LITTLE SWITZERLAND INC/DE, DEF 14A, 1999-03-16

LITTLE SWITZERLAND INC/DE
DEF 14A, 1999-03-16
JEWELRY STORES

Previous: IDF INTERNATIONAL INC, NT 10-Q, 1999-03-16

Next: DATAWARE TECHNOLOGIES INC, 8-K/A, 1999-03-16

<PAGE>

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
Proxy statement pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant [X]

Filed by a party other than the Registrant [_]

Check the appropriate box:
<TABLE>
<S> <C>
[_] Preliminary Proxy Statement [_] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
</TABLE>

Little Switzerland, Inc.
------------------------
(Name of Registrant as Specified In Its Charter)

Little Switzerland, Inc.
------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.

(1) Title of each class of securities to which transaction applies:

----------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

----------------------------------------------------------------------
(5) Total fee paid:

----------------------------------------------------------------------
[_] Fee paid previously with preliminary materials:

[_] Check box if any part of the fee if offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number
of the Form or Schedule and the date of its filing.

(1) Amount Previously paid:

----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

----------------------------------------------------------------------
(3) Filing Party:

----------------------------------------------------------------------
(4) Date Filed:

----------------------------------------------------------------------

<PAGE>

LITTLE SWITZERLAND
161-B Crown Bay Cruise Ship Port
St. Thomas, U.S.V.I. 00804

March 16, 1999

Dear Fellow Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of
Little Switzerland, Inc. (the "Company") to be held on Wednesday, April 7,
1999, at 12:00 p.m., local time, at the Friars Club, 57 East 55th Street
(between Park Avenue and Madison Avenue), New York, New York (the "Annual
Meeting"). Your Board of Directors and management look forward to greeting
personally those stockholders able to attend the Annual Meeting.

The Annual Meeting has been called for the purpose of electing two Class III
Directors, each for a term expiring at the 2000 annual meeting and two Class I
Directors, each for a term expiring at the 2001 annual meeting, and
considering and voting upon such other business as may properly come before
the Annual Meeting or any adjournments postponements thereof.

Your Board of Directors recommends that you vote "FOR" the election of
Adriane J. Dudley and Seymour Holtzman as Class I Directors and "FOR" the
election of Melanie L. Sturm and Richard C. Hunter as Class III Directors, the
four nominees of your Board of Directors.

On behalf of your Board of Directors, your continued interest and support
are greatly appreciated.

Very truly yours,

/s/ C. William Carey
C. William Carey
Acting Chief Executive Officer

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.

<PAGE>

LITTLE SWITZERLAND, INC.
161-B Crown Bay Cruise Ship Port
St. Thomas, U.S.V.I. 00804
(340) 776-2010

----------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

----------------

To Be Held on Wednesday, April 7, 1999

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Little
Switzerland, Inc. (the "Company") will be held on Wednesday, April 7, 1999, at
12:00 p.m., local time, at the Friars Club, 57 East 55th Street (between Park
Avenue and Madison Avenue), New York, New York (the "Annual Meeting") for the
purpose of considering and voting upon:

1. The election of two Class III Directors, each for a term expiring at
the 2000 annual meeting and until each Director's successor is duly
elected and qualified;

2. The election of two Class I Directors, each for a term expiring at the
2001 annual meeting and until each Director's successor is duly elected
and qualified; and

3. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.

The Board of Directors has fixed the close of business on February 24, 1999
as the record date for determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournments or postponements thereof.
Only holders of common stock of record at the close of business on that date
will be entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof.

By Order of the Board of Directors

Richard E. Floor
Secretary

St. Thomas, U.S.V.I.
March 16, 1999

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN
IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD. IF YOU HAVE ANY QUESTIONS
OR NEED ASSISTANCE, PLEASE CALL D.F. KING & CO., INC., WHICH IS ASSISTING
US, TOLL FREE AT (800) 769-5414.

<PAGE>

LITTLE SWITZERLAND, INC.
161-B Crown Bay Cruise Ship Port
St. Thomas, U.S.V.I. 00804
(340) 776-2010

---------------------
PROXY STATEMENT

---------------------

ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Wednesday, April 7, 1999

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Little Switzerland, Inc., a corporation
incorporated under the laws of the state of Delaware on May 23, 1991 (the
"Company"), for use at the Annual Meeting of Stockholders of the Company to be
held on Wednesday, April 7, 1999, at 12:00 p.m., local time, at the Friars
Club, 57 East 55th Street, New York, New York and any adjournments or
postponements thereof (the "Annual Meeting"). Unless otherwise indicated,
references to the "Company" in this Proxy Statement include its various
subsidiaries.

At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the following matters:

1. The election of two Class III Directors, each for a term to continue
until the 2000 annual meeting and until each Director's successor is
duly elected and qualified;

2. The election of two Class I Directors, each for a term to continue until
the 2001 annual meeting and until each Director's successor is duly
elected and qualified; and

3. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.

The Notice of Annual Meeting, Proxy Statement and Proxy Card are first being
mailed to stockholders of the Company on or about March 16, 1999 in connection
with the solicitation of proxies for the Annual Meeting. The Board of
Directors has fixed the close of business on February 24, 1999 as the record
date for the determination of stockholders entitled to notice of and to vote
at the Annual Meeting (the "Record Date"). Only holders of the Company's
common stock, par value $.01 per share ("Common Stock"), of record at the
close of business on the Record Date will be entitled to notice of and to vote
at the Annual Meeting. As of the Record Date, there were 8,624,516 shares of
the Company's Common Stock outstanding and entitled to vote at the Annual
Meeting. Each holder of a share of Common Stock outstanding as of the close of
business on the Record Date will be entitled to one vote for each share held
of record for each matter properly submitted at the Annual Meeting.

The presence, in person or by proxy, of a majority of the total number of
outstanding shares of Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. A quorum being present, the
affirmative vote of a plurality of the votes cast is necessary to elect a
nominee as a Director of the Company and the affirmative vote of a majority of
the shares of stock voting on a matter is necessary to approve any proposal
presented at the Annual Meeting. Shares that reflect abstentions or "broker
non-votes" (i.e., shares represented at the meeting held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote such shares and with respect to which the
broker or nominee does not have discretionary voting power to vote such
shares) will be counted for purposes of determining whether a quorum is
present for the transaction of business at the Annual Meeting. In addition,
abstentions will be treated as votes cast against a particular proposal while
broker non-votes will have no impact on the outcome of the vote on a
particular proposal. With respect to the election of Directors, votes may only
be cast in favor of or withheld from the nominee; there is no ability to
abstain. In addition, broker non-votes will have no effect on the outcome of
the election of Directors.
<PAGE>

Stockholders of the Company are requested to sign, date and promptly mail
the accompanying Proxy Card in the enclosed envelope. Common Stock represented
by properly executed proxies received by the Company and not revoked will be
voted at the Annual Meeting in accordance with the instructions contained
therein. If instructions are not given therein, properly executed proxies will
be voted "FOR" the election of Adriane J. Dudley and Seymour Holtzman as Class
I Directors and "FOR" the election of Melanie L. Sturm and Richard C. Hunter
as Class III Directors. It is not anticipated that any matters other than the
election of Directors will be presented at the Annual Meeting. If other
matters are presented, proxies will be voted in accordance with the discretion
of the proxy holders.

Any properly completed proxy may be revoked at any time before it is voted
on any matter (without, however, affecting any vote taken prior to such
revocation) by giving written notice of such revocation to the Secretary of
the Company at Little Switzerland, Inc., 161-B Crown Bay Cruise Port, St.
Thomas, U.S.V.I. 00804, or by signing and duly delivering a proxy bearing a
later date, or by attending the Annual Meeting and voting in person.

The Company's Annual Report, including financial statements for the fiscal
year ended May 30, 1998 ("Fiscal 1998"), is being mailed to stockholders of
the Company concurrently with this Proxy Statement. The Annual Report,
however, is not a part of the proxy solicitation material.

RECENT DEVELOPMENTS; SETTLEMENT OF POTENTIAL PROXY CONTEST

On February 4, 1998, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Destination Retail Holdings Corporation
("DRHC") and certain of its affiliates, pursuant to which DRHC would acquire
all of the issued and outstanding shares of the Common Stock of the Company at
the effective time of the proposed merger for $8.10 per share in cash. At the
Special Meeting of Stockholders held on May 8, 1998, the stockholders of the
Company approved this proposed merger. On June 9, 1998, the Company terminated
the Merger Agreement because of DRHC's inability to raise the financing
necessary to consummate the proposed merger and announced that it would
continue to transact business as an independent entity. Following termination
of the Merger Agreement, the Company commenced legal action against DRHC,
certain of its affiliates and Stephen Crane, DRHC's controlling stockholder,
in the United States District Court for the District of Delaware seeking
damages caused by the defendants' breach of the Merger Agreement. This action
is still pending.

Prior to entering into the Merger Agreement with DRHC, the Company was the
exclusive authorized retailer for Rolex watches on the islands on which the
Company operates. Following the execution of the Merger Agreement with DRHC,
Rolex suspended shipments of its products to the Company because Rolex
indicated that it did not believe it would be in its best interest to begin a
business relationship with DRHC. The Company received its last shipment of
Rolex products in January 1998.

On August 14, 1998, the Company announced the resignation of John E. Toler,
Jr., the former President and Chief Executive Officer of the Company,
effective August 31, 1998. The Company has commenced the selection process for
a new President and Chief Executive Officer, and has selected a nationally
recognized executive search firm to assist in this process. On September 1,
1998, the Board of Directors appointed C. William Carey as Acting Chief
Executive Officer until the earlier of the employment of a successor President
and Chief Executive Officer or Mr. Carey's resignation.

Following the termination of the Merger Agreement with DRHC, management and
the Board of Directors actively sought to rebuild the Company's business.
Management of the Company has explored and pursued opportunities for expanding
existing, and adding new product lines in both watches and jewelry. In
connection with these efforts, the Company has added Movado, Baume & Mercier
and Mont Blanc time pieces to its watch lines and has added Breitling watches
to its flagship store in Aruba. In addition, the Company has increased the
showcase space allocated to jewelry in certain of its larger stores to
accommodate a greater variety of moderate to higher priced fashion
merchandise, including diamond, tanzanite, pearl and certain designer name
classifications. Management of the Company also has endeavored to reassure
vendors and employees concerning the Company's future prospects and has
successfully recruited a number of talented senior executives, including its
Chief Financial Officer and new General Merchandise Manager.

