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                                 PROMISSORY NOTE
                             (Reynolds C. Faulkner)
Up to $717,000                                                 as of May 4, 2002

         In consideration of the loan (hereinafter referred to as a "Loan"),
KIRKLAND'S, INC., a Tennessee corporation (the "Lender"), has made or has agreed
to make to REYNOLDS C. FAULKNER, (the "Borrower"), and for value received, the
Borrower hereby promises to pay to the order of the Lender, at the Lender's
office located at 805 N. Parkway, Jackson, Tennessee 38308 or at such other
place in the continental United States as the Lender may designate in writing,
in lawful money of the United States, and in immediately available funds, the
principal sum of SEVEN HUNDRED SEVENTEEN THOUSAND DOLLARS ($717,000), or such
lesser amount as has actually been advanced by the Lender to the Borrower
hereunder, together with all accrued interest thereon.

         1.       Advances under this Note.

                  a.       Initial Advance. The Lender has advanced to the
Borrower Two Hundred Seventeen Thousand Dollars ($217,000) under this Note as of
the date first set forth above, constituting the initial principal amount
outstanding hereunder.

                  b.       Subsequent Advance. At the request of the Borrower,
the Lender agrees to lend an additional amount under this Note to the Borrower
on one occasion only, on April 10, 2003, in an amount not to exceed the lesser
of (a) Five Hundred Thousand Dollars ($500,000), or (b) the amount payable by
the Borrower to the U.S. Treasury as "alternative minimum tax" as shown on the
Borrower's Form 1040 tax return that he will be filing for the year 2002. Any
additional advance pursuant to this paragraph (b) shall give rise to an increase
in the outstanding principal amount of the Loan in the amount of such additional
advance.

         2.       Payments of Principal and Interest.

                  a.       Scheduled Maturity. The entire outstanding principal
balance of this Promissory Note (the "Note"), together with all accrued interest
and other fees, expenses and other amounts accrued hereunder, shall be due and
payable in full on the earlier of May 4, 2005 or such earlier date that this
Note is accelerated pursuant to Paragraph 3(b) hereof.

                  b.       Interest. The Borrower hereby further promises to pay
to the order of the Lender interest on the outstanding principal amount from the
date first set forth above, at a per annum rate equal to four and seventy-five
hundredths percent (4.75%)(the "Loan Rate"). Interest will accrue on any
additional advance made pursuant to Section 1(b) hereof from and after the date
of such additional advance on the outstanding principal amount of such
additional advance. Accrued interest will be due and payable on each of the
first, second and third anniversaries of the date first set forth above. The
Borrower shall pay on demand interest on any overdue payment of principal and
interest (to the extent legally enforceable) at the Loan Rate plus two percent
(2%) (the "Default Rate").

                  c.       Application of Payments. All payments made on this
Note (including, without limitation, prepayments) shall be applied, at the
option of the Lender, first to late charges and collection costs, if any, then
to accrued interest and then to principal. Interest


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payable hereunder shall be calculated for actual days elapsed on the basis of a
360-day year. All accrued and unpaid interest shall be due and payable upon
maturity of this Note. After maturity or in the Event of Default, interest shall
continue to accrue on this Note at the Default Rate set forth above, and shall
be payable on demand of the Lender.

                  d.       Optional Prepayment. The outstanding principal amount
of this Note may be prepaid in whole or in part without any prepayment penalty
or premium at any time or from time to time by Borrower upon notice to the
Lender; provided, that any prepayment shall be applied first to any interest due
to the date of such prepayment on this Note and thereafter shall be applied to
the installments of principal hereunder in the inverse order of maturity.

                  e.       Maximum Interest Rate. Notwithstanding anything in
this Note, the interest rate charged hereon shall not exceed the maximum rate
allowable by applicable law. If any stated interest rate herein exceeds the
maximum allowable rate, then the interest rate shall be reduced to the maximum
allowable rate, and any excess payment of interest made by Borrower at any time
shall be applied to the unpaid balance of any outstanding principal of this
Note.

         3.       Events of Default.

                  a.       The occurrence of any of the following events or
circumstances shall constitute an Event of Default hereunder:

                           (i)      A default in the payment by the Borrower to
the Lender of principal or interest under this Note as and when the same shall
become due and payable; or

                           (ii)     Institution of any proceeding by or against
the Borrower under any present or future bankruptcy or insolvency statute or
similar law and, if involuntary, if the same are not stayed or dismissed within
sixty (60) days, or the Borrower's assignment for the benefit of creditors or
the appointment of a receiver, trustee, conservator or other judicial
representative for the Borrower or the Borrower's property or the Borrower's
being adjudicated as bankrupt or insolvent; or

                           (iii)    An event of default under any pledge or
security agreement collateralizing the obligations under this Note; or

                           (iv)     The expiration of the thirty (30) day period
following the date the Borrower ceases for any reason to remain in service to
the Lender. For this purpose, the Borrower will be considered to remain in
service to the Lender for so long as the Borrower renders services as a
director, consultant or employee of the Lender, or to any successor entity or
one or more of the Lender's fifty (50%) percent or more owned (direct or
indirect) subsidiaries.

                  b.       Upon the occurrence of an Event of Default hereunder,
this Note shall automatically without any action or notice by Lender, be
accelerated and become immediately due and payable, and Lender shall have all of
the rights and remedies provided for herein or otherwise available at law or in
equity, all of which remedies shall be cumulative.


