<PAGE>

                                                                   EXHIBIT 10.85

                              RETENTION AGREEMENT
                              -------------------

     This Retention Agreement (the "Agreement") is dated effective as of
December 1, 2000 (the "Effective Date"), between Micron Electronics, Inc., a
Minnesota corporation, located at 900 East Karcher Road, Nampa, Idaho 83687 (the
"Company"), and Lyle W. Jordan, located at the business address of 900 East
Karcher Road, Nampa, Idaho 83687 (the "Executive").  Capitalized terms or words
that are not otherwise defined where stated in this Agreement shall have the
meanings assigned to such terms or words in Section 6.

     1.    Background and Purpose. The Company considers it essential to the
           ----------------------
best interests of its stockholders to take reasonable steps to retain its key
management, including Executive. Further, the Company recognizes that the
uncertainty and questions which might arise among management in the context of a
significant restructuring of the Company's business or any possible change of
control of the Company could result in the departure or distraction of key
management to the detriment of the Company and its stockholders. Accordingly,
the Company has determined that appropriate steps should be taken to reinforce
and encourage Executive's attention and dedication to the Company's business and
to the Executive's assigned duties without distraction in the face of possible
external opportunities, or any potential uncertainty and questions that may
arise in the context of a change of control or restructuring of the Company or
its business. The purpose of this Agreement, therefore, is to provide Executive
with reasonable compensation and incentives that encourage Executive's
continuation of employment with the Company.

     2.    Term of Agreement.  The term of this Agreement shall commence on the
           -----------------
Effective Date and shall continue for 24 months following the Effective Date
(the "Term").

     3.    Not a Contract of Employment; Employment At-Will.  This Agreement is
           ------------------------------------------------
not and shall not be construed as a contract of employment between the Company
and Executive, and nothing in this Agreement shall confer upon Executive any
right to continued employment by the Company.  Executive's employment with the
Company shall remain on an at-will basis; meaning that both Executive and the
Company shall have the right to terminate employment at any time, for any
reason, with or without cause or prior notice.

     4.    Retention Pay and Benefits for Continuation in Employment. Subject to
           ---------------------------------------------------------
all of the terms, provisions and conditions set forth in this Agreement, the
Company shall pay to Executive the Retention Pay and Benefits set forth in
Sections 4.1, 4.2 and 4.3 below.

           4.1   Level One Retention Pay and Benefits. The Company shall pay to
Executive a retention bonus in two lump sum installment Payments, if the
Executive is continuously employed with the Company from the Effective Date
through the Retention Date or the CIC Retention Date, as the case may be,
subject to Sections 4.1.1 and 4.1.2 below.

                 4.1.1   First Installment. A lump sum Payment of Five Hundred
                         -----------------
Fifty Thousand Dollars ($550,000) shall be paid to Executive within 5 days
following Execution Date, subject to the following conditions and obligations:

RETENTION AGREEMENT -- Page 1
<PAGE>

                         4.1.1.1   In the event of Executive's Voluntary
Termination or Termination for Cause prior to the earliest to occur of (i)
Executive's death, (ii) Executive's Disability, (iii) a Change in Control Date,
or (iv) the first anniversary of the Effective Date, Executive shall be required
to repay, and hereby expressly agrees to repay, to the Company the full gross
amount of the Payment ($550,000) paid pursuant to Section 4.1.1 within 10 days
following such Voluntary Termination or Termination for Cause.

                         4.1.1.2   In the event of Executive's Involuntary
Termination, Executive shall not be required to repay any amounts paid pursuant
to Section 4.1.1.

                 4.1.2   Second Installment.  A lump sum Payment of Four
                         ------------------
Hundred Twenty Five Thousand Dollars ($425,000) shall be paid to Executive
within 10 days following the Retention Date, subject to the following conditions
and obligations:

                         4.1.2.1   In the event that a Change in Control occurs
within 12 months following the Effective Date and Executive receives a Buyer
Employment Offer, Executive must accept the Buyer Employment Offer and remain
continuously employed with such Buyer from the Change in Control Date through at
least the CIC Retention Date in order to be eligible to receive the Payment
under Section 4.1.2. In such event, the Payment under Section 4.1.2. shall be
paid to Executive within 10 days following the CIC Retention Date.

