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Exhibit 10.1    
  

 
 

APAC CUSTOMER SERVICES, INC.
  FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT    
  

    This Fifth Amendment to Amended and Restated Credit Agreement (herein, the "Amendment") is entered into as of
May 15, 2001, between APAC Customer Services, Inc., an Illinois corporation formerly known as APAC TeleServices, Inc. (the  "Borrower"), Banks party to the Credit Agreement (as such term
is defined below) and Harris Trust and Savings Bank, as a Bank and in its capacity as
agent under the Credit Agreement (the "Agent"). 

 
 

PRELIMINARY STATEMENTS    
  

    A.  The
Borrower and the Banks entered into a certain Amended and Restated Credit Agreement, dated as of September 8, 1998 (as amended, the  "Credit Agreement"). All capitalized terms used herein without
definition shall have the same meanings herein as such terms have in the Credit
Agreement. 

    B.  The
Borrower has requested that the Banks waive the Borrower's current noncompliance with the Credit Agreement, decrease the Revolving Credit Commitments, amend
certain financial covenants, and make certain other amendments to the Credit Agreement, and the Banks party hereto are willing to do so under the terms and conditions set forth in this Amendment. 

    NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 

SECTION 1.  WAIVERS.

    (a) Fixed Charge Coverage. As of April 1, 2001, the Borrower was not in compliance with
Section 8.24 of the Credit Agreement by reason of the Borrower's failure to maintain the ratio specified in such
Section at not less than 1.50 to 1.0. Such failure to comply with Section 8.24 of the Credit Agreement as of April 1, 2001 is hereby waived. 

    (b) Minimum Adjusted EBITDA. As of April 1, 2001, the Borrower was not in compliance with
Section 8.25 of the Credit Agreement by reason of the Borrower's failure to maintain its Adjusted EBITDA for the four fiscal quarters of the Borrower then ending in an amount not less than
$62,500,000. Such failure to comply with Section 8.25 of the Credit Agreement as of April 1, 2001 is hereby waived. 

    (c) Effectiveness. None of the waivers made in this Section 1 shall become effective unless and
until the conditions precedent set forth in Section 4 hereof have been satisfied. 

SECTION
2.  REVOLVING CREDIT COMMITMENTS. 

    (a) Upon
the execution of this Amendment by the Borrower and the Required Banks, the amount of each Bank's Revolving Credit Commitment set forth opposite its name on
its signature page to the 

Credit Agreement shall be amended (effective as of May 15, 2001) so as to reflect such Bank's Revolving Credit Commitment as amended hereby as follows: 

	Bank
 
	 	Amount of its Revolving Credit Commitment and Available Revolving Credit Commitment from and including the date of the Fifth Amendment

	Harris Trust and Savings Bank	 	$5,211,080.13
	Bank of America National Trust and Savings Association	 	$3,999,900.00
	LaSalle Bank National Association	 	$3,999,900.00
	The Northern Trust Company	 	$2,000,100.00
	Firstar Bank Milwaukee, N.A.	 	$5,333,400.00
	National City Bank	 	$2,130,177.51
	The Fuji Bank, Limited	 	$2,658,642.36
	The Bank of Nova Scotia	 	$2,000,100.00
	U.S. Bank National Association	 	$2,666,700.00
	 	 	

	Total	 	$30,000,000.00
	 	 	

    (b) The
Borrower acknowledges and agrees there are no longer any Standby Revolving Credit Commitments. 

    (c) For
purposes of calculating the Revolving Credit commitment fee payable under Section 2.1(a) of the Credit Agreement, the Revolving Credit Commitments of the
Banks shall be deemed to have been so decreased as of May 15, 2001. 

SECTION 3.  AMENDMENTS

    Subject
to satisfaction of the conditions precedent in Section 4 below, the Credit Agreement shall be and hereby is amended as follows: 

    (a) Section 1.10(b)
of the Credit Agreement shall be amended by inserting the following sentence immediately at the end thereof: 

"Notwithstanding
anything in the foregoing to the contrary, no later than June 1, 2001, the Borrower shall have made such payments on the principal of the Term Loan as shall reduce the
aggregate unpaid principal balance thereof to $89,000,000, such payment to be (i) accompanied by any amount due the Banks under Section 1.13 of the Credit Agreement, (ii) applied
to the last installment due on the Term Loans at their final maturity and (iii) allocated among the Term Loans of the Banks in accordance with their respective Term Loan Percentages." 

