Document:

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                                                                    EXHIBIT 10.1

                   DOVER DOWNS GAMING & ENTERTAINMENT, INC.

                            2002 Stock Option Plan

     1.  Purpose.  The 2002 Stock Option Plan (the "Plan") is intended to
advance the best interests of Dover Downs Gaming & Entertainment, Inc. (the
"Company") by providing its employees and the employees of its subsidiaries with
additional incentive and by increasing their proprietary interest in the success
of the Company and its subsidiary corporations.

     2.  Administration.  The Plan shall be administered by the Stock Option
Committee of the Board of Directors of the Company (the "Committee").  The
Committee shall consist of two or more Directors of the Company.  Meetings shall
be held at such time and place as shall be determined by the Committee.  A
majority of the members of the Committee shall constitute a quorum for the
transaction of business, and the vote of a majority of those members present at
any meeting shall decide any questions brought before that meeting.  In
addition, the Committee may take any action otherwise proper under the Plan by
the unanimous written consent of its members.  No member of the Committee shall
be liable for any act or omission of any other member of the Committee or for
any act or omission of such member, including, but not limited to, the exercise
of any power or discretion under the Plan, except those resulting from gross
negligence or willful misconduct.  All questions of interpretation and
application of the Plan, or of options granted hereunder (the "Options"), shall
be subject to the determination, which shall be final and binding, of a majority
of the whole Committee.

     3.  Option Shares.  The stock subject to the Options and other provisions
of the Plan shall be shares of the Company's Common Stock, $0.10 par value (the
"Stock").  The total amount of the Stock with respect to which Options may be
granted shall not exceed in the aggregate 1,500,000 shares; provided, however,
that the class and aggregate number of shares which may be subject to Options
granted hereunder shall be subject to adjustment in accordance with the
provisions of Section 16 hereof.  Such shares may be treasury shares or
authorized but unissued shares.  In the event that any outstanding Option for
any reason shall expire, the shares of Stock allocable to the unexercised
portion of such Option may again be subject to an Option under the Plan.

     4.  Termination of Plan.  The Plan shall terminate on January 14, 2012;
provided, however, that the Board of Directors of the Company within its
absolute discretion may terminate the Plan at any time.  No such termination,
other than as provided for in Section 16 hereof, shall in any way affect any
Option then outstanding.

     5.  Authority to Grant Options.  The Committee may grant from time to time
to such eligible individuals (the "Participants") as it shall from time to time
determine an Option, or Options, to buy a stated number of shares of Stock under
the terms and conditions of the Plan.  Subject only to any applicable
limitations set forth in the Plan, the number of shares of Stock to be covered
by any Option shall be as determined by the Committee.  The Committee shall
determine whether an Option shall be an "incentive stock option" qualified under
Section 422 of the Internal Revenue Code of 1986 as amended (the "Code"), or a
"non-qualified stock option" (that is, any Option which is not considered an
incentive stock option).  The aggregate Fair Market Value (determined as
provided in Section 7 of the Plan) of the Stock with respect to which incentive
stock options are granted hereunder which are exercisable for the first time by
such employee during any calendar year (under all the stock option plans
maintained by the Company and subsidiary corporations) shall not exceed $100,000
in accordance with Section 422 of the Code (or such greater or lesser dollar
amount as may be in effect under the Code on the date of grant).  No Option
shall be granted under the Plan after ten (10) years from the date the Plan is
adopted.

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     6.  Eligibility.  Participants shall be employees of the Company, or of any
subsidiary corporation, as the Committee shall determine from time to time;
provided, however, that no employee owning more than ten percent (10%) of the
stock of the Company at the time an Option is granted shall be eligible to
participate in the Plan.  For all purposes of the Plan, the term "subsidiary
corporation" shall mean any corporation of which the Company is the "parent
corporation" as that term is defined in Section 424(e) of the Code.

     7.  Option Price.  The price at which shares may be purchased pursuant to
an Option (the "Option Price") shall be not less than the fair market value of
the shares of Stock on the date the Option is granted, and the Committee in its
discretion may provide that the Option Price shall be more than such fair market
value.  The "fair market value" of the Stock shall be the closing price of the
Stock on the New York Stock Exchange as reported in The Wall Street Journal for
the trading day on which the Option is granted, or if the Option is not granted
on a trading day, then such fair market value shall be determined on the trading
day before the Option is granted.

     8.  Duration of Options.  No Option shall be exercisable after the
expiration of ten years from the date such Option is granted; and the Committee
in its discretion may provide that an Option shall be exercisable throughout
such ten-year period or during any lesser period of time commencing on or after
the date of grant of the Option and ending upon or before the expiration of such
ten-year period.