           4.2   Level Two Retention Pay and Benefits. The Company shall pay to
Executive a retention bonus in a one-time lump sum Payment of up to One Million
One Hundred Twenty Five Thousand Dollars ($1,125,000), subject to the following
conditions and obligations:

                 4.2.1   Change in Control. The Payment under Section 4.2 shall
                         -----------------
be paid to Executive within 10 days following the Change in Control Date in the
event of a Change in Control during the Term if the Executive does not receive a
Buyer Employment Offer. Alternatively, in the event that Executive receives a
Buyer Employment Offer during the Term, Executive must accept such position and
remain continuously employed with such Buyer from the Change in Control Date
through at least the CIC Retention Date, and in such event, Executive shall be
paid the Payment under Section 4.2 within 10 days following the CIC Retention
Date. The amount of the Payment under Section 4.2 with respect to the foregoing
circumstances shall be $1,125,000. If the Board adopts a Wind Down Resolution
during the Term, Executive agrees to oversee and assume executive responsibility
for completion of the acts anticipated by the Wind Down Resolution subject to
direction and confirmation by the CEO of the Company or the Board, including,
without limitation, (i) negotiating with suppliers to minimize any liabilities
related to supplier relationships, supply agreements, inventory and related
issues, and (ii) maximizing return on the sale, liquidation or distribution of
the Supply Chain Assets. Following the adoption of a Wind Down Resolution, the
amount of the Payment under Section 4.2 shall be $1,125,000, unless the
aggregate Sales Price for the PC Business Assets is less than $175,000,000 in
which case the Payment under Section 4.2 shall be equal to $750,000.

                 4.2.2   Involuntary Termination. Notwithstanding the provisions
                         -----------------------
of Section 4.2.1, the Payment under Section 4.2 shall be paid to Executive
within 10 days following the date of Executive's Involuntary Termination during
the Term.

RETENTION AGREEMENT -- Page 2
<PAGE>

           4.3   Level Three Retention Pay and Benefits.  In the event that a
Change in Control occurs during the Term and prior to Executive's Voluntary
Termination, Termination for Cause, death, or Disability, the Company shall pay
to Executive a transaction bonus in a one-time lump sum Payment (the
"Transaction Bonus"), within ten (10) days following the Change in Control Date.
Alternatively, in the event of Executive's Involuntary Termination and a Change
in Control during the Term, Executive shall receive Payment of the Transaction
Bonus within 10 days following the Change in Control Date.  If Executive is
eligible to receive Payment of the Transaction Bonus and to the extent that the
Change in Control results from the sale of substantially all, but less than all,
of the PC Business Assets or the Supply Chain Assets, the Transaction Bonus
shall be adjusted by aggregating the consideration received by the Company for
the sale of any remaining PC Business Assets or Supply Chain Assets that occurs
after the Change in Control Date and during the Term (as defined in Section 2).
The Payment of the Transaction Bonus shall be calculated as set forth on
Schedule A to this Agreement.

     5.    Excise Tax.  In the event that any Payment to the Executive is
           ----------
subject to the Excise Tax as determined pursuant to Section 5.1, the Company
shall pay to Executive a tax restoration payment (the "Gross-Up Payment") equal
to: (a) the Excise Tax on the Payment, plus (b) the Excise Tax on the Gross-Up
Payment, plus (c) federal, state and local income taxes on the Gross-Up Payment,
assuming that such taxes are imposed at their highest marginal rate.  All
determinations with respect to any Gross-Up Payment shall be made in accordance
with Sections 5.1 through 5.6 below.

