letter to Bingo.com, this letter will become a binding
agreement.

1.       Your employment under the written employment agreement made between us,
         Bingo, Inc., and Redruth Ventures Inc. ("Redruth") dated April 16, 2001
         (the "Employment Agreement") is terminated as of August 31, 2001. As a
         result, all rights and obligations under the Employment Agreement,
         other than sections 1, 3 and 7 and subsections 4(c), 4(e), 4(g) and
         4(h) (which expressly survive the termination of your employment), are
         terminated as of August 31, 2001.

2.       Please return all property belonging to Bingo.com that is in your
         possession, including all written information, tapes, discs or memory
         devices and copies thereof, and any other material on any medium in
         your possession or control relating to the business or affairs of
         Bingo.com, without retaining any copies or records of confidential or
         proprietary information whatsoever. Please return any keys, pass cards,
         identification cards or other property belonging to Bingo.com.

3.       With respect to salary, vacation pay and any other benefits, Bingo.com
         will pay you any outstanding salary, vacation pay and benefits payable
         under the Employment Agreement or pursuant to the Employment Standards
         Act (British Columbia) for your employment up to and including August
         31, 2001.

4.       Bingo.com, Redruth and Mitch White ("White") hereby covenant and agree
         as follows:

         (a)      Bingo.com will make a payment to you of Cdn$10,000, on the
                  first day of each and every month for 12 months commencing on
                  September 1, 2001. The payments will be made to you by way of
                  12 post-dated cheques, which will be delivered to you on or
                  before August 31, 2001. You will be responsible for making and
                  remitting any necessary statutory deductions;


<PAGE>


         (b)      White will execute a personal guarantee substantially in the
                  form attached as Schedule "A" hereto, whereby he will
                  guarantee payment to you of the 12 monthly payments of
                  Cdn$10,000 each as they become due and owing to you by
                  Bingo.com;

         (c)      Bingo.com will pay you Cdn$130,000 by issuing to you 250,000
                  Common shares (the "Shares") of Bingo.com, Inc. as validly
                  issued and outstanding fully paid and non-assessable Common
                  shares of Bingo.com, Inc. registered in your name and
                  beneficially owned by you. The Shares will be "restricted
                  securities" and will be subject to the conditions of the
                  resale exemption provided by U.S. Securities and Exchange
                  Commission Rule 144 ("Rule 144") including, without
                  limitation, a one-year hold period from the date of issuance
                  of the Shares;

         (d)      The payments under subparagraphs 4(a) and 4(c) and the other
                  covenants and agreements under this paragraph 4 are in full
                  satisfaction of all contractual, common law and statutory
                  obligations of Bingo.com regarding severance pay, notice,
                  payment in lieu of notice or damages of any kind including,
                  without limitation, any entitlements under the Employment
                  Standards Act (British Columbia).

         (e)      As of the date of this letter, you hold stock options to
                  purchase up to 1,100,000 Common shares of Bingo.com (the
                  "Options"). All of the Options will vest immediately.
                  Notwithstanding anything contained in the Employment
                  Agreement, the 1999 Non-Qualified Stock Option Plan, the Stock
                  Option Agreement dated December 13, 2000 or the Second Amended
                  and Restated Stock Option Agreement dated December 13, 2000,
                  your Options will expire on August 31, 2003;

         (f)      Bingo.com will sign a release substantially in the form
                  attached as Schedule "B" hereto;

         (g)      Bingo.com, Redruth and White will cause Tarnie Williams to be
                  appointed as President and Chief Executive Officer of
                  Bingo.com and Bingo.com (Canada) Enterprises Inc. and Tarnie
                  Williams will hold such offices until such time as Tarnie
                  Williams approves a successor; and

         (h)      The 750,000 Common shares issued to you under subsection 2(f)
                  of the Employment Agreement will be released to you on August
                  31, 2001. You acknowledge that the shares will be "restricted
                  securities" and will be subject to the conditions of the
                  resale exemption provided by Rule 144 including, without
                  limitation, a one-year hold period from July 11, 2001.

