<PAGE>

                                                                    EXHIBIT 10.5


                  FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
                    AND FIRST AMENDMENT TO ESCROW AGREEMENT

        This First Amendment to Asset Purchase Agreement and First Amendment to
Escrow Agreement (this "First Amendment") is made as of this __th day of May,
                        ---------------
2001 by and among Cisco Systems, Inc, a California corporation ("Cisco Inc."),
                                                                 ----------
CAIS Internet, Inc., a Delaware corporation ("CAIS Internet"), CAIS Software
                                              -------------
Solutions, Inc., a California corporation ("CAIS Software"), and CAIS, Inc., a
                                            -------------
Virginia corporation ("CAIS Inc."), with the agreement and consent of Cisco
                       --------
Systems Capital Corporation ("Lender"), as undersigned. Capitalized terms used
                              ------
but not otherwise defined herein shall have the meaning set forth in the
Purchase Agreement (as defined below).

                                   WITNESSETH

                  WHEREAS, Cisco Inc., CAIS Software, CAIS Internet, and CAIS
Inc. entered into an Asset Purchase Agreement (the "Purchase Agreement"), dated
                                                    ------------------
as of October 19, 2000, providing for the purchase by Cisco Inc. from CAIS
Software and CAIS Inc. of all of the assets, properties and rights of CAIS
Software and CAIS Inc. relating to the Business;

                  WHEREAS, pursuant to Article VIII of the Purchase Agreement
("Article VIII"), an Initial Escrow Amount in the original principal sum of
  ------------
$15,000,000 plus a Special Escrow Amount in the original principal sum of
$25,500,000 were each to be held and administered as an Escrow Fund by the
Escrow Agent for the benefit of Cisco Inc., subject to the rights of the Escrow
Participants to receive the sums remaining at the end of the Escrow Periods, all
according to the terms and conditions set forth in Article VIII;

                  WHEREAS, pursuant to Article VIII, Cisco Inc., CAIS Software,
CAIS Internet, CAIS Inc., and Escrow Agent entered into that certain Escrow
Agreement ("Escrow Agreement") dated as of December 4, 2000, and the Escrow
            ----------------
Amount is, as of the date hereof, being held and administered by the Escrow
Agent in accordance with the terms of the Escrow Agreement;

                  WHEREAS, CAIS Software, CAIS Internet, and CAIS Inc. have each
requested Cisco Inc. to agree to the early release of $41,300,000 from the
$41,325,000 comprising the Escrow Amount (original principal balance of
$40,500,000, plus interest accrued thereupon in the approximate amount of
$825,000, as of May 1, 2001), all for the purposes of funding (i) a payment to
Science Applications International Corporation ("SAIC") in the amount of
$13,500,000 in full settlement of SAIC's lien claim against the Escrow Fund and
obtaining related releases, and (ii) a distribution to Lender in the amount of
$27,800,000 in payment of certain Obligations outstanding under the Credit
Agreement (as defined hereinafter) and related loan documents, with such release
to be made notwithstanding the fact that the Escrow Periods provided for under
Article VIII have not terminated as of the date hereof, and Cisco Inc. is
willing to consent to such early release on the terms and conditions set forth
herein below;

                  WHEREAS, CAIS Inc. and Lender are parties to that certain
Agreement dated as of June 30, 1999 (as amended, modified, renewed or extended
from time to time, the "Credit Agreement") providing for extensions of credit by
                        ----------------
Lender to CAIS Inc., and in connection therewith,
<PAGE>

CAIS Internet delivered to Lender that certain Guaranty dated as of June 30,
1999 (as amended, modified, renewed or extended from time to time, the
"Guaranty"), whereby CAIS Internet guaranteed the indebtedness and other
 --------
obligations of CAIS Inc. to Lender under the Credit Agreement;

                  WHEREAS, in connection with the Credit Agreement, CAIS Inc.
(i) made and delivered that certain Security Agreement ("Borrower Security
                                                         -----------------
Agreement") dated as of June 30, 1999, for the benefit of Lender, granting
---------
Lender a security interest in, among other things, all accounts, contract
rights, rights to payment, money and instruments, and other obligations of any
kind owed to CAIS Inc., and all general intangibles, investment property, and
other personal property of CAIS Inc., and all proceeds of any of the foregoing,
as more particularly set forth in the Borrower Security Agreement, and (ii) made
and delivered as debtor those certain UCC-1 financing statements, which
financing statements were duly filed to perfect Lender's security interest under
the Borrower Security Agreement;