2
<PAGE>

On October 7, 1998, Jewelcor Management, Inc. ("Jewelcor") filed an action
in the Court of Chancery for the State of Delaware seeking an order that a
meeting of stockholders be held immediately for the purposes of electing
directors and conducting such other business as is brought before the meeting.
Following the Company's announcement that a meeting of stockholders had been
scheduled, Jewelcor filed an ameded complaint alleging, among other things,
that the Company had inequitably manipulated the size of the Board of
Directors and seeking the election of four directors at the Annual Meeting.

In the latter months of 1998, the Company began discussions with two major
stockholders of the Company, Donald L. Sturm, and Seymour Holtzman, President
of Jewelcor, respectively, regarding the possibility of nominees of Mr. Sturm
and Jewelcor, respectively, serving on the Board of Directors of the Company,
and about certain other matters relating to the management of the Company.
Subsequently, each of Mr. Sturm and Jewelcor nominated their own candidates
(collectively, the "Stockholder Nominees") for election as Directors of the
Company at the Annual Meeting. Donald L. Sturm nominated Melanie L. Sturm for
election as a Class III Director and Richard C. Hunter for election as a Class
I Director. Jewelcor nominated Seymour Holtzman for election as a Class I
Director and Peter R. McMullin for election as a Class III Director. Jewelcor
filed preliminary proxy materials with the SEC relating to the election of its
Stockholder Nominees. During January and February 1999, the Company continued
discussions with these two stockholders concerning the above matters. In
connection with these discussions, in January 1999, the Company entered into a
settlement agreement with Jewelcor pursuant to which Jewelcor dismissed the
litigation against the Company described above. As part of this settlement,
the Company reimbursed Jewelcor in the amount of $18,500 for the legal fees
and expenses Jewelcor incurred in this litigation.

On February 23, 1999, the Company entered into a settlement agreement with
Mr. Sturm, Jewelcor, Mr. Holtzman and certain other parties thereto relating
to the election of directors and certain other matters relating to the
management of the Company. This settlement agreement provides that, among
other things, at the Annual Meeting, stockholders will elect two Class I
Directors, each with a term expiring at the 2001 annual meeting of
stockholders, and two Class III Directors, each with a term expiring at the
2000 annual meeting of stockholders. In addition, the Board of Directors
agreed to nominate the following persons as its candidates for election at the
Annual Meeting: Adriane J. Dudley and Seymour Holtzman for election as Class I
Directors, and Melanie L. Sturm and Richard C. Hunter for election as Class
III Directors. In connection with the restructuring of the Board of Directors,
C. William Carey will not stand for re-election at the Annual Meeting and
Timothy B. Donaldson will resign from the Board of Directors, effective as of
the date of the Annual Meeting. In order to fill the vacancy to be caused by
Mr. Donaldson's resignation, the Board of Directors has agreed, immediately
following the Annual Meeting, to appoint Peter R. McMullin as a Class II
Director to serve until the 1999 annual meeting. In addition, Mr. Sturm has
been granted the right to attend and observe all meetings of the Board of
Directors for so long as he beneficially owns at least 5% of the outstanding
shares of the Common Stock of the Company. If all of the Board of Directors'
nominees are elected at the Annual Meeting, the Company has been informed that
Ms. Sturm and Mr. Hunter intend to nominate Mr. Holtzman for the position of
Chairman of the Board of Directors.

This settlement agreement also provides that Mr. Carey will resign as the
Acting Chief Executive Officer of the Company as of the date of the Annual
Meeting. Thereafter, Mr. Carey will act as a consultant to the Company for a
period of six months. The Company has appointed Kenneth W. Watson as Acting
Chief Executive Officer of the Company effective April 7, 1999 until a
permanent replacement is found. For a description of the payments to be
received by Mr. Carey in connection with his resignation and the terms of Mr.
Carey's consulting arrangement and the terms of Mr. Watson's employment, see
"Executive Compensation--Compensation Committee Interlocks and Insider
Participation" and "--Employment Contracts, Termination of Employment."

The resignations, appointments and consulting arrangement described herein
in connection with the settlement agreement are contingent on the election of
the Board of Directors' four nominees at the Annual Meeting. Pursuant to the
terms of the settlement agreement, Messrs. Sturm and Holtzman and their
affiliates and associates, and Mr. Carey will vote the shares of Common Stock
beneficially owned by them for the Board of Directors' four nominees at the
Annual Meeting.

3
<PAGE>

PROPOSAL NUMBERS 1 AND 2

ELECTION OF DIRECTORS

The Board of Directors of the Company currently consists of five members and
is divided into three classes, with one Director in Class I and two Directors
in each of Class II and III. John E. Toler, Jr. and C. William Carey,
currently the Class III Directors will not stand for re-election at the Annual
Meeting. Timothy B. Donaldson, a Class II Director, will resign as a Director
of the Company, effective as of April 7, 1999. In connection with the
settlement of the proxy contest described above, the Company, as of the Annual
Meeting, will fix the size of the Board of Directors at six members. After the
Annual Meeting, the Board of Directors of the Company will consist of six
members divided into three classes, with two Directors in each of Class I, II
and III serving for three-year terms, with one class of Directors being
elected by the Company's stockholders at each annual meeting. However, because
no annual meeting of stockholders was held for 1997, the Class III Directors
elected at the Annual Meeting will serve for a term ending at the 2000 annual
meeting.

At the Annual Meeting, two Class III Directors will be elected, each to
serve until the 2000 annual meeting and two Class I Directors will be elected,
each to serve until the 2001 annual meeting, and each until their successors
are duly elected and qualified. The Board of Directors has nominated Melanie
L. Sturm and Richard C. Hunter for election as Class III Directors and Adriane
J. Dudley and Seymour Holtzman for election as Class I Directors. Unless
otherwise specified in the proxy, it is the intention of the persons named in
the proxy to vote the shares represented by each properly executed proxy for
the election of Melanie L. Sturm and Richard C. Hunter as Class III Directors
and the election of Adriane J. Dudley and Seymour Holtzman as Class I
Directors. Each of the nominees of the Board of Directors has agreed to stand
for election and to serve if elected as a Director. However, if any of the
persons nominated by the Board of Directors fails to stand for election or is
unable to accept election, properly executed proxies voting in favor of the
nominees of the Board of Directors will be voted for the election of such
other person or persons as the Board of Directors may recommend.

Vote Required For Approval

A quorum being present, the affirmative vote of a plurality of the votes
cast is necessary to elect a Board's Nominee as a Director of the Company.

The Board of Directors of the Company recommends that you vote FOR the
election of the nominees of the Board of Directors, Adriane J. Dudley, Seymour
Holtzman, Melanie L. Sturm and Richard C. Hunter, as Directors of the Company.

INFORMATION REGARDING DIRECTORS

The Board of Directors of the Company held thirty-one (31) meetings during
Fiscal 1998 to deal with, among other things, the Merger Agreement with DRHC
and its subsequent termination. During Fiscal 1998, each of the incumbent
Directors attended at least 75% of the total number of meetings of the Board
of Directors and of the committees of which he or she was a member. The Board
of Directors has established an Audit Committee and a Compensation Committee
to assist it in discharging its duties. During Fiscal 1998, a majority of the
members of all committees were outside directors. The current members of the
Audit Committee are Messrs. Carey and Donaldson. Each of Mr. Carey and Mr.
Donaldson will retire from the Board of Directors effective as of the date of
the Annual Meeting. The Audit Committee reviews the financial statements of
the Company and the scope of the annual audit, monitors the Company's internal
financial and accounting controls and recommends to the Board of Directors the
appointment of independent certified public accountants. The Audit Committee
met once during Fiscal 1998. The current members of the Compensation Committee
are Messrs. Carey and Donaldson. Each of Mr. Carey and Mr. Donaldson will
retire from the Board of Directors effective as of the date of the Annual
Meeting. The Compensation Committee recommends the compensation levels of
officers and employees of the Company to the Board of Directors and is
responsible for administering the

4
<PAGE>

Company's stock option plans pursuant to authority delegated to it by the
Board of Directors. The Compensation Committee met twice during Fiscal 1998.
The Board of Directors does not maintain a nominating committee. Instead, its
functions are carried out by the entire Board of Directors.

Directors who are officers or employees of the Company receive no
compensation for service as Directors. Directors who are not officers or
employees of the Company receive such compensation for their services as the
Board of Directors may from time to time determine. Non-employee Directors
each receive an annual retainer of $5,000, plus a fee of $2,500 for each Board
of Directors meeting attended ($500 if such meeting is held via telephone
conference) if such meeting does not take place in conjunction with a
regularly scheduled Board of Directors meeting. In addition, non-employee
Directors who are members of committees each receive $1,000 for each committee
meeting attended ($500 if such meeting is held via telephone conference). All
Directors are reimbursed for expenses incurred in connection with attendance
at meetings. In addition to the above compensation, in May, 1998, the Company
awarded each person who was a Director of the Company at the end of Fiscal
1998 a gold watch for services provided during Fiscal 1998. The aggregate
gross value of such watches was approximately $51,000.

In order to align stockholder and director interests, in 1992 the Board of
Directors established the 1992 Non-Employee Directors' Nonqualified Stock
Option Plan (the "1992 Option Plan"). Pursuant to the 1992 Option Plan, each
eligible non-employee Director automatically receives an option to purchase
3,000 shares of Common Stock on the last day of the Company's fiscal year. All
options granted pursuant to the 1992 Option Plan vest and are immediately
exercisable upon grant. All options granted under the 1992 Option Plan have an
exercise price equal to 100% of the fair market value of a share of Common
Stock on the grant date. On May 30, 1998, the then eligible non-employee
Directors of the Company each received an option to purchase 3,000 shares of
Common Stock at an exercise price of $5.5625 per share, the fair market value
of the Common Stock on May 29, 1998. In addition, on December 23, 1998, in
connection with her appointment to the Board of Directors, Ms. Dudley received
an option granted pursuant to the 1992 Option Plan to purchase 5,000 shares of
Common Stock at an exercise price of $2.50 per share, the fair market value of
the Common Stock on December 23, 1998.

Set forth below is certain information regarding the nominees of the Board
of Directors for election at the Annual Meeting and the Directors continuing
after the Annual Meeting based on information furnished by them to the
Company.

