Document:

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                                                                   Exhibit 10.5

                                GUARANTY OF LEASE

         WHEREAS, Ryan Companies US, Inc., a Minnesota corporation, as Landlord,
has entered into a certain Lease Agreement dated April 14, 1999, between
Landlord and D56, Inc., a Minnesota corporation, as Tenant (herein referred to
as the "Lease").

         WHEREAS, the undersigned ("Guarantor") is the parent company of the
Tenant.

         NOW, THEREFORE, for value received, the undersigned hereby absolutely
and unconditionally guarantees to said Landlord, its successors and assigns, the
due and prompt performance and observance of all of the obligations of said
Lease to be met by Tenant, including but not limited to the payment of rent and
other payments to be made under the Lease. The undersigned agrees that no act or
thing, except for payment in full or written release of this Guaranty by
Landlord, which but for this provision might or could in law or equity act as a
release of the liability of the undersigned hereunder, shall in any way affect
or impair the absolute and unconditional obligation of the undersigned. This
Guaranty shall be a continuing, absolute and unconditional Guaranty and shall be
in full force and effect for the term of the Lease or until this Guaranty has
been released in writing by Landlord, whichever occurs first. This Guaranty is a
guaranty of payment (and not of collection), and of performance. The liability
of Guarantor is co-extensive with that of Tenant and also joint and several with
that of Tenant, and this Guaranty shall be enforceable against Guarantor without
the necessity of any suit or proceeding on Landlord's part of any kind or nature
whatsoever against Tenant. This Guaranty shall inure to the benefit of the
successors and assigns of said Landlord, including any subsequent holder of the
Landlord's interest in the Lease.

         The undersigned expressly agrees that the liability and obligations
under this Guaranty shall not in any way be affected by the institution by or
against the Tenant of any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or any other similar proceedings for relief under any
bankruptcy law or similar law for relief of debtors and that upon the
institution of any of the above actions, at Landlord's sole discretion and
without any notice thereof or demand therefor, Guarantor shall pay all rent and
other payments to be made under the Lease and perform and observe all covenants
under the Lease.

         The undersigned hereby further agrees that notwithstanding any
assignment of the Lease or sublettings, the undersigned shall remain liable as a
guarantor of the Lease, irrespective of whether or not the Tenant has been
released from liability; and the Guarantor agrees to execute a reaffirmation of
this Guarantee upon the request of Landlord in connection with any such
assignment or subletting. Landlord shall deliver to Guarantor a copy of any and
all notices of default required pursuant to the terms and conditions of the
Lease to be given by Landlord to Tenant (and simultaneously with any such notice
to Tenant), by certified mail, return receipt requested as follows (or to such
other address as Guarantor may designate from time to time by written notice to
Landlord):

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                             Department 56, Inc.
                             One Village Place
                             6436 City West Parkway
                             Eden Prairie, MN 55344

         Landlord agrees to accept the cure by Guarantor of any such default by
Tenant so long as such cure is completed during the same cure period, if any,
accorded Tenant under the Lease.

         This Guaranty is executed under and intended to be constructed by the
laws of the State of Minnesota.

         IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be
executed as of this 14 day of April, 1999.

DEPARTMENT 56, INC., a Delaware corporation

BY  /s/ Robert Rose
   -------------------------

Its  Vice President
    ------------------------

STATE OF MINNESOTA         )
                           ) SS.
COUNTY OF HENNEPIN         )

         The foregoing instrument was acknowledged before me this 14 day of
April, 1999, by Robert Rose, the Vice President of Department 56, Inc., a
Delaware corporation, on behalf of the corporation.

/s/ Stephen M. Hickok
----------------------------
Notary Public<PAGE>

                                                                  EXECUTION COPY

                                 FIRST AMENDMENT

                  FIRST AMENDMENT dated as of January 27, 2000 (this
"AMENDMENT") to the Credit Agreement dated as of March 19, 1999 (the "CREDIT
AGREEMENT") among DEPARTMENT 56, INC., a Delaware corporation (the "BORROWER"),
the several banks and other financial institutions party thereto (the "LENDERS")
and THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative
agent for the Lenders (in such capacity, the "ADMINISTRATIVE AGENT").

                              W I T N E S S E T H :

                  WHEREAS, the Borrower, the Lenders and the Administrative
Agent are parties to the Credit Agreement;

                  WHEREAS, the Borrower has requested that the Administrative
Agent and the Lenders amend the Credit Agreement in certain respects; and

                  WHEREAS, the Administrative Agent and the Lenders are willing
to enter into this Amendment on the terms and conditions hereof;

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:

1.                           DEFINED TERMS.  Unless otherwise defined herein,
capitalized terms used herein which are defined in the Credit Agreement are
used herein as so defined.

1.                           AMENDMENT TO SECTION 1.1. Subsection 1.1 of the
Credit Agreement is hereby amended by inserting therein, in appropriate
alphabetical order, the following new definitions:

                  "`FIRST AMENDMENT':  the First Amendment dated as of January
27, 2000, to this Agreement.

