<PAGE>

                         THIRD AMENDMENT TO CREDIT AGREEMENT

         THIS THIRD AMENDMENT TO CREDIT AGREEMENT dated as of June23, 1997 
("this Amendment") by and between DAMARK INTERNATIONAL, INC., a Minnesota 
corporation (the "Borrower"), the banks which are signatories hereto 
(individually, a "Bank" and, collectively, the "Banks") and FIRST BANK 
NATIONAL ASSOCIATION, a national banking association, one of the Banks, as 
agent for the Banks (in such capacity, the "Agent").

                                       RECITALS

         A.  The Borrower, the Banks and the Agent are parties to a Credit 
Agreement dated as of March 22, 1996, as amended by a First Amendment dated 
as of October 18, 1996 and a Second Amendment dated as of February 10, 1997 
(as so amended, the "Credit Agreement").

         B.  The obligations of the Borrower to the Banks under the Credit 
Agreement are evidenced by three separate Promissory Notes of the Borrower in 
favor of the Banks each dated March 22, 1996 (collectively, the "Existing 
Notes").

         C.  The parties hereto desire to amend the Credit Agreement in the 
respects hereinafter set forth and to cause the Existing Notes to be amended 
and restated in their entireties.

         NOW, THEREFORE, in consideration of the premises and for other good 
and valuable consideration the receipt and adequacy of which are hereby 
acknowledged, the parties hereto hereby agree as follows:

         Section 1.  DEFINITIONS.  Capitalized terms used herein and not 
otherwise defined herein, but which are defined in the Credit Agreement, 
shall have the meanings ascribed to such terms in the Credit Agreement unless 
the context otherwise requires.

         Section 2.   AMENDMENTS TO CREDIT AGREEMENT.  Subject to Section 4 
hereof, the Credit Agreement is hereby amended as follows:

         (a)  The definition of the term "Commitment Amount" set forth in 
Section 1.1 thereof is amended to read as follows:

              "COMMITMENT AMOUNT":  With respect to a Bank, the amount set
    opposite such Bank's name on Exhibit 1.1-E hereto as its Commitment Amount,
    but as the same may be reduced from time to time pursuant to Section 2.14.

         (b)  The definition of the term "Loan/Standby Letter of Credit
Sublimit" set forth in Section 1.1 thereof is amended to read as follows:

<PAGE>

              "LOAN/STANDBY LETTER OF CREDIT SUBLIMIT":  With respect to a
    Bank, the amount set opposite such Bank's name on Exhibit 1.1-E hereto as
    its Loan/Standby Letter of Credit Sublimit, but as the same may be reduced
    from time to time pursuant to Section 2.14.

         (c)  Section 6.9 thereof is amended to read as follows:

              Section 6.9  CAPITAL EXPENDITURES.  The Borrower will not, and
    will not permit any Subsidiary to, make Capital Expenditures in an amount
    exceeding, on a consolidated basis, (a) $11,500,000 in its fiscal year
    ending December31, 1997 or (b) $10,000,000 in its fiscal year ending
    December 31, 1998 or in any fiscal year thereafter; provided, however, that
    Capital Expenditures made, with the prior written consent of the Majority
    Banks, from equity capital specifically raised by the Borrower for the
    purpose of making such Capital Expenditures shall not be subject to the
    foregoing limitations.

         (d)  Section 6.19 thereof is amended to read as follows:

              Section 6.19  EBITDA.  The Borrower will not permit EBITDA as of
    any date set forth below, for the period of four consecutive fiscal
    quarters ending on such date, to be less than the minimum amount set
    opposite that date:

           Four-Quarter                  Minimum
           Period Ending                 EBITDA
           -------------                 -------
         6/30/97                       $11,400,000
         9/30/97                       $11,700,000
         12/31/97 and on the
         last day of any fiscal
         quarter thereafter            $11,900,000



                                     -2-

<PAGE>

         (e)  Section 6.21 thereof is amended to read as follows:

              Section 6.21  CLEAN-DOWN.  The Borrower shall cause the sum of

                   (a)  the aggregate principal balance of all Loans
         outstanding, plus

                   (b)  the remainder of (i) the aggregate maximum amount
         available to be drawn under outstanding Standby Letters of Credit plus
         the aggregate amount of Unpaid Drawings relating to Standby Letters of
         Credit, minus (ii) the average daily amount of funds on deposit in
         accounts maintained by the Borrower with the Agent during the
         calculation period, plus

                   (c)  the sum of the aggregate maximum amount available to be
         drawn under outstanding Documentary Letters of Credit having
         expiration dates more than 180 days later than the date of
         determination plus the aggregate amount of Unpaid Drawings relating to
         Documentary Letters of Credit 

    not to exceed $4,000,000 for at least 60 consecutive days during the period
    of twelve consecutive months beginning on September1, 1997 and during each
    period of twelve consecutive months beginning on the first day of each
    month thereafter occurring.