<TABLE>
<CAPTION>
Name Age
- ---- ---
<S> <C>
Class I--Term Expires 2001
Adriane J. Dudley(1)(2)..................................................... 50
Seymour Holtzman(1)......................................................... 63

Class II--Term Expires 1999
Kenneth W. Watson........................................................... 56
Peter R. McMullin(3)........................................................ 55

Class III--Term Expires 2000
Melanie L. Sturm(1)......................................................... 37
Richard C. Hunter(1)........................................................ 54
</TABLE>
- --------
(1) Nominee of the Board of Directors.
(2) Ms. Dudley was appointed as a Class I Director of the Company on December
1, 1998 and her term expires at the Annual Meeting.
(3) Mr. McMullin will be appointed as a Class II Director immediately after
the Annual Meeting.

5
<PAGE>

The principal occupation and business experience during at least the last
five years for the nominees of the Board of Directors and the Directors
continuing after the Annual Meeting are set forth below.

Class I

Ms. Dudley has been an attorney with Dudley, Clark & Chan, a Caribbean law
firm of which she is the senior partner since 1985, and has been a Director
since 1998. Presently, Ms. Dudley is a member of the Board of Governors of the
American Bar Association and is also a member of the Board's Finance
Committee. She is also a member of the Board of Directors of the Foundation
for the University of the Virgin Islands and serves on its Investment
Committee (1996-present). She has served as President of the St. Thomas-St.
John Chamber of Commerce (1986, 1989 and 1993), and continues to serve on its
Board of Directors. She has also served on the Boards of the V.I. Public
Television Stations (WTJX) (1979 to 1984); the Queen Louise Home for Children
(1980 to 1983); Legal Services of the Virgin Islands (1978 to 1980); and the
United Way (1991 to 1992).

Mr. Holtzman is the founder and Chief Executive Officer of Jewelcor
Management, Inc. Since 1990, Mr. Holtzman has served as Chairman and Chief
Executive Officer of each of Jewelcor Management & Consulting, Inc., located
in Wilkes-Barre, Pennsylvania; C.D. Peacock, Inc., a Chicago, Illinois retail
jewelry establishment; Central European Capital Investors, Inc., an investment
company operating in eastern Europe; and S.A. Peck & Company, a retail and
mail order jewelry company based in Chicago, Illinois.

Class II

Mr. Watson served as Chief Executive Officer and President of the Company
from January 1, 1994 to October 21, 1994, and has been a Director since 1991.
Mr. Watson has been appointed as the Acting Chief Executive Officer of the
Company effective April 7, 1999 until a permanent replacement is found. Since
October 1996, Mr. Watson served as Vice President--Consumer Marketing of the
New York Times Magazine Group, a subsidiary of the New York Times Company. Mr.
Watson served as Executive Vice President of K-Mart Corporation from October
1994 through March 1996. Mr. Watson was President of Louis Vuitton Stores,
Inc. from July 1992 to March 1993. Previously, he was Chairman and Chief
Executive Officer of Gump's, a retailer of jewelry, art and gift items from
September 1989 to June 1992 and President and Chief Executive Officer of
Cartier, Inc. from 1985 to September 1989.

Mr. McMullin is the co-founder of Southeast Research Partners, Inc.
("Southeast") and has been an Executive Vice President and a managing director
of Southeast since its inception in June 1990. Since 1997, Mr. McMullin has
been the Executive Vice President, Chief Investment Officer and a director of
Research Partners International, a company that provides institutional
research, investment banking, securities brokerage and trading services
through its principal subsidiaries. Prior to his nomination, Mr. McMullin
followed and wrote about the Company since its initial public offering in
1991. Southeast has been and will continue to be a market maker for the
Company's Common Stock.

Class III

Ms. Sturm is a private equity investor and serves on the Board of Directors
of FirstWorld Communications, a telecommunications company, and MD Network, a
healthcare company based in Denver, Colorado. From 1990 to 1996, Ms. Sturm
served as an Investment Officer at International Finance Corporation, the
private sector affiliate of the World Bank, where she specialized in project
finance. From 1984 to 1989 Ms. Sturm specialized in mergers and acquisitions
at Morgan Stanley and Drexel Burnham Lambert. Ms. Sturm holds a B.A. degree in
Economics from Tufts University and a MBA from INSEAD in Fontainebleu, France.

Mr. Hunter has been the Senior Vice President for International Operations &
Development of Williams-Sonoma, Inc. since November 1996. From March 1996 to
October 1996, Mr. Hunter was the President of RCH Consulting, Inc., from
January 1995 to February 1996 he was the Executive Vice President of DFS Group
Limited and from June 1992 to December 1994 he was the President of DFS North
America Division of DFS Group Limited.

6
<PAGE>

EXECUTIVE OFFICERS

The names and ages of all executive officers of the Company and the
principal occupation and business experience during at least the last five
years for each are set forth below as of February 24, 1999.

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <S> <C>
C. William Carey............ 61 Acting Chief Executive Officer
David J. Nace............... 52 Chief Financial Officer, Executive Vice President and Treasurer
William Canfield............ 51 Vice President of Store Operations
Michael M. Poole............ 56 Vice President and General Merchandise Manager
</TABLE>

Mr. Canfield has been Vice President of Store Operations since June 1994. In
that position, he has been responsible for store operations, new store
development and strengthening the Company's position in jewelry throughout its
stores. Mr. Canfield was Managing Director of Colombian Emeralds International
from December 1979 to June 1994. In the past, he served as the President of
the St. Thomas Retail Association for two years.

Mr. Carey resigned as the Chairman of the Board of Directors of the Company
effective September 1, 1998 and, on such date, became the Acting Chief
Executive Officer of the Company, but has resigned from this position
effective April 7, 1999. Mr. Carey will not stand for re-election at the
Annual Meeting. Since January 1997, Mr. Carey has been President of Carey
Associates, Inc., a company engaged in international marketing and finance,
management consulting and Russian business development. From 1965 through
January 3, 1997, he served as Chairman, Chief Executive Officer, President and
Treasurer of Town & Country Corporation ("Town & Country"), which was the sole
stockholder of the Company prior to the public offering of approximately 68%
of the Company's Common Stock in July 1991. Town & Country is a public company
specializing in the international design, manufacture and distribution of
jewelry. On November 11, 1997, Town & Country filed a petition under chapter
11 of the federal bankruptcy laws with the United States Bankruptcy Court for
the District of Massachusetts (Case No: 97-20872-WCH). Town & Country's Fourth
Amended Plan of Reorganization, dated April 16, 1998, was confirmed on May 26,
1998. Mr. Carey is also a Director of Prospect Street High Income Portfolio,
Inc.

Mr. Nace has been the Chief Financial Officer, Executive Vice President and
Treasurer of the Company since September 1998. Mr. Nace was the Executive Vice
President, Chief Financial Officer and Treasurer for Gart Sports Company, a
publicly held, full-line sporting goods retailer, from October 1993 to January
1998. From June 1981 to June 1993, Mr. Nace was the Vice President, Controller
of Child World, Inc.

Mr. Poole has been the Vice President and General Merchandise Manager of the
Company since August 1998. Mr. Poole was the Director of Licensing for Combine
International Inc., a jewelry manufacturing company, from August 1996 to
August 1998. From September 1991 to July 1996, Mr. Poole was the President of
NXP, d/b/a Jewels at A.H. Riise, a retail jewelry store in St. Thomas,
U.S.V.I.

Mr. Watson has been appointed as the Acting Chief Executive Officer of the
Company effective April 7, 1999 until a permanent replacement is found. For a
description of Mr. Watson's principal occupation and business experience, see
"Information Regarding Directors."

Subject to the terms of their respective employment agreements, each of the
officers holds his respective office until the regular annual meeting of the
Board of Directors following the annual meeting of stockholders and until his
successor is elected and qualified or until his earlier resignation or
removal.

7
<PAGE>

EXECUTIVE COMPENSATION

The following sections of this Proxy Statement set forth and discuss the
compensation paid or awarded during the last three fiscal years to (i) the
Company's Chief Executive Officer and the two most highly compensated
executive officers who earned in excess of $100,000 during Fiscal 1998 and
(ii) one other individual for whom disclosure would have been provided but for
the fact that he was not serving as an executive officer at the end of Fiscal
1998.

Summary Compensation Table

The following table shows for the fiscal years ended June 1, 1996, May 31,
1997 and May 30, 1998 compensation paid by the Company to (i) the Chief
Executive Officer and the two most highly compensated executive officers who
earned in excess of $100,000 during Fiscal 1998 and (ii) one other individual
for whom disclosure would have been provided but for the fact that he was not
serving as an executive officer at the end of Fiscal 1998.

