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                                                                   EXHIBIT 10.21

                                KIRKLAND'S, INC.

                 COMPENSATION POLICY FOR INDEPENDENT DIRECTORS

         Each Independent Director (as defined) of Kirkland's, Inc. (the
"Company") shall be compensated for service on the Board and any Board
committee as follows:

    A. MONETARY COMPENSATION

         1. BOARD ANNUAL RETAINER FEE: Each Independent Director shall be paid a
$20,000 annual retainer fee. This fee shall paid in equal installments at the
end of each fiscal quarter for which said Independent Director provided services
as a Director to the Company. To the extent an Independent Director provided
services to the Company as a Director for less than all of the prior fiscal
quarter, this annual retainer fee and the related installment shall be prorated
to compensate the Independent Director only for the portion of the prior fiscal
quarter that such Independent Director provided services as a Director.

         2. COMMITTEE ANNUAL FEES:

              a. Audit Committee: Each Independent Director who is a member of
the Audit Committee of the Board shall be paid an additional $2,000 annual fee.
This fee shall paid in equal installments at the end of each fiscal quarter for
which said Independent Director served as a member of the Audit Committee. To
the extent an Independent Director served as a member of the Audit Committee for
less than all of the prior fiscal quarter, the annual Audit Committee fee and
the related installment shall be prorated to compensate the Independent Director
only for the portion of the prior fiscal quarter that such Independent Director
served as a member of the Audit Committee.

              b. Compensation Committee: Each Independent Director who is a
member of the Compensation Committee of the Board shall be paid an additional
$1,000 annual fee. This fee shall paid in equal installments at the end of each
fiscal quarter for which said Independent Director served as a member of the
Compensation Committee. To the extent an Independent Director served as a member
of the Compensation Committee for less than all of the prior fiscal quarter, the
annual Compensation Committee fee and the related installment shall be prorated
to compensate the Independent Director only for the portion of the prior fiscal
quarter that such Independent Director served as a member of the Compensation
Committee.

         3. COMMITTEE CHAIR FEES:

              a. Audit Committee: Each Independent Director who serves as the
Chairman of the Audit Committee of the Company shall be paid an additional
$4,500 annual fee. This fee shall paid in equal installments at the end of each
fiscal quarter for which said Independent Director served as the Chairman of the
Audit Committee. To the extent an Independent Director served as the Chairman of
the Audit Committee for less than all of the prior fiscal quarter, this annual
Audit Committee Chairman fee and the related installment shall

                                      -1-
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be prorated to compensate the Independent Director only for the portion of the
prior fiscal quarter that such Independent Director served as the Chairman of
the Audit Committee.

              b. Compensation Committee: Each Independent Director who serves as
the Chairman of the Compensation Committee of the Board shall be paid an
additional $2,000 annual fee. This fee shall paid in equal installments at the
end of each fiscal quarter for which said Independent Director served as the
Chairman of the Compensation Committee. To the extent an Independent Director
served as the Chairman of the Compensation Committee for less than all of the
prior fiscal quarter, this annual Compensation Committee Chairman fee and the
related installment shall be prorated to compensate the Independent Director
only for the portion of the prior fiscal quarter that such Independent Director
served as the Chairman of the Compensation Committee.

         4. BOARD MEETING FEES: Each Independent Director shall be paid an
additional $1,000 fee for each meeting of the Board that such Independent
Director attends IN PERSON. This fee shall paid at the end of each fiscal
quarter for which said Independent Director attended Board meetings as a member
of the Board of the Company.

         5. COMMITTEE MEETING FEES: Each Independent Director who is a member of
the Audit or the Compensation Committee of the Company shall be paid an
additional $500 fee for each such Committee meeting that such Independent
Director attends IN PERSON. This fee shall paid at the end of each fiscal
quarter for which said Independent Director attended Committee meetings as a
member of one or both of the Committees of the Company.