                  `FIRST AMENDMENT EFFECTIVE DATE':  the date on which the
First Amendment shall become effective."

1.                            AMENDMENT TO SECTION 7.1(c). Section 7.1(c) of
the Credit Agreement is hereby amended by deleting such Section 7.1(c) in its
entirety and inserting the following in lieu thereof:

<PAGE>

         "(c) CONSOLIDATED NET WORTH. Permit Consolidated Net Worth at the last
         day of any fiscal quarter to be less than the greater of (i)
         $65,000,000 or (ii) $142,988,000 MINUS, (A) for any fiscal quarter
         ending after the First Amendment Effective Date (and, for purposes of
         calculating pro forma compliance pursuant to Section 7.6(b), the
         applicable fiscal quarter ending prior to the First Amendment Effective
         Date) and on or prior to December 30, 2000, the amount expended by the
         Borrower to repurchase its Capital Stock pursuant to Section 7.6(b)
         (after giving effect to this clause (ii)(A)) during the period from the
         First Amendment Effective Date to the last day of such fiscal quarter
         and (B) for any fiscal quarter ending thereafter, the amount expended
         by the Borrower to repurchase its Capital Stock pursuant to Section
         7.6(b) (after giving effect to clause (ii)(A)) during the period from
         the First Amendment Effective Date to December 30, 2000."

1.            REPRESENTATIONS AND WARRANTIES. The Borrower hereby confirms
that, after giving effect to the amendments provided for herein, the
representations and warranties contained in Section 4 of the Credit Agreement
are true and correct in all material respects on and as of the date hereof and
no Default or Event of Default has occurred and is continuing.

1.            NO OTHER AMENDMENTS. Except as expressly amended hereby, the
Credit Agreement shall continue to be, and shall remain, in full force and
effect in accordance with its terms.

1.            COUNTERPARTS. This Amendment may be executed by the parties hereto
in any number of separate counterparts and all of such counterparts taken
together shall be deemed to constitute one and the same instrument. Delivery of
an executed counterpart of a signature page to this Amendment by telecopier
shall be effective as delivery of a manually executed counterpart of this
Amendment.

1.            CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective
upon the receipt by the Administrative Agent of (i) this Amendment, executed and
delivered by a duly authorized officer of each of the Borrower and the Required
Lenders and (ii) all fees required to be paid by the Borrower pursuant to
Section 9 of this Amendment.

1.            GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

1.            AMENDMENT FEE. The Borrower shall pay an amendment fee to each of
the Lenders entering into this Amendment prior to January 27, 2000 of .075% of
each such Lender's Commitment, payable on the First Amendment Effective Date.

<PAGE>

                                                                             3

                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the date set forth above.

DEPARTMENT 56, INC.

By:  /s/ Percy C. Tomlinson
   -------------------------------------
     Title: Executive Vice President and
            Chief Financial Officer

THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender

By:  /s/ Jonathan L. Twichell
   -------------------------------------
     Title: Vice President

ABN AMRO BANK N.V., as Co-Documentation Agent and as a Lender

By:  /s/ John E. Robertson
   -------------------------------------
     Title: Vice President

By:  /s/ Peter J. Hallan
   -------------------------------------
     Title: Assistant Vice President

BANK ONE, NA (Main Office Chicago),
as Co-Documentation Agent and as a Lender

By:  /s/ Lisa Whatley
   -------------------------------------
     Title: Vice President

U.S. BANK NATIONAL ASSOCIATION, as Managing Agent and as a Lender

By:  /s/ Michael J. Reymann
   -------------------------------------
     Title: Vice President

<PAGE>

COMERICA BANK

By:  /s/ Timothy O'Rourke
   -------------------------------------
     Title: Vice President

FIRSTAR BANK MILWAUKEE, N.A.

By:  /s/ Jason R. Hickey
   -------------------------------------
     Title: Assistant Vice President

HARRIS TRUST AND SAVINGS BANK

By:  /s/ Andrew K. Peterson
   -------------------------------------
     Title: Managing Director

M&I MARSHALL & ILSLEY BANK

By:  /s/ John W. Howard
   -------------------------------------
     Title: Vice President

THE FIFTH THIRD BANK

By:  /s/ Kevin J. Walter
   -------------------------------------
     Title: Corporate Banking Officer

<PAGE>

                                                                           iii
WELLS FARGO BANK, NATIONAL      ASSOCIATION

By:  /s/ Molly S. Van Metre
   -------------------------------------
     Title: Vice President and Senior Banker

MICHIGAN NATIONAL BANK

By:  /s/ Draga B. Palincas
   -------------------------------------
     Title: Vice President

WACHOVIA BANK

By:  /s/ Walter R. Gillikin
   -------------------------------------
     Title: Senior Vice President

BANK HAPOALIM B.M.

By:
     Title:

By:  /s/ Conrad Wagner
   -------------------------------------
     Title: First Vice President

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