5.       In consideration of the covenants and agreements of Bingo.com, Redruth
         and White under paragraph 4 of this letter, you hereby covenant and
         agree as follows:

         (a)      You will deliver a written resignation as director, President,
                  Chief Executive Officer, Chairman of the Board, Treasurer and
                  Secretary of Bingo.com, Inc. and director, President, Chief
                  Executive Officer and Secretary of Bingo.com (Canada)
                  Enterprises Inc. to Bingo.com for insertion into the minute
                  books of the companies;

         (b)      You will use your reasonable best efforts to cause David Chalk
                  to resign as a director of Bingo.com, Inc.; and

         (c)      You will sign a release substantially in the form attached as
                  Schedule "B" hereto.


                                      -2-

<PAGE>


6.       Provided that Bingo.com, White and Redruth remain in good standing with
         respect to their obligations to you under paragraph 4 of this letter
         (including, without limitation, payment of the monthly payments within
         five days of the date that each becomes due and owing), you further
         covenant and agree that:

         (a)      You will appoint by proxy a proxyholder to be determined by
                  Bingo.com and Redruth as your nominee to attend and act at
                  shareholder meetings of Bingo.com, Inc. The proxy will
                  represent all of the Common shares that you hold from time to
                  time of Bingo.com, Inc.;

         (b)      Prior to August 31, 2003 you will not, in any one day, sell a
                  number of Common shares of Bingo.com, Inc. that is greater
                  than 25% of the volume of Common shares of Bingo.com, Inc.
                  that is traded on a stock exchange on that day; and

         (c)      If at any time to desire to sell, exchange, assign or dispose
                  (a "Transfer") any of the Common shares that you acquire upon
                  the exercise of the Options, you may only do so if you first
                  offer Bingo.com, Inc. the prior right to purchase, receive or
                  acquire such shares on the following basis:

                  (i)      the offer must be made by written notice to
                           Bingo.com, Inc. and must specify the number of shares
                           that you desire to Transfer;

                  (ii)     Bingo.com, Inc. will have the right to accept the
                           offer to purchase some or all of the offered shares
                           from you;

                  (iii)    the purchase price per share will be the closing
                           trading price of the Common shares on the last
                           trading day immediately preceding the date the offer
                           is made;

                  (iv)     Bingo.com, Inc. will have 48 hours after receipt of
                           the offer (the "Offering Period") to deliver written
                           notice to you that Bingo.com, Inc. either accepts or
                           rejects the offer. Failure to deliver such notice
                           will be deemed to be a rejection of the offer;

                  (v)      if Bingo.com, Inc. does not accept the Offer, then
                           you may transfer some or all of the offered shares to
                           a third party provided that the transfer is completed
                           within a 90 day period following the Offering Period
                           (after which period has expired you must again comply
                           with this subparagraph before you Transfer any of the
                           Common shares that you acquire upon the exercise of
                           the Options); and

                  (vi)     the closing of the purchase of the shares by
                           Bingo.com, Inc. will take place within the 30 day
                           period following the Offering Period.

7.       We take this opportunity to remind you that your obligations to
         Bingo.com not to disclose trade secrets and other confidential
         information and not to compete with or solicit the business or
         employees of Bingo.com continue beyond the termination of your
         employment.


                                      -3-

<PAGE>


We wish you every success in the future.

