Document:

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, 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 $150,000.

 

“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

 

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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

 

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(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 (15th) day
following the designation of the second arbitrator, or if a second arbitrator
has not been designated by the (15th) 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.

 

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(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

 

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

 

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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.

 

6

 

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

 

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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

  

 

8Exhibit 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, 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 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 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

 

“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.

 

“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” 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 $500,000.

 

“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 60 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’

 

2

 

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;

 

3

 

(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

 

4

 

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

 

5

 

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.

 

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.

 

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

 

6

 

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

 

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.

 

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 (15th) day
following the designation of the second arbitrator, or if a second arbitrator
has not been designated by the (15th) 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

 

7

 

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.

 

8

 

(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

 

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 9

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 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

 

9

 

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

 

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.

 

10

 

Section 16

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 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

 

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 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

 

11

 

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

  

 

12

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