           5.1   Determination of Gross-Up Payment. Upon prior written
notice from the Executive, the Company shall within 15 days following the
earliest of the Retention Date, the CIC Retention Date, the Change in Control
Date, or the date of termination of Executive's employment, cause the Accounting
Firm to (i) make a determination whether any Payment received by Executive is
subject to the Excise Tax, and (ii) provide supporting calculations and an
analysis to Executive and the Company with respect to such a determination. In
the event that the Accounting Firm determines that any Payment received by
Executive is subject to the Excise Tax, the Company shall cause the Accounting
Firm to determine the amount of the applicable Gross-Up Payment owed to
Executive in accordance with Section 5, and the Company shall thereafter provide
such Gross-Up Payment in accordance with Section 5.2. In the event that the
Accounting Firm determines that any Payment received by Executive is not subject
to the Excise Tax, then the Company shall cause the Accounting Firm to provide
the Company, which shall furnish Executive with a copy, with a written opinion
that the Company has substantial authority under the Code and Regulations not to
withhold such an Excise Tax or report such an Excise Tax on Executive's W-2. Any
determination or opinion by the Accounting Firm shall be binding upon Executive
and the Company with respect to whether the Company is required to provide any
Gross-Up Payment to Executive under this Section 5.1. The Company shall pay all
of the fees and expenses of the Accounting Firm relating to any determination or
opinion required under this Section 5.1. Notwithstanding the Accounting Firm's
determination or opinion, if a claim or notice of possible claim ultimately is
asserted by the Internal Revenue Service (the "Claim") that, if made and
successful, would subject any Payment to the Excise Tax, then Executive shall be
entitled to indemnification and the other rights and obligations as set forth in
Section 5 of this Agreement.

RETENTION AGREEMENT -- Page 3
<PAGE>

           5.2   Initial Gross-Up Payment. In the event that the Accounting Firm
determines a Gross-Up Payment is owed to Executive under Section 5.1, the
Company shall pay to Executive the amount of the Gross-Up Payment determined by
the Accounting Firm within 10 days of the Company's receipt of such
determination, subject to the requirements of Section 7.2 and all of the rights
and obligations as set forth in Section 5 of this Agreement.

           5.3   Underpayment and Overpayment; Adjustment to Gross-Up Payment.
If the initial Gross-Up Payment provided under Section 5.2 is insufficient to
cover the amount of the Excise Tax that is ultimately determined pursuant to a
Claim to be owed by Executive with respect to any Payment (an "Underpayment"),
the Company, after exhausting its remedies under Section 5.4, shall promptly pay
to Executive an additional Gross-Up Payment in respect of the Underpayment. If
the initial Gross-Up Payment provided under Section 5.2 is in excess of the
amount necessary to cover the Excise Tax that is ultimately determined pursuant
to a Claim to be owed by Executive with respect to any Payment (an
"Overpayment"), the Executive shall promptly repay to the Company an amount
equal to the Overpayment within 10 business days of the Company's request for
such repayment.

           5.4   Procedures Relating to Claim. The following procedures shall
apply to the Parties with respect to their respective rights and obligations
under Section 5 of this Agreement in the event of any Claim (as defined in
Section 5.1):

                 5.4.1   Notice of Claim by Executive. Executive shall notify
                         ----------------------------
the Company of any Claim, irrespective of whether any Gross-Up Payment
previously has been provided by the Company to Executive. Such notice shall be
given within 10 days after Executive knows of such Claim, and shall apprise the
Company of the nature of the Claim and the date on which the Claim is requested
to be paid, and shall include complete copies of all notices or communications
received by the Executive from the Internal Revenue Service or its
representatives with respect to the Claim. Executive agrees not to pay the Claim
until the expiration of the 30-day period following the date on which Executive
notifies the Company, or such shorter period ending on the date the Taxes with
respect to such Claim are due (the "Notice Period"). Executive's failure to
timely notify the Company of any claim as required by this Section 5.4.1 shall
result in a waiver of Executive's rights under this Section 5.

