Exhibit 10.7

MONEYGRAM INTERNATIONAL, INC.
DEFERRED COMPENSATION PLAN
AS STATED July 1, 2004

1. PURPOSE OF THE PLAN.

     The purpose of the Deferred Compensation Plan (the “Plan”) is to provide a
select group of management or highly compensated employees of MoneyGram
International, Inc. (the “Corporation”), and its subsidiaries with an
opportunity to defer the receipt of incentive compensation awarded to them under
the Management Incentive Plan and certain other incentive plans of MoneyGram
International, Inc. and its subsidiaries (the “Incentive Plans”) or such other
substitute plans as may be adopted by the Corporation (“successor plans”) and
thereby enhance the long-range benefits and purposes of the incentive awards.
Each plan year shall extend from January 1 through December 31 of each calendar
year, except that the first plan year shall begin on July 1, 2004 and shall end
on December 31, 2004.

2. ADMINISTRATION OF THE PLAN.

     The Plan shall be administered by a committee appointed by the Chief
Executive Officer of the Corporation (hereinafter the “Compensation Advisory
Committee” or the “Committee”). Subject to the express provisions of the Plan,
and the Incentive Plans or successor plans, the Committee shall have the
authority to adopt, amend and rescind such rules and regulations, and to make
such determinations and interpretations relating to the Plan, which it deems
necessary or advisable for the administration of the Plan, but it shall not have
the power to amend, suspend or terminate the Plan. All such rules, regulations,
determinations and interpretations shall be conclusive and binding on all
parties.

3. PARTICIPATION IN THE PLAN.

     (a) Participation in the Plan shall be restricted to a select group of
management or highly compensated employees of the Corporation or one of its
subsidiaries who are participants in certain Incentive Plans, including the
Management Incentive Plan, and any other bonus or bonuses or similar or
successor plans, who have been selected in writing by the Chief Executive
Officer of the Corporation to participate in the Plan, and whose timely written
requests to defer the receipt of all or a portion of any incentive compensation
which may be awarded to them, are honored in whole or in part by the Committee.
Any individual whose request for deferral is not accepted or honored by the
Committee, whether for failure of timely submission or for any other reason,
shall not become a participant in the Plan, and the Committee’s determination in
this regard shall be conclusive and binding.

     (b) Participants may defer incentive compensation into a cash account and,
if designated by the Committee, into a stock unit account.

 

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     (c) If a participant in the Plan shall 1) sever, voluntarily or
involuntarily, his or her employment with the Corporation or one of its
subsidiaries other than as a result of disability or retirement, 2) engage in
any activity in competition with the Corporation or any of its subsidiaries
during or following such employment, or 3) remain in the employ of a corporation
which for any reason ceases to be a subsidiary of the Corporation, the Committee
may at any time thereafter direct, in its sole and exclusive discretion, that
his participation in the Plan shall terminate, and that he or she be paid in a
lump sum the aggregate amount credited to his or her deferred incentive cash
account as of the date such participation is terminated and that he or she be
paid shares of MoneyGram International, Inc. Common Stock (“Common Stock”) equal
to the aggregate number of stock units credited to his or her deferred stock
unit account as of the date such participation is terminated (with any
fractional unit being settled by cash payment). The Committee is authorized to
establish and implement a policy and procedures for administration of this
paragraph, including, but not limited to, a policy regarding small account
balance cash-outs.

     (d) The Corporation and each participating subsidiary shall be solely
liable for payment of any benefits and, except as may be otherwise determined by
the Committee, for maintenance of deferred incentive accounts pursuant to
paragraph 7, with respect to its own employees who participate in the Plan. In
the event a participant leaves the employ of the Corporation or a participating
subsidiary (“former employer”) and is subsequently employed by another employer,
the Corporation or another subsidiary of the Corporation (“new employer”), the
former employer may agree to transfer and the new employer may agree to assume
the benefit liability reflected in such participant’s deferred incentive
account, without the consent of such participant and subject to the approval of
the Committee, in its sole discretion. In the event of such a transfer and
assumption of liability, the former employer shall have no further liability for
any benefit under the Plan to its former employee or otherwise with respect to
such transferred account.