    (b) The
definition of "Applicable Margin" appearing in Section 5.1 of the Credit Agreement shall be amended by
inserting the following immediately at the end thereof: 

"Notwithstanding
anything in the foregoing of the contrary, the Applicable Margin for the Revolving Credit commitment fee from and including the date of the Fifth Amendment to this Agreement shall be
0.50% to but not including the next Pricing Date; provided that the Applicable Margin for the Revolving Credit commitment fee shall be subject to adjustment on such next Pricing Date and on each
Pricing Date thereafter, so that the Applicable Margin for the Revolving Credit commitment fee shall be determined in accordance with the following schedule: 

	Total Debt Ratio for Such Pricing Date
 
	 	Applicable Margin for Revolving Credit Commitment Fee Shall Be:

	Greater than or equal to 1.5 to 1.0	 	0.50%
	Less than 1.50 to 1.0	 	0.30%

    (c) The
definition of "EBITDA" appearing in Section 5.1 of the Credit Agreement shall be amended and restated in
its entirety to read as follows: 

    ""EBITDA" means, with reference to any period, Net Income for such period plus the sum (without duplication) of all amounts deducted in
arriving at such Net Income amount in respect of (v) Interest Expense for such period, (w) federal, state and local income taxes for such period, (x) depreciation of fixed assets
and amortization of intangible assets (including, without limitation, goodwill, deferred expenses and organization costs) for such period, (y) up to $1,000,000 of non-cash losses
realized on the sale of Paragren and attributable to the discontinuance of its operations and (z) up to $12,000,000 of non-recurring, non-cash charges incurred in the
Borrower's fiscal year ended December 31, 2001." 

    (d) Sections
8.22, 8.23, 8.24 and 8.25 of the Credit Agreement shall each be amended and restated in their entirety to read as follows: 

    "Section 8.22. Total Debt Ratio. The Borrower shall not at any time during any fiscal quarter of the Borrower permit the Total
Debt Ratio to be greater than or equal to the amount set forth for such quarter below: 

	From and Including
 
	 	To and Including
	 	Total Debt Ratio Shall Not

Be Greater Than or

Equal to

	The date hereof	 	Close of third fiscal quarter	 	2.50 to 1.0
	

Start of fourth fiscal quarter 2001	
 	

Close of first fiscal quarter 2002	
 	

2.25 to 1.0
	

Start of second fiscal quarter 2002	
 	

At all times thereafter	
 	

2.00 to 1.0

    Section 8.23. Net Worth. The Borrower shall, as of the last day of each fiscal quarter of the Borrower, maintain Net Worth of
not less than the Minimum Required Amount. For purposes hereof, the term "Minimum Required Amount" shall mean $62,500,000 through June 30, 2001
and shall increase (but never decrease) as of July 1, 2001 and as of the last day of each fiscal quarter of the Borrower thereafter by an amount (if positive) equal to 80% of Net Income for the
fiscal quarter then ended. 

    Section 8.24. Fixed Charge Coverage Ratio. As of the last day of each fiscal quarter of the Borrower set forth below (commencing
with the fiscal quarter ending on or about March 31, 2002), the Borrower shall maintain a ratio of (a) EBITDA for the four fiscal quarters of the Borrower then ended less Capital
Expenditures incurred during such period to (b) Fixed Charges for the same four fiscal quarter period then ended, of not less than the amount set forth below: 

	As of Close of
 
	 	Fixed Charge Coverage Ratio Shall Not Be Less Than

	First fiscal quarter 2002	 	1.00 to 1.00
	Second and third fiscal quarters 2002	 	1.20 to 1.00
	Fourth fiscal quarter 2002	 	1.25 to 1.00
	First fiscal quarter 2003	 	1.30 to 1.00
	Each fiscal quarter thereafter	 	1.50 to 1.00