         (f)  Exhibit 1.1-A thereto is amended and restated to be in the form 
of Exhibit 1.1-A attached to this Amendment.

         (g)  Exhibit 1.1-B thereto is amended and restated to be in the form 
of Exhibit 1.1-B attached to this Amendment.

         (h)  A new Exhibit 1.1-E is added thereto, which new Exhibit 1.1-E 
shall be in the form of Exhibit 1.1-E attached to this Amendment.

         Section 3.  REPRESENTATIONS AND WARRANTIES OF THE BORROWER.  To 
induce the Banks and the Agent to execute and deliver this Amendment (which 
representations and warranties shall survive the execution and delivery of 
this Amendment), the Borrower represents and warrants to the Agent and the 
Banks that:

         (a)  this Amendment and the Amended Notes (as hereinafter defined)
    have been duly authorized, executed and delivered by it and this Amendment
    and the Amended Notes constitute the legal, valid and binding obligations
    of the Borrower enforceable against the Borrower in accordance with their
    respective terms, subject to limitations as to enforceability which 


                                     -3-

<PAGE>

    might result from bankruptcy, insolvency, reorganization, moratorium or 
    similar laws or equitable principles relating to or limiting creditors' 
    rights generally;

         (b)  the Credit Agreement, as amended by this Amendment, constitutes
    the legal, valid and binding obligation of the Borrower enforceable against
    the Borrower in accordance with its terms, subject to limitations as to
    enforceability which might result from bankruptcy, insolvency,
    reorganization, moratorium or similar laws or equitable principles relating
    to or limiting creditors' rights generally;

         (c)  the execution, delivery and performance by the Borrower of this
    Amendment and the Amended Notes (i) have been duly authorized by all
    requisite corporate action and, if required, shareholder action, (ii) do
    not require the consent or approval of any governmental or regulatory body
    or agency, and (iii) will not (A) violate (1) any provision of law,
    statute, rule or regulation or its certificate of incorporation or bylaws,
    (2) any order of any court or any rule, regulation or order of any other
    agency or government binding upon it, or (3) any provision of any material
    indenture, agreement or other instrument to which it is a party or by which
    any of its properties or assets are or may be bound, or (B) result in a
    breach of or constitute (alone or with due notice or lapse of time or both)
    a default under any indenture, agreement or other instrument referred to in
    clause (iii)(A)(3) of this Section 3(c);

         (d)  as of the date hereof, no Default or Event of Default has
    occurred which is continuing; and

         (e)  all the representations and warranties contained in Article IV of
    the Credit Agreement are true and correct in all material respects with the
    same force and effect as if made by the Borrower on and as of the date
    hereof.

         Section 4.  CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT.  This 
Amendment shall not become effective until, and shall become effective when, 
each and every one of the following conditions shall have been satisfied:

         (a)  executed counterparts of this Amendment, duly executed by the
    Borrower and each of the Banks, shall have been delivered to the Agent;

         (b)  each Bank shall have received a new promissory note substantially
    in the form attached as Exhibit 1.1-C to the Credit Agreement, payable to
    such Bank and in a maximum amount equal to such Bank's Commitment Amount as
    amended by this Amendment, duly executed by the Borrower (as to such Bank,
    its "Amended Note"), which Amended Note shall constitute an amendment and
    restatement of the Existing Note payable to such Bank;


                                     -4-

<PAGE>

         (c)  the Agent shall have received from each Subsidiary a Consent and
    Agreement of Subsidiary in the form of Attachment 1 hereto (the "Subsidiary
    Agreements") duly completed and executed by such Subsidiary;

         (d)  the Agent shall have received a copy of the resolutions of the
    Board of Directors of the Borrower authorizing the execution, delivery and
    performance by the Borrower of this Amendment, certified by an officer
    thereof, together with a certificate of an officer of the Borrower
    certifying as to the incumbency and the true signatures of the officers
    authorized to execute this Amendment on behalf of the Borrower; and

         (e)  the Agent shall have received the favorable opinion of counsel to
    Borrower, covering the matters set forth in Sections 3(a), 3(b) and 3(c).