         6. EFFECTIVE DATE: The monetary fees set forth in this section A shall
apply with respect to all Board and Committee service from and after July 16,
2002, the date of the closing of the Company's initial public offering of common
stock ("IPO").

    B. EQUITY COMPENSATION

        Each Independent Director shall be issued a fully-vested, non-qualified
stock option to purchase 5,000 shares of the Company's common stock (the
"Options"). The Options shall: (i) be granted pursuant to the Company's 2002
Equity Incentive Plan (the "Plan"), (ii) have a fair market value exercise
price based upon the closing price of the Company's common stock on the date of
grant, (iii) be fully exercisable upon grant, and (iv) shall expire upon the
ten (10) year anniversary of the grant date, subject to earlier termination in
accordance with the terms of the Plan and the option award agreement.

         The first grant of options to each of the Independent Directors shall
be effective as of the date of adoption of this Compensation Policy by the Board
and shall carry an exercise price of $15.00 per share, equal to the initial
public offering price in the Company's IPO. Subsequent to this initial issuance,
annual grants shall occur immediately after each annual meeting of the
shareholders of the Company, to each Independent Director who is serving on the
Board after such annual meeting.

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    C. DEFINITION OF INDEPENDENT DIRECTOR.

         For purposes of this policy, the term "Independent Director" shall mean
any director who is not an employee of the Company or any of its subsidiaries.

                                      -3-Exhibit 10.17

 

Exhibit 10.17

2005 INCENTIVE AND NONQUALIFIED STOCK OPTION AGREEMENT

          THIS AGREEMENT, effective as of April ___, 2005, by and between FOREST CITY ENTERPRISES, INC.,
an Ohio corporation of Cleveland, Ohio, (the “Company”) and  ______, an employee
of the Company or a Subsidiary (the “Employee”). All capitalized terms have the meanings set forth
in the Forest City Enterprises, Inc. 1994 Stock Plan (As Amended, Restated and Renamed as of June
8, 2004) (the “Plan”) unless otherwise specifically provided.

WITNESSETH:

     WHEREAS, the Board of Directors of the Company (the “Board”) is of the opinion that the
interests of the Company and its shareholders will be advanced by affording present and future
executives and key employees an opportunity to secure stock ownership in the Company;

     WHEREAS, the execution of an Incentive and Nonqualified Stock Option Agreement substantially
in the form hereof has been authorized by a resolution of the Compensation Committee of the Board
(the “Committee”) duly adopted on April ___, 2005; and

     NOW THEREFORE, in consideration of the premises and the mutual covenants, agreements and
promises set forth herein, the parties hereto agree as follows:

	1.  	     GRANT OF OPTION. The Company hereby grants to the Employee, effective as of April
___, 2005 (the “Date of Grant”), a stock option (this “Option Right”) to purchase under the
Plan, an aggregate of ___shares of the presently authorized Class A Common Stock, $0.33
1/3 par value, of the Company (the “Shares”). With respect to ___Shares, the Option Right
is intended to be an “incentive stock option” (the “Incentive Stock Option Right”) within the
meaning of that term under Section 422 of the Internal Revenue Code of 1986, as amended, and
this Agreement shall be construed in a manner that will enable the Incentive Stock Option
Right to be so qualified and with respect to ___Shares, the Option Right is intended to
be a nonqualified stock option (the “Nonqualified Option Right”) and shall not be treated as
an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended.

	2.  	     OPTION PRICE. The Option Price with respect to the Shares covered by this Option
Right shall be $___.___per Share, the Market Value per Share as of the close of business on the
Date of Grant.

	3.  	     OPTION PERIOD; VESTING AND TIME OF EXERCISE OF OPTION RIGHT. (a) This Option Right
shall continue in effect for a period of 10 years from the Date of Grant, except as such
option period may be reduced as hereinafter provided in Section 6 of this Agreement as a
result of certain terminations of the employment of the Employee.

