EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the “Agreement”) is dated as of December 22, 2005 by
and between PORTFOLIO RECOVERY ASSOCIATES, INC., a Delaware corporation (the
“Company”), and Judith S. Scott (“Employee”).

W I T N E S S E T H
:

WHEREAS, the Company desires that Employee serve as the Executive Vice
President, General Counsel and Secretary of the Company;

WHEREAS, the Employee desires to enter into such an employment relationship upon
the terms set forth in this Agreement;

NOW THEREFORE, in consideration of the premises and mutual covenants contained
herein and for other good and valuable consideration, the adequacy and receipt
of which are hereby acknowledged, the parties agree as follows:

1. Employment.

a) The Company hereby employs (the “Employment”) Employee as the Executive Vice
President, General Counsel and Secretary. Employee shall perform such duties and
exercise such powers as directed by the President and Chief Executive Officer,
subject to the general supervision, control and guidance of the Board of
Directors of the Company (the “Board”). Employee hereby accepts the Employment
and agrees to (i) render such executive services, (ii) perform such executive
duties and (iii) exercise such executive supervision and powers to, for and with
respect to the Company, as may be established, for the period and upon the terms
set forth in this Agreement.

b) Employee shall devote substantially all of Employee’s business time and
attention to the business and affairs of the Company consistent with Employee’s
executive position with the Company, except as permitted for Paid Time Off,
pursuant to Section 4(d) and for Disability (as defined in Section 8(b)). This
Agreement shall not be construed as preventing Employee from serving on the
Boards of Directors of other companies, engaging in charitable and community
affairs, or giving attention to her passive investments, provided that such
activities do not interfere with the regular performance of her duties and
responsibilities under this Agreement or violate any other provision of this
Agreement.

2. Place of Performance. The principal place of employment of Employee shall be
at the Company’s principal executive offices in Norfolk, Virginia or, if such
offices are relocated, within a 50 mile radius of Norfolk, Virginia (the
“Metropolitan Area”). Notwithstanding the foregoing, Employee may be required to
travel beyond the Metropolitan Area as reasonably required to perform his duties
hereunder.

3. Term. Except as otherwise specifically provided in Section 8 below, this
Agreement shall commence on January 1, 2006 (the “Commencement Date”), and shall
continue until December 31, 2008, subject to the terms and conditions of this
Agreement. The Term may be terminated at an earlier date in accordance with
Section 8 hereof.

4. Compensation.

a) Base Salary. Employee shall be paid a base salary (the “Base Salary”) at an
annual rate of $155,000, payable at such intervals as the other executive
officers of the Company are paid, but in any event at least on a monthly basis.
On each January 1 following the Commencement Date, commencing January 1, 2007,
Base Salary shall be increased annually by no less than 4% over the immediately
preceding year’s Base Salary.

b) Bonus Compensation. Employee shall receive bonus compensation (“Bonus
Compensation”) in accordance with paragraph (i) of this Section 4(b); provided,
however, that if at any time the Management Bonus (as hereinafter defined) is
not in effect, Employee shall receive bonus compensation in accordance with
paragraph (ii) of this Section 4(b). Employee shall not be entitled to
participate in any incentive bonus program for non-management level employees
during the time the Management Bonus is in effect.

(i) Management Bonus. The performance of the business shall be reviewed at the
end of each operating year and compared to such goals as are set forth in the
business plan for that year as approved by the Board (the “Business Plan”). If
the results of operations for the year achieve the net profitability goals for
the year specified in the approved Business Plan, Plan and (ii) the Employee’s
performance is determined in conformance with Company policy to have met
expectations, a bonus equal to no less than 50% of the Employee’s Base Salary
shall be paid to him (the “Management Bonus”). If (i) the results of operations
for the year exceed the net profitability goals of the approved Business Plan
and (ii) the Employee’s performance is determined in conformance with Company
policy to have exceeded expectations, the amount of the Employee’s Management
Bonus may be increased in recognition of the degree to which results exceeded
such goals, and the degree to which the Employee contributed to the Company’s
superior performance results as determined in the sole discretion of the
Compensation Committee of the Board (the “Committee”). If (i) the results of
operations for the year fail to achieve such net profitability goals specified
in the approved Business Plan or (ii), the Employee’s performance is determined
in conformance with Company policy not to have met expectations, then the
amount, if any of the Employee’s Management Bonus shall be within the absolute
discretion of the Committee, provided that the Committee shall give reasonable
consideration to any intervening or extraordinary events or circumstances that
might have given rise to such shortfall. Further, if pursuant to the Company’s
senior executive target equity ownership policies, the Employee’s targeted
equity ownership levels have not been met, the Employee’s Management Bonus may
be paid, in whole or in part, in shares of the Company’s common stock.

