LITTLE SWITZERLAND INC/DE
STANDSTILL AGREEMENT
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>STANDSTILL AGREEMENT
<TEXT>

<PAGE>

                                 July 28, 2000


Little Switzerland, Inc.
161-B Crown Bay
P.O. Box 930
St. Thomas, U.S. Virgin Islands 00804

Attn:    Robert L. Baumgardner, President

         Re:   Extension to Standstill for Completion of Almod Transactions

Dear Mr. Baumgardner:

         This letter agreement shall document agreements and understandings of
the parties arising out of the recent discussions between The Chase Manhattan
Bank and the Bank of Nova Scotia (the "Lenders") with Little Switzerland, Inc.
(the "Company") regarding the proposed transactions of the Company and its
related entities with Almod Diamonds Limited ("ADL"). In the interest of
allowing the Company and ADL to complete the proposed transactions within the
agreed time frames, the Lenders are willing to extend the standstill until
September 30, 2000 (the "Standstill Period") with respect to the outstanding
indebtedness to the Lenders subject to the following terms and conditions:

         1.       The Lenders agree to release the mortgage over the fee simple
                  real property in St. Maarten owned by the Company or its
                  subsidiary upon the sale of such property to ADL and the
                  funding of an account in the amount of $900,000 from the sale
                  proceeds, to be held in escrow at The Chase Manhattan Bank
                  pursuant to this letter agreement. If all of the following
                  occur before August 18, 2000: (a) the sale of either (i) the
                  Company's Barbados subsidiary for not less than $2,300,000 or
                  (ii) receivables due to the Company by the Barbados subsidiary
                  for not less than $1,900,000; and (b) the delivery of the
                  greater of $1,150,000 or 50% of such proceeds to the Lenders;
                  and (c) the cancellation and discharge by the Government of
                  Barbados of all letters of credit from the Bank of Nova
                  Scotia, then the funds held in escrow shall be released to the
                  Company. If such sale and delivery of funds shown as (a) and
                  (b) above have occurred before August 18, 2000, but the
                  cancellation of letters of credit shown as (c) above has
                  occurred before August 18, 2000, such $900,000 shall continue
                  to be held in escrow and, if on or before September 30, 2000,
                  (c) shall have occurred, then the funds held in escrow shall
                  be released to the Company. On August 18, 2000, if the
                  conditions have not been met for either the release of the
                  escrow funds or the continued holding in escrow of the escrow
                  funds pursuant to the foregoing, The Chase Manhattan Bank
                  shall pay the escrow funds to the Lenders for application to
                  amounts due to the Lender by the Company and its subsidiaries.
                  If, on or




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Letter dated July 28, 2000
Page 2

                  following August 18, 2000 and such payment to the Lenders of
                  the escrow funds, the following occur before September 30,
                  2000: (a) the sale of either (i) the Company's Barbados
                  subsidiary for not less than $2,300,000 or (ii) receivables
                  due to the Company by the Barbados subsidiary for not less
                  than $1,900,000; and (b) the delivery of the greater of
                  $1,150,000 or 50% of such proceeds to the Lenders of which
                  such amount less $900,000 shall be applied to amounts due the
                  Lenders by the Company or its subsidiaries and $900,000 shall
                  be transferred into an escrow account to be held at The Chase
                  Manhattan Bank as follows: if the cancellation and discharge
                  by the Government of Barbados of all letters of credit from
                  the Bank of Nova Scotia occur on or before September 30, 2000,
                  then such escrow funds shall be released to the Company. On
                  September 30, 2000, if the conditions have not been met for
                  the release of the escrow funds to the Company pursuant to the
                  foregoing, The Chase Manhattan Bank shall pay such escrow
                  funds to the Lenders for application to amounts due the
                  Lenders by the Company or its subsidiaries.