Upon receipt of all of the foregoing, (i) the Agent shall notify the Borrower 
and the Banks that this Amendment has become effective, but the failure of 
the Agent to give such notice shall not affect the validity of this Amendment 
or prevent it from becoming effective, (ii) each Bank shall surrender to the 
Borrower such Bank's Existing Note, marked "renewed but not paid" or words to 
similar effect; and (iii) the unpaid principal balance outstanding under each 
Bank's Existing Note, and the interest accrued but unpaid thereon, shall be 
outstanding under such Bank's Amended Note.

         Section 5.  UCC FILINGS.  The Borrower agrees that it will, by not 
later than September 1, 1997, deliver to the Agent Uniform Commercial Code 
financing statements prepared for filing with the appropriate filing offices 
in the State of North Carolina with respect to collateral located at the 
Borrower's facility in Fayetteville, North Carolina, duly executed by the 
Borrower.  The Borrower further agrees that failure on its part to comply 
with the foregoing requirement shall constitute an Event of Default under the 
Credit Agreement. 

         Section 6.  COUNTERPARTS AND EFFECTIVENESS.  This Amendment may be 
executed in any number of counterparts, and by different parties hereto in 
separate counterparts, each of which when so executed and delivered shall be 
deemed an original, but all such counterparts together shall constitute but 
one of the same instrument.

         Section 7.  LEGAL EXPENSES.  The Borrower agrees to reimburse the 
Agent for all reasonable out-of-pocket expenses (including attorneys' fees 
and legal expenses of Dorsey & Whitney LLP, counsel for the Agent) incurred 
in connection with the negotiation, preparation, execution and delivery of 
this Amendment.

         Section 8.  AFFIRMATION.  Each party hereto affirms and acknowledges
that (a) the Credit Agreement as amended by this Amendment remains in full force
and effect in accordance with its terms, (b) all references to the "Credit
Agreement"


                                     -5-

<PAGE>

or any similar term contained in any other Loan Document shall be deemed to 
be references to the Credit Agreement as amended hereby and (c) all 
references to the "Notes" or any similar term contained in the Credit 
Agreement or any other Loan Document shall be deemed to be references to the 
Amended Notes.

         Section 9.  CHOICE OF LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND 
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, 
OF THE STATE OF MINNESOTA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO 
NATIONAL BANKS.

         Section 10.  SUCCESSORS AND ASSIGNS.  This Amendment shall be 
binding upon the Borrower, the Banks, the Agent and their respective 
successors and assigns, and shall inure to the benefit of the Borrower, the 
Bank and the successors and assigns of the Banks and the Agent.

           [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]


                                     -6-

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to 
be executed as of the day and year first above written.


                                       DAMARK INTERNATIONAL, INC.

                                       By
                                         ------------------------------------
                                         Its
                                            ---------------------------------


                                       FIRST BANK NATIONAL ASSOCIATION,
                                          as a Bank and as Agent

                                       By
                                         ------------------------------------
                                       Title
                                            ---------------------------------


                                       THE SUMITOMO BANK, LIMITED,
                                       CHICAGO BRANCH

                                       By
                                         ------------------------------------
                                       Title
                                            ---------------------------------

                                       By
                                         ------------------------------------
                                       Title
                                            ---------------------------------


                                       BANK ONE, MILWAUKEE,
                                       NATIONAL ASSOCIATION

                                       By
                                         ------------------------------------
                                         Title
                                              -------------------------------



               [Signature Page to Third Amendment to Credit Agreement]


                                     S-1

<PAGE>

                                                                EXHIBIT 1.1-A TO
                                                                CREDIT AGREEMENT

                                     FORMULA FOR
                                    BORROWING BASE

         1.   BORROWING BASE.  The "Borrowing Base" as of any date of 
determination shall be the sum of the following:

              (a)  the product of (i) the aggregate face amount of Eligible 
Accounts (provided, that the aggregate face amount of Eligible Accounts 
attributable to installments payable under the Ten Pay Installment Plan that 
can be taken into account for purposes of this clause 1(a)(i) shall not 
exceed 30% of the aggregate face amount of all Eligible Accounts), MULTIPLIED 
BY (ii) 50%; and

              (b)  an amount equal to the lesser of (i) 40% of the lower of 
cost (determined on a first-in, first-out basis) or market value of Eligible 
Inventory or (ii) $30,000,000.

