<PAGE>

                                                                    EXHIBIT 10.2

                     TRANSITION SUPPORT SERVICES AGREEMENT

     THIS AGREEMENT for the performance of certain corporate services is
executed and made effective as of January 15, 2002, by and between DOVER DOWNS
ENTERTAINMENT, INC., a Delaware corporation ("DVD"), and DOVER DOWN GAMING &
ENTERTAINMENT, INC., a Delaware corporation ("Gaming & Entertainment").

     WHEREAS, DVD, through its ownership of all of the issued and outstanding
common stock (the "Stock") of Dover Downs, Inc. ("Slots"), participates in the
business of gaming operations; and

     WHEREAS, the Board of Directors of DVD has determined that it would be
advisable and in the best interests of DVD and its shareholders for DVD to
contribute all of the Stock and any other related assets and liabilities
relating to gaming operations (the "Business") to Gaming & Entertainment in
exchange for Gaming & Entertainment common stock and Class A Common Stock and
thereafter to distribute all of the outstanding shares of Gaming & Entertainment
common stock and Class A Common Stock on a pro rata basis to the holders of
DVD's common stock and Class A Common Stock (the "Distribution") pursuant to an
Agreement Regarding Distribution and Plan of Reorganization, dated as of the
date hereof, between DVD and Gaming & Entertainment (the "Distribution
Agreement"); and

     WHEREAS, the parties intend that the transactions described herein will be
effective at the Effective Time (as defined in the Distribution Agreement); and

     WHEREAS, the parties hereto deem it to be appropriate and in the best
interests of the parties that they provide certain services to each other on the
terms and conditions set forth herein;

     NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

     1.  Description of Services.

          (a)  Gaming & Entertainment shall, subject to the terms and provisions
of this Agreement, provide DVD with certain services of a financial,
administrative and/or advisory nature, on terms to be agreed upon by DVD and
Gaming & Entertainment, and render such other specific services as DVD may from
time to time reasonably request in writing, subject to Gaming & Entertainment's
sole discretion and its being in a position to supply such services at the time
of such request.

          (b)  DVD shall, subject to the terms and provisions of this Agreement,
provide DVD with such services as DVD may from time to time reasonably request
in writing, subject to DVD's sole discretion and its being in a position to
supply such services at the time of the request.

     Each of DVD and Gaming & Entertainment, as the case may be, shall use
commercially reasonable efforts to transition from using the services provided
by the other under this Agreement on or prior to the termination of the original
term for the provision of such services (as provided in Section 7 below).

                                                                               1
<PAGE>

     2. Consideration for Services.  Gaming & Entertainment shall pay DVD for
the services provided hereunder and DVD shall pay Gaming & Entertainment for all
the services provided hereunder at rates agreed to by the parties hereunder.

     3. Terms of Payment.  Within ten (10) business days after the end of each
month during the term of this Agreement, DVD will submit a written invoice to
Gaming & Entertainment and Gaming & Entertainment will submit a written invoice
to DVD for service fees for the immediately preceding month together with an
accounting of the charges for the immediately preceding month's services. Within
thirty (30) business days after the receipt of such invoices, DVD and Gaming &
Entertainment, as the case may be, will remit payment of the full amount of such
invoices to the other in the manner provided below. Interest shall accrue at the
Prime Rate (as defined in the Distribution Agreement) on any amounts not
received by the party providing the service hereunder within thirty (30) days
after receipt by the other of the invoice. The amount of any monthly service fee
shall be prorated to correspond with the portion of a given month for which
services were actually rendered.

     4. Method of Payment.  All amounts payable by Gaming & Entertainment and
DVD for the services rendered by the other pursuant to this Agreement shall be
remitted to DVD or Gaming & Entertainment, as the case may be, in United States
dollars in the form of a check or wire transfer.

     5. WARRANTIES.  THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY STATED IN
THIS AGREEMENT, THERE ARE NO WARRANTIES OR GUARANTIES, INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.

     6. Liability; Indemnification; Dispute Resolution.

          (a)  In no event shall either DVD or Gaming & Entertainment have any
liability, whether based on contract, tort (including, without limitation,
negligence), warranty or any other legal or equitable grounds, for any punitive,
consequential, special, indirect or incidental loss or damage suffered by the
other arising from or related to this Agreement, including without limitation,
loss of data, profits, interest or revenue, or interruption of business, even if
the party providing the services hereunder is advised of the possibility of such
losses or damages.

          (b)  The limitations set forth in Section 6(a) above shall not apply
to liabilities which may arise as the result of willful misconduct or gross
negligence of the party providing the services hereunder.