(ii) Bonus. In the event that the Management Bonus is not in effect, in addition
to the Base Salary, Employee shall be entitled to such bonus compensation as may
be determined from time to time by the Committee, in its sole discretion. The
Committee shall base its decision on a review of the performance of the Company
and the Employee’s performance at the end of each year.

c) Employee Benefits. In addition to the Base Salary and the Bonus Compensation,
and subject to the limitations imposed herein, Employee shall be entitled to
(i) receive any fringe benefits provided by the Company to its executive
officers, including, but not limited to, life, hospitalization, surgical, major
medical and disability insurance and sick leave, (ii) such employee benefit
programs as may be offered by the Company to other employees and (iii) be a full
participant in all of the Company’s other benefit plans, pension plans,
retirement plans and profit-sharing plans which may be in effect from time to
time or may hereafter be adopted by the Company.

d) Paid Time Off. During the Term, Employee shall be entitled to such paid time
off (“PTO”) during each calendar year of his Employment hereunder consistent
with the Company’s PTO policies then in effect and his position as an executive
officer of the Company, but in no event less than twenty-five PTO days in any
such calendar year (pro-rated as necessary for partial calendar years during the
Term). Such PTO may be taken, in Employee’s discretion, at such time or times as
are not inconsistent with the reasonable business needs of the Company. At the
end of the calendar year, Employee shall be entitled to carry over up to five
days of unused PTO into the next calendar year, but shall not be entitled to any
additional compensation in the event that Employee, for whatever reason, fails
to take such vacation during any year of his Employment hereunder. Employee
shall also be entitled to all paid holidays given by the Company to its
executive officers.

5. Indemnification. Employee shall be entitled at all times to the benefit of
the maximum indemnification and advancement of expenses available from time to
time under the laws of the State of Delaware, and such benefit shall not be less
than any other officer or director entitled to indemnification by the Company.
Without limiting the foregoing, Employee shall also be entitled to the benefit
of the following provisions:

a) D&O Insurance. Employee shall be covered under any directors’ and officers’
liability insurance policy then in effect for the Company or any of its
affiliates as to which Employee is serving as a director or officer. The failure
to have an insurance policy in effect at all times shall not allow Employee to
assert a Constructive Termination of this Agreement, other than to the extent
such failure constitutes a breach of the immediately preceding sentence.

b) Scope of Indemnification. In addition to the insurance coverage provided for
in Section 5(a), the Company and any of the Company’s affiliates as to which
Employee has at any time served as a director, officer, employee, agent or
fiduciary (collectively, the “Indemnitors”) shall jointly and severally hold
harmless and indemnify Employee (and his heirs, executors and administrators) to
the fullest extent permitted under applicable law against all expenses and
liabilities reasonably incurred by him in connection with or arising out of any
action, suit or proceeding (each, a “Claim”) in which he may be involved by
reason of his having been a director, officer, employee, agent or fiduciary of
any Indemnitor (whether or not he continues to be a director, officer, employee,
agent or fiduciary thereof at the time of incurring such expenses or
liabilities), or by reason of any action or inaction on Employee’s part while
serving in any such capacity, such expenses and liabilities to include, but not
be limited to, losses, damages, judgments, investigation costs, court costs and
attorneys’ fees and the cost of reasonable settlements.

c) Selection of Counsel. In the event the Indemnitors shall be obligated
hereunder to pay any Expenses with respect to a Claim, the Indemnitors shall be
entitled to assume the defense of such Claim upon the delivery to Employee of
written notice of its election to do so. After delivery of such notice and the
retention of such counsel by the Indemnitors, the Indemnitors will not be liable
to Employee under this Agreement for any fees of counsel subsequently incurred
by Employee with respect to the same Claim; provided that, (i) Employee shall
have the right to employ counsel in any such Claim at his expense; and (ii) if
(A) the employment of counsel by Employee has been previously authorized by the
Indemnitors, (B) counsel for Employee shall have provided the Indemnitors with
written advice that there is a conflict of interest between the Indemnitors and
Employee in the conduct of any such defense, or (C) the Indemnitors shall not
continue to retain such counsel to defend such Claim, then the fees and expenses
of Employee’s counsel shall be at the expense of the Indemnitors.