         2.  DEFINITIONS.  Capitalized terms used herein which are defined in 
the Credit Agreement are used herein with the respective meanings attributed 
thereto in the Credit Agreement.  In addition, for the purposes of this 
Exhibit and for determining the Borrowing Base, the following terms shall 
have the following respective meanings:

              "ELIGIBLE ACCOUNTS":  the right of the Borrower to receive 
payment of installments owed to the Borrower on account of sales of inventory 
(including related shipping and handling fees), membership and other services 
in the ordinary course of the Borrower's business on the Borrower's 
installment plans, provided such right to payment:

         (a)  has arisen out of the sale of goods and services by the 
Borrower within the United States, or, if such goods and services are sold 
outside the United States, is backed by a letter of credit issued or 
confirmed by a bank chartered under the laws of the United States or of any 
State;

         (b)  is the valid, binding and legally enforceable obligation of the 
obligor and such right to payment has not been subordinated by the Borrower 
to any other claim against the obligor and such obligor is not (i) the 
Borrower or an Affiliate of the Borrower, (ii) the United States or any 
department, agency or instrumentality thereof unless the Borrower shall have 
complied with the Assignment of Claims Act to the satisfaction of the Agent, 
(iii) a debtor under any proceeding under the 


<PAGE>

Bankruptcy Code or comparable provision of state or foreign law, (iv) an 
assignor for the benefit of creditors, or (v) a customer for whom the 
Borrower has tried, but has been refused, an authorization by the applicable 
credit card processor in whole or in part;

         (c)  is assignable;

         (d)  is subject to a perfected first security interest in favor of 
the Agent and is free and clear of any other Lien;

         (e)  is not subject to any claimed offset, counterclaim or other 
defense with respect thereto (except for return rights and warranty claims 
not yet asserted);

         (f)  is not unpaid for more than 30 days from the date that payment 
thereof is due or for more than (i) 300 days from the date of the relevant 
invoice, in the case of installments payable on sales made under the Ten Pay 
Installment Plan, (ii) 180 days from the date of the relevant invoice, in the 
case of installments payable on sales made under the Six Pay Installment 
Plan, or (iii) 120 days from the date of the relevant invoice, in the case of 
installments payable under the Four Pay Installment Plan;

         (g)  is not owed by an obligor who is obligated on accounts owed to 
the Borrower more than 10% of the aggregate unpaid balance of which remains 
unpaid for longer than the relevant periods specified in clause (f) above; and

         (h)  is not, as reasonably determined by the Agent in its 
discretion, uncollectible or otherwise disqualified; 

PROVIDED, that the Agent shall, notwithstanding the foregoing, have the 
right, in the reasonable exercise of its discretion, to establish reserves 
against the aggregate amount of Eligible Accounts.

              "ELIGIBLE INVENTORY":  all inventory held by the Borrower for 
sale in the ordinary course of business, less any reserves maintained by the 
Borrower, and which:

         (a)  is subject to a perfected, first priority security interest in 
favor of the Agent free and clear of all other Liens;

         (b)  is located at one of the locations set forth in the Security 
Agreement or in any schedule delivered pursuant thereto as a location at 
which inventory is kept, and is not in transit (other than inventory in 
transit to a location set forth in the Security Agreement or in any schedule 
delivered pursuant thereto as a location at which inventory is kept and which 
has been shipped pursuant to a Documentary Letter of Credit);


<PAGE>

         (c)  is not so identified to a contract to sell that it is evidenced 
by an account;

         (d)  is of good and merchantable quality free from any defects which 
would affect the market value thereof;

         (e)  is not inventory that the Borrower has returned or is in the 
process of returning, including, but not limited to, inventory classified by 
the Borrower as "C-Goods";

         (f)  is insured against loss or damage in accordance with the 
provisions of the Security Agreement;

         (g)  is not subject to or covered by a negotiable document of title, 
including, without limitation, negotiable warehouse receipts and negotiable 
bills of lading;

         (h)  is not stored in a public warehouse or held by any Person as 
bailee, unless the terms of such storage or bailment are satisfactory to the 
Agent; and

         (i)  does not consist of packaging supplies;

PROVIDED, that the Agent shall, notwithstanding the foregoing, have the 
right, in the reasonable exercise of its discretion, to establish reserves 
against the aggregate amount of Eligible Inventory.

              "FOUR PAY INSTALLMENT PLAN":  an installment payment plan of 
the Borrower which requires the customer to make payment in four consecutive 
monthly installments, the first installment of which is to be paid at or 
before shipment of the item sold.

