SEPARATION AGREEMENT AND RELEASE OF ALL CLAIMS

Exhibit 10.01

SEPARATION AGREEMENT AND RELEASE OF ALL CLAIMS

This Separation Agreement and Release of All Claims (“Agreement”) is entered into by and between Philip W. Milne (“Mr. Milne”) and MoneyGram International, Inc., a Delaware corporation, and its predecessors, successors, affiliates, subsidiaries and related companies (“MoneyGram”) as of June 18, 2008.

WHEREAS, MoneyGram employs Mr. Milne in the position of President and Chief Executive Officer and Mr. Milne also serves as the Chairman of the Board of Directors of MoneyGram;

WHEREAS, the parties have mutually agreed that Mr. Milne’s employment with MoneyGram and his position on its Board of Directors will terminate effective June 19, 2008 (the “Separation Date”);

WHEREAS, Mr. Milne is a participant in the MoneyGram International, Inc. Special Executive Severance Plan (Tier I) (the “Severance Plan”) and may be entitled to certain payments and benefits pursuant to the Severance Plan;

WHEREAS, MoneyGram and Mr. Milne are parties to an Amended and Restated Employment Agreement dated November 5, 2007 and effective July 1, 2005 (the “Employment Agreement”), which Employment Agreement provides for a two-year non-competition period following the termination of Mr. Milne’s employment;

WHEREAS, Mr. Milne may be entitled to certain payments and benefits pursuant to the Employment Agreement, which payments and benefits are to be applied to and set off against MoneyGram’s obligations under the Severance Plan;

WHEREAS, Mr. Milne and MoneyGram Payment Systems, Inc., including its parent companies, predecessors, successors, affiliates, and subsidiaries are parties to an Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement dated and effective April 14, 2006 (the “Post-Employment Restriction Agreement”);

WHEREAS, Mr. Milne and MoneyGram have agreed to amend and restate Mr. Milne’s obligations under the Post-Employment Restriction Agreement;

WHEREAS, Mr. Milne and MoneyGram have agreed upon the following payments, benefits, and other terms and conditions under which they will end their employment relationship and all other relationships and wish to resolve all actual and potential disputes between them.

NOW, THEREFORE, in consideration of the mutual promises, agreements, covenants, and provisions contained in this Agreement, the sufficiency of which is hereby acknowledged, MoneyGram and Mr. Milne agree as follows:

1. Termination of Employment. Mr. Milne’s employment with MoneyGram shall terminate effective as of the Separation Date. Effective as of that date, Mr. Milne hereby resigns from MoneyGram’s Board of Directors and from any other position he holds with MoneyGram and/or its parent, subsidiary, or affiliate companies.

2. Release of Claims by Mr. Milne. In consideration for the receipt of the payments and other benefits described in this Agreement, to which Mr. Milne understands and acknowledges he may not otherwise be entitled without executing this Agreement, Mr. Milne hereby releases and forever discharges MoneyGram, its parent companies, predecessors, successors, affiliates, subsidiaries, related companies, shareholders, and their respective members managers, partners, employees, officers, agents, and directors (individually a “Released Party” and collectively the “Released Parties”) from the following:

Mr. Milne acknowledges and agrees that this release extends to and includes any and all claims, known or unknown, asserted or unasserted, direct or indirect, which he has or may have by reason of any matter, fact or thing occurring up through the date of his signature on this Agreement. MoneyGram acknowledges and understands, however, that (1) Mr. Milne does not release any claims that the law does not allow to be waived by private agreement; (2) Except as otherwise provided in this Agreement, Mr. Milne does not release any claims that arise from events or actions occurring after the date on which Mr. Milne signs this Agreement; and (3) Mr. Milne does not release any claims to indemnification or insurance coverage (including but not limited to D&O coverage) that he may have with respect to any claims made or threatened against him in his capacity as an officer, director, or employee of MoneyGram.

3. Release of Claims by MoneyGram. Except as otherwise set forth in this Agreement, and with the exception of any suits, claims, counter-claims, actions, causes of action, rights, judgments, damages, costs, attorneys’ fees, losses, debts, setoffs or defenses arising from any criminal conduct by Mr. Milne, MoneyGram, its parent companies, predecessors, successors, affiliates, subsidiaries, and related companies hereby releases and forever discharges Mr. Milne from any and all suits, claims, counter-claims, actions, causes of action, rights, judgments, damages, costs, attorneys’ fees, losses, debts, setoffs or defenses to the extent known by the members of MoneyGram’s Board of Directors or its (a) EVP & Chief Operating Officer, (b) EVP & Chief Financial Officer, (c) EVP, General Counsel & Secretary, (d) EVP, Human Resources & Corporate Services, and (e) EVP & Chief Compliance Officer – Government Affairs (its “Senior Leadership Team”) as of the date on which MoneyGram signs this Agreement.