Bingo.com, Inc.                                            Redruth Ventures Inc.

per:                                                       per:

"Shane Murphy"                                             "Mitch White"
----------------------------------------                   ---------------------
Authorized Signatory                                       Authorized Signatory


Bingo.com (Canada) Enterprises Inc.

per:

"Shane Murphy"
-------------------------------------------
Authorized Signatory


                                                           )
SIGNED, SEALED & DELIVERED                                 )
by Mitch White in the presence of:                         )
                                                           )
"Jamie Lanfranco"                                          )   "Mitch White"
-------------------------------------------------------        -----------------
Signature of Witness                                       )   Mitch White
                                                           )
Name of Witness:  C. Jamie Lanfranco                       )
                                                           )
Address of Witness:  #2703 - 1238 Melville Street,         )
                        Vancouver, BC                      )
Occupation of Witness:  Chartered Accountant



I hereby agree to the terms and conditions contained in this letter, in witness
whereof I have hereunto set my hand and seal this 17th day of August, 2001.

                                                           )
SIGNED, SEALED & DELIVERED                                 )
by Shane Murphy in the presence of:                        )
                                                           )
"Jamie Lanfranco"                                          )   "Shane Murphy"
-------------------------------------------------------        -----------------
Signature of Witness                                       )   Shane Murphy
                                                           )
Name of Witness:  C. Jamie Lanfranco                       )
                                                           )
Address of Witness:  #2703 - 1238 Melville Street,         )
                        Vancouver, BC                      )

Occupation of Witness:  Chartered Accountant



                                      -4-


<PAGE>

                                  SCHEDULE "A"

                               PERSONAL GUARANTEE


To:               Shane Murphy
                  c/o Suite C200 - 4223 Glencoe Avenue
                  Marina del Ray, California
                  90292


For consideration the undersigned hereby guarantees payment to Shane Murphy (the
"Creditor") of Cdn$120,000 as it becomes due and owing to the Creditor by
Bingo.com, Inc. and Bingo.com (Canada) Enterprises Inc. (together, the "Debtor")
in accordance with the terms of a Termination Agreement dated August 17, 2001
among the Creditor, the undersigned, Redruth Ventures Inc. and the Debtor (the
"Termination Agreement"). Under the Termination Agreement, a payment of
Cdn$10,000 shall become due and owing to the Creditor by the Debtor on the first
day of each and every month for 12 months commencing on September 1, 2001.

It is agreed that no change in the name, objects, capital stock or constitution
of the Debtor, shall in any way affect the liability of the undersigned, either
with respect to transactions occurring before or after any such change, and the
Creditor shall not be concerned to see or inquire into the powers of the Debtor
or any of its directors or other agents, acting or purporting to act on its
behalf, and moneys, advances, renewals or credits, in fact borrowed or obtained
from the Creditor in professed exercise of such powers shall be deemed to form
part of the debts and liabilities hereby guaranteed, notwithstanding that such
borrowing or obtaining of moneys, advances, renewals or credits shall be in
excess of the powers of the Debtor or of its directors or other agents
aforesaid, or be in any way irregular, defective or informal.

It is further agreed that the Creditor, without exonerating in whole or in part
the undersigned, may grant time, renewals, extensions, indulgences, releases and
discharges to, may take securities from and give the same and any or all
existing securities up to, may abstain from taking securities from, or from
perfecting securities of, may accept compositions from, and may otherwise deal
with the Debtor and all other persons (including the undersigned, and any other
guarantor) and securities, as the Creditor may see fit, and that all dividends,
compositions, and moneys received by the Creditor from the Debtor or from any
other persons or estates capable of being applied by the Creditor in reduction
of the debts and liabilities hereby guaranteed, shall be regarded for all
purposes as payments in gross, and the Creditor shall be entitled to prove
against the estate of the Debtor upon any insolvency or winding-up in respect of
the whole of said debts and liabilities and the undersigned shall have no right
to be subrogated to the Creditor in respect of any such proof until the Creditor
shall have received from such estate payment in full of its claim with interest.