	 	(b)  	This Option Right shall be exercisable cumulatively over the option period only
in accordance with the following terms, conditions and provisions:

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	 	(i)  	Except as otherwise provided in the Plan or this Agreement,
this Option Right shall not be exercisable prior to the second anniversary of
the Date of Grant, and upon such day this Option Right shall automatically
become vested and exercisable with respect to 25% of this Option Right.
Thereafter, upon the third anniversary of the Date of Grant, the Employee may
exercise an additional 25% up to 50% of this Option Right. Upon the fourth
anniversary and thereafter until the tenth anniversary of the Date of Grant,
the Employee may exercise an additional 50% up to 100% of this Option Right.
Schedule I, attached hereto, lists the number of Shares the Employee may
exercise this Option Right for upon the second, third and fourth through tenth
anniversaries of the ten-year option period.
	 
	 	(ii)  	Except as hereinafter provided in Section 6 of this Agreement,
no part of this Option Right may be exercised unless the Employee is, at the
date of such exercise, in the employ of the Company or a Subsidiary, and shall
have been continuously so employed since the Date of Grant. Approved absence
or leave from the Company, or a Subsidiary, shall not be considered an
interruption of employment for the purposes of this Agreement.

	4.  	     METHOD OF EXERCISE. Shares may be purchased pursuant to this Agreement only upon
receipt by the Secretary of the Company of notice in writing from Employee of his or her
intention to purchase, specifying the number of Shares as to which he desires to exercise his
Option Right, and said notice shall be accompanied by the full amount of the purchase price in
the form of: cash, a certified or official bank check, a money order, a cashier’s check, or
in Shares that have been owned by the Employee for at least six months prior to the date of
exercise and having a market value at the time of exercise equal to the total Option Price of
the Shares subject to such exercise. Such form of written notice is attached hereto. In no
event shall this Option Right be exercisable as to less than 25 Shares at any one time or all
of the remaining Shares then subject to this Option Right, if less than 25.

	5.  	     OPTION RIGHT CONFERS NO RIGHTS AS COMMON STOCKHOLDER. The Employee shall not be
entitled to any privileges of ownership with respect to Shares subject to this Option Right,
unless and until purchased and delivered upon the exercise of this Option Right, in whole or
in part, and the Employee becomes a stockholder of record with respect to such delivered
Shares. The Employee shall not be considered a stockholder of the Company with respect to any
such Shares not so purchased and delivered.

	6.  	     TERMINATION OF OPTION RIGHT. (a) In the event the employment of the Employee with
the Company or a Subsidiary, shall terminate for any reason other than disability (as defined
in the Company’s Long Term Disability Plan, as amended from
time to time) (“Disability”), death, or Retirement, all rights to purchase Shares pursuant
to this Option Right (including rights to purchase Shares thereunder which have accrued but
which then remain unexercised) shall forthwith cease and terminate.

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	 	(b)  	In the event of the termination of the Employee’s employment because of
Disability, this Option Right may be exercised by the Employee, to the extent he was
entitled to do so on the date of termination of his employment, but not later than ten
years from the Date of Grant.
	 
	 	(c)  	If the Employee’s employment shall terminate by reason of Retirement, this
Option Right shall become immediately exercisable by the Employee on the date of his or
her Retirement until ten years from the Date of Grant.
	 
	 	(d)  	If the Employee shall die during his employment with the Company or a
Subsidiary or during a period of Disability, this Option Right may be exercised by the
legal representative of the Optionee, to the extent the Optionee was entitled to
exercise this Option Right at the time of his death until ten years from the Date of
Grant.
	 
	 	(e)  	To the extent that this Option Right shall not have been exercised within the
period above provided due to his death, Retirement or termination because of
Disability, all further rights to purchase Shares pursuant to such Option Right shall
cease and terminate at the expiration of such period.