         2.       One half of any gross sales proceeds from the sale of the
                  Company's Barbados subsidiary or any interest therein or
                  assets thereof, but in no event less than $1,150,000 of such
                  proceeds, shall immediately be delivered to the Lenders. In
                  addition, upon any such sale or upon the closure of the
                  Barbados store(s), the Company will provide to and obtain from
                  the Government of Barbados all documentation necessary to
                  cause the official discharge of all letters of credit from the
                  Bank of Nova Scotia.

         3.       The Security Agreement dated May 7, 1999 (the "Security
                  Agreement") and all security instruments and other documents
                  executed and/or filed under the laws of any foreign
                  jurisdiction to evidence and/or perfect the Lenders' security
                  interest granted under the Security Agreement shall continue
                  in full force and effect.

         4.       The Company shall pay to the Lenders, immediately upon receipt
                  by the Company, the lesser of $500,000 or 50% of the net
                  proceeds (gross receipts less out-of-pocket costs) of any
                  business interruption insurance received under claims filed as
                  a result of Hurricanes Jose and Lenny.

         5.       Upon ADL's purchase of the newly issued shares of stock of the
                  Company, which shall occur no later than September 15, 2000,
                  50% of the proceeds realized by the Company from such stock
                  sale shall immediately be delivered to the Lenders for
                  application to amounts due the Lenders by the Company or its
                  subsidiaries.

         6.       The Company shall pay all reasonable costs and expenses of the
                  Lenders incurred in connection with the Forbearance Agreement,
                  the Security Agreement and this


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Letter dated July 28, 2000
Page 3

                  letter agreement, including the documentation and perfection
                  of the security interests granted to Lenders pursuant to the
                  Forbearance Agreement and the Security Agreement and the
                  release of mortgage agreed to in this letter agreement.

         7.       The Company shall continue to provide to the Lenders on a
                  weekly basis a schedule of inventory by store location. The
                  Company shall further provide to the Lenders on a monthly
                  basis no later than the last day of the following month copies
                  of its consolidated and consolidating reports of operations,
                  including balance sheets, profit and loss statements and a
                  narrative review of the monthly operations for the prior
                  month; provided, however, that such financial statements for
                  June may be provided on or before August 31, 2000. Audited
                  year-end financial statements shall be provided on or before
                  August 31, 2000.

         8.       During the Standstill Period, the Company shall have no
                  obligation to make payments to the Lenders, other than (a)
                  regularly scheduled interest payments; (b) such payments to
                  the Lenders; and (c) payments of all reasonable costs and
                  expenses of the Lenders incurred in connection with this
                  letter agreement, the Mortgages and the release of the St.
                  Maarten Mortgage, the Security Agreement and any collateral
                  documentation filed in or executed pursuant to the laws of any
                  jurisdiction in which the collateral pledged to the Lenders
                  under the Security Agreement is located.

         9.       Notwithstanding the foregoing, the Standstill Period shall
                  terminate prior to September 30, 2000, in the event of an
                  earlier Termination Event. Each of the following shall
                  constitute a Termination Event:

                  a.       The Company shall fail to make any regularly
                           scheduled interest payment when due (subject to any
                           application notice and cure period in the loan
                           documents evidencing and governing the indebtedness
                           of the Company and its subsidiaries to Lenders), time
                           being of the essence with respect to any and all such
                           payments.

                  b.       The Company or any subsidiary otherwise shall fail to
                           comply with any term of this letter agreement, the
                           Security Agreement, the mortgage over the St. Thomas
                           leasehold property or any other document executed in
                           connection with the indebtedness of the Company or a
                           related entity to the Lenders or either of them
                           (subject to any applicable notice and cure period
                           therein).

                  c.       The rendition by any court of a final judgment
                           against the Company or any subsidiary in a stated
                           amount in excess of $250,000.00 (or more than one


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Letter dated July 28, 2000
Page 4

                           such judgement shall be entered against any one or
                           more of them in an aggregate stated amount in excess
                           of $250,000.00); or the attachment of any property of
                           the Company or any subsidiary not bonded or insured
                           against or remedied within sixty (60) days.

                  d.       The filing of a tax lien against the Company or any
                           subsidiary by the Internal Revenue Service or the
                           taxing authority having authority over the
                           jurisdiction in which any such entity is located not
                           remedied within thirty (30) days.

                  e.       The commencement of any action or proceeding against
                           any one or both of the Lenders by the Company or any
                           subsidiary or other entity affiliated with,
                           controlled by or under common control with the
                           Company.

                  f.       The commencement of any bankruptcy or insolvency
                           proceeding by or against the Company or any
                           subsidiary.

