<PAGE>
                                                                   EXHIBIT 10.12

                                KIRKLAND'S, INC.
                        2002 EMPLOYEE STOCK PURCHASE PLAN

      1. Purpose and Effective Date.

            (a) Purpose. The purpose of the Plan is to provide Eligible
Employees with an opportunity to increase their interest in the success of the
Company by purchasing Stock from the Company on favorable terms and to pay for
such purchases through payroll deductions. The Plan is intended to satisfy the
requirements of Section 423 of the Code and will be interpreted accordingly.

            (b) Effective Date. The Plan is effective as of the first date that
Stock is sold to the public pursuant to an effective registration statement
filed by the Company with the Securities and Exchange Commission.

      2. Administration.

            (a) Committee Composition. The Plan will be administered by the
Committee. The Committee will consist exclusively of one or more directors of
the Company, who will be appointed by the Board.

            (b) Committee Responsibilities. The Committee will interpret the
Plan and make all other policy decisions relating to the operation of the Plan.
The Committee may adopt such rules, guidelines and forms as it deems appropriate
to implement the Plan. The Committee's determinations under the Plan will be
final and binding on all persons.

      3. Enrollment And Participation.

            (a) Offering Periods. While the Plan is in effect, two overlapping
Offering Periods will commence in each calendar year. The Offering Periods will
consist of the 24-month periods commencing on each February 1st and August 1st,
except that the first Offering Period will commence on the date of the IPO and
end on July 31, 2004.

            (b) Accumulation Periods. While the Plan is in effect, two
Accumulation Periods will commence in each calendar year. The Accumulation
Periods will consist of the six-month periods commencing on each February 1st
and August 1st, except that the first Accumulation Period will commence on the
date of the IPO and end on July 31, 2002.

            (c) Enrollment. Any individual who, on the day preceding the first
day of an Offering Period, qualifies as an Eligible Employee may elect to become
a Participant in the Plan for such Offering Period by executing the enrollment
form prescribed for this purpose by the Committee. The enrollment form must be
filed with the Company at the prescribed location at least 15 days prior to the
commencement of such Offering Period.

            (d) Duration of Participation. Once enrolled in the Plan, a
Participant will continue to participate in the Plan until he or she ceases to
be an Eligible Employee, withdraws from the Plan under Section 5(a) or reaches
the end of the Accumulation Period in which his or her employee contributions
were discontinued under Section 4(d) or 8(b). A Participant who discontinued
employee contributions under
<PAGE>
Section 4(d) or withdrew from the Plan under Section 5(a) may again become a
Participant, if he or she then is an Eligible Employee, by following the
procedure described in Subsection (c) above. A Participant whose employee
contributions were discontinued automatically under Section 8(b) will
automatically resume participation at the beginning of the earliest Accumulation
Period ending in the next calendar year, if he or she then is an Eligible
Employee.

            (e) Applicable Offering Period. For purposes of calculating the
Purchase Price under Section 7(b), the applicable Offering Period will be
determined as follows:

                  (i) Once a Participant is enrolled in the Plan for an Offering
      Period, such Offering Period will continue to apply to him or her until
      the earliest of (A) the end of such Offering Period, (B) the end of his or
      her participation under Subsection (d) above or (C) re-enrollment in a
      subsequent Offering Period under Paragraph (ii) below.

                  (ii) If the Fair Market Value of Stock on the last trading day
      before the commencement of the Offering Period in which the Participant is
      enrolled is higher than on the last trading day before the commencement of
      any subsequent Offering Period, the Participant will automatically be
      re-enrolled for such subsequent Offering Period.

                  (iii) When a Participant reaches the end of an Offering Period
      but his or her participation is to continue, then such Participant will
      automatically be re-enrolled for the Offering Period that commences
      immediately after the end of the prior Offering Period.

      4. Employee Contributions.

            (a) Frequency of Payroll Deductions. A Participant may purchase
shares of Stock under the Plan solely by means of payroll deductions. Payroll
deductions, as designated by the Participant pursuant to Subsection (b) below,
will occur on each payday during participation in the Plan.

            (b) Amount of Payroll Deductions. An Eligible Employee will
designate on the enrollment form the portion of his or her Compensation that he
or she elects to have withheld for the purchase of Stock. Such portion may be
any whole percentage of the Eligible Employee's Compensation not less than 1%
and not more than 15%.

            (c) Changing Withholding Rate. If a Participant wishes to change the
rate of payroll withholding, he or she may do so by filing a new enrollment form
with the Company at the prescribed location at any time. The new withholding
rate will be effective as soon as reasonably practicable after such form has
been received by the Company.