4. Payments and Benefits. In exchange for the release of claims in this Agreement and in further consideration for the post-employment restrictions set forth in Exhibit A to this Agreement, MoneyGram shall make the following payments and provide the following benefits to Mr. Milne:

4.2.1 the pro-rata Management and Line of Business Incentive Plan bonus severance payable under the Employment Agreement;

4.2.2 the accelerated vesting of any and all Performance Unit Incentive Plan awards provided for under the Employment Agreement;

4.2.3 MoneyGram’s obligation under the Employment Agreement to continue to maintain and pay the premiums with respect to Milne’s family medical and dental coverage from April 1, 2011 for the remainder of Milne’s and his spouse’s lifetimes (hereinafter, the “Lifetime Medical Obligation”); and

4.2.4 the accelerated vesting of any unvested stock options, restricted stock awards or other equity incentives.

Payment of Bonus Severance shall be made on the first day of the seventh month following the Separation Date; provided, however, that the portion of Bonus Severance representing payment in lieu of the Lifetime Medical Obligation shall be paid on January 2, 2009 to satisfy the requirements of section 409A of the Internal Revenue Code.

The parties acknowledge that the above payments and benefits may arise from obligations set forth in the Employment Agreement, the Severance Plan, or both. The parties agree that these payments and benefits satisfy any and all of MoneyGram’s obligations under the Employment Agreement and the Severance Plan. Mr. Milne shall have no right to any additional or further payments or benefits pursuant to the Employment Agreement, the Severance Plan, or otherwise, except as expressly set forth in Section 6 below.

In the event it should be determined that any of the payments made hereunder to Mr. Milne would be subject to an Excise Tax, then Mr. Milne shall be entitled to receive an additional payment (the “Gross-Up Payment”) in an amount such that, after payment by Mr. Milne of all taxes (and any interest and penalties imposed with respect thereto as a direct result of any Underpayment as determined under the Severance Plan or any other action or inaction of MoneyGram, but not any interest and penalties imposed as a direct result of Mr. Milne’s failure to timely remit taxes) and Excise Tax imposed upon the Gross-Up Payment, Mr. Milne will retain an amount of the Gross-Up Payment equal to the Excise Tax that his been imposed. The parties’ rights and obligations with respect to any Gross-Up Payment shall be determined pursuant to and conditioned upon compliance with the terms of Section 7 of the Severance Plan.

5. Payments and Benefits for Post-Employment Restriction Obligations. Mr. Milne and MoneyGram acknowledge and agree that a portion of the severance payable hereunder is attributable to Mr. Milne’s post-employment restriction obligations. Mr. Milne and MoneyGram further acknowledge and agree that certain of the consideration to be paid under this Agreement will be allocated to the value of those non-competition obligations. Mr. Milne and MoneyGram hereby agree that Ernst & Young LLP (“Ernst”) will act as the Accounting Firm for the purposes of determining and allocating that value. Mr. Milne and MoneyGram agree to cooperate fully with Ernst in its determination of that value, and to file any required tax returns or other documents reflecting the value as determined by Ernst which such cooperation includes, but is not limited to, being available to meet in person with Ernst personnel at Ernst’s and/or MoneyGram’s offices. If a tax authority determines that Mr. Milne has any additional tax liability or other obligations arising from or relating to such determination and/or allocation of value, MoneyGram agrees to defend, utilizing counsel of MoneyGram’s choosing, and fully indemnify Mr. Milne for and from such additional tax liability or other obligations.

6. Other Benefit Coverages after Separation Date. Mr. Milne’s other benefit coverages not addressed in section 3 above are affected as follows:

Mr. Milne’s other benefits, if any, will be paid in accordance with the provisions of the governing document(s) for those benefits.

7. No Change of Control. The parties acknowledge and agree that for all purposes, there has been no change of control of MoneyGram. Without limiting the generality of the foregoing, the parties specifically acknowledge and agree that there has been no “Change of Control” as defined in the Amended and Restated MoneyGram International, Inc. Executive Severance Plan (Tier I) or the SERP, and that Mr. Milne is not entitled to any payments or benefits under either of those Plans or any other payments, benefits, or rights that would arise as a result of any change of control (or change in control) now or at any time in the future. This section 7 is not intended to alter or affect and does not alter or affect (a) any determination as to whether any payments hereunder are subject to section 280G of the Internal Revenue Code; (b) any Gross-Up Payment and/or (c) the parties’ rights and obligations with respect to any Gross-Up Payment.

