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Preferred Stock Purchase Agreement - Cisco Systems Inc., KPMG LLP and KPMG Consulting Inc.

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                       PREFERRED STOCK PURCHASE AGREEMENT


                                  by and among


                              CISCO SYSTEMS, INC.,


                                    KPMG LLP


                                       and


                              KPMG CONSULTING, INC.


                         Dated as of September 15, 2000




<PAGE>   2

                                TABLE OF CONTENTS



                                                                                  Page


ARTICLE I  PURCHASE AND SALE........................................................1

         1.1  Purchase and Sale.....................................................1
         1.2  The Closing...........................................................1
         1.3  Deliveries............................................................1

ARTICLE II  REPRESENTATIONS AND WARRANTIES OF KPMG..................................2

         2.1  Organization..........................................................2
         2.2  Authorization, Validity and Enforceability............................2
         2.3  No Conflicts..........................................................2
         2.4  Consents and Approvals................................................3

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF the company..........................3

         3.1  Organization..........................................................3
         3.2  Authorization, Validity and Enforceability............................3
         3.3  No Conflicts..........................................................3
         3.4  Consents and Approvals................................................4

ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF THE INVESTOR..........................4

         4.1  Organization of the Investor..........................................4
         4.2  Authorization, Validity and Enforceability............................4
         4.3  No Conflicts..........................................................5
         4.4  Consents and Approvals................................................5
         4.5  Ownership.............................................................5

ARTICLE V  COVENANTS................................................................5

         5.1  Agreement To Convert..................................................5
         5.2  Obligation to Repurchase..............................................6
         5.3  Public Announcements..................................................6

ARTICLE VI  DEFINITIONS.............................................................6

         6.1  Definitions...........................................................6

ARTICLE VII  MISCELLANEOUS..........................................................8

         7.1  Notices...............................................................8
         7.2  Fees and Expenses....................................................10
         7.3  Specific Performance.................................................10


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<PAGE>   3

                                TABLE OF CONTENTS



                                                                                  Page


         7.4  Entire Agreement; Waivers and Amendments.............................10
         7.5  Assignment; Binding Effect...........................................10
         7.6  Severability.........................................................10
         7.7  No Third Party Beneficiaries.........................................10
         7.8  Governing Law........................................................11
         7.9  Interpretation.......................................................11
         7.10  Termination.........................................................11
         7.11  Captions............................................................11
         7.12  Counterparts........................................................11





                                       ii
<PAGE>   4
                                    EXHIBITS

Exhibit A         Hypothetical Illustration





<PAGE>   5

                       PREFERRED STOCK PURCHASE AGREEMENT


                  THIS PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of September 15, 2000, by and among CISCO SYSTEMS,
INC., a California corporation (the "Investor"), KPMG LLP, a registered Delaware
limited liability partnership ("KPMG"), and KPMG CONSULTING, INC., a Delaware
corporation (the "Company"). Certain capitalized terms used herein shall have
the meanings set forth in Article VI.

                                 R E C I T A L S

                  WHEREAS, the Investor purchased from the Company, and the
Company sold to the Investor, 5,000,000 shares of Series A Mandatorily
Redeemable Convertible Preferred Stock, par value $0.01 per share, of the
Company (the "Series A Preferred Stock"), having an aggregate liquidation
preference of $1,050,000,000 and the other rights, preferences and terms set
forth in the Certificate of Designation of Series A Mandatorily Redeemable
Convertible Preferred Stock of the Company filed with the Secretary of State of
the State of Delaware (the "Certificate of Designation"), all upon the terms and
subject to the conditions set forth in that certain Stock Purchase Agreement,
dated as of December 29, 1999 by and among the Investor, KPMG and the Company
(the "Stock Purchase Agreement"); and

                  WHEREAS, the Investor now desires to sell 2,500,000 of its
shares of Series A Preferred Stock to KPMG for $525,000,000.

                  NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

                                   ARTICLE I

                               PURCHASE AND SALE

                  1.1 Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, the Investor hereby agrees to sell, and
KPMG hereby agrees to purchase, 2,500,000 shares of Series A Preferred Stock
held by the Investor (the "Transferred Shares") for a purchase price of
$525,000,000 in cash (the "Purchase Price").

                  1.2 The Closing. The closing (the "Closing") of the sale of
the Transferred Shares hereunder shall take place at the offices of Sidley &
Austin, 875 Third Avenue, New York, New York. The Closing shall occur
concurrently with, or immediately prior to, the closing of the IPO. The date on
which the Closing occurs is referred to herein as the "Closing Date."