And it is further agreed that this shall be a continuing Guarantee, and shall
cover and secure any ultimate balance owing to the Creditor, but the Creditor
shall not be obliged to exhaust its recourse against the Debtor or other persons
or the securities it may hold before being entitled to payment from the
undersigned of all and every of the debts and liabilities hereby guaranteed;
Provided always that the undersigned, or the executor, administrator or legal
representative of the undersigned, may determine his further liability under
this continuing guarantee by ninety days' notice in writing to be given to the
Creditor, and the liability hereunder of the undersigned, and his executor,
administrator or legal representative shall continue until the expiration of
ninety days after the giving of such notice, notwithstanding the death or
insanity of the undersigned, and after the expiry of such notice the
undersigned, and his executor, administrator or legal representative shall
remain liable under this guarantee in respect of any sum or sums of money owing
to the Creditor as aforesaid on the date such notice expired and also in respect
of any contingent or further liabilities incurred to or by the Creditor on or
before such date but maturing thereafter. Every Certificate issued under the
hand of the Creditor for


<PAGE>


the time being purporting to show the amount at any particular time due and
payable to the Creditor, and covered by this Guarantee, shall be received as
conclusive evidence as against the undersigned, and his executor, administrator
or legal representative, that such amount is at such time so due and payable to
the Creditor and is covered hereby.

This contract shall be construed in accordance with the laws of the Province of
British Columbia and for the purpose of legal proceedings this Guarantee shall
be deemed to have been made in the said Province and to be performed there, and
the Courts of that Province shall have jurisdiction over all disputes which may
arise under this Guarantee, provided always that nothing herein contained shall
prevent the Creditor from proceeding at his election against the undersigned in
the Courts of any other Province or country.

Notwithstanding the provisions of any Statute relating to the rate of interest
payable by debtors, this Guarantee shall remain in full force and effect
whatever the rate of interest received or demanded by the Creditor.

All debts and liabilities present and future of the Debtor to the undersigned
are hereby postponed to the debts and liabilities of the Debtor to the Creditor
and all moneys received by the undersigned or his assign thereon shall be
received as trustee for the Creditor and shall be paid over to the Creditor.

The undersigned acknowledges that this Guarantee has been delivered free of any
conditions and that no representations have been made to the undersigned
affecting the liability of the undersigned under this Guarantee save as may be
specifically embodied herein and agrees that this Guarantee is in addition to
and not in substitution for any other Guarantees held or which may hereafter be
held by the Creditor.

The undersigned confirms that counsel for the Debtor has acted in the subject
matter of this Guarantee on behalf of the Debtor only, and is not acting for the
undersigned or for the directors, officers or shareholders of the Debtor in
their personal capacities. The undersigned acknowledges that the Debtor has
advised the undersigned to obtain independent legal advice concerning the
subject matter of this Guarantee.

AS WITNESS the hands and seals of the undersigned, at _______________ this 17th
day of August, 2001.


SIGNED, SEALED & DELIVERED                                 )
by Mitch White in the presence of:                         )
                                                           )
"Jamie Lanfranco"                                          )
-------------------------------------------------------    )
Signature of Witness                                       )   "Mitch White"
                                                           )   -------------
                                                           )   Mitch White
Name of Witness:  C. Jamie Lanfranco                       )
                                                           )
Address of Witness:  #2703 - 1238 Melville Street,         )
                        Vancouver, BC                      )
                                                           )
Occupation of Witness:  Chartered Accountant               )
                                                           )



                                      -2-

<PAGE>


                                  SCHEDULE "B"

                                 MUTUAL RELEASE

THIS MUTUAL RELEASE dated for reference and effective the 20 day of
August, 2001.