                  At any time five (5) days after either of the Lenders shall
                  have made written demand on the Company following the
                  occurrence of a Termination Event described in subparagraphs
                  a, b, c or d above, and immediately upon the occurrence of a
                  Termination Event described in subparagraphs e or f above,
                  each Lender may, at its option, acting alone or together with
                  the other Lender: (i) terminate the Standstill Period
                  described above; (ii) declare all amounts outstanding to be
                  due and payable forthwith, whereupon the same shall be
                  immediately due and payable; and (iii) take any other action
                  which the Lenders or either of them deems necessary or
                  appropriate to collect the outstanding obligations and to
                  enforce the rights and remedies under the documents
                  evidencing, governing and/or securing the indebtedness of the
                  Company and its subsidiaries to the Lenders, the Security
                  Agreement, any document executed or filed in connection with
                  or pursuant to the Security Agreement, and under applicable
                  law.

         If the Company and its subsidiaries are in agreement with the
foregoing, please sign as indicated below and return a signed original of this
letter to the Lenders.

                                     THE CHASE MANHATTAN BANK

                                     By:      /s/ R. Odell
                                              ------------------------------

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

                                     THE BANK OF NOVA SCOTIA


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Letter dated July 28, 2000
Page 5

                                     By:      /s/ R. Edwards
                                              ------------------------------

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

The foregoing is acknowledged and agreed to by:

LITTLE SWITZERLAND, INC., a Delaware corporation

By:    /s/ Robert L. Baumgardner
     -------------------------------------------------
         Robert L. Baumgardner, President


L.S. WHOLESALE, INC., a Massachusetts corporation

By:    /s/ Robert L. Baumgardner
     -------------------------------------------------
         Robert L. Baumgardner, President


L.S. HOLDING, INC., a U.S. Virgin Islands corporation

By:    /s/ Robert L. Baumgardner
     -------------------------------------------------
         Robert L. Baumgardner, President


WORLD GIFT IMPORTS (BARBADOS) LIMITED, a Barbados company

By:    /s/ P.J. Hopper
     -------------------------------------------------
         Patrick J. Hopper, Director


WORLD GIFT IMPORTS, N.V., a St. Maarten Netherlands Antilles limited liability
company

By:    /s/ P.J. Hopper
     -------------------------------------------------
         Peter J. Hopper, Managing Director


S.A.R.L. MONTRES ET BIJOUX, a St. Martin company

By:    /s/ P.J. Hopper
     -------------------------------------------------

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


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Letter dated July 28, 2000
Page 6

LITTLE SWITZERLAND, N.V., an Aruba limited liability company
By:  L.S. HOLDING (ARUBA), N.V., Managing Director

By:    /s/ Robert L. Baumgardner
     -------------------------------------------------
         Robert Lee Baumgardner, President of the Managing Board


L.S. HOLDING (ARUBA), N.V., an Aruba limited liability company

By:    /s/ Robert L. Baumgardner
     -------------------------------------------------
         Robert Lee Baumgardner, President of the Managing Board


L.S. HOLDING CURACAO, N.V., a Curacao limited liability company

By:    /s/ Robert L. Baumgardner
     -------------------------------------------------
         Robert L. Baumgardner, President and Managing Director


L.S. HOLDING (USA), INC., an Alaska corporation

By:    /s/ Robert L. Baumgardner
     -------------------------------------------------
         Robert L. Baumgardner, President



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