Document:

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                                                                    EXHIBIT 10.6

                       (AS AMENDED THROUGH JULY 31, 2000)

                                KIRKLAND'S, INC.
                                  P.O. Box 7222
                             Jackson, TN 38303-7222

                                                                   June 12, 1996

Mr. Robert Alderson
Senior Vice President
Kirkland's, Inc.
805 North Parkway
Jackson, Tennessee 38305

Dear Mr. Alderson:

        In recognition of your contribution to the growth and success of
Kirkland's, Inc. and its related companies (the "Company"), we are pleased to
offer to you ("Executive") continued employment with the Company as Chief
Administrative Officer, subject to the following terms of this letter agreement
(the "Agreement").

        1. Term and Duties. Executive shall be employed for a term commencing on
the date hereof and expiring on the sixth anniversary of the date hereof (the
"Term"). During the Term, Executive shall devote his best efforts and
substantially all of his business time and services to the Company, subject to
the direction of the Board of Directors of the Company (the "Board"). Executive
shall report to the President and Chief Executive Officer of the Company.

        2. Annual Salary. Executive hereby agrees to accept, as compensation for
all services rendered by Executive in any capacity hereunder and for the
Restrictive Covenants made by Executive in Section 6 hereof, an annual salary at
the rate of $424,500 (the "Annual Salary") commencing on the date hereof and
continuing until expiration or termination of the Term. The Annual Salary shall
be inclusive of all applicable income, social security and other taxes and
charges which are required by law to be withheld by the Company. The Annual
Salary will be paid in the following manner: (a) a minimum of $275,000 in 12
equal monthly installments in arrears and (b) $149,500 payable annually in
arrears on February 1 of each year. This minimum amount may be increased from
time to time by the approval of the Company's Board of Directors. The annual
payment to be made on February 1, 1997 shall be a prorated portion of $149,500
based on the portion of a year which has elapsed from the Closing Date (as
defined in the Recapitalization Agreement, dated April 26, 1996 among the
Company, Kirkland Holdings L.L.C. and the Company's former majority
shareholders, including Executive (the "Recapitalization Agreement") through
February 1, 1997. The annual payment to be made with respect to any period
during which the Term terminated prior to the applicable February 1 payment date
will be prorated based on the portion of a year which has elapsed from February
1 of the prior year until the termination or expiration of the Term.

        3. Annual Bonus. Executive will be eligible to receive with respect to
each fiscal year of the Company during the Term (each, a "Fiscal Year")
commencing with the Fiscal Year ending December 31, 1996, a bonus ("Annual
Bonus") consisting of: (i) an annual performance bonus of either (A) $175,000.00
if the Company achieves at least ninety-five (95%) of its Performance Target (as
defined below), or (B)

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$175,000.00 multiplied by the product of (i) the actual percentage of
Performance Target achieved minus eighty-five (85%) percent, but not less than
zero, times (ii) ten (10); and (ii) up to an additional $75,000.00, subject to
the discretion of the Board, which may take performance measures into
consideration, including but not limited to team leadership, new store openings,
existing store performance and/or customer satisfaction. For purposes of this
Agreement, "Performance Target" means the Company's projected annual operating
profit, as established by the Board for each Fiscal Year during the Term. The
Annual Bonus shall be payable within 30 days after completion of the audit of
the Company's financial statements for the prior Fiscal Year.

        4. Benefits. Executive shall be entitled to the benefits (the
"Benefits") set forth on Schedule A attached hereto.

        5. Incentive Stock Options. Simultaneously with the execution of this
Agreement, the Company has granted stock options to Executive to purchase two
percent (2%) of the Company's common stock (determined on a fully diluted
basis), pursuant to and subject to the terms of the 1996 Incentive and
Non-Qualified Stock Option Plan of the Kirkland Companies adopted on the date
hereof by the Board of Directors of the Company, and further subject to the
terms and provisions contained in that certain Stock Option Agreement between
the Company and Executive.