            (d) Discontinuing Payroll Deductions. If a Participant wishes to
discontinue employee contributions entirely, he or she may do so by filing a new
enrollment form with the Company at the prescribed location at any time. Payroll
withholding will cease as soon as reasonably practicable after such form has
been received by the Company. (In addition, employee contributions may be
discontinued automatically pursuant to Section 8(b).) A Participant who has
discontinued employee contributions may resume such contributions by filing a
new enrollment form with the Company at the prescribed location. Payroll
withholding will resume as soon as reasonably practicable after such form has
been received by the Company.


                                      -2-
<PAGE>
      5. Withdrawals and Re-enrollment.

            (a) Withdrawals. A Participant may elect to withdraw from the Plan
by filing the prescribed form with the Company at the prescribed location at any
time before the last day of an Accumulation Period. As soon as reasonably
practicable thereafter, payroll deductions will cease and the entire amount
credited to the Participant's Plan Account will be refunded to him or her in
cash, without interest. No partial withdrawals will be permitted.

            (b) Re-enrollment. A former Participant who has withdrawn from the
Plan will not be a Participant until he or she re-enrolls in the Plan under
Section 3(c). Re-enrollment may be effective only at the commencement of an
Offering Period.

      6. Change in Employment Status.

            (a) Termination of Employment. Termination of employment as an
Eligible Employee for any reason, including death, will be treated as an
automatic withdrawal from the Plan under Section 5(a). (A transfer from one
Participating Company to another will not be treated as a termination of
employment.)

            (b) Leave of Absence. For purposes of the Plan, employment will not
be deemed to terminate when the Participant goes on a military leave, a sick
leave or another bona fide leave of absence, if the leave was approved by the
Company in writing. Employment, however, will be deemed to terminate 90 days
after the Participant goes on a leave, unless a contract or statute guarantees
his or her right to return to work. Employment will be deemed to terminate in
any event when the approved leave ends, unless the Participant immediately
returns to work.

            (c) Death. In the event of the Participant's death, the amount
credited to his or her Plan Account will be paid to a beneficiary designated by
him or her for this purpose on the prescribed form or, if none, to the
Participant's estate. Such form will be valid only if it was filed with the
Company at the prescribed location before the Participant's death.

      7. Plan Accounts and Purchase of Shares.

            (a) Plan Accounts. The Company will maintain a Plan Account on its
books in the name of each Participant. Whenever an amount is deducted from the
Participant's Compensation under the Plan, such amount will be credited to the
Participant's Plan Account. Amounts credited to Plan Accounts will not be trust
funds and may be commingled with the Company's general assets and applied to
general corporate purposes. No interest will be credited to Plan Accounts.

            (b) Purchase Price. The Purchase Price for each share of Stock
purchased at the close of an Accumulation Period will be 85% of the lower of:

                  (i) the Fair Market Value on the last day of such Accumulation
      Period; or

                  (ii) the Fair Market Value on the first day of the applicable
      Offering Period (as determined under Section 3(e)).


                                      -3-
<PAGE>
            (c) Number of Shares Purchased. As of the last day of each
Accumulation Period, each Participant will be deemed to have elected to purchase
the number of shares of Stock calculated in accordance with this Subsection (c),
unless the Participant has previously elected to withdraw from the Plan in
accordance with Section 5(a). The amount then in the Participant's Plan Account
will be divided by the Purchase Price, and the number of shares that results
will be purchased from the Company with the funds in the Participant's Plan
Account. The foregoing notwithstanding, no Participant will purchase more than
[25,000] shares of Stock with respect to any Accumulation Period nor more than
the amounts of Stock set forth in Sections 8(b).

            (d) Available Shares Insufficient. If the aggregate number of shares
that all Participants elect to purchase during an Accumulation Period exceeds
the maximum number of shares remaining available for issuance under Section
13(a), then the number of shares to which each Participant is entitled will be
determined by multiplying the number of shares available for issuance by a
fraction, the numerator of which is the number of shares that such Participant
has elected to purchase and the denominator of which is the number of shares
that all Participants have elected to purchase.

            (e) Issuance of Stock. Certificates representing the shares of Stock
purchased by a Participant under the Plan will be issued to him or her as soon
as reasonably practicable after the close of the applicable Accumulation Period,
except that the Committee may determine that such shares will be held for each
Participant's benefit by a broker designated by the Committee (unless the
Participant has elected that certificates be issued to him or her). Shares may
be registered in the name of the Participant or jointly in the name of the
Participant and his or her spouse as joint tenants with right of survivorship or
as community property.

