United States Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2004

Commission file number 1-16791

Dover Downs Gaming & Entertainment, Inc.

(Exact name of registrant as specified in its charter)

Delaware		51-0414140
(State or Other Jurisdiction of Incorporation)		(I.R.S. Employer Identification Number)

1131 North DuPont Highway, Dover, Delaware 19901
(Address of principal executive offices)

(302) 674-4600
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

As of July 31, 2004, the number of shares of each class of the registrant’s common stock outstanding is as follows:

Common Stock -	10,455,112 shares
Class A Common Stock -	16,075,059 shares

Part I – Financial Information

Item 1. Financial Statements

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

CONSOLIDATED STATEMENT OF EARNINGS

In Thousands, Except Per Share Amounts

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
Revenues:
Gaming	$	46,959	$	44,292	$	94,268	$	85,849
Other operating	8,460		8,286		16,748		15,084
Gross revenues	55,419		52,578		111,016		100,933
Less – promotional allowances	4,892		4,536		9,929		8,692
	50,527		48,042		101,087		92,241

Expenses:
Gaming	36,913		35,011		74,565		67,532
Other operating	3,131		2,750		5,572		5,004
General and administrative	1,098		1,115		2,245		2,069
Depreciation	1,699		1,523		3,390		3,025
	42,841		40,399		85,772		77,630

Operating earnings	7,686		7,643		15,315		14,611

Interest expense	176		253		329		467

Earnings before income taxes	7,510		7,390		14,986		14,144

Income taxes	3,052		3,005		6,094		5,752

Net earnings	$	4,458	$	4,385	$	8,892	$	8,392

Net earnings per common share (Note 3):
Basic	$	0.17	$	0.17	$	0.34	$	0.32
Diluted	$	0.17	$	0.17	$	0.33	$	0.32

The Notes to the Consolidated Financial Statements are an integral part of these consolidated statements.

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEET

In Thousands, Except Share and Per Share Amounts

(Unaudited)

	June 30, 2004			December 31, 2003
ASSETS
Current assets:
Cash and cash equivalents	$	16,969		$	14,138
Accounts receivable	2,572			1,914
Due from State of Delaware	4,304			8,670
Inventories	1,723			1,801
Prepaid expenses and other	2,529			2,414
Receivable from Dover Motorsports, Inc.	22			—
Prepaid income taxes	487			—
Deferred income taxes	895			878
Total current assets	29,501			29,815

Property and equipment, net	125,493			122,344
Total assets	$	154,994		$	152,159

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,590		$	6,516
Purses due horsemen	4,059			7,957
Accrued liabilities	4,908			6,015
Payable to Dover Motorsports, Inc.	—			96
Income taxes payable	—			53
Deferred revenue	355			261
Total current liabilities	14,912			20,898

Notes payable to banks	32,350			31,225
Other long-term liabilities	299			—
Deferred income taxes	6,467			5,061

Commitments and contingencies (see Notes to the Consolidated Financial Statements)

Stockholders’ equity:
Preferred stock, $0.10 par value; 1,000,000 shares authorized; issued and outstanding: none	—			—
Common stock, $0.10 par value; 74,000,000 shares authorized; issued and outstanding: June 30, 2004-10,455,112 shares; December 31, 2003-10,333,112 shares	1,045			1,033
Class A common stock, $0.10 par value; 50,000,000 shares authorized; issued and outstanding: June 30, 2004-16,075,059 shares; December 31, 2003-16,145,059 shares	1,608			1,615
Additional paid-in capital	68,050			67,454
Retained earnings	30,848			24,873
Deferred compensation	(585		)	—
Total stockholders’ equity	100,966			94,975
Total liabilities and stockholders’ equity	$	154,994		$	152,159

The Notes to the Consolidated Financial Statements are an integral part of these consolidated statements.

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

In Thousands

(Unaudited)

	Six Months Ended June 30,
	2004			2003
Operating activities:
Net earnings	$	8,892		$	8,392
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	3,390			3,025
Amortization of credit facility origination fees	31			—
Amortization of deferred compensation	16			—
Deferred income taxes	1,059			522
Changes in assets and liabilities:
Accounts receivable	(658		)	2,610
Due from State of Delaware	4,366			4,766
Inventories	78			(199		)
Prepaid expenses and other	(146		)	(1,380		)
Receivable from/payable to Dover Motorsports, Inc.	(118		)	155
Prepaid income taxes/income taxes payable	(210		)	763
Accounts payable	(2,717		)	(1,800		)
Purses due horsemen	(3,898		)	(4,815		)
Accrued liabilities	(1,107		)	(2,542		)
Deferred revenue	94			10
Net cash provided by operating activities	9,072			9,507

Investing activities:
Capital expenditures	(4,449		)	(1,988		)
Net cash used in investing activities	(4,449		)	(1,988		)

Financing activities:
Borrowings from revolving debt	96,930			77,360
Repayments of revolving debt	(95,805		)	(80,625		)
Dividends paid	(2,917		)	(2,657		)
Repurchase of common stock	—			(1,523		)
Net cash used in financing activities	(1,792		)	(7,445		)

Net increase in cash and cash equivalents	2,831			74
Cash and cash equivalents, beginning of period	14,138			12,836
Cash and cash equivalents, end of period	$	16,969		$	12,910

Supplemental information:
Interest paid	$	312		$	555
Income taxes paid	$	5,244		$	5,155

The Notes to the Consolidated Financial Statements are an integral part of these consolidated statements.

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – Basis of Presentation

References in this document to “the Company,” “Gaming & Entertainment,” “we,” “us” and “our” mean Dover Downs Gaming & Entertainment, Inc. and its wholly owned subsidiaries.

The accompanying consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and accounting principles generally accepted in the United States of America, but do not include all of the information and disclosures required for audited financial statements. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K filed on March 9, 2004. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods presented. Operating results for the three and six-month periods ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.

NOTE 2 - Business Operations

Dover Downs Gaming & Entertainment, Inc. is a diversified gaming and entertainment company whose operations consist of Dover Downs Slots – a 91,000 square foot video lottery (slots) casino complex; the Dover Downs Hotel and Conference Center – featuring luxury accommodations with conference, banquet, fine dining, ballroom and concert hall facilities; and Dover Downs Raceway – a harness racing track with pari-mutuel wagering on live and simulcast horse races.

Gaming & Entertainment has two wholly owned subsidiaries: Dover Downs, Inc. and Dover Downs Management Corp. Dover Downs, Inc. was incorporated in 1967 and began motorsports and harness racing operations in 1969. In June of 1994, legislation authorizing video lottery operations in the State of Delaware (the “State”) was adopted. The Company’s video lottery (slots) casino operations began on December 29, 1995. As a result of several restructurings, Dover Downs, Inc. became a wholly owned subsidiary of Dover Motorsports, Inc. (f/k/a Dover Downs Entertainment, Inc.) (“DVD”), and became the operating entity for all of DVD’s gaming operations.

Dover Downs Gaming & Entertainment, Inc. was incorporated in the State in December of 2001 as a wholly owned subsidiary of DVD. Effective March 31, 2002, DVD completed a tax-free spin-off of its gaming operations by contributing 100% of the issued and outstanding common stock of Dover Downs, Inc. to the Company, and subsequently distributing 100% of the issued and outstanding common stock of the Company to DVD stockholders. Immediately following the spin-off, Dover Downs Gaming & Entertainment, Inc. became an independent public company.

The Company is authorized to conduct video lottery operations as a “Licensed Agent” under the Delaware State Lottery Code. Pursuant to Delaware’s Horse Racing Redevelopment Act, enacted in 1994, the Delaware State Lottery Office administers and controls the operation of the video lottery.

The Company’s license from the Delaware Harness Racing Commission (the “Commission”) to hold harness race meetings on our premises and to offer pari-mutuel wagering on live and simulcast horse races must be renewed on an annual basis. In order to maintain its license to conduct video lottery operations, the Company is required to maintain its harness horse racing license. The Company has received an annual license from the Commission for the past 35 consecutive years and management believes that its relationship with the Commission remains good.

Our entertainment complex is located in Dover, the capital of the State of Delaware. Approximately 70% of our customers come from Maryland, Pennsylvania, Virginia and the District of Columbia. In July 2004, Pennsylvania adopted legislation which authorizes up to 61,000 slot machines at various existing and proposed venues throughout the state, predominantly horse racing facilities. It is difficult for us to predict the effect that such legislation will have on us, but we estimate that one or more facilities in Pennsylvania are likely to begin operations in 2006. Pennsylvania will have one of the highest effective tax rates on slot machine gaming in the country and will charge an up front $50,000,000 license fee to the horse racing and casino venues that are granted a gaming license. It is difficult to predict whether these factors will discourage investment in facilities capable of competing with destination facilities, such as ours, that offer luxurious hotel accommodations and various forms of entertainment. Pennsylvania patrons comprise approximately 7% of our customer base.

Due to the nature of the Company’s business activities, it is subject to various federal, state and local regulations.

NOTE 3 - Summary of Significant Accounting Policies

Basis of consolidation— The consolidated financial statements include the accounts of Gaming & Entertainment and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated.

Revenue and expense recognition— Gaming revenues represent (i) the net win from video lottery (slot) machine wins and losses and (ii) commissions from pari-mutuel wagering. Other operating revenues consist of hotel rooms revenue, food and beverage sales and other miscellaneous income.

For the video lottery operations, which account for more than 80% of gross revenues for all periods presented, the difference between the amount wagered by bettors and the amount paid out to bettors is referred to as the win. The win is included in the amount recorded in the Company’s consolidated financial statements as gaming revenue. The Delaware State Lottery Office sweeps the win from the video lottery operations, collects the State’s share of the win and the amount due to the vendors under contract with the State who provide the video lottery (slot) machines and associated computer systems, collects the amount allocable to purses for harness horse racing and remits the remainder to the Company as its commission for acting as a Licensed Agent. Gaming expenses include the amounts collected by the State (i) for the State’s share of the win, (ii) for remittance to the providers of the video lottery (slot) machines and associated computer systems, and (iii) for harness horse racing purses. The Company recognizes revenues from pari-mutuel commissions earned from live harness horse racing and importing of simulcast signals from other race tracks when the race occurs. Revenues from hotel rooms, food and beverage sales and other miscellaneous income are recognized at the time the service is provided.

The retail value of hotel rooms, food, beverage and other items that are provided to customers without charge has been included in gross revenues, and a corresponding amount has been deducted as promotional allowances. The estimated direct cost of providing these items has been charged to the casino through interdepartmental allocations and is included in gaming expenses in the consolidated statement of earnings.

The Company currently has a point loyalty program for its video lottery customers which allows them to earn points based on the volume of their video lottery activity. The points can be redeemed for various services and merchandise throughout the gaming facility; however, they are not redeemable for cash or casino play. The Company records the points as an expense when they are redeemed by the customers. The value of all points outstanding as of June 30, 2004 and December 31, 2003 was $4,920,000 and $4,592,000, respectively.

Earnings per share -Basic and diluted earnings per share (“EPS”) are calculated in accordance with Financial Accounting Standards Board (“FASB”) Statement No. 128, Earnings Per Share . Weighted average shares used in computing basic and diluted EPS are as follows:

	Three months ended June 30,		Six months ended June 30,
	2004	2003	2004	2003
Basic EPS	26,478,000	26,510,000	26,478,000	26,544,000
Effect of dilutive securities	111,000	25,000	89,000	26,000
Diluted EPS	26,589,000	26,535,000	26,567,000	26,570,000

Dilutive securities include stock options and unvested restricted stock awards.

For the three and six months ended June 30, 2004, options to purchase approximately 252,000 and 274,000 shares of common stock, respectively, were outstanding, but were not included in the computation of diluted EPS because the options’ exercise prices were greater than the average market price of the common stock during the period. For the three and six months ended June 30, 2003, options to purchase approximately 676,000 shares of common stock were outstanding but not included in the computation for the same reason.

Accounting for stock-based compensation— The Company has a stock incentive plan which provides for the grant of stock options and/or restricted stock to officers and key employees. The Company accounts for stock options in accordance with FASB Statement No. 123, Accounting for Stock-Based Compensation, as amended by FASB Statement No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123 . Statement No. 123 defines a fair-value based method of accounting for stock-based compensation plans; however, it allows the continued use of the intrinsic value method under Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees , and related interpretations. The Company has elected to continue to use the intrinsic value method and based on this method did not record any stock-based compensation expense related to its stock options during the three and six-month periods ended June 30, 2004 and 2003. The Company’s restricted stock vests based on continued employment with the Company. Restricted stock awards result in compensation expense as discussed in NOTE 6 – Stockholders’ Equity.

The following table illustrates the effect on net earnings and net earnings per common share if the Company had applied the fair-value recognition provisions of Statement No. 123 to stock-based employee compensation:

	Three months ended June 30,						Six months ended June 30,
	2004			2003			2004			2003
Net earnings, as reported	$	4,458,000		$	4,385,000		$	8,892,000		$	8,392,000
Add: Stock-based employee compensation expense included in reported net earnings, net of related tax effects	10,000			—			10,000			—
Deduct: Total stock-based employee compensation expense determined under fair-value based method for all awards, net of related tax effects	(155,000		)	(154,000		)	(301,000		)	(308,000		)
Pro forma net earnings	$	4,313,000		$	4,231,000		$	8,601,000		$	8,084,000

Net earnings per common share:
Basic – as reported	$	0.17		$	0.17		$	0.34		$	0.32
Basic – pro forma	$	0.16		$	0.16		$	0.32		$	0.30

Diluted – as reported	$	0.17		$	0.17		$	0.33		$	0.32
Diluted – pro forma	$	0.16		$	0.16		$	0.32		$	0.30

Use of estimates— The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications —Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation. These reclassifications had no effect on net earnings.

NOTE 4 – Indebtedness

The Company has a $40,000,000 credit facility, as amended effective February 19, 2004, that expires on April 30, 2006. Interest is based, at the Company’s option, upon (i) LIBOR plus 0.75% or (ii) the base rate (the greater of the prime rate or the federal funds rate plus 0.5%) minus 1%. The terms of the credit facility contain, among others, minimum net worth, interest coverage and maximum leverage covenant requirements. Material adverse changes in the Company’s results of operation could impact its ability to maintain financial ratios necessary to satisfy these requirements. The facility is for seasonal funding needs, capital improvements and other general corporate purposes. At June 30, 2004, the Company was in compliance with all terms of the facility and there was $32,350,000 outstanding at a weighted average interest rate of 2.08%. After consideration of stand by letters of credit outstanding, $7,550,000 was available pursuant to the facility at June 30, 2004.

NOTE 5 – Pension Plans

The Company maintains a non-contributory, tax qualified defined benefit pension plan. All of Gaming & Entertainment’s full time employees are eligible to participate in the pension plan. Benefits provided by the Gaming & Entertainment pension plan are based on years of service and employees’ remuneration over their term of employment. Pension costs are funded in accordance with the provisions of the Internal Revenue Code. The Company also maintains a non-qualified, non-contributory defined benefit pension plan for certain employees to restore pension benefits reduced by federal income tax regulations. The cost associated with the plan is determined using the same actuarial methods and assumptions as those used for the Company’s qualified pension plan.

The components of net periodic pension cost are as follows:

	Three months ended June 30,						Six months ended June 30,
	2004			2003			2004			2003
Service cost	$	198,000		$	178,000		$	396,000		$	356,000
Interest cost	68,000			52,000			136,000			104,000
Expected return on plan assets	(57,000		)	(36,000		)	(114,000		)	(72,000		)
Recognized net actuarial loss	12,000			13,000			24,000			26,000
Amortization of prior service cost	2,000			2,000			4,000			4,000
	$	223,000		$	209,000		$	446,000		$	418,000

The Company expects to contribute approximately $500,000 to its pension plans in 2004, of which $300,000 was contributed during the six months ended June 30, 2004.

NOTE 6 – Stockholders’ Equity

Changes in the components of stockholders’ equity are as follows:

	Common Stock		Class A Common Stock			Additional Paid-in Capital		Retained Earnings			Deferred Compensation
Balance at December 31, 2003	$	1,033,000	$	1,615,000		$	67,454,000	$	24,873,000		$	—
Net earnings	—		—			—		8,892,000			—
Dividends paid, $0.11 per share	—		—			—		(2,917,000		)	—
Issuance of restricted stock	5,000		—			596,000		—			(601,000		)
Amortization of deferred compensation	—		—			—		—			16,000
Conversion of Class A common stock to common stock	7,000		(7,000		)	—		—			—
Balance at June 30, 2004	$	1,045,000	$	1,608,000		$	68,050,000	$	30,848,000		$	(585,000	)

On July 28, 2004, the Company’s Board of Directors declared a quarterly cash dividend on both classes of common stock of $0.06 per share. The dividend is payable on September 10, 2004 to shareholders of record at the close of business on August 10, 2004.