     9.  Amount Exercisable.  Each Option may be exercised, so long as it is
valid and outstanding, from time to time in part or as a whole, subject to any
limitations with respect to the number of shares for which the Option may be
exercised at a particular time and to such other conditions as the Committee in
its discretion may specify upon granting the Option.

     10.  Exercise of Options.  Options shall be exercised by the delivery of
written notice to the Company setting forth the number of shares with respect to
which the Option is to be exercised and specifying the address to which the
certificates for such shares are to be mailed, accompanied by provision for full
payment for the Shares.  The Option Price shall be payable in cash or its
equivalent or if permitted by the terms of the Award Agreement (a) by tendering
previously acquired shares of Stock having an aggregate Fair Market Value at the
time of exercise equal to the total Option Price (provided that the shares of
Stock which are tendered must have been held by the Participant for at least
twelve (12) months prior to their tender to satisfy the Option Price), (b) by
broker-assisted cashless exercise (provided that any shares of Stock which are
sold in connection with any broker-assisted cashless exercise must have been
held by the Participant for at least twelve (12) months if such shares were
previously acquired by exercise of an option) or (c) by a combination of any of
the foregoing.  Notice may be delivered in person to a member of the Committee,
or the Secretary of the Company, or may be sent by registered mail, return
receipt requested, to a member of the Committee, or the Secretary of the
Company, in which case delivery shall be deemed made on the date such notice is
deposited in the mail.  As promptly as practicable after receipt of such written
notification and payment, the Company shall deliver to the Participant
certificates for the number of shares with respect to which such Option has been
so exercised, issued in the Participant's name; provided, however, that such
delivery shall be deemed effected for all purposes when a stock transfer agent
of the Company shall have deposited such certificates in the United States mail,
addressed to the Participant, at the address specified pursuant to this Section
10.

     11.  Transferability of Options.  Options shall not be transferable by a
Participant other than by will or under the laws of descent and distribution,
and shall be exercisable only by the Participant during such Participant's
lifetime.  In the event of (a) any attempt by the Participant to alienate,
assign, pledge, hypothecate or otherwise dispose of an Option, except as
provided for herein, or (b) the levy of any attachment, execution or similar
process upon the rights or interest conferred by an Option, the Company may
terminate the Option

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by notice to the Participant and it shall thereupon become null and void.

     12.  Certain Option Terminations.  Except as may be otherwise expressly
provided herein, Options shall terminate on such date as shall be selected by
the Committee in its discretion and specified in the Award Agreement, but not in
excess of one day less than three months following severance of the employment
relationship between the Company or its subsidiary corporation and the
Participant for any reason, for or without cause.  For purposes of termination
of an Option, if a Participant is an employee of a subsidiary of the Company,
the aforementioned employment relationship shall be deemed severed at such time
as the subsidiary ceases for any reason to be a subsidiary of the Company under
Section 6 hereto whether or not the employee continues in the employ of the
subsidiary.  Whether authorized leave of absence, or absence on military or
government service, shall constitute severance of the employment relationship
between the Company or its subsidiary corporation and the Participant shall be
determined by the Committee at the time thereof.  If, before the date of
expiration of the Option, the Participant shall be retired in good standing from
the employ of the Company for reasons of age or disability under the then
established rules of the Company, the Option shall terminate on the earlier of
such date of expiration or one day less than three months after the date of such
retirement.  In the event of such retirement, the Participant shall have the
right prior to the termination of such Option to exercise the Option to the
extent to which the Participant was entitled to exercise such Option immediately
prior to such retirement.  After the death of the Participant, the Participant's
executors, administrators, or any person or persons to whom an Option may be
transferred by will or by the laws of descent and distribution, shall have the
right, at any time prior to the earlier of the date of expiration or one year
following the date of such death, to exercise the Option, in whole or in part
(without regard to any limitations set forth in or imposed pursuant to Section 9
hereof).

     13.  Requirements of Law.  The Company shall not be required to sell or
issue any shares under an Option if the issuance of such shares constitute a
violation by the Participant or the Company of any provisions of any law or
regulation of any governmental authority.  In addition, in connection with the
Securities Act of 1933 (as now in effect or hereafter amended), upon exercise of
any Option, the Company shall not be required to issue such shares unless the
Committee has received evidence satisfactory to it to the effect that the holder
of such Option will not transfer such shares except pursuant to a registration
statement in effect under such Act or unless an opinion of counsel to the
Company has been received by the Company to the effect that such registration is
not required.  Any determination in this connection by the Committee shall be
final, binding and conclusive.  In the event the shares issuable on exercise of
an Option are not registered under the Securities Act of 1933, the Company may
imprint the following legend or any other legend which counsel for the Company
considers necessary or advisable to comply with the Securities Act of 1933:

          "The shares of stock represented by this certificate
          have not been registered under the Securities Act of
          1933 or under the securities laws of any State and may
          not be sold or transferred except upon such registration
          or upon receipt by the Company of an opinion of counsel
          satisfactory to the Company, in form and substance
          satisfactory to the Company, that registration is not
          required for such sale or transfer."