d) Nonexclusivity. The indemnification rights set for in this Section 5 shall be
in addition to any rights to which Employee may be entitled under any of the
Indemnitors’ charter documents, bylaws or agreements, any vote of stockholders
or disinterested directors, the laws of the various Indemnitors’ jurisdictions
of formation or incorporation. The indemnification rights set forth in this
Section 5 shall continue as to Employee for any action Employee took or did not
take while serving in an indemnified capacity even though Employee may have
ceased to serve in such capacity.

e) Survival. The indemnification and contribution provided for in this Section 5
will remain in full force and effect after any termination of Employee’s
employment and without regard to any investigation made by or on behalf of
Employee or any agent or representative of Employee.

6. Expenses. During the Term, the Company shall reimburse Employee upon
presentation of appropriate vouchers or receipts in accordance with the
Company’s expense reimbursement policies for executive officers, for all
out-of-pocket business travel and entertainment expenses incurred or expended by
Employee in connection with the performance of his duties under this Agreement
in accordance with the Company’s expense reimbursement policies for executive
officers.

7. Termination Procedure.

a) Notice of Termination. Any termination of Employee’s Employment by the
Company or by Employee during the Term (other than termination pursuant to
Section 8(a) of this Agreement) shall be communicated by written notice (“Notice
of Termination”) to the other party hereto in accordance with Section 13 herein.
For purposes of this Agreement, a Notice of Termination shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Employee’s Employment under the
provision so indicated.

b) Date of Termination. “Date of Termination” shall mean (a) if Employee’s
Employment is terminated by his death, the date of death, (b) if Employee’s
Employment is terminated pursuant to Section 8(b) herein, 30 days after Notice
of Termination (provided that Employee shall not have returned to the
substantial performance of his duties on a full-time basis during such 30 day
period), (c) if Employee’s Employment terminates upon the expiration of the Term
and Employee’s Employment is not renewed, the date of expiration of the Term,
and (d) if Employee’s Employment is terminated for any other reason, the date on
which Notice of Termination is given or any later date (within 30 days after the
giving of such notice) set forth in such Notice of Termination.

8. Termination of Employment.

a) Death. In the event of the death of Employee during the Term, Employee’s
Employment hereunder shall be terminated as of the date of his death and
Employee’s designated beneficiary, or, in the absence of such designation, the
estate or other legal representative of Employee (collectively, the “Estate”),
shall be paid Employee’s unpaid Base Salary through the month in which the death
occurs and any unpaid Bonus Compensation for any fiscal year which has ended as
of the date of such termination or which was at least fifty percent (50%)
completed as of the date of death. In the case of such incomplete fiscal year,
the Bonus Compensation shall be determined based upon the assumption that
Employee would have earned the target Bonus Compensation in accordance with
Section 4(b) and pro-rated, and all such Bonus Compensation, if any, payable as
a result of this Section 8(a) shall be payable at the same time as bonuses would
be payable to other executive officers (regardless of whether such other
officers earned any such bonus). The Estate shall be entitled to all other death
benefits in accordance with the terms of the Company’s benefit programs and
plans.

b) Disability. In the event Employee shall be unable to render the services or
perform his duties hereunder by reason of illness, injury or incapacity (whether
physical, mental, emotional or psychological) (any of the foregoing shall be
referred to herein as a “Disability”) for a period of either (i) 180 consecutive
days or (ii) 270 days in any consecutive 365-day period, the Company shall have
the right to terminate this Agreement by giving Employee 30 days’ prior written
notice. Any determination of Disability shall be made by the Board in its
reasonable good faith discretion. If Employee’s Employment hereunder is so
terminated, Employee shall be paid, offset by payments under any disability
insurance policy in effect, Employee’s unpaid Base Salary through the month in
which the termination occurs, plus Bonus Compensation on the same basis as is
set forth in Section 8(a) above. The Employee shall be entitled to receive all
benefits in accordance with the terms of this Agreement and of the Company’s
benefit programs and plans.

c) Termination of Employment by the Company for Cause.