          (c)  Effective as of the date of this Agreement, Gaming &
Entertainment shall indemnify, defend and hold harmless DVD and its affiliates
and their respective directors, officers, employees and agents (the "DVD
Indemnitees") from and against any and all damage, loss, liability and expense
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any and all actions
or threatened actions) ("Indemnifiable Losses") incurred or suffered by any of
the DVD Indemnitees arising from, related to or associated with (i) DVD's
furnishing or failure to furnish the services provided for in this Agreement,
other than liabilities arising out of the willful misconduct or gross negligence
of the DVD Indemnitees and (ii) the gross negligence or willful misconduct of
Gaming & Entertainment

                                                                               2
<PAGE>

in furnishing or failing to furnish the services to be provided by Gaming &
Entertainment in this Agreement, provided however, in no event shall Gaming &
Entertainment be obligated to indemnify the DVD Indemnitees (taken together)
under this Section 6(c) for Indemnifiable Losses arising out of Gaming &
Entertainment's gross negligence in an amount in excess of three times the
service fee charged for the category of service related to the Indemnifiable
Loss in the month in which the act or failure to act by Gaming & Entertainment
that gave rise to such Indemnifiable Loss occurs.

          (d)  Effective as of the date of this Agreement, DVD shall indemnify,
defend and hold harmless Gaming & Entertainment and its affiliates and their
respective directors, officers, employees and agents (the "Gaming &
Entertainment Indemnitees") from and against any and all Indemnifiable Losses
incurred or suffered by any of the Gaming & Entertainment Indemnitees arising
from, related to or associated with (i) Gaming & Entertainment's furnishing or
failure to furnish the services provided for in this Agreement, other than
liabilities arising out of the willful misconduct or gross negligence of the
Gaming & Entertainment Indemnitees, and (ii) the gross negligence or willful
misconduct of DVD in furnishing or failing to furnish the services to be
provided by DVD to Gaming & Entertainment in this Agreement, provided however,
in no event shall DVD be obligated to indemnify the Gaming & Entertainment
Indemnitees (taken together) under this Section 6(d) for Indemnifiable Losses
arising out of DVD's gross negligence in an amount in excess of three times the
service fee charged for the category of service related to the Indemnifiable
Loss in the month in which the act or failure to act by DVD that gave rise to
such Indemnifiable Loss occurs.

          (e)  To the extent any advisory services provided by one party to the
other shall be deemed to constitute legal advice, the parties may enter into a
separate agreement to preserve attorney-client privilege, waive conflicts and
limit the liability of the party providing such services.

          (f)  Any disputes arising under this Agreement shall be resolved in
accordance with Section 13.10 (Disputes) of the Distribution Agreement.

     7. Termination.

          (a)  After the first anniversary date of this Agreement, each category
of service provided under this Agreement shall terminate ninety (90) days after
the request of the party receiving the service.

          (b)  After the first anniversary date of this Agreement, each category
of service provided under this Agreement shall terminate one hundred and eighty
(180) days after the request of the party providing the service.

          (c)  Notwithstanding Sections 7(a) and 7(b) above, this Agreement may
be terminated in its entirety (or any particular category of service may be
terminated) in accordance with the following:

                    (i)  Upon written agreement of the parties;

                    (ii) By either party for material breach hereof by the other
if the breach is not cured within thirty (30) calendar days after written notice
of breach is delivered to the breaching party; or

                                                                               3
<PAGE>

                    (iii) By either party, upon written notice to the other if
the other shall become insolvent or shall make an assignment of substantially
all of its assets for the benefit of creditors, or shall be placed in
receivership, reorganization, liquidation or bankruptcy.

                    (iv)  By either party upon a "change-in-control" of the
other party. For these purposes "change-in-control" shall be defined as the
earliest of the following to occur: (a) the acquisition by any person of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more of the combined voting power of the then
outstanding securities of a party entitled to vote generally in the election of
directors ("Outstanding Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by a party or any corporation controlled by such party or (ii) any
acquisition by any corporation pursuant to a transaction described in clauses
(i), (ii) and (iii) of paragraph (b) below; or (b) the effective date of a
reorganization, merger or consolidation of a party (a "Business Combination"),
in each case, unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the beneficial owners
of the Outstanding Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 75% of the
combined voting power of the then outstanding securities entitled to vote
generally in the election of directors of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a
result of such transaction owns a party through one or more subsidiaries) in
substantially the same proportion as their ownership, immediately prior to such
Business Combination, of the Outstanding Voting Securities, (ii) no person
(excluding any employee benefit plan or related trust of a party or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 25% or more of the combined voting power of the then
outstanding voting securities of such party except to the extent that such
ownership existed prior to the Business Combination, and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the incumbent board of a party at
the time of the initial action taken by such party to provide for such Business
Combination.

          (d)  Upon any termination pursuant to Sections 7(b) and 7(c) above,
DVD and Gaming & Entertainment shall be compensated for all services performed
to the date of termination in accordance with the provisions of this Agreement,
and DVD and Gaming & Entertainment, as the case may be, will consider hiring
certain employees of the other identified by the other prior to the termination
to the extent that DVD or Gaming & Entertainment, as the case may be, does not
contract with third parties to provide the services rendered by DVD or Gaming &
Entertainment pursuant to this Agreement.