                  WHEREAS, in connection with the Guaranty, CAIS Internet (i)
made and delivered that certain Security Agreement ("Guarantor Security
                                                     ------------------
Agreement") dated as of June 30, 1999, for the benefit of Lender, granting
---------
Lender a security interest in, among other things, all accounts, contract
rights, rights to payment, money and instruments, and other obligations of any
kind owed to CAIS Internet, and all general intangibles, investment property,
and other personal property of CAIS Internet, and all proceeds of any of the
foregoing, as more particularly set forth in the Guarantor Security Agreement,
and (ii) made and delivered as debtor those certain UCC-1 financing statements,
which financing statements were duly filed to perfect Lender's security interest
under the Guarantor Security Agreement;

                  WHEREAS, the parties hereto desire to amend the provisions the
Purchase Agreement, including Article VIII thereof, and the provisions of the
Escrow Agreement to provide, among other things, for certain immediate
disbursements therefrom, all on terms and conditions as more particularly set
forth herein below.

                  NOW, THEREFORE, the parties hereto, in consideration of the
confirmation of the foregoing recitals and the mutual covenants contained
herein, and intending to be legally bound, hereby agree as follows:

         SECTION 1 Amendment to Purchase Agreement, Article VIII, Section 8.4,
                   ----------------------------------------------------------
and Escrow Agreement, Section 3. The provisions of Section 8.4 of Article VIII
-------------------------------
of the Purchase Agreement and the provisions of Section 3 of the Escrow
Agreement are each hereby deleted in their entirety and are amended and restated
to read as follows:

                  [Section 8.4 / Section 3.] Disbursements from Escrow; Escrow
                                             ---------------------------------
                  Period; Insurance Option; Claims.
                  --------------------------------

                           (a) Disbursements from Escrow. The parties shall
                               -------------------------
                               forthwith request and instruct the Escrow Agent
                               =========
                               to make the following disbursements from the
                               Escrow Fund pursuant to the terms of separate
                               joint written

                                       2
<PAGE>

                           escrow instructions to Escrow Agent to be delivered
                           by Parent, Seller, Affiliate, Buyer, and Lender:

                                    (i)   To SAIC, a disbursement in the amount
                                    of $13,500,000.00 (Thirteen Million Five
                                    Hundred Thousand and 00/100 Dollars);

                                    (ii)  To Cisco Systems Capital Corporation,
                                    forthwith, a disbursement in the amount of
                                    $27,800,000.00 (Twenty-Seven Million Eight
                                    Hundred Thousand and 00/100 Dollars); and

                                    (iii) Upon presentation to Escrow Agent of
                                    an Officer's Certificate from Buyer stating
                                    that the Claims Insurance Policy (as defined
                                    below) is in force, a disbursement to CAIS
                                    Internet, Inc. of cash in the amount
                                    necessary to reduce the Escrow Fund to a
                                    balance of $1,000.00 (One Thousand and
                                    00/100 Dollars). Buyer and Lender agree that
                                    such cash disbursement shall be free and
                                    clear of any lien or claim of Buyer or of
                                    Lender.

                           (b) Escrow Period. The remaining portion of the
                               -------------
                           Escrow Amount, in the sum of $1,000.00 (One Thousand
                           and 00/100 Dollars), plus any additional interest or
                           earnings subsequently accrued thereupon, plus any
                           additional sums required by the Escrow Agent to be
                           deposited by Buyer in order to maintain a minimum
                           balance in the account in which the Escrow Amount is
                           held, shall remain in the Escrow Fund until, and the
                           escrow period (the "Escrow Period") shall terminate
                                               -------------
                           at, 11:59 p.m. Pacific Standard Time on, the earlier
                           of (i) December 4, 2006, or (ii) the date specified
                           by Buyer in a notice (the "Notice") delivered to the
                                                      ------
                           Escrow Agent. Buyer shall pay the Escrow Agent such
                           fees as are established by the Fee Schedule attached
                           to and incorporated in the Escrow Agreement.