        6. Non-Compete; Confidentiality; Non-Solicitation.

           6.1. Restrictive Covenants.

                (a) Non-Compete. Executive shall not, during the Term and for a
period of three (3) years thereafter (the "Restricted Period"), in the United
States, Canada or any other place where the Company, its subsidiaries or
affiliates conduct business, directly or indirectly (except in Executive's
capacity as an officer of the Company or its subsidiaries or affiliates) do any
of the following directly or indirectly without the prior written consent of the
Company:

                        (i) engage or participate in any business activity
competitive with the Company's business, or in any business activity which sells
to or supplies goods or products to a business that is competitive with the
Company's business, or in either case, the business of any of the Company's
subsidiaries or affiliates ("Competing Business"), as the same are conducted by
the Company or its subsidiaries or affiliates at any time during the Restricted
Period;

                        (ii) become interested in (as owner, stockholder,
lender, partner, co-venturer, director, officer, employee, agent, consultant or
otherwise) any person, firm, corporation, association or other entity engaged in
any Competing Business. Notwithstanding the foregoing, Executive may hold up to
one percent (1%) of the outstanding securities of any class of any
publicly-traded securities of any company;

                        (iii) solicit or call on, either directly or indirectly,
(A) for purposes of selling goods or products competitive with goods or products
sold by the Company, any customer with whom the Company shall have dealt at any
time during the two year period immediately preceding the termination of
Executive's employment hereunder; or (B) any supplier with whom the Company
shall have dealt at any time during the two year period immediately preceding
the termination of Executive's employment hereunder;

                        (iv) except by reason of and in his capacity as an
officer of the Company, and in the best interests of the Company, directly or
indirectly, influence or attempt to influence any supplier, customer

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or potential customer of the Company to terminate or modify any written or oral
agreement or course of dealing with the Company; or

                        (v) except by reason of and in his capacity as an
officer of the Company, and in the best interests of the Company, influence or
attempt to influence any person to either (i) terminate or modify his
employment, consulting, agency, distributorship or other arrangement with the
Company, or (ii) employ or retain, or arrange to have any other person or entity
employ or retain, any person who has been employed or retained by the Company as
an employee, consultant, agent or distributor of the Company at any time during
the one year period immediately preceding the termination of Executive's
employment hereunder.

                (b) Confidential Information. Executive agrees that, during and
after the Restricted Period, Executive shall keep secret and retain in strictest
confidence, and shall not use for Executive's benefit or the benefit of others
any proprietary, confidential or secret matters relating to the Company
including, without limitation, financial information, trade secrets, customer
lists, details of client or consultant contracts, pricing policies, operational
methods, marketing plans or strategies, product development techniques or plans,
business acquisition plans, new personnel acquisition plans, methods of
manufacture, technical processes, designs and design projects, inventions and
research projects of the Company, its affiliates or any other entity which may
hereafter become an affiliate thereof, learned, acquired or developed by
Executive while employed by the Company. Notwithstanding the provisions of this
Section 6.1(b), Executive, while Robert Kirkland and any investment funds
managed by Advent International Corporation are (directly or indirectly)
shareholders in the Company, may communicate with Robert Kirkland or Advent
International Corporation any information which a shareholder, under Tennessee
law, is entitled to receive.

        6.2. Rights and Remedies Upon Breach. If Executive breaches, or
threatens to commit a breach of, any of the provisions contained in Section 6.1
(the "Restrictive Covenants"), the Company shall have the following rights and
remedies, each of which rights and remedies shall be independent of the others
and severally enforceable, and each of which is in addition to, and not in lieu
of, any other rights and remedies available to the Company under law or in
equity:

                (a) Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and that
money damages would not provide an adequate remedy to the Company.

                (b) Accounting. The right and remedy to require Executive to
account for and pay over to the Company all compensation, profits, monies,
accruals, increments or other benefits derived or received by Executive as the
result of any action constituting a breach of the Restrictive Covenants.