                  1.3 Deliveries. (a) At the Closing, the Investor shall deliver
to KPMG (i) a certificate representing 2,500,000 shares of the Series A
Preferred Stock; (ii) duly executed stock

<PAGE>   6

powers in favor of KPMG in respect of such certificate; and (iii) all other
documents required hereunder to be delivered by the Investor to KPMG at the
Closing.

                  (b) Within five Business Days after the Closing, KPMG shall
pay to Investor the Purchase Price by wire transfer of immediately available
funds to an account designated by the Investor in a written notice delivered to
KPMG at the Closing.

                                   ARTICLE II

                     REPRESENTATIONS AND WARRANTIES OF KPMG

                  KPMG hereby represents and warrants to the Investor, as of the
date of this Agreement, as follows:

                  2.1 Organization. KPMG is a limited liability partnership, is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and has full partnership power and authority
to execute and deliver this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby.

                  2.2 Authorization, Validity and Enforceability. The execution
and delivery and performance by KPMG of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary partnership action on the part of KPMG and no other partnership
proceeding on the part of KPMG is necessary to authorize the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by KPMG
and (assuming the due authorization, execution and delivery by the Investor)
constitutes the legal, valid and binding obligation of KPMG, enforceable against
KPMG in accordance with its terms, except to the extent such enforceability may
be limited by the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally and
general principles of equity or public policy (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

                  2.3 No Conflicts. Assuming all Consents described Section 2.4
are obtained, made or given (as the case may be), the execution and delivery by
KPMG of this Agreement does not, and the performance by KPMG of its obligations
hereunder and the consummation of the transactions contemplated hereby will not,
conflict with, result in any breach or violation of, constitute a default under
(or an event which with the giving of notice or the lapse of time or both would
constitute a default under), (a) the partnership agreement of KPMG or
organizational documents of any of its Subsidiaries, (b) any Contract to which
KPMG or any of its Subsidiaries is a party or by or to which any of its assets
or Properties may be bound or subject, or (c) any applicable order, writ,
judgment, injunction, award, decree, Permit, law, statute, ordinance, rule or
regulation, other than any such conflict, breach, violation, default,
termination, acceleration, Lien or Encumbrance or consequence which in the case
of clauses (b) and (c) only, would not, individually or in the aggregate
together with all such other conflicts, breaches, violations, defaults,
terminations, accelerations, Liens or Encumbrances or consequences have a
material


                                       2
<PAGE>   7

adverse effect on the ability of KPMG to execute and deliver this Agreement,
perform its obligations hereunder or consummate the transactions contemplated
hereby.

                  2.4 Consents and Approvals. Except in connection with the IPO
and except where the failure to obtain, make or give such Consent would not,
individually or in the aggregate, have a material adverse effect on, or a
material adverse change in, the ability of KPMG to execute and deliver this
Agreement, perform its obligations hereunder or consummate the transactions
contemplated hereby, no consent, approval, authorization, license or order of,
registration or filing with, or notice to, any federal, state, local, foreign or
other Governmental Entity or any other Person (collectively, "Consents") is
necessary to be obtained, made or given by KPMG or any of its Subsidiaries in
connection with the execution and delivery by KPMG of this Agreement, the
performance by KPMG of its obligations hereunder, and the consummation of the
transactions contemplated hereby.

                                  ARTICLE III

                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

                  The Company hereby represents and warrants to the Investor, as
of the date of this Agreement, as follows:

                  3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, and has full corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby.

                  3.2 Authorization, Validity and Enforceability. The execution
and delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company and no
other corporate proceeding on the part of the Company is necessary to authorize
the execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and (assuming the due authorization, execution and
delivery by the Investor) constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except to the extent such enforceability may be limited by the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and general principles of equity or public
policy (regardless of whether such enforceability is considered in a proceeding
in equity or at law).

                  3.3 No Conflicts. Assuming all Consents described Section 3.4
are obtained, made or given (as the case may be), the execution and delivery by
the Company of this Agreement does not, and the performance by the Company of
its obligations hereunder and the consummation of the transactions contemplated
hereby will not, conflict with, result in any breach or violation of, constitute
a default under (or an event which with the giving of notice or the lapse of
time or both would constitute a default under), (a) the certificate of
incorporation or bylaws of the Company or any of its Subsidiaries, (b) any
Contract to which the Company or any


                                       3
<PAGE>   8

of its Subsidiaries is a party or by or to which any of its assets or Properties
may be bound or subject, or (c) any applicable order, writ, judgment,
injunction, award, decree, Permit, law, statute, ordinance, rule or regulation,
other than any such conflict, breach, violation, default, termination,
acceleration, Lien or Encumbrance or consequence which in the case of clauses
(b) and (c) only, would not, individually or in the aggregate together with all
such other conflicts, breaches, violations, defaults, terminations,
accelerations, Liens or Encumbrances or consequences have a material adverse
effect on the ability of the Company to execute and deliver this Agreement,
perform its obligations hereunder or consummate the transactions contemplated
hereby.