                           (c) Insurance Option. Parent, Seller, and Affiliate,
                               ----------------
                           collectively, covenant and agree that on or before
                           June 30, 2001, they shall either (i) obtain an
                           insurance policy fully pre-paid by or on behalf of
                           Parent, naming Buyer as insured and providing
                           coverage in an aggregate amount of not less than
                           $5,000,000 (Five Million and 00/100 Dollars) with
                           coverage commencing on or before June 30, 2001, and
                           continuing through December 4, 2006, insuring Buyer
                           against any Buyer Damages which Buyer could assert
                           under Section 8.2(a)(iv) of the Purchase Agreement,
                           with said policy to be issued by an insurer and upon
                           terms and conditions reasonably acceptable to Buyer
                           (a "Claims Insurance Policy"), or (ii) obtain a
                           Claims Insurance Policy providing a benefit amount of
                           less than $5,000,000 and, together therewith, either
                           deposit

                                       3
<PAGE>

                           cash in the Escrow Fund, or provide a letter of
                           credit for the benefit of Buyer, in form and by an
                           issuer reasonably acceptable to Buyer, in such amount
                           (the "Deductible Amount"), as may be required to
                           supplement coverage under the Claims Insurance
                           Policy, or (iii) in the event no Claims Insurance
                           Policy is then in place, deposit $5,000,000 (the
                           "Cash Substitute") in ready funds in the Escrow Fund.
                           Buyer and Parent agree to cause instructions to be
                           delivered to the Escrow Agent releasing from the
                           Escrow Fund the Cash Substitute, together with all
                           interest earned thereon, to or for the account of
                           Parent on such date, whether before or after June 30,
                           2001, as Parent, Seller or Affiliate shall furnish
                           the Claims Insurance Policy and any required
                           Deductible Amount. Parent, Seller, or Affiliate shall
                           reimburse Buyer's reasonable expenses, including
                           legal fees and costs, incurred in connection with
                           their exercise of the insurance option and related
                           transactions set forth in this sub-paragraph. Buyer
                                                                         =====
                           shall provide Parent with a monthly written statement
                           =====================================================
                           of the amount of such expenses on a one-month
                           =============================================
                           trailing basis.
                           ==============

                           (d) Security Agreement; Power of Attorney. The
                               -------------------------------------
                           obligations of Parent, Seller, and Affiliate under
                           subparagraph (c) hereof shall be secured by, and
                           Parent, Seller, and Affiliate hereby grant, a
                           security interest in favor of Buyer attaching to (i)
                           their rights under and in connection with the Escrow
                           Agreement and the Escrow Fund and any Claims
                           Insurance Policy; (ii) all equipment of Parent,
                           Seller, and Affiliate that has been purchased from
                           Buyer or an affiliate of Buyer, and all data,
                           software, and other information to the extent stored
                           therein; and (iii) all proceeds of the collateral
                           described in the preceding sub-clauses (i) and (ii).
                           Parent, Seller, and Affiliate, and each of them,
                           hereby agree to execute such financing statements and
                           related documents and provide such other cooperation
                           as may be necessary to accomplish the foregoing and
                           further hereby irrevocably makes, constitutes, and
                           appoints Buyer as its true and lawful agent and
                           attorney-in-fact for the purposes of executing and
                           filing any such financing or continuation statements
                           and authorizes Buyer to file any such financing or
                           continuation statements without the signature of
                           Parent, Seller, and/or Affiliate as debtor to the
                           extent permitted by applicable law.