On October 23, 2002, the Company’s Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company’s outstanding common stock. The purchases may be made in the open market or in privately negotiated transactions as conditions warrant. The repurchase authorization does not obligate the Company to acquire any specific number of shares and may be suspended at any time. During the three and six months ended June 30, 2003, the Company purchased and retired 49,700 and 169,945 shares of its outstanding common stock at an average purchase price of $8.99 and $8.96 per share. Gaming & Entertainment did not repurchase any outstanding shares of its common stock during the six months ended June 30, 2004. At June 30, 2004, the Company had remaining repurchase authority of 1,830,055 shares.

The Company has a stock incentive plan which provides for the grant of up to 1,500,000 shares of stock to our officers and key employees through stock options and/or awards valued in whole or in part by reference to our common stock, such as restricted stock awards. Under the plan, option grants must have an exercise price of not less than 100% of the fair market value of the underlying shares of common stock at the date of the grant. The stock options have eight-year terms and generally vest equally over a period of six years from the date of grant. The restricted stock vests an aggregate of twenty percent each year beginning on the second anniversary date of the grant. During the three and six months ended June 30, 2004, the Company issued 52,000 shares of restricted stock to certain officers and key employees. The aggregate market value of the restricted stock at the date of issuance has been recorded as deferred compensation, a separate component of stockholders’ equity, and is being amortized on a straight-line basis over the six-year service period. As of June 30, 2004, there were 574,859 shares available for granting options or stock awards.

NOTE 7 - Related Party Transactions

During the three and six months ended June 30, 2004 and 2003, Gaming & Entertainment allocated costs of $337,000 and $593,000, and $441,000 and $862,000, respectively, to DVD for certain administrative and operating services. Additionally, DVD allocated costs of $33,000 and $62,000, respectively, to Gaming & Entertainment for the three and six months ended June 30, 2004. The allocations were based on an analysis of each company’s share of the costs. In connection with DVD’s June 2004 and 2003 NASCAR event weekends, Gaming & Entertainment provided certain catering services for which DVD was invoiced $445,000 and $343,000, respectively. Additionally, DVD invoiced Gaming & Entertainment $131,000 and $115,000, respectively, for tickets purchased and other services related to the 2004 and 2003 events. As of June 30, 2004, Gaming & Entertainment’s consolidated balance sheet includes a $22,000 receivable from DVD for the aforementioned costs and for other payments made by the Company on DVD’s behalf. The Company has since settled the receivable in the third quarter of 2004. The net costs incurred by each company for these services are not necessarily indicative of the costs that would have been incurred if the companies had been unrelated entities and/or had otherwise independently managed these functions; however, management believes that these costs are reasonable.

The Company’s use of DVD’s 5/8-mile harness racing track is under an easement granted to the Company by DVD which does not require the payment of any rent. Under the terms of the easement, the Company has exclusive use of the harness track during the period beginning November 1 of each year and ending April 30 of the following year, together with set up and tear down rights for the two weeks before and after such period. The harness track is located on property owned by DVD and is on the inside of DVD’s motorsports superspeedway. The Company’s indoor grandstands are used by DVD at no charge in connection with its motorsports events. DVD also leases its principal executive office space from the Company. Various easements and agreements relative to access, utilities and parking have also been entered into between DVD and the Company relative to their respective Dover, Delaware facilities.

NOTE 8 – Commitments and Contingencies

The Company is a party to ordinary routine litigation incidental to its business. Management does not believe that the resolution of any of these matters is likely to have a serious adverse effect on our results of operations, financial condition or cash flows.

During the three months ended June 30, 2004, the Company entered into employment, severance and noncompete agreements with certain of its officers and directors under which certain change of control, severance and noncompete payments and benefits might become payable in the event of a change in control of the Company, defined to include a tender offer or the closing of a merger or similar corporate transactions. In the event of such a change in control of the Company and the subsequent termination of employment of all employees covered under these agreements, the maximum contingent liability would be approximately $4,762,000.

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

The following discussion is based upon and should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

More than 80% of the Company’s gross revenue is derived from video lottery (slot) machine win (as defined below). Several factors contribute to the video lottery (slot) machine win for any gaming company, including, but not limited to:

• Proximity to major population bases,

• Competition in the company’s market,

• The quantity and types of slot machines available,

• The quality of the physical property,

• Other amenities offered on site,

• Customer service levels, and

• Marketing programs.

The Company believes that it holds a strong position in each of these areas. Our entertainment complex is located in Dover, the capital of the State of Delaware. We draw patrons from several major metropolitan areas. Philadelphia, Baltimore and Washington, D.C. are all within a 2 hour drive. According to the 2000 United States Census, approximately 32.8 million people live within 150 miles of the complex. There are significant barriers to entry related to the gaming business in Delaware, such as the statutory limitation of gaming licenses to the three existing horse racing facilities. The Company’s property, designed and developed with the assistance of Caesars World Gaming Development Corporation (“Caesars”) is similar to properties found in the country’s largest gaming markets. The Company offers the only luxury hotel in the Delaware gaming market, providing a strong marketing tool, especially to higher-end players. The Company also utilizes its recently improved slot marketing system to allow for the most efficient marketing programs and the highest levels of customer service.

The biggest risks to the Company are increased competition in surrounding states from the legalization of new or additional casino or other gaming venues and the fact that all of our operations are located at one facility. The Company has therefore focused on creating the region’s premier gaming destination and building and rewarding customer loyalty through innovative marketing efforts and unparalleled customer service.

Results of Operations

Gaming revenues represent (i) the net win from video lottery (slot) machine wins and losses and (ii) commissions from pari-mutuel wagering. Other operating revenues consist of hotel rooms revenue, food and beverage sales and other miscellaneous income.

For the video lottery operations, the difference between the amount wagered by bettors and the amount paid out to bettors is referred to as the win. The win is included in the amount recorded in the Company’s financial statements as gaming revenue. The Delaware State Lottery Office sweeps the win from the video lottery operations, collects the State’s share of the win and the amount due to the vendors under contract with the State who provide the video lottery (slot) machines and associated computer systems, collects the amount allocable to purses for harness horse racing and remits the remainder to the Company as its commission for acting as a Licensed Agent. Gaming expenses include the amounts collected by the State (i) for the State’s share of the win, (ii) for remittance to the providers of the video lottery (slot) machines and associated computer systems, and (iii) for harness horse racing purses. The Company recognizes revenues from pari-mutuel commissions earned from live harness horse racing and importing of simulcast signals from other race tracks when the race occurs. Revenues from hotel rooms, food and beverage sales and other miscellaneous income are recognized at the time the service is provided.

The retail value of hotel rooms, food, beverage and other items that are provided to customers without charge has been included in gross revenues and a corresponding amount has been deducted as promotional allowances. The estimated direct cost of providing these items has been charged to the casino through interdepartmental allocations and is included in gaming expenses in the consolidated statement of earnings.

Three Months Ended June 30, 2004 vs. Three Months Ended June 30, 2003

Gaming revenues increased by $2,667,000, or 6.0%, to $46,959,000 in the second quarter of 2004, primarily the result of increased play in our casino. During the first quarter of 2004, we added 500 new video lottery (slot) machines which increased our average number of machines from 2,000 in the second quarter of 2003 to 2,500 in the second quarter of 2004. Additionally, we have redirected our marketing efforts to attract more casino customers to our hotel by providing additional complimentary and discounted rooms. We believe that our marketing efforts have been effective at attracting customers to our casino and consequently increasing slot win.

Other operating revenues increased by $174,000, or 2.1%, to $8,460,000 in the second quarter of 2004, primarily due to higher occupancy levels at the Dover Downs Hotel and Conference Center and increased concert sales.

Other operating revenues for the second quarter of 2004 and 2003 included $4,892,000 and $4,536,000, respectively, related to promotional items provided to customers without charge. The increase in promotional allowances is primarily due to the Company’s expanded marketing efforts to attract more casino customers to the hotel by providing additional complimentary and discounted hotel rooms.

Gaming expenses increased by $1,902,000, or 5.4%, reflecting the higher gaming revenues. Amounts retained by the State of Delaware and the amount collected by the State for payment to the vendors under contract with the State who provide the video lottery (slot) machines and associated computer systems increased by $941,000 and $370,000, respectively. Amounts allocated from the video lottery operation for harness horse racing purses increased from $5,131,000 in the second quarter of 2003 to $5,411,000 in the second quarter of 2004. Collectively, these statutory costs increased as a percentage of gaming revenues in the second quarter of 2004 as compared to the second quarter of 2003 primarily due to a 1.25% surcharge imposed by the State on the Company’s share of the video lottery (slot) proceeds that took effect in June of 2003. The remaining $311,000 increase in gaming expenses relates primarily to higher payroll as a result of our casino expansion and increased benefit costs.

Other operating expenses increased by $381,000, or 13.9%, reflecting the higher other operating revenues and lower cost of promotions allocated to the gaming segment. As hotel rooms become a larger percentage of our total promotional allowances, the lower cost associated with that promotion results in less cost being allocated to the gaming segment. Payroll and related costs and food costs in the food and beverage department represented the largest increases in other operating expenses.

General and administrative expenses for the second quarter of 2004 remained consistent with the second quarter of 2003 at $1,098,000 and $1,115,000, respectively.

Depreciation expense increased by $176,000, primarily due to the construction of 11,000 additional square feet of gaming space to accommodate the installation of 500 video lottery (slot) machines within our existing casino complex during the first quarter of 2004 and the purchase of a new customer management and slot data system that went into service in April 2004.

Interest expense decreased by $77,000, primarily due to the decrease in outstanding borrowings under our credit facility and the Company’s average interest rate being 2.04% during the second quarter of 2004 as compared to 2.17% during the second quarter of 2003.

The Company’s effective income tax rate was 40.6% and 40.7% for the second quarter ended June 30, 2004 and 2003, respectively.

Net earnings were $4,458,000 in the second quarter of 2004 as compared to $4,385,000 in the second quarter of 2003. The increase of $73,000, or 1.7%, was primarily due to the improved results for our gaming operations.

Six Months Ended June 30, 2004 vs. Six Months Ended June 30, 2003

Gaming revenues increased by $8,419,000, or 9.8%, to $94,268,000 in the first six months of 2004, primarily the result of increased play in our casino. During the first quarter of 2004, we added 500 new video lottery (slot) machines which increased our average number of machines from 2,000 in the first six months of 2003 to 2,362 in the first six months of 2004. Additionally, we have redirected our marketing efforts to attract more casino customers to our hotel by providing additional complimentary and discounted rooms. We believe that our marketing efforts have been effective at attracting customers to our casino and consequently increasing slot win.

Other operating revenues increased by $1,664,000, or 11.0%, to $16,748,000 in the first six months of 2004, primarily due to higher occupancy levels at the Dover Downs Hotel and Conference Center and increased food, beverage and concert sales.

Other operating revenues for the first six months of 2004 and 2003 included $9,929,000 and $8,692,000, respectively, related to promotional items provided to customers without charge. The increase in promotional allowances is primarily due to the Company’s expanded marketing efforts to attract more casino customers to the hotel by providing additional complimentary and discounted hotel rooms.

Gaming expenses increased by $7,033,000, or 10.4%, reflecting the higher gaming revenues. Amounts retained by the State of Delaware and the amount collected by the State for payment to the vendors under contract with the State who provide the video lottery (slot) machines and associated computer systems increased by $3,268,000 and $796,000, respectively. Amounts allocated from the video lottery operation for harness horse racing purses increased from $9,781,000 in the first six months of 2003 to $10,732,000 in the first six months of 2004. Collectively, these statutory costs increased as a percentage of gaming revenues in the first six months of 2004 as compared to the first six months of 2003 primarily due to a 1.25% surcharge imposed by the State on the Company’s share of the video lottery (slot) proceeds that took effect in June of 2003. The remaining $2,018,000 increase in gaming expenses relates primarily to higher payroll as a result of our casino expansion and increased benefit costs, marketing, insurance and utilities.

Other operating expenses increased by $568,000, or 11.4%, reflecting the higher other operating revenues and lower cost of promotions allocated to the gaming segment. Payroll and related costs and food costs in the food and beverage department represented the largest increases in other operating expenses.

General and administrative expenses increased by $176,000 to $2,245,000 from $2,069,000 in the first six months of 2003 primarily the result of higher legal, audit and consulting expenses related to the Company’s compliance with the Sarbanes-Oxley Act of 2002.

Depreciation expense increased by $365,000, primarily due to the construction of 11,000 additional square feet of gaming space to accommodate the installation of 500 video lottery (slot) machines within our existing casino complex during the first quarter of 2004 and the purchase of a new customer management and slot data system that went into service in April 2004.

Interest expense decreased by $138,000, primarily due to the decrease in outstanding borrowings under our credit facility and the Company’s average interest rate being 2.01% during the first six months of 2004 as compared to 2.18% during the first six months of 2003.

The Company’s effective income tax rate was 40.7% for the six months ended June 30, 2004 and 2003.

Net earnings were $8,892,000 in the first six months of 2004 as compared to $8,392,000 in the first six months of 2003. The increase of $500,000, or 6.0%, was primarily due to the improved results for our gaming operations.

Liquidity and Capital Resources

Net cash provided by operating activities was $9,072,000 for the six months ended June 30, 2004 compared to $9,507,000 for the six months ended June 30, 2003. The decrease was primarily due to the timing of cash receipts from the Delaware State Lottery Office related to our commission, partially offset by the increase in net earnings before depreciation and amortization from $11,417,000 in the first six months of 2003 to $12,329,000 in the first six months of 2004, as well as the timing of payments to vendors.

Net cash used in investing activities was $4,449,000 for the six months ended June 30, 2004 compared to $1,988,000 for the six months ended June 30, 2003. The increase in 2004 as compared with 2003 was primarily due to the construction of 11,000 additional square feet of gaming space to accommodate the installation of 500 newly authorized video lottery (slot) machines within our existing casino complex and the purchase of a new customer management and slot data system.

Net cash used in financing activities was $1,792,000 for the six months ended June 30, 2004 compared to $7,445,000 for the six months ended June 30, 2003. The change was primarily due to higher repayments of outstanding borrowings under our credit facility and the repurchase of 169,945 shares of the Company’s outstanding common stock during the first six months of 2003. The Company paid $2,917,000 and $2,657,000 in regular quarterly cash dividends during the six months ended June 30, 2004 and 2003, respectively.

On October 23, 2002, the Company’s Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company’s outstanding common stock. The purchases may be made in the open market or in privately negotiated transactions as conditions warrant. The repurchase authorization does not obligate the Company to acquire any specific number of shares and may be suspended at any time. During the three and six months ended June 30, 2003, the Company purchased and retired 49,700 and 169,945 shares of its outstanding common stock at an average purchase price of $8.99 and $8.96 per share. The Company did not repurchase any outstanding shares of its common stock during the six months ended June 30, 2004.

Based on current business conditions, the Company expects to make additional capital expenditures of approximately $2,000,000-$4,000,000 through 2004. These expenditures primarily relate to additional amenities at our luxury hotel and site improvements, such as parking and signage, as well as the conversion of a portion of our casino floor to ticket-in, ticket-out (cashless) technology. Additionally, the Company expects to contribute approximately $500,000 to its pension plans in 2004, of which $300,000 was contributed during the six months ended June 30, 2004.

We have a $40,000,000 unsecured revolving line of credit agreement. At June 30, 2004, $32,350,000 was outstanding under the facility. Based on current business trends, we believe that our cash flows from operations and the funds available pursuant to our revolving credit facility will be sufficient to meet our short and long-term cash needs. Any significant expansion of our gaming facility that we may decide to undertake, any significant acquisitions, or any material adverse change in our operations could cause the need for additional financing. The Company expects that its net cash flows from operating activities and funds available from its credit facility will be sufficient to provide for its working capital needs and capital spending requirements at least through 2004, as well as any cash dividends the Company’s Board of Directors may declare. We expect cash flows from operating activities and funds available from our credit facility to also provide for long-term liquidity.

The introduction or expansion of gaming in nearby states could have a material adverse effect on our cash flows and results of operations. In July 2004, Pennsylvania adopted legislation which authorizes up to 61,000 slot machines at various existing and proposed venues throughout the state, predominantly horse racing facilities. It is difficult for us to predict the effect that such legislation will have on us, but we estimate that one or more facilities in Pennsylvania are likely to begin operations in 2006. Pennsylvania will have one of the highest effective tax rates on slot machine gaming in the country and will charge an up front $50,000,000 license fee to the horse racing and casino venues that are granted a gaming license. It is difficult to predict whether these factors will discourage investment in facilities capable of competing with destination facilities, such as ours, that offer luxurious hotel accommodations and various forms of entertainment. Pennsylvania patrons comprise approximately 7% of our customer base.

Related Party Transactions

See NOTE 7 – Related Party Transactions of the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Critical Accounting Policies

The accounting policies described below are those the Company considers critical in preparing its consolidated financial statements and/or include significant estimates made by management using information available at the time the estimates are made. However, as described below, these estimates could change materially if different information or assumptions were used. The descriptions below are summarized and have been simplified for clarity.