(i) Nothing herein shall prevent the Company from terminating Employee’s
Employment for Cause (as hereinafter defined). From and after the Date of
Termination, Employee shall no longer be entitled to receive Base Salary and
Bonus Compensation and the Company shall no longer be required to pay premiums
on any life insurance or disability policy for Employee. Any rights and benefits
which Employee may have in respect of any other compensation or any employee
benefit plans or programs of the Company, whether pursuant to Section 4(c) or
otherwise, shall be determined in accordance with the terms of such other
compensation arrangements or plans or programs. The term “Cause,” as used
herein, shall mean: (A) Employee’s conviction, or plea of guilty or nolo
contendere to, a felony; (B) Employee’s engaging in willful misconduct that is
economically injurious to the Company or its subsidiaries, including, but not
limited to, a willful violation of Sections 10 or 11 of this Agreement, or the
embezzlement of funds or misappropriation of other property of the Company or
any subsidiary); or (C) Employee’s material violation of the Company’s written
policies and procedures (including gross and continued failure to satisfy
written directives or performance material provided to Employee),
insubordination or breach this Agreement in a material manner; or (D) Employee’s
fraudulent conduct as regards the Company, which results either in personal
enrichment to Employee or material injury to the Company or its subsidiaries.

(ii) The Company shall provide Employee with Notice of Termination stating that
it intends to terminate Employee’s Employment for Cause under this Section 8(c)
and specifying the particular act or acts on the basis of which the Board
intends to terminate Employee’s Employment. Employee shall then be given the
opportunity, within 15 days of his receipt of such notice, to have a meeting
with the Board to discuss such act or acts (other than with respect to an action
described in Sections 8(c)(i)(A), (B) or (D) above as to which the Board may
immediately terminate Employee’s Employment for Cause). Other than with respect
to an action described in Sections 8(c)(i)(A) (B) or D above, Employee shall be
given seven days after his meeting with the Board to take reasonable steps to
cease or correct the performance (or nonperformance) giving rise to such Notice
of Termination. In the event the Board determines that Employee has failed
within such seven-day period to take reasonable steps to cease or correct such
performance (or nonperformance), Employee shall be given the opportunity, within
10 days of his receipt of written notice to such effect, to have a meeting with
the Board to discuss such determination. Following that meeting, if the Board
believes that Employee has failed to take reasonable steps to cease or correct
his performance (or nonperformance) as above described, the Board may thereupon
terminate the Employment of Employee for Cause.

d) Termination Other than for Cause, Death or Disability.

(i) Termination. This Agreement may be terminated by the Company (in addition to
termination pursuant to Sections 8(a), (b) or (c) above) or Employee at any time
and for any reason or upon the expiration of the Term.

(ii) Severance and Non-Competition Payments. If the Employee’s employment is
terminated under this Section 8(d), including a Constructive Termination (as
hereinafter defined), or other than as a termination by Employee, or as a result
of death or Disability of Employee or for Cause, the following shall apply:

A) the Company shall pay to Employee (w) Base Salary and accrued PTO through the
Date of Termination, plus a pro rata portion of the Target Bonus Compensation
for the year in which the Termination occurs (whether or not such target is
actually met) determined based upon the days elapsed in the year divided by 365,
as soon as practicable following the Date of Termination, (x) the greater of a
lump-sum payment equal to one times Employee’s then current Base Salary or the
minimum Base Salary due under the remaining Term and (y) a lump-sum payment
equal to the greater of one times the amount of the Bonus Compensation, if any,
paid to Employee in the year immediately prior to the year in which the Date of
Termination occurs or the target Bonus Compensation due under the remaining Term
(whether or not such target is actually met). Such payment under clauses (x) and
(y) hereof shall be made as soon as administratively feasible following the Date
of Termination and the execution of a valid Release (as hereinafter defined),
but in no event more than 45 days following the execution of such Release;

B) the Company shall continue to provide Employee with the same level of medical
benefits upon substantially the same terms and conditions (including
contributions required by Employee for such benefits) as existed immediately
prior to Employee’s termination for the longer of the maximum period of time
provided under federal law or the remainder of the Term; provided that the
Company shall bear the costs of such benefits for the longer of 12 months or the
remainder of the Term and, provided further, if Employee cannot continue to
participate in the Company’s plans providing such benefits, the Company shall
reimburse Employee the cost of obtaining such benefits as if continued
participation had been permitted. Notwithstanding the foregoing, in the event
Employee obtains employment with another employer and becomes eligible to
receive comparable benefits from such employer, the benefits described in this
clause (B) shall cease; and

C) Employee shall be entitled to any other rights, compensation and/or benefits
as may be due to Employee in accordance with the terms and provisions of any
agreements, plans or programs of the Company.