                           (e) Release of Security Interests.
                               -----------------------------

                                    (i)   Upon satisfaction of the obligations
                           of Parent, Seller and Affiliate under subparagraph
                           (c) hereof, Buyer shall release, and promptly cause
                           to be filed releases and termination statements in
                           such forms as may reasonably be requested by Parent,
                           of all its liens and

                                       4
<PAGE>

                           security interests in the assets, rights and
                           properties of Parent and Affiliate, except that Buyer
                           shall not release its security interest in the rights
                           of Parent and Affiliate under and in connection with
                           the Escrow Agreement and the Escrow Fund and the
                           Claims Insurance Policy, and proceeds thereof
                           (collectively, the "Retained Liens"), which security
                           interest shall continue in order to secure the
                           obligations of Parent, Seller, and Affiliate under
                           Article VIII of the Purchase Agreement, the Escrow
                           Agreement, and the First Amendment. Except for the
                           Retained Liens, all claims of Buyer upon Parent,
                           Seller, and Affiliate with respect to Buyer Damages
                           under the Purchase Agreement and the Escrow Agreement
                           shall be otherwise unsecured.

                                    (ii)  Buyer shall fully release the Retained
                           Liens promptly following the last to occur of the
                           following:

                                             (x) the sixth anniversary after the
                           Closing Date under the Purchase Agreement has passed
                           and Parent, Seller, and Affiliate have not breached
                           their obligations under the First Amendment, or, to
                           the extent continuing or revived, the Loan Documents;
                           and

                                             (y) Buyer has been paid in full, or
                           has released, all claims in connection with Buyer
                           Damages under the terms of the Escrow Agreement and
                           Annex A thereto or, alternately, all applicable
                           Escrow Periods have run under the terms of the Escrow
                           Agreement and Annex A thereto and no claims for Buyer
                           Damages are then outstanding.

                           (f) Release of Escrow Amounts Not Intended to Release
                               -------------------------------------------------
                           Or Modify Indemnities. Notwithstanding the releases
                           ---------------------
                           from the Escrow Fund, and the option for insurance to
                           be placed in favor of Buyer, all as authorized and
                           instructed pursuant to this Section, the scope of
                           Seller's and Parent's indemnification of the Seller
                           Indemnified Persons pursuant to the Purchase
                           Agreement shall remain unmodified and undiminished,
                           except that such indemnification shall not have the
                           benefit of the cash disbursed from the Escrow Fund
                           pursuant to Section 3(a) of the Escrow Agreement as
                           amended by the First Amendment, and provided further
                           that such indemnification shall be an unsecured claim
                           except to the extent otherwise set forth herein.

         SECTION 2 Revival of Obligations. Notwithstanding anything to the
                   ----------------------
contrary in this First Amendment, a material term of the consideration for the
agreement of Cisco Inc. hereunder to permit early releases of the Escrow Fund,
and an express condition to such agreement, are the payments to be

                                       5
<PAGE>

made to Lender pursuant to the Section 1 herein above. Therefore, in the event
that any such payment to Lender, or any portion thereof, is rescinded, voided,
or must otherwise be refunded by Lender or otherwise paid or released by Lender,
for any reason whatsoever, then all such sums shall be returned by Lender
directly to the Escrow Fund to serve as a source of payment for Buyer's Damages
as originally contemplated under Article VIII of the Purchase Agreement, and the
related obligations of CAIS Software, CAIS Internet, and CAIS Inc. thereunder
shall be automatically revived and reinstated, in full force and effect, all to
the extent that and as though such releases from the Escrow Fund had never been
made, and as if the Purchase Agreement and the Escrow Agreement had never been
amended to permit such releases, and CAIS Software, CAIS Internet, and CAIS Inc.
hereby agree to execute such other and further documents as Cisco Inc. may then
require for the purpose of evidencing and giving notice of the same and hereby
irrevocably appoint Cisco Inc. as their attorney-in-fact for the purpose of
executing such documents.

         SECTION 3 Amendment to Purchase Agreement, Article VIII, Section 8.5.
                   ----------------------------------------------------------
The provisions of Section 8.5 of Article VIII of the Purchase Agreement are
hereby deleted in their entirety and are amended and restated to read as
follows:

                  8.5      Claims upon Escrow Fund.
                           -----------------------
                           (a) Upon receipt by the Escrow Agent, on or before
                           the last day of the Escrow Period, of a certificate
                           signed by any officer of Buyer (an "Officer's
                                                               ---------
                           Certificate"):
                           -----------

                                    (i)   stating that Buyer Damages exist and,
                                    solely in the case of Section 8.2(a)(i),
                                    specifying that such Buyer Damages are in an
                                    aggregate amount greater than $100,000; and