          The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933 (as now in
effect or as hereafter amended); and in the event any shares are so registered
the Company may remove any legend on certificates representing such shares.  The
Company shall not be obligated to take any other affirmative action in order to
cause the exercise of an Option or the issuance of shares pursuant thereto to
comply with any law or regulation of any governmental authority.  The Company
may contractually provide in any Award Agreement for a holding period prior to
the sale or disposition of shares of Stock acquired under an Option.

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     14.  No Rights as Shareholder.  No Participant shall have rights as a
shareholder with respect to shares covered by an Option until the date of
issuance of a stock certificate for such shares; and, except as otherwise
provided in Section 16 hereof, no adjustment for dividends, or otherwise, shall
be made if the record date thereof is prior to the date of issuance of such
certificate.

     15.  Employment Obligation.  The granting of any Option shall not impose
upon the Company any obligation to employ or continue to employ any Participant;
and the right of the Company to terminate the employment of any Participant
shall not be dismissed or affected by reason of the fact that an Option has been
granted.

     16.  Changes in the Company's Capital Structure.  The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Stock or the rights thereof, or the dissolution or liquidation of
the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.

          If the Company shall effect a subdivision or consolidation of shares
or other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of the Stock outstanding, without
receiving compensation therefor in money, services or property, then (a) the
number, class, and per share price of shares of Stock subject to outstanding
Options hereunder shall be appropriately adjusted in such a manner as to entitle
a Participant to receive upon exercise of any Option, for the same aggregate
cash consideration, the same total number and class of shares as would have been
received had the Option been exercised in full immediately prior to the event
requiring the adjustment; and (b) the number and class of shares then reserved
for issuance under the Plan shall be adjusted by substituting for the total
number and class of shares of Stock then reserved that number and class of
shares of Stock that would have been received by the owner of an equal number of
outstanding shares of each class of Stock as the result of the event requiring
the adjustment.

          After a merger of one or more corporations into the Company, or after
a consolidation of the Company and one or more corporations in which the Company
shall be the surviving corporation, each holder of an outstanding Option shall,
at no additional cost, be entitled upon exercise of such Option to receive
(subject to any required action by shareholders) in lieu of the number and class
of shares as to which such Option would have been so exercisable in the absence
of such event, the number and class of shares of Stock or other securities to
which such holder would have been entitled pursuant to the terms of the
agreement of merger or consolidation if, immediately prior to such merger or
consolidation, such holder had been the holder of record of the number and class
of shares of Stock equal to the number and class of shares as to which such
Option shall be so exercised.

          If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation, or if
the Company is liquidated, or sells or otherwise disposes of substantially all
of its assets to another corporation while unexercised Options remain
outstanding under the Plan, (i) subject to the provisions of clause (iii) below,
after the effective date of such merger, consolidation or sale, as the case may
be, each holder of an outstanding Option  shall be entitled, upon exercise of
such Option, to receive, in lieu of shares of the Stock, shares of such stock or
other securities as the holders of shares of such class of Stock received
pursuant to the terms of the merger, consolidation or sale; (ii) the Board of
Directors may waive any limitations set forth in or imposed pursuant to Section
9 hereof so that all Options, from and after a date prior to the effective date
of such merger, consolidation, liquidation or sale, as the case may be,
specified by the Board, shall be exercisable in full; and (iii) all outstanding
Options may be

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canceled by the Board of Directors as of the effective date of any such merger,
consolidation, liquidation or sale provided that (x) notice of such cancellation
shall be given to each holder of an Option and (y) each holder of an Option
shall have the right to exercise such Option in full (without regard to any
limitations set forth in or imposed pursuant to Section 9 hereof) during a 30-
day period preceding the effective date of such merger, consolidation,
liquidation or sale.

          Except as hereinbefore expressly provided, the issue by the Company of
shares of Stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number, class or price of shares of Stock then
subject to outstanding Options.

     17.  Amendment or Termination of Plan.  The Board of Directors may modify,
revise or terminate this Plan at any time and from time to time; provided,
however, that without the further approval of the holders of at least a majority
of the outstanding shares of Stock, the Board may not increase the aggregate
number of shares which may be issued under Options pursuant to the provisions of
the Plan and that any amendment, modification, revision or termination shall not
effect any outstanding Options.