                  3.4 Consents and Approvals. Except in connection with the IPO
and except where the failure to obtain, make or give such Consent would not,
individually or in the aggregate, have a material adverse effect on, or a
material adverse change in, the ability of the Company to execute and deliver
this Agreement, perform its obligations hereunder or consummate the transactions
contemplated hereby, no Consent of any Governmental Entity or other Person is
necessary to be obtained, made or given by the Company or any of its
Subsidiaries in connection with the execution and delivery by the Company of
this Agreement, the performance by the Company of its obligations hereunder, and
the consummation of the transactions contemplated hereby.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES
                                 OF THE INVESTOR

                  The Investor hereby represents and warrants to KPMG and the
Company, as of the date of this Agreement, as follows:

                  4.1 Organization of the Investor. The Investor is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction and has full corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.

                  4.2 Authorization, Validity and Enforceability. The execution,
delivery and performance by the Investor of this Agreement and the consummation
of the transactions contemplated hereby by the Investor have been duly and
validly authorized by all necessary corporate action on the part of the Investor
and no other corporate proceeding on the part of the Investor is necessary to
authorize the execution, delivery and performance of this Agreement or the
consummation of any of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Investor and (assuming the due
authorization, execution and delivery by KPMG and the Company) constitutes the
legal, valid and binding obligation of the Investor, enforceable against the
Investor in accordance with its terms, except to the extent such enforceability
may be limited by the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally and
general principles of equity or public policy (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

                                       4
<PAGE>   9

                  4.3 No Conflicts. Assuming all Consents described in Section
4.4 are obtained, made or given (as the case may be), the execution and delivery
by the Investor of this Agreement do not, and the performance by the Investor of
its obligations hereunder and the consummation of the transactions contemplated
hereby will not, conflict with, result in any breach or violation of, constitute
a default under (or an event which with the giving of notice or the lapse of
time or both would constitute a default under), (a) the certificate of
incorporation, by-laws or other charter or organizational documents of the
Investor, (b) any Contract to which the Investor is a party or by or to which it
or its assets or Properties may be bound or subject, or (c) any applicable
order, writ, judgment, injunction, award, decree, Permit, law, statute,
ordinance, rule or regulation, other than any conflict, breach, violation or
default which in the case of clauses (b) and (c) only, would not, individually
or in the aggregate together with all such other conflicts, breaches, violations
or defaults, have a material adverse effect on the ability of the Investor to
execute and deliver this Agreement, perform its obligations hereunder or
consummate the transactions contemplated hereby.

                  4.4 Consents and Approvals. Except where the failure to
obtain, make or give such Consent would not, individually or in the aggregate,
have a material adverse effect on, or a material adverse change in, the ability
of the Investor to execute and deliver this Agreement, perform its obligations
hereunder, or consummate the transactions contemplated hereby, no Consent of any
Governmental Entity or other Person is necessary to be obtained, made or given
by the Investor in connection with the execution and delivery by the Investor of
this Agreement, the performance by the Investor of its obligations hereunder,
and the consummation of the transactions contemplated hereby.

                  4.5 Ownership. The shares of Series A Preferred Stock are
owned by the Investor, free and clear of any Liens or Encumbrances (except for
those expressly set forth in this Agreement, the Certificate of Designation, the
Investor Rights Agreement and applicable federal and state securities laws and
regulations). Except as may be provided in the Transaction Documents (as defined
in the Stock Purchase Agreement), the sale of the Transferred Shares to KPMG as
contemplated by this Agreement is not subject to any preemptive right or right
of first refusal. Upon the consummation of the sale of the Transferred Shares to
KPMG, KPMG will acquire good and marketable title to each of the Transferred
Shares, free and clear of any Lien or Encumbrance, and will be entitled to all
the rights and benefits of a holder of such securities.

