Dover Downs Gaming & Entertainment DEF 14A Definitive proxy

Dover Downs Gaming & Entertainment Inactive DEF 14ADefinitive proxy

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

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Dover Downs Gaming & Entertainment, Inc.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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DOVER DOWNS GAMING & ENTERTAINMENT, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 2003

TO THE HOLDERS OF COMMON STOCK AND CLASS A COMMON STOCK:

PLEASE TAKE NOTICE that the 2003 Annual Meeting of Stockholders of DOVER DOWNS GAMING & ENTERTAINMENT, INC., a Delaware corporation, will be held at the Dover Downs Hotel and Conference Center, 1131 North DuPont Highway, Dover, Delaware, on Wednesday, April 23, 2003, at 11:45 A.M. for the following purposes:

1.: To elect three Class I Directors to the Board of Directors;
2.: To consider and act upon such other business as may properly come before the Annual Meeting or any adjournment thereof.

The Proxy Statement dated March 27, 2003 is attached.

The Board of Directors has fixed the close of business on March 24, 2003 as the record date for the determination of stockholders entitled to notice of and to vote at the meeting.

You are cordially invited to attend the Annual Meeting. If you cannot be present in person, please sign and date the enclosed proxy and promptly mail it in the enclosed return envelope which requires no United States postage. Any stockholder giving a proxy has the right to revoke it any time before it is voted. If you hold your stock in a broker or bank "street" account and wish to vote your shares in person at the meeting, you must obtain the appropriate documentation from your broker or bank custodian (the record holder).

			BY ORDER OF THE BOARD OF DIRECTORS KLAUS M. BELOHOUBEK, Senior Vice President-General Counsel and Secretary
Dated:	Dover, Delaware March 27, 2003

YOU ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO UNITED STATES POSTAGE.

PROXY STATEMENT

DOVER DOWNS GAMING & ENTERTAINMENT, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 2003

The information concerning the enclosed proxy and the matters to be acted upon at the Annual Meeting of Stockholders to be held on April 23, 2003 (the "Annual Meeting") is submitted to the stockholders for their information.

SOLICITATION OF AND POWER TO REVOKE PROXY

This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors of DOVER DOWNS GAMING & ENTERTAINMENT, INC., a Delaware corporation (the "Company"). Proxies solicited hereby are to be voted at the Annual Meeting or at any adjournment thereof.

The mailing address for the Company's principal executive office is 1131 North DuPont Highway, Route 13, Dover, Delaware 19901. This Proxy Statement and the form of proxy were first sent to the Company's stockholders on or about March 27, 2003.

A form of proxy is enclosed. Each proxy submitted will be voted as directed but, if not otherwise specified, proxies solicited by the Board of Directors of the Company will be voted in favor of the candidates for election to the Board of Directors as Class I Directors.

The solicitation of proxies will be by mail. It may be that further solicitation of proxies will be made by telephone, telegram or interview with some stockholders of the Company, following the original solicitation. All such further solicitations will be made by regular officers and employees of the Company, who will not be additionally compensated therefor, or its Transfer Agent. The Company will bear the entire cost of all such solicitations, which will be nominal and include reimbursements paid to brokerage firms and others for their expenses in forwarding solicitation material regarding the meeting to beneficial owners.

Each stockholder has the right to revoke his or her proxy at any time before it is voted. A proxy may be revoked by filing with the General Counsel of the Company a written revocation or a duly executed proxy bearing a later date or by voting in person at the Annual Meeting. Any stockholder may attend the Annual Meeting and vote in person, whether or not such stockholder has previously given a proxy. If you hold your stock in a broker or bank "street" account and wish to vote your shares in person at the meeting, you must obtain the appropriate documentation from your broker or bank custodian (the record holder).

CAPITAL STOCK

The outstanding capital stock of the Company on March 1, 2003 consisted of 10,413,012 shares of Common Stock, par value $.10 per share (the "Common Stock"), and 16,145,059 shares of Class A Common Stock, par value $.10 per share (the "Class A Common Stock"). Shares of Class A Common Stock are convertible at any time into shares of Common Stock on a share-for-share basis at the option of the holder thereof.

Voting Rights in General. Each holder of Common Stock is entitled to one vote for each share of Common Stock held and each holder of Class A Common Stock is entitled to ten votes for each share of Class A Common Stock held, except to the extent that voting by class is required by law. At a meeting of stockholders at which a quorum is present, a majority of the votes cast decides all questions, unless the matter is one upon which a different vote is required by express provision of law or the Company's Certificate of Incorporation or By-laws. Under the General Corporation Law of the State of Delaware, holders of Common Stock and Class A Common Stock are entitled to vote as a class with respect to certain matters, including mergers and amendments to the Certificate of Incorporation of the Company which would have certain specified effects on the rights of holders of Common Stock and Class A Common Stock, respectively.

Quorum. A majority of the outstanding shares, present in person or by proxy, will constitute a quorum at the Annual Meeting. Abstentions and broker non-votes are counted for purposes of determining the presence or absence of a quorum for the transaction of business. Broker non-votes occur when a broker or other nominee does not vote on a particular proposal because it does not have discretionary voting authority for that proposal and has not received voting instructions from the beneficial owner.