	7.  	     TRANSFERABILITY. (a) Except as provided in Section 7(b), this Option Right may not
be transferred by the Employee other than by will or the laws of descent and distribution or
pursuant to a domestic relations order. During the Employee’s lifetime, this Option Right is
exercisable only by the Employee or, in the case of the Employee’s legal incapacity, only by
his guardian or legal representative, provided, however, that if so determined
by the Committee, the employee may, in a manner designated by the Committee, designate a
beneficiary to exercise the rights of the Employee under this Option Right upon the death of
the Employee. Absent such a designation, in a case of death, this Option Right shall be
exercisable by the executor, administrator or legal representative of the deceased Employee.

	 	(b)  	The Nonqualified Option Right only may be transferable by the Employee,
without payment of consideration therefor by the transferee, only to any one or more
members of the Employee’s immediate family; provided, however, that (i) no such
transfer shall be effective unless reasonable prior notice thereof is delivered to the
Company and such transfer is thereafter effected in accordance with any terms and
conditions that shall have been made applicable thereto by the Committe and (ii) any
such transferee shall be subject to the same terms and conditions hereunder as the
Employee. For the purposes of this Section 7, the term “immediate family” means any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the Employee’s
household (other than a tenant or Employee), a
trust in which these persons have more than fifty percent of the beneficial
interest, a foundation in which these persons (or the Employee) control the
management of assets, and any other entity in which these persons (or the Employee)
own more than fifty percent of the voting interests.

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	 	(c)  	Except as permitted by the above, this Option Right may not be sold,
transferred, assigned, pledged, hypothecated or otherwise disposed of (whether by
operation of law or otherwise or be subject to execution, attachment or similar
process). Any attempted sale, transfer, assignment, pledge, hypothecation or
encumbrance, or other disposition of this Option Right shall be null and void.

	8.  	     CHANGE IN STOCK CAPITALIZATION. The Committee may make or provide for such
adjustments in the numbers of Shares covered by this Option Right, in the price per share
applicable to such Option Right and in the kind of shares covered thereby, as the Committee,
in its sole discretion, exercised in good faith, may determine is equitably required to
prevent dilution or enlargement of the rights of the Employee that otherwise would result from
(i) any stock dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Company, or (ii) any merger, consolidation, spin-off,
split-off, spin-out, split-up, reorganization, partial or complete liquidation or other
distribution of assets, issuance of rights or warrants to purchase securities, or (iii) any
other corporate transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Committee, in its discretion, may
provide in substitution for this Option Right any or all other outstanding awards under the
Plan such alternative consideration as it, in good faith, may determine to be equitable in the
circumstances and may require in connection therewith the surrender of all awards so replaced.
The Company shall give the Employee written notice of any change described in this Section 8.

	9.  	     EMPLOYMENT RIGHTS. Nothing contained in the Plan or in any Option Right granted
pursuant to the Plan shall confer upon any Employee any right to be continued in the
employment of the Company or any Subsidiary, or interfere in any way with the right of the
Company, or such Subsidiary, to terminate his or her employment at any time.

	10.  	     AMENDMENTS TO PLAN AND AGREEMENT. (a) The Committee may, without further action by
the shareholders, from time to time, amend, alter, suspend or terminate the Plan, except as
otherwise required by applicable law or the rules of the New York Stock Exchange or, if the
Shares are not traded on the New York Stock Exchange, the principal national securities
exchange upon which the Shares are traded or quoted.

	 	(b)  	This Agreement may not be modified orally. Any amendment to the Plan will be
deemed to be an amendment to this Agreement to the extent that the amendment is
applicable hereto; provided, however, that no amendment will adversely
affect the rights of the Employee with respect to this Option Right without the
Employee’s written consent.

	11.  	     DELIVERING OF SHARES. The Employee shall give notice of his intent to exercise an
Option Right, and Shares shall be delivered by the Company after full
payment of the Option Right Price in respect of the Shares delivered, subject to the
conditions of Section 4 hereof.

	12.  	     CANCELLATION OF OPTION RIGHTS. The Committee may cancel any unexercised portion of
the Option if the Employee and while having rights to purchase

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hereunder, engages in
employment or activities which in any way directly or indirectly, divert or attempts to divert
from the Company any business whatsoever, and which in the opinion of the Committee are
contrary to the best interests of the Company.