4. REQUESTS FOR DEFERRAL.

     All requests for deferral of incentive awards must be made in writing prior
to November 15 of the year in which the bonus is being earned and shall be in
such form and shall contain such terms and conditions as the Committee may
determine. Each such request shall specify the dollar amount or the percentage
to be deferred of incentive award which would otherwise be received in the
following calendar year, but the deferral amount must be in an amount equal to
or greater than the lesser of $10,000 or 25% of the incentive award. Each such
request shall also specify 1) the date (no later than the employee’s actual
retirement date) when payment of the aggregate amount credited to the deferred
incentive account is to commence, 2) whether such payment is then to be made in
a lump sum or in quarterly or annual installments, 3) if payment is to be made
in installments, the period of time (not in excess of ten years) over which the
installments are to be paid, and 4) if the participant is permitted to defer
incentive compensation into a stock unit account, the portion of the deferred
incentive compensation which shall be treated as a cash account under

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paragraph 7(b) and the portion which shall be treated as a stock unit account
under paragraph 7(c). If the participant has requested that a portion of the
deferred incentive compensation be placed in a stock unit account, such request
shall also include acknowledgment that such stock unit account will be settled
in Common Stock of the Corporation, and that such stock unit account cannot be
converted to a cash account in the future. The Committee shall, under no
circumstances, accept any request for deferral of less than $1,000 of an
incentive award or any request which is not in writing or which is not timely
submitted.

5. DEFERRAL AND PAYMENT OF INCENTIVE AWARDS.

     The Committee shall, prior to December 15 of the year in which the bonus is
being earned, notify each individual who has submitted a request for deferral of
an incentive award whether or not such request has been accepted and honored. If
the request has been honored in whole or in part, the Committee shall advise the
participant of the dollar amount or percentage of his or her incentive
compensation which the Committee has determined to be deferred. The Committee
shall further advise the participant of its determination as to the date when
payment of the aggregate amount credited to the participant’s deferred incentive
account is to commence, whether payment of the amount so credited as of that
date will then be made in a lump sum or in quarterly or annual installments, if
payment is to be made in installments, the period of time over which the
installments will be paid, and if the participant is permitted to defer
incentive compensation into a stock unit account, whether the deferred incentive
account shall be treated as a cash account or a stock unit account or split
between cash and stock units. Upon subsequently being advised of the existence
of special circumstances which are beyond the participant’s control and which
impose an unforeseen severe financial hardship on the participant or his or her
beneficiary, the Committee may, in its sole and exclusive discretion, modify the
deferral arrangement established for that participant to the extent necessary to
remedy such financial hardship.

     If the participant has elected to defer incentive compensation in the form
of cash, the Corporation shall distribute a sum in cash to such participant,
pursuant to his or her election provided for in paragraph 4. If the participant
has elected to defer incentive compensation in the form of stock units, the
Corporation shall distribute to such participant, pursuant to his or her
election provided for in paragraph 4, shares of Common Stock of the Corporation
equal to the number of stock units being settled in such installment (with any
fractional unit being settled by cash payment).

6. CONVERSION OF CASH ACCOUNT BALANCE.

     Each participant who is permitted to defer incentive compensation into a
stock unit account may, not more than once a year or such other period as is
determined by the Committee, by written notice delivered to the Committee,
convert the aggregate balance or any portion thereof in his or her deferred
compensation cash account (either before or after installment payments from the
account may have commenced) from an account in the form of cash to an account in
the form of stock units in an amount equal

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to the cash balance or specified portion thereof divided by the closing price of
the Common Stock of the Corporation (as reported for the New York Stock
Exchange-Composite Transactions) on the last trading day of the quarter in which
such notice is given, said account to then accrue dividend equivalents as set
forth in paragraph 7(c) below; provided however, that no such notice of
conversion (“Conversion Notice”) (a) may be given within six months following
the date of an election by such participant, if an Executive Officer of the
Corporation, with respect to any plan of the Corporation, that effected a
Discretionary Transaction (as defined in Rule 16b-3(f) under the Securities
Exchange Act of 1934) that was a disposition or (b) may be given after an
individual ceases to be an employee of the Corporation . The stock unit account
will be settled in Common Stock of the Corporation and such stock unit account
cannot be converted to a cash account in the future.