<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
---------------------------------------- --------------------------------
Awards Payouts
---------- ---------------------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Bonus Compensation Award(s) Options Payouts Compensation
Name and Principal Position Year Salary ($) ($) ($) ($) (#) ($) ($)
- --------------------------- ---- ---------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John E. Toler, Jr........ 1998 $300,000 $140,000 $4,000(7) -- -- -- $6,688(12)(13)
President and Chief 1997 $300,000 -- $3,000(7) -- 300,000(10) -- $3,894(12)
Executive Officer(1) 1996 $177,804 $ 50,000 $1,750(8) -- -- -- --
Thomas S. Liston......... 1998 $ 81,845 -- -- -- 25,000(11) -- --
Chief Financial Officer, 1997 -- -- -- -- -- -- --
Vice President and 1996 -- -- -- -- -- -- --
Treasurer(2)
William Canfield......... 1998 $173,000 $ 28,000 -- -- -- -- $8,659(14)
Vice President of 1997 $173,000 -- -- -- -- -- --
Store Operations 1996 $156,327 $ 15,000 -- -- -- -- --
Ronald J. Lataille....... 1998 $ 74,077 $ 50,000(4) -- -- -- -- --
Chief Financial Officer,
Vice 1997 $150,000 $ 44,202(5) -- -- -- -- --
President and 1996 $110,000 $ 70,000(6) $1,250(9) -- -- -- --
Treasurer(3)
</TABLE>
- -------
(1) Mr. Toler resigned as the Chief Executive Officer and President of the
Company effective August 31, 1998.
(2) Mr. Liston resigned as the Chief Financial Officer, Vice President and
Treasurer of the Company effective September 10, 1998.
(3) Mr. Lataille resigned as the Chief Financial Officer, Vice President and
Treasurer of the Company on October 31, 1997.
(4) Mr. Lataille was awarded a one time stay bonus of $50,000 during Fiscal
1998.
(5) Mr. Lataille was awarded a bonus of $44,202 as compensation for certain
services to the Company performed during the fiscal year ended May 31,
1997. Specifically, Mr. Lataille provided additional services to the
Company in connection with (i) the preparation and filing of an insurance
claim on behalf of the Company in connection with hurricane damage to
certain of the Company's properties and (ii) the initial analysis for the
disposition and redevelopment of assets of the Company, to be used later
by Wasserstein Perella & Co., Inc., the Company's financial advisor, in
the development of a strategic plan for the Company.
(6) Mr. Lataille was awarded a bonus of $50,000 as compensation for his
services to the Company as its acting President and Chief Executive
Officer from October 21, 1994 to October 31, 1995.
(7) This amount represents the cost to the Company for one year of certain
automobile allowances.
(8) This amount represents the cost to the Company for seven months of
certain automobile allowances.
(9) This amount represents the cost to the Company for five months of certain
automobile allowances.
(10) In connection with his appointment as President and Chief Executive
Officer of the Company, the Company granted Mr. Toler an option to
purchase 300,000 shares of the Company's Common Stock pursuant to the
Little Switzerland, Inc. 1991 Stock Option Plan (the "1991 Option Plan").
(11) In connection with his appointment as Chief Financial Officer, Vice
President and Treasurer of the Company, the Company granted Mr. Liston an
option to purchase 25,000 shares of the Company's Common Stock pursuant
to the 1991 Option Plan.

8
<PAGE>

Pursuant to the terms of the Incentive Stock Option Agreement between the
Company and Mr. Liston, due to Mr. Liston's resignation, this option
expired on December 10, 1998.
(12) Effective June 1, 1996, the Company replaced its tax-qualified
discretionary contribution retirement plan with a 401(k) Plan under which
the Company matches each employee's contribution up to 3% of
compensation. In Fiscal 1998, the Company contributed $2,423 to the
individual account maintained on behalf of Mr. Toler pursuant to the
401(k) Plan. In fiscal 1997, the Company contributed $3,894 to an
individual account maintained on behalf of Mr. Toler pursuant to the
401(k) Plan.
(13) This amount includes $4,265 in insurance premiums paid by the Company
with respect to term life insurance for the benefit of Mr. Toler.
(14) This amount represents $1,092 in insurance premiums paid by the Company
with respect to term life insurance for the benefit of Mr. Canfield and
$7,567 in remainder of premiums paid by the Company due to Mr. Canfield's
interest in the cash surrender value under one such insurance policy.

Option Grants in Last Fiscal Year

The following table sets forth the number of shares underlying stock options
granted during Fiscal 1998 to the Chief Executive Officer and each other
executive officer named in the Summary Compensation Table and certain other
information regarding such stock options.
<TABLE>
<CAPTION>
Realizable
Value At
Assumed Annual
Rates Of Stock Alternative To
Price (f) and (g):
Appreciation Grant Date
Individual Grants for Option Term Value
--------------------------------------------- --------------- --------------
Percent of
Number of Total
Securities Options/SARs Exercise
Underlying Granted To Or Base Grant Date
Option/SARs Employees In Price Expiration Present Value
Name Granted (#) Fiscal Year ($/Sh)(1) Date 5% ($) 10% ($) $
- ---- ----------- ------------ --------- ---------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
John E. Toler, Jr....... -- -- -- -- -- -- --
Thomas S. Liston(2)..... 25,000 100% $6.4375 9/29/07 101,213 256,493 --
William Canfield........ -- -- -- -- -- -- --
Ronald J. Lataille...... -- -- -- -- -- -- --
</TABLE>
- --------
(1) The exercise price is equal to the fair market value of a share of Common
Stock on the grant date. The amounts shown as potential realizable value
illustrate what might be realized upon exercise immediately prior to
expiration of the option term using the 5% and 10% appreciation rates
established in regulations of the Securities and Exchange Commission (the
"SEC"), compounded annually. The potential realizable value is not
intended to predict future appreciation of the price of the Company's
Common Stock. The values shown do not consider nontransferability, vesting
or termination of the options upon termination of employment.
(2) In connection with his appointment as Chief Financial Officer, Vice
President and Treasurer of the Company, the Company granted Mr. Liston an
option to purchase 25,000 shares of the Company's Common Stock pursuant to
the 1991 Option Plan. This option vested and became immediately
exercisable upon the execution of the Merger Agreement with DRHC and
certain of its affiliates pursuant to the terms of the 1991 Option Plan.
Pursuant to the terms of the Incentive Stock Option Agreement between the
Company and Mr. Liston, due to Mr. Liston's resignation, this option
expired on December 10, 1998.

9
<PAGE>

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Values

The following table sets forth the shares acquired and the value realized
upon exercise of stock options during Fiscal 1998 by the Chief Executive
Officer and each other executive officer named in the Summary Compensation
Table and certain information concerning the number and value of unexercised
options.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Value Options at FY-End (#) FY-End ($)(2)
Shares Acquired on ----------------------------- -------------------------
Name Exercise (#) Realized ($) Exercisable (1) Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ --------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John E. Toler, Jr....... -- -- 300,000 -- $618,750 $ 0
Thomas S. Liston........ -- -- 25,000(3) -- $ 0 $ 0
William Canfield........ -- -- 60,000 -- $ 8,125 $ 0
Ronald J. Lataille...... 70,000 $196,750 -- -- -- --
</TABLE>
- --------
(1) All of the unvested options on the date of the execution of the Merger
Agreement with DRHC automatically vested and became immediately
exercisable pursuant to the terms of the 1991 Option Plan.
(2) Equal to the market value of shares covered by in-the-money options on May
30, 1998 (based on the market value of $5.5625 per share as reported by
the NASDAQ National Market as of May 29, 1998) less the aggregate option
exercise price. Options are in-the-money if the market value of the shares
covered thereby is greater than the option exercise price.
(3) Pursuant to the terms of the Incentive Stock Option Agreement between the
Company and Mr. Liston, due to Mr. Liston's resignation, this option
expired on December 10, 1998.

Report of the Compensation Committee of the Board of Directors on Executive
Compensation

During Fiscal 1998, the Compensation Committee of the Board of Directors of
the Company consisted of C. William Carey, Timothy B. Donaldson and Ilene B.
Jacobs, all of whom were outside directors during Fiscal 1998. Ms. Jacobs
resigned as a member of the Board of Directors effective September 14, 1998
and, on such date, the Compensation Committee was reconstituted with Messrs.
Carey and Donaldson. In connection with the settlement of the proxy contest,
Mr. Donaldson will resign as a member of the Board of Directors and the
Compensation Committee effective April 7, 1999, and Mr. Carey will not stand
for re-election at the Annual Meeting and will resign as a member of the
Compensation Committee effective April 7, 1999. The Compensation Committee
approves Company compensation policies and procedures and establishes
compensation levels for executive officers. The Compensation Committee also
administers and grants awards under the 1991 Option Plan and the Company's
Employee Stock Purchase Plan.

Compensation Policies for Executive Officers

The Compensation Committee's executive compensation philosophy is to provide
competitive levels of compensation, integrate management's pay with Company
performance, reward above average individual performance, and assist the
Company in attracting and retaining qualified management. The Compensation
Committee has determined that base salaries of executive officers should be
set at levels that are competitive within the local retail industry. In
addition, the Compensation Committee believes that it is appropriate to reward
outstanding performance through a combination of cash bonuses and stock option
grants and, through stock option grants, to provide a competitive compensation
package that will enable the Company to attract and retain the executives
needed to achieve such performance. The Compensation Committee also has
determined that any stock option or other equity-based compensation should
involve long-term vesting to encourage long-term tenure and enhancement of
shareholder value over the long-term.

Base salaries for executive officers are targeted according to the salaries
of employees holding similar offices and having similar responsibilities
within the local retail industry. The Compensation Committee also considers
the relative cost of living within the United States Virgin Islands. Annual
salary adjustments for executive officers are determined by evaluating the
competitive marketplace, the performance of the Company, the performance of
the executive officer and any change in the responsibilities assumed by the
executive officer. Salary adjustments are normally determined and made on an
annual basis. The base salary and salary adjustments

10
<PAGE>

for John E. Toler, Jr., President and Chief Executive Officer of the Company
during Fiscal 1998 were established pursuant to his employment agreement, as
described below under "--Employment Contracts, Termination of Employment." See
"--Compensation of John E. Toler, Jr., Former Chief Executive Officer" below.
The terms of employment of Thomas S. Liston, the Chief Financial Officer, Vice
President and Treasurer of the Company as of the end of Fiscal 1998, were
determined by the Compensation Committee and approved by the Board of
Directors.

Cash bonuses paid to executive officers generally are earned primarily
through the achievement of financial goals relative to each officer's
responsibilities. Such financial goals include targeted sales and profit
levels, earnings before interest and taxes ratios, selling, general and
administrative expense ratios, return on assets, inventory shrinkage and
inventory turns. Based on this criteria for Fiscal 1998, Mr. Toler and Mr.
Canfield received $140,000 and $28,000, respectively, as a bonus. Cash bonuses
may also be paid to executive officers in accordance with the terms of their
employment agreements. Bonuses payable pursuant to such agreements generally
are earned through the achievement of the financial goals similar to those
discussed above and may also be awarded for executive retention purposes in
the sole discretion of the Compensation Committee. Pursuant to their
respective employment contracts, Messrs. Toler, Liston and Canfield were each
eligible to earn a bonus of up to 45.83%, 25% and 25%, respectively, of their
respective base salaries for Fiscal 1998. See "--Compensation of John E.
Toler, Jr., Former Chief Executive Officer" and "--Employment Contracts,
Termination of Employment" below. Occasionally, cash bonuses are paid to
executive officers for the performance of services to the Company outside the
scope of their offices, as determined by the Compensation Committee of the
Board of Directors of the Company.