    Section 8.25. Minimum EBITDA. (a) 2001 EBITDA. As of the last day
of each fiscal quarter of the Borrower occurring during its 2001 fiscal year, the Borrower shall maintain 

EBITDA for the fiscal year-to-date period then ended at not less than the amount set forth below: 

	During Fiscal Year-To-Date Period Consisting of
 
	 	EBITDA Shall Not Be Less Than

	First fiscal quarter 2001	 	$ 9,000,000
	First and second fiscal quarters 2001	 	$12,000,000
	First, second and third fiscal quarters 2001	 	$26,000,000
	Entire fiscal year 2001	 	$40,000,000

    (b)     Annual EBITDA. As of the last day of each fiscal quarter of the Borrower (commencing with the
fiscal quarter ending on or about March 31, 2002) set forth below, the Borrower shall maintain EBITDA for the four fiscal quarters then ended at not less than the amount set forth below: 

	During Four Quarters Ending

On Last Day Of
 
	 	EBITDA Shall Not Be Less Than

	First fiscal quarter of fiscal 2002	 	$44,000,000
	Second fiscal quarter of fiscal 2002	 	$49,000,000
	Each of third and fourth fiscal quarters of fiscal 2002	 	$54,000,000
	Each fiscal quarter thereafter	 	$62,500,000

    (e) Section 8.28
of the Credit Agreement shall be amended in its entirety and as so amended shall read as follows: 

    "Section 8.28. Capital Expenditures. The Borrower shall not permit Capital Expenditures for the Borrower and its Subsidiaries
(taken together) to exceed $15,000,000 during the fiscal year of the Borrower ended on or about December 31, 2001." 

SECTION 4.  CONDITIONS
PRECEDENT. 

    This
Amendment shall not become effective unless and until all of the following conditions have been satisfied: 

    (a) The
Borrower, the Guarantors, the Agent and the Required Banks shall have executed and delivered this Amendment. 

    (b) The
Agent shall have received the compliance certificate required for the quarterly fiscal period ended April 1, 2001 by the last paragraph of
Section 8.5 of the Credit Agreement. 

    (c) Any
fees which the Borrower has agreed to pay the Banks in connection with and prior to this Amendment shall have been paid. 

    (d) The
Agent shall have received copies executed or certified (as may be appropriate) of all legal documents or proceedings taken in connection with the execution and
delivery hereof and the other instruments and documents contemplated hereby; 

    (e) All
legal matters incident to the execution and delivery hereby and of the other instruments and documents contemplated hereby shall be satisfactory to the Required
Banks, the Agent and their respective counsel. 

SECTION 5.  REPRESENTATIONS.

    In
order to induce the Required Banks to execute and deliver this Amendment, the Borrower hereby represents to each Bank that as of the date hereof, after giving effect to this
Amendment, the representations and warranties set forth in Section 6 of the Credit Agreement are and shall be and remain true and correct (except that the representations contained in
Section 6.5 shall be deemed to refer to the most recent financial statements of the Borrower delivered to the Agent pursuant to Section 8.5(a) of the Credit Agreement) and, after giving
effect to this Amendment, (i) the Borrower is 

in full compliance with all of the terms and conditions of the Credit Agreement and (ii) no Default or Event of Default has occurred and is continuing under the Credit Agreement. 

SECTION 6.  MISCELLANEOUS. 

    (a) The
Borrower has heretofore executed and delivered to the Agent and the Banks certain Collateral Documents and the Borrower hereby acknowledges and agrees that,
notwithstanding the execution and delivery of this Amendment, the Collateral Documents remain in full force and effect and the rights and remedies of the Agent and the Banks thereunder, the
obligations of the Borrower thereunder and the liens and security interests created and provided for thereunder remain in full force and effect and shall not be affected, impaired or discharged
hereby. Nothing herein contained shall in any manner affect or impair the priority of the liens and security interests created and provided for by the Collateral Documents as to the indebtedness which
would be secured thereby prior to giving effect to this Amendment. 