Vote Required. The election of the nominees named herein as directors will require a plurality of the votes cast by the shares entitled to vote in the election (i.e., the nominees receiving the greatest number of votes will be elected). Accordingly, abstentions and broker non-votes will not affect the outcome of the election of directors. There is no class voting or cumulative voting with respect to the election of directors.

STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

As of March 1, 2003, the persons listed below were known to the Company to own beneficially more than five percent (5%) of the outstanding shares of the Common Stock or Class A Common Stock. The name and address of each such person, together with the number of shares owned and the percentage of outstanding shares that ownership represents, and information as to Common Stock and Class A Common Stock ownership of (i) each director, or nominee for director, of the Company, (ii) the Named Executives identified in the Summary Compensation Table, and (iii) the officers and

directors of the Company as a group, in each case according to information received by the Company, are set forth below.

	Number of Shares and Nature of Beneficial Ownership by Class⁽¹⁾				Percentage Beneficially Owned by Class
					Percentage Beneficially Owned by Class				Percentage of Combined Voting Power of Both Classes
Names and Addresses of Beneficial Owners	Common Stock		Class A Common Stock		Common Stock		Class A Common Stock		Percentage of Combined Voting Power of Both Classes
Estate of John W. Rollins P.O. Box 26557 Austin, TX 78755	200,000		7,018,372	⁽²⁾	1.9	%	43.5	%	41.0	%
Henry B. Tippie P.O. Box 26557 Austin, TX 78755	—		2,000,000	⁽²⁾⁽³⁾	—		12.4	%	11.6	%
R. Randall Rollins 2170 Piedmont Street, NE Atlanta, GA 30301	—		1,421,000		—		8.8	%	8.3	%
Gary W. Rollins 2170 Piedmont Street, NE Atlanta, GA 30301	—		1,421,000		—		8.8	%	8.3	%
Eugene W. Weaver 570 Winturford Drive West Chester, PA 19382	84,850	⁽⁴⁾	800,000	⁽⁴⁾	0.8	%	5.0	%	4.7	%
Jeffrey W. Rollins P.O. Box 10767 Wilmington, DE 19850	38,650	⁽⁵⁾	827,782		0.4	%	5.1	%	4.8	%
Melvin L. Joseph RD 7, Box 218 Georgetown, DE 19947	14,000		602,000		0.1	%	3.7	%	3.5	%
Denis McGlynn 1131 North DuPont Highway Dover, DE 19901	140		531,900	⁽⁶⁾	—		3.3	%	3.1	%
John W. Rollins, Jr. 2200 Concord Pike, 14^th Floor Wilmington, DE 19803	135,030	⁽⁷⁾	137,900		1.3	%	0.9	%	0.9	%
Patrick J. Bagley 1131 N. DuPont Highway Dover, DE 19901	700		—		—		—		—
Kenneth K. Chalmers 233 South Wacker Drive Sears Tower, Suite 9650 Chicago, IL 60606	1,000	⁽⁸⁾	—		—		—		—
Klaus M. Belohoubek 3505 Silverside Road Plaza Centre Bldg., Suite 203 Wilmington, DE 19810	3,150		—		—		—		—
Edward J. Sutor 1131 North DuPont Highway Dover, DE 19901	3,150		—		—		—		—

Timothy R. Horne 1131 North DuPont Highway Dover, DE 19901	350	—	—		—		—
Merrill Lynch Investment Managers 250 Vesey Street World Financial Center, North Tower New York, NY 10381	1,060,646	—	10.2	%	—		0.6	%
Gabelli Asset Management, Inc. One Corporate Center Rye, NY 10580	753,300	—	7.2	%	—		0.4	%
Barclays Global Investors, N.A. 45 Fremont Street San Francisco, CA 94105	814,793	—	7.8	%	—		0.5	%
Loomis Sayles & Co., L.P. One Financial Center Boston, MA 02111	572,490	—	5.5	%	—		0.3	%
All Directors and Officers as a Group (12 persons)	210,170	5,520,582	2.0	%	34.2	%	32.2	%