Stock options are designed to attract and retain executives who can make
significant contributions to the Company's success; reward executives for such
significant contributions; and give executives a longer-term incentive to
increase shareholder value. In determining whether to grant stock options to
executive officers, the Compensation Committee evaluates each officer's
performance by examining criteria similar to that involved in fixing cash
bonuses (but without any specific performance measures) and awards reflect
individual performance reviews. The Compensation Committee also may grant
stock options for executive retention purposes, taking into account, among
other things, general industry practice. Stock options typically vest over
three to five years in order to encourage outstanding performance over the
long-term. Historically, stock options generally have been granted with a ten-
year term and an exercise price equal to 100% of the fair market value of the
Common Stock on the grant date. Upon the execution of the Merger Agreement
with DRHC, all unvested stock options on the date of the execution of the
Merger Agreement automatically vested pursuant to the terms of the 1991 Option
Plan.

Compensation of John E. Toler, Jr., Former Chief Executive Officer

The base salary and bonus for Mr. Toler, the Company's President and Chief
Executive Officer during Fiscal 1998 were established by Mr. Toler's
employment agreement. See "--Employment Contracts, Termination of Employment"
below. During Fiscal 1998, there were no adjustments made to Mr. Toler's base
salary, and he received a cash bonus equal to $140,000, in accordance with the
terms of his employment agreement. Additionally, pursuant to the terms of Mr.
Toler's employment agreement, on November 1, 1995, the Company granted Mr.
Toler an option to purchase 300,000 shares of the Company's Common Stock at
$3.50 per share pursuant to the 1991 Option Plan. This option automatically
vested upon the execution of the Merger Agreement with DRHC pursuant to the
terms of the 1991 Option Plan. In connection with his resignation, the Board
of Directors has amended his option agreement so that he may exercise the
option after the termination of his employment with the Company at any time
prior to September 1, 2000, upon which date the option shall expire.

Federal Tax Regulations

As a result of Section 162(m) of the Internal Revenue Code (the "Code"), the
Company's deduction of executive compensation may be limited to the extent
that a "covered employee" (i.e., the chief executive officer or one of the
four highest compensated officers who is employed on the last day of the
Company's taxable year and whose compensation is reported in the summary
compensation table in the Company's proxy statement) receives compensation in
excess of $1,000,000 in such taxable year of the Company (other than
performance-based compensation that otherwise meets the requirements of
Section 162(m) of the Code). The Company intends to take appropriate action to
comply with such regulations, if applicable, in the future.

11
<PAGE>

The report of the Compensation Committee of the Board of Directors on
executive compensation is made by each of the members of the Compensation
Committee listed below:

C. William Carey Timothy B. Donaldson

Compensation Committee Interlocks and Insider Participation

Mr. Carey served as a member of the Compensation Committee of the Board of
Directors of the Company during Fiscal 1998. Mr. Carey also served as the
Chairman of the Board of Directors of the Company until September 1, 1998 and,
on such date, became the Acting Chief Executive Officer of the Company. Mr.
Carey has resigned as the Acting Chief Executive Officer of the Company
effective as of April 7, 1999 and will not stand for re-election as a Director
of the Company at the Annual Meeting.

Mr. Carey was the controlling stockholder of Town & Country during a portion
of calendar year 1997 and was President, Chief Executive Officer and Chairman
of the Board of Town & Country until January 3, 1997. On November 11, 1997,
Town & Country filed a petition under chapter 11 of the federal bankruptcy
laws with the United States Bankruptcy Court for the District of Massachusetts
(Case No. 97-20872-WCH). Town & Country's Fourth Amended Plan of
Reorganization, dated April 16, 1998, was confirmed on May 26, 1998. Town &
Country and certain of its subsidiaries supply the Company with jewelry. The
aggregate amount of purchases by the Company from these entities totaled
approximately $1.4 million, $640,000 and $560,000, in fiscal 1996, 1997 and
1998, respectively. Pursuant to written agreements among Town & Country, these
subsidiaries and the Company, Town & Country and the subsidiaries have agreed
to supply jewelry to the Company at the Company's option, on the terms and
conditions in effect prior to the Company's initial public offering. These
agreements are automatically renewed each year unless either party terminates
upon 60 days' notice prior to the end of a year. The Company believes that all
jewelry purchased pursuant to these agreements with Town & Country and its
subsidiaries can be readily purchased from other, unrelated third party
suppliers on comparable terms, and that these agreements do not restrict the
Company from purchasing from other sources. See "Certain Relationships and
Related Transactions."

On June 2, 1996, Mr. Carey entered into a consulting agreement with the
Company (the "CWC Consulting Agreement"). Pursuant to the CWC Consulting
Agreement, Mr. Carey provided consulting services to the Company, including,
without limitation, advice with respect to business and product planning,
marketing strategy, leasing and new store development and executive
recruitment, in exchange for a consulting fee at the annual rate of $150,000,
payable in monthly installments. In addition, Mr. Carey was entitled to
receive reimbursement for all reasonable expenses incurred by him on behalf of
the Company in connection with the performance of his obligations thereunder.
In connection with his position as Acting Chief Executive Officer of the
Company, the Company terminated the CWC Consulting Agreement effective
September 1, 1998. Mr. Carey has received $37,500 in lieu of the three-month
notification necessary pursuant to the CWC Consulting Agreement to terminate
such agreement.

On September 1, 1998, the Company has entered into an employment agreement
with Mr. Carey with respect to his position as Acting Executive Officer and
President of the Company. In connection with his resignation as Acting Chief
Executive Officer, the Company entered into a severance agreement with Mr.
Carey. For a description of certain terms of such agreements, see "--
Employment Agreements, Termination of Employment."

In connection with his resignation as Acting Chief Executive Officer, the
Company has entered into a new consulting agreement with Mr. Carey (the "New
Consulting Agreement"). This New Consulting Agreement is effective as of April
7, 1999 and is further contingent on the Board of Directors' four nominees
being elected at the Annual Meeting. Subject to the foregoing, pursuant to the
New Consulting Agreement, Mr. Carey has agreed to provide consulting services
to the Company similar to those he provided under the CWC Consulting Agreement
in exchange for a consulting fee equal to an aggregate of $180,000, which is
payable on April 7, 1999. Mr. Carey is also entitled to receive reimbursement
for all reasonable expenses incurred by him on behalf of the Company in
connection with such consulting services.

On February 23, 1999, the Company entered into an amended and restated
success fee agreement with Mr. Carey pursuant to which, under certain
circumstances, he will be entitled to receive a fee upon the successful
completion of certain transactions involving the Company. For a more detailed
description of this agreement, see "Certain Relationships and Related
Transactions."

12
<PAGE>

The other members of the Compensation Committee of the Board of Directors of
the Company during Fiscal 1998 were Timothy B. Donaldson and Ilene B. Jacobs.
Ms. Jacobs resigned as a member of the Board of Directors and the Compensation
Committee of the Board of Directors effective September 14, 1998 and Mr.
Donaldson will resign as a member of the Board of Directors and the
Compensation Committee of the Board of Directors effective April 7, 1999.
Neither Mr. Donaldson nor Ms. Jacobs has ever been an officer or employee of
the Company or has ever had any other reportable relationship with the Company
other than through his/her position as a Director of the Company.

Shareholder Return Performance Graph

Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock, based
on the market price of the Company's Common Stock and assuming reinvestment of
dividends, with the total return of companies within the NASDAQ stock market
and the companies within the NASDAQ Retail Trade Stocks Index prepared by the
Center for Research in Security Prices at The University of Chicago Graduate
School of Business. The calculation of total cumulative return assumes a $100
investment in the Company's Common Stock, the NASDAQ stock market and the
NASDAQ Retail Stocks Index on May 28, 1993.

Comparison of Five-Year Cumulative Total Returns

[GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
05/28/93 05/31/94 05/31/95 05/31/96 05/30/97 05/29/98
- ----------------------------------------------------------------------------------------------------------------------------------
Little Switzerland, Inc. 100.0 65.0 47.5 58.8 57.5 55.6
- ----------------------------------------------------------------------------------------------------------------------------------
Nasdaq Stock Market (US Companies) 100.0 105.3 125.3 182.0 205.0 260.5
- ----------------------------------------------------------------------------------------------------------------------------------
Nasdaq Retail Trade Stocks 100.0 101.5 103.5 142.1 137.2 183.8
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

On March 2, 1999, the closing price of a share of the Company's Common Stock
on NASDAQ was $1.875. Assuming a $100 investment in the Company's Common Stock
on May 28, 1993, the total cumulative return of such investment on March 2,
1999 would have been $18.75.

13
<PAGE>

Employment Contracts, Termination of Employment

On November 1, 1995, Mr. Toler entered into an employment agreement with the
Company (the "Toler Employment Agreement"), pursuant to which Mr. Toler was to
serve as President and Chief Executive Officer of the Company for a five-year
term. Mr. Toler resigned as Chief Executive Officer and President of the
Company effective August 31, 1998. Under the Toler Employment Agreement, Mr.
Toler received a base salary of $300,000 over each twelve-month period
employed. The Toler Employment Agreement did not provide for any adjustment of
base salary over the term. Pursuant to the Toler Employment Agreement, Mr.
Toler was entitled to receive a bonus if certain performance criteria were
satisfied, ranging from 33.33% of base salary for fiscal 1996 to 50% of base
salary for fiscal 1999 and each fiscal year thereafter. In the event the
Company terminated Mr. Toler's employment without cause, Mr. Toler was
entitled to receive the salary plus the pro rata share of any cash bonus he
would have received if he had continued his employment for 18 months following
the date of such termination. Mr. Toler was subject to certain non-competition
provisions during the term of his employment and, in certain circumstances,
for a period of 18 months subsequent to his leaving the Company. On August 14,
1998, Mr. Toler entered into a letter agreement (the "Toler Letter Agreement")
with the Company, pursuant to which Mr. Toler received an aggregate amount
equal to $19,883 as payment for certain fees and expenses upon his resignation
as President and Chief Executive Officer of the Company. In addition, pursuant
to the Toler Letter Agreement, Mr. Toler received a one time stay bonus equal
to $4,000 and is entitled to purchase any and all of the Company's
merchandise, at the Company's cost, up to a maximum aggregate amount equal to
$20,000 until August 31, 1999. For a description of the options granted to Mr.
Toler see "--Report of the Compensation Committee of the Board of Directors on
Executive Compensation--Compensation of John E. Toler, Jr., Former Chief
Executive Officer."