    (b) Except
as specifically amended herein or waived hereby, the Credit Agreement shall continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Credit Agreement, the Notes, or any other instrument or document executed in connection therewith, or in any certificate, letter or
communication issued or made pursuant to or with
respect to the Credit Agreement, any reference in any of such items to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby. 

    (c) By
executing this Amendment in the place provided for that purpose below, each Guarantor hereby consents to the Amendment to the Credit Agreement as set forth
herein and confirms that its obligations under its Guaranty remain in full force and effect. Each Guarantor further agrees that the consent of such Guarantor to any further amendments to the Credit
Agreement shall not be required as a result of this consent having been obtained. 

    (d) The
Borrower agrees to pay on demand all reasonable costs and expenses of or incurred by the Agent in connection with the negotiation, preparation, execution and
delivery of this Amendment. 

    (e) This
Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together
shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be
an original. This Amendment shall be governed by the internal laws of the State of Illinois. 

[Signature Pages to Follow]

	

 	
 	

APAC CUSTOMER SERVICES, INC.
	

 	
 	

By:	

 	

/s/ Gary S. Holter
	 	 	Name:	 	Gary S. Holter
	 	 	Title:	 	Senior Vice President and
	 	 	 	 	Chief Financial Officer

	

    Accepted and agreed to as of the date and year first above written.
	

 	
 	

HARRIS TRUST AND SAVINGS BANK, in its individual capacity as a Bank and as Agent
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

BANK OF AMERICA NATIONAL TRUST

AND SAVINGS ASSOCIATION
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

LASALLE BANK NATIONAL ASSOCIATION
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

THE NORTHERN TRUST COMPANY
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

FIRSTAR BANK MILWAUKEE, N.A.
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

NATIONAL CITY BANK
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

THE FUJI BANK, LIMITED
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

THE BANK OF NOVA SCOTIA
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

U.S. BANK NATIONAL ASSOCIATION
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

 
 

GUARANTORS' CONSENT    
  

    The undersigned have heretofore executed and delivered to the Guaranteed Creditors (as defined in the Guaranty) a Guaranty Agreement dated May 20, 1998
(the "Guaranty") and hereby consent to the Amendment to the Credit Agreement as set forth above and confirms that their Guaranty and all of the
undersigned's obligations thereunder remain in full force and effect. The undersigned further agree that the consent of the undersigned to any further amendments to the Credit Agreement shall not be
required as a result of this consent having been obtained, except to the extent, if any, required by the Guaranty referred to above. 

	

 	
 	

AAPAC TELESERVICES OF TEXAS, L.P.
	

 	
 	

By	
 	

APAC CUSTOMER SERVICES, INC. ITS MANAGER
	 	 	By	 	 	

	 	 	 	 	Name	

	 	 	 	 	Title	

	

 	
 	

APAC TELESERVICES GENERAL PARTNER, INC.
	

 	
 	

By	
 	

 	

 
	 	 	 	 	Name	

	 	 	 	 	Title	

	

 	
 	

ITI HOLDINGS, INC.
	

 	
 	

By	
 	

 	

 
	 	 	 	 	Name	

	 	 	 	 	Title	

	

 	
 	

ITI MARKETING SERVICES, INC.
	

 	
 	

By	
 	

 	

 
	 	 	 	 	Name	

	 	 	 	 	Title	

	

 	
 	

APAC TELESERVICES, L.L.C.
	

 	
 	

APAC CUSTOMER SERVICES, INC.,

ITS MANAGER
	

 	
 	

By	
 	

 	

 
	 	 	By	 	 	

	 	 	 	 	Name	

	 	 	 	 	Title	

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Exhibit 10.1

APAC CUSTOMER SERVICES, INC. FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

PRELIMINARY STATEMENTS

GUARANTORS' CONSENT<PAGE>

                                                                    EXHIBIT 10.4

================================================================================

                            LITTLE SWITZERLAND, INC.