                                   ARTICLE V

                                   COVENANTS

                  5.1 Agreement To Convert. Immediately following the Closing,
each of the Investor and KPMG hereby irrevocably agrees to convert all of the
shares of Series A Preferred Stock held by it after any repurchase pursuant to
Section 5.2 into shares of Common Stock in accordance with the Certificate of
Designation. The conversion of all of the outstanding shares of Series A
Preferred Stock not repurchased pursuant to Section 5.2 into Common Stock shall
occur immediately prior to the closing of the IPO.

                                       5
<PAGE>   10

                  5.2 Obligation to Repurchase. (a) The Investor and the Company
agree that, to the extent that the conversion by the Investor of its remaining
2,500,000 shares of Series A Preferred Stock at the time of the IPO would result
in the Investor holding more than 9.9% of the outstanding shares of Common Stock
on such date (assuming the conversion of all outstanding shares of Series A
Preferred Stock), then the Company will, immediately prior to the conversion of
Series A Preferred Stock by the Investor, repurchase enough shares of Series A
Preferred Stock from the Investor so that the Investor would hold no more than
9.9% of the outstanding shares of Common Stock immediately following the closing
of the IPO. The repurchase price shall be calculated in the same manner as set
forth in Section 4.a of the Certificate of Designation. The Investor agrees not
to exercise any rights set forth in Section 4.a of the Certificate of
Designation. The Company shall pay the repurchase price to the Investor within
five (5) Business Days after the Closing, by wire transfer of immediately
available funds to an account designated by the Investor in a written notice
delivered to the Company at the Closing.

                  (b) Exhibit A hereto contains a hypothetical illustration of
the conversion and the repurchase described in this Section 5.2. It is
understood and agreed among the parties that the example contained in Exhibit A
is solely for the purpose of illustrating and agreeing to the mathematical
calculation of the conversion of the Series A Preferred Stock held by the
Investor and the repurchase contemplated by this Section 5.2, and that the
numbers are not representations of actual prices that would be achieved in the
IPO.

                  5.3 Public Announcements. Each party hereto shall notify the
other parties prior to issuing any press release or making any public statement
pertaining to this Agreement or the transactions contemplated hereby, and shall
not issue any such press release or make any such public statement without
obtaining the reasonable approval of the other parties prior thereto, except
that the Company shall be permitted to disclose the existence and content of
this Agreement and the transactions contemplated herein in its Registration
Statement and Prospectus and in connection with the IPO and each party will in
any event have the right to issue any such press release or statement upon
advice of its counsel that such issuance is required in order to comply with any
applicable law or any listing agreement with, or rules of, a national securities
exchange to which such party is a party or subject.

                                   ARTICLE VI

                                   DEFINITIONS

                  6.1 Definitions. The following terms when used in this
Agreement shall have the following respective meanings:

                  "Agreement" has the meaning set forth in the first paragraph
of this Agreement.

                  "Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in California or New York are required or
authorized by law to be closed.

                  "Certificate of Designation" has the meaning set forth in the
recitals of this Agreement.

                                       6
<PAGE>   11

                  "Closing" has the meaning set forth in Section 1.2.

                  "Closing Date" has the meaning set forth in Section 1.2.

                  "Common Stock" means the Company's common stock, par value
$.01 per share.

                  "Company" has the meaning set forth in the first paragraph of
this Agreement.

                  "Consents" has the meaning set forth in Section 2.4.

                  "Contracts" means all written or binding oral contracts,
agreements, undertakings, indentures, notes, debentures, bonds, loans,
instruments, leases, mortgages, franchise, license, commitments or other binding
arrangements.

                  "Governmental Entity" means any federal, state, local or
foreign government, political subdivision, legislature, court, agency,
department, bureau, commission or other governmental or regulatory authority,
body or instrumentality, including any industry or other non-governmental
self-regulatory organizations.

                  "Investor" has the meaning set forth in the first paragraph of
this Agreement.

                  "Investor Rights Agreement" means the Investor Rights
Agreement dated as of January 31, 2000 by and among the Investor, KPMG and the
Company.

                  "IPO" means the proposed initial public offering of Common
Stock by the Company.

                  "KPMG" has the meaning set forth in the first paragraph of
this Agreement.

                  "Lien or Encumbrance" means any lien, pledge, mortgage,
security interest, claim, lease, charge, option, right, easement, servitude,
transfer limit, restriction, title defect or other encumbrance.

                  "Permits" means all licenses, certificates of authority,
permits, orders, consents, approvals, registrations, authorizations,
qualifications and filings under any federal, state, local or foreign laws or
with any Governmental Entities.