Points Program

The Company currently has a point loyalty program for its video lottery customers which allows them to earn points based on the volume of their video lottery activity. The Company records the points as an expense when they are redeemed by the customers. The points can be redeemed for various services and merchandise throughout the gaming facility; however, they are not redeemable for cash or casino play. The value of all points outstanding as of June 30, 2004 was $4,920,000.

Accrued Pension Cost

The benefits provided by the Company’s defined-benefit pension plans are based on years of service and employee’s remuneration over their employment with the Company. The Company establishes accrued pension costs in accordance with the provisions of Financial Accounting Standards Board Statement No. 87, Employers’ Accounting for Pensions. Accrued pension costs are developed using actuarial principles and assumptions which consider a number of factors, including estimates for the discount rate, assumed rate of compensation increase, and expected long-term rate of return on assets. Changes in these estimates would impact the amounts that the Company records in its consolidated financial statements.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided for financial reporting purposes using the straight-line method over estimated useful lives ranging from 5 to 10 years for furniture, fixtures and equipment and up to 40 years for facilities. These estimates require assumptions that are believed to be reasonable. Long-lived assets are evaluated for impairment when an event occurs that indicates an impairment may exist.

Factors That May Affect Operating Results; Forward-Looking Statements

In addition to historical information, this Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to our financial condition, profitability, liquidity, resources, business outlook, proposed acquisitions, market forces, corporate strategies, consumer preferences, contractual commitments, legal matters, capital requirements and other matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. To comply with the terms of the safe harbor, we note that a variety of factors could cause our actual results and

experience to differ substantially from the anticipated results or other expectations expressed in our forward-looking statements. When words and expressions such as: “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “may,” “could,” “should,” “might,” “likely,” “enable” or similar words or expressions are used in this document, as well as statements containing phrases such as “in our view,” “there can be no assurance,” “although no assurance can be given” or “there is no way to anticipate with certainty,” forward-looking statements are being made.

Various risks and uncertainties may affect the operation, performance, development and results of our business and could cause future outcomes to differ materially from those set forth in our forward-looking statements, including the following factors:

• success of or changes in our growth strategies;

• our development and potential acquisition of new facilities;

• anticipated trends in the gaming industry;

• patron demographics;

• general market and economic conditions, including consumer and corporate spending sentiment;

• our ability to finance future business requirements;

• our ability to effectively compete in the marketplace;

• the availability of adequate levels of insurance;

• our ability to successfully integrate acquired companies and businesses;

• management retention and development;

• changes in Federal, state, and local laws and regulations, including environmental, gaming license and tax legislation;

• the effect of weather conditions or travel on attendance at our facilities;

• military or other government actions; and

• national or local catastrophic events.

We undertake no obligation to publicly update or revise any forward-looking statements as a result of future developments, events or conditions. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ significantly from those forecast in any forward-looking statements. Given these risks and uncertainties, stockholders should not overly rely or attach undue weight to our forward-looking statements as an indication of our actual future results.

Our Gaming Activities Compete Directly With Other Gaming Facilities And Other Entertainment Businesses

We compete in local and regional markets with horse tracks, off-track betting parlors, state run lotteries, casinos and other gaming facilities. We cannot be certain that we will maintain our market share or compete more effectively with our competitors. The legalization of new or additional casino or other gaming venues in jurisdictions close to Delaware, particularly Maryland, Virginia, Washington, D.C., Pennsylvania or New Jersey, could negatively impact our gaming business. From time to time legislation is proposed for adoption in these jurisdictions which if enacted, would further expand state gambling and wagering opportunities, including video

lottery (slot) machines at racetracks. Enactment of such legislation could increase our competition and could adversely affect our business, financial condition and overall profitability. Approximately 70% of our customers come from Maryland, Pennsylvania, Virginia and the District of Columbia. In July 2004, Pennsylvania adopted legislation which authorizes up to 61,000 slot machines at various existing and proposed venues throughout the state, predominantly horse racing facilities. It is difficult for us to predict the effect that such legislation will have on us, but we estimate that one or more facilities in Pennsylvania are likely to begin operations in 2006. Pennsylvania will have one of the highest effective tax rates on slot machine gaming in the country and will charge an up front $50,000,000 license fee to the horse racing and casino venues that are granted a gaming license. It is difficult to predict whether these factors will discourage investment in facilities capable of competing with destination facilities, such as ours, that offer luxurious hotel accommodations and various forms of entertainment. Pennsylvania patrons comprise approximately 7% of our customer base.

All Of Our Facilities Are In One Location

Our facilities are located adjacent to one another at a single location in Dover, Delaware. Any prolonged disruption of operations at these facilities due to destruction of or material damage to the facilities or other reasons could adversely affect our financial condition and results of operations. We maintain property and business interruption insurance to protect against such types of disruption, but there can be no assurance that the proceeds of such insurance would be adequate to repair or rebuild our facilities in such event or to compensate us for lost profit during the period of any such disruption.

The Revocation, Suspension Or Modification Of Our Gaming Licenses Would Adversely Affect Our Gaming Business

The Delaware State Lottery Office and the Delaware Harness Racing Commission regulate our gaming operations. Our license from the Commission must be renewed on an annual basis. To keep our license for video lottery (slot) machine gaming, we must remain licensed for harness horse racing by the Commission and conduct at least 80 live race days each racing season, subject to the availability of harness race horses. The Commission has broad discretion to reject any application for a license or suspend or revoke a license once it is issued. The Director of the Delaware State Lottery Office (the “Lottery Director”) has broad discretion to revoke, suspend or modify the terms of a video lottery license. Any modification or termination of existing licensing regulations or any revocation, suspension or modification of our licenses could adversely affect our business, financial condition and overall profitability.

Our Gaming Activities Are Subject To Extensive Government Regulation And Any Additional Government Regulation Or Taxation Of Gaming Activities Could Substantially Reduce Our Revenue Or Profit

Video lottery (slot) machine gaming, harness horse racing and pari-mutuel wagering are subject to extensive government regulation. Delaware law regulates the win we are entitled to retain and the percentage of commission we are entitled to receive from our gaming revenues, which comprises a significant portion of our overall revenues. The State granted us a license to conduct video lottery (slot) machine operations and a license to conduct harness horse races and pari-mutuel wagering. The laws under which these licenses are granted could be modified or repealed at any time and we could be required to terminate our gaming operations. If we are required to terminate our gaming operations or if the amount of the commission we receive from the State for conducting our gaming operations is decreased, our business operations and overall profitability would be significantly impaired.

We believe that the prospect of significant additional tax revenue is one of the primary reasons why jurisdictions have legalized gaming. As a result, gaming operators are typically subject to significant taxes and fees in addition to normal federal and state corporate income taxes. These taxes and fees are subject to increase at any time. We pay substantial taxes and fees with respect to our operations and will likely incur similar burdens in any other jurisdiction in which we may conduct gaming operations in the future. Any material increase in taxes or fees, or the adoption of additional taxes or fees, may have a material adverse effect on our future financial results.

We Do Not Own Or Lease Our Video Lottery (Slot) Machines And Related Technology

We do not own or lease the video lottery (slot) machines or central computer systems used in connection with our video lottery gaming operations. The Lottery Director enters into contracts directly with the providers of the video lottery (slot) machines and computer systems. The State purchases or leases all equipment and the Lottery Director licenses all technology providers. Our operations could be disrupted if a licensed technology provider violates its agreement with the State or ceases to be licensed for any reason. Such an event would be outside of our control and could adversely affect our gaming revenues.

Item 3. Quantitative And Qualitative Disclosures About Market Risk

The Company does not utilize financial instruments for trading purposes and holds no derivative financial instruments which could expose it to market risk. Our exposure to market risks related to fluctuations in interest rates is limited to our variable rate borrowings of $32,350,000 at June 30, 2004 under our revolving credit facility. A change in interest rates of one percent on the balance outstanding at June 30, 2004 would cause a change in total annual interest costs of $324,000. The carrying values of these borrowings approximate their fair values at June 30, 2004.

Item 4. Controls and Procedures

(a) Disclosure Controls and Procedures.

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), the Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that material information relating to the Company required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. In designing and evaluating the disclosure controls and procedures, the Company’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and management necessarily was required to apply its judgment in designing and evaluating the controls and procedures. The Company currently is in the process of further reviewing and documenting its disclosure controls and procedures, and its internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

(b) Changes in Internal Control Over Financial Reporting.

There were no changes in our internal control over financial reporting during the second quarter of fiscal year 2004 that have materially affected, or that are reasonably likely to materially affect our internal controls over financial reporting.

Part II – Other Information

Item 1. Legal Proceedings

We are a party to ordinary routine litigation incidental to our business. Management does not believe that the resolution of any of these matters is likely to have a serious negative effect on our financial condition, cash flows or profitability.

Item 2. Changes In Securities, Use Of Proceeds And Issuer Purchases of Equity Securities

On October 23, 2002, the Company’s Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company’s outstanding common stock. The purchases may be made in the open market or in privately negotiated transactions as conditions warrant. The repurchase authorization does not obligate the Company to acquire any specific number of shares and may be suspended at any time. During the three and six months ended June 30, 2003, the Company purchased and retired 49,700 and 169,945 shares of its outstanding common stock at an average price of $8.99 and $8.96 per share, respectively. Gaming & Entertainment did not repurchase any outstanding shares of its common stock during the six months ended June 30, 2004. At June 30, 2004, the Company had remaining repurchase authority of 1,830,055 shares.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission Of Matters To A Vote Of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits And Reports On Form 8-K

(a) Exhibits

10.1		Non-Compete Agreement between Dover Downs Gaming & Entertainment, Inc. and Patrick J. Bagley dated June 16, 2004.

10.2		Employment and Non-Compete Agreement between Dover Downs Gaming & Entertainment, Inc. and Klaus M. Belohoubek dated June 16, 2004.

10.3		Employment and Non-Compete Agreement between Dover Downs Gaming & Entertainment, Inc. and Timothy R. Horne dated June 16, 2004.

10.4		Non-Compete Agreement between Dover Downs Gaming & Entertainment, Inc. and Melvin L. Joseph dated June 16, 2004.

10.5		Employment and Non-Compete Agreement between Dover Downs Gaming & Entertainment, Inc. and Denis McGlynn dated June 16, 2004.

10.6		Employment and Non-Compete Agreement between Dover Downs Gaming & Entertainment, Inc. and Edward J. Sutor dated June 16, 2004.

10.7		Non-Compete Agreement between Dover Downs Gaming & Entertainment, Inc. and Henry B. Tippie dated June 16, 2004.

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Sec. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Sec. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

The Company furnished a Form 8-K on April 28, 2004 announcing that it had issued a press release on the same date reporting that the Company’s Board of Directors declared a quarterly cash dividend on both classes of common stock of $0.06 per share.

The Company furnished a Form 8-K on April 29, 2004 announcing that it had issued a press release on the same date regarding its first quarter 2004 financial results.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DATED:	August 6, 2004	Dover Downs Gaming & Entertainment, Inc.
		Registrant


		/s/ Denis McGlynn
		Denis McGlynn
		President and Chief Executive Officer
		and Director


		/s/ Timothy R. Horne
		Timothy R. Horne
		Senior Vice President-Finance,
		Treasurer and
		Chief Financial Officer

Exhibit 10.1

NON-COMPETE AGREEMENT

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

AND

PATRICK J. BAGLEY

THIS AGREEMENT, is by and between Dover Downs Gaming & Entertainment, Inc. (the “Company”) and Patrick J. Bagley (the “Director”) and is effective as of this 16th day of June 2004 (the “Effective Date”).

W I T N E S S E T H:

WHEREAS, the Director is currently a director of the Company and employed by the Company or an affiliate thereof in an executive position; and

WHEREAS, the Director has, in the course of his tenure as a Director, developed relationships with employees and customers of the Company, and learned valuable and sensitive information concerning the Company’s operations, policies and procedures; and

WHEREAS, the Director has, in the course of his tenure as a Director, been exposed to valuable and sensitive Company reports, files, memoranda, records, software, and other property; and

WHEREAS, the Company recognizes that the solicitation of its employees and customers, and the use or disclosure of the policies, procedures, information, documents, and property of the Company would be damaging to the Company’s interests; and

WHEREAS, the Company has determined that it is in the best interests of the Company to protect its interests through the use of Employment and Non-Compete Agreements; and

WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders for the Company to agree to provide benefits under the circumstances described below to the Director and other executives who agree to such an agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows:

Section 1
Definitions

“Announcement” shall mean a press release issued by the Company announcing the signing of an agreement whereby the Company will be acquired by or merge with any other entity or a tender offer for the shares of the Company stock will be initiated.

“Change in Control” shall mean the earlier to occur of (a) ten (10) days following the closing of a tender offer for the Company’s stock following the Announcement or (b) the closing of a merger or similar transaction (“Transaction”) of the Company and any other entity; provided, however, a Transaction the result of which is the shareholders of the Company’s voting securities immediately prior to the Transaction own, directly or indirectly in substantially the same proportion, at least 60% of the voting securities of the survivor of such Transaction immediately following such Transaction shall not be a Change in Control.

“Change in Control Fee” shall mean $100,000.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

Section 2
Term of Agreement

This Agreement shall be effective as of the Effective Date but shall automatically terminate if no Announcement occurs within two (2) years of the Effective Date or if the Director’s employment is terminated prior to an Announcement. Renewal of this Agreement for successive two (2) year terms shall require approval of the Company’s Compensation and Stock Incentive Committee.

Section 3
Benefits

On the date of a Change in Control, the Company shall pay to the Director in cash the Change in Control Fee. Such amount shall be deemed earned on the date of the Change in Control and not forfeitable.

If all, or any portion, of the payment provided under this Agreement, if any, either alone or together with other payments and benefits which the Director receives or is entitled to receive from the Company, would constitute an excess “parachute payment” within the meaning of Section 280G of the Code (whether or not under an existing plan, arrangement, or other agreement) (each such parachute payment, a “Parachute Payment”), and would result in the imposition on the Director of an excise tax under Section 4999 of the Code, then, in addition to any other benefits to which the Director is entitled under this Agreement or otherwise, the Director shall be paid an amount in cash equal to the sum of the excise taxes payable by the Director by reason of receiving Parachute Payments plus the amount necessary to place the Director in the same after-tax position (taking into account any and all applicable federal, state and local excise, income or other taxes at the highest possible applicable rates on such Parachute Payments (including, without limitation, any payments under this Section) as if no excise taxes had been imposed with respect to Parachute Payments (the “Parachute Gross-Up”). Any

Parachute Gross-Up otherwise required by this Section shall not be made later than the time of the corresponding payment or benefit hereunder giving rise to the underlying Section 4999 excise tax, even if the payment of the excise tax is not required under the Code until a later time.

Except as may otherwise be agreed to by the Company and the Director, any gross up payable under this Section shall be as conclusively determined by the KPMG LLP, or such other firm as mutually agreed to by the Company and the Director (“Independent Tax Counsel”), whose determination or determinations shall be final and binding on all parties. The Director shall agree to utilize such determination or determinations, as applicable, in filing all of the Director’s tax returns with respect to the excise tax imposed by Section 4999 of the Code, if any. If such Independent Tax Counsel fails or refuses to make the required determinations for any reason, then such determinations shall be made by a comparable firm or group of national reputation to which the parties reasonably mutually agreed. All fees and expenses of the Independent Tax Counsel or its replacement shall be paid by the Company.

As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Independent Tax Counsel hereunder, it is possible that Parachute Gross-Up payments, if any, which will not have been made by the Company, should have been made, together with any interest, penalties or taxes of any kind thereon, consistent with the calculations required to be made hereunder (an “Underpayment”). The Company shall pay all such Underpayments to or for the benefit of the Director. The Director shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment within ten (10) business days after the Director is informed in writing of such claim. The Company shall notify the Director within ten (10) business days of receipt of the Director notice that the Company (x) will pay the Underpayment and do so on or before the date due, or (y) that it desires to contest such claim. The Director will cooperate with the Company in any such contest; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Director harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Director shall be entitled, at Director’s expense, to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

References herein to Code sections shall apply to comparable Code sections in the event of any amendment to the Code.

Section 4
Litigation Expenses and Arbitration

(including, without limitation, any rights to a tax gross-up). Such payments are to be made within five days after the Director’s request for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require; provided, however, that if the Director institutes a proceeding and the judge or other decision-maker presiding over the proceeding affirmatively finds that the Director has failed to prevail substantially, he shall pay his own costs and expenses (and, if applicable, return any amounts theretofore paid on his behalf under this Section).