7. DEFERRED INCENTIVE ACCOUNT.

     (a) A deferred incentive account shall be maintained by his or her employer
for each participant in the Plan, and there shall be credited to each
participant’s account, on the date incentive compensation is paid, the incentive
award, or portion thereof, which would have been paid to such participant on
said date if the receipt thereof had not been deferred. If the account is to be
a stock unit account, the incentive compensation award shall be converted into
stock units by dividing the closing price of the Corporation’s Common Stock (as
reported for the New York Stock Exchange Composite Transactions) on the day such
incentive award is payable into such incentive award.

     (b) If the participant has elected to defer incentive compensation in the
form of cash, there shall be credited on the last day of the quarter to each
participant’s account, an interest credit on his or her deferred incentive award
at the interest rates determined by the Committee to be payable during each
calendar year, or portion thereof, prior to the termination of such
participant’s deferral period or, if the amount then credited to his or her
deferred incentive account is to be paid in installments, prior to the
termination of such installment period. Interest will be paid on a prorated
basis for amounts withdrawn from the account during the quarter, with the
remaining balance accruing interest for the duration of the quarter. The
interest credit for the following quarter shall be a rate equal to the yield as
of March 31, June 30, September 30, and December 31 on Merrill Lynch Taxable
Bond Index — Long Term Medium Quality (A3) Industrial Bonds, unless and until
otherwise determined.

     (c) If a participant has elected to defer incentive compensation in the
form of stock units, then, in the event of a dividend paid in cash, stock of the
Corporation (other than Common Stock) or property, additional credits (dividend
equivalents) shall be made to the participant’s stock unit account consisting of
a number of stock units equal to the amount of such dividend per share (or the
fair market value, on the date of payment, of dividends paid in stock or
property), multiplied by the aggregate number of stock units credited to such
participant’s deferred compensation account on the record date for the payment
of such dividend, divided by the last closing price of the

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Corporation’s Common Stock (as reported for the New York State
Exchange-Composite transactions) prior to the date such dividend is payable to
stockholders. After payment of deferred compensation commences, dividend
equivalents shall accrue on the unpaid balance thereof in the same manner until
all such deferred compensation has been paid.

     (d) In the event of a dividend of Common Stock declared and paid by the
Corporation, an additional credit shall be made to the participant’s stock unit
account of a number of stock units equal to the number of shares of the
Corporation’s Common Stock which the participant would have received as a stock
dividend had he or she been the owner on the record date for the payment of such
stock dividend of the number of shares of Common Stock equal to the number of
units in such stock unit account on such date. After payment of deferred
compensation commences, additional credits for stock dividends shall accrue on
the unpaid balance thereof in the same manner until all such deferred
compensation has been paid.

     (e) The Plan shall at all times be unfunded. The Corporation shall not be
required to segregate physically any amounts of money or otherwise provide
funding or security for any amounts credited to the deferred incentive accounts
of participants in the Plan.

8. CHANGE OF CONTROL OR CHANGE IN CAPITALIZATION.

     (a) If a tender offer or exchange offer for shares of Common Stock of the
Corporation (other than such an offer by the Corporation) is commenced, or if
the stockholders of the Corporation shall approve an agreement providing either
for a transaction in which the Corporation will cease to be an independent
publicly owned corporation or for a sale or other disposition of all or
substantially all the assets of the Corporation (“Change of Control”), a lump
sum cash payment shall be made to each participant participating in the Plan of
the aggregate current balance of his or her deferred compensation cash account
accrued on the date of the Change of Control, notwithstanding any other
provision herein. If the participant has elected to defer compensation in the
form of stock units, the Corporation shall distribute to such participant shares
of Common Stock of the Corporation equal to the number of stock units in such
participant’s stock unit account on the day preceding the date of the Change of
Control (with any fractional unit being settled by cash payment). Any notice by
a participant to change or terminate his or her election to defer Compensation
on or before the date of the Change of Control shall be effective as of the date
of the Change of Control, notwithstanding any other provision herein.