BETWEEN:
                  BINGO.COM, INC., at Suite C200 - 4223 Glencoe Avenue, Marina
                  del Ray, California, 90292;

                  ("Bingo.com")

AND:

                  BINGO.COM (CANADA) ENTERPRISES INC., at Suite C200 - 4223
                  Glencoe Avenue, Marina del Ray, California, 90292;

                  ("Bingo.com Canada")

AND:

                  SHANE MURPHY, c/o Suite C200 - 4223 Glencoe Avenue, Marina del
                  Ray, California, 90292;

                  ("Murphy")



IN CONSIDERATION of the covenants and agreements made by or on behalf of
Bingo.com and Bingo.com Canada to Murphy under the termination agreement dated
August 17, 2001 among Murphy, Bingo.com, Bingo.com Canada, Mitch White and
Redruth Ventures Inc. (the "Termination Agreement"), the receipt and sufficiency
of which is hereby duly accepted and acknowledged by Murphy, and in further
consideration of the mutual promises and agreements contained herein, Murphy,
Bingo.com and Bingo.com Canada each covenant and agree as follows:

                                   ARTICLE 1

                          RELEASES AND INDEMNIFICATION

1.1      Release by Bingo Group

(a)      Except with respect to the Termination Agreement, Bingo.com, Bingo.com
         Canada, their divisions and subsidiaries, affiliates and predecessors
         and their respective officers, directors, employees, servants, agents,
         successors, heirs, administrators, executors, estates and assigns
         (collectively, the "Bingo Group") release and forever discharge Murphy
         of and from any and all manner of action and actions, suits, debts,
         dues, sums of money, accounts, covenants, contract, undertakings,
         claims, losses, expenses and damages of every nature and kind
         whatsoever, at law or in equity, which the Bingo Group had, has, or
         which the Bingo Group can, shall or may have by reason of or arising
         out of any matter, thing or cause whatsoever existing up to the present
         time, whether now known to the Bingo Group or not and, in particular,
         but without restricting the


<PAGE>


         generality of the foregoing, by reason of any matter, cause or thing
         arising from the employment of Murphy.

(b)      The Bingo Group covenants and agrees that it will not make or continue
         any claim or any proceeding at any time in respect of any matter
         released under this Mutual Release that might result in any claim or
         proceeding against Murphy. If any such claim or proceeding has already
         been commenced, or is commenced at any subsequent date, and if such
         claim or proceeding results in a claim or proceeding against Murphy,
         then the Bingo Group will discontinue each such claim or proceeding and
         will indemnify and save harmless Murphy from all liabilities, claims,
         losses, expenses, damages and costs, including solicitors' fees and
         disbursements, together with all applicable taxes of every nature and
         kind whatsoever, resulting from each such claim or proceeding.

1.2      Release by Murphy Group

(a)      Except with respect to (i) the Termination Agreement; and (ii) the
         Stock Option Agreement dated December 13, 2000 (the "Option Agreement")
         and the Second Amended and Restated Stock Option Agreement dated
         December 13, 2000 (the "Second Option Agreement"), Murphy does for
         himself, his heirs, executors, administrators, successors and assigns
         (collectively, the "Murphy Group"), release and forever discharge the
         Bingo Group of and from any and all manner of action and actions,
         suits, debts, dues, sums of money, accounts, covenants, contracts,
         undertakings, claims, losses, expenses and damages of every nature and
         kind whatsoever, at law or in equity, which the Murphy Group had, now
         has, or which the Murphy Group can, shall, or may have by reason of or
         arising out of any matter, thing or cause whatsoever existing up to the
         present time, whether now known to the Murphy Group or not and, in
         particular, but without restricting the generality of the foregoing, by
         reason of any matter, cause or thing relating in any manner to Murphy's
         employment with, or the termination of his employment by, the Bingo
         Group.

(b)      Except with respect to (i) the Termination Agreement; and (ii) the
         Option Agreement and the Second Option Agreement, the Murphy Group
         covenants and agrees that it will not make or continue any claim or any
         proceeding at any time in respect of any matter released under this
         Mutual Release that might result in any claim or proceeding against the
         Bingo Group. If any such claim or proceeding has already been
         commenced, or is commenced at any subsequent date, and if such claim or
         proceeding results in a claim or proceeding against the Bingo Group,
         then the Murphy Group will discontinue each such claim or proceeding
         and will indemnify and save harmless the Bingo Group from all
         liabilities, claims, losses, expenses, damages and costs, including
         solicitors' fees and disbursements, together with all applicable taxes
         of every nature and kind whatsoever, resulting from each such claim or
         proceeding.