                           INVESTOR'S RIGHTS AGREEMENT

                                   May 1, 2001

================================================================================

<PAGE>

                           INVESTOR'S RIGHTS AGREEMENT

                  This INVESTOR'S RIGHTS AGREEMENT (this "Agreement") is made as
of May 1, 2001 between Little Switzerland, a Delaware corporation (the
"Company"), and Jewelcor Management, Inc., a Nevada corporation (the
"Stockholder").

                                    RECITALS:

                  WHEREAS, concurrently with the execution of this Agreement,
the Company is agreeing to sell forty-five percent of its Common Stock, par
value $.01 per share, to Tiffany & Co. International, Inc., a Delaware
corporation ("Tiffany"), pursuant to the certain Stock Purchase Agreement, dated
of even date herewith (the "Stock Purchase Agreement"), between the Company and
Tiffany;

                  WHEREAS, the Stock Purchase Agreement provides, among other
things, that Tiffany will have the right to subscribe to certain issuances of
the Company's capital stock (and rights to acquire such capital stock); and

                  WHEREAS, in order to induce the Stockholder to relinquish
certain of its rights to facilitate the transactions contemplated by the Stock
Purchase Agreement, the Company has agreed to grant the Stockholder the right to
subscribe to certain issuances of the Company's capital stock (and rights to
acquire such capital stock);

                  NOW, THEREFORE, in consideration of the foregoing, the parties
hereto agree as follows:

                  1.       DEFINITIONS.  For purposes of this Agreement:

                           1.1      "AFFILIATE" means, as to a Person, any other
Person that directly or indirectly, through one or more intermediaries controls,
is controlled by or is under common control with the first-mentioned Person.

                           1.2      "COMMON SHARE EQUIVALENTS" means Common
Stock at the time outstanding or issuable upon conversion of shares of Preferred
Stock at the time outstanding, or issuable upon exercise of warrants or options
to purchase Common Stock or upon conversion or exercise of any other security.

                           1.3      "COMMON STOCK" means shares of Common Stock,
par value $.01, of the Company.
<PAGE>

                           1.4      "PERSON" means an individual, corporation,
partnership, limited liability company, association, trust, unincorporated
organization or other legal entity.

                           1.5      "PREFERRED STOCK" means shares of Preferred
Stock, par value $.01, of the Company.

                           1.6      "STOCKHOLDER" means Jewelcor Management,
Inc., its Affiliates and, for purposes of Section 2 of this Agreement, shall
include Seymour Holtzman, his siblings, spouse, lineal descendants and any
trusts for the benefit of the foregoing; PROVIDED, HOWEVER, that the foregoing
definition shall not be deemed to constitute an admission that the foregoing
persons are includable in any "group" as such term is defined in Rule 13d-3
promulgated under Section 13 of the Securities Exchange Act of 1934, as amended.
"Stockholder" shall not include Marc Holtzman, Steven Holtzman or Allison
Holtzman Garcia.

         2.       SUBSCRIPTION RIGHTS.

                  2.1 The Company shall not issue, sell or exchange, agree to
issue, sell or exchange, or reserve or set aside for issuance, sale or exchange,
(i) any Common Stock, (ii) any other equity securities of the Company,
including, without limitation, shares of Preferred Stock, (iii) any option,
warrant or other right to subscribe for, purchase or otherwise acquire any
equity securities of the Company, or (iv) any debt or other securities directly
or indirectly convertible into capital stock of the Company (collectively, the
"Offered Securities"), unless in each such case the Company shall have first
complied with this Section 2. The Company shall deliver to the Stockholder a
written notice of any proposed or intended issuance, sale or exchange of Offered
Securities (the "Offer"), which Offer shall (i) identify and describe the
Offered Securities, (ii) describe the price and other terms upon which they are
to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (iii) identify the persons or
entities (if known) to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (iv) offer to issue and sell to or
exchange with such Stockholder (A) a portion of the Offered Securities
determined by dividing the aggregate number of shares of Common Stock then held
by such Stockholder (giving effect to the conversion or exercise of all Common
Share Equivalents then held by such Stockholder) by the total number of shares
of Common Stock then outstanding (giving effect to the conversion or exercise of
all Common Share Equivalents then outstanding (other than those owned by such
Stockholder)) (the "Basic Amount"); PROVIDED, HOWEVER, that the Stockholder, in
its discretion, may subscribe for less than the Basic Amount.