(iii) Constructive Termination. For purposes of this Agreement, “Constructive
Termination” shall be deemed to have occurred upon (i) the removal of Employee
from, or a failure of Employee to continue as Executive Vice President, General
Counsel and Secretary of the Company, (ii) any material diminution in the nature
or scope of the authorities, powers, functions, duties or responsibilities
attached to such position, (iii) the relocation of the Company’s principal
executive offices to a location more than 50 miles from Norfolk, Virginia, or
(iv) the material breach by the Company of this Agreement and, in the case of
clauses (i)-(iii) above, Employee does not agree to such change (which decision
is personal in nature and not subject to any fiduciary responsibilities Employee
may have as an officer of the Company) and elects to terminate her Employment.

(iv) Severance and Non-Competition Payments Following Non-Renewal of this
Agreement. If this Agreement is not renewed beyond the Term by the parties
hereto, the Company shall pay Employee a severance and non-competition payment
equal to: (w) his Base Salary and accrued PTO through the Date of Termination,
as soon as practicable following the Date of Termination, plus a pro rata
portion of the target Bonus Compensation for the year in which the Termination
occurs (whether or not such target is actually met) determined based upon the
days elapsed in the year divided by 365, (x) a lump-sum payment equal to one
times Employee’s then current Base Salary and (y) the benefits set forth in
Sections 8(d)(ii)(B) and (C). Such payment under clause (x) hereof shall be made
as soon as administratively feasible following the Date of Termination and the
execution of a valid Release, but in no event more than 45 days following the
execution of such Release.

(v) No Mitigation. Employee shall not be required to mitigate the amount of any
severance and non-competition payment provided for under this Agreement by
seeking other employment or otherwise.

(vi) Excise Tax. In the event that Employee becomes entitled to any payments or
benefits under this Agreement and any portion of such payments or benefits, when
combined with any other payments or benefits provided to Employee (including,
without limiting the generality of the foregoing, by reason of the exercise of
any stock options or the receipt of any shares of stock of the Company), which
in the absence of this Section 8(d) would be subject to the tax (the “Excise
Tax”) imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the “Code”), then the amount payable to Employee under this Agreement shall be
reduced to the largest amount or greatest right (for example, by deferring the
vesting date of Employee’s options) such that none of the amounts payable to
Employee under this Agreement and any other payments or benefits received or to
be received by Employee as a result of, or in connection with, an event
constituting a change in the ownership or effective control of the Company or in
the ownership of a substantial portion of the assets of the Company (within the
meaning of Section 280G(b)(2)(A) of the Code) or the termination of Employment
(including a Constructive Termination, shall be treated as “parachute payments”
within the meaning of Section 280G(b)(2) of the Code. The Company shall
cooperate in good faith with Employee in making such determination. In the event
that the vesting date of any option is deferred hereunder, the term during which
such option may be exercised shall be extended until the ninetieth (90th) day
following the full vesting thereof.

9. Release. Employee acknowledges and agrees that the payments set forth in
Section 8 of this Agreement constitute liquidated damages for any claim of
breach of contract under this Agreement as it relates to termination of
Employee’s employment. In order to receive any of the payments set forth above,
prior to the payment of such amounts, Employee shall execute and agree to be
bound by an agreement relating to the waiver and general release of any and all
claims (other than claims for the compensation and benefits payable under
Section 8 hereof) arising out of or relating to Employee’s employment and
termination of employment (the “Release”), which Release shall be in
substantially the form annexed hereto as Exhibit B (with such changes as counsel
to the Company may reasonably require as a result of changes in law after the
date hereof).