            (f) Unused Cash Balances. An amount remaining in the Participant's
Plan Account that represents the Purchase Price for any fractional share will be
carried over in the Participant's Plan Account to the next Accumulation Period.
Any amount remaining in the Participant's Plan Account that represents the
Purchase Price for whole shares that could not be purchased by reason of
Subsection (c) above, Section 8(b) or Section 13(a) will be refunded to the
Participant in cash, without interest.

      8. Limitations on Stock Ownership.

            (a) Five Percent Limit. Any other provision of the Plan
notwithstanding, no Participant will be granted a right to purchase Stock under
the Plan if such Participant, immediately after his or her election to purchase
such Stock, would own stock possessing more than 5% of the total combined voting
power or value of all classes of stock of the Company or any parent or
Subsidiary of the Company. For purposes of this Subsection (a), the following
rules will apply:

                  (i) Ownership of stock will be determined after applying the
      attribution rules of Section 424(d) of the Code; and

                  (ii) Each Participant will be deemed to own any stock that he
      or she has a right or option to purchase under this or any other plan or
      arrangement.

            (b) Dollar Limit. Any other provision of the Plan notwithstanding,
no Participant will purchase Stock with a Fair Market Value in excess of the
following limit:


                                      -4-
<PAGE>
                  (i) In the case of Stock purchased during an Offering Period
      that commenced in the current calendar year, the limit will be equal to
      (A) $25,000 minus (B) the Fair Market Value of the Stock that the
      Participant previously purchased in the current calendar year (under this
      Plan and all other employee stock purchase plans of the Company or any
      parent or Subsidiary of the Company).

                  (ii) In the case of Stock purchased during an Offering Period
      that commenced in the immediately preceding calendar year, the limit will
      be equal to (A) $50,000 minus (B) the Fair Market Value of the Stock that
      the Participant previously purchased (under this Plan and all other
      employee stock purchase plans of the Company or any parent or Subsidiary
      of the Company) in the current calendar year and in the immediately
      preceding calendar year.

                  (iii) In the case of Stock purchased during an Offering Period
      that commenced in the second preceding calendar year, the limit will be
      equal to (A) $75,000 minus (B) the Fair Market Value of the Stock that the
      Participant previously purchased (under this Plan and all other employee
      stock purchase plans of the Company or any parent or Subsidiary of the
      Company) in the current calendar year and in the two preceding calendar
      years.

      9. Rights Not Transferable. The rights of any Participant under the Plan,
or any Participant's interest in any Stock or moneys to which he or she may be
entitled under the Plan, will not be transferable by voluntary or involuntary
assignment or by operation of law, or in any other manner other than by
beneficiary designation or the laws of descent and distribution. If a
Participant in any manner attempts to transfer, assign or otherwise encumber his
or her rights or interest under the Plan, other than by beneficiary designation
or the laws of descent and distribution, then such act will be treated as an
election by the Participant to withdraw from the Plan under Section 5(a).

      10. No Rights as an Employee. Nothing in the Plan or in any right granted
under the Plan will confer upon the Participant any right to continue in the
employ of a Participating Company for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Participating
Companies or of the Participant, which rights are hereby expressly reserved by
each, to terminate his or her employment at any time and for any reason, with or
without cause.

      11. No Rights as a Stockholder. A Participant will have no rights as a
stockholder with respect to any shares of Stock that he or she may have a right
to purchase under the Plan until such shares have been purchased on the last day
of the applicable Accumulation Period.

      12. Securities Law Requirements. Shares of Stock will not be issued under
the Plan unless the issuance and delivery of such shares comply with (or are
exempt from) all applicable requirements of law, including (without limitation)
the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, state securities laws and regulations, and the regulations of any
stock exchange or other securities market on which the Company's securities may
then be traded.

      13. Stock Offered Under the Plan.

            (a) Authorized Shares. The aggregate number of shares of Stock
available for purchase under the Plan will be _______, subject to adjustment
pursuant to this Section 13.


                                      -5-
<PAGE>
            (b) Adjustments. The aggregate number of shares of Stock offered
under the Plan, the share limit described in Section 7(c) and the price of
shares that any Participant has elected to purchase will be adjusted
proportionately by the Committee for any increase or decrease in the number of
outstanding shares of Stock resulting from a subdivision or consolidation of
shares or the payment of a stock dividend, any other increase or decrease in
such shares effected without receipt or payment of consideration by the Company,
the distribution of the shares of a Subsidiary to the Company's stockholders or
a similar event.