                  2.2 To accept an Offer, in whole or in part, the Stockholder
must deliver a written notice to the Company prior to the end of the five (5)
day period following the Stockholder's receipt of the Offer, setting forth the
portion of the Stockholder's Basic Amount that such Stockholder elects to
purchase (the "Notice of Acceptance").

                  2.3 The Company shall have 90 days from the expiration of the
period set forth in Section 2.2 above to issue, sell or exchange all or any part
of such Offered Securities as to which a
<PAGE>

Notice of Acceptance has not been given by the Stockholder (the "Refused
Securities"), but only to the offerees described in the Offer (if so described
therein) and only upon terms and conditions (including, without limitation, unit
prices and interest rates) that are not more favorable to the acquiring person
or persons or less favorable to the Company than those set forth in the Offer.

                  2.4 In the event the Company shall propose to sell less than
all the Refused Securities (any such sale to be in the manner and on the terms
specified in Section 2.3 above), then the Stockholder may, at its sole option
and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not
less than the number or amount of the Offered Securities that the Stockholder
elected to purchase pursuant to Section 2.2 above multiplied by a fraction, (i)
the numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to the Stockholder pursuant to Section 2.2 above
prior to such reduction) and (ii) the denominator of which shall be the original
amount of the Offered Securities. In the event that the Stockholder so elects to
reduce the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have
again been offered to the Stockholder in accordance with Section 2.1 above.

                  2.5 Upon the closing of the issuance, sale or exchange of all
or less than all of the Refused Securities, the Stockholder shall acquire from
the Company, and the Company shall issue to the Stockholder, the number or
amount of Offered Securities specified in the Notice of Acceptance, as reduced
pursuant to Section 2.4 above if the Stockholders have so elected, upon the
terms and conditions specified in the Offer. The purchase by the Stockholder of
any Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Stockholder of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the
Stockholder and its counsel.

                  2.6 Any Offered Securities not acquired by the Stockholder or
other persons in accordance with Section 2.3 above may not be issued, sold or
exchanged until they are again offered to the Stockholder under the procedures
specified in this Agreement.

                  2.7      The term "Offered Securities" shall NOT include:

                           (a)      Common Stock issued as a stock dividend to
holders of Common Stock or upon any subdivision or combination of Common Stock;
and

                           (b)      shares of Common Stock issued or issuable
pursuant to any Company employee stock option, employee purchase or similar
plan.

<PAGE>

         3.      BUSINESS OPPORTUNITIES.

                  3.1 In the event that (a) the Stockholder or any of its
Affiliates or (b) any officer, director or employee of the Company or any
subsidiary of the Company who is also an officer, director or employee of the
Stockholder or an Affiliate thereof, acquires knowledge of a potential
transaction which may be a business opportunity for both the Company and the
Stockholder or any of its Affiliates, such business opportunity shall belong to
the Stockholder and not to the Company, and any such officer, director of
employee of the Company shall treat such business opportunity as belonging only
to the Stockholder and not the Company, PROVIDED, HOWEVER, with respect to
clause (b) of this sentence, the Stockholder shall determine in good faith
whether, based on the circumstances under which such officer, director or
employee acquired his knowledge, such business opportunity was offered to such
person solely in his capacity as an officer, director or employee of the Company
("Company Capacity"). For the purposes of the foregoing determination, there
shall be a presumption that such opportunity was offered to such person in his
capacity as an officer, director or employee of the Stockholder or an Affiliate
thereof. In the event that the Stockholder determines that it was so offered to
such person in his Company Capacity, such business opportunity shall belong only
to the Company and not to the Stockholder and such officer, director or employee
shall treat such business opportunity as belonging only to the Company and not
to the Stockholder. With respect to any business opportunity belonging to the
Stockholder pursuant to this Section 3.1, the Stockholder shall decide how to
allocate and pursue such business opportunity based on its sole determination of
what is the b est interests of the Stockholder's stockholders. The good faith
determination of the allocation of business opportunities pursuant to the
Section 3.1 shall be conclusive and binding for all purposes.