                 5.4.2   Notice by the Company; Cooperation. If the Company
                         ----------------------------------
notifies Executive prior to the expiration of the Notice Period that it desires
to contest the Claim, Executive shall: (a) provide the Company with any
information reasonably requested by the Company relating to the Claim; (b) take
such action in connection with the Claim as the Company may reasonably request,
including, without limitation, accepting legal representation with respect to
such Claim by attorneys selected by the Company; (c) cooperate with the Company
in good faith in contesting the Claim; and (d) permit the Company to participate
in any proceedings relating to the Claim.

                 5.4.3   No Notice by the Company; Payment on Claim. If the
                         ------------------------------------------
Company does not notify Executive prior to the end of the Notice Period of the
Company's desire to contest the Claim, and if the Company previously has not
provided Executive with an initial Gross-Up Payment under Section 5.2, the
Company shall pay to Executive a Gross-Up Payment or an additional Gross-Up
Payment, as the case may be, in respect of any Payment that is subject of the
Claim; provided, however, that Executive shall immediately pay the amount of the
Excise Tax that is the subject

RETENTION AGREEMENT -- Page 4
<PAGE>

of the Claim to the applicable taxing authority in accordance with applicable
law, and Executive shall release, indemnify and hold the Company harmless from
any costs, expenses, penalties, fines, interest or other liabilities with
respect to Executive's failure to pay such Excise Tax as required under this
Section 5.4.3.

                 5.4.4   Notice by the Company; Payment and Contest of Claim;
                         ----------------------------------------------------
Payment of Advance. If the Company notifies Executive pursuant to Section 5.4.2
------------------
of the Company's desire to contest the Claim, and if thereafter requested by the
Company, Executive shall either pay the Taxes claimed in respect of the Excise
Tax and timely sue for a refund, or timely contest the Claim in any permissible
manner and prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction, and in one or more appellate
courts as the Company shall determine in its sole discretion; provided, however,
that if the Company directs Executive to pay such Claim and pursue a refund, the
Company shall advance the amount of such payment to Executive on an after-tax
and interest-free basis (the "Advance"), subject to the rights and obligations
under Section 5.5.

                 5.4.5   Control of Proceedings. Executive shall permit the
                         ----------------------
Company to control all proceedings related to the Claim and, at the Company's
option, permit the Company to pursue or forgo any and all administrative
appeals, proceedings, hearings, and conferences with the taxing authority in
respect of such Claim. The Company's control of the contest and proceedings
related to the Claim shall be limited to the issues related to the Excise Taxes
and Gross-Up Payments, and Executive shall be entitled to settle or contest, as
the case may be, any other unrelated issues raised by the Internal Revenue
Service or other taxing authority.

           5.5   Repayment of Advance on Refund. If, after receipt by Executive
of an Advance under Section 5.4.4 of this Agreement, Executive becomes entitled
to a refund with respect to the Claim to which such Advance relates, Executive
shall pay to the Company the amount of the refund (together with any interest
paid or credited thereon after Taxes applicable thereto). However, if after
receipt by Executive of an Advance, a determination is made that Executive shall
not be entitled to any refund with respect to the Claim and the Company does not
promptly notify Executive of its intent to contest the denial of refund, then
the amount of the Advance shall not be required to be repaid by Executive and
the amount thereof shall offset the amount of any additional Gross-Up Payment
then owing to Executive.

           5.6   Indemnification; Further Assurances. The Company shall
indemnify Executive and hold Executive harmless, on an after-tax basis, from any
costs, expenses, penalties, fines, interest or other liabilities (the "Losses")
incurred by Executive with respect to the exercise by the Company of any of its
rights under this Section 5, including, without limitation, any Losses related
to the Company's decision to contest a Claim or any imputed income to Executive
resulting from any Advance or action taken on Executive's behalf by the Company
pursuant to this Section 5. The Company shall pay all reasonable legal fees and
expenses incurred by the Company under this Section 5, and shall promptly
reimburse Executive for the reasonable expenses incurred by Executive in
connection with any actions taken by the Company or required to be taken
pursuant to this Section 5.

