Senior Vice President of Human Resources Severance Agreement And Release - KATHLEEN MCKEOUGH

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


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


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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 ...