                                    (ii)  specifying in reasonable detail the
                                    individual items of such Buyer Damages
                                    included in the amount so stated, the date
                                    each such item was paid, or properly
                                    accrued or arose, the nature of the
                                    misrepresentation, breach of warranty or
                                    claim to which such item is related;

                           the Escrow Agent shall, subject to the provisions of
                           Sections 8.6 and 8.7 below, deliver to Buyer out of
                           the Escrow Fund, as promptly as practicable, and to
                           the extent sufficient funds remain in the Escrow
                           Fund, a portion of the Escrow Amount (and/or interest
                           or earnings thereon) having a value equal to such
                           Buyer Damages.

         SECTION 4 Amendment to Escrow Agreement, Section 4. The provisions of
                   ----------------------------------------
Section 4 of the Escrow Agreement are hereby deleted in their entirety and are
amended and restated to read as follows:

                                       6
<PAGE>

                  4.       Duties of Escrow Agent. In addition to the Duties set
                           ----------------------
                           forth in Article VIII, the Duties of the Escrow Agent
                           shall include the following:

                                    (a) The Escrow Agent shall hold and
                                    safeguard the Escrow Fund during the Escrow
                                    Period and shall treat such Escrow Fund as a
                                    trust fund in accordance with the terms of
                                    this Agreement and Article VIII and not as
                                    the property of Buyer or as the property of
                                    Seller, Parent, or Affiliate, and shall hold
                                    and dispose of the Escrow Fund only in
                                    accordance with the terms hereof and of
                                    Article VIII.

                                    (b) Promptly following termination of the
                                    Escrow Period as set forth in Section 3(b)
                                    of the Escrow Agreement, as the same may
                                    from time to time be amended, the Escrow
                                    Agent shall release (i) that part of the
                                    remaining Escrow Amount and any Earnings
                                    thereon in excess of any amount sufficient
                                    to satisfy any unsatisfied claims specified
                                    in any Officer's Certificate theretofore
                                    delivered to the Escrow Agent prior to the
                                    termination of the Escrow Period with
                                    respect to facts and circumstances existing
                                    prior to expiration of the Escrow Period and
                                    shall deliver said sums to the Escrow
                                    Participants, at their addresses and in the
                                    proportions set forth in Annex B and (ii)
                                    that part, if any, of the Escrow Fund
                                    deposited by Buyer in order to maintain a
                                    minimum balance in the account in which the
                                    Escrow Amount is held, and any Earnings
                                    thereon, and shall deliver said sums
                                    according to the written instructions of
                                    Buyer. As soon as all Buyer's Damages claims
                                    have been resolved, the Escrow Agent shall
                                    deliver the remaining Escrow Amount (and
                                    Earnings thereon) that is not required to
                                    satisfy such claims and expenses to the
                                    Escrow Participants, at their addresses and
                                    in the proportions set forth in Annex B.

                                    (c) Any Earnings on the Escrow Fund shall be
                                    distributed to Buyer and/or the Escrow
                                    Participants, as the case may be, in
                                    accordance with, and in proportion to, the
                                    distributions of the Escrow Amount made to
                                    such parties, but without reference to any
                                    distributions made to other parties.

         SECTION 5 Amendment to Purchase Agreement, Section 9.5. Sub-clause (b)
                   --------------------------------------------
of Section 9.5 of the Purchase Agreement is hereby deleted in its entirety and
is amended and restated to read as follows:

                           (b) are not intended to confer upon any other person
                           any rights or remedies hereunder, except that Cisco
                           Systems Capital Corporation

                                       7
<PAGE>

                           shall be an express third-party beneficiary of
                           Section 8.4 this Agreement;

         SECTION 6 General.
                   -------

                           (a) Purchase Agreement and Escrow Agreement Not
                               -------------------------------------------
Otherwise Affected. Except as expressly amended pursuant hereto, the Purchase
------------------
Agreement and the Escrow Agreement shall remain unchanged and in full force and
effect according to their terms, which are hereby ratified and confirmed. The
parties' execution and delivery of this First Amendment shall not be deemed to
create a course of dealing or otherwise create any express or implied duty to
enter into other or further amendments to or modifications of any agreements
existing between any of them.