RETENTION AGREEMENT -- Page 5
<PAGE>

     6.    Definitions.  For purposes of this Agreement, the following
           -----------
capitalized words shall have the meanings set forth below:

           "Accounting Firm" means PricewaterhouseCoopers LLP or, if such firm
is unable or unwilling to perform the services contemplated by this Agreement,
such other national accounting firm as the Company and Executive shall designate
by mutual agreement.

           "Board" means the Board of Directors of the Company.

           "Buyer" means a buyer who is a party to the transaction resulting in
a Change in Control during the Term, or such buyer's successor.

           "Buyer Employment Offer" means a final offer of employment for an
executive position with a Buyer.

           "Change in Control" means, and shall be deemed to have occurred
solely for the purposes of this Agreement, in the event of (i) a sale,
liquidation or distribution of all or substantially all of the PC Business
Assets or the Supply Chain Assets of the Company, irrespective of the form of
the transaction or series of transactions; (ii) any person (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) or entity becoming the
beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of the Company representing fifty percent
(50%) of the total voting power of all of its then outstanding securities; or
(iii) a merger or consolidation of the Company with or into any other entity,
other than a merger or consolidation that would result in the holders of the
voting securities of the Company outstanding immediately prior thereto holding
securities which represent immediately after such merger or consolidation more
than fifty percent (50%) of the total combined voting power of the entity which
survives such merger or consolidation or the parent of the entity which survives
such merger or consolidation. To the extent that less than all of the PC
Business Assets or the Supply Chain Assets have been sold, liquidated or
distributed, the issue of whether "substantially all" of such assets have been
sold, liquidated or distributed shall be determined by the Committee in its
reasonable discretion.

           "Change in Control Date" means the date of closing with respect to a
transaction, the consummation of which results in a Change in Control.

           "CIC Retention Date" means the earlier to occur of (i) the date 180
days following the Change in Control Date, provided Executive is still employed
on such date by a party to the transaction resulting in the Change in Control;
or (ii) Executive's Involuntary Termination after the Change in Control Date.

           "Code" means the Internal Revenue Code of 1986, as amended, and any
successor provisions thereto.

           "Committee" means the Compensation Committee of the Board.

           "Disability" means (i) Executive's incapacity due to physical or
mental illness that causes Executive to be absent from the full-time or regular
performance of Executive's duties with the Company for at least 90 consecutive
days, and (ii) Executive's failure to return to

RETENTION AGREEMENT -- Page 6
<PAGE>

full-time or regular performance of Executive's duties for the Company within 15
days after receiving written notice of termination of this Agreement due to
Disability. Any question as to the existence of a Disability upon which
Executive and the Company cannot agree shall be determined by a qualified
independent physician selected by Executive (or, if Executive is unable to make
such selection, a selection shall be made by any adult member of Executive's
immediate family), and approved by the Committee. The determination of such
physician made in writing to the Company and to Executive shall be final and
conclusive for all purposes of determining Disability under this Agreement.

           "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor provisions thereto.

           "Excise Tax" means the federal excise tax, together with any interest
or penalties thereon, on the type of payment defined under Section 280G(b) of
the Code.

           "Execution Date" means the latest to occur of (i) approval of this
Agreement by the Committee, or (ii) execution of this Agreement by the Parties.

           "Good Reason" means a resignation of Executive's employment because
of one or more of the following reasons: (i) a substantial adverse change
without Executive's consent in Executive's responsibilities from those in effect
as of the Effective Date, provided that this clause (i) shall not apply to
constitute Good Reason following a Change in Control; (ii) a Company-imposed
reduction of Executive's annual base salary below the level set as of the
Effective Date, without Executive's consent; or (iii) a Company-imposed
relocation of Executive's principal place of employment with the Company by more
than a 50 mile radius, without Executive's consent; ; provided, however, that
any event described in clauses (i) through (iii) shall not constitute Good
Reason unless it is first communicated by Executive to the Company in writing
and such event is not corrected by the Company in a manner that is reasonably
satisfactory to Executive within 10 days of the Company's receipt of such
written notice from Executive.

           "Involuntary Termination" means: (i) any termination of Executive's
employment by the Company other than by reason of Disability or Termination for
Cause; or (ii) any resignation of employment by Executive that occurs within 30
days following an event that constitutes Good Reason.