(1): As to officers and directors, shares owned directly and of record are reflected in the table and other holdings are noted by footnote. Class A Common Stock is convertible, at any time, on a share-for-share basis into Common Stock at the option of the holder thereof. As a result, pursuant to Rule 13d of the Securities Exchange Act of 1934, a stockholder is deemed to have beneficial ownership of the shares of Common Stock which such stockholder may acquire upon conversion of Class A Common Stock. In order to avoid overstatement, the amount of Common Stock beneficially owned does not take into account such shares of Common Stock which may be acquired upon conversion of Class A Common Stock (an amount which is equal to the number of shares of Class A Common Stock held by a stockholder). The above numbers exclude the following shares of Common Stock subject to options granted under the Company's 2002 Stock Option Plan (the "Plan") which the listed beneficial owner has the right to acquire beneficial ownership as specified in Rule 13d of the Securities Exchange Act of 1934: Denis McGlynn, 50,184 shares; Edward J. Sutor, 26,254 shares; Timothy R. Horne, 28,780 shares; Klaus M. Belohoubek, 17,040 shares; Melvin Joseph, 7,000 shares; and all directors and officers as a group, 129,258 shares.
(2): Henry B. Tippie is the executor of the Estate of John W. Rollins, Sr. His individual holdings are listed separately from the holdings of the Estate.
(3): Does not include 105,000 shares of Common Stock and 100,000 shares of Class A Common Stock held by his wife and 25,000 shares of Common Stock held as Co-Trustee, as to which Mr. Tippie disclaims any beneficial interest.
(4): Does not include 17,000 shares of Common Stock and 60,000 shares of Class A Common Stock held by his wife and 17,220 shares of Common Stock held as Trustee, as to which Mr. Weaver disclaims any beneficial interest, and 420,000 shares of Class A Common Stock owned by a partnership over which Mr. Weaver has sole voting power, as to which Mr. Weaver disclaims beneficial interest in 76.14% of the partnership, and 100,000 shares of Common Stock owned by a limited liability corporation over which Mr. Weaver has sole voting and investment power.
(5): Does not include 15,295 shares of Common Stock owned by a limited liability corporation over which Mr. Rollins has sole voting and investment power.

(6): Does not include 36,400 shares of Class A Common Stock held by his wife, as to which Mr. McGlynn disclaims any beneficial interest.
(7): Does not include 630 shares of Common Stock held by his wife.
(8): Does not include 1,400 shares of Common Stock held by his wife, as to which Mr. Chalmers disclaims any beneficial interest.

ELECTION OF DIRECTORS

Three individuals are to be elected at the Annual Meeting to serve as Class I Directors for a term of three years, and until the election and qualification of their successors. Five other individuals serve as directors but are not standing for re-election because their terms as directors extend past the Annual Meeting pursuant to provisions of the Company's Certificate of Incorporation which provide for the election of directors for staggered terms, with each director serving a three year term.

The Company has eight members and one vacancy on its Board of Directors. There is a position for a Class II Director which will remain vacant. The Board of Directors believes that it is in the best interests of the Company and its stockholders to keep this vacancy on the Board so that the Board may, if the opportunity arises, appoint a candidate in the future without amending its Certificate of Incorporation. A majority of the members of the Board of Directors may appoint an individual to fill the vacancy.

Unless a stockholder WITHHOLDS AUTHORITY, the proxy holders will vote FOR the election of each of the nominees named below to a three year term as a director. Although the Board of Directors does not contemplate the possibility, in the event a nominee is not a candidate or is unable to serve as director at the time of the election, unless the stockholder WITHHOLDS AUTHORITY, the proxies will be voted for such nominee as is designated by the present Board of Directors to fill such vacancy.

The name and age of each director and each of the nominees, his principal occupation, and the period during which he has served as a director are set forth below.

Names of Nominees	Principal Occupation⁽¹⁾	Service as Director	Age
Class I (Term Expires 2006)
Henry B. Tippie	Chairman of the Board; Chairman of the Board and Chief Executive Officer, Tippie Services, Inc.; Chairman of the Board, Dover Motorsports, Inc.	2002 to date	76
R. Randall Rollins	Chairman of the Board, Rollins, Inc.; Chairman of the Board and Chief Executive Officer, RPC, Inc.	2002 to date	71
Patrick J. Bagley	Senior Vice President-Finance, Chief Financial Officer and Director, Dover Motorsports, Inc.; Former Vice President-Finance, Treasurer and Director, Rollins Truck Leasing Corp.	2002 to date	55
Names of Directors Whose Terms Have Not Expired
Class II (Term Expires 2004)
John W. Rollins, Jr.	Former President, Chief Executive Officer and Director, Rollins Truck Leasing Corp.	2002 to date	60
Melvin L. Joseph	Vice President and Director of Auto Racing, Dover International Speedway, Inc.; President, Melvin Joseph Construction Company	2002 to date	81
Class III (Term Expires 2005)
Denis McGlynn	President and Chief Executive Officer; President, Chief Executive Officer and Director, Dover Motorsports, Inc.	2002 to date	57
Jeffrey W. Rollins	Principal, Context Ventures Inc., LLC	2002 to date	38
Kenneth K. Chalmers	Former Executive Vice President of Bank of America	2002 to date	73

(l): Except as noted, the nominees and other directors have held the positions of responsibility set out in the above column (but not necessarily their present titles) for more than five years. In addition to the directorships listed in the above column, the following individuals also serve on the board of directors of the following companies: Henry B. Tippie, Rollins, Inc., RPC, Inc. and Marine Products Corporation; R. Randall Rollins, SunTrust Banks Inc., SunTrust Banks of Georgia, Marine Products Corporation and Dover Motorsports, Inc.; and Kenneth K. Chalmers, Safety-Kleen Corp. and Dover Motorsports, Inc. John W. Rollins, Jr., Melvin L. Joseph and Jeffrey W. Rollins also serve on the Board of Dover Motorsports, Inc. Jeffrey W. Rollins co-founded Context Ventures Inc., LLC, a firm that provides management and financial services, in 2001. He is also President of Label Dynamics, Inc., a manufacturer of labels, decals and product identification graphics which was acquired by Context Ventures in 2002. From 1997 to 2001 he was Vice President-Development for Brandywine Center Management, L.L.C., a real estate management company. Dover Motorsports, Inc. is a