	13.  	     NOTICES. Any notice to be given hereunder by the Employee shall be sent by certified
or registered mail addressed to the Company for the attention of the Chairman of the Board, or
the President, at its principal office, Terminal Tower, 50 Public Square, Suite 1100,
Cleveland, Ohio 44113-2267, and any notice by the Company to the Employee shall be sent by
certified or registered mail addressed to the Employee at [address]. Either party
may, by notice given to the other in accordance with the provisions of this Section, change
the address to which subsequent notices shall be sent.

	14.  	     AGREEMENT SUBJECT TO THE PLAN. This Agreement is subject to the provisions of the
Plan and shall be interpreted in accordance therewith. The Employee hereby acknowledges
receipt of a copy of the Plan.

	15.  	     GOVERNING LAW. This Agreement shall be governed by the internal substantive laws of
the State of Ohio.

	16.  	     WITHHOLDING TAXES. If the Company shall be required to withhold any federal, state,
local or foreign tax in connection with the exercise of the Option Right, the Employee shall
pay the tax or make provisions that are satisfactory to the Company for the payment thereof.
The Employee may elect to satisfy all or any part of any such withholding obligation by
surrendering to the Company a portion of the Shares that are issuable to the Employee upon the
exercise of the Option Right. If such election is made, the Shares so surrendered by the
Employee shall be credited against any such withholding obligation at their Market Value per
Share on the date of such surrender. In no event, however, shall the Company accept Shares
for payment of taxes in excess of required tax withholding rates.

	17.  	     MANDATORY NOTICE OF DISQUALIFYING DISPOSITION. Without limiting any other provision
hereof, the Employee hereby agrees that if he disposes (whether by sale, exchange, gift, or
otherwise) of any of the Incentive Stock Option Right within two years of the Date of Grant or
within one year of the transfer of such Incentive Stock Option Right to the Employee, the
Employee shall notify the Company of such disposition in writing within 30 days from the date
of such disposition. Such written notice shall state the principal terms of such disposition
and the type and amount of the consideration received for such Incentive Stock Option Right by
the Employee in connection therewith.

	18.  	     GENERAL. It is understood that wherever masculine pronouns are used in this
Agreement, it is intended to include the feminine pronouns as well as the masculine.

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     IN WITNESS WHEREOF, we have hereunto set our hands this ___ day of April, 2005.

	 	 	 
	

	 	FOREST CITY ENTERPRISES, INC.

	 
	 	 
	

	 	 
	

	 	Charles A. Ratner, President

	 
	 	 
	

	 	 
	

	 	NAME, Employee

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Exercise of Stock Option

Forest City Enterprises, Inc.

Terminal Tower

50 Public Square, Suite 1100

Cleveland, Ohio 44113-2267

Ladies and Gentlemen:

          The undersigned Employee hereby exercises the Option Right granted to him/her pursuant to the
Incentive and Nonqualified Stock Option Agreement dated April ___, 2005 between Forest City
Enterprises, Inc. and the Employee with respect to                      Shares covered by the Incentive
Stock Option Right of                      Shares covered by the Nonqualified Stock Option Right; and:

	(a)  	tenders herewith $                      in payment of the Option Right Price thereof by delivery of
                                        . The name and registered address on such certificate should be:

	 	 	 
	

	 	(form of payment)
	 
	 	 
	

	 	 
	 
	 	 
	

	 	 
	 
	 	 
	

	 	 

or

	 	 	 
	(b)

	 	to the extent permitted by law, elects to make a cashless exercise in accordance with Section
6D of the Plan. A copy of this Notice and stock certificates representing the Shares should
be delivered to:
	 
	 	 
	

	 	.
	

	 	 

	 	 
	The
Employee’s social security number is: 

	 
	

	 

	 	 	 
	

	 	 
	

	 	Employee

	   	Dated:

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