8. Claims Involving MoneyGram. Mr. Milne warrants that he has not instituted, filed or caused others to file or institute any charge, complaint or action against any Released Party. Mr. Milne warrants that, to the full extent permitted by law, he will not file or institute any charge, complaint or action against any Released Party with respect to any matters arising before or on the date Mr. Milne signs this Agreement. Mr. Milne will not recommend or suggest to any potential claimants or employees of MoneyGram or their attorneys or agents that they initiate claims or lawsuits against any Released Party, nor will Mr. Milne voluntarily aid, assist, or cooperate with any claimants or employees of MoneyGram or their attorneys or agents in any claims or lawsuits now pending or commenced in the future against any Released Party; provided, however, that nothing in this paragraph will be construed to prevent Mr. Milne from giving truthful testimony in response to direct questions asked pursuant to a lawful subpoena during any future legal proceedings involving any Released Party. Further, this Agreement does not purport to limit any right Mr. Milne may have to file a charge under the Age Discrimination in Employment Act of 1967 (“ADEA”) or any other civil rights statute or to participate in an investigation or proceeding conducted by the EEOC or other investigative agency. This Agreement does, however, waive and release any right to recover damages or other relief under the ADEA or other civil rights statute.

9. Post-Employment Restrictions and Obligations. Mr. Milne understands, acknowledges and agrees that he is bound to the post-employment restrictions and other obligations set forth in Exhibit A to this Agreement. Mr. Milne further acknowledges and agrees that the terms of Exhibit A are fully incorporated into this Agreement and are intended to be a part of this Agreement

10. Non-Disparagement. Mr. Milne hereby acknowledges that he is not aware of any acts or practices of any Released Party that he knows or believes to be unlawful or unethical, and MoneyGram hereby acknowledges that the members of its Board of Directors and its Senior Leadership Team do not know of any acts or practices of Mr. Milne known or believed to be unlawful or unethical. Mr. Milne agrees not to express any derogatory or damaging statements about any Released Party, the management of MoneyGram or MoneyGram’s business condition in any public way or to anyone who could make these statements public. Mr. Milne understands and acknowledges that this non-disparagement provision is a material inducement to MoneyGram to the making of this Agreement and that if Mr. Milne breaches this provision, MoneyGram will be entitled to pursue its legal and equitable remedies, including without limitation, the right to recover damages (including but not limited to any amounts paid and/or owing under this Agreement) and to seek injunctive relief. MoneyGram agrees that it will direct the current members of its Board of Directors and its Senior Leadership Team to not express any derogatory or damaging statements about Mr. Milne in any public way. It is understood and acknowledged that nothing in this Section 10 will be construed to prevent any person from giving truthful testimony in response to direct questions asked pursuant to a lawful subpoena during any future legal proceedings.

11. Time to Consider Agreement. Mr. Milne understands and acknowledges that he may take seven (7) calendar days to decide whether to sign this Agreement (“Consideration Period”). Mr. Milne represents that if he signs this Agreement before the expiration of the Consideration Period, it is because he has decided that he does not need any additional time to decide whether to sign this Agreement. Mr. Milne further agrees that any changes, material or otherwise, made to this Agreement do not restart or affect in any manner the original Consideration Period.

12. Right to Rescind or Revoke. Mr. Milne understands and acknowledges that he has fifteen (15) days to revoke the release of any claims under the Age Discrimination in Employment Act (“ADEA”) and/or the Minnesota Human Rights Act (“MHRA”). Mr. Milne understands and acknowledges that if he wishes to revoke the above-referenced release of claims under the ADEA and/or the MHRA after he has signed this Agreement, the revocation must be in writing and hand-delivered or mailed to MoneyGram. If hand-delivered to MoneyGram, the revocation must be: (a) addressed and delivered to Cindy Stemper, Executive Vice President, Human Resources & Corporate Services, MoneyGram International, Inc., 1550 Utica Avenue South, Minneapolis, MN 55416, within the fifteen-day period. If mailed to MoneyGram, the revocation must be: (a) postmarked within the fifteen-day period; (b) addressed to Cindy Stemper, Executive Vice President, Human Resources & Corporate Services, MoneyGram International, Inc., 1550 Utica Avenue South, M.S. 1010 Minneapolis, MN 55416; and (c) sent by certified mail, return receipt requested. In the event that Mr. Milne provides a timely revocation pursuant to this Section 11, then in its sole discretion MoneyGram may either (a) void this Agreement in its entirety, or (b) void the release of Mr. Milne’s ADEA and/or MHRA claims but enforce the remainder of this Agreement according to its terms.