promoter of motorsports events. This Company was spun-off from Dover Motorsports, Inc. on April 1, 2002. Dover International Speedway, Inc. is a wholly-owned subsidiary of Dover Motorsports, Inc. Rollins Truck Leasing Corp. was merged into a subsidiary of Penske Truck Leasing Co., L.P. in 2001 and was engaged in the business of truck leasing. Rollins, Inc. is a consumer services company engaged in residential and commercial termite and pest control. Safety-Kleen Corp. is engaged in the business of industrial waste disposal. RPC, Inc. is engaged in oil and gas field services. Marine Products Corporation is engaged in boat manufacturing. SunTrust Banks Inc. and SunTrust Banks of Georgia are both financial institutions. Tippie Services, Inc. provides management services. John W. Rollins, Jr. and Jeffrey W. Rollins are brothers. R. Randall Rollins is a cousin of John W. Rollins, Jr. and Jeffrey W. Rollins.

BOARD OF DIRECTORS AND BOARD COMMITTEES

The Board of Directors held six meetings during the year ended December 31, 2002. All meetings were attended by one hundred percent of the Board except for one meeting attended by eighty-nine percent of the Board.

Audit Committee. The Audit Committee consists of Kenneth K. Chalmers, Chairman, R. Randall Rollins and Jeffrey W. Rollins. The Audit Committee held three meetings during the year ended December 31, 2002. The Committee's functions are described under the caption "Report of the Audit Committee."

Executive Committee. The Executive Committee consists of Henry B. Tippie, Chairman, and Denis McGlynn. The Executive Committee held three meetings during the year ended December 31, 2002. The Executive Committee has the power to exercise all of the powers and authority of the Board of Directors in the management of the business and affairs of the Company in accordance with the provisions of the By-laws of the Company.

Compensation and Stock Option Committee. The Compensation and Stock Option Committee consists of Henry B. Tippie, Chairman, and R. Randall Rollins. The Compensation and Stock Option Committee held three meetings during the year ended December 31, 2002. The Committee establishes compensation and benefits for the Company's directors, officers and key employees and administers the Company's outstanding Stock Option Plan including the granting of options to various employees of the Company and its subsidiaries.

Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee consists of Henry B. Tippie and R. Randall Rollins. This Committee was formed on July 24, 2002 for the following purposes (a) to recommend to the Board of Directors nominees for director and in connection therewith to consider any nominations properly made by a stockholder; (b) upon request of the Board of Directors, to review and report to the Board of Directors with regard to matters of corporate governance; and (c) to make recommendations to the Board of Directors regarding the agenda for the Corporation's annual stockholder's meetings and with respect to appropriate action to be taken in response to any stockholder proposals. The Committee held its first meeting in January 2003. Procedures for a nomination by a stockholder are set forth in the Company's By-laws, which will be provided to any stockholder upon written request.

DIRECTORS' COMPENSATION

Directors who are not employees of the Company or any of its subsidiaries are each paid an annual retainer for Board service of $12,000, an attendance fee of $1,000 for each Board of Directors or committee meeting attended and are permitted to participate in the Company's health plans on the same basis as Company employees. In addition to the Board of Directors or committee meeting

attendance fees, the Chairman of the Board receives $3,000 per quarter and the Chairman of the Audit Committee receives $1,000 per quarter.

Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including this Proxy Statement, in whole or in part, the following reports and the Performance Graph on page 10 shall not be incorporated by reference into any such filings.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board of Directors is established pursuant to the Company's By-laws and the Audit Committee Charter adopted by the Board of Directors on January 2, 2002.

Management is responsible for the Company's internal controls and the financial reporting process. The Company's independent auditors are responsible for performing an independent audit of the Company's consolidated financial statements in accordance with auditing standards generally accepted in the United States of America and for issuing a report thereon. The Audit Committee's responsibility is generally to monitor and oversee these processes, as described in the Audit Committee Charter. It is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and in accordance with accounting principles generally accepted in the United States of America; these are the responsibility of the Company's independent public accountants and management, respectively.

Each member of the Audit Committee is independent in the judgment of the Company's Board of Directors and as required by the listing standards of the New York Stock Exchange.

In fulfilling its oversight responsibilities with respect to the year ended December 31, 2002, the Audit Committee:

•: Approved the terms of the engagement of KPMG LLP as independent auditors of the Company for the year ended December 31, 2002;
•: Reviewed and discussed with the Company's management and the independent auditors the audited consolidated financial statements of the Company as of December 31, 2002 and for the year then ended;
•: Discussed with the independent auditors the matters required to be discussed by American Institute of Certified Public Accountants Statement on Auditing Standards No. 61,Communications with Audit Committees; and
•: Received from the independent auditors written affirmation of their independence required by Independence Standards Board Standard No. 1,Independence Discussions with Audit Committee, and discussed with the auditors the firm's independence from the Company.

Based upon the review and discussions referred to above, the Committee recommended to the Board of Directors that the audited consolidated financial statements of the Company, as of December 31, 2002 and for the year then ended, be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002 for filing with the Securities and Exchange Commission. In giving this recommendation to the Board of Directors, the Audit Committee has relied in part on (i) management's representation that such consolidated financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the United States of America and (ii) the report of the Company's independent auditors with respect to such consolidated financial statements.

Audit Committee
Kenneth K. Chalmers, Chairman
R. Randall Rollins
Jeffrey W. Rollins

REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION

During the fiscal year ending December 31, 2002, the members of the Compensation and Stock Option Committee of the Board of Directors held primary responsibility for determining executive compensation levels.

The Company is engaged in a highly competitive industry. As a consequence, the Company views its ability to attract and retain qualified executives as the cornerstone of its future success. In order to accomplish this objective, the Company has endeavored to structure its executive compensation in a fashion that takes into account the Company's operating performance and the individual performance of the executive.

Of necessity, this analysis is subjective in nature and not based upon a structured formula. The factors referred to above are not weighted in an exact fashion.

Pursuant to the above compensation philosophy, the total annual compensation of executive officers of the Company is made up of one or more of three elements. The three elements are salary, an annual incentive and, in some years, grants of stock options.

The salary of each executive officer is determined by the Compensation and Stock Option Committee. As previously stated, in making its determinations the Committee gives consideration to the Company's operating performance for the prior fiscal year and the individual executive's performance.

The annual incentive compensation package for the executive officers is developed by the Chief Executive Officer (CEO) of the Company prior to the end of each fiscal year and presented to the Committee for review, modification or approval. The package is based upon a performance formula for the ensuing fiscal year but its payment is within the discretion of the Chief Executive Officer based on each individual officer's performance.

Awards under the Company's Stock Option Plan are purely discretionary, are not based upon any specific formula and may or may not be granted in any given fiscal year. Grants are made under the Plan and the Plan is administered pursuant to Rule 16b-3 of the Securities Exchange Act of 1934. When considering the grant of stock options, the Committee gives consideration to the overall performance of the Company and the performance of individual employees.

CEO COMPENSATION

The CEO's compensation is determined by the Compensation and Stock Option Committee. As is the case with respect to the executive officers, the CEO's compensation is based upon the Company's operating performance and his individual performance. The CEO's compensation consists of the same three elements identified above with respect to executive officers: salary, an annual incentive, and, in some years, grants of stock options. The determination of salary and the award of stock options, if any, are subjective and not based upon any specific formula or guidelines. The determination of an annual incentive depends on a favorable overall evaluation of the CEO's performance and is calculated as five percent of the year over year increase in the Company's pre-tax earnings less $125,000. The formula is revised annually. The CEO is not a member of the Committee and does not participate in the deliberations of the Committee when his salary or incentive is determined.

Compensation and Stock Option Committee
Henry B. Tippie—Chairman
R. Randall Rollins

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors and persons who own more than ten percent of a registered class of the Company's equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC"). Officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

Based on its review of the copies of such forms, the Company believes that during its fiscal year ended December 31, 2002, all filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with, except Robert M. Comollo was late with respect to one filing for two transactions for the sale of 1,400 shares of Common Stock.

COMMON STOCK PERFORMANCE

The following graph reflects a comparison of the cumulative total stockholder return on the Company's Common Stock with the Russell 2000 Index and an index of peer companies selected by the Company consisting of companies engaged in the gaming business. The peer group is comprised of the Company, MTR Gaming Group, Inc., Ameristar Casinos, Inc., Penn National Gaming, Inc., Churchill Downs, Inc., Argosy Gaming Company, Pinnacle Entertainment, Inc., and Magna Entertainment Corp. The graph assumes that the value of the investment in the Company's Common Stock and each index was 100 at April 1, 2002 (the date of this Company's spin-off from Dover Motorsports, Inc.) and all dividends were reinvested. The comparisons in this table are required by the Securities and Exchange Commission and, therefore, are not intended to forecast or be necessarily indicative of any future return on the Company's Common Stock.

TABLE

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The following non-employee directors serve on the Company's Compensation and Stock Option Committee: Henry B. Tippie, Chairman and R. Randall Rollins. Mr. Rollins replaced Patrick J. Bagley as a member of the Committee when Mr. Bagley resigned from the Committee during 2002.

EXECUTIVE COMPENSATION

Shown below is information concerning the annual compensation for services in all capacities to the Company for the fiscal year ended December 31, 2002 of those persons who were, at December 31, 2002, (i) the Chief Executive Officer and (ii) the other most highly compensated executive officers of the Company whose total annual salary exceeded $100,000 (the "Named Executives"):

SUMMARY COMPENSATION TABLE

							Long Term Compensation
		Annual Compensation					Awards		Payouts
Name and Principal Position	Fiscal Year	Salary $⁽¹⁾		Incentive $		Other Annual Comp.⁽²⁾ $	Restricted Stock Awards⁽³⁾ $	Stock Options /SARs #	LTIP Payouts $	All Other Compensation $
Denis McGlynn President and Chief Executive Officer	12/02	$	200,000		—	—	—	20,000	—	—
Edward J. Sutor Executive Vice President	12/02		190,000	$	5,730	—	—	18,000	—	—
Timothy R. Horne Senior Vice President—Finance and Chief Financial Officer	12/02		115,673		—	—	—	12,000	—	—
Klaus M. Belohoubek Senior Vice President—General Counsel and Secretary	12/02		132,000		—	—	—	15,000	—	—

(1): The Company was formed in connection with the spin-off of the gaming business from Dover Motorsports, Inc. on April 1, 2002. Salaries noted are for the period beginning January 1, 2002 and ending December 31, 2002. Denis McGlynn and Klaus M. Belohoubek hold similar positions with Dover Motorsports, Inc. and are separately compensated by that entity.
(2): The only type of Other Annual Compensation for each of the named officers was in the form of perquisites and was less than the level required for reporting.
(3): No awards have ever been made.

OPTION AND STOCK APPRECIATION RIGHTS GRANTS IN LAST FISCAL YEAR

The following table sets forth stock options granted in the fiscal year ending December 31, 2002 to each of the Company's Named Executives. Employees of the Company and its subsidiaries are eligible for stock option grants based on individual performance. The Company did not issue any stock appreciation rights. The table also sets forth the hypothetical gains that would exist for the options at the end of their eight-year terms, assuming compound rates of stock appreciation of 0%, 5% and 10%. The actual future value of the options will depend on the market value of the Company's Common Stock. All option exercise prices are based on the market price on the grant date.

	Individual Grants⁽¹⁾
						Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term($)⁽²⁾
		% of Total Options Granted To Employees in Fiscal Year
	Options Granted (#)			Exercise Price ($/Sh)	Expiration Date
Name	Options Granted (#)			Exercise Price ($/Sh)	Expiration Date	0%	5%		10%
Denis McGlynn	20,000	7.2	%	$11.95	5/01/10	—	$	114,112	$	273,318
Edward J. Sutor	18,000	6.5		11.95	5/01/10	—		102,701		245,986
Timothy R. Horne	12,000	4.3		11.95	5/01/10	—		68,467		163,991
Klaus M. Belohoubek	15,000	5.4		11.95	5/01/10	—		85,584		204,988
All employees as a group	277,000	100.0		11.95 and 13.31	5/01/10 and 5/12/10	—		1,593,436		3,816,556

(1): Options were granted on May 2, 2002 and May 13, 2002. All option exercise prices are based on the market price on the grant date. All options relate to shares of Common Stock, typically have an eight year term and vest in equal one-sixth increments on the first through the sixth year anniversaries of the date of grant.
(2): These amounts, based on assumed appreciation rates of 0% and the 5% and 10% prescribed by the Securities and Exchange Commission rules, are not intended to forecast possible future appreciation, if any, of the Company's stock price. These numbers do not take into account certain provisions of options providing for termination of the option following termination of employment, nontransferability or phased-in vesting.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES

The following table summarizes option exercises for the fiscal year ending December 31, 2002 by the Company's Named Executives, and the value of the options held by such persons as of December 31, 2002. The Company has not granted and does not have any Stock Appreciation Rights outstanding.

Name	Shares Acquired on Exercise (#)	Value Realized ($)	Number of Unexercised Options at FY-End (#) Exercisable/Unexercisable		Value of Unexercised In-the-Money Options at FY-End ($)⁽¹⁾ Exercisable/Unexercisable
Denis McGlynn	—	—	44,470	62,000	$	104,505	$	2,695
Edward J. Sutor	—	—	26,254	54,756		462		1,617
Timothy R. Horne	—	—	28,780	25,220		41,421		1,069
Klaus M. Belohoubek	—	—	14,470	44,630		192		385

(1): The value of the Company's Common Stock on December 31, 2002 was $9.09 per share.

LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR

There were no Long-Term Incentive Plan Awards to the Named Executives during the fiscal year ended December 31, 2002.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In conjunction with the Company's spin-off from Dover Motorsports, Inc. ("DVD"), the two companies entered into various agreements that address the allocation of assets and liabilities between the companies and that define the companies' relationship after the separation. These are the Agreement Regarding Distribution and Plan of Reorganization, the Real Property Agreement, the Employee Benefits Agreement, the Transition Support Services Agreement, and the Tax Sharing Agreement. The companies have several common directors and officers.

The Plan of Reorganization set forth the principal corporate transactions required to effect the spin-off and the allocation between the Company and DVD of certain assets and liabilities such that all assets and liabilities relating to the gaming business are owned and assumed by the Company or its subsidiaries, and all assets and liabilities relating to the motorsports business are owned and assumed by DVD or its subsidiaries.

The Real Property Agreement governs certain real property transfers, leases and easements affecting the Company's Dover, Delaware facility. The Employee Benefits Agreement provides for the transfer of Company employees from employee benefits under plans or programs sponsored by DVD to those sponsored by the Company. The Transition Support Services Agreement provides for each of the Company and DVD to provide each other with certain administrative and operational services and may be terminated by the party receiving the service or by the party providing the service after April 1, 2003. The Tax Sharing Agreement provides for the treatment of income tax matters for periods beginning before and including the date of the spin-off and any taxes resulting from transactions effected in connection with the spin-off.

During the year ended December 31, 2002 the Company allocated corporate costs of $495,000 to DVD for certain administrative and operational services. The allocation was based on both an allocation to the business that directly incurred the costs and an analysis of each company's share of the costs. The net costs incurred by each company for these services are not necessarily indicative of the costs that would have been incurred if the companies had been separate, independent entities and/or had otherwise independently managed these functions; however, management believes that these costs are reasonable.

During the third quarter of 2002, pursuant to the Tax Sharing Agreement, the Company paid DVD $2.7 million for its portion of DVD's consolidated federal income tax liability for 2002. Since the spin-off of the Company from DVD was effective on March 31, 2002, DVD's 2002 federal income tax return will include the operations of the Company for the first quarter of the year.

The Company's use of DVD's⁵/8-mile harness racing track is under an easement granted to the Company by DVD which does not require the payment of any rent. Under the terms of the easement the Company has exclusive use of the harness track during the period beginning November 1 of each year and ending April 30 of the following year, together with set up and tear down rights for the two weeks before and after such period. The harness track is located on property owned by DVD and is on the inside of DVD's motorsports superspeedway. The Company's indoor grandstands are used by DVD at no charge in connection with its motorsports events. Various easements and agreements relative to access, utilities and parking have also been entered into between DVD and the Company relative to the Company's Dover, Delaware facilities.

BENEFIT PLANS

Pension Plans

The Company's Pension Plan is a non-contributory qualified defined benefit plan. All full-time employees of the Company and its subsidiaries are eligible to participate in the Pension Plan. Up to September 30, 1989, retirement benefits were equal to the sum of from 1% to 1.8% of an employee's annual cash compensation for each year of service to age 65. Commencing October 1, 1989 and thereafter, retirement benefits are equal to the sum of 1.35% of earnings up to covered compensation, as that term is defined in the Plan, and 1.7% of earnings above covered compensation. Pensionable earnings includes regular salaries or wages, commissions, bonuses, overtime earnings and short-term disability income protection benefits.

Retirement benefits are not subject to any reduction for Social Security benefits or other offset amounts. An employee's benefits may be paid in certain alternative forms having actuarially equivalent

values. Retirement benefits are fully vested after the completion of five years of credited service or, if earlier, upon reaching age 55. The maximum annual benefit under a qualified pension plan is currently $160,000 beginning at the Social Security retirement age (currently age 65).

The Company maintains a non-qualified, defined benefit plan, called the Excess Benefit Plan, which covers those participants of the Pension Plan whose benefits are limited by the Internal Revenue Code. A participant in the Excess Benefit Plan is entitled to a benefit equaling the difference between the amount of the benefit payable without limitation and the amount of the benefit payable under the Pension Plan.

Annual pension benefit projections for the Named Executives assume: (a) that the participant remains in the service of the Company until age 65; (b) that the participant's earnings continue at the same rate as paid in the fiscal year ended December 31, 2002 during the remainder of his service until age 65; and (c) that the Plans continue without substantial modification.

The estimated annual benefit at retirement for each of the following Named Executives of the Company is: Denis McGlynn, $29,207; Edward J. Sutor, $44,662; Timothy R. Horne, $53,622; and Klaus M. Belohoubek, $49,235.

401(k) Retirement Plan

The Company has a deferred compensation plan pursuant to section 401(k) of the Internal Revenue Code for all its full time employees who have completed ninety (90) days of service. Covered employees may contribute up to 15% of their compensation for each calendar year. In addition, the Company contributes up to an additional 100% of the first $250 of compensation contributed by any covered employee to the plan. An employee's maximum annual contribution to the plan is $11,000. All contributions are funded currently.

AUDITORS

The Board of Directors has not selected or recommended the name of an independent public accounting firm for approval or ratification by the stockholders. The Board of Directors believes that it will be in the best interests of the stockholders if it is free to make such determination based upon all factors that are then relevant.

KPMG LLP served as the Company's auditors for the fiscal year ended December 31, 2002. A representative of KPMG LLP will be present at the Annual Meeting and will have the opportunity to make a statement should such representative so desire. Such representative also will be available to answer appropriate questions from stockholders.

During the fiscal year ended December 31, 2002, KPMG LLP's services rendered to the Company primarily consisted of auditing the Company's consolidated financial statements and performing quarterly reviews.

Audit Fees

Fees billed by KPMG LLP for the audit of the Company's consolidated financial statements for the fiscal year ended December 31, 2002 and review of its quarterly reports for that fiscal year were $98,500.

Financial Information Systems Design and Implementation Fees

KPMG LLP did not provide the Company with any professional services in connection with financial information systems design and implementation.

All Other Fees

Fees billed and to be billed by KPMG LLP for services rendered to the Company, other than the services described above under "Audit Fees," for the fiscal year ended December 31, 2002 were $27,500, of which $22,500 relates to tax consulting services and $5,000 relates to benefit plan audits.

The Audit Committee of the Board of Directors considered whether the provision of the services described above under "All Other Fees" was compatible with maintaining KPMG LLP's independence.

STOCKHOLDER PROPOSALS

Appropriate proposals of eligible stockholders (an eligible stockholder must be a record or beneficial owner of at least l% or $2,000 in market value of securities entitled to be voted at the meeting and have held such securities for at least one year) intended to be presented at the Company's next Annual Meeting of Stockholders must be received by the Company no later than December 27, 2003 for inclusion in the Proxy Statement and form of proxy relating to that meeting. Stockholders are also advised to review the Company's By-laws, which contain additional advance notice requirements, including requirements with respect to advance notice of stockholder proposals and director nominations.

MISCELLANEOUS

ON WRITTEN REQUEST OF ANY RECORD OR BENEFICIAL STOCKHOLDER OF THE COMPANY, THE COMPANY WILL PROVIDE, FREE OF CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002, WHICH INCLUDES THE CONSOLIDATED FINANCIAL STATEMENTS. REQUESTS FOR A COPY OF FORM 10-K SHOULD BE MADE IN WRITING AND ADDRESSED TO:

TIMOTHY R. HORNE
SENIOR VICE PRESIDENT—FINANCE AND CHIEF FINANCIAL OFFICER
DOVER DOWNS GAMING & ENTERTAINMENT, INC.
P. O. BOX 843
DOVER, DE 19903

THE COMPANY WILL CHARGE REASONABLE OUT-OF-POCKET EXPENSES FOR THE REPRODUCTION OF EXHIBITS TO FORM 10-K SHOULD A STOCKHOLDER REQUEST COPIES OF SUCH EXHIBITS.

The Company's Annual Report as of and for the fiscal year ended December 31, 2002 is being provided to stockholders with this proxy statement.

The Board of Directors knows of no business other than the matters set forth herein which will be presented at the meeting. Inasmuch as matters not known at this time may come before the meeting, the enclosed proxy confers discretionary authority with respect to such matters as may properly come before the meeting and it is the intention of the persons named in the proxy to vote in accordance with their judgment on such matters.

		BY ORDER OF THE BOARD OF DIRECTORS Klaus M. Belohoubek, Senior Vice President-General Counsel and Secretary
Dover, Delaware March 27, 2003

DOVER DOWNS GAMING & ENTERTAINMENT, INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS

WEDNESDAY, APRIL, 23, 2003, 11:45 A.M.

The undersigned hereby constitutes and appoints Henry B. Tippie and Denis McGlynn, and each of them jointly and severally, proxies with full power of substitution, to vote all shares of Common Stock and Class A Common Stock which the undersigned is entitled to vote at the Annual Meeting of Stockholders of the Company to be held on April, 23, 2003 at 11:45 A.M., Kent Room, Dover Downs Hotel and Conference Center, 1131 N. DuPont Highway, Dover, Delaware, or at any adjournment thereof, on all matters set forth in the Notice of Annual Meeting and Proxy Statement dated March 27, 2003, as follows:

(Mark only one box)

1.	ELECTION OF DIRECTORS
	Nominees: Henry B. Tippie, R. Randall Rollins, Patrick J. Bagley
	o	VOTE FOR all nominees listed above; except vote withheld from following nominee (if any):


	o	VOTE WITHHELD FROM all nominees.
2.	At their discretion, upon such matters as may properly come before the Annual Meeting or any adjournment thereof.

(OVER)

(CONTINUED FROM OTHER SIDE)

The undersigned acknowledges receipt of the aforesaid Notice of Annual Meeting and Proxy Statement, each dated March 27, 2003, grants authority to any of said proxies, or their substitutes, to act in the absence of others, with all the powers which the undersigned would possess if personally present at such meeting, and hereby ratifies and confirms all that said proxies, or their substitutes, may lawfully do in the undersigned's name, place and stead.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DOVER DOWNS GAMING & ENTERTAINMENT, INC. AND THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH YOUR INSTRUCTIONS. IF NO CHOICE IS SPECIFIED BY YOU, THIS PROXY WILL BE VOTED FOR PROPOSAL 1.

NO POSTAGE IS REQUIRED IF THIS PROXY IS RETURNED IN THE ENCLOSED ENVELOPE AND MAILED IN THE UNITED STATES

QuickLinks

SOLICITATION OF AND POWER TO REVOKE PROXY
CAPITAL STOCK
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ELECTION OF DIRECTORS
BOARD OF DIRECTORS AND BOARD COMMITTEES
DIRECTORS' COMPENSATION
REPORT OF THE AUDIT COMMITTEE
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
CEO COMPENSATION
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
COMMON STOCK PERFORMANCE
TABLE
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
OPTION AND STOCK APPRECIATION RIGHTS GRANTS IN LAST FISCAL YEAR
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BENEFIT PLANS
AUDITORS
STOCKHOLDER PROPOSALS
MISCELLANEOUS

Please sign below, date and return promptly.

Signature(s) of Stockholder(s)

Signature(s) should conform to name(s) and title(s) stenciled hereon. Executors, administrators, trustees, guardians and attorneys should add their title(s) on signing.