All disputes with respect to the subject matter of this Agreement and the enforcement of rights hereunder shall be submitted to binding arbitration in accordance with the rules of the American Arbitration Association (the “AAA”). Each party hereto shall designate one arbitrator (who need not be impartial) within fifteen (15) days after notice of the dispute. The two arbitrators so designated shall endeavor to designate promptly a third, neutral arbitrator. If the two arbitrators have not designated the third arbitrator by the fifteenth (15 ^th ) day following the designation of the second arbitrator, or if a second arbitrator has not been designated by the (15 ^th ) day following the designation of the first, either Party may request the AAA to designate the remaining arbitrator(s). The third arbitrator shall take an oath of neutrality. The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evidence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation. The arbitrators shall have the power to render equitable relief as may be available in accordance with applicable law. Unless otherwise agreed by the parties, any such arbitration shall take place in such City within the United States as Director may designate, and shall be conducted in accordance with the Rules of the AAA. The determination reached in such arbitration shall be final and binding on both parties without any right of appeal or further dispute. The arbitrators’ award may be confirmed in, and judgment upon the award entered by, any federal or state court having jurisdiction over the parties.

Section 5
Restrictive Covenants

(a) For a period of one year following the Change in Control, whether or not Director continues his engagement with the Company, Director agrees not to, directly or indirectly, individually or on behalf of persons not now parties to this Agreement, or as a director, officer, principal, agent, executive, or in any other capacity or relationship, engage in the casino business (except as a passive investor holding not more than 3% of the equity of such business), or aid or endeavor to assist any business or legal entity, that is in the casino business and that competes with the Company anywhere in the Territory. The Territory shall consist of both the entire State of Delaware and a 50-mile radius around the Company’s facility in Dover, Delaware. The Company and Director acknowledge the reasonableness of this covenant not to compete and the reasonableness of the geographic area and duration of time which are a part of said covenant.

(b) Unless waived in writing by the Company, Director further agrees that he will not, directly or indirectly, during the Extension Period, solicit the trade or patronage of any of the customers of the Company, regardless of the location of such customers of the Company with respect to any services, products, or other matters in which the Company is active.

(c) Unless waived in writing by the Company, Director further agrees that he will not, directly or indirectly, during the Extension Period, solicit or attempt to entice away from the Company any director, agent or employee of the Company.

(d) Director acknowledges that the Company has no adequate remedy at law and would be irreparably harmed if Director breaches or threatens to breach any of the provisions of this Section and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any such breach or threatened breach thereof and to specific performance of the terms of this Section. Director further agrees that Director shall not, in any equity proceeding relating to the enforcement of this Section, raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have under and in respect of this Agreement or any other agreement.

Section 6
Severability

If, for any reason, any one or more of the provisions or part of a provision contained in this Agreement shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement not held so invalid, illegal or unenforceable, and each other provision or part of a provision shall to the fullest extent consistent with law continue in full force and effect.

Section 7
Amendment, Termination, or Modification

Except as provided below, this Agreement may not be terminated, modified or amended other than by an instrument in writing signed by the parties hereto. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument signed by the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.

Section 8
Tax Withholding

The Company may withhold from any payments made under this Agreement all federal, state or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

Section 9
Entire Understanding

not affect or operate to reduce any benefit or compensation inuring to the Director of any kind elsewhere provided and not expressly dealt with in this Agreement.

Section 10
Binding Agreement

This Agreement shall be binding upon, and shall inure to the benefit of, the Director and the Company and their respective permitted successors and assigns.

Section 11
Director Status

Nothing herein contained shall be deemed to create an agreement between the Company and the Director providing for the Director’s tenure with the Company to continue for any fixed period of time prior to a Change in Control. There are no other agreements or understandings between the Company and the Director which guarantee his continued tenure with the Company or guarantee any level of compensation, including incentive or bonus payments, to the Director.

Section 12
No Attachment

Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect.

Section 13
Notices

All notices, requests, demands and other communications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, first class as follows:

(a) to the Company, at its Dover, Delaware address

(b) to the Director, at the address maintained by the Company for the Director for payroll purposes;

or to such address as either party shall have previously specified in writing to the other.

Section 14
Revocation and Director Acknowledgments

The Director acknowledges that he has read and understands the provisions of this Agreement. The Director further acknowledges that he has been given an opportunity for his legal counsel to review this Agreement and that the provisions of this Agreement are reasonable and that he has received a copy of this Agreement.

Section 15
Headings of No Effect

The section headings contained in this Agreement are included solely for convenience of reference and shall not in any way affect the meaning or interpretation of any of the provisions of this Agreement.

Section 16
Applicable Law

This Agreement and its validity, interpretation, performance, and enforcement shall be governed by the laws of the State of Delaware.

Section 17
Counterparts

This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF, the Company through its officer duly authorized, and the

Director both intending to be legally bound have duly executed and delivered this Agreement, to be effective as of the Effective Date.

	Dover Downs Gaming & Entertainment, Inc.

	/S/ Denis McGlynn
	Its


	DIRECTOR

	/S/ Patrick J. Bagley

Exhibit 10.2

EMPLOYMENT AND NON-COMPETE AGREEMENT

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

AND

KLAUS M. BELOHOUBEK

THIS AGREEMENT, is by and between Dover Downs Gaming & Entertainment, Inc. (the “Company”) and Klaus M. Belohoubek (the “Executive”) and is effective as of this 16th day of June, 2004 (the “Effective Date”).

W I T N E S S E T H:

WHEREAS, the Executive is currently employed by the Company or an affiliate thereof in an executive position; and

WHEREAS, the Executive has, in the course of his employment, developed relationships with employees and customers of the Company, and learned valuable and sensitive information concerning the Company’s operations, policies and procedures; and

WHEREAS, the Executive has, in the course of his employment, been exposed to valuable and sensitive Company reports, files, memoranda, records, software, and other property; and

WHEREAS, the Company has determined that it is in the best interests of the Company to protect its interests through the use of Employment and Non-Compete Agreements; and

WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders for the Company to agree to provide benefits under the circumstances described below to the Executive and other executives who agree to such an agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows:

Section 1
Definitions

“Board” shall mean the Board of Directors of the Company or the ultimate corporate parent entity which owns the Company if the Company is not public.

“Cause” shall mean a unanimous determination by the Board that the Executive has been convicted of a felony, has embezzled from, or committed fraud against, the Company which embezzlement or fraud has a material adverse financial impact on the Company or gross insubordination which has continued after written notice of such from the Board which determination is upheld by a final, non-appealable arbitration award pursuant to Section 6.

“Change in Control Fee” shall mean $250, 000.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Company Information” shall mean (i) confidential information including, without limitation, information received from third parties under confidential conditions, (ii) information subject to the Company’s and its affiliates’ attorney-client or work-product privilege; and (iii) other technical, business, legal or financial information (including, without limitation, customer lists), the use or disclosure of which might reasonably be construed to be contrary to the Company’s and its affiliates’ interests.

“Date of Termination” shall mean the date on which the Executive’s employment is terminated.

“Employment Period” shall mean the period of time during the Extension Period the Executive is an employee of the Company.

“Extension Period” shall mean the 24 month period following the Change in Control.

“Good Reason” shall mean a (i) reduction in title, responsibilities, administrative support or support services, (ii) relocation of Executive’s office, (iii) travel at a level that exceeds the travel requirements before the Change in Control, (iv) any breach by the Company of its obligations hereunder, (v) any breach by the purchaser under a merger or acquisition agreement pursuant to which the Change in Control takes place relating to employee benefits or directors’

and officers’ insurance or indemnification provisions, or (vi) any reason whatsoever two months after the Change in Control.

“Monthly Amount” shall be an amount equal to one-twelfth of the sum of (a) the Executive’s then current annual base salary (excluding any incentive or bonus), and (b) the amount of any cash bonus awarded to the Executive for the then most recently concluded fiscal year of the Company.

“Non-Compete Monthly Amount” shall mean the portion of the Monthly Amount which is paid in consideration of the Executive’s agreement to the restrictions and other provisions of Section 7, with the remainder of the Monthly Amount and other benefits under this Agreement paid after the Employment Period to be treated as severance. Executive’s Non-Compete Monthly Amount shall be calculated by multiplying the Monthly Amount by fifty percent.

“Retirement Plan” shall mean the Company’s qualified defined benefit retirement plan(s) in which the Executive participates.

“SERP” shall mean any and all supplemental retirement plans in which the Executive participates (including, but not limited to, any benefit restoration plan(s) maintained by the Company from time to time).

Section 2
Term of Agreement

This Agreement shall be effective as of the Effective Date but shall automatically terminate if no Announcement occurs within two (2) years of the Effective Date or if the Executive’s employment is terminated prior to an Announcement. Renewal of this Agreement for successive two (2) year terms shall require approval of the Company’s Compensation and Stock Incentive Committee.

Section 3
Benefits

(a) On the date of a Change in Control, the Company shall pay to the Executive in cash the Change in Control Fee.

(b) During the Extension Period, the Company shall pay to the Executive the Monthly Amount, payable on the first day of each month, prorated for partial months.

(c) If the Executive’s employment is terminated during the Extension Period, then,

(i) within five business days after the Date of Termination, the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) in cash all accrued but unpaid salary, earned but unpaid bonuses, and accrued but unused vacation in accordance with Company policies;

(ii) the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) the Monthly Amount on the first day of each month during the remainder of the Extension Period;

(iii) the Company shall pay to the Executive (or if the Executive dies, to his beneficiary, if any, under the Retirement Plan) a lump sum amount equal to the value of the monthly benefit under (x) the Retirement Plan and (y) the SERP, that the Executive or his beneficiary, if any, under the Retirement Plan would have received (1) for payments of the Monthly Amount had Executive been an employee while receiving such payments, and (2) for payment of the Change of Control Fee had such amount been treated as a normal bonus for pension accrual purposes (giving credit for all purposes, including, but not limited to, accrual of benefits, vesting, age and years of service and making the determination without regard to compensation or benefit limitations prescribed by federal law or regulation), which payment shall be paid within 10 days of the Date of Termination and calculated by Buck Consultants (or such other consultant as may be agreed upon) using the actuarial assumptions under the Retirement Plan and the discount rate which would be utilized for purposes of funding a Plan termination;

(iv) on the Date of Termination the Company shall transfer title and ownership to the Executive of his laptop computer, if any, without any payment by the Executive to the Company.

(d) During the Extension Period (whether or not during the Employment Period) the Executive shall be entitled to the following additional benefits:

(i) The Executive and, as applicable, the Executive’s covered dependents shall be entitled to all health, welfare, and fringe benefits provided by the Company to its key employees generally or to the Executive on an individual or group basis (including, but not limited to, any life, accident, health, hospitalization or long-term disability insurance, maintained from time to time by the Company), whether maintained pursuant to a plan, policy or other arrangement (written or unwritten), as if the Executive were still employed during such period, at the same level of benefits and at the same dollar cost to the Executive as is available generally to comparable employees of the Company (but in no instances shall such benefits be at a level less than as in effect on the date of the Change in Control). If the Company reasonably determines that the coverage required under this Section would cause a welfare plan sponsored by the Company to violate any provision of the Code prohibiting discrimination in favor of highly compensated employees or key employees, or if any benefits described in this Section cannot be provided (or the Company determines that it does not wish to provide such benefits) pursuant to the appropriate plan or program maintained for employees of the Company, the Company shall provide such benefits outside such plan or program at no additional cost (on an after tax basis) to the Executive or, if the parties shall so agree, the Company will pay to the Executive the cash equivalent thereof. The health benefits provided in accordance with this Section shall be secondary to any comparable benefits provided by another employer if and only if the Executive chooses to be covered by such other employee plan.

(ii) Executive shall receive continued payment of professional and organizational dues and fees as in effect prior the Change in Control.

(e) Executive shall have exclusive use of the office space identified on the attached Exhibit A for the term set forth thereon, together with all furniture, fixtures, equipment and systems currently therein (or comparable equipment and systems, such as phone, voicemail, email, copiers or computers, if Company wishes to change service providers), all of which shall be provided and maintained (including utilities and janitorial service) at no cost to Executive (on an after tax basis) consistent with past practices, except that for any period of such use which extends past the Employment Period, Executive shall be responsible to reimburse Company for long distance phone charges. Executive shall also be given title to the law library in such offices (including the unexpired term of any subscription series) at no cost to Executive (on an after tax basis).

(f) (i) If all, or any portion, of the payments and benefits provided under this Agreement, if any, either alone or together with other payments and benefits which the Executive receives or is entitled to receive from the Company, would constitute an excess “parachute payment” within the meaning of Section 280G of the Code (whether or not under an existing plan, arrangement, or other agreement) (each such parachute payment, a “Parachute Payment”), and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code, then, in addition to any other benefits to which the Executive is entitled under this Agreement or otherwise, the Executive shall be paid an amount in cash equal to the sum of the excise taxes payable by the Executive by reason of receiving Parachute Payments plus the amount necessary to place the Executive in the same after-tax position (taking into account any and all applicable federal, state and local excise, income or other taxes at the highest possible applicable rates on such Parachute Payments (including, without limitation, any payments under this Section) as if no excise taxes had been imposed with respect to Parachute Payments (the “Parachute Gross-Up”). Any Parachute Gross-Up otherwise required by this Section shall not be made later than the time of the corresponding payment or benefit hereunder giving rise to the underlying Section 4999 excise tax, even if the payment of the excise tax is not required under the Code until a later time.

(ii) Subject to the provisions of Section 3(d) and except as may otherwise be agreed to by the Company and the Executive, the amount or amounts (if any) payable under this Section 3 shall be as conclusively determined by the KPMG LLP, or such other firm as mutually agreed to by the Company and the Executive (“Independent Tax Counsel”), whose determination or determinations shall be final and binding on all parties. The Executive shall agree to utilize such determination or determinations, as applicable, in filing all of the Executive’s tax returns with respect to the excise tax imposed by Section 4999 of the Code, if any. If such Independent Tax Counsel fails or refuses to make the required determinations for any reason, then such determinations shall be made by a comparable firm or group of national reputation to which the parties reasonably mutually agreed. All fees and expenses of the Independent Tax Counsel or its replacement shall be paid by the Company.

(iii) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Independent Tax Counsel hereunder, it is possible that Parachute Gross-Up payments, if any, which will not have been made by the Company, should have been made, together with any interest, penalties or taxes of any kind thereon, consistent with the calculations required to be made hereunder (an “Underpayment”). The Company shall pay all such Underpayments to or for the benefit of the Executive. The

Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment within ten (10) business days after the Executive is informed in writing of such claim. The Company shall notify the Executive within ten (10) business days of receipt of the Executive notice that the Company (x) will pay the Underpayment and do so on or before the date due, or (y) that it desires to contest such claim. The Executive will cooperate with the Company in any such contest; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled, at Executive’s expense, to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(iv) References herein to Code sections shall apply to comparable Code sections in the event of any amendment to the Code.

(v) The foregoing provisions of this subsection (f) shall similarly apply to any benefit provided elsewhere in this Agreement where it is expressly provided that the benefit is to be provided on an after tax basis.

(g) In the event of the Executive’s termination of employment under this Agreement, the Executive shall be under no obligation to seek other employment, and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment.

In the event that Executive’s employment is terminated by the Company for Cause (and Executive was not capable of voluntarily terminating for Good Reason at or prior to such time) or if Executive voluntarily terminates without Good Reason, the Company shall remain obligated to pay the Non-Compete Monthly Amount but shall not be obligated to pay the balance of the Monthly Amount. Executive is free to terminate his employment for Good Reason.

Section 4
Employment

Following a Change in Control, the Executive will, except as provided below, continue as an employee during the Extension Period. During the Employment Period:

(i) The Executive shall perform services consistent with his past practices,

(ii) The Executive shall not be required to relocate or travel in excess of past practices,

(iii) The Executive shall enjoy the same office, administrative support and support services as he enjoyed prior to the Change in Control.

(iv) The Executive shall not be required to devote more time to Company business than he did prior to the Change in Control and may continue director or officer positions with other private or public entities that do not violate Section 7.

(v) The Executive’s expenses shall be reimbursed consistent with past practices, and

(vi) The Executive shall receive at least the same vacation as he currently enjoys, but not less than four weeks paid vacation.

No breach or alleged breach of this Section 4 shall constitute grounds for, or otherwise entitle, the Company to offset payments otherwise owing to the Executive under this Agreement.

Section 5
Source of Payments

All payments provided for in this Agreement shall be paid in cash from the general funds of the Company; provided, however, that such payments shall be reduced by the amount of any payments made to the Executive or his dependents, beneficiaries or estate from any trust or special or separate fund established by the Company to assure such payments. The Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments.

Section 6
Litigation Expenses and Arbitration

In addition to the Company’s other obligations under this Agreement, the Company shall pay all legal fees and expenses incurred in a legal proceeding (including arbitration) by the Executive in seeking to obtain or enforce any right or benefit provided by this Agreement (including, without limitation, any rights to a tax gross-up). Such payments are to be made within five days after the Executive’s request for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require; provided, however, that if the Executive institutes a proceeding and the judge or other decision-maker presiding over the proceeding affirmatively finds that the Executive has failed to prevail substantially, he shall pay his own costs and expenses (and, if applicable, return any amounts theretofore paid on his behalf under this Section 6.

obligation. The arbitrators shall have the power to render equitable relief as may be available in accordance with applicable law. Unless otherwise agreed by the parties, any such arbitration shall take place in such City within the United States as Executive may designate, and shall be conducted in accordance with the Rules of the AAA. The determination reached in such arbitration shall be final and binding on both parties without any right of appeal or further dispute. The arbitrators’ award may be confirmed in, and judgment upon the award entered by, any federal or state court having jurisdiction over the parties.