                  "Person" means any individual, corporation, partnership,
limited liability company, firm, joint venture, association, joint stock
company, trust, unincorporated organization, Governmental Entity or other entity
or organization.

                  "Property" means any real, personal or mixed property, whether
tangible or intangible.

                  "Prospectus" means the form of prospectus included in the
Registration Statement, as the same may be amended or supplemented from time to
time.

                                       7
<PAGE>   12

                  "Registration Statement" means the registration statement on
Form S-1 of the Company filed under the Securities Act in connection with its
proposed IPO, as the same may be amended from time to time.

                  "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.

                  "Series A Preferred Stock" has the meaning set forth in the
recitals of this Agreement.

                  "Stock Purchase Agreement" has the meaning set forth in the
recitals of this Agreement.

                  "Subsidiary" means, with respect to any Person, any entity
controlled by such Person.

                                  ARTICLE VII

                                 MISCELLANEOUS

                  7.1 Notices. Any notices and other communications required to
be given pursuant to this Agreement shall be in writing and shall be effective
upon delivery by hand (against written receipt) or upon receipt if sent by
certified or registered mail (postage prepaid and return receipt requested) or
by a nationally recognized overnight courier service (appropriately marked for
overnight delivery) or upon transmission if sent by telex or facsimile (with
request for immediate confirmation of receipt in a manner customary for
communications of such respective type and with physical delivery of the
communication being made by one of the other means specified in this Section 7.1
as promptly as practicable thereafter). Notices are to be addressed as follows:

                   If to KPMG to:

                           KPMG LLP
                           345 Park Avenue
                           New York, New York 10154
                           Attention: Chairman
                           Telecopy No.: (212) 758-9819

                           With a copy to:

                           KPMG LLP
                           280 Park Avenue
                           New York, New York 10017
                           Attention: Claudia L. Taft, Esq.
                           Telecopy No.: (212) 909-5485

                           and

                                       8
<PAGE>   13

                           Sidley & Austin
                           Bank One Plaza
                           10 South Dearborn Street
                           Chicago, Illinois 60603
                           Attention: Paul L. Choi, Esq.
                           Telecopy No.: (312) 853-7036

                   If to the Company to:

                           KPMG Consulting, Inc.
                           1676 International Drive
                           McLean, Virginia 22102
                           Attention: David W. Black, Esq.
                           Telecopy No.: (703) 747-3847


                           with a copy to:

                           Sidley & Austin
                           Bank One Plaza
                           10 South Dearborn Street
                           Chicago, Illinois 60603
                           Attention:  Paul L. Choi, Esq.
                           Telecopy No.: (312) 853-7036

                   If to the Investor to:

                           Cisco Systems, Inc.
                           170 West Tasman Drive
                           San Jose, California 95134
                           Attention:  Larry Carter
                           Telecopy No.: (408) 526-4545

                           with a copy to:

                           Brobeck, Phleger & Harrison LLP
                           Two Embarcadero Place
                           2200 Geng Road
                           Palo Alto, California 94303
                           Attention: Curtis L. Mo, Esq.
                           Telecopy No.: (650) 496-2885

or to such other respective addresses as any of the parties hereto shall
designate to the others by like notice, provided that notice of a change of
address shall be effective only upon receipt thereof.

                                       9
<PAGE>   14

                  7.2 Fees and Expenses. Each of the parties hereto shall pay
its own respective fees and expenses (including, without limitation, the fees
and disbursements of any attorneys, accountants, investment bankers, consultants
or other Representatives) incurred in connection with this Agreement and the
transactions contemplated hereby, whether or not such transactions are
consummated.

                  7.3 Specific Performance. Each party hereto acknowledges and
agrees that in the event of any breach or default by the other parties under
this Agreement, the non-defaulting parties hereto would be irreparably and
immediately harmed and could not be made whole by monetary damages. It is
accordingly agreed that in such case (i) each defaulting party hereto will
waive, in any action, suit or proceeding for specific performance or other
relief referred to in this paragraph, the defense of adequacy of money damages
or a remedy at law, and (ii) the other non-defaulting parties shall be entitled,
in addition to any other remedy to which it may be entitled at law or in equity
or otherwise, to compel specific performance of this Agreement or to obtain a
temporary restraining order, preliminary and permanent injunction or other
equitable relief or remedy, in any action, suit or proceeding instituted in any
state or federal court.