     (b) Any recapitalization, reclassification, split-up, spin-off, sale of
assets, combination or merger not otherwise provided for herein which affects
the outstanding shares of Common Stock of the Corporation or any other relevant
change in the capitalization of the Corporation shall be appropriately adjusted
for by the Board of Directors of this Corporation, and any such adjustments
shall be final, conclusive and binding.

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9. DESIGNATION OF BENEFICIARY.

     Each participant in the Plan shall deliver to the Committee a written
instrument, in the form provided by the Committee, designating one or more
beneficiaries to whom payment of the amount credited to his or her deferred
incentive account shall be made in the event of his or her death. Unless the
Committee shall otherwise determine, such payments shall be made in such amounts
and at such times as they would otherwise have been paid to the participant if
he had survived.

10. NONASSIGNABILITY OF PARTICIPATION RIGHTS.

     No right, interest or benefit under the Plan shall be assignable or
transferable under any circumstances other than to a participant’s designated
beneficiary in the event of his or her death, nor shall any such right, interest
or benefit be subject to or liable for any debt, obligation, liability or
default of any participant. The payments, benefits or rights arising by reason
of this Plan shall not in any way be subject to a participant’s debts, contracts
or engagements, and shall not be subject to attachment, garnishment, levy,
execution or other legal or equitable process.

11. RIGHTS OF PARTICIPANTS.

     A participant in the Plan shall have only those rights, interests or
benefits as are expressly provided in the Plan and in the Incentive Plans or
successor plans. The Plan shall be deemed to be ancillary to the Incentive Plans
or successor plans and the rights of participants in the Plan shall be limited
as provided in the Incentive Plans or successor plans. The right of a
participant or designated beneficiary to receive a distribution hereunder shall
be an unsecured claim against the general assets of the Corporation. All amounts
credited to an account shall constitute general assets of the Corporation and
may be disposed of by the Corporation at such time and for such purposes as it
may deem appropriate.

12. CLAIMS FOR BENEFITS.

     Claims for benefits under the Plan shall be filed with the Committee.
Written notice of the disposition of a claim shall be furnished the claimant
within 60 days after the application therefor is filed. In the event the claim
is denied, the reasons for the denial shall be specifically set forth. Pertinent
provisions of this Plan shall be cited. In addition, the written notice shall
describe any additional material or information necessary for the claimant to
perfect the claim (along with an explanation of why such material or information
is needed), and the written notice will fully describe the claim review
procedures of paragraph 13 below.

13. CLAIM REVIEW.

     Any claimant who has been denied a benefit shall be entitled, upon request
to the Committee, to receive a written notice of such action, together with a
full and clear statement of the reasons for the action. The claimant may also
review this Plan if he or she chooses. If the claimant wishes further
consideration of his or her position, he or she may request a hearing. The
request, together with a written statement of the

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claimant’s position, shall be filed with a Committee member no later than
60 days after receipt of the written notification provided for above. The
Committee shall schedule an opportunity for a full and fair hearing of the issue
within the next 60 days. The decision following the hearing shall be made within
60 days and shall be communicated in writing to the claimant. If the claimant
requests, the hearing may be waived, in which case the Committee’s decision
shall be made within 60 days from the date on which the hearing is waived and
shall be communicated in writing to the claimant.

14. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.

     The Board of Directors of the Corporation (the “Board”) may from time to
time amend, suspend or terminate the Plan, in whole or in part, and if the Plan
is suspended or terminated, the Board may reinstate any or all provisions of the
Plan, except that no amendment, suspension or termination of the Plan shall,
without the consent of a participant, adversely affect such participant’s right
to receive payment of the entire amount credited to his or her deferred
incentive account on the date of such Board action. In the event the Plan is
suspended or terminated, the Board may, in its discretion, direct the Committee
to pay to each participant the amount credited to his or her account either in a
lump sum or in accordance with the Committee’s prior determination regarding the
method of payment.

15. EFFECTIVE DATE.

     The Plan shall become effective on July 1, 2004.

IN WITNESS WHEREOF, the undersigned authorized officer has signed this document
on July 1, 2004, effective as of July 1, 2004 .

     

  MONEYGRAM INTERNATIONAL, INC.
 
   

  By: /s/ Teresa H. Johnson

 

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  Its: Vice President and General Counsel

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