Section 7
Restrictive Covenants

(a) Within a reasonable period of time following his termination of employment, the Executive shall return to the Company all Company Information, reports, files, memoranda, records, credit cards, cardkey passes, door and file keys, computer access codes, and other property which the Executive has received, prepared, or helped to prepare in connection with his employment with the Company, except as provided in Section 3. The Executive acknowledges that in the course of employment with the Company, he has acquired Company Information and that such Company Information has been disclosed to him in confidence and for the Company’s use only. The Executive agrees that, during the Extension Period, he (i) will keep such Company Information confidential at all times, (ii) will not disclose or communicate Company Information to any third party, and (iii) will not make use of Company Information on his own behalf or on behalf of any third party. The Executive further acknowledges and agrees that the Company’s remedy in the form of monetary damages for any breach by him of any of the provisions of this Section may be inadequate and that, in addition to any monetary damages for such breach, the Company shall be entitled to institute and maintain any appropriate proceeding or proceedings, including an action for specific performance and/or injunction.

(b) Executive agrees not to, during the Extension Period, within the Territory, directly or indirectly, individually or on behalf of persons not now parties to this Agreement, or as a director, officer, principal, agent, executive, or in any other capacity or relationship, engage in the casino business (except as a passive investor holding not more than 3% of the equity of such business), or aid or endeavor to assist any business or legal entity, that is in the casino business and that competes with the Company anywhere in the Territory. The Territory shall consist of both the entire State of Delaware and a 50-mile radius around the Company’s facility in Dover, Delaware. The Company and Executive acknowledge the reasonableness of this covenant not to compete and the reasonableness of the geographic area and duration of time which are a part of said covenant.

(c) Unless waived in writing by the Company, Executive further agrees that he will not, directly or indirectly, during the Extension Period, solicit the trade or patronage of any of the customers of the Company, regardless of the location of such customers of the Company with respect to any services, products, or other matters in which the Company is active.

(d) Unless waived in writing by the Company, Executive further agrees that he will not, directly or indirectly, during the Extension Period, solicit or attempt to entice away from the Company any director, agent or employee of the Company.

(e) Executive acknowledges that the Company has no adequate remedy at law and would be irreparably harmed if Executive breaches or threatens to breach any of the provisions of this Section and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any such breach or threatened breach thereof and to specific performance of the terms of this Section (in addition to any other legal or equitable remedy the Company may have, including if so determined by arbitration, that the Company is not obligated to pay to the Executive (or the Executive is required to repay to the Company) a portion or all of the Non-Compete Monthly Amount; provided, however, in all instances the Company shall continue to pay to Executive the Non-Compete Monthly Amount unless and until all appeals have been exhausted or the time for such has expired). Executive further agrees that Executive shall not, in any equity proceeding relating to the enforcement of this Section, raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have under and in respect of this Agreement or any other agreement.

(f) The Executive agrees to pay to the Company any outstanding amounts owed to the Company; provided, however, that no breach or alleged breach of this subsection (f) or any other provision of this Section shall constitute grounds for, or otherwise entitle, the Company to offset payments otherwise owed to the Executive under this Agreement.

Section 8
Severability

Section 9
Amendment, Termination, or Modification

Section 10
Consolidation, Merger, or Sale of Assets; Assignability

agree to perform under the terms of this Agreement in the same manner and to the same extent that the Company and its affiliates would be required to perform it if no such succession had taken place (provided that such a requirement to perform which arises by operation of law shall be deemed to satisfy the requirements for such an express assumption and agreement). Except as provided herein, the Executive’s rights hereunder shall not be assignable.

Section 11
Tax Withholding

The Company may withhold from any payments made under this Agreement all federal, state or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

Section 12
Entire Understanding

This Agreement contains the entire understanding between the Company and the Executive with respect to the subject matter hereof and supersedes any prior agreement between the Company and the Executive regarding non-compete provisions, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Executive of any kind elsewhere provided and not expressly dealt with in this Agreement.

Section 13
Binding Agreement

This Agreement shall be binding upon, and shall inure to the benefit of, the Executive and the Company and their respective permitted successors and assigns.

Section 14
Employment Status

Nothing herein contained shall be deemed to create an employment agreement between the Company and the Executive providing for the employment of the Executive by the Company for any fixed period of time prior to a Change in Control. The Executive’s employment with the Company is terminable at will by the Company or Executive and each shall have the right to terminate Executive’s employment with the Company at any time, with or without Cause, subject to the Company’s obligation to provide any benefits required hereunder. There are no other agreements or understandings between the Company and the Executive which guarantee continued employment to the Executive or guarantee any level of compensation, including incentive or bonus payments, to the Executive.

Section 15
No Attachment

Section 16
Notices

(a) to the Company, at its Dover, Delaware address

(b) to the Executive, at the address maintained by the Company for the Executive for payroll purposes;

or to such address as either party shall have previously specified in writing to the other.

Section 17
Revocation and Executive Acknowledgments

The Executive acknowledges that he has read and understands the provisions of this Agreement. The Executive further acknowledges that he has been given an opportunity for his legal counsel to review this Agreement and that the provisions of this Agreement are reasonable and that he has received a copy of this Agreement.

Section 18
Headings of No Effect

Section 19
Applicable Law

This Agreement and its validity, interpretation, performance, and enforcement shall be governed by the laws of the State of Delaware.

Section 20
Counterparts

This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF, the Company through its officer duly authorized, and the

Executive both intending to be legally bound have duly executed and delivered this Agreement, to be effective as of the Effective Date.

	Dover Downs Gaming & Entertainment, Inc.

	/S/ Denis McGlynn
	Its


	EXECUTIVE

	/S/ Klaus M. Belohoubke

Exhibit A – Office Space

Office Space shall be Suite 203

Concord Plaza

3505 Silverside Road

Plaza Centre Bldg.,

Wilmington, DE 19810

Term shall be through initial lease term with Concord Properties expiring January 31, 2008

Exhibit 10.3

EMPLOYMENT AND NON-COMPETE AGREEMENT

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

AND

TIMOTHY R. HORNE

THIS AGREEMENT, is by and between Dover Downs Gaming & Entertainment, Inc. (the “Company”) and Timothy R. Horne (the “Executive”) and is effective as of this 16th day of June, 2004 (the “Effective Date”).

W I T N E S S E T H:

WHEREAS, the Executive is currently employed by the Company or an affiliate thereof in an executive position; and

WHEREAS, the Executive has, in the course of his employment, been exposed to valuable and sensitive Company reports, files, memoranda, records, software, and other property; and

WHEREAS, the Company has determined that it is in the best interests of the Company to protect its interests through the use of Employment and Non-Compete Agreements; and

WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders for the Company to agree to provide benefits under the circumstances described below to the Executive and other executives who agree to such an agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows:

Section 1
Definitions

“Board” shall mean the Board of Directors of the Company or the ultimate corporate parent entity which owns the Company if the Company is not public.

“Change in Control Fee” shall mean $250, 000.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Date of Termination” shall mean the date on which the Executive’s employment is terminated.

“Employment Period” shall mean the period of time during the Extension Period the Executive is an employee of the Company.

“Extension Period” shall mean the 24 month period following the Change in Control.

and officers’ insurance or indemnification provisions, or (vi) any reason whatsoever two months after the Change in Control.

“Retirement Plan” shall mean the Company’s qualified defined benefit retirement plan(s) in which the Executive participates.

Section 2
Term of Agreement

Section 3
Benefits

(a) On the date of a Change in Control, the Company shall pay to the Executive in cash the Change in Control Fee.

(b) During the Extension Period, the Company shall pay to the Executive the Monthly Amount, payable on the first day of each month, prorated for partial months.

(c) If the Executive’s employment is terminated during the Extension Period, then,

(i) within five business days after the Date of Termination, the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) in cash all accrued but unpaid salary, earned but unpaid bonuses, and accrued but unused vacation in accordance with Company policies;

(ii) the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) the Monthly Amount on the first day of each month during the remainder of the Extension Period;

(iii) the Company shall pay to the Executive (or if the Executive dies, to his beneficiary, if any, under the Retirement Plan) a lump sum amount equal to the value of the monthly benefit under (x) the Retirement Plan and (y) the SERP, that the Executive or his beneficiary, if any, under the Retirement Plan would have received (1) for payments of the Monthly Amount had Executive been an employee while receiving such payments, and (2) for payment of the Change of Control Fee had such amount been treated as a normal bonus for pension accrual purposes (giving credit for all purposes, including, but not limited to, accrual of benefits, vesting, age and years of service and making the determination without regard to compensation or benefit limitations prescribed by federal law or regulation), which payment shall be paid within 10 days of the Date of Termination and calculated by Buck Consultants (or such other consultant as may be agreed upon) using the actuarial assumptions under the Retirement Plan and the discount rate which would be utilized for purposes of funding a Plan termination;

(iv) on the Date of Termination the Company shall transfer title and ownership to the Executive of his laptop computer, if any, without any payment by the Executive to the Company.

(d) During the Extension Period (whether or not during the Employment Period) the Executive shall be entitled to the following additional benefits:

(i) The Executive and, as applicable, the Executive’s covered dependents shall be entitled to all health, welfare, and fringe benefits provided by the Company to its key employees generally or to the Executive on an individual or group basis (including, but not limited to, any life, accident, health, hospitalization or long-term disability insurance, maintained from time to time by the Company), whether maintained pursuant to a plan, policy or other arrangement (written or unwritten), as if the Executive were still employed during such period, at the same level of benefits and at the same dollar cost to the Executive as is available generally to comparable employees of the Company (but in no instances shall such benefits be at a level less than as in effect on the date of the Change in Control). If the Company reasonably determines that the coverage required under this Section would cause a welfare plan sponsored by the Company to violate any provision of the Code prohibiting discrimination in favor of highly compensated employees or key employees, or if any benefits described in this Section cannot be provided (or the Company determines that it does not wish to provide such benefits) pursuant to the appropriate plan or program maintained for employees of the Company, the Company shall provide such benefits outside such plan or program at no additional cost (on an after tax basis) to the Executive or, if the parties shall so agree, the Company will pay to the Executive the cash equivalent thereof. The health benefits provided in accordance with this Section shall be secondary to any comparable benefits provided by another employer if and only if the Executive chooses to be covered by such other employee plan.

(ii) Executive shall receive continued payment of professional and organizational dues and fees as in effect prior the Change in Control.

(e) (i) If all, or any portion, of the payments and benefits provided under this Agreement, if any, either alone or together with other payments and benefits which the Executive receives or is entitled to receive from the Company, would constitute an excess “parachute payment” within the meaning of Section 280G of the Code (whether or not under an existing plan, arrangement, or other agreement) (each such parachute payment, a “Parachute Payment”), and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code, then, in addition to any other benefits to which the Executive is entitled under this Agreement or otherwise, the Executive shall be paid an amount in cash equal to the sum of the excise taxes payable by the Executive by reason of receiving Parachute Payments plus the amount necessary to place the Executive in the same after-tax position (taking into account any and all applicable federal, state and local excise, income or other taxes at the highest possible applicable rates on such Parachute Payments (including, without limitation, any payments under this Section) as if no excise taxes had been imposed with respect to Parachute Payments (the “Parachute Gross-Up”). Any Parachute Gross-Up otherwise required by this Section shall not be made later than the time of the corresponding payment or benefit hereunder giving rise to the underlying Section 4999 excise tax, even if the payment of the excise tax is not required under the Code until a later time.

(ii) Subject to the provisions of Section 3(d) and except as may otherwise be agreed to by the Company and the Executive, the amount or amounts (if any) payable under this Section 3 shall be as conclusively determined by the KPMG LLP, or such other firm as mutually agreed to by the Company and the Executive (“Independent Tax Counsel”), whose determination or determinations shall be final and binding on all parties. The Executive shall agree to utilize such determination or determinations, as applicable, in filing all of the Executive’s tax returns with respect to the excise tax imposed by Section 4999 of the Code, if any. If such Independent Tax Counsel fails or refuses to make the required determinations for any reason, then such determinations shall be made by a comparable firm or group of national reputation to which the parties reasonably mutually agreed. All fees and expenses of the Independent Tax Counsel or its replacement shall be paid by the Company.

(iii) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Independent Tax Counsel hereunder, it is possible that Parachute Gross-Up payments, if any, which will not have been made by the Company, should have been made, together with any interest, penalties or taxes of any kind thereon, consistent with the calculations required to be made hereunder (an “Underpayment”). The Company shall pay all such Underpayments to or for the benefit of the Executive. The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment within ten (10) business days after the Executive is informed in writing of such claim. The Company shall notify the Executive within ten (10) business days of receipt of the Executive notice that the Company (x) will pay the Underpayment and do so on or before the date due, or (y) that it desires to contest such claim. The Executive will cooperate with the Company in any such contest; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Furthermore, the Company’s control of the

contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled, at Executive’s expense, to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(iv) References herein to Code sections shall apply to comparable Code sections in the event of any amendment to the Code.

(v) The foregoing provisions of this subsection (f) shall similarly apply to any benefit provided elsewhere in this Agreement where it is expressly provided that the benefit is to be provided on an after tax basis.

(f) In the event of the Executive’s termination of employment under this Agreement, the Executive shall be under no obligation to seek other employment, and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment.

Section 4
Employment

Following a Change in Control, the Executive will, except as provided below, continue as an employee during the Extension Period. During the Employment Period:

(i) The Executive shall perform services consistent with his past practices,

(ii) The Executive shall not be required to relocate or travel in excess of past practices,

(iii) The Executive shall enjoy the same office, administrative support and support services as he enjoyed prior to the Change in Control.

(iv) The Executive shall not be required to devote more time to Company business than he did prior to the Change in Control and may continue director or officer positions with other private or public entities that do not violate Section 7.

(v) The Executive’s expenses shall be reimbursed consistent with past practices, and

(vi) The Executive shall receive at least the same vacation as he currently enjoys, but not less than four weeks paid vacation.

No breach or alleged breach of this Section 4 shall constitute grounds for, or otherwise entitle, the Company to offset payments otherwise owing to the Executive under this Agreement.

Section 5
Source of Payments

Section 6
Litigation Expenses and Arbitration

All disputes with respect to the subject matter of this Agreement and the enforcement of rights hereunder shall be submitted to binding arbitration in accordance with the rules of the American Arbitration Association (the “AAA”). Each party hereto shall designate one arbitrator (who need not be impartial) within fifteen (15) days after notice of the dispute. The two arbitrators so designated shall endeavor to designate promptly a third, neutral arbitrator. If the two arbitrators have not designated the third arbitrator by the fifteenth (15 ^th ) day following the designation of the second arbitrator, or if a second arbitrator has not been designated by the (15 ^th ) day following the designation of the first, either Party may request the AAA to designate the remaining arbitrator(s). The third arbitrator shall take an oath of neutrality. The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evidence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation. The arbitrators shall have the power to render equitable relief as may be available in accordance with applicable law. Unless otherwise agreed by the parties, any such arbitration shall take place in such City within the United States as Executive may designate, and shall be conducted in accordance with the Rules of the AAA. The determination reached in such arbitration shall be final and binding on both parties without any right of appeal or further dispute. The arbitrators’ award may be confirmed in, and judgment upon the award entered by, any federal or state court having jurisdiction over the parties.

Section 7
Restrictive Covenants

(a) Within a reasonable period of time following his termination of employment, the Executive shall return to the Company all Company Information, reports, files, memoranda, records, credit cards, cardkey passes, door and file keys, computer access codes, and other property which the Executive has received, prepared, or helped to prepare in connection with his employment with the Company, except as provided in Section 3. The Executive acknowledges that in the course of employment with the Company, he has acquired Company Information and that such Company Information has been disclosed to him in confidence and for the Company’s use only. The Executive agrees that, during the Extension Period, he (i) will keep such Company Information confidential at all times, (ii) will not disclose or communicate Company Information to any third party, and (iii) will not make use of Company Information on his own behalf or on behalf of any third party. The Executive further acknowledges and agrees that the Company’s remedy in the form of monetary damages for any breach by him of any of the provisions of this Section may be inadequate and that, in addition to any monetary damages for such breach, the Company shall be entitled to institute and maintain any appropriate proceeding or proceedings, including an action for specific performance and/or injunction.

(b) Executive agrees not to, during the Extension Period, within the Territory, directly or indirectly, individually or on behalf of persons not now parties to this Agreement, or as a director, officer, principal, agent, executive, or in any other capacity or relationship, engage in the casino business (except as a passive investor holding not more than 3% of the equity of such business), or aid or endeavor to assist any business or legal entity, that is in the casino business and that competes with the Company anywhere in the Territory. The Territory shall consist of both the entire State of Delaware and a 50-mile radius around the Company’s facility in Dover, Delaware. The Company and Executive acknowledge the reasonableness of this covenant not to compete and the reasonableness of the geographic area and duration of time which are a part of said covenant.