           "Parties" means the Company and Executive.

           "Payment" means (i) any payment or portion thereof with respect to
the retention bonuses under Sections 4.1 or 4.2, (ii) the Transaction Bonus
under Section 4.3, or (iii) any payment that is described in Section 280G(b)(2)
of the Code which is received by Executive during the Term. All Payments shall
be made less applicable federal, state and local tax withholding and payroll
deductions.

           "PC Business Assets" means the assets directly and predominantly
attributable to the Company's operations to market, design, develop, supply,
manufacture, distribute, and sell personal computer products, including, without
limitation, inventories, property, plant, equipment, manufacturing and
distribution assets and related systems.  "PC Business Assets"

RETENTION AGREEMENT -- Page 7
<PAGE>

shall not include cash and cash equivalents, liquid investments, or the assets
directly and predominantly attributable to the operations of the Company's other
reportable segments, including, without limitation, the HostPro and SpecTek
operations, as referred to in the Company's latest Form 10-K or Form 10-Q filed
under the Exchange Act.

           "PC Systems Business" means that segment of the Company's business
involving the marketing, design, development, supply, manufacturing,
distribution and sales of PC Business Assets.

           "Regulations" means the proposed, temporary and promulgated
regulations under Section 280G of the Code, or any successor provision thereto.

           "Retention Pay and Benefits" means the pay and benefits payable to
Executive under Section 4.

           "Retention Date" means the earliest to occur of (i) the date 12
months following the Effective Date, provided that Executive is still employed
by the Company on such date; (ii) a Change in Control Date, provided that
Executive is still employed by the Company on such date; or (iii) the date of
Executive's Involuntary Termination, prior to a Change in Control which occurs
during the Term.

           "Sales Price" means the total consideration or present value of the
total consideration received by the Company in connection with a transaction or
series of transactions culminating in a Change in Control.

           "Supply Chain Assets" means that portion of the assets of the PC
Business Assets which are directly and predominantly attributable to the
Company's operations to supply, manufacture and distribute personal computer
products.  "Supply Chain Assets" shall not include the Company's cash and cash
equivalents, liquid investments, or any of the assets directly attributable to
(i) the Company's operations to market and sell personal computer products; or
(ii) the operations of the Company's other reportable segments, including,
without limitation, the HostPro and SpecTek operations, as referred to in the
Company's latest Form 10-K or Form 10-Q filed under the Exchange Act.

           "Taxes" means the federal, state and local income taxes to which
Executive is subject at the time of determination, calculated on the basis of
the highest marginal rates then in effect, plus any additional payroll or
withholding taxes to which Executive is then subject.

           "Term" is as defined in Section 2.

           "Termination for Cause" means termination of Executive's employment
during the Term because of (i) any willful, material violation by the Executive
of any law or regulation applicable to the business of the Company or a
subsidiary of the Company, the Executive's conviction for, or guilty plea to, a
felony or a crime, or any willful perpetration by the Executive of a common law
fraud, (ii) Executive's commission of an act of personal dishonesty which
involves personal profit in connection with the Company or any other entity
having a business relationship with the Company, (iii) any breach by Executive
of any material provision of any agreement or understanding between the Company
and Executive regarding Executive's service

RETENTION AGREEMENT -- Page 8
<PAGE>

as an employee, officer, director or consultant to the Company which results in
loss, damage or injury to the Company, including, without limitation, the
willful and continued refusal of Executive to perform the material duties
reasonably required of Executive as an employee, officer, director or consultant
of the Company, other than as a result of having a Disability, (iv) Executive's
violation of the policies of the Company so as to cause loss, damage or injury
to the property, reputation or employees of the Company, or (v) any willful
misconduct or unauthorized actions by Executive which results in loss, damage or
injury to the Company.

           "Voluntary Termination" means Executive's resignation or voluntary
termination of employment with the Company other than for Good Reason.

