EX-10.1






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 Steven D.
Fredrickson (“Employee”).



W I T N E S S E T H

:




WHEREAS, the Company desires that Employee serve as the President and Chief Executive Officer
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 President and Chief Executive
Officer of the Company. Employee shall perform such duties and exercise such powers as directed
by 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 his business time and attention to the business
and affairs of the Company consistent with his 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
his passive investments, provided that such activities do not interfere with the regular
performance of his 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 $350,000, 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 80% 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. Notwithstanding the foregoing, under no circumstances shall Employee’s
refusal or unwillingness to make any of the certifications required of him as Chief Executive
Officer of the Company pursuant to Section 302 or Section 906 of the Sarbanes-Oxley Act of 2002, or
any rules or regulations promulgated thereunder, or any similar requirements of any federal, state,
local or foreign governmental authority or agency, or of any national securities exchange or
quotation system on which any class or series of the Company’s capital stock is then traded or
listed for quotation, constitute or give rise to a basis for termination for “Cause.”



(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),
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) his 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 two 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
two 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, President and Chief Executive Officer of the Company, (ii) Employee is
not elected or nominated by the Nominating and Corporate Governance Committee to serve as a
director of the Company or is removed from the Board other than for cause (other than as a result
of a change in the law preventing Employee from serving as a director), (iii) any material
diminution in the nature or scope of the authorities, powers, functions, duties or responsibilities
attached to such positions, (iv) the relocation of the Company’s principal executive offices to a
location more than 50 miles from Norfolk, Virginia, or (v) the material breach by the Company of
this Agreement and, in the case of clauses (i)-(iv) 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 or director of the Company) and elects to terminate his 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 two 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 two years 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: General Counsel

	 
	 	Fax: 757-321-2518

	If to Employee, to:
	 	Steven D. Fredrickson

	 
	 	Fax: 757-554-0586







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