(c) Unless waived in writing by the Company, Executive further agrees that he will not, directly or indirectly, during the Extension Period, solicit the trade or patronage of any of the customers of the Company, regardless of the location of such customers of the Company with respect to any services, products, or other matters in which the Company is active.

(d) Unless waived in writing by the Company, Executive further agrees that he will not, directly or indirectly, during the Extension Period, solicit or attempt to entice away from the Company any director, agent or employee of the Company.

(e) Executive acknowledges that the Company has no adequate remedy at law and would be irreparably harmed if Executive breaches or threatens to breach any of the provisions of this Section and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any such breach or threatened breach thereof and to specific performance of the terms of this Section (in addition to any other legal or equitable remedy the Company may have, including if so determined by arbitration, that the Company is not obligated to pay to the Executive (or the Executive is required to repay to the Company) a portion or all of the Non-Compete Monthly Amount; provided, however, in all instances the Company shall continue to pay to Executive the

Non-Compete Monthly Amount unless and until all appeals have been exhausted or the time for such has expired). Executive further agrees that Executive shall not, in any equity proceeding relating to the enforcement of this Section, raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have under and in respect of this Agreement or any other agreement.

(f) The Executive agrees to pay to the Company any outstanding amounts owed to the Company; provided, however, that no breach or alleged breach of this subsection (f) or any other provision of this Section shall constitute grounds for, or otherwise entitle, the Company to offset payments otherwise owed to the Executive under this Agreement.

Section 8
Severability

Section 9
Amendment, Termination, or Modification

Section 10
Consolidation, Merger, or Sale of Assets; Assignability

The Company shall require (a) any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company and (b) the parent entity owning or controlling such successor expressly to assume and agree to perform under the terms of this Agreement in the same manner and to the same extent that the Company and its affiliates would be required to perform it if no such succession had taken place (provided that such a requirement to perform which arises by operation of law shall be deemed to satisfy the requirements for such an express assumption and agreement). Except as provided herein, the Executive’s rights hereunder shall not be assignable.

Section 11
Tax Withholding

The Company may withhold from any payments made under this Agreement all federal, state or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

Section 12
Entire Understanding

Section 13
Binding Agreement

This Agreement shall be binding upon, and shall inure to the benefit of, the Executive and the Company and their respective permitted successors and assigns.

Section 14
Employment Status

Section 15
No Attachment

Section 16
Notices

(a) to the Company, at its Dover, Delaware address

(b) to the Executive, at the address maintained by the Company for the Executive for payroll purposes;

or to such address as either party shall have previously specified in writing to the other.

Section 17
Revocation and Executive Acknowledgments

Section 18
Headings of No Effect

Section 19
Applicable Law

This Agreement and its validity, interpretation, performance, and enforcement shall be governed by the laws of the State of Delaware.

Section 20
Counterparts

This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF, the Company through its officer duly authorized, and the

Executive both intending to be legally bound have duly executed and delivered this Agreement, to be effective as of the Effective Date.

	Dover Downs Gaming & Entertainment, Inc.

	/S/ Denis McGlynn
	Its


	EXECUTIVE

	/S/ Timothy R. Horne

Exhibit 10.4

NON-COMPETE AGREEMENT

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

AND

MELVIN L. JOSEPH

THIS AGREEMENT, is by and between Dover Downs Gaming & Entertainment, Inc. (the “Company”) and Melvin L. Joseph (the “Director”) and is effective as of this 16th day of June 2004 (the “Effective Date”).

W I T N E S S E T H:

WHEREAS, the Director is currently a director of the Company and employed by the Company or an affiliate thereof in an executive position; and

WHEREAS, the Director has, in the course of his tenure as a Director, been exposed to valuable and sensitive Company reports, files, memoranda, records, software, and other property; and

WHEREAS, the Company has determined that it is in the best interests of the Company to protect its interests through the use of Employment and Non-Compete Agreements; and

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows:

Section 1
Definitions

“Change in Control Fee” shall mean $150,000.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

Section 2
Term of Agreement

Section 3
Benefits

On the date of a Change in Control, the Company shall pay to the Director in cash the Change in Control Fee. Such amount shall be deemed earned on the date of the Change in Control and not forfeitable.

If all, or any portion, of the payment provided under this Agreement, if any, either alone or together with other payments and benefits which the Director receives or is entitled to receive from the Company, would constitute an excess “parachute payment” within the meaning of Section 280G of the Code (whether or not under an existing plan, arrangement, or other agreement) (each such parachute payment, a “Parachute Payment”), and would result in the imposition on the Director of an excise tax under Section 4999 of the Code, then, in addition to any other benefits to which the Director is entitled under this Agreement or otherwise, the Director shall be paid an amount in cash equal to the sum of the excise taxes payable by the Director by reason of receiving Parachute Payments plus the amount necessary to place the Director in the same after-tax position (taking into account any and all applicable federal, state and local excise, income or other taxes at the highest possible applicable rates on such Parachute Payments (including, without limitation, any payments under this Section) as if no excise taxes had been imposed with respect to Parachute Payments (the “Parachute Gross-Up”). Any

Parachute Gross-Up otherwise required by this Section shall not be made later than the time of the corresponding payment or benefit hereunder giving rise to the underlying Section 4999 excise tax, even if the payment of the excise tax is not required under the Code until a later time.

Except as may otherwise be agreed to by the Company and the Director, any gross up payable under this Section shall be as conclusively determined by the KPMG LLP, or such other firm as mutually agreed to by the Company and the Director (“Independent Tax Counsel”), whose determination or determinations shall be final and binding on all parties. The Director shall agree to utilize such determination or determinations, as applicable, in filing all of the Director’s tax returns with respect to the excise tax imposed by Section 4999 of the Code, if any. If such Independent Tax Counsel fails or refuses to make the required determinations for any reason, then such determinations shall be made by a comparable firm or group of national reputation to which the parties reasonably mutually agreed. All fees and expenses of the Independent Tax Counsel or its replacement shall be paid by the Company.

As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Independent Tax Counsel hereunder, it is possible that Parachute Gross-Up payments, if any, which will not have been made by the Company, should have been made, together with any interest, penalties or taxes of any kind thereon, consistent with the calculations required to be made hereunder (an “Underpayment”). The Company shall pay all such Underpayments to or for the benefit of the Director. The Director shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment within ten (10) business days after the Director is informed in writing of such claim. The Company shall notify the Director within ten (10) business days of receipt of the Director notice that the Company (x) will pay the Underpayment and do so on or before the date due, or (y) that it desires to contest such claim. The Director will cooperate with the Company in any such contest; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Director harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Director shall be entitled, at Director’s expense, to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

References herein to Code sections shall apply to comparable Code sections in the event of any amendment to the Code.

Section 4
Litigation Expenses and Arbitration

Section 5
Restrictive Covenants

(a) For a period of one year following the Change in Control, whether or not Director continues his engagement with the Company, Director agrees not to, directly or indirectly, individually or on behalf of persons not now parties to this Agreement, or as a director, officer, principal, agent, executive, or in any other capacity or relationship, engage in the casino business (except as a passive investor holding not more than 3% of the equity of such business), or aid or endeavor to assist any business or legal entity, that is in the casino business and that competes with the Company anywhere in the Territory. The Territory shall consist of both the entire State of Delaware and a 50-mile radius around the Company’s facility in Dover, Delaware. The Company and Director acknowledge the reasonableness of this covenant not to compete and the reasonableness of the geographic area and duration of time which are a part of said covenant.

(b) Unless waived in writing by the Company, Director further agrees that he will not, directly or indirectly, during the Extension Period, solicit the trade or patronage of any of the customers of the Company, regardless of the location of such customers of the Company with respect to any services, products, or other matters in which the Company is active.

(c) Unless waived in writing by the Company, Director further agrees that he will not, directly or indirectly, during the Extension Period, solicit or attempt to entice away from the Company any director, agent or employee of the Company.

(d) Director acknowledges that the Company has no adequate remedy at law and would be irreparably harmed if Director breaches or threatens to breach any of the provisions of this Section and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any such breach or threatened breach thereof and to specific performance of the terms of this Section. Director further agrees that Director shall not, in any equity proceeding relating to the enforcement of this Section, raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have under and in respect of this Agreement or any other agreement.

Section 6
Severability

Section 7
Amendment, Termination, or Modification

Section 8
Tax Withholding

The Company may withhold from any payments made under this Agreement all federal, state or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

Section 9
Entire Understanding

not affect or operate to reduce any benefit or compensation inuring to the Director of any kind elsewhere provided and not expressly dealt with in this Agreement.

Section 10
Binding Agreement

This Agreement shall be binding upon, and shall inure to the benefit of, the Director and the Company and their respective permitted successors and assigns.

Section 11
Director Status

Section 12
No Attachment

Section 13
Notices

(a) to the Company, at its Dover, Delaware address

(b) to the Director, at the address maintained by the Company for the Director for payroll purposes;

or to such address as either party shall have previously specified in writing to the other.

Section 14
Revocation and Director Acknowledgments

Section 15
Headings of No Effect

Section 16
Applicable Law

This Agreement and its validity, interpretation, performance, and enforcement shall be governed by the laws of the State of Delaware.

Section 17
Counterparts

This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF, the Company through its officer duly authorized, and the

Director both intending to be legally bound have duly executed and delivered this Agreement, to be effective as of the Effective Date.

	Dover Downs Gaming & Entertainment, Inc.

	/S/ Denis McGlynn
	Its


	DIRECTOR

	/S/ Melvin L. Joseph

Exhibit 10.5

EMPLOYMENT AND NON-COMPETE AGREEMENT

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

AND

DENIS MCGLYNN

THIS AGREEMENT, is by and between Dover Downs Gaming & Entertainment, Inc. (the “Company”) and Denis McGlynn (the “Executive”) and is effective as of this 16th day of June 2004 (the “Effective Date”).

W I T N E S S E T H:

WHEREAS, the Executive is currently employed by the Company or an affiliate thereof in an executive position; and

WHEREAS, the Executive has, in the course of his employment, been exposed to valuable and sensitive Company reports, files, memoranda, records, software, and other property; and

WHEREAS, the Company has determined that it is in the best interests of the Company to protect its interests through the use of Employment and Non-Compete Agreements; and

WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders for the Company to agree to provide benefits under the circumstances described below to the Executive and other executives who agree to such an agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows:

Section 1
Definitions

“Board” shall mean the Board of Directors of the Company or the ultimate corporate parent entity which owns the Company if the Company is not public.

“Change in Control Fee” shall mean $500,000.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Date of Termination” shall mean the date on which the Executive’s employment is terminated.

“Employment Period” shall mean the period of time during the Extension Period the Executive is an employee of the Company.

“Extension Period” shall mean the 60 month period following the Change in Control.

and officers’ insurance or indemnification provisions, or (vi) any reason whatsoever two months after the Change in Control.

“Retirement Plan” shall mean the Company’s qualified defined benefit retirement plan(s) in which the Executive participates.

Section 2
Term of Agreement

Section 3
Benefits

(a) On the date of a Change in Control, the Company shall pay to the Executive in cash the Change in Control Fee.

(b) During the Extension Period, the Company shall pay to the Executive the Monthly Amount, payable on the first day of each month, prorated for partial months.

(c) If the Executive’s employment is terminated during the Extension Period, then,

(i) within five business days after the Date of Termination, the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) in cash all accrued but unpaid salary, earned but unpaid bonuses, and accrued but unused vacation in accordance with Company policies;

(ii) the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) the Monthly Amount on the first day of each month during the remainder of the Extension Period;

(iii) the Company shall pay to the Executive (or if the Executive dies, to his beneficiary, if any, under the Retirement Plan) a lump sum amount equal to the value of the monthly benefit under (x) the Retirement Plan and (y) the SERP, that the Executive or his beneficiary, if any, under the Retirement Plan would have received (1) for payments of the Monthly Amount had Executive been an employee while receiving such payments and (2) for payment of the Change of Control Fee had such amount been treated as a normal bonus for pension accrual purposes (giving credit for all purposes, including, but not limited to, accrual of benefits, vesting, age and years of service and making the determination without regard to compensation or benefit limitations prescribed by federal law or regulation), which payment shall be paid within 10 days of the Date of Termination and calculated by Buck Consultants (or such other consultant as may be agreed upon) using the actuarial assumptions under the Retirement Plan and the discount rate which would be utilized for purposes of funding a Plan termination;

(d) During the Extension Period (whether or not during the Employment Period) the Executive shall be entitled to the following additional benefits:

(i) The Executive and, as applicable, the Executive’s covered dependents shall be entitled to all health, welfare, and fringe benefits provided by the Company to its key employees generally or to the Executive on an individual or group basis (including, but not limited to, any life, accident, health, hospitalization or long-term disability insurance, maintained from time to time by the Company), whether maintained pursuant to a plan, policy or other arrangement (written or unwritten), as if the Executive were still employed during such period, at the same level of benefits and at the same dollar cost to the Executive as is available generally to comparable employees of the Company (but in no instances shall such benefits be at a level less than as in effect on the date of the Change in Control). If the Company reasonably determines that the coverage required under this Section would cause a welfare plan sponsored by the Company to violate any provision of the Code prohibiting discrimination in favor of highly compensated employees or key employees, or if any benefits described in this Section cannot be provided (or the Company determines that it does not wish to provide such benefits) pursuant to the appropriate plan or program maintained for employees of the Company, the Company shall provide such benefits outside such plan or program at no additional cost (on an after tax basis) to the Executive or, if the parties shall so agree, the Company will pay to the Executive the cash equivalent thereof. The health benefits provided in accordance with this Section shall be secondary to any comparable benefits provided by another employer if and only if the Executive chooses to be covered by such other employee plan.

(ii) Executive shall receive continued payment of professional and organizational dues and fees as in effect prior the Change in Control.

(e) (i) If all, or any portion, of the payments and benefits provided under this Agreement, if any, either alone or together with other payments and benefits which the Executive receives or is entitled to receive from the Company, would constitute an excess “parachute

payment” within the meaning of Section 280G of the Code (whether or not under an existing plan, arrangement, or other agreement) (each such parachute payment, a “Parachute Payment”), and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code, then, in addition to any other benefits to which the Executive is entitled under this Agreement or otherwise, the Executive shall be paid an amount in cash equal to the sum of the excise taxes payable by the Executive by reason of receiving Parachute Payments plus the amount necessary to place the Executive in the same after-tax position (taking into account any and all applicable federal, state and local excise, income or other taxes at the highest possible applicable rates on such Parachute Payments (including, without limitation, any payments under this Section) as if no excise taxes had been imposed with respect to Parachute Payments (the “Parachute Gross-Up”). Any Parachute Gross-Up otherwise required by this Section shall not be made later than the time of the corresponding payment or benefit hereunder giving rise to the underlying Section 4999 excise tax, even if the payment of the excise tax is not required under the Code until a later time.

(ii) Subject to the provisions of Section 3(d) and except as may otherwise be agreed to by the Company and the Executive, the amount or amounts (if any) payable under this Section 3 shall be as conclusively determined by the KPMG LLP, or such other firm as mutually agreed to by the Company and the Executive (“Independent Tax Counsel”), whose determination or determinations shall be final and binding on all parties. The Executive shall agree to utilize such determination or determinations, as applicable, in filing all of the Executive’s tax returns with respect to the excise tax imposed by Section 4999 of the Code, if any. If such Independent Tax Counsel fails or refuses to make the required determinations for any reason, then such determinations shall be made by a comparable firm or group of national reputation to which the parties reasonably mutually agreed. All fees and expenses of the Independent Tax Counsel or its replacement shall be paid by the Company.

(iii) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Independent Tax Counsel hereunder, it is possible that Parachute Gross-Up payments, if any, which will not have been made by the Company, should have been made, together with any interest, penalties or taxes of any kind thereon, consistent with the calculations required to be made hereunder (an “Underpayment”). The Company shall pay all such Underpayments to or for the benefit of the Executive. The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment within ten (10) business days after the Executive is informed in writing of such claim. The Company shall notify the Executive within ten (10) business days of receipt of the Executive notice that the Company (x) will pay the Underpayment and do so on or before the date due, or (y) that it desires to contest such claim. The Executive will cooperate with the Company in any such contest; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled, at Executive’s expense, to settle or contest, as the

case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(iv) References herein to Code sections shall apply to comparable Code sections in the event of any amendment to the Code.

(v) The foregoing provisions of this subsection (f) shall similarly apply to any benefit provided elsewhere in this Agreement where it is expressly provided that the benefit is to be provided on an after tax basis.

(f) In the event of the Executive’s termination of employment under this Agreement, the Executive shall be under no obligation to seek other employment, and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment.