           "Wind Down Resolution" means a resolution adopted by the Board to
liquidate and wind down the PC Systems Business.  The term "wind down" is
intended by the Parties to be interchangeable with the term "wind up," and may
include, without limitation, every act necessary by the Company to "wind down"
or "wind up" the business and affairs of the PC Systems Business within the
meaning of applicable law and as determined appropriate by the Board under the
circumstances.

     7.    Other Terms, Conditions and Provisions.
           --------------------------------------

           7.1   Confidentiality. As a condition to Payment of the Retention Pay
and Benefits, Executive agrees not to disclose to any person, agency or court
the terms and provisions of this Agreement, or any of the discussions between
Executive and the Company's representatives relating to this Agreement, unless
Executive is expressly compelled to do so pursuant to legal process (e.g., a
court summons or subpoena), or as otherwise required by law. Executive may
discuss this Agreement and the terms and provisions hereof with Executive's
attorney, financial advisor, certified public accountant or immediate family
members on a confidential basis; provided, however, that Executive understands
and agrees that any material breach of confidentiality by such persons shall be
deemed a material breach by Executive. Executive further understands that the
Company may have a legal obligation to publicly disclose some or all of the
terms and provisions of this Agreement; and, if so, the Company shall disclose
such terms and provisions to the extent required under applicable law or
regulation. This Section 7.1 shall survive the termination of this Agreement.

           7.2   Tax Treatment of Retention Pay and Benefits.  All Payments and
Gross-Up Payments payable to Executive under this Agreement are subject to
applicable federal, state and local tax withholding (including, but not limited
to, withholding for applicable Excise Taxes) and payroll deductions, and
constitute taxable income to Executive.  Other than as expressly provided in
this Agreement, Executive, and not the Company, is liable for federal, state and
local income taxes and any employee's share of employment taxes on the Retention
Pay and Benefits.

           7.3   Dispute Resolution. Any dispute concerning the interpretation
or construction of this Agreement or relating to any compensation or benefits
that Executive may claim under this Agreement shall first be submitted to
confidential mediation before a mediator mutually selected and agreed to by the
Parties, except as otherwise provided under Section 5.4. If the Parties fail to
resolve such dispute through such mediation, the dispute shall be submitted

RETENTION AGREEMENT -- Page 9
<PAGE>

for binding arbitration to be conducted in accordance with the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA"). Any decision or award of the arbitral tribunal shall be
final and binding upon the parties to the arbitration proceeding. The Parties
agree that the arbitral award may be enforced against the parties to the
arbitration proceeding or their assets wherever the award may be entered in any
court having jurisdiction thereof. The venue for any mediation or arbitration
under this Section 7.3 shall be in Boise, Idaho, unless the Parties mutually
agree to an alternative location. The Parties shall be responsible for their own
costs and legal fees in any mediation or arbitration proceedings under this
Section 7.3.

           7.4   Incentive Compensation; Non-eligibility. Executive shall not be
eligible to participate in the Company's Management and Executive Incentive Plan
(the "MEIP") for the 12 month period following the Effective Date, and Executive
shall not receive payment of any bonus under the MEIP with respect to such
period of time.

           7.5   Successors; Assignment.

                 7.5.1   Successors and Assigns. This Agreement shall be binding
                         ----------------------
on the Company, its successors and assigns, including any person acquiring
control of the Company's business and operations.

                 7.5.2   No Assignment by Executive. Executive's rights and
                         --------------------------
benefits under this Agreement are personal to Executive, and may not be
transferred or assigned voluntarily or involuntarily.

           7.6   Effect on Prior Agreements. This Agreement shall not affect in
any manner Executive's rights and obligations under the Employment and
Noncompete Agreement with the Company dated as of April 23, 1998 (the
"Noncompete Agreement"), or any other agreements with the Company that pertain
to confidentiality, invention assignment or indemnification, and all such
agreements shall remain in full force and effect.

           7.7   Waiver by the Company. In the event that Executive accepts a
Buyer Employment Offer, the Company agrees to waive, and upon occurrence of such
event shall waive, any of Executive's covenants not to compete that are set
forth in the Noncompete Agreement.