            (c) Reorganizations. Any other provision of the Plan
notwithstanding, immediately prior to the effective time of a Corporate
Reorganization, the Offering Period and Accumulation Period then in progress
will terminate and shares will be purchased pursuant to Section 7, unless the
Plan is assumed by the surviving corporation or its parent corporation pursuant
to the plan of merger or consolidation. The Plan will in no event be construed
to restrict in any way the Company's right to undertake a dissolution,
liquidation, merger, consolidation or other reorganization.

      14. Amendment or Discontinuance. The Board will have the right to amend,
suspend or terminate the Plan at any time and without notice. Except as provided
in Section 13, any increase in the aggregate number of shares of Stock to be
issued under the Plan will be subject to approval by a vote of the stockholders
of the Company.

      15. Definitions. Capitalized terms used herein have the meanings set forth
in this Section 15.

            (a) "Accumulation Period" means a period during which contributions
may be made toward the purchase of Stock under the Plan, as determined pursuant
to Section 3(b).

            (b) "Board" means the Board of Directors of the Company, as
constituted from time to time.

            (c) "Code" means the Internal Revenue Code of 1986, as amended.

            (d) "Committee" means a committee of the Board, as described in
Section 2.

            (e) "Company" means Kirkland's, Inc.

            (f) "Compensation" means (i) the total compensation paid in cash to
a Participant by a Participating Company, including salaries, wages, bonuses,
incentive compensation, commissions, overtime pay and shift premiums, plus (ii)
any pre-tax contributions made by the Participant under Section 401(k) or 125 of
the Code. "Compensation" will exclude all non-cash items, moving or relocation
allowances, cost-of-living equalization payments, car allowances, tuition
reimbursements, imputed income attributable to cars or life insurance, severance
pay, fringe benefits, contributions or benefits received under employee benefit
plans, income attributable to the exercise of stock options, and similar items.
The Committee will determine whether a particular item is included in
Compensation.

            (g) "Corporate Reorganization" means:

                  (i) The consummation of a merger or consolidation of the
      Company with or into another entity, or any other corporate
      reorganization; or


                                      -6-
<PAGE>
                  (ii) The sale, transfer or other disposition of all or
      substantially all of the Company's assets or the complete liquidation or
      dissolution of the Company.

            (h) "Eligible Employee" means any employee of a Participating
Company who meets both of the following requirements:

                  (i) His or her customary employment is for more than five
      months per calendar year and for more than 20 hours per week; and

                  (ii) He or she has been an employee of a Participating Company
      for at least 12 consecutive months.

            (i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

            (j) "Fair Market Value" means, as of any specified date:

                  (i) the closing price of the Stock as reported on the
      principal nationally recognized stock exchange on which Stock is traded,
      or if no price is are reported on that date, the closing price on the last
      preceding date on which there were reported Stock prices;

                  (ii) if the Stock is not listed or admitted to unlisted
      trading privileges on a nationally recognized stock exchange, the closing
      price of the Stock on that date as reported by The Nasdaq Stock Market, or
      if no price is reported for that date, the closing price of the Stock on
      the last preceding date for which there were reported Stock prices; or

                  (iii) if the Stock is not listed or admitted to unlisted
      trading privileges on a nationally recognized stock exchange or traded on
      The Nasdaq Stock Market, the fair market value of one share of Stock, as
      determined by the Board in its discretion, which determination will be
      conclusive and binding on all persons.

Notwithstanding the foregoing, the Fair Market Value on the first day of the
first Offering Period will be equal to the price set forth in the final
prospectus included in the Form S-1 filed with the Securities and Exchange
Commission in connection with the IPO.

            (k) "IPO" means the first offering of Stock to the public pursuant
to an effective registration statement filed by the Company with the Securities
and Exchange Commission.

            (l) "Offering Period" means a period with respect to which the right
to purchase Stock may be granted under the Plan, as determined pursuant to
Section 3(a).

            (m) "Participant" means an Eligible Employee who elects to
participate in the Plan, as provided in Section 3(c).

            (n) "Participating Company" means (i) the Company and (ii) each
present or future Subsidiary designated by the Committee as a Participating
Company.

            (o) "Plan" means this Kirkland's, Inc. 2002 Employee Stock Purchase
Plan, as amended from time to time.


                                      -7-
<PAGE>
            (p) "Plan Account" means the account established for each
Participant pursuant to Section 7(a).

            (q) "Purchase Price" means the price at which Participants may
purchase Stock under the Plan, as determined pursuant to Section 7(b).

            (r) "Stock" means the Common Stock of the Company.

            (s) "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.


                                      -8-