Section 4
Employment

Following a Change in Control, the Executive will, except as provided below, continue as an employee during the Extension Period. During the Employment Period:

(i) The Executive shall perform services consistent with his past practices,

(ii) The Executive shall not be required to relocate or travel in excess of past practices,

(iii) The Executive shall enjoy the same office, administrative support and support services as he enjoyed prior to the Change in Control.

(iv) The Executive shall not be required to devote more time to Company business than he did prior to the Change in Control and may continue director or officer positions with other private or public entities that do not violate Section 7.

(v) The Executive’s expenses shall be reimbursed consistent with past practices, and

(vi) The Executive shall receive at least the same vacation as he currently enjoys, but not less than four weeks paid vacation.

Notwithstanding Executive’s ability to voluntarily terminate his employment under clauses (i) and (vi) under the definition of Good Reason, Executive agrees, for a 24 month period following the Change of Control, to assist the Company from time to time, at mutually agreeable

times, with respect to legislative matters within the State of Delaware in terms of sharing his knowledge of the industry, key legislators and regulators and the legislative process in general and in terms of making appropriate introductions within the Delaware community, provided that Executive shall not be required to engage in lobbying activities or assist in day-to-day matters, and further provided that Executive retains the right to completely terminate his employment under any other clause defining Good Reason.

No breach or alleged breach of this Section 4 shall constitute grounds for, or otherwise entitle, the Company to offset payments otherwise owing to the Executive under this Agreement.

Section 5
Source of Payments

Section 6
Litigation Expenses and Arbitration

Section 7
Restrictive Covenants

(a) Within a reasonable period of time following his termination of employment, the Executive shall return to the Company all Company Information, reports, files, memoranda, records, credit cards, cardkey passes, door and file keys, computer access codes, and other property which the Executive has received, prepared, or helped to prepare in connection with his employment with the Company, except as provided in Section 3. The Executive acknowledges that in the course of employment with the Company, he has acquired Company Information and that such Company Information has been disclosed to him in confidence and for the Company’s use only. The Executive agrees that, during the Extension Period, he (i) will keep such Company Information confidential at all times, (ii) will not disclose or communicate Company Information to any third party, and (iii) will not make use of Company Information on his own behalf or on behalf of any third party. The Executive further acknowledges and agrees that the Company’s remedy in the form of monetary damages for any breach by him of any of the provisions of this Section may be inadequate and that, in addition to any monetary damages for such breach, the Company shall be entitled to institute and maintain any appropriate proceeding or proceedings, including an action for specific performance and/or injunction.

(b) Executive agrees not to, during the Extension Period, within the Territory, directly or indirectly, individually or on behalf of persons not now parties to this Agreement, or as a director, officer, principal, agent, executive, or in any other capacity or relationship, engage in the casino business (except as a passive investor holding not more than 3% of the equity of such business), or aid or endeavor to assist any business or legal entity, that is in the casino business and that competes with the Company anywhere in the Territory. The Territory shall consist of both the entire State of Delaware and a 50-mile radius around the Company’s facility in Dover, Delaware. The Company and Executive acknowledge the reasonableness of this covenant not to compete and the reasonableness of the geographic area and duration of time which are a part of said covenant.

(c) Unless waived in writing by the Company, Executive further agrees that he will not, directly or indirectly, during the Extension Period, solicit the trade or patronage of any of the customers of the Company, regardless of the location of such customers of the Company with respect to any services, products, or other matters in which the Company is active.

(d) Unless waived in writing by the Company, Executive further agrees that he will not, directly or indirectly, during the Extension Period, solicit or attempt to entice away from the Company any director, agent or employee of the Company.

(e) Executive acknowledges that the Company has no adequate remedy at law and would be irreparably harmed if Executive breaches or threatens to breach any of the provisions of this Section and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any such breach or threatened breach thereof and to specific performance of the terms of this Section (in addition to any other legal or equitable remedy the Company may have, including if so determined by arbitration, that the Company is not obligated to pay to the Executive (or the Executive is required to repay to the Company) a portion or all of the Non-Compete Monthly Amount; provided, however, in all instances the Company shall continue to pay to Executive the Non-Compete Monthly Amount unless and until all appeals have been exhausted or the time for such has expired). Executive further agrees that Executive shall not, in any equity proceeding relating to the enforcement of this Section, raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have under and in respect of this Agreement or any other agreement.

(f) The Executive agrees to pay to the Company any outstanding amounts owed to the Company; provided, however, that no breach or alleged breach of this subsection (f) or any other provision of this Section shall constitute grounds for, or otherwise entitle, the Company to offset payments otherwise owed to the Executive under this Agreement.

Section 8
Severability

Section 9
Amendment, Termination, or Modification

Section 10
Consolidation, Merger, or Sale of Assets; Assignability

Section 11
Tax Withholding

The Company may withhold from any payments made under this Agreement all federal, state or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

Section 12
Entire Understanding

Section 13
Binding Agreement

This Agreement shall be binding upon, and shall inure to the benefit of, the Executive and the Company and their respective permitted successors and assigns.

Section 14
Employment Status

Section 15
No Attachment

Section 16
Notices

(a) to the Company, at its Dover, Delaware address

(b) to the Executive, at the address maintained by the Company for the Executive for payroll purposes;

or to such address as either party shall have previously specified in writing to the other.

Section 17
Revocation and Executive Acknowledgments

Section 18
Headings of No Effect

Section 19
Applicable Law

This Agreement and its validity, interpretation, performance, and enforcement shall be governed by the laws of the State of Delaware.

Section 20
Counterparts

This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF, the Company through its officer duly authorized, and the

Executive both intending to be legally bound have duly executed and delivered this Agreement, to be effective as of the Effective Date.

	Dover Downs Gaming & Entertainment, Inc.

	/S/ Klaus M. Belohoubek
	Its


	EXECUTIVE

	/S/ Denis McGlynn

Exhibit 10.6

EMPLOYMENT AND NON-COMPETE AGREEMENT

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

AND

EDWARD J. SUTOR

THIS AGREEMENT, is by and between Dover Downs Gaming & Entertainment, Inc. (the “Company”) and Edward J. Sutor (the “Executive”) and is effective as of this 16th day of June, 2004 (the “Effective Date”).

W I T N E S S E T H:

WHEREAS, the Executive is currently employed by the Company or an affiliate thereof in an executive position; and

WHEREAS, the Executive has, in the course of his employment, been exposed to valuable and sensitive Company reports, files, memoranda, records, software, and other property; and

WHEREAS, the Company has determined that it is in the best interests of the Company to protect its interests through the use of Employment and Non-Compete Agreements; and

WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders for the Company to agree to provide benefits under the circumstances described below to the Executive and other executives who agree to such an agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows:

Section 1
Definitions

“Board” shall mean the Board of Directors of the Company or the ultimate corporate parent entity which owns the Company if the Company is not public.

“Change in Control Fee” shall mean $200, 000.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Date of Termination” shall mean the date on which the Executive’s employment is terminated.

“Employment Period” shall mean the period of time during the Extension Period the Executive is an employee of the Company.

“Extension Period” shall mean the 24 month period following the Change in Control.

and officers’ insurance or indemnification provisions, or (vi) any reason whatsoever two months after the Change in Control.

“Retirement Plan” shall mean the Company’s qualified defined benefit retirement plan(s) in which the Executive participates.

Section 2
Term of Agreement

Section 3
Benefits

(a) On the date of a Change in Control, the Company shall pay to the Executive in cash the Change in Control Fee.

(b) During the Extension Period, the Company shall pay to the Executive the Monthly Amount, payable on the first day of each month, prorated for partial months.

(c) If the Executive’s employment is terminated during the Extension Period, then,

(i) within five business days after the Date of Termination, the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) in cash all accrued but unpaid salary, earned but unpaid bonuses, and accrued but unused vacation in accordance with Company policies;

(ii) the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) the Monthly Amount on the first day of each month during the remainder of the Extension Period;

(iii) the Company shall pay to the Executive (or if the Executive dies, to his beneficiary, if any, under the Retirement Plan) a lump sum amount equal to the value of the monthly benefit under (x) the Retirement Plan and (y) the SERP, that the Executive or his beneficiary, if any, under the Retirement Plan would have received (1) for payments of the Monthly Amount had Executive been an employee while receiving such payments, and (2) for payment of the Change of Control Fee had such amount been treated as a normal bonus for pension accrual purposes (giving credit for all purposes, including, but not limited to, accrual of benefits, vesting, age and years of service and making the determination without regard to compensation or benefit limitations prescribed by federal law or regulation), which payment shall be paid within 10 days of the Date of Termination and calculated by Buck Consultants (or such other consultant as may be agreed upon) using the actuarial assumptions under the Retirement Plan and the discount rate which would be utilized for purposes of funding a Plan termination;

(iv) on the Date of Termination the Company shall transfer title and ownership to the Executive of his laptop computer, if any, without any payment by the Executive to the Company.

(d) During the Extension Period (whether or not during the Employment Period) the Executive shall be entitled to the following additional benefits:

(i) The Executive and, as applicable, the Executive’s covered dependents shall be entitled to all health, welfare, and fringe benefits provided by the Company to its key employees generally or to the Executive on an individual or group basis (including, but not limited to, any life, accident, health, hospitalization or long-term disability insurance, maintained from time to time by the Company), whether maintained pursuant to a plan, policy or other arrangement (written or unwritten), as if the Executive were still employed during such period, at the same level of benefits and at the same dollar cost to the Executive as is available generally to comparable employees of the Company (but in no instances shall such benefits be at a level less than as in effect on the date of the Change in Control). If the Company reasonably determines that the coverage required under this Section would cause a welfare plan sponsored by the Company to violate any provision of the Code prohibiting discrimination in favor of highly compensated employees or key employees, or if any benefits described in this Section cannot be provided (or the Company determines that it does not wish to provide such benefits) pursuant to the appropriate plan or program maintained for employees of the Company, the Company shall provide such benefits outside such plan or program at no additional cost (on an after tax basis) to the Executive or, if the parties shall so agree, the Company will pay to the Executive the cash equivalent thereof. The health benefits provided in accordance with this Section shall be secondary to any comparable benefits provided by another employer if and only if the Executive chooses to be covered by such other employee plan.

(ii) Executive shall receive continued payment of professional and organizational dues and fees as in effect prior the Change in Control.

(e) (i) If all, or any portion, of the payments and benefits provided under this Agreement, if any, either alone or together with other payments and benefits which the Executive receives or is entitled to receive from the Company, would constitute an excess “parachute payment” within the meaning of Section 280G of the Code (whether or not under an existing plan, arrangement, or other agreement) (each such parachute payment, a “Parachute Payment”), and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code, then, in addition to any other benefits to which the Executive is entitled under this Agreement or otherwise, the Executive shall be paid an amount in cash equal to the sum of the excise taxes payable by the Executive by reason of receiving Parachute Payments plus the amount necessary to place the Executive in the same after-tax position (taking into account any and all applicable federal, state and local excise, income or other taxes at the highest possible applicable rates on such Parachute Payments (including, without limitation, any payments under this Section) as if no excise taxes had been imposed with respect to Parachute Payments (the “Parachute Gross-Up”). Any Parachute Gross-Up otherwise required by this Section shall not be made later than the time of the corresponding payment or benefit hereunder giving rise to the underlying Section 4999 excise tax, even if the payment of the excise tax is not required under the Code until a later time.

(ii) Subject to the provisions of Section 3(d) and except as may otherwise be agreed to by the Company and the Executive, the amount or amounts (if any) payable under this Section 3 shall be as conclusively determined by the KPMG LLP, or such other firm as mutually agreed to by the Company and the Executive (“Independent Tax Counsel”), whose determination or determinations shall be final and binding on all parties. The Executive shall agree to utilize such determination or determinations, as applicable, in filing all of the Executive’s tax returns with respect to the excise tax imposed by Section 4999 of the Code, if any. If such Independent Tax Counsel fails or refuses to make the required determinations for any reason, then such determinations shall be made by a comparable firm or group of national reputation to which the parties reasonably mutually agreed. All fees and expenses of the Independent Tax Counsel or its replacement shall be paid by the Company.

(iii) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Independent Tax Counsel hereunder, it is possible that Parachute Gross-Up payments, if any, which will not have been made by the Company, should have been made, together with any interest, penalties or taxes of any kind thereon, consistent with the calculations required to be made hereunder (an “Underpayment”). The Company shall pay all such Underpayments to or for the benefit of the Executive. The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment within ten (10) business days after the Executive is informed in writing of such claim. The Company shall notify the Executive within ten (10) business days of receipt of the Executive notice that the Company (x) will pay the Underpayment and do so on or before the date due, or (y) that it desires to contest such claim. The Executive will cooperate with the Company in any such contest; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Furthermore, the Company’s control of the

contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled, at Executive’s expense, to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(iv) References herein to Code sections shall apply to comparable Code sections in the event of any amendment to the Code.

(v) The foregoing provisions of this subsection (f) shall similarly apply to any benefit provided elsewhere in this Agreement where it is expressly provided that the benefit is to be provided on an after tax basis.

(f) In the event of the Executive’s termination of employment under this Agreement, the Executive shall be under no obligation to seek other employment, and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment.

Section 4
Employment

Following a Change in Control, the Executive will, except as provided below, continue as an employee during the Extension Period. During the Employment Period:

(i) The Executive shall perform services consistent with his past practices,

(ii) The Executive shall not be required to relocate or travel in excess of past practices,

(iii) The Executive shall enjoy the same office, administrative support and support services as he enjoyed prior to the Change in Control.

(iv) The Executive shall not be required to devote more time to Company business than he did prior to the Change in Control and may continue director or officer positions with other private or public entities that do not violate Section 7.

(v) The Executive’s expenses shall be reimbursed consistent with past practices, and

(vi) The Executive shall receive at least the same vacation as he currently enjoys, but not less than four weeks paid vacation.

No breach or alleged breach of this Section 4 shall constitute grounds for, or otherwise entitle, the Company to offset payments otherwise owing to the Executive under this Agreement.

Section 5
Source of Payments

Section 6
Litigation Expenses and Arbitration

All disputes with respect to the subject matter of this Agreement and the enforcement of rights hereunder shall be submitted to binding arbitration in accordance with the rules of the American Arbitration Association (the “AAA”). Each party hereto shall designate one arbitrator (who need not be impartial) within fifteen (15) days after notice of the dispute. The two arbitrators so designated shall endeavor to designate promptly a third, neutral arbitrator. If the two arbitrators have not designated the third arbitrator by the fifteenth (15 ^th ) day following the designation of the second arbitrator, or if a second arbitrator has not been designated by the (15 ^th ) day following the designation of the first, either Party may request the AAA to designate the remaining arbitrator(s). The third arbitrator shall take an oath of neutrality. The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evidence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation. The arbitrators shall have the power to render equitable relief as may be available in accordance with applicable law. Unless otherwise agreed by the parties, any such arbitration shall take place in such City within the United States as Executive may designate, and shall be conducted in accordance with the Rules of the AAA. The determination reached in such arbitration shall be final and binding on both parties without any right of appeal or further dispute. The arbitrators’ award may be confirmed in, and judgment upon the award entered by, any federal or state court having jurisdiction over the parties.

Section 7
Restrictive Covenants

(a) Within a reasonable period of time following his termination of employment, the Executive shall return to the Company all Company Information, reports, files, memoranda, records, credit cards, cardkey passes, door and file keys, computer access codes, and other property which the Executive has received, prepared, or helped to prepare in connection with his employment with the Company, except as provided in Section 3. The Executive acknowledges that in the course of employment with the Company, he has acquired Company Information and that such Company Information has been disclosed to him in confidence and for the Company’s use only. The Executive agrees that, during the Extension Period, he (i) will keep such Company Information confidential at all times, (ii) will not disclose or communicate Company Information to any third party, and (iii) will not make use of Company Information on his own behalf or on behalf of any third party. The Executive further acknowledges and agrees that the Company’s remedy in the form of monetary damages for any breach by him of any of the provisions of this Section may be inadequate and that, in addition to any monetary damages for such breach, the Company shall be entitled to institute and maintain any appropriate proceeding or proceedings, including an action for specific performance and/or injunction.

(b) Executive agrees not to, during the Extension Period, within the Territory, directly or indirectly, individually or on behalf of persons not now parties to this Agreement, or as a director, officer, principal, agent, executive, or in any other capacity or relationship, engage in the casino business (except as a passive investor holding not more than 3% of the equity of such business), or aid or endeavor to assist any business or legal entity, that is in the casino business and that competes with the Company anywhere in the Territory. The Territory shall consist of both the entire State of Delaware and a 50-mile radius around the Company’s facility in Dover, Delaware. The Company and Executive acknowledge the reasonableness of this covenant not to compete and the reasonableness of the geographic area and duration of time which are a part of said covenant.

(c) Unless waived in writing by the Company, Executive further agrees that he will not, directly or indirectly, during the Extension Period, solicit the trade or patronage of any of the customers of the Company, regardless of the location of such customers of the Company with respect to any services, products, or other matters in which the Company is active.