         4.     MISCELLANEOUS.

                  4.1 SUCCESSORS AND ASSIGNS. The Stockholder may assign its
rights under this Agreement, in whole or in part, to any Affiliate, and the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Except as
provided in the immediately preceding sentence, no party may assign its rights
or delegate its duties or obligations hereunder without the prior written
consent of the other party hereto. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

                  4.2     GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL.

                           (a)      This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within New York.
<PAGE>

                           (b)      The jurisdiction and venue in any action
brought by any party hereto pursuant to this Agreement shall properly (but not
exclusively) lie in any federal or state court located in the State of New York.
By execution and delivery of this Agreement, each party hereto irrevocably
submits to the jurisdiction of such courts for himself or itself and in respect
of his or its property with respect to such action. The parties irrevocably
agree that venue would be proper in such court, and hereby waive any objection
that such court is an improper or inconvenient forum for the resolution of such
action. The parties further agree that the mailing by certified or registered
mail, return receipt requested, of any process required by any such court shall
constitute valid and lawful service of process against them, without necessity
for service by any other means provided by statute or rule of court.

                           (c)      BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT OR ANY DOCUMENTS RELATED HERETO.

                  4.3 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement
may be executed in any number of counterparts, each of which shall be deemed to
be an original, and all of which together shall constitute one and the same
document. This Agreement may be executed by facsimile signatures.

                  4.4 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

                  4.5 NOTICES. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon receipt by the party to be notified or five (5) days
after deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed to the party to be notified

         (a)      if to the Company, at the following address:

                  161-B Crown Bay
                  P.O. Box 930
                  St. Thomas, U.S. V. I.  00804
                  Attention:  Robert L. Baumgardner
                  Fax:  (340) 779-9900

<PAGE>

                  with a copy to:

                  Proskauer Rose LLP
                  1585 Broadway
                  New York, New York  10036-8299
                  Attn:  Jack P. Jackson, Esq.
                  Fax:  (212) 969-2900

         (b)      if to the Stockholder, at the address set forth opposite the
         Stockholder's name on the signature pages hereto

or at such other address as any of the parties may designate by ten (10) days'
advance written notice to the other parties.

                  4.6 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement (including, without
limitation, Section 3) may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Stockholder.

                  4.7 TERMINATION. This Agreement shall terminate and be of no
further force on the first day that the Stockholder ceases to own at least 50%
of the number of shares of Common Stock owned by the Stockholder as of the date
such Stockholder became a party to this Agreement (as adjusted for any stock
splits, stock dividends or stock combinations).

                  4.8 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

                  4.9 SPECIFIC PERFORMANCE. In addition to any and all other
remedies that may be available at law in the event of any breach of this
Agreement, the Stockholder shall be entitled to specific performance of the
agreements and obligations of the Company hereunder and to such other injunctive
or other equitable relief as may be granted by a court of competent
jurisdiction.

                  4.10 COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter (including, without limitation, that certain letter of
intent, dated as of March 5, 2001, by and among the Company, the Stockholder,
Seymour Holtzman and Tiffany and Company) and negotiations and oral
understandings, if any, with respect thereto.

<PAGE>

                  4.11 PRONOUNS. Whenever the context may require, any pronouns
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.

                  IN WITNESS WHEREOF, the parties have executed this Investor's
Rights Agreement as of the date first above written.

                                          THE COMPANY:

                                          LITTLE SWITZERLAND, INC.

                                          By: /s/ Robert L. Baumgardner
                                             -----------------------------------
                                               Name:  Robert L. Baumgardner
                                               Title: President

                                          INVESTOR:

ADDRESS:                                  JEWELCOR MANAGEMENT, INC.

225 North East Mizner Boulevard
Boca Raton, FL  33432                     By: /s/ Seymour Holtzman
                                             -----------------------------------
Attention:  Seymour Holtzman                   Name:  Seymour Holtzman
Fax:  (561) 672-4758                           Title:    President

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