     18.  Written Agreement.  Each Option granted hereunder shall be embodied in
a written option agreement (the "Award Agreement"), which shall be subject to
the terms and conditions prescribed above and shall be signed by the Participant
and by the President or any Executive Officer of the Company for and in the name
and on behalf of the Company.  The Award Agreement shall contain such other
terms, conditions or limitations as the Committee in its discretion shall deem
advisable.

     19.  Indemnification of Committee.  The Company shall indemnify each
present and future member of the Committee against, and each member of the
Committee shall be entitled without further action to indemnity from the Company
for, all expenses (including the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by such member in
connection with or arising out of any action, suit or proceeding in which such
member may be involved by reason of being or having been a member of the
Committee, whether or not such member continues to be a member of the Committee
at the time of incurring such expenses; provided, however, that such indemnity
shall not include any expenses incurred by any such member of the Committee (a)
in respect of matters as to which such member shall be finally adjudged in any
such action, suit or proceeding to have been guilty of gross negligence or
willful misconduct in the performance of such member's duty as a member of the
Committee, or (b) in respect of any matter in which any settlement is effected,
to any amount in excess of the amount approved by the Company on the advice of
its legal counsel; and provided further, that no right of indemnification under
the provisions set forth herein shall be available to or enforceable by any such
member of the Committee unless, within sixty (60) days after institution of any
such action, suit or proceeding, such member shall have offered the Company, in
writing, the opportunity to handle and defend same at its own expense.  The
foregoing right of indemnification shall inure to the benefit of the heirs,
executors or administrators of each such member of the Committee and shall be in
addition to all other rights to which such member of the Committee may be
entitled as a matter of law, contract, or otherwise.

     20.  Tax Withholding.  The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
(including any shares of Stock withheld as provided herein) sufficient to
satisfy Federal, state and local taxes (including the Participant's FICA
obligation) required by law to be withheld with respect to an Option or its
exercise.  The Committee may, in its sole discretion, permit a Participant to
satisfy the withholding requirement, in whole or in part, by tendering shares of
Stock

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held by the Participant at least twelve (12) months prior to their tender or by
having the Company withhold shares of Stock having a Fair Market Value on the
effective date of exercise equal to the minimum statutory total tax which could
be imposed on the transaction. Any such election shall be irrevocable, made in
writing and signed by the Participant.

     21.  Effective Date of Plan.  The Plan shall become effective and shall be
deemed to have been adopted on January 15, 2002.

     22.  Severability.  In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

     23.  Requirements of Law.  The granting of Options and the issuance of
shares of Stock under the Plan shall be subject to all applicable laws, rules
and regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

     24.  Governing Law.  To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with, and
governed by, the laws of the State of Delaware.

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                                                                    EXHIBIT 10.2

                          EMPLOYEE BENEFITS AGREEMENT

          THIS EMPLOYEE BENEFITS AGREEMENT ("Agreement") is made as of the 15th
day of Janaury 2002 by and between Dover Downs Entertainment, Inc., a Delaware
corporation ("DVD") and Dover Downs Gaming & Entertainment, Inc., a Delaware
corporation ("Gaming & Entertainment").

                                    RECITALS

          WHEREAS, Dover Downs, Inc., a Delaware corporation ("Slots") is a
wholly-owned subsidiary of DVD and a member of a Controlled Group (as
hereinafter defined) that includes DVD;

          WHEREAS, DVD has formed Gaming & Entertainment as a wholly-owned
subsidiary of DVD and the board of directors of DVD has approved the transfer,
as a capital contribution, of all of the issued and outstanding capital stock of
Slots to Gaming & Entertainment, followed by the distribution of all of the
issued and outstanding shares of capital stock of Gaming & Entertainment to the
holders of the issued and outstanding shares of capital stock of DVD ("the
Spinoff");

          WHEREAS, the parties desire to set forth the terms and conditions
pursuant to which Gaming & Entertainment and/or Slots shall provide various
employee benefits to those Employees (as hereinafter defined) who remain
employed by Slots on the Spinoff Date or who become employed by Gaming &
Entertainment on the Spinoff Date or who thereafter become employed by Slots,
Gaming & Entertainment or any subsidiary of Gaming & Entertainment;

          NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

                                   ARTICLE 1

                                  DEFINITIONS

          1.1  GENERAL. As used in this Agreement, capitalized terms defined
immediately after their use shall have the respective meanings thereby provided,
and the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):

          Action: any demand, action or cause of action, claim, suit,
arbitration, inquiry, subpoena, discovery request, proceeding or investigation
by or before any court or grand jury, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal related to,
arising out of or resulting from any employee liability.

          Affiliate: with respect to any specified person, a person who,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control
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with, such specified person; provided, that DVD and Gaming & Entertainment shall
be deemed not to be Affiliates of each other for purposes of this Agreement.