13. Return of Equipment. Unless otherwise noted in this Agreement, Mr. Milne shall, prior to or on the Separation Date, diligently locate all of MoneyGram’s property (which such property shall not include property that is generally available to the public) within his possession and return to MoneyGram all of MoneyGram’s property and information within his possession. Such property includes, but is not limited to, credit cards, computers, copy machines, facsimile machines, lap top computers, Blackberries, pagers, entry cards, keys, building passes, computer software, manuals, journals, diaries, files, lists, codes, documents, correspondence, and methodologies particular to MoneyGram and any and all copies thereof; provided, however, that Mr. Milne may retain his cellular telephone and telephone number, and MoneyGram will provide Mr. Milne with a personal computer that is substantially similar to the home personal computer purchased by MoneyGram for his use. Moreover, Mr. Milne is strictly prohibited from destroying, obliterating or altering any of MoneyGram’s property covered by this section, and Mr. Milne is strictly prohibited from making copies, or directing copies to himself through e-mail or other transmission, of any of MoneyGram’s property covered by this section. After the Separation Date, Mr. Milne agrees to promptly respond to any reasonable request by MoneyGram to return MoneyGram property in his possession and/or control, and Mr. Milne further agrees that should he later discover any MoneyGram property in his possession and/or control, he will promptly return it to MoneyGram without a specific request by MoneyGram to do so.

14. Reasonable Requests; Indemnification.

14.1. Mr. Milne will make himself available to MoneyGram either by telephone or, if MoneyGram believes necessary, in person upon reasonable request and notice, to assist MoneyGram in connection with any matter relating to services performed by him on behalf of MoneyGram prior to the Separation Date. Mr. Milne further agrees that he will cooperate fully with MoneyGram in the defense or prosecution of any claims or actions now in existence or which may be brought or threatened in the future against or on behalf of MoneyGram, its directors, shareholders, officers, or employees. Mr. Milne will cooperate in connection with such claims or actions including, without limitation, his being available to meet with MoneyGram to prepare for any proceeding (including depositions), to provide affidavits, to assist with any audit, inspection, proceeding or other inquiry, and to act as a witness in connection with any litigation or other legal proceeding affecting MoneyGram. MoneyGram shall reimburse Mr. Milne for his actual out-of-pocket expenses incurred pursuant to his obligations hereunder;

14.2 Mr. Milne further agrees that should he be contacted (directly or indirectly) by any individual or any person representing an individual or entity that is or may be legally or competitively adverse to MoneyGram in connection with any claims or legal proceedings, he will promptly notify MoneyGram of that fact in writing, but in no event later than within three (3) calendar days after he is contacted. Such notification shall include a reasonable description of the content of the communication with the legally or competitively adverse individual or entity; and

14.3 MoneyGram agrees that, to the extent not prohibited by law, it shall defend, utilizing counsel of MoneyGram’s choosing, and fully indemnify Mr. Milne in any action, suit, claim or proceeding, whether actual, threatened, pending or completed, whether judicial, administrative or investigative, whether Mr. Milne or MoneyGram or both are named or the subject matter thereof, arising out of Mr. Milne’s performance of services for MoneyGram, to the full extent provided under the articles, bylaws, or any other governing document of MoneyGram or under applicable law.

15. Press Release and Other Communications. The parties agree to prepare a mutually agreeable press release regarding Mr. Milne’s separation from MoneyGram and a communications plan with respect to that subject. Mr. Milne agrees that he will not make any verbal or written comments with respect to his separation from MoneyGram except in accordance with that plan.

16. Full Compensation. Mr. Milne agrees that the payments made and other consideration provided by MoneyGram under this Agreement constitute full compensation for and extinguish all of Mr. Milne’s actual or potential claims, including, but not limited to, all claims for attorneys’ fees, costs, and disbursements, and all claims for any type of legal or equitable relief.

