DAMARK Announces ClickShip Closure, Placement of $14.2 M in Senior Convertible Securities and Appointment of New Chairman and CEO.

Business Editors

MINNEAPOLIS--(BUSINESS WIRE)--Feb. 27, 2001

DAMARK International, Inc. (Nasdaq:DMRK) announced today that it expects the cash outlay to wind-down its ClickShip Direct business to be $10 to $12 million to be incurred over the following 24 months. As previously reported, the accounting loss of the wind-down will be approximately $25 to $35 million. The ClickShip business could not be sold on a timely basis, and therefore the Company has closed the fulfillment center and retained the Stonehill Group, LLP, an independent consulting group specializing in the business of work-outs, to assist with the wind-down of ClickShip.

To finance the wind-down of ClickShip Direct and to provide funds for Provell and its ongoing membership business, the Company has completed the sale of $14.2 million of senior convertible securities, $10.0 million of which was funded to the Company today and $4.2 million of which has been escrowed pending satisfaction of certain conditions. These securities are convertible into common stock at $3.00 per share. As a result of the transaction, the conversion price will be reduced to $3.00 for the $20 million of preferred stock issued in September 2000, and an adjustment will also result for the related warrants. The Company stated that sale of these securities has been made necessary by the refusal of Bank of America, the Company's lender under a $10 million bank credit line, to advance any funds to the Company under the credit line. The Company is assessing its rights against Bank of America and is seeking a replacement lender and an expanded credit facility.

The Company also stated that the cost of the wind-down of ClickShip, coupled with the action by Bank of America, present a potential liquidity issue. George S. Richards, Damark's President, added, "We are pleased with the vote of confidence by the private investors who have purchased the senior convertible securities and provided new funds to allow us to continue to operate. With these funds, we believe that we have the ability to obtain a credit facility from a major financial institution that should be adequate to allow us to fund Provell and complete the wind-down of ClickShip. Obviously, until our negotiations are concluded, there can be no assurance that we will be able to finalize the terms of replacement bank financing or secure other necessary funding."

With the previously announced closure of the Company's catalog business and the wind down of ClickShip Direct, Mark A. Cohn, the Company's founder and chairman, has resigned to pursue other activities. George S. Richards, who has been responsible for the operation of Provell, the Company's membership business, will become Chairman, Chief Executive Officer and President of Damark.

DAMARK International, Inc., operating under the Provell name, develops, markets and manages leading edge membership and customer relationship management programs. Provell's proprietary programs provide purchase price discounts and other benefits related to consumer and small business needs in the areas of shopping, travel, hospitality, entertainment, health/fitness, and finance. As of December 31, 2000, consumers enjoyed benefits provided through over 2.6 million memberships. The Company is headquartered in Minneapolis, Minnesota and was founded in 1986.

Any statements herein regarding the business of DAMARK International, Inc. that are not historical facts are "forward-looking statements" that are intended to qualify for the safe harbor provisions from liability provided by the Private Securities Litigation Reform Act of 1995. For a discussion of risks and uncertainties that could cause actual results to differ from those implied by any forward looking statement, see "Forward-Looking Information" in the Company's most recent Annual and Quarterly Reports on Forms 10-K and 10-Q and the disclosures under the Sections entitled "Risk Factors" and "Recent Developments" in the Company's Form S-3 Registration Statement (File No. 333-48776), all as filed with the Securities and Exchange Commission.