          Code: the Internal Revenue Code of 1986, as it may be amended or
recodified from time to time.

          Controlled Group: two or more business entities affiliated within the
meaning of Code Sections 414(b), 414(c), 414(m) and/or 414(o).

          Dual Employee:  An Employee of DVD immediately prior to the Spinoff
Date who, on or after the Spinoff Date, becomes an Employee of Games and
Entertainment while remaining an Employee of DVD or Slots.

          Employee Benefit Plans: (i) any severance, disability, cafeteria,
bonus, stock option, stock appreciation, stock purchase, deferred compensation,
or similar types of plans, agreements, policies or arrangements that currently
are established, maintained or contributed to by DVD or Slots for the benefit of
any former or present employees or their beneficiaries, dependents or spouses,
and (ii) any employee welfare and employee pension benefit plans (as such terms
are defined in Section 3(l) and 3(2), respectively, of ERISA) which are
applicable to former or present Employees or their beneficiaries, dependents or
spouses, and that currently are established, maintained or contributed to by DVD
or Slots.

          Employee/labor Law: any federal, state, local or municipal law
(including common law), statute, ordinance, regulation, order, decree, judgment,
decision, ruling, permit or authorization (each as may be in effect, applicable
and binding, from time to time) relating or applicable to the work place or to
the employer/employee relationship including, without limitation, any of the
foregoing relating or applicable to wage and hour claims, collective bargaining
and labor laws, ERISA-governed employee benefit and welfare plans, federal,
state and local tax withholding and payment rules and regulations, workers'
compensation and similar laws, accrued vacation statutes, and sexual harassment
and anti-discrimination laws.

          Employee Liability: any and all debts, charges, liabilities,
warranties and obligations (of any nature or type whatsoever regardless of when
arising), whether accrued, contingent or reflected on a balance sheet including,
without limitation, liability for administrative, civil or criminal penalties or
forfeitures, and attorneys' fees or other costs of defending an Action or a
claim of Employee Liability under any Employee/Labor Law.

          Employees: Employees of Slots, Gaming & Entertainment or any of its
subsidiaries on and after the Spinoff Date.

          ERISA: the Employee Retirement Income Security Act of 1974, as
amended.

          Spinoff Date: The date the Spinoff is effective.

          1.2  OTHER DEFINITIONS. Capitalized terms not specifically defined
herein shall have the meanings ascribed thereto in the Agreement Regarding
Distribution and

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Plan of Reorganization of even date herewith by and between DVD and Gaming &
Entertainment.

                                   ARTICLE 2

                                   EMPLOYEES

          2.1  CONDITIONS OF EMPLOYMENT. (a) Nothing in this Agreement shall
require either Gaming & Entertainment or Slots to employ any person on or after
the Spinoff Date; and (b) nothing in this Agreement shall be interpreted to
prohibit or otherwise restrict Gaming & Entertainment or Slots from terminating
the employment of any Employee, or from changing the salary or wage range, grade
level or location of employment of any Employee, in accordance with their
respective personnel policies and procedures following the Spinoff Date. Without
limiting the generality of Section 5.9 hereof, no Employee or other person shall
have any rights as a third party beneficiary under this Agreement.

          2.2  CERTAIN PAYROLL DEDUCTIONS. Effective as of the Spinoff Date, to
the extent (if any) required by applicable law, Gaming & Entertainment and/or
Slots will assume DVD's obligation to comply with any garnishment order
applicable to any Employee. Furthermore, if an Employee has any outstanding
liability or obligation to DVD (for example, salary advances) which existed on
the Spinoff Date, which has resulted in a special payroll deduction for such
Employee, then, to the extent permitted under applicable law, Gaming &
Entertainment and/or Slots will withhold such amounts for DVD's benefit from the
Employee's compensation earned subsequent to the Spinoff Date. DVD will provide
the special payroll deduction information or garnishment information at least
fifteen (15) days prior to the date Gaming & Entertainment and/or Slots assumes
payroll-processing responsibility for an Employee.

                                   ARTICLE 3

                             EMPLOYEE BENEFIT PLANS

          3.1  WELFARE BENEFIT PLANS. DVD maintains various welfare benefits
plans (as defined by Section 3(l) of ERISA). As of the date of the Spinoff, or
as soon thereafter as is reasonably practicable, Gaming & Entertainment shall
establish its own welfare benefits plans so that following the Spinoff, DVD and
Gaming & Entertainment will each continue to sponsor their own separate welfare
benefit plans, including medical and life insurance and disability benefits.
With respect to Dual Employees, DVD and Gaming & Entertainment will determine
which welfare benefit plans these employees will be permitted to participate in.