        6.3. Blue-Pencilling. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, such court shall have the
power to reduce the duration or scope of such provision, as the cast! may be,
and, in its reduced form, such provision shall then be enforceable.

        6.4. Enforceability in Jurisdictions. The Company and Executive intend
to and hereby confer jurisdiction to enforce the Restrictive Covenants upon the
courts of Shelby County, Tennessee or Davidson County, Tennessee or any federal
or district court within those counties. If the courts of any one or more of
such jurisdictions hold the Restrictive Covenants unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of the Company that such
determination not bar or in any way affect the right of

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the Company to the relief provided above in the courts of any other jurisdiction
within the geographical scope of such Restrictive Covenants.

        7. Termination.

           7.1. Change in Control. Upon the occurrence of a Change in Control,
Qualified Public Offering, Sale or Refinancing (such terms being used herein as
defined in the Recapitalization Agreement) during the Term (or any renewal of
the Term), this Agreement shall terminate and the Executive and the Company
shall enter into a new employment agreement which shall be coextensive with the
remaining Term hereunder and which shall provide for an annual salary at the
rate of $275,000, a bonus equivalent to that provided for in Section 3 hereof,
and a non-competition provision equivalent to that provided for in Section 6
hereof which continues until three years following the end of the remaining Term
hereunder.

           7.2. Disability. In the event of the disability of the Executive
during the Term (or any renewal of the Term), such that Executive is unable to
perform his duties and responsibilities hereunder to the full extent required by
this Agreement by reasons of illness, injury or incapacity for a period of more
than sixty (60) consecutive days or more than ninety (90) days, in the
aggregate, during any one hundred twenty (120) day period ("Disability"), the
Term will terminate and the Company will cease to pay the Annual Salary and
Bonus and will, in recognition of Executive's past services to the Company, pay
to Executive: (i) the sum of $149,500 per annum (prorated for any partial year)
until the seventh anniversary of the date of this Agreement; provided that such
annual payments shall terminate upon the occurrence of a Change in Control,
Qualified Public Offering, Sale or Refinancing and (ii) a pro rata portion of
his Annual Bonus for the Fiscal Year in which such termination occurs, if the
Performance Targets applicable to that Fiscal Year are achieved.

           7.3. Death. In the event that Executive dies during the Term (or any
renewal of the Term), the Term will terminate and the Company will cease to pay
the Annual Salary and Bonus and will, in recognition of Executive's past
services to the Company, pay Executive's executors, legal representatives or
administrators: (i) a death benefit of $149,500 per annum (prorated for any
partial year) until the seventh anniversary of the date of this Agreement;
provided that such payments shall terminate upon the occurrence of a Change in
Control, Qualified Public Offering, Sale or Refinancing and (ii) a pro rata
portion of Executive's Annual Bonus for the Fiscal Year in which the death
occurs, if the Performance Targets applicable to that Fiscal Year are achieved.

           7.4. Continuing Obligation. The Company's obligation to pay the
compensation to Executive under this Agreement may be terminated only to the
extent provided in Sections 7 and 8 of this Agreement, and shall not be
terminated for any other reason.

        8. Consulting Agreement. If the Term is not extended on the fourth
anniversary of the date hereof or upon any expiration of any Term renewal period
which expiration occurs prior to the seventh anniversary of the date hereof, the
parties shall enter into a Consulting Agreement (the "Consulting Agreement") on
such date. The terms of the Consulting Agreement shall include the following:
(i) annual compensation at the rate of $149,500 ("Consulting Compensation"),
prorated for any partial year; (ii) a term expiring on the seventh anniversary
of the date of this Agreement (the "Consulting Term"); (iii) the termination of
the Consulting Agreement upon the occurrence of a Change in Control, Qualified
Public offering, Sale or Refinancing; (iv) the continued payment of Consulting
Compensation for the remainder of the Consulting Term (subject to clause (iii))
as a death or Disability benefit to the Executive or Executive's executors,
legal

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representatives or administrators, upