<PAGE>

                                                                    EXHIBIT 10.6

                        SEVERANCE AGREEMENT AND RELEASE

      This Severance Agreement and Release (this "Agreement") is made as of the
24th day of NOVEMBER, 2004, by and among GTECH HOLDINGS CORPORATION
("Holdings"), GTECH Corporation ("GTECH Corporation" and together with Holdings
and their respective direct and indirect subsidiaries and affiliates,
collectively, "GTECH" or the "Company") and KATHLEEN MCKEOUGH ("Ms. McKeough",
and together with GTECH, sometimes referred to collectively as the "Parties").

                                   WITNESSETH:

      WHEREAS, Ms. McKeough has been employed by GTECH since May 2000 as its
Senior Vice President of Human Resources; and

      WHEREAS, GTECH has sought for its own convenience that Ms. McKeough and
GTECH sever their relationship and Ms. McKeough has sought to sever her
relationship as an employee and officer of GTECH; and

      WHEREAS, the parties entered into a Separation Agreement dated June 28,
2000 (the "Separation Agreement") detailing the rights and obligations of the
parties upon Ms. McKeough's separation from employment with GTECH; and

      WHEREAS, the parties wish to set forth their agreement respecting the
terms and conditions thereof.

      NOW, THEREFORE, the parties hereby agree as follows:

      1. TERMINATION OF EMPLOYMENT. It is hereby agreed that: (a) Ms. McKeough's
employment terminates effective December 31, 2004 (the "Termination Date"), and
(b) as of the Termination Date, Ms. McKeough shall no longer serve as: (i) an
employee of Holdings; (ii) an employee of GTECH Corporation; or (iii) an
employee or director of any direct or indirect subsidiary or other affiliate of
GTECH. Notwithstanding the foregoing, except as GTECH may otherwise request, Ms.
McKeough will not be required to report to GTECH's offices after December 3,
2004. Additionally, Ms. McKeough shall cease to be an officer of GTECH
(including any direct or indirect subsidiary or other affiliate of GTECH)
effective on November 30, 2004.

      2. CONTINUATION OF BASE SALARY. (a) For the period commencing January 1,
2005 through December 31, 2005 (the "Post-Termination Period"), GTECH shall
continue to pay Ms. McKeough her base salary as of the Termination Date
(annualized at $280,000.00), subject to all applicable deductions and otherwise
in accordance with GTECH's normal payroll practices. In the event of Ms.
McKeough's death, any remaining severance payments to which she would have been
entitled under this Agreement will be made to her estate.

      (b) These payments and the other benefits provided for in this Agreement
constitute the entire obligation of GTECH, represent full and complete
satisfaction by GTECH of all obligations under the Separation Agreement, and
constitute full and complete settlement of any

<PAGE>

claim under law or equity that Ms. McKeough might otherwise assert against GTECH
for compensation, benefits or remuneration of any form.

      3. BENEFITS. From and after the Termination Date, Ms. McKeough shall not
be eligible for any GTECH benefits or perquisites (including, without
limitation, any management incentive bonus with respect to GTECH's 2005 fiscal
year), and shall no longer be eligible to participate in any GTECH benefit
program or plan, except as expressly set forth below:

      (a) During the Post-Termination Period, or until Ms. McKeough's earlier
death, and subject to payment by Ms. McKeough of the employee contribution
portion of the applicable monthly benefits cost, GTECH shall continue to provide
Ms. McKeough with the life insurance coverage, and the medical, dental and
vision coverage, and accidental death and dismemberment insurance, available
under Company plans.

      (b) Commencing on January 1, 2006, GTECH will respect Ms. McKeough's
rights, if any, to continued coverage at her own expense under the Consolidated
Omnibus Budget Reconciliation Act ("COBRA") through June 30, 2007.

      (c) Commencing on January 1, 2006 (or if Ms. McKeough shall have elected
to continue coverage at her own expense under COBRA, upon the termination of the
period of such COBRA coverage), GTECH shall permit Ms. McKeough to participate
in GTECH's Retiree Benefits Plan at her own expense.

      (d) On or before January 15, 2005, GTECH shall pay to Ms. McKeough an
amount equal to the value, calculated in accordance with GTECH's standard
policy, of Ms. McKeough's accrued but unused vacation as of the Termination
Date.

      (e) GTECH shall pay, or reimburse Ms. McKeough, in accordance with GTECH's
standard policy for one executive physical examination provided that such
physical is performed prior to June 1, 2005.

      (f) Ms. McKeough and GTECH are parties to certain Restricted Stock
Agreements and Non-Qualified Stock Option Agreements that are described on
Exhibit A attached hereto and made a part hereof. The Restricted Stock
Agreements and the Non-Qualified Stock Option Agreements are collectively
referred to as the "Executive's Stock Related Agreements". The Parties hereby
agree that the Executive's Stock Related Agreements are amended with effect from
the date of this Agreement: (i) to provide for the immediate vesting of such
stock options, and shares of restricted stock, granted under the Executive's
Stock Related Agreements that are specifically identified on Exhibit A; and (ii)
to provide that all of Ms. McKeough's rights to exercise options to acquire
stock under the Executive's Stock Related Agreements shall expire on June 30,
2005. The Parties hereby agree that Exhibit A fully and accurately sets forth
with respect to the Executive's Stock-Related Agreements, as amended hereby: (A)
with respect to the options, the grant date, the number of options granted, the
grant price and the number of options for which vesting is accelerated as of the
Termination Date; and (B) with respect to the restricted stock, the award date,
the number of shares awarded, the number of shares forfeited under plan rules
and the number of shares for which vesting has been accelerated as of the
Termination Date. Except as expressly provided herein, nothing in this Agreement
is intended to amend or alter the Executive's Stock Related Agreements, which
remain in full force and effect

                                      -2-
<PAGE>

in accordance with their terms (including, without limitation, the restrictions
on the transfer of shares contained therein).

      (g) On or before May 1, 2005, GTECH shall pay to Ms. McKeough $55,000, in
accordance with GTECH's Executive Perquisites Program.

      4. CONTINUING OBLIGATIONS. Ms. McKeough further covenants with GTECH as
follows:

      (a) For a period of three years after the Termination Date, Ms. McKeough,
upon reasonable notice, shall furnish such information and proper assistance to
GTECH as may reasonably be required in connection with any third party claims,
investigations, litigation or similar proceedings which may involve GTECH with
respect to the period of Ms. McKeough's employment with GTECH. GTECH shall
reimburse Ms. McKeough for all reasonable expenses including, but not limited
to, travel costs associated with fulfilling her duty of cooperation under this
Section 4(a).

      (b) Ms. McKeough shall not knowingly use for her own benefit or disclose
or reveal to any unauthorized person any trade secret or other confidential
information relating to GTECH, including, without limitation, any customer
lists, customer needs, price and performance information, processes,
specifications, hardware, software, firmware, programs, devices, supply sources
and characteristics, business opportunities, marketing, promotional, pricing and
financing techniques, or other information relating to the business of GTECH,
provided that such restriction shall not apply to information which is (i)
proven to be generally available in the industry, (ii) disclosed in published
literature, (iii) obtained by Ms. McKeough after the Termination Date from a
third party without binder of secrecy, or (iv) required to be disclosed by Ms.
McKeough by court order or other process of law, provided however, that Ms.
McKeough shall to the extent the circumstances allow, provide GTECH with prior
written notice of any such requirement and with the opportunity to assist in
opposing such court order or other process of law. Ms. McKeough agrees that,
except as otherwise agreed by GTECH, she will return to GTECH, promptly upon
request, any physical embodiment of such confidential information.

      (c) All rights, title and interest in and to any ideas, inventions,
technology, processes, know-how, works, hardware, software, firmware, programs,
devices, trade secrets, trade names, trademarks or service marks, which Ms.
McKeough may have conceived, created, organized, prepared or produced during the
period of her employment with GTECH and which relate to the business of GTECH,
and all rights, title and interest in and to any patents, patent applications,
copyright registrations and copyright applications resulting therefrom, are
owned by GTECH, and Ms. McKeough agrees to execute instruments or documents,
provide evidence and testimony, and to otherwise assist GTECH in establishing,
enforcing and maintaining such rights, title and interest of GTECH.

      5. INDEMNIFICATION. During the Post-Termination Period and thereafter,
GTECH shall indemnify, defend, and hold harmless Ms. McKeough from and against
all suits, claims, demands, charges, judgments, costs and liabilities, including
reasonable attorneys fees, arising from or relating to her being an employee or
officer of GTECH to the same extent and in the same manner as other officers of
GTECH.

                                      -3-
<PAGE>

      6. RELEASE. Ms. McKeough acknowledges that the payments and benefits
provided for in Sections 2 and 3 of this Agreement are greater than any to which
she may have otherwise been entitled under the Separation Agreement or any
existing Company separation, benefit or compensation policy. In consideration of
the foregoing, Ms. McKeough hereby releases and forever discharges GTECH, its
present and former directors, officers, employees, agents, subsidiaries,
shareholders, successors and assigns from any and all liabilities, causes of
action, debts, claims and demands (including without limitation claims and
demands for monetary payment) both in law and in equity, known or unknown, fixed
or contingent, which she may have or claim to have based upon or in any way
related to employment (as an officer, director or employee), or termination of
such employment by GTECH and Ms. McKeough hereby covenants not to file a lawsuit
or charge to assert any such claim; provided, however, that this release shall
not be construed to apply to claims of breach of this Agreement or to enforce
this Agreement. This release includes but is not limited to claims of breach of
contract and wrongful termination and claims arising under the federal Age
Discrimination in Employment Act of 1967, as amended, and any other federal,
state or local law prohibiting employment discrimination, or claims growing out
of any legal restrictions on GTECH's right to terminate its employees.

      7. ADVICE OF COUNSEL. Ms. McKeough understands that various state and
federal laws prohibit employment discrimination based on age, sex, race, color,
national origin, religion, disability or veteran status. These laws are enforced
through the Equal Employment Opportunity Commission (EEOC), Department of Labor
and state human rights agencies. Ms. McKeough acknowledges that she has been
advised by GTECH to discuss this Agreement with her attorney and has been
encouraged to take this Agreement home for up to forty-five days so that she can
thoroughly review and understand the effect of this Agreement before acting on
it.

      8. NON-COMPETITION AND OTHER RESTRICTIONS. Ms. McKeough further covenants
with GTECH as follows and expressly agrees that all payments and benefits due to
her under this Agreement are subject to her compliance with the following
provisions.

      (a) During the Post-Termination Period, Ms. McKeough shall not engage or
propose to engage, directly or indirectly (which includes owning, managing,
operating, controlling, being employed by, acting as a consultant to, giving
financial assistance to, participating in or being connected in any material way
with any business or person so engaged) in the Lottery and Gaming Business (as
defined below). As used herein, the "Lottery and Gaming Business" shall mean the
provision of products or services of every nature relating to the operation of
all manner of lotteries, games of chance and parimutuel wagering however and
wherever conducted. Ms. McKeough shall not be deemed to have violated this
Section 7(a) merely by virtue of employment by a non-competitive division or
subsidiary of a business entity or consolidated group that includes one or more
divisions or subsidiaries that does in fact compete with a business carried on
by GTECH. Ms. McKeough's ownership as a passive investor of less than one
percent of the issued and outstanding stock or equity, or $100,000 principal
amount of any debt securities, of any corporation, partnership or other entity
engaged in the Lottery and Gaming Business shall not by itself by deemed to
constitute engagement by Ms. McKeough.

      (b) Further, during the Post-Termination Period, Ms. McKeough shall not
(i) disturb or interfere with any business relationship between GTECH and any of
its employees, dealers,

                                      -4-
<PAGE>

customers, suppliers or other business associates, or (ii) solicit or cause to
be solicited any officer, employee, customer or shareholder of GTECH to
terminate such person's relationship with GTECH; provided, however, that this
Section 8(b) shall not be construed to prevent Ms. McKeough from being engaged
as a human resources or general business consultant (x) by any of GTECH's
dealers or suppliers, or (y) without the prior written consent of GTECH (which
consent shall not be unreasonably withheld or delayed), by any of GTECH's
employees, customers, suppliers or other business associates.

      (c) Ms. McKeough shall at no time make or cause to be made any derogatory
or disparaging comments regarding GTECH, its business, or its present or past
directors, officers or employees. Ms. McKeough agrees to direct all reference
inquiries to GTECH's Human Resources Department, who will respond to such
inquiries by providing Ms. McKeough's dates of employment, and position held.

      (d) Ms. McKeough recognizes that the possible restrictions on Ms.
McKeough's activities which may occur as a result of her performance of her
obligations under this Section 7 and Section 4 are required for the reasonable
protection of GTECH and its investments, and Ms. McKeough expressly acknowledges
that such restrictions are fair and reasonable for that purpose. Ms. McKeough
further expressly acknowledges that damages alone will be an inadequate remedy
for any breach or violation of any of the provisions of this Section 7 and
Section 4, and that GTECH, in addition to all other remedies hereunder and at
law or equity, shall be entitled, as a matter of right, to injunctive relief,
including specific performance, with respect to any such breach or violation, in
any court of competent jurisdiction. If any of the provisions of this Section 7
are held to be in any respect an unreasonable restriction upon Ms. McKeough then
they shall be deemed to extend only over the maximum period of time, geographic
area, and/or range of activities as to which they may be enforceable.

      9. CHANGE OF ADDRESS. Ms. McKeough agrees to promptly notify GTECH of any
change in address, and/or non-Company employment or business activity occurring
within twelve (12) months of the Termination Date. Such notice shall include the
name and address of each such employer or business associated as well as the
nature of each such non-Company employment or business activity.

      10. RETURN OF PROPERTY. Ms. McKeough shall return to GTECH any GTECH
property in her possession, custody or control within seven days of the
Termination Date.

      11. TAX WITHHOLDING. GTECH may withhold from any compensation or benefits
payable under this agreement all Federal, State, City, or other taxes as shall
be required pursuant to any law or governmental regulations or ruling.

      12. NO ADMISSION. The execution of this Agreement does not represent and
shall not be construed as an admission of a violation of any statute or law or
breach of any duty or obligation by either GTECH or Ms. McKeough.

      13. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid and
unenforceable provisions were omitted.

                                      -5-
<PAGE>

      14. NON-ASSIGNABILITY. (a) Neither this Agreement nor any rights or
interest hereunder shall be assignable by Ms. McKeough, her beneficiaries, or
legal representatives without GTECH's prior written consent.

      (b) This Agreement shall be binding upon, and accrue to the benefit of,
Ms. McKeough and GTECH and their respective heirs, executors, administrator,
successors and permitted assigns, including, in the case of GTECH, any person or
entity acquiring all or substantially all of GTECH's assets.

      15. GOVERNING LAW. This Agreement is made pursuant to and shall be
governed by the laws of the State of Rhode Island, without regard to its rules
regarding conflict of laws. In any dispute concerning this Agreement, the
non-prevailing party shall pay the prevailing party's reasonable attorney's fees
and costs, together with interest on any unpaid amount due at the rate of twelve
percent per annum (but not in excess of the highest rate allowed by law).

      16. ENTIRE AGREEMENT. This Agreement, together with the Executive's Stock
Related Agreements, contains the entire understanding between Ms. McKeough and
GTECH regarding the subject matter hereof and, except as expressly set forth
herein, supersedes any prior agreements, written or oral, including without
limitation, the Separation Agreement.