                           (b) Recitals Are Material Terms. The recitals set
                               ---------------------------
forth above are hereby confirmed and agreed to by the parties hereto as true and
correct in all respects as of the date hereof and shall comprise material terms
of this First Amendment.

                           (c) No Reliance. The parties hereto acknowledge and
                               -----------
confirm to each other that each such party is executing this First Amendment on
the basis of its own investigation and for its own reasons, without reliance
upon any agreement, representation, understanding or communication by or on
behalf of any other party hereto.

                           (d) Binding Effect. This First Amendment shall be
                               --------------
binding upon, inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.

                           (e) Governing Law. This First Amendment shall be
                               -------------
governed by, and construed in accordance with, the law of the State of
California.

                           (f) Complete Agreement; Amendments. This First
                               ------------------------------
Amendment contains the entire and exclusive agreement of the parties hereto with
reference to the matters expressly set forth herein. This First Amendment
supersedes all prior commitments, drafts, communications, discussions and
understandings, oral and written, with respect thereto. This First Amendment may
not be modified, amended or otherwise altered except in accordance with the
terms of the Purchase Agreement.

                           (g) Severability. Whenever possible, each provision
                               ------------
of this First Amendment shall be interpreted in such manner as to be effective
and valid under all applicable laws and regulations. If, however, any provision
of this First Amendment shall be prohibited by or invalid under any such law or
regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed
modified to conform to the minimum requirements of such law or regulation, or,
if for any reason it is not deemed so modified, it shall be ineffective and
invalid only to the extend of such prohibition or invalidity without

                                       8
<PAGE>

affecting the remaining provisions of this First Amendment, or the validity or
effectiveness of such provision in any other jurisdiction.

                           (h) Counterparts. This First Amendment may be
                               ------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement.

                           (i) Interpretation. This First Amendment is the
                               --------------
result of negotiations between the parties hereto, and has been reviewed by
their respective counsel, and is therefore the product of all parties hereto.
Accordingly, this First Amendment and any alleged ambiguities herein shall not
be construed against any party, including by reason of such party's involvement
in the preparation hereof.

                  (j) Form of Releases; Further Assurances. Where Buyer is
                      ------------------------------------
obligated hereunder to cause the release of security interests in the asset of
any party, it is understood, and Buyer hereby confirms, that such obligation
includes the execution and delivery of such Uniform Commercial Code termination
statements, lien releases, termination of assignments of trade marks and
copyrights, discharges of security interests, and other similar discharges and
release documents (including, if applicable, in recordable form) as are
necessary or as are reasonably requested by the debtor party to release the
security interests, financing statements and all other notices of security
interests and liens in favor of Buyer or its affiliates. The parties agree to
execute and deliver to one another such additional documents and additional
information as any of them may reasonably require to carry out the agreements
and terms of this First Amendment.

                  IN WITNESS WHEREOF, the undersigned have caused this First
Amendment to be executed and delivered by their respective officers, duly
authorized, all as of the date first written above.

                                       CAIS INTERNET, INC.

                                       By:
                                           -------------------------
                                       Name:
                                             -----------------------
                                       Title:
                                              ----------------------



                                       CAIS SOFTWARE SOLUTIONS, INC.

                                       By:
                                           -------------------------
                                       Name:
                                             -----------------------
                                       Title:
                                              ----------------------

                                       9
<PAGE>

                                       CAIS, INC.

                                       By:
                                           -------------------------
                                       Name:
                                             -----------------------
                                       Title:
                                              ----------------------



                                       CISCO SYSTEMS, INC.

                                       By:
                                           -------------------------
                                       Name:
                                             -----------------------
                                       Title:
                                              ----------------------



THE PROVISIONS SET FORTH HEREIN ABOVE
ARE HEREBY AGREED AND CONSENTED TO
AS OF THE DATE FIRST WRITTEN ABOVE:



                                       CISCO SYSTEMS CAPITAL CORPORATION

                                       By:
                                           -------------------------
                                       Name:
                                             -----------------------
                                       Title:
                                              ----------------------


                                       10