(d) Unless waived in writing by the Company, Executive further agrees that he will not, directly or indirectly, during the Extension Period, solicit or attempt to entice away from the Company any director, agent or employee of the Company.

(e) Executive acknowledges that the Company has no adequate remedy at law and would be irreparably harmed if Executive breaches or threatens to breach any of the provisions of this Section and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any such breach or threatened breach thereof and to specific performance of the terms of this Section (in addition to any other legal or equitable remedy the Company may have, including if so determined by arbitration, that the Company is not obligated to pay to the Executive (or the Executive is required to repay to the Company) a portion or all of the Non-Compete Monthly Amount; provided, however, in all instances the Company shall continue to pay to Executive the

Non-Compete Monthly Amount unless and until all appeals have been exhausted or the time for such has expired). Executive further agrees that Executive shall not, in any equity proceeding relating to the enforcement of this Section, raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have under and in respect of this Agreement or any other agreement.

(f) The Executive agrees to pay to the Company any outstanding amounts owed to the Company; provided, however, that no breach or alleged breach of this subsection (f) or any other provision of this Section shall constitute grounds for, or otherwise entitle, the Company to offset payments otherwise owed to the Executive under this Agreement.

Section 8
Severability

Section 9
Amendment, Termination, or Modification

Section 10
Consolidation, Merger, or Sale of Assets; Assignability

Section 11
Tax Withholding

The Company may withhold from any payments made under this Agreement all federal, state or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

Section 12
Entire Understanding

Section 13
Binding Agreement

This Agreement shall be binding upon, and shall inure to the benefit of, the Executive and the Company and their respective permitted successors and assigns.

Section 14
Employment Status

Section 15
No Attachment

Section 16
Notices

(a) to the Company, at its Dover, Delaware address

(b) to the Executive, at the address maintained by the Company for the Executive for payroll purposes;

or to such address as either party shall have previously specified in writing to the other.

Section 17
Revocation and Executive Acknowledgments

Section 18
Headings of No Effect

Section 19
Applicable Law

This Agreement and its validity, interpretation, performance, and enforcement shall be governed by the laws of the State of Delaware.

Section 20
Counterparts

This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF, the Company through its officer duly authorized, and the

Executive both intending to be legally bound have duly executed and delivered this Agreement, to be effective as of the Effective Date.

	Dover Downs Gaming & Entertainment, Inc.

	/S/ Denis McGlynn
	Its


	EXECUTIVE

	/S/ Edward J. Sutor

Exhibit 10.7

NON-COMPETE AGREEMENT

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

AND

HENRY B. TIPPIE

THIS AGREEMENT, is by and between Dover Downs Gaming & Entertainment, Inc. (the “Company”) and Henry B. Tippie (the “Director”) and is effective as of this 16th day of June 2004 (the “Effective Date”).

W I T N E S S E T H:

WHEREAS, the Director is currently Chairman of the Board of the Company; and

WHEREAS, the Director has, in the course of his tenure as a Director, been exposed to valuable and sensitive Company reports, files, memoranda, records, software, and other property; and

WHEREAS, the Company has determined that it is in the best interests of the Company to protect its interests through the use of Employment and Non-Compete Agreements; and

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows:

Section 1
Definitions

“Change in Control Fee” shall mean $750,000.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

Section 2
Term of Agreement

This Agreement shall be effective as of the Effective Date but shall automatically terminate at such time as Director no longer serves as a director of the Company.

Section 3
Benefits

On the date of a Change in Control, the Company shall pay to the Director in cash the Change in Control Fee. Such amount shall be deemed earned on the date of the Change in Control and not forfeitable.

If all, or any portion, of the payment provided under this Agreement, if any, either alone or together with other payments and benefits which the Director receives or is entitled to receive from the Company, would constitute an excess “parachute payment” within the meaning of Section 280G of the Code (whether or not under an existing plan, arrangement, or other agreement) (each such parachute payment, a “Parachute Payment”), and would result in the imposition on the Director of an excise tax under Section 4999 of the Code, then, in addition to any other benefits to which the Director is entitled under this Agreement or otherwise, the Director shall be paid an amount in cash equal to the sum of the excise taxes payable by the Director by reason of receiving Parachute Payments plus the amount necessary to place the Director in the same after-tax position (taking into account any and all applicable federal, state and local excise, income or other taxes at the highest possible applicable rates on such Parachute Payments (including, without limitation, any payments under this Section) as if no excise taxes had been imposed with respect to Parachute Payments (the “Parachute Gross-Up”). Any Parachute Gross-Up otherwise required by this Section shall not be made later than the time of the corresponding payment or benefit hereunder giving rise to the underlying Section 4999 excise tax, even if the payment of the excise tax is not required under the Code until a later time.

Except as may otherwise be agreed to by the Company and the Director, any gross up payable under this Section shall be as conclusively determined by the KPMG LLP, or such other firm as mutually agreed to by the Company and the Director (“Independent Tax Counsel”), whose determination or determinations shall be final and binding on all parties. The Director shall agree to utilize such determination or determinations, as applicable, in filing all of the Director’s tax returns with respect to the excise tax imposed by Section 4999 of the Code, if any. If such Independent Tax Counsel fails or refuses to make the required determinations for any reason, then such determinations shall be made by a comparable firm or group of national reputation to which the parties reasonably mutually agreed. All fees and expenses of the Independent Tax Counsel or its replacement shall be paid by the Company.

As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Independent Tax Counsel hereunder, it is possible that Parachute Gross-Up payments, if any, which will not have been made by the Company, should have been made, together with any interest, penalties or taxes of any kind thereon, consistent with the calculations required to be made hereunder (an “Underpayment”). The Company shall pay all such Underpayments to or for the benefit of the Director. The Director shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment within ten (10) business days after the Director is informed in writing of such claim. The Company shall notify the Director within ten (10) business days of receipt of the Director notice that the Company (x) will pay the Underpayment and do so on or before the date due, or (y) that it desires to contest such claim. The Director will cooperate with the Company in any such contest; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Director harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Director shall be entitled, at Director’s expense, to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

References herein to Code sections shall apply to comparable Code sections in the event of any amendment to the Code.

Section 4
Litigation Expenses and Arbitration

In addition to the Company’s other obligations under this Agreement, the Company shall pay all legal fees and expenses incurred in a legal proceeding (including arbitration) by the Director in seeking to obtain or enforce any right or benefit provided by this Agreement (including, without limitation, any rights to a tax gross-up). Such payments are to be made within five days after the Director’s request for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require; provided, however, that if the Director institutes a proceeding and the judge or other decision-maker presiding over the

proceeding affirmatively finds that the Director has failed to prevail substantially, he shall pay his own costs and expenses (and, if applicable, return any amounts theretofore paid on his behalf under this Section).

Section 5
Restrictive Covenants

(a) For a period of one year following the Change in Control, whether or not Director continues his engagement with the Company, Director agrees not to, directly or indirectly, individually or on behalf of persons not now parties to this Agreement, or as a director, officer, principal, agent, executive, or in any other capacity or relationship, engage in the casino business (except as a passive investor holding not more than 3% of the equity of such business), or aid or endeavor to assist any business or legal entity, that is in the casino business and that competes with the Company anywhere in the Territory. The Territory shall consist of both the entire State of Delaware and a 50-mile radius around the Company’s facility in Dover, Delaware. The Company and Director acknowledge the reasonableness of this covenant not to compete and the reasonableness of the geographic area and duration of time which are a part of said covenant.

(b) Unless waived in writing by the Company, Director further agrees that he will not, directly or indirectly, during the Extension Period, solicit the trade or patronage of any of the customers of the Company, regardless of the location of such customers of the Company with respect to any services, products, or other matters in which the Company is active.

(c) Unless waived in writing by the Company, Director further agrees that he will not, directly or indirectly, during the Extension Period, solicit or attempt to entice away from the Company any director, agent or employee of the Company.

(d) Director acknowledges that the Company has no adequate remedy at law and would be irreparably harmed if Director breaches or threatens to breach any of the provisions of this Section and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any such breach or threatened breach thereof and to specific performance of the terms of this Section. Director further agrees that Director shall not, in any equity proceeding relating to the enforcement of this Section, raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have under and in respect of this Agreement or any other agreement.

Section 6
Severability

Section 7
Amendment, Termination, or Modification

Section 8
Tax Withholding

The Company may withhold from any payments made under this Agreement all federal, state or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

Section 9
Entire Understanding

This Agreement contains the entire understanding between the Company and the Director with respect to the subject matter hereof and supersedes any prior agreement between the Company and the Director regarding non-compete provisions, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Director of any kind elsewhere provided and not expressly dealt with in this Agreement.

Section 10
Binding Agreement

This Agreement shall be binding upon, and shall inure to the benefit of, the Director and the Company and their respective permitted successors and assigns.

Section 11
Director Status

Section 12
No Attachment

Section 13
Notices

(a) to the Company, at its Dover, Delaware address

(b) to the Director, at the address maintained by the Company for the Director;

or to such address as either party shall have previously specified in writing to the other.

Section 14
Revocation and Director Acknowledgments

Section 15
Headings of No Effect

Section 16
Applicable Law

This Agreement and its validity, interpretation, performance, and enforcement shall be governed by the laws of the State of Delaware.

Section 17
Counterparts

This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF, the Company through its officer duly authorized, and the

Director both intending to be legally bound have duly executed and delivered this Agreement, to be effective as of the Effective Date.

	Dover Downs Gaming & Entertainment, Inc.

	/S/ Klaus M. Belohoubek
	Its


	DIRECTOR

	/S/ Henry B. Tippie

Exhibit 31.1

Certification

I, Denis McGlynn, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dover Downs Gaming & Entertainment, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [intentionally omitted]

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2004

/s/ Denis McGlynn
Denis McGlynn
President and Chief Executive
Officer and Director

Exhibit 31.2

Certification

I, Timothy R. Horne, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dover Downs Gaming & Entertainment, Inc.;

b) [intentionally omitted]

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2004

/s/ Timothy R. Horne
Timothy R. Horne
Senior Vice President-Finance,
Treasurer and
Chief Financial Officer

Exhibit 32.1

Dover Downs Gaming & Entertainment, Inc.

Certification Pursuant to 18 U.S.C. Sec. 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Dover Downs Gaming & Entertainment, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Denis McGlynn, President and Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 6, 2004

/s/ Denis McGlynn
Denis McGlynn
President and Chief Executive
Officer and Director

This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Exhibit 32.2

Dover Downs Gaming & Entertainment, Inc.

Certification Pursuant to 18 U.S.C. Sec. 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Dover Downs Gaming & Entertainment, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy R. Horne, Senior Vice President-Finance, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 6, 2004

/s/ Timothy R. Horne
Timothy R. Horne
Senior Vice President-Finance,
Treasurer and
Chief Financial Officer

Washington, D.C. 20549

CONSOLIDATED STATEMENT OF EARNINGS

NOTE 3 - Summary of Significant Accounting Policies

NOTE 5 – Pension Plans

NOTE 6 – Stockholders’ Equity

NOTE 7 - Related Party Transactions

NOTE 8 – Commitments and Contingencies

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

Related Party Transactions

Critical Accounting Policies

Part II – Other Information

Section 1 Definitions

Section 2 Term of Agreement

Section 3 Benefits

On the date of a Change in Control, the Company shall pay to the Director in cash the Change in Control Fee. Such amount shall be deemed earned on the date of the Change in Control and not forfeitable.

Parachute Gross-Up otherwise required by this Section shall not be made later than the time of the corresponding payment or benefit hereunder giving rise to the underlying Section 4999 excise tax, even if the payment of the excise tax is not required under the Code until a later time.

References herein to Code sections shall apply to comparable Code sections in the event of any amendment to the Code.

Section 4 Litigation Expenses and Arbitration

Section 5 Restrictive Covenants

(c) Unless waived in writing by the Company, Director further agrees that he will not, directly or indirectly, during the Extension Period, solicit or attempt to entice away from the Company any director, agent or employee of the Company.

Section 6 Severability

Section 7 Amendment, Termination, or Modification

Section 8 Tax Withholding

Section 9 Entire Understanding

Section 10 Binding Agreement

Section 11 Director Status

Section 12 No Attachment

Section 13 Notices

(a) to the Company, at its Dover, Delaware address

(b) to the Director, at the address maintained by the Company for the Director for payroll purposes;

Section 14 Revocation and Director Acknowledgments

Section 15 Headings of No Effect

Section 16 Applicable Law

Section 17 Counterparts

Section 1 Definitions

Section 2 Term of Agreement

Section 3 Benefits

(a) On the date of a Change in Control, the Company shall pay to the Executive in cash the Change in Control Fee.

(b) During the Extension Period, the Company shall pay to the Executive the Monthly Amount, payable on the first day of each month, prorated for partial months.

(c) If the Executive’s employment is terminated during the Extension Period, then,

(i) within five business days after the Date of Termination, the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) in cash all accrued but unpaid salary, earned but unpaid bonuses, and accrued but unused vacation in accordance with Company policies;

(ii) the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) the Monthly Amount on the first day of each month during the remainder of the Extension Period;

(iv) on the Date of Termination the Company shall transfer title and ownership to the Executive of his laptop computer, if any, without any payment by the Executive to the Company.

(d) During the Extension Period (whether or not during the Employment Period) the Executive shall be entitled to the following additional benefits:

(ii) Executive shall receive continued payment of professional and organizational dues and fees as in effect prior the Change in Control.

(iv) References herein to Code sections shall apply to comparable Code sections in the event of any amendment to the Code.

(v) The foregoing provisions of this subsection (f) shall similarly apply to any benefit provided elsewhere in this Agreement where it is expressly provided that the benefit is to be provided on an after tax basis.

Section 4 Employment

(i) The Executive shall perform services consistent with his past practices,

(ii) The Executive shall not be required to relocate or travel in excess of past practices,

(iii) The Executive shall enjoy the same office, administrative support and support services as he enjoyed prior to the Change in Control.

(iv) The Executive shall not be required to devote more time to Company business than he did prior to the Change in Control and may continue director or officer positions with other private or public entities that do not violate Section 7.

(v) The Executive’s expenses shall be reimbursed consistent with past practices, and

(vi) The Executive shall receive at least the same vacation as he currently enjoys, but not less than four weeks paid vacation.

Section 5 Source of Payments

Section 6 Litigation Expenses and Arbitration

Section 7 Restrictive Covenants

(d) Unless waived in writing by the Company, Executive further agrees that he will not, directly or indirectly, during the Extension Period, solicit or attempt to entice away from the Company any director, agent or employee of the Company.

Section 8 Severability

Section 9 Amendment, Termination, or Modification

Section 10 Consolidation, Merger, or Sale of Assets; Assignability

Section 11 Tax Withholding

Section 12 Entire Understanding

Section 13 Binding Agreement

Section 14 Employment Status

Section 15 No Attachment

Section 16 Notices

(a) to the Company, at its Dover, Delaware address

(b) to the Executive, at the address maintained by the Company for the Executive for payroll purposes;

Section 17 Revocation and Executive Acknowledgments

Section 18 Headings of No Effect

Section 19 Applicable Law

Section 20 Counterparts

Section 1 Definitions

Section 2 Term of Agreement

Section 3 Benefits

(a) On the date of a Change in Control, the Company shall pay to the Executive in cash the Change in Control Fee.

(b) During the Extension Period, the Company shall pay to the Executive the Monthly Amount, payable on the first day of each month, prorated for partial months.

(c) If the Executive’s employment is terminated during the Extension Period, then,

(i) within five business days after the Date of Termination, the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) in cash all accrued but unpaid salary, earned but unpaid bonuses, and accrued but unused vacation in accordance with Company policies;

Section 1
Definitions

Section 2
Term of Agreement

Section 3
Benefits

Section 4
Litigation Expenses and Arbitration

Section 5
Restrictive Covenants

Section 6
Severability

Section 7
Amendment, Termination, or Modification

Section 8
Tax Withholding

Section 9
Entire Understanding

Section 10
Binding Agreement

Section 11
Director Status

Section 12
No Attachment

Section 13
Notices

Section 14
Revocation and Director Acknowledgments

Section 15
Headings of No Effect

Section 16
Applicable Law

Section 17
Counterparts

Section 1
Definitions

Section 2
Term of Agreement

Section 3
Benefits

Section 4
Employment

Section 5
Source of Payments

Section 6
Litigation Expenses and Arbitration

Section 7
Restrictive Covenants

Section 8
Severability

Section 9
Amendment, Termination, or Modification

Section 10
Consolidation, Merger, or Sale of Assets; Assignability

Section 11
Tax Withholding

Section 12
Entire Understanding

Section 13
Binding Agreement

Section 14
Employment Status

Section 15
No Attachment

Section 16
Notices

Section 17
Revocation and Executive Acknowledgments

Section 18
Headings of No Effect

Section 19
Applicable Law

Section 20
Counterparts

Section 1
Definitions

Section 2
Term of Agreement

Section 3
Benefits