      17. CONFIDENTIALITY. This Agreement is confidential and neither the
Agreement nor any of its terms or contents shall be made public by Ms. McKeough
or otherwise disclosed by her to any person other than her immediate family,
attorney, tax advisor or accountant, except as required by law or if necessary
to enforce this Agreement. GTECH shall treat the terms and contents contained
herein as confidential and shall only disclose them (i) to its employees,
advisors and other individuals who have a business purpose for receiving such
information, or (ii) as required by law as determined in GTECH's discretion, or
(iii) if necessary to enforce this Agreement.

      18. MODIFICATION. This Agreement may not be changed orally but only by an
instrument in writing signed by the parties hereto. Ms. McKeough acknowledges
that she has not relied upon any representation or statement, written or oral,
not set forth in this Agreement.

            [The remainder of this page is left blank intentionally.]

                                      -6-
<PAGE>

      19. REVOCATION; EFFECTIVE DATE. Ms. McKeough may revoke her agreement to
the terms hereof at any time during the seven-day period immediately following
the date of her signature below ("Revocation Period") by delivering written
notice of her revocation to GTECH. This Agreement shall become effective upon
the expiration of the Revocation Period.

      IN WITNESS WHEREOF, the parties have executed this Agreement on the date
set forth below.

GTECH Holdings Corporation                  Attest:

By: /s/                                    /s/
   ------------------------------------    ------------------------------------

Date:
      ---------------------------------

GTECH Corporation                           Attest:

By:  /s/                                   /s/
   ------------------------------------    ------------------------------------

Date:
      ---------------------------------

                                            Witness:
/s/                                        /s/
---------------------------------------    ------------------------------------
Kathleen McKeough

Date:
     ---------------------------------

                                      -7-
<PAGE>

                                    EXHIBIT A

LIST OF EXECUTIVE'S STOCK RELATED AGREEMENTS

      A. RESTRICTED STOCK AGREEMENTS

            1.    GTECH Holdings Corporation Restricted Stock Agreement
                  effective as of April 1, 2003 by and between GTECH Holdings
                  Corporation and Kathleen E. McKeough to acquire 10,000 shares
                  of Common Stock, pre stock split adjustment.

            2.    GTECH Holdings Corporation Restricted Stock Agreement
                  effective as of April 13, 2001 by and between GTECH Holdings
                  Corporation and Kathleen E. McKeough to acquire 5,000 shares
                  of Common Stock, pre stock split adjustment.

      B. NON-QUALIFIED STOCK OPTION AGREEMENTS

            1.    GTECH Holdings Non-Qualified Stock Option Agreement effective
                  as of April 1, 2003 by and between GTECH Holdings Corporation
                  and Kathleen E. McKeough for an option to acquire 30,000
                  shares of Common Stock at a grant price of $16.70 per share,
                  adjusted for stock split.

            2.    GTECH Holdings Non-Qualified Stock Option Agreement effective
                  as of April 3, 2002 by and between GTECH Holdings Corporation
                  and Kathleen E. McKeough for an option to acquire 30,000
                  shares of Common Stock at a grant price of $11.65 per share,
                  adjusted for stock split.

            3.    GTECH Holdings Non-Qualified Stock Option Agreement effective
                  as of April 4, 2001 by and between GTECH Holdings Corporation
                  and Kathleen E. McKeough for an option to acquire 26,000
                  shares of Common Stock at a grant price of $6.70 per share,
                  adjusted for stock split, of which 17,500 shares, adjusted for
                  stock split.

OPTIONS

<TABLE>
<CAPTION>
Date of Grant      No. of Options     Grant Price        Plan
-------------      --------------     -----------      ---------
<S>                <C>                <C>              <C>
April 4, 2001          17,500          $    6.70       2000 OSOP
April 3, 2002          20,000          $   11.65       2000 OSOP
April 1, 2003          10,000          $   16.70       2002 OSOP
</TABLE>

RESTRICTED STOCK

<TABLE>
<CAPTION>
Date of Award       No. of Shares        Plan
-------------       -------------        ----
<S>                 <C>                <C>
April 13, 2001          3,500          2000 OSOP
April 1, 2003           3,500          2002 OSOP
</TABLE>