Mr. Carey entered into an employment agreement with the Company (the "CWC
Employment Agreement") effective as of September 1, 1998. Under the terms of
the CWC Employment Agreement, Mr. Carey was to serve as Acting Chief Executive
Officer and President of the Company for a one-year term, or until such time
as a successor Chief Executive Officer and President of the Company commenced
employment. Mr. Carey was to receive a base salary of $350,000 over the
twelve-month period employed, but such amount was not subject to adjustment
over the term. In addition, Mr. Carey was entitled to receive a minimum of six
months' salary if the Company employed him for more than three months of the
term of the employment (minus the amount of base salary actually paid to Mr.
Carey). Upon the achievement of certain performance and other criteria,
Mr. Carey was entitled to receive up to a maximum of $50,000 per quarter (and
up to 100% of such amount for each quarter or part thereof worked) as a
quarterly bonus. The Board of Directors has authorized a payment of $41,250 to
Mr. Carey as a bonus for the second quarter of the Company. Mr. Carey has also
received payment for certain expenses, including living expenses, relocation
expenses and travel related expenses. Mr. Carey is subject to certain non-
competition provisions during the term of this employment. Additionally, on
September 1, 1998, the Company granted Mr. Carey an option to purchase 150,000
shares of the Company's Common Stock at $2.25 per share. The Company granted
this option outside of the 1991 Option Plan.

Mr. Carey has resigned as the Acting Chief Executive Officer of the Company
effective April 7, 1999. In connection with his resignation, on February 23,
1999, Mr. Carey entered into a severance agreement with the Company ( the "CWC
Severance Agreement"). This agreement and Mr. Carey's resignation are
contingent on the Board of Directors' four nominees being elected at the
Annual Meeting. Subject to the foregoing, pursuant to the terms of the CWC
Severance Agreement, Mr. Carey will receive an aggregate amount equal to
$29,167 in base salary on the effective date of his resignation as Acting
Chief Executive Officer of the Company. In addition, pursuant to the terms of
the CWC Severance Agreement, Mr. Carey (i) will receive $50,000 as a bonus for
the Company's third quarter, (ii) is entitled to purchase any and all of the
Company's merchandise, at the Company's cost, for his personal use until March
17, 2002, (iii) will be reimbursed for the premiums associated with
continuation of medical coverage under COBRA and (iv) will be reimbursed for
the legal expenses he incurred in connection with the negotiation of the CWC
Severance Agreement. Pursuant to the terms of his stock option agreement, the
option granted to Mr. Carey in connection with his appointment as the Acting
Chief Executive Officer of the Company automatically vested as a result of the
execution of the settlement agreement and is exercisable until February 23,
2001.

14
<PAGE>

Mr. Watson has been appointed as the Acting Chief Executive Officer of the
Company effective as of April 7, 1999 and will serve until a successor is
found. This appointment is contingent on the Board of Directors' four nominees
being elected at the Annual Meeting. Based on a term sheet, the terms of Mr.
Watson's employment substantially will be as follows. Mr. Watson will serve as
the Acting Chief Executive Officer of the Company from month to month until a
successor President and Chief Executive Officer of the Company commences
employment. Mr. Watson will receive a salary equal to $30,000 per month for
each month employed, but such amount will not be subject to adjustment over
the term. Mr. Watson also will be entitled to receive reimbursement of his
reasonable living expenses.

On November 12, 1997, Mr. Liston entered into an employment agreement with
the Company, which was subsequently amended on June 14, 1998 (the "Liston
Employment Agreement"), pursuant to which Mr. Liston was to serve as the Chief
Financial Officer, Vice President and Treasurer of the Company for a two-year
term. Mr. Liston resigned as the Chief Financial Officer, Vice President and
Treasurer of the Company effective September 10, 1998. Under the Liston
Employment Agreement, Mr. Liston received a base salary ranging from $65,000
to $160,000 (depending on whether or not Mr. Liston rendered services under
the Liston Employment Agreement at the main offices of the Company). Mr.
Liston also was entitled to receive, upon the achievement of certain financial
performance criteria, a bonus in an amount of up to 25% of his base salary in
each year. Mr. Liston was subject to certain non-competition provisions during
the term of his employment.

Mr. Nace entered into an employment agreement with the Company (the "Nace
Employment Agreement") effective as of September 10, 1998. Under the terms of
the Nace Employment Agreement, Mr. Nace will serve as the Chief Financial
Officer, Executive Vice President and Treasurer of the Company for a two-year
term. Mr. Nace receives a base salary of $200,000 over each twelve-month
period employed, but such amount will not be subject to adjustment over the
term. Upon achievement of certain performance criteria, Mr. Nace will be
entitled to receive a bonus in an amount of up to 25% of his base salary in
each year. Mr. Nace's employment may be terminated immediately by the Company
with "cause" (as defined in the Nace Employment Agreement). If Mr. Nace's
employment is terminated by the Company due to his disability, without cause
or within one year from the date of a change of control of the Company, then
he will be entitled to receive, on the date of such termination, a lump sum
payment equal to twelve months of base salary plus the pro rata share of any
accrued and unpaid cash bonus Mr. Nace earned prior to his termination. Mr.
Nace will be subject to certain non-competition provisions during the term of
his employment. Additionally, on September 10, 1998, the Company granted Mr.
Nace an option to purchase 75,000 shares of the Company's Common Stock at
$2.50 per share pursuant to the 1991 Option Plan.

Mr. Poole entered into an employment agreement with the Company (the "Poole
Employment Agreement") effective as of August 25, 1998. Under the terms of the
Poole Employment Agreement, Mr. Poole will serve as Vice President and General
Merchandise Manager of the Company for a two-year term. Mr. Poole receives a
base salary of $135,000 over each twelve-month period employed, but such
amount will not be subject to adjustment over the term. Upon achievement of
certain performance criteria, Mr. Poole is entitled to receive a bonus in an
amount of up to 25% of his base salary in each year. Mr. Poole's employment
may be terminated immediately by the Company with "cause" (as defined in the
Poole Employment Agreement). If Mr. Poole's employment is terminated by the
Company without cause or within one year from the date of a change of control
of the Company, then he will be entitled to receive, on the date of such
termination, a lump sum payment equal to twelve months of base salary plus the
pro rata share of any accrued and unpaid cash bonus Mr. Poole earned prior to
his termination. Additionally, on August 25, 1998, the Company granted Mr.
Poole an option to purchase 50,000 shares of the Company's Common Stock at
$2.0625 per share. The Company granted this option outside of the 1991 Option
Plan.

On June 16, 1994, Mr. Canfield entered into an employment agreement with the
Company (the "Canfield Employment Agreement"), pursuant to which Mr. Canfield
serves as the Vice President of Store Operations of the Company for a five-
year term. On November 13, 1998, Mr. Canfield entered into an amendment to the
Canfield Employment Agreement that, in part, extends the term of his
employment until June 15, 2000. Under

15
<PAGE>

the Canfield Employment Agreement, Mr. Canfield receives a base salary ranging
from $157,000 over the twelve-month period ended on June 15, 1996 to $182,000
over the twelve-month period ending on June 15, 2000, and upon the achievement
of certain performance criteria, a bonus in an amount of up to 25% of his base
salary in each year. Pursuant to the Canfield Employment Agreement,
Mr. Canfield received a signing bonus equal to $50,000 on the date he became
Vice President of Store Operations of the Company. In the event Mr. Canfield's
employment is terminated by the Company due to his disability, for non-
performance or without cause, Mr. Canfield is entitled to receive the salary
he would have received had he continued his employment for 60 days, 90 days or
12 months, respectively, following the date of such termination. Pursuant to
the amendment to the Canfield Employment Agreement, in the event that Mr.
Canfield is terminated by the Company within one year from the date of a
change of control of the Company, Mr. Canfield will be entitled to receive, on
the date of such termination, a lump sum payment equal to twelve months of
base salary plus the pro rata share of any accrued and unpaid bonus which Mr.
Canfield earned prior to his termination. Mr. Canfield is subject to certain
non-competition provisions during the term of his employment and, in certain
circumstances, for a period of up to one year subsequent to his leaving the
Company.

16
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Carey, a Director and the former Chairman of the Board of Directors of
the Company, was the controlling stockholder of Town & Country during a
portion of calandar year 1997 and was Chairman, President and Chief Executive
Officer of Town & Country until January 3, 1997. Effective September 1, 1998,
Mr. Carey resigned as Chairman of the Board of Directors of the Company and,
on such date, became the Acting Chief Executive Officer of the Company, but
has resigned from this position effective as of April 7, 1999. On October 22,
1997, Mr. Carey exchanged 25,000 shares of Town & Country Exchangeable
Preferred Stock, which he acquired on June 9, 1994 at $7.1875 pre share, on a
share-for-share basis into 25,000 shares of the Company's Common Stock.

Town & Country and certain of its subsidiaries supply the Company with
jewelry. The aggregate amount of purchases by the Company from these entities
totaled approximately $1.4 million, $640,000 and $560,000 in fiscal 1996, 1997
and 1998, respectively. Pursuant to written agreements among Town & Country,
these subsidiaries and the Company, Town & Country and the subsidiaries have
agreed to supply jewelry to the Company at the Company's option, on the terms
and conditions in effect prior to the Company's initial public offering. These
agreements are automatically renewed each year unless either party terminates
upon 60 days' notice prior to the end of a year. The Company believes that all
jewelry purchased pursuant to these agreements with Town & Country and its
subsidiaries can be readily purchased from other, unrelated third party
suppliers on comparable terms, and that these agreements do not restrict the
Company from purchasing from other sources.

Mr. Carey was, as of the end of Fiscal 1998, also a Director of Solomon
Brothers, Limited which, until termination on November 1, 1998, operated eight
stores in the Bahamas under a franchise agreement with the Company. In
addition, Mr. Carey entered into the CWC Consulting Agreement with the Company
on June 2, 1996, which provided, among other things, that Mr. Carey would
receive in exchange for certain services a consulting fee at the annual rate
of $150,000 over a three-year term, as well as reimbursement for all
reasonable expenses incurred by him on behalf of the Company in connection
with the performance of his obligations thereunder. In connection with his
position as Acting Chief Executive Officer of the Company, the Company
terminated the CWC Consulting Agreement effective September 1, 1998. Mr. Carey
has received $37,500 in lieu of the three-month notification necessary
pursuant to the CWC Consulting Agreement to terminate such agreement. See
"Executive Compensation--Compensation Committee Interlocks and Insider
Participation."