     8. General.

          (a)  Force Majeure. Any delays in or failure of performance by DVD or
Gaming & Entertainment shall not constitute a default hereunder if and to the
extent such delay or failure of performance is caused by occurrences beyond the
reasonable control of DVD or Gaming & Entertainment, as the case may be,
including, but not limited to: acts of God or the public enemy; compliance with
any order or request of any governmental authority; acts of war; riots or
strikes or other concerted acts of personnel; or any other causes beyond the
reasonable control of DVD or Gaming & Entertainment, whether or not of the same
class or kind as those specifically named above.

                                                                               4
<PAGE>

          (b)  Confidentiality. Each party shall hold and cause its directors,
officers, employees, agents, consultants and advisors to hold, in strict
confidence, unless compelled to disclose by judicial or administrative process
or, in the opinion of its counsel, by other requirements of law, all information
concerning the other party (except to the extent that such information can be
shown to have been (a) in the public domain through no fault of such disclosing
party or (b) lawfully acquired after the Effective Time (as defined in the
Distribution Agreement) on a non-confidential basis from other sources by the
disclosing party), and neither party shall release or disclose such information
to any other person, except its auditors, attorneys, financial advisors, bankers
and other consultants and advisors who shall be advised of the provisions of
this Section and be bound by them.

          (c)  Expenses. Except as specifically provided in this Agreement or in
the Distribution Agreement, all costs and expenses incurred prior to the
Effective Time in connection with the preparation, execution, delivery and
implementation of this Agreement and with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all fees for
counsel, accountants and financial and other advisors) shall be paid by DVD and
all such costs incurred thereafter shall be paid by the party incurring such
costs.

          (d)  Notices. All notices and communications under this Agreement
shall be deemed to have been given (a) when received, if such notice or
communication is delivered by facsimile, hand delivery or overnight courier,
and, (b) three (3) business days after mailing if such notice or communication
is sent by United States registered or certified mail, return receipt requested,
first class postage prepaid. All notices and communications, to be effective,
must be properly addressed to the party to whom the same is directed at its
address as set forth in the Distribution Agreement. Either party may, by written
notice delivered to the other party in accordance with this Section 8(d), change
the address to which delivery of any notice shall thereafter be made.

          (e)  Amendment and Waiver. This Agreement may not be altered or
amended, nor may any rights hereunder be waived, except by an instrument in
writing executed by the party or parties to be charged with such amendment or
waiver. No waiver of any terms, provision or condition of or failure to exercise
or delay in exercising any rights or remedies under this Agreement, in any one
or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, provision, condition, right or remedy or as
a waiver of any other term, provision or condition of this Agreement.

          (f)  Entire Agreement. This Agreement together with the Distribution
Agreement constitutes the entire understanding of the parties hereto with
respect to the subject matter hereof, superseding all negotiations, prior
discussions and prior agreements and understandings relating to such subject
matter. To the extent that the provisions of this Agreement are inconsistent
with the provisions of any Distribution Agreement, the provisions of this
Agreement shall prevail with respect to the subject matter hereof.

          (g)  Parties in Interest. Neither of the parties hereto may assign its
rights or delegate any of its duties under this Agreement without the prior
written consent of the other party. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. Nothing contained in this Agreement, express
or implied, is intended to confer any benefits, rights or remedies upon any
person or entity other than

                                                                               5
<PAGE>

the DVD Indemnitees and Gaming & Entertainment Indemnitees under Section 6 of
this Agreement.

          (h)  Further Assurances and Consents. In addition to the actions
specifically provided for elsewhere in this Agreement, each of the parties
hereto will use its reasonable efforts to (a) execute and deliver such further
instruments and documents and take such other actions as any other party may
reasonably request in order to effectuate the purposes of this Agreement and to
carry out the terms hereof and (b) take, or cause to be taken, all actions, and
do, or cause to be done, all things, reasonably necessary, proper or advisable
under applicable laws, regulations and agreements or otherwise to consummate and
make effective the transactions contemplated by this Agreement, including,
without limitation, using its reasonable efforts to obtain any consents and
approvals, make any filings and applications and remove any liens, claims,
equity or other encumbrances on any asset of the other party necessary or
desirable in order to consummate the transactions  contemplated by this
Agreement; provided that no party hereto shall be obligated to pay any
consideration therefor (except for filing fees and other similar charges) to any
third party from whom such consents, approvals and amendments are requested or
to take any action or omit to take any action if the taking of or the omission
to take such action would be unreasonably burdensome to the party or its
business.

          (i)  Severability. The provisions of this Agreement are severable and
should any provision hereof be void, voidable or unenforceable under any
applicable law, such provision shall not affect or invalidate any other
provision of this Agreement, which shall continue to govern the relative rights
and duties of the parties as though such void, voidable or unenforceable
provision were not a part hereof.

          (j)  Governing Law. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of Delaware, without regard to the
conflicts of law rules of such state.

          (k)  Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same Agreement.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

                                    Dover Downs Entertainment, Inc.

                                    By:   /s/ Denis McGlynn
                                          -------------------------------
                                    Name: Denis McGlynn
                                    Its:  President


                                    Dover Downs Gaming & Entertainment, Inc.

                                    By:   /s/ Denis McGlynn
                                          -------------------------------
                                    Name: Denis McGlynn
                                    Its:  President

                                                                               6