          3.2  VACATION, HOLIDAY, SICK LEAVE AND SHORT-TERM DISABILITY POLICIES.
Gaming & Entertainment shall credit all Employees (other than Dual Employees)
for any accrued vacation, holiday and sick leave earned but not taken by such
Employees with respect to their employment with DVD and/or Slots in the current
year through the Spinoff Date; and Gaming & Entertainment shall be solely
responsible for payment of such vacation, holiday and sick leave, and shall
indemnify DVD and its Affiliates with respect to any

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<PAGE>

liability therefore. Any vacation, holiday or sick leave with respect to service
on and after the Spinoff Date shall be credited in accordance with the vacation,
holiday or sick leave policies adopted or maintained by Gaming & Entertainment
effective on and after the Spinoff Date. If an Employee who transferred
employment to Gaming & Entertainment is, on the Spinoff Date, on short-term
disability or other approved leave of absence, Gaming & Entertainment shall
assume responsibility for the payment of all benefits associated with such
short-term disability or other approved leave of absence (including without
limitation rights under the federal Family and Medical Leave Act) with respect
to periods of time on and after the Spinoff Date and shall indemnify DVD and its
Affiliates with respect to any liability therefore; provided that Gaming &
Entertainment shall not provide lesser benefits than had been provided by DVD to
such Employee with respect to any short-term disability or approved leave of
absence existing at the Spinoff Date.

          3.3  DVD PENSION PLAN.

          (a)  Effective for service on and after the Spinoff Date, Gaming &
Entertainment shall establish its own defined benefit Pension Plan (the "Gaming
& Entertainment Pension Plan"), the benefit formula under which shall be
substantially similar to that under the DVD Pension Plan. The foregoing sentence
shall not be construed to limit the ability of Gaming & Entertainment in the
future to amend or terminate its Pension Plan. Such Gaming & Entertainment
Pension Plan shall afford credit for eligibility and vesting purposes for
service prior to the Spinoff Date with DVD and/or Slots as if such service were
service with Gaming & Entertainment. Gaming & Entertainment will promptly submit
the Gaming & Entertainment Pension Plan to the Internal Revenue Service for a
determination of its tax-exempt status.

          (b)  As soon as practicable following the Spinoff Date and the
establishment of the Gaming & Entertainment Pension Plan in such form as will,
in the opinion of counsel to DVD, be qualified under section 401(a) of the Code,
DVD and Gaming & Entertainment will provide for the transfer of plan assets and
the transfer of liabilities, with respect to Former DVD or Slots employees
(other than Dual Employees) who will, immediately after the Spinoff Date, become
Gaming & Entertainment Employees, from the DVD Pension Plan to the Gaming &
Entertainment Pension Plan. The amount of assets to be so transferred shall be
determined as of the Spinoff Date by the actuary of the DVD Pension Plan
consistent with the requirements of Section 414(l) of the Code and the
regulations thereunder relating to spinoffs and mergers (the "Transfer Amount").
The Transfer Amount shall be adjusted by an agreed upon interest for the period
from the Spinoff Date to the actual date of transfer.

          (c)  No transfer of assets and liabilities from the DVD Pension Plan
shall take place with respect to Dual Employees. Each such Dual Employee will
retain his or her benefit under the DVD Pension Plan (and be able to accrue
additional benefits thereunder after the Spinoff Date with respect to his or her
continuing service and compensation as a DVD Employee), and be eligible to
accrue benefits under the Gaming & Entertainment Pension Plan with respect to
service and compensation as a Gaming & Entertainment Employee.

          (d)  Any administrative, legal and actuarial work necessary for the
transfer of assets and liabilities from the DVD Pension Plan shall be provided
and paid for by DVD and any

                                       4
<PAGE>

administrative, legal and actuarial work necessary for the establishment of the
Gaming & Entertainment Pension Plan, and the submission of the Gaming &
Entertainment Pension Plan to the Internal Revenue Service for the determination
of its tax-exempt status, shall be provided and paid for by Gaming &
Entertainment.

          3.4  DVD 401(K) PLAN.

          (a)  Effective for service on and after the Spinoff Date, Gaming &
Entertainment shall establish its own 401(k) Plan (the "Gaming and Entertainment
401(k) Plan), the contribution formula under which shall be substantially
similar to that under the DVD 401(k) Plan. The foregoing sentence shall not be
construed to limit the ability of Gaming & Entertainment in the future to amend
or terminate its 401(k) Plan. Such Gaming & Entertainment 401(k) Plan shall
afford credit for eligibility and vesting purposes for service prior to the
Spinoff Date with DVD or Slots as if such service were service with Gaming &
Entertainment. Gaming & Entertainment will promptly submit the Gaming &
Entertainment 401(k) Plan to the Internal Revenue Service for a determination of
its tax exempt status.