17. No Admission of Wrongdoing. Mr. Milne and MoneyGram understand and acknowledge that this Agreement does not constitute an admission that either party has violated any local ordinance, state or federal statute, or principle of common law, or that either party has engaged in any improper or unlawful conduct or wrongdoing against the other party. Mr. Milne and MoneyGram agree that he/it will not characterize this Agreement or the payment of any money or other consideration in accord with this Agreement as an admission that the other party has engaged in any wrongdoing.

18. Authority. Mr. Milne represents and warrants that he has the authority to enter into this Agreement and that no causes of action, claims, or demands released pursuant to this Agreement have been assigned to any person or entity not a party to this Agreement.

19. Right to Consult with Attorney. Mr. Milne acknowledges that, by virtue of being presented with this Agreement, Mr. Milne has hereby been advised in writing and is fully aware of his right to consult with an attorney of his own choosing for the purpose of determining whether to sign this Agreement.

20. Knowing and Voluntary Action. Mr. Milne acknowledges that he has had a full opportunity to consider this Agreement and to ask any questions that he may have concerning this Agreement. Mr. Milne acknowledges that in deciding whether to sign this Agreement, he has not relied upon any statements made by MoneyGram or its agents, other than the statements made in this Agreement and any MoneyGram benefit plans in which Mr. Milne is a participant. Mr. Milne further acknowledges that he has not relied on any legal, tax or accounting advice from MoneyGram or its agents, except to the extent required pursuant to Section 7 of the Severance Plan and/or Section 5 of this Agreement.

21. Entire Agreement. Except as expressly stated to the contrary in this Agreement, this Agreement, including Exhibit A hereto, constitutes the entire agreement of the parties with respect to Mr. Milne’s employment with MoneyGram and Mr. Milne’s separation from employment with MoneyGram. Except as expressly stated to the contrary in this Agreement, the Employment Agreement, the Severance Plan, and the Post-Employment Restriction Agreement are hereby terminated and extinguished, and Mr. Milne shall have no further rights, to payments, benefits, or otherwise, under the Employment Agreement, the Severance Plan, or under any other MoneyGram agreement or plan.

22. Miscellaneous Provisions.

23. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

24. Governing Law. This Agreement will be construed in accordance with, and any dispute or controversy arising from any breach or asserted breach of this Agreement will be governed by, the internal laws, and not the law of conflicts, of the State of Delaware.

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25. Notices. Any notice required or permitted to be given under this Agreement shall be sufficient if made in writing and sent via Certified Mail, Return Receipt Requested and addressed as follows:

If to Mr. Milne:

Philip W. Milne
[INTENTIONALLY OMITTED]

with a copy to:

Robert C. Boisvert, Jr.
Fredrikson & Byron, P.A.
200 South Sixth Street, Suite 4000
Minneapolis, MN ###-###-####

If to MoneyGram:

MoneyGram International, Inc.
1550 Utica Avenue South
Minneapolis MN 55416
Attn: Executive Vice President, General Counsel & Secretary

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have executed this Agreement on the dates indicated at their respective signatures below.

/s/ Philip W. Milne

Philip W. Milne

MoneyGram International, Inc.

By: /s/ Anthony P. Ryan

Its: EVP and Chief Operating Officer

[THIS IS THE SIGNATURE PAGE TO THE SEPARATION AGREEMENT
AND RELEASE OF ALL CLAIMS]

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EXHIBIT A

AMENDED AND RESTATED EMPLOYEE TRADE SECRET, CONFIDENTIAL INFORMATION AND POST-EMPLOYMENT
RESTRICTIONS

1. MoneyGram’s Business Operations and Interests.

2. Trade Secrets, Confidential Information and Related Covenants.

3. Post-Employment Competitive Activities and Related Covenants.

3.1.1 “Conflicting Product or Service” means any product, or process, or service in existence or under development, which is the same as or similar to or improves upon or competes with or is intended to replace or serve as an alternative to, a product, process, or service rendered by MoneyGram or which is under development or the subject of a pending acquisition or license by MoneyGram or as to which MoneyGram is actively negotiating to provide services through a business alliance relationship.

3.1.2 “Conflicting Organization” means any business that is a Customer (as defined below), or any other person or organization (including one owned in whole or in part by Mr. Milne) which is engaged in or is about to become engaged in the research on, or the development, production, marketing or sale of a Conflicting Product or Service.

3.1.3 “Customer” means any current customer or prospective or former customer of MoneyGram with which Mr. Milne had any contact or about which Mr. Milne had access to Confidential Information or trade secrets at any time during the twenty-four (24) months preceding the Separation Date.

4. Remedies.

5. Discoveries, Inventions, Improvements and Works by Employee.

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