10. Confidential Information.

a) Employee covenants and agrees that he will not at any time, either during the
Term or thereafter, use, disclose or make accessible to any other person, firm,
partnership, corporation or any other entity any Confidential Information (as
defined below) pertaining to the business of the Company or any of its
subsidiaries except (i) while employed by the Company, in the business of and
for the benefit of the Company or (ii) when required to do so by a court of
competent jurisdiction, by any governmental agency having supervisory authority
over the business of the Company, or by any administrative body or legislative
body (including a committee thereof) with jurisdiction to order the Company to
divulge, disclose or make accessible such information. For purposes of this
Agreement, “Confidential Information” shall mean non-public information
concerning the Company’s or any of its subsidiaries’ financial data, statistical
data, strategic business plans, product development (or other proprietary
product data), customer and supplier lists, customer and supplier information,
information relating to practices, processes, methods, trade secrets, marketing
plans and other non-public, proprietary and confidential information of the
Company or any of its subsidiaries; provided, however, that Confidential
Information shall not include any information which (x) is known generally to
the public other than as a result of unauthorized disclosure by Employee,
(y) becomes available to the Employee on a non-confidential basis from a source
other than the Company or any of its subsidiaries or (z) was available to
Employee on a non-confidential basis prior to its disclosure to Employee by the
Company or any of its subsidiaries. It is specifically understood and agreed by
Employee that any Confidential Information received by Employee during his
Employment by the Company is deemed Confidential Information for purposes of
this Agreement. In the event Employee’s Employment is terminated hereunder for
any reason, he immediately shall return to the Company all tangible Confidential
Information in his possession.

b) Employee and the Company agree that this covenant regarding Confidential
Information is a reasonable covenant under the circumstances, and further agree
that if, in the opinion of any court of competent jurisdiction, such covenant is
not reasonable in any respect, such court shall have the right, power and
authority to excise or modify such provision or provisions of this covenant as
to the court shall appear not reasonable and to enforce the remainder of the
covenant as so amended. Employee agrees that any breach of the covenant
contained in this Section 10 would irreparably injure the Company. Accordingly,
Employee agrees that the Company, in addition to pursuing any other remedies it
may have in law or in equity, may obtain an injunction against Employee from any
court having jurisdiction over the matter, restraining any further violation of
this Section 10.

11. Non-Competition; Non-Solicitation.

a) Employee agrees that during the Non-Competition Period (as defined in Section
11(d) below), without the prior written consent of the Company: (i) he shall not
be a principal, manager, agent, consultant, officer, director or employee of,
or, directly or indirectly, own more than 1% percent of any class or series of
equity securities in, any partnership, corporation or other entity, which, now
or at such time, has material operations which are engaged in any business
activity competitive (directly or indirectly) with the Business of the Company
(a “Competing Entity”); and (ii) he shall not, on behalf of any Competing
Entity, directly or indirectly, have any dealings or contact with any suppliers
or customers of the Company or any or its subsidiaries. As used in this
Agreement, the term “Business” means the means government revenue
administration; the administration, auditing and collection of taxes; skip
tracing and asset location; and the purchase, collection and management of
portfolios of defaulted and bankrupt consumer receivables, but shall not include
such collection and management activities to the extent they are incidental to a
business primarily engaged in loan origination or servicing. Notwithstanding the
foregoing, an entity will not be deemed to be a Competing Entity, and Employee
will not be deemed to be engaged in the Business, if (i) Employee is employed by
an entity that is engaged in any meaningful way in one or more businesses other
than the Business (the “Non-Competing Businesses”), (ii) such entity’s
relationship with Employee relates solely to the Non-Competing Businesses, and
(iii) if requested by the Company, such entity and Employee shall provide the
Company with reasonable assurances that Employee will have no direct or indirect
involvement in the Business on behalf of such entity.

b) During the Non-Competition Period, Employee agrees that, without the prior
written consent of the Company (and other than on behalf of the Company),
Employee shall not, on his own behalf or on behalf of any person or entity,
directly or indirectly, (i) solicit the customers or suppliers of the Company or
any of its subsidiaries to terminate their relationship with the Company or any
of its subsidiaries (or to modify such relationship in a manner that is adverse
to the interests of the Company) or (ii) hire or solicit the employment of any
employee who has been employed by the Company or any of its subsidiaries at the
time of Employee’s termination or at any time during the six months immediately
preceding such date of hiring or solicitation. This provision does not prohibit
the solicitation of employees by means of a general advertisement.

c) Employee and the Company agree that the covenants of non-competition and
non-solicitation are reasonable covenants under the circumstances, in order to
protect the Company’s goodwill and other legitimate business interests, such as
business opportunities, customer and client contacts, prospects, contracts,
lists and leads, and to ensure that former employees do not disclose the
Company’s trade secrets and its proprietary and confidential information to its
competitors. Employee and the Company further agree that if, in the opinion of
any court of competent jurisdiction such covenants are not reasonable in any
respect, such court shall have the right, power and authority to excise or
modify such provision or provisions of these covenants as to the court shall
appear not reasonable and to enforce the remainder of these covenants as so
amended. Employee agrees that any breach of the covenants contained in this
Section 11 would irreparably injure the Company. Accordingly, Employee agrees
that the Company, in addition to pursuing any other remedies it may have in law
or in equity, may obtain an injunction against Employee from any court having
jurisdiction over the matter, restraining any further violation of this
Section 11.