          (b)  As soon as practicable following the Spinoff Date and the
establishment of the Gaming & Entertainment 401(k) Plan in such form as will, in
the opinion of counsel to DVD, be tax-qualified under sections 401(a) and 401(k)
of the Code, DVD and Gaming & Entertainment will provide for the transfer of
accounts of former DVD and Slots employees (but not Dual Employees) who will,
immediately after the Spinoff Date, become employees of Gaming & Entertainment,
from the DVD 401(k) Plan to the Gaming & Entertainment 401(k) Plan. The amounts
so transferred shall equal the fair market value of each transferred
participant's DVD 401(k) Plan account as of the valuation date immediately
preceding the date of transfer ("transfer date"), which account shall be treated
as fully vested as of the transfer date, and shall be adjusted to reflect any
contributions, distributions, in-service withdrawals or participant loans
contributed or received by the participant during the period between transfer
date and the valuation date immediately preceding the transfer date. Assets
shall be transferred entirely in (a) cash or other assets acceptable to the
Gaming & Entertainment Plan's trustee and (b) notes which represent the
participant loans of individuals whose DVD 401(k) Plan accounts are being
transferred.

          (c)  To the extent the investment options under the Gaming &
Entertainment 401(k) Plan are the same as under the DVD 401(k) Plan, the
accounts of participants described in subsection (b) will be transferred to and
held in those same investment options under the Gaming & Entertainment 401(k)
Plan. To the extent that investment options are different, participants'
accounts will be either mapped into comparable investment options under the
Gaming & Entertainment 401(k) Plan, or participants will be afforded the
opportunity to choose the investment options into which their DVD 401(k) Plan
account will be transferred, all as determined by the Plan administrator of the
Gaming & Entertainment 401(k) Plan.

          (d)  No transfer of account balances from the DVD 401(k) Plan shall
take place with respect to Dual Employees. Each such Dual Employee will retain
his or her account under the DVD 401(k) Plan and be able to continue to
participate therein on and after the Spinoff Date with respect to his or her
compensation as a DVD employee, and be eligible to participate, on

                                       5
<PAGE>

and after the Spinoff Date, in the Gaming & Entertainment 401(k) Plan with
respect to compensation as a Gaming & Entertainment Employee.

          (e)  Any administrative and legal work necessary for the transfer
shall be provided by DVD and any administrative and legal work necessary for the
establishment of the Gaming & Entertainment 401(K) Plan shall be provided by
Gaming & Entertainment.

          3.5  SEVERANCE LIABILITIES. Gaming & Entertainment acknowledges that
the transactions contemplated by the Spinoff will not result in DVD being or
becoming liable for any severance pay to any Employee and Gaming & Entertainment
shall indemnify DVD in respect thereof.

          3.6  2002 EMPLOYEE STOCK INCENTIVE PLAN.

          (a)  On or before the Spinoff Date, Gaming & Entertainment shall adopt
the Dover Downs Gaming & Entertainment, Inc. 2002 Employee Stock Incentive Plan
in a form substantially similar to the DVD Employees Stock Incentive Plan (the
"Gaming & Entertainment 2002 Plan").

          (b)  Following the completion of the Spinoff, Gaming & Entertainment
Employees who are not also employees of DVD and have outstanding DVD options
immediately prior to the effective date of the Spinoff will receive replacement
options of Gaming & Entertainment under the Gaming & Entertainment 2002 Plan
equivalent in value to the DVD stock options at such time as follows:

          Each Employee of Gaming & Entertainment with outstanding DVD options
will be granted replacement Gaming & Entertainment options with the exercise
price determined by multiplying the Average Percentage (as defined below) times
the original exercise price, and the number of shares subject to such
replacement grant determined by dividing the number of shares subject to options
currently held by the Average Percentage. "Average Percentage" shall mean Gaming
& Entertainment's opening stock price on the New York Stock Exchange ("NYSE")
multiplied by .7, or if the Gaming & Entertainment common stock is not traded on
the NYSE, such other exchange or quotation system on which it is traded, on the
first trading day after the effective date of the Spinoff divided by the sum of
(i) the stock price of DVD and (ii) the stock price of Gaming & Entertainment
multiplied by .7, in each case on the first trading day after the effective date
of the Spinoff.

          (c)  Each Dual Employee who holds outstanding DVD options will receive
replacement grants for a certain number of such outstanding options under the
Gaming & Entertainment 2002 Plan equivalent in value to the options surrendered
for cancellation to DVD pursuant to the terms set forth in a Cancellation
Agreement entered into by such Dual Employee and DVD. The number of DVD options
to be surrendered in exchange for Gaming & Entertainment options shall be
calculated by multiplying the number of such employees' DVD options by the
Average Percentage defined in Section 3.6 (b) above.