                                   ARTICLE 2

                            INDEMNIFICATION BY mURPHY

2.1      Indemnification

The Murphy Group further covenants and agrees to save harmless and indemnify the
Bingo Group from and against any and all claims, charges, taxes or penalties and
demands that may be made by the Minister of National Revenue pursuant to the
Income Tax Act (Canada) or the Unemployment Insurance Commission or the Pension
Commission under applicable statutes and regulations, for and in respect of
withholdings that may arise from the payments under the Termination Agreement
and in respect of any


                                      -2-

<PAGE>


claims or demands by Human Resources Development Canada for overpaid benefits,
which according to Human Resources Development Canada ought to have been
deducted from any amounts paid under the Termination Agreement and to have been
remitted to the Receiver General by the Bingo Group, plus any interest or
penalties relating thereto and any reasonable costs or expenses incurred in
defending such claims or demands.

                                   ARTICLE 3

                                    GENERAL

3.1      Governing Law and Attornment

This Mutual Release will be governed by and construed in accordance with the
laws of British Columbia and the federal laws of Canada applicable in British
Columbia, without regard to the conflict of the law rules of British Columbia.
The Bingo Group and the Murphy Group each hereby irrevocably and unconditionally
attorn to the exclusive jurisdiction of the Courts of British Columbia and all
courts competent to hear appeals therefrom. 3.2 Entire Agreement

The parties acknowledge and warrant that the terms of this Mutual Release
contain the entire agreement between them relating to the subject matter hereof
and that they have each had an opportunity to consult with and obtain advice
from their own solicitors before entering into this Mutual Release and that they
have read this Mutual Release and know the contents hereof and fully understand
them. There is no representation, warranty, collateral term or condition or
collateral agreement affecting this Mutual Release, other than as expressed in
writing in this Mutual Release.

3.3      No Admissions

The parties each acknowledge that the execution of this Mutual Release is not an
admission of any liability in any sense of the parties to this Mutual Release,
and agree that this Mutual Release may not be used by anyone as evidence of an
admission of liability or in any other manner except to the extent necessary to
enforce the terms of this Mutual Release.

3.4      Counterparts

This Mutual Release may be executed in any number of counterparts with the same
effect as if all parties had signed the same document. All of these counterparts
will for all purposes constitute one Mutual Release, binding on each such party,
notwithstanding that each party is not a signatory to the same counterpart.

3.5      Enurement

This Mutual Release will enure to the benefit of and be binding on the parties
and their respective heirs, executors, administrators, successors and assigns.

3.6      Headings

The headings and captions of sections and paragraphs contained in this Mutual
Release are all inserted for convenience of reference only and are not to be
considered when interpreting this Mutual Release.



                     [The next page is the execution page.]



                                      -3-

<PAGE>



IN WITNESS WHEREOF the parties hereto have executed this Mutual Release
effective as of the date specified on the first page of this Mutual Release.



SIGNED, SEALED & DELIVERED by SHANE                        )
MURPHY in the presence of:                                 )
                                                           )
                                                           )
"Jamie Lanfranco"                                          )     "Shane Murphy"
-------------------------------------------------------    )     --------------
Signature of Witness                                       )     SHANE MURPHY
Name of Witness:  C. Jamie Lanfranco                       )
Address of Witness:  #2703 - 1238 Melville Street,         )
                        Vancouver, BC                      )
                                                           )
Occupation of Witness:  Chartered Accountant               )
                                                           )
                                                           )


BINGO.COM, INC.:

Per:
"Shane Murphy"
-----------------------------------
Authorized Signatory



BINGO.COM (CANADA) ENTERPRISES INC.

Per:
"Shane Murphy"
-----------------------------------
Authorized Signatory


                                      -4-