PEOPLEPC INC
RETENTION AGREEMENT W/ NICK GROUF
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>5
<FILENAME>dex105.txt
<DESCRIPTION>RETENTION AGREEMENT W/ NICK GROUF
<TEXT>
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                                                                    EXHIBIT 10.5

June 29, 2001

VIA HAND DELIVERY


Nick Grouf
PeoplePC, Inc.

Re:  Incentive Bonuses and Severance Benefits

Dear Nick:

In consideration of your continued employment, PeoplePC, Inc. ("PeoplePC" or the
"Company") is pleased to offer you the following agreement regarding monthly
incentive bonuses and severance benefits (the "Agreement").

     1.   Entitlement To Monthly Incentive Bonuses. During your continued
employment with the Company for the Term of this Agreement (defined below), you
will be eligible to receive monthly incentive bonuses for those calendar months,
if any, that you meet specified individual performance targets (the "Bonuses").
The amount of the Bonuses and your individual performance targets are stated on
Exhibit A to this Agreement. The Bonuses will be subject to standard payroll
deductions and withholdings, and will be paid on the first payday following the
end of the month for which the bonus payment was earned. The Company will
determine, in its sole discretion, whether the required targets have been met.

     2.   Entitlement To Severance Benefits. Subject to the terms and conditions
of this Agreement, and without regard to the occurrence (or non-occurrence) of a
change in control or other reorganization of the Company, the Company will
provide you with Severance Benefits (defined below) if the Company terminates
your employment at any time during the Term without Cause (defined below). You
will not be entitled to receive any Severance Benefits if the Company terminates
your employment for Cause or if you resign from your employment. As used herein,
the "Company" includes any successor in interest to PeoplePC.

     3.   Description of Severance Benefits. For purposes of this Agreement,
"Severance Benefits" are defined as severance pay equivalent to twelve (12)
months of your Base Salary (defined below) in effect as of your last day of
employment with PeoplePC (the "Termination Date"). The severance pay will be
paid in a single lump sum within seven (7) days after the effective date of the
release described below, and will be subject to standard payroll deductions and
withholdings.

To receive the Severance Benefits, you must first sign a general release of
claims in favor of the Company in the form attached hereto as Exhibit B.

     4.   Definition of Cause for Termination. For purposes of this Agreement,
"Cause" shall mean the Company's termination of your employment for any of the
following reasons: (a) your indictment or conviction (including a no contest or
guilty plea) of any felony or crime involving dishonesty or moral turpitude; (b)
your participation in a fraud or act of dishonesty
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against the Company; (c) the material breach of your duties to the Company,
including insubordination, misconduct, excessive absenteeism, or persistent
unsatisfactory performance of job duties; (d) your intentional damage to, or
willful misappropriation of, any property of the Company; (e) your material
breach of any written agreement with the Company; or (f) conduct that in the
good faith and reasonable determination of the Company's Board of Directors
demonstrates your unfitness to serve.

     5.   Definition of Good Reason for Resignation.  For purposes of this
Agreement, "Good Reason" shall mean your resignation of employment because of a
significant reduction of your job duties and responsibilities, including but not
limited to a demotion, without your consent.

     6.   Definition of Base Salary. For purposes of this Agreement, "Base
Salary" means your base salary as of the Termination Date, excluding: the
Bonuses or any other type of bonus payments, commissions, incentive payments or
any other remuneration paid directly to you, or any other income received in
connection with stock options, contributions made by the Company under any
employee benefit plan, or similar items of compensation.

     7.   Term. The term of this Agreement (the "Term") shall commence as of
June 15, 2001 and terminate on April 30, 2002. Bonuses will be determined based
on calendar month beginning July 1, 2001. Any Bonuses for June 2001 will be
based on a half-month.

     8.   At-Will Employment. Nothing in this Agreement alters the at-will
nature of your employment relationship with the Company. Subject to the terms of
this Agreement, either you or the Company may terminate your employment
relationship at any time, with or without Cause or advance notice.

     9.   Dispute Resolution Process. All disputes, claims and causes of action,
in law or equity, arising from or relating to this Agreement or its enforcement,
performance, breach or interpretation shall be resolved solely and exclusively
by final and binding arbitration before Judicial Arbitration & Mediation
Services, Inc. ("JAMS") in San Francisco, California, using a single arbitrator,
under the then-existing JAMS employment arbitration rules. However, nothing in
this section is intended to prevent either you or the Company from obtaining
injunctive relief in court to prevent irreparable harm pending the conclusion of
any such arbitration.

     10.  Miscellaneous. This Agreement constitutes the complete, final and
exclusive embodiment of the entire agreement between you and the Company with
regard to the Bonuses and Severance Benefits. It is entered into without
reliance on any promise or representation, written or oral, other than those
expressly contained herein, and it supersedes any other such promises,
warranties or representations. Because of this individual Agreement, you will
not be eligible to receive severance benefits under the PeoplePC Severance
Benefit Plan or any other Company-wide severance plan or practice. This
Agreement may not be modified or amended except in writing signed by you and a
duly authorized officer of the Company. This Agreement will be deemed to have
been entered into and will be construed and enforced in accordance with the laws
of the State of California as applied to contracts made and to be performed
entirely within California.
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The Company appreciates your continuing contributions to PeoplePC. Please sign
below to indicate your understanding and acceptance of this Agreement and return
the signed original to me at your earliest convenience.

Very truly yours,

PeoplePC, Inc.


By: /s/: Mary Humiston
    -----------------------------------
    Mary Humiston

Title: Chief Administrative Officer
       --------------------------------


Understood and Agreed:

/s/: Nick Grouf
---------------------------------------           ______________________________
Nick Grouf                                        Date
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                                Exhibits A & B

                   [Exhibits A & B on file with The Company]

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