           7.8   Release by Executive. As a condition to receipt of any Payments
under Section 4.2 and Section 4.3, Executive shall execute a waiver and release
of claims against the Company in a form provided by the Company within the
specified consideration or execution periods, and subject to confirmation by the
Company that Executive does not later revoke such waiver and release of claims
within any revocation period allowed by applicable law.

     8.    Miscellaneous.
           -------------

           8.1   Amendments; Waivers.  No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
shall be agreed to in writing. Any modification of this Agreement shall be
effective only if in writing and signed by each party or its duly authorized
representative. The waiver of a condition of benefits on any

RETENTION AGREEMENT -- Page 10
<PAGE>

occasion shall not constitute a waiver of any other condition on the same
occasion or a waiver of the same or any other condition on any other occasion.

           8.2   Validity. The terms and provisions of this Agreement are
contractual and not mere recitals. If, for any reason, any provision of this
Agreement shall be held invalid in whole or in part, such invalidity shall not
affect the remainder of this Agreement.

           8.3   Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

           8.4   Headings. The headings contained in this Agreement are intended
solely for convenience of reference and shall not affect the rights of the
Parties to this Agreement.

           8.5   Governing Law; Venue. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws of
the State of Idaho applicable to contracts entered into and performed in such
State.

           8.6   Notice to Parties. All notices required or permitted to be
given under this Agreement shall be in writing. Notices may be served by
certified or registered mail, postage paid with return receipt requested; by
private courier, prepaid; by telex, facsimile, or other telecommunication device
capable of transmitting or creating a written record; or personally. Mailed
notices shall be deemed delivered 5 days after mailing, properly addressed.
Couriered notices shall be deemed delivered when delivered as addressed, or if
the addressee refuses delivery, when delivery is refused. Telex or
telecommunicated notices shall be deemed delivered when receipt is either
confirmed by confirming transmission equipment or acknowledged by the addressee
or its office. Personal delivery shall be effective when accomplished. Unless a
party changes its address by giving notice to the other party as provided
herein, notices shall be delivered to Executive at Executive's last known
residential address as found in the Company's records, and to the Company as
follows:

                     Micron Electronics, Inc.
                     900 E. Karcher Road
                     Nampa, Idaho 83687
                     Attn: General Counsel and Board of Directors
                     Facsimile: (208) 898-7411

           8.7   Entire Agreement. This Agreement contains the entire agreement
between the Parties concerning the subject matters discussed herein and
supersedes and replaces any earlier understandings, agreements or summaries,
whether written or oral, except as provided in Section 7.6.

RETENTION AGREEMENT -- Page 11
<PAGE>

     MICRON ELECTRONICS, INC.


     By  /s/                             Date:   1/22/2001
       ---------------------                  ---------------------
       Joel J. Kocher
       Chairman, President & CEO


     Accepted and agreed:

     By  /s/                             Date:   1/22/2001
       ---------------------                  ---------------------
       Lyle W. Jordan

RETENTION AGREEMENT -- Page 12
<PAGE>

                                   Schedule A
                                   ----------

                        Calculation of Transaction Bonus

                     (Pursuant to Section 4.3 of Agreement)


     Sales Price                            Transaction Bonus
     -----------                            -----------------

     Equal to $175,000,000                  $  550,000
     Equal to $200,000,000                  $  750,000
     Equal to $250,000,000                  $1,000,000
     Equal to $300,000,000                  $1,250,000
     In excess of $350,000,000              $1,750,000


No Transaction Bonus shall be payable in the event the Sales Price is below One
Hundred Seventy-Five Million Dollars ($175,000,000).  If the Sales Price is
between two values on the above schedule, then the Payment of the Transaction
Bonus shall be calculated based on a straight line interpolation between the
next highest and next lowest corresponding Sales Price values from the schedule
above, provided that in no event shall the Payment of the Transaction Bonus
exceed One Million Seven Hundred Fifty Thousand Dollars ($1,750,000).

RETENTION AGREEMENT -- Page 13