d) The provisions of this Section 11 shall extend for the Term and survive the
termination of this Agreement for one year from the date of such termination
(herein referred to as the “Non-Competition Period”).

e) The provisions of this Section 11 shall terminate if this Agreement is
terminated by the Company other than for Cause, or in the event of a
Constructive Termination of this Agreement or if the Company defaults on any of
its payment obligations set forth in this Agreement, which payment default is
not cured within fifteen (15) days after notice.

12. Limitation of Liability and Indemnity. The limitation of liability and
indemnity provisions of Section 8.1 of the Amended and Restated By-Laws of the
Company and Article 9 of the Amended and Restated Certificate of Incorporation
of the Company are a contractual benefit to Employee and are a material
consideration for Employee’s employment.

13. Notices. All notices and other communications hereunder shall be in writing
and shall be deemed to have been given if delivered personally or sent by
facsimile transmission, overnight courier, or certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so delivered
personally or sent by facsimile transmission (provided that a confirmation copy
is sent by overnight courier), one day after deposit with an overnight courier,
or if mailed, five days after the date of deposit in the United States mails, as
follows (or to another address specified in writing by the recipient prior to
the sending of such notice or communication):

         
If to the Company, to:
  Portfolio Recovery Associates, Inc.

 
  120 Corporate Boulevard
 
  Norfolk, Virginia 23502

 
  Attn: President and Chief Executive Officer

 
  Fax: 757-554-0586

If to Employee, to:
  Judith Scott

Fax: 757-321-2518

14. Entire Agreement. This Agreement contains the entire agreement between the
parties hereto with respect to the matters contemplated herein and supersede all
prior agreements or understandings among the parties related to such matters.

15. Successors; Binding Effect. Except as otherwise provided herein, this
Agreement shall be binding upon, and inure to the benefit of, the Company and
its successors and assigns and upon Employee. “Successors and assigns” shall
mean, in the case of the Company, any successor pursuant to a merger,
consolidation, or sale, or other transfer of all or substantially all of the
assets or Common Stock of the Company, provided that, should the Company assign
or transfer this Agreement, the Company will require any successor to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such assignment or transfer
had taken place.

16. No Assignment. Except as contemplated by Section 15 above, this Agreement
shall not be assignable or otherwise transferable by either party.

17. Withholding. All payments hereunder shall be subject to any required
withholding of federal, state and local taxes pursuant to any applicable law or
regulation.

18. Amendment or Modification; Waiver. No provision of this Agreement may be
amended or waived unless such amendment or waiver is authorized by the Board and
is agreed to in writing, signed by Employee and by a duly authorized officer of
the Company (other than Employee). Except as otherwise specifically provided in
this Agreement, no waiver by either party hereto of any breach by the other
party hereto of any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of a similar or dissimilar provision
or condition at the same or at any prior or subsequent time.

19. Fees and Expenses. If either party institutes any action or proceedings to
enforce any rights the party has under this Agreement, or for damages by reason
of any alleged breach of any provision of this Agreement, or for a declaration
of each party’s rights or obligations hereunder or to set aside any provision
hereof, or for any other judicial remedy, the prevailing party shall be entitled
to reimbursement from the other party for its costs and expenses incurred
thereby, including but not limited to, reasonable attorneys’ fees and
disbursements.

20. Governing Law. The validity, interpretation, construction, performance and
enforcement of this Agreement shall be governed by the internal laws of the
State of Delaware, without regard to its conflicts of law rules.

21. Titles. Titles to the Sections in this Agreement are intended solely for
convenience and no provision of this Agreement is to be construed by reference
to the title of any Section.

22. Counterparts. This Agreement may be executed in one or more counterparts,
which together shall constitute one agreement. It shall not be necessary for
each party to sign each counterpart so long as each party has signed at least
one counterpart.

23. Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms and provisions of
this Agreement in any other jurisdiction.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first set forth above.

PORTFOLIO RECOVERY ASSOCIATES, INC.

By:      /s/ Judith S. Scott     
Name: Judith S. Scott
Position: General Counsel and Secretary

By:     /s/ Steven D. Fredrickson     

      Steven D. Fredrickson