                                       6
<PAGE>

                                   ARTICLE 4

                                INDEMNIFICATION

          4.1  INDEMNIFICATION. In addition to the indemnity obligations set
forth in Section 3.2 hereof, Gaming & Entertainment and/or Slots agree to
indemnify, defend, reimburse and hold harmless DVD and its Affiliates, and the
officers, directors, employees, agents and representatives of DVD and its
Affiliates (each, a "DVD Indemnified Party"), from and against any and all
Actions, assessments, losses, damages, liabilities, costs and reasonable
expenses including, without limitation, interest, penalties, fines, excise taxes
and reasonable attorneys' fees and expenses, asserted against or imposed upon or
incurred by any DVD Indemnified Party which result from, arise out of or are
related to any failure by Gaming & Entertainment and/or Slots to comply with the
terms of this Employee Benefits Agreement. DVD agrees to indemnify, defend,
reimburse and hold harmless Gaming & Entertainment and its Affiliates, and the
officers, directors, employees, agents and representatives of said companies
(each, a "Gaming & Entertainment Indemnified Party"), from and against any and
all Actions, assessments, losses, damages, liabilities, costs and reasonable
expenses including, without limitation, interest, penalties, fines, excise taxes
and reasonable attorneys' fees and expenses, asserted against or imposed upon or
incurred by any Gaming & Entertainment Indemnified Party which result from,
arise out of or are related to any failure on the part of DVD to comply with the
terms of this Employee Benefits Agreement.

          4.2  PROCEDURE FOR INDEMNIFICATION. In the event any action, suit or
proceeding is brought pursuant to this Article 4 or Section 3.2 hereof, the
parties shall comply with and be subject to the indemnification procedures set
forth in the Distribution Agreement.

                                   ARTICLE 5

                                 MISCELLANEOUS

          5.1  BINDING AGREEMENT. This Agreement is binding upon and is for the
benefit of the Parties hereto and their respective successors and permitted
assigns.

          5.2  ASSIGNMENT. No party to this Agreement shall convey, assign or
otherwise transfer any of its rights or obligations under this Agreement without
the express written consent of the other party hereto in its sole and absolute
discretion. No assignment of this Agreement shall relieve the assigning party of
its obligations hereunder.

          5.3  NOTICES. All notices or other communications required or
permitted to be given hereunder shall be made pursuant to the notice provisions
set forth in the Distribution Agreement.

          5.4  NO WAIVER. No delay on the part of any party hereto in exercising
any right, power or privilege hereunder shall operate as a waiver, nor shall any
waiver on the part of any party of any right, power or privilege operate as a
waiver of any other right, power or

                                       7
<PAGE>

privilege hereunder, nor shall any single or partial exercise of any right,
power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which the parties hereto may otherwise have at law or in equity.

          5.5  ENTIRE AGREEMENT; AMENDMENT. This Agreement, and the agreements
and other documents referred to herein, shall constitute the entire agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior agreements, understandings, statements or representations,
oral or in writing, of the parties relating thereto. This Agreement may be
modified or amended only by written agreement of the parties. In addition to the
foregoing, any amendment to this Agreement must, in the case of each of Gaming &
Entertainment, DVD, and Slots, be approved by one of their respective elected
officers, with their respective execution of such amendment to evidence
conclusively such approval.

          5.6  SHARING OF INFORMATION. DVD and Gaming & Entertainment recognize
that each of them will require certain information regarding employees of the
other company or its subsidiaries, including without limitation information
regarding past service and compensation information used to determine accrued
benefits. Each agrees to provide the information requested by the other in good
faith, and on a reasonably prompt basis.

          5.7  COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single instrument.

          5.8  GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware (regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws) as to all matters including, without limitation, matters of validity,
construction, effect, performance and remedies.

          5.9  NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties and is not intended to confer upon any other person any
rights or remedies hereunder.

          5.10 LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

          5.11 INTERPRETATION. The Article and Section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the Parties and shall not in any way affect the meaning or
interpretation of this Agreement. The parties have made a good faith effort in
this Agreement to provide for those issues involving employee benefits in the
transaction which can be reasonably foreseen. The parties acknowledge that other

                                       8
<PAGE>

such issues may arise, and they agree to work in good faith to resolve any
differences which may arise.

          5.12  DISPUTES. Any disputes between the parties based upon, related
to, or arising in connection with this Agreement shall be resolved in accordance
with the dispute resolution procedure set forth in Section 13.10 of the
Distribution Agreement.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the day and year 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

                                       9

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