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         4.       Notices. Notices required to be given hereunder shall be
deemed validly given (i) three business days after sent, postage prepaid, by
certified mail, return receipt requested, (ii) one business day after sent,
charges paid by the sender, by Federal Express Next Day Delivery or other
guaranteed delivery service, (iii) when sent by facsimile transmission, or (iv)
when delivered by hand:

         If to the Lender:        Kirkland's, Inc.
                                  805 N. Parkway
                                  P.O. Box 7222
                                  Jackson, Tennessee 38308-7222
                                  Attn: General Counsel

         If to the Borrower:      Reynolds C. Faulkner
                                  20 Deepwood Drive
                                  Jackson, Tennessee 38305

or to such other address, or in care of such other person, as the holder or the
Borrower shall hereafter specify to the other from time to time by due notice.

         5.       Miscellaneous.

                  a.       Payment of this Note will be secured by a pledge of
certain collateral with the Lender pursuant to a separate pledge or security
agreement. However, the Borrower is personally liable for payment of this note
and his assets may be applied to the satisfaction of his obligations hereunder.
Neither the reference to nor the provisions of any agreement or document
referred to herein shall affect or impair the absolute and unconditional
obligation of the Borrower to pay the principal of and interest on this Note as
herein provided.

                  b.       In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon and
after any amount becomes due and payable hereunder, the Lender is hereby
authorized by the Borrower, without notice to the Borrower, any such notice
being hereby expressly waived, to set off and appropriate and to apply any and
all obligations of Lender to the Borrower (including, without limitation,
salary, bonuses, deferred compensation and non-qualified retirement plan
benefits then payable and any other compensatory amounts) against and on account
of the amount then due and payable to Lender.

                  c.       Any action, suit or proceeding arising out of or
relating to this Note, or the breach, termination or validity thereof, shall be
litigated exclusively in the [trial court] of the State of Tennessee (the "State
Court"). Each of the parties hereto hereby irrevocably and unconditionally (i)
submits to the jurisdiction of the State Court, (ii) agrees not to commence any
proceeding relating to this Note except in the State Court, (iii) waives, and
agrees not to plead or to make, any objection to the venue of any such
proceeding in the State Court, (iv) waives, and agrees not to plead or to make,
any claim that any such proceeding brought in the State Court has been brought
in an improper or otherwise inconvenient forum, (v) waives, and agrees not to
plead or to make any claim that the State Court lacks personal jurisdiction over
it, (vi) waives its right to remove any such proceeding to the federal courts
except where such courts are vested with sole and exclusive jurisdiction by
statute, and (vii) understands and agrees


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that it shall not seek a jury trial or punitive damages in any such proceeding
based upon or arising out of or otherwise related to this Note and waives any
and all rights to any such jury trial or to seek punitive damages. Borrower
waives personal service of process and agrees that a summons and complaint
commencing an action or proceeding in State Court will be properly served if
served by registered or certified mail in accordance with the notice provisions
set forth herein.

                  d.       The Borrower hereby waives presentment, demand,
notice of nonpayment, protest, notice of protest, notice of dishonor and any and
all other notices in connection with any default in the payment of, or any
enforcement of the payment of all amounts due under this Note. To the extent
permitted by law, the Borrower waives the right to any stay of execution and the
benefit of all exemption laws now or hereafter in effect. The Borrower agrees
that extension or extensions of the time of payment of this Note or any
installment or part thereof may be made before, at or after maturity by
agreement by the Lender. The Borrower shall pay to the Lender, upon demand, all
costs and expenses, including, without limitation, attorneys' fees and legal
expenses, that may be incurred by the Lender in connection with the enforcement
of this Note.

                  e.       Any failure by the Lender to exercise any right
hereunder shall not be construed as a waiver of the right to exercise the same
or any other right at any time. No amendment to or modification of this Note
shall be binding upon the Lender unless in writing and signed by it. Any
provision hereof found to be illegal, invalid or unenforceable for any reason
whatsoever shall not affect the validity, legality or enforceability of the
remainder hereof. This Note shall apply to and bind the successors of the
Borrower and shall inure to the benefit of the Lender, its successors and
assigns.

                  f.       This Note shall be governed by and interpreted in
accordance with the laws of the State of Tennessee.

         IN WITNESS WHEREOF, the Borrower has duly executed this Note as of the
day and year first set forth above.

                                                    /s/ Reynolds C. Faulkner
                                                    ------------------------
                                                    REYNOLDS C. FAULKNER



Accepted, Acknowledged and Agreed:

KIRKLAND'S, INC.


By: /s/ Robert E. Alderson
   --------------------------------------------
   Name: Robert E. Alderson
   Title: Chief Executive Officer and President


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