On September 1, 1998, the Company has entered into an employment agreement
with Mr. Carey with respect to his position as Acting Chief Executive Officer
and President of the Company. For a description of certain terms of such
agreement, see "Executive Compensation--Employment Agreements, Termination of
Employment."

In connection with his resignation as Acting Chief Executive Officer of the
Company, Mr. Carey entered into a severance agreement and a new consulting
agreement with the Company for a period of six months. For a description of
certain terms of such agreements, see "Executive Compensation--Compensation
Committee Interlocks and Insider Participation".

To modify a previously existing agreement, on February 23, 1999, the Company
entered into an amended and restated success fee agreement with Mr. Carey (the
"Amended Success Fee Agreement") which narrows the scope of the Success Fee
Agreement, dated as of January 15, 1999 (the "Old Success Fee Agreement"),
between the Company and Mr. Carey. The Amended Success Fee Agreement is
contingent on the Board of Directors' four nominees being elected at the
Annual Meeting. The Old Success Fee Agreement provided for the payment of a
fee if Mr. Carey actively participated in the negotiation, structuring and
closing of a transaction or a series of related transactions approved by the
Board of Directors of the Company that are a tender or exchange offer, merger,
reorganization, consolidation or other business combination that directly
result in the sale or other disposition of all or substantially all of the
assets of the Company or a sale of all or substantially all of the issued and
outstanding stock of the Company. Under the Amended Success Fee Agreement, the
Company is only obligated to pay Mr. Carey a fee if the Company requests in
writing that he participate in such a transaction. If the Company requests Mr.
Carey's participation in such a transaction, as compensation for all such
services,

17
<PAGE>

Mr. Carey is entitled to receive an amount equal to 83.33% of two-thirds of
one percent of the aggregate value (as defined in the Amended Success Fee
Agreement) of any such transaction. In addition, no payment will be due
Mr. Carey if such transaction involves any person, company or entity (i) that
is operated by Mr. Carey, (ii) for which Mr. Carey is performing or has
performed, in the twelve (12) months preceding the execution of the definitive
documents relating to such transaction, any material advisory or consulting
services, (iii) that employs Mr. Carey or (iv) in which Mr. Carey owns or has
an agreement to own more than an one percent (1%) equity interest in a
privately-held corporation or a five percent (5%) equity interest in a
publicly-held corporation. The Amended Success Fee Agreement automatically
terminates on January 15, 2000 if the closing of any such transaction does not
occur by such date.

Mr. Toler, a Director of the Company, served as President and Chief
Executive Officer of the Company until his resignation as such on August 31,
1998. In connection with his resignation, the Company entered into the Toler
Letter Agreement. For a description of the terms of Mr. Toler's employment
agreement and the Toler Letter Agreement, see "Executive Compensation--
Employment Contracts, Termination of Employment."

During Fiscal 1998, the Company retained and continues to retain, Dudley,
Clark & Chan, of which Ms. Dudley, a Director of the Company, is the senior
partner, as its local law firm in St. Thomas, U.S.V.I. Based on information
provided to the Company by Ms. Dudley, the fees received by Dudley, Clark &
Chan from the Company during Fiscal 1998 did not exceed 5% of such firm's
gross revenues for its last fiscal year.

Mr. Watson will serve as Acting Chief Executive Officer of the Company
effective as of April 7, 1999. For a description of the terms of his
employment based on a term sheet, see "Executive Compensation--Employment
Contracts, Termination of Employment."

18
<PAGE>

PRINCIPAL AND MANAGEMENT STOCKHOLDERS

Beneficial Ownership

The following table sets forth, to the best knowledge and belief of the
Company, certain information regarding the beneficial ownership of the
Company's Common Stock as of February 24, 1999 by (i) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, (ii) each of the Company's Directors and nominees for Directors, (iii)
each of the named executive officers in the Summary Compensation Table and
(iv) all of the Company's executive officers and Directors as a group.

<TABLE>
<CAPTION>
Directors, Executive Officers and 5% Shares Percent of
Stockholders Beneficially Owned(1) Class(2)
- ------------------------------------ --------------------- ----------
<S> <C> <C>
Value Vest Partners, L.P. ................... 1,177,400(3) 12.3%
1 Sansome Street, 39 Floor,
San Francisco, CA 94104
Donald L. Sturm
3033 East First Avenue, Suite 200,
Denver, CO 80206
Jewelcor Management, Inc..................... 1,092,000(4) 11.4%
Seymour Holtzman
Steven Holtzman
Trust F/B/O A. Holtzman Garcia
Custodial Account F/B/O
Chelsea Holtzman
100 N. Wilkes-Barre Boulevard
Wilkes-Barre, PA 18702
Franklin Advisory Services, Inc. ............ 813,000(5) 8.5%
One Parker Plaza,
Sixteenth Floor,
Ft. Lee, NJ 07024
Franklin Resources, Inc.
Charles B. Johnson
Rupert H. Johnson, Jr.
777 Mariners Island Boulevard,
San Mateo, CA 94404
Heartland Advisors, Inc. .................... 769,000(6) 8.1%
790 North Milwaukee Street
Milwaukee, WI 53202
Lincluden Management Limited................. 488,000(7) 5.1%
1275 North Service Road West, Suite 607
Oakville, Ontario, Canada L6M 3G4
William Canfield............................. 60,000(8) *
C. William Carey............................. 398,000(9) 4.2%
Timothy B. Donaldson......................... 24,000(10) *
Adriane J. Dudley............................ 5,000(11) *
Seymour Holtzman............................. 1,092,000(4) 11.4%
Richard C. Hunter............................ 0 *
Ronald J. Lataille........................... 1,158 *
Thomas S. Liston............................. 0(12) *
Melanie L. Sturm............................. 0 *
John E. Toler, Jr............................ 300,000(13) *
Kenneth W. Watson............................ 30,000(14) *
All directors and executive officers as a
group (8 persons)........................... 942,000(15) 9.9%
</TABLE>
- --------
* Less than 1%.
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Accordingly, a beneficial owner of a security includes any person who,
directly or

19
<PAGE>

indirectly, through any contract, arrangement, understanding, relationship
or otherwise has or shares the power to vote such security or the power to
dispose of such security. The amounts set forth as beneficially owned
include shares owned, if any, by spouses and relatives living in the same
home as to which beneficial ownership may be disclaimed. The amounts set
forth as beneficially owned include shares of Common Stock which such
Directors or officers had the right to acquire within 60 days of February
24, 1999 under options previously granted pursuant to the 1991 Option Plan
and the 1992 Option Plan and options previously granted outside of the 1991
Plan. Upon the execution of the Merger Agreement with DRHC, all unvested
stock options on the date of the execution of the Merger Agreement
automatically vested pursuant to the terms of the 1991 Option Plan. Upon
the execution of the settlement agreement with Jewelcor, Mr. Sturm and the
other parties thereto, all unvested stock options on the date of the
execution of the settlement agreement automatically vested pursuant to the
terms of the 1991 Option Plan and Messrs. Carey's and Poole's option
agreements.
(2) Percentages are calculated on the basis of 9,538,516 shares of stock
outstanding as of February 24, 1999, which includes 62,000 shares subject
to options exercisable within 60 days of February 24, 1999 granted
pursuant to the 1992 Option Plan, 652,000 shares subject to options
exercisable within 60 days of February 24, 1999 granted pursuant to the
1991 Option Plan, and 200,000 shares subject to options exercisable
within 60 days of February 24, 1999 granted to Messrs. Carey and Poole
outside of the 1991 Option Plan.
(3) The above information is based on copies of a statement on Schedule 13D
filed with the SEC on May 5, 1997, as amended by Amendment No. 1 to
Schedule 13D filed with the SEC on August 4, 1997, as amended by
Amendment No. 2 to Schedule 13D filed with the SEC on October 30, 1998,
which indicates that ValueVest Partners L.P. has sole voting and
dispositive power with respect to 395,300 shares and Donald L. Sturm has
sole voting and dispositive power with respect to 782,100 shares.
(4) The above information is based on copies of a statement on Schedule 13D
filed with the SEC on September 4, 1998, as amended by Amendment No. 1 to
Schedule 13D filed with the SEC on September 24, 1998, as amended by
Amendment No. 2 to Schedule 13D filed with the SEC on October 5, 1998, as
amended by Amendment No. 3 to Schedule 13D filed with the SEC on October
13, 1998, as amended by Amendment No. 4 to Schedule 13D filed with the
SEC on January 28, 1999, which indicates that Jewelcor Management, Inc.
has sole voting and sole dispositive power with respect to 1,031,000
shares, Seymour Holtzman and Steven Holtzman have shared voting and
shared dispositive power with respect to 48,000 shares, the Custodial
Account F/B/O Chelsea Holtzman, has sole voting and sole dispositive
power with respect to 3,000 shares, and the Trust F/B/O Allison Holtzman
Garcia, has sole voting and sole dispositive power with respect to 10,000
shares. For purposes of the reporting requirements of the Exchange Act,
each of Jewelcor Management, Inc., Jewelcor Inc., S.H. Holdings, Inc.,
Seymour Holtzman, Steven Holtzman, Evelyn Holtzman, the Custodial Account
F/B/O Chelsea Holtzman and the Trust F/B/O Allison Holtzman Garcia may be
deemed to be a beneficial owner of such securities; however, each such
person expressly disclaims beneficial ownership of any Common Stock of
the Company beneficially owned by any other such person, except that
Seymour Holtzman acknowledges beneficial ownership of the Common Stock
owned by Jewelcor Management, Inc.
(5) The above information is based on copies of a statement on Schedule 13G
filed with the SEC on February 5, 1998, as amended by Amendment No. 3 to
Schedule 13G filed with the SEC on February 2, 1999, which indicates that
the Franklin Advisory Services, Inc. has sole voting power with respect
to 513,000 shares and sole dispositive power with respect to all 813,000
shares. These securities are owned by one or more open or closed-end
investment companies or other managed accounts, which are advised by
direct and indirect investment advisory subsidiaries of Franklin
Resources, Inc. For purposes of the reporting requirements of the
Exchange Act, each of Franklin Advisory Services, Inc., Franklin
Resources, Inc., Charles B. Johnson and Rupert B. Johnson may be deemed
to be a beneficial owner of such securities; however, each such person
expressly disclaims any economic interest or beneficial ownership in any
of such securities.
(6) The above information is based on copies of a Statement 13G filed with
the SEC on February 3, 1998, as amended by Amendment No. 2 to Schedule
13G filed with the SEC on February 2, 1999, which indicates that
Heartland Advisors, Inc. has sole voting power with respect to 362,900
shares and sole dispositive power with respect to all 769,900 shares.
These shares of Common Stock are held in investment advisory accounts of
Heartland Advisors, Inc. As a result, various persons have the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the shares.
(7) The above information is based on copies of a statement on Schedule 13G
filed with the SEC on February 16, 1999, which indicates that Lincluden
Management Limited has sole voting power with respect to 118,300 shares,
shared voting power with respect to 369,700 shares and sole dispositive
power with respect to 488,000 shares.
(8) Represents shares of Common Stock deemed to be beneficially owned by Mr.
Canfield which are subject to options previously granted pursuant to the
1991 Option Plan.
(9) Includes 10,000 shares and 23,000 shares of Common Stock deemed to be
beneficially owned by Mr. Carey which are subject to options previously
granted pursuant to the 1991 Option Plan and 1992 Option Plan,
respectively. Includes 150,000 shares of Common Stock deemed to be
beneficially owned by Mr. Carey which are subject to options previously
granted outside of the 1991 Option Plan. Includes 25,000 shares of Common
Stock which were acquired pursuant to the one-for-one exchange