              "SIX PAY INSTALLMENT PLAN":  an installment payment plan of the 
Borrower which requires the customer to make payment in six consecutive 
monthly installments, the first installment of which is to be paid at or 
before shipment of the item sold.

              "TEN PAY INSTALLMENT PLAN":  an installment payment plan of the 
Borrower which requires the customer to make payment in ten consecutive 
monthly installments, the first installment of which is to be paid at or 
before shipment of the item sold.

<PAGE>

                                                                   EXHIBIT 1.1-B
                                                             TO CREDIT AGREEMENT

                            BORROWING BASE CERTIFICATE

                Borrowing Base as of ______________________, 199___  

To: First Bank National Association:

         The undersigned hereby certifies to First Bank National Association 
that as of the date above, the Borrowing Base for DAMARK INTERNATIONAL, INC. 
was as follows:

1.     Total Accounts                                     $__________

2.     LESS Ineligible Accounts                          ($_________ )

3.     Eligible Accounts (Line 1 - Line 2)                $__________

4.     Total "Ten Pay" Eligible Accounts                  $__________

5.     30% of Line 3                                      $__________

6.     Line 4 LESS Line 5 (but not less than
       zero)                                              $__________

7.     Line 3 LESS Line 6                                 $__________

8.     TIMES Availability Rate                                x 50%

9.     Borrowing Base Amount
       (Line 7 x Line 8)                                  $__________

10.    Total Inventory                                    $__________

11.    LESS Ineligible Inventory                         ($__________)

12.    Eligible Inventory (Line 10 - Line 11)             $__________

13.    TIMES Availability Rate                                x 40%
 
14.    Borrowing Base Amount 
       (Line 12 x Line 13 but not
       more than $30,000,000)                             $__________


<PAGE>

15.    Total Borrowing Base 
       (Line 9 + Line 14 but not
       to exceed $50,000,000)                             $__________

16.    Loans Outstanding                                  $__________

17.    Standby Letters of Credit Outstanding              $__________

18.    Documentary Letters of Credit 
       Outstanding                                        $__________

19.    Total Outstandings
       (Line 16 + Line 17 + Line 18)                      $__________

20.    Additional Availability or (Deficiency)
       (Line 15 - Line 19)                                $__________

       Capitalized terms are used herein as defined in the Credit Agreement 
dated as of March 22, 1996 and the Exhibits thereto, as the same may be from 
time to time amended, modified, supplemented or extended.

Date of Certificate:__________ , ____


                                       --------------------------------------
                                       Title
                                            ---------------------------------
                                       For DAMARK INTERNATIONAL, INC.



<PAGE>

                                                                  EXHIBIT 1.1-E
                                                            TO CREDIT AGREEMENT

                              BANK COMMITMENTS

                                                           Loan/Standby
                                     Commitment          Letter of Credit
Bank                                   Amount                Sublimit
----                                ------------         -----------------
First Bank National Association     $23,333,334            $21,000,000

The Sumitomo Bank, Limited
  Chicago Branch                     13,333,333             12,000,000

Bank One, Wisconsin                  13,333,333             12,000,000
                                    -----------            -----------

      Total                         $50,000,000            $45,000,000

<PAGE>

       ATTACHMENT 1 TO THIRD AMENDMENT TO CREDIT AGREEMENT

               CONSENT AND AGREEMENT OF SUBSIDIARY


     _________________________, a Minnesota corporation (the "Subsidiary"), 
hereby acknowledges and consents to that certain Third Amendment to Credit 
Agreement dated as of June __, 1997 (the "Amendment") between Damark 
International, Inc., a Minnesota corporation (the "Borrower"), the Banks 
which are signatories thereto (the "Banks") and First Bank National 
Association as Agent for the Banks.  The Subsidiary further acknowledges and 
agrees as follows:

          (a)  All references to the "Credit Agreement" contained
     in the Guaranty dated as of _____________ (the "Guaranty"),
     executed by the Subsidiary in favor of the Banks and the
     Agent, shall hereafter mean and refer to the Credit
     Agreement dated as of March 22, 1996 between the Borrower,
     the Banks and the Agent, as heretofore amended, as amended
     by the Amendment and as the same may hereafter be further
     amended, supplemented, restated, extended or renewed from
     time to time.

          (b)  The Guaranty is hereby reaffirmed and shall remain
     in full force and effect with respect to the Obligations (as
     defined in the Guaranty).


Dated: June __, 1997 

                                       SUBSIDIARY:

                                       --------------------------------------
                                       By
                                         ------------------------------------
                                       Title
                                            ---------------------------------