                  7.4 Entire Agreement; Waivers and Amendments. This Agreement
(including the Exhibit hereto and the Transaction Documents as defined in the
Stock Purchase Agreement) contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes all prior
written or oral agreements, representations and understandings with respect
thereto. This Agreement may only be amended or modified, and the terms hereof
may only be waived, by a writing signed by all parties hereto or, in the case of
a waiver, by the party entitled to the benefit of the terms being waived.

                  7.5 Assignment; Binding Effect. This Agreement may not be
assigned or delegated, in whole or in part, by any party hereto without the
prior written consent of the other parties hereto.

                  7.6 Severability. In the event that any provision of this
Agreement shall be declared invalid or unenforceable by a court of competent
jurisdiction in any jurisdiction, such provision shall, as to such jurisdiction,
be ineffective to the extent declared invalid or unenforceable without affecting
the validity or enforceability of the other provisions of this Agreement, and
the remainder of this Agreement shall remain binding on the parties hereto (so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner adverse to any party). Upon such determination,
the parties shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the greatest extent possible.

                  7.7 No Third Party Beneficiaries. This Agreement is for the
benefit of the parties hereto and is not intended to confer upon any other
Person any rights or remedies hereunder. Notwithstanding anything herein to the
contrary, the only Persons entitled to assert any rights or claims hereunder are
KPMG, the Company, and the Investor.

                                       10
<PAGE>   15

                  7.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California,
without giving effect to the principles of conflicts of law thereof.

                  7.9 Interpretation. This Agreement is the result of
arms-length negotiations between the parties hereto and has been prepared
jointly by the parties. In applying and interpreting the provisions of this
Agreement, there shall be no presumption that the Agreement was prepared by any
one party or that the Agreement shall be construed in favor of or against any
one party.

                  7.10 Termination. This Agreement shall terminate upon the
earliest to occur of (i) the failure to close a Qualified IPO (as defined in the
Certificate of Designation) by March 15, 2001, (ii) the formal withdrawal by the
Company of its Registration Statement from the Securities and Exchange
Commission, (iii) the public announcement by the Company that it intends to make
such formal withdrawal or to terminate or abandon the IPO by March 15, 2001 or
(iv) the public announcement by the Company that it intends to delay the IPO
beyond March 15, 2001 or a public announcement by the Company that it will not
proceed with the IPO until after March 15, 2001.

                  7.11 Captions. The Article and Section Headings in this
Agreement are inserted for convenience of reference only, and shall not affect
the interpretation of this Agreement.

                  7.12 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.

                           [SIGNATURE PAGE TO FOLLOW]




                                       11
<PAGE>   16
                  IN WITNESS WHEREOF, each of the parties has executed this
Agreement as of the date first written above.

                             CISCO SYSTEMS, INC.



                             By:        /s/ David A. Rogan
                                 -----------------------------------------------
                             Name:      David A. Rogan
                             Title:     Vice President, Treasurer


                             KPMG LLP


                             By:        /s/ Robert W. Alspaugh
                                 -----------------------------------------------
                             Name:      Robert W. Alspaugh
                             Title:     Deputy Chairman


                             KPMG CONSULTING, INC.



                             By:        /s/ Randolph C. Blazer
                                 -----------------------------------------------
                             Name:      Randolph C. Blazer
                             Title:     Chief Executive Officer





















             [SIGNATURE PAGES TO PREFERRED STOCK PURCHASE AGREEMENT]



<PAGE>   17


                                                                       EXHIBIT A

                            Hypothetical Illustration

Assumptions

     1.   Initial public offering price in the IPO of $7.75 per share of Common
          Stock

     2.   591.5 million shares of Common Stock outstanding after the IPO.

     3.   Investor owns 2.5 million shares of Series A Preferred Stock
          immediately prior to the IPO.



Calculations

     1.   If converted on the date of the closing of the IPO, the 2.5 million
          shares of Series A Preferred Stock held by the Investor would convert
          into 84.7 million shares of Common Stock.

     2.   Since 9.9% of the outstanding shares of Common Stock equals 58.6
          million shares of Common Stock, the Company would need to repurchase
          the equivalent of 26.1 million shares of Common Stock from the
          Investor.

     3.   Therefore, immediately prior to the conversion, the Company would
          repurchase from the Investor such number of shares of Series A
          Preferred Stock that would convert into 26.1 million shares of Common
          Stock. The repurchase price would equal 26.1 million shares x $7.75,
          or approximately $202.0 million.

     4.   The remaining shares of Series A Preferred Stock held by the Investor
          would convert into 58.6 million shares of Common Stock.