20
<PAGE>

on October 22, 1997 of 25,000 shares of Town & Country Exchangeable
Preferred Stock, which Mr. Carey purchased on June 9, 1994 for $7.1875 per
share. Includes 190,000 shares of Common Stock acquired by Mr. Carey in
September 1998.
(10) Represents 10,000 shares and 14,000 shares of Common Stock deemed to be
beneficially owned by Mr. Donaldson which are subject to options
previously granted pursuant to the 1991 Option Plan and 1992 Option Plan,
respectively.
(11) Represents shares of Common Stock deemed to be beneficially owned by Ms.
Dudley which are subject to an option previously granted pursuant to the
1992 Option Plan.
(12) In connection with his appointment as Chief Financial Officer, Vice
President and Treasurer, the Company granted Mr. Liston an option to
purchase 25,000 shares of the Company's Common Stock pursuant to the 1991
Option Plan. Pursuant to the terms of the Incentive Stock Option
Agreement between the Company and Mr. Liston, due to Mr. Liston's
resignation, this option expired on December 10, 1998.
(13) Represents shares of Common Stock deemed to be beneficially owned by Mr.
Toler which are subject to options previously granted pursuant to the
1991 Option Plan.
(14) Represents 10,000 shares and 20,000 shares of Common Stock deemed to be
beneficially owned by Mr. Watson which are subject to options previously
granted pursuant to the 1991 Option Plan and 1992 Option Plan,
respectively.
(15) Amount does not include beneficial ownership of the Company's Common
Stock by Mr. Lataille of 1,158 shares of Common Stock. Amount does
include beneficial ownership of the Company's Common Stock by Messrs.
Nace and Poole of 75,000 and 50,000 shares of Common Stock, respectively,
which are subject to options previously granted pursuant to the 1991
Option Plan and outside of the 1991 Option Plan, respectively.

21
<PAGE>

SOLICITATION OF PROXIES

This solicitation of proxies for use at the Annual Meeting is being made by
the Board of Directors of the Company. The cost of this proxy solicitation
will be borne by the Company. In addition to solicitations by mail,
solicitations also may be made by advertisement, telephone, telegram,
facsimile transmission or other electronic media, and personal meetings and
interviews. In addition to solicitation services to be provided by D.F. King &
Co., Inc. ("D.F. King"), as described below, proxies may be solicited by the
Company and its directors, officers and employees (who will receive no
compensation therefor in addition to their regular salaries). Arrangements
also will be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of the
Common Stock of the Company, and such persons will be reimbursed for their
expenses. The Company has retained D.F. King at a fee estimated not to exceed
$10,000 plus reimbursement of reasonable out-of-pocket expenses, to assist in
the solicitation of proxies. The Company has also agreed to indemnify D.F.
King against certain liabilities and expenses, including liabilities under the
Federal securities laws.

SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING

Stockholder proposals intended to be presented at the 1999 annual meeting
must be received by the Company on or before November 16, 1999 in order to be
considered for inclusion in the Company's proxy statement and form of proxy
for that meeting. These proposals must also comply with the rules of the SEC
governing the form and content of proposals in order to be included in the
Company's proxy statement and form of proxy. Any such proposals should be
mailed to: Secretary, Little Switzerland, Inc., 161-B Crown Bay Cruise Port,
St. Thomas, U.S.V.I. 00804.

A record stockholder who wishes to present a proposal at the next annual
meeting, other than a proposal to be considered for inclusion in the Company's
proxy statement described above, must provide written notice of such proposal
and appropriate supporting documentation, as set forth in the Company's By-
laws, to the Company at its principal executive office not less than 75 days
nor more 120 days prior to the first anniversary of the date of the preceding
year's annual meeting; provided, however, that in the event the annual meeting
is advanced by more than seven days from the anniversary date, notice must be
so delivered not later than (i) the 20th day after public disclosure of the
date of such meeting or (ii) if such public disclosure occurs more than 75
days prior to such scheduled date of such meeting, then the later of the 20th
day after the date of public disclosure or the 75th day prior to such
scheduled date of such meeting. Proxies solicited by the Board of Directors
will confer discretionary voting authority with respect to these proposals,
subject to SEC rules governing the exercise of this authority. Any such
proposal should be mailed to: Secretary, Little Switzerland, Inc., 161-B Crown
Bay Cruise Port, St. Thomas, U.S.V.I. 00804.

INDEPENDENT ACCOUNTANTS

The Company has selected Arthur Andersen LLP as the independent public
accountants for the Company for the fiscal year ending May 29, 1999. The firm
of Arthur Andersen LLP has served as the Company's independent public
accountants since its incorporation and has served as the accountant for
certain of its subsidiaries since 1980. A representative of Arthur Andersen
LLP will be present at the Annual Meeting and will be given the opportunity to
make a statement if he or she so desires. The representative will be available
to respond to appropriate questions.

22
<PAGE>

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of the Company's outstanding
shares of Common Stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and NASDAQ. Officers, directors
and greater than ten percent stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it, or written
representations from certain reporting persons that no Section 16(a) reports
were required for those persons, the Company believes that during the fiscal
year ended May 30, 1998, Mr. Carey inadvertently failed to timely file a Form
4 with respect to the exchange of 25,000 shares of Town & Country Exchangeable
Preferred Stock on a share-for-share basis into 25,000 shares of the Company's
Common Stock. Mr. Carey subsequently filed the required form.

VOTING INFORMATION

Your vote is important. Please sign, date and mail promptly the enclosed
proxy card in the enclosed self- addressed stamped envelope. Your Board of
Directors recommends that you vote "FOR" Adriane J. Dudley, Seymour Holtzman,
Melanie L. Sturm and Richard C. Hunter as Directors of the Company on the
enclosed proxy card.

The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If any other matters properly come before the Annual Meeting,
the proxy holders intend to vote such proxies in accordance with their best
judgment. Unrevoked proxy cards returned without direction will be voted "FOR"
the nominees of the Board of Directors for election to the Board of Directors.

If your shares are registered in your name, please mail your blue proxy card
at your earliest convenience. If your shares are held in "street name,"
immediately instruct your broker or the person responsible for your account to
sign a blue proxy card on your behalf. You should also sign, date and mail
your proxy card immediately upon receipt from your broker or bank, using the
postage-paid envelope provided. Please do so for each account you maintain. If
you have further questions or need assistance, please call:

D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Call Toll Free (800) 769-5414

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. PLEASE
ACT TODAY.

23
<PAGE>

P
R
O
X
Y

C
A
R
D

LITTLE SWITZERLAND, INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS OF LITTLE SWITZERLAND, INC. FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON WEDNESDAY, APRIL 7, 1999

The undersigned hereby constitutes and appoints Adriane J. Dudley and Kenneth
W. Watson, and each of them, as Proxies of the undersigned, with full power to
appoint his substitute, and authorizes each of them to represent and to vote
all shares of Common Stock of Little Switzerland, Inc. (the "Company") held of
record by the undersigned as of the close of business on February 24, 1999, at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Friars Club, 57 East 55th Street, New York, New York, at 12:00 p.m. local time,
on Wednesday, April 7, 1999, and at any adjournments or postponements thereof.

When properly executed, this proxy will be voted in the manner directed
herein by the undersigned stockholder(s). If no direction is given, this proxy
will be voted FOR the nominees of the Board of Directors listed in Proposals 1
and 2. In their discretion, the Proxies are each authorized to vote upon such
other business as may properly come before the Annual Meeting and any
adjournments or postponements thereof. A stockholder wishing to vote in
accordance with the Board of Directors' recommendations need only sign and date
this proxy and return it in the enclosed envelope.

The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of Annual Meeting of Stockholders, the Proxy Statement with respect
thereto and the Company's Annual Report to Stockholders and hereby revoke(s)
any proxy or proxies heretofore given. This proxy may be revoked at any time
before it is exercised.

PLEASE SIGN AND DATE ON REVERSE SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.

Proposal 1. Election of Melanie L. Sturm and FORWITHHOLD
Richard C. Hunter as Class III [_] [_]
Directors, each for a term
expiring at the 2000 annual
meeting.
Proposal 2. Election of Adriane J. Dudley and [_] [_]
Seymour Holtzman as Class I
Directors, each for a term
expiring at the 2001 annual
meeting.

To withhold authority to vote FOR a
particular nominee, write that
nominee's name below. Your shares
will be voted for the remaining
nominee(s).
---------------------

In their discretion, the Proxies are Please sign name exactly as shown
each authorized to vote upon such other here. If more than one holder, each
business as may properly come before the should sign. When signing as an
Annual Meeting and any adjournments or attorney, administrator, executor,
postponements thereof. guardian or trustee, please add
your title as such. If executed by
a corporation or partnership, the
proxy should be signed by a duly
authorized person, indicating title
or authority.
Please be sure to sign and date
this Proxy.

Date:
------------------------------

---------------------------------
Shareholder(s) signature(s)

---------------------------------

PLEASE, SIGN, DATE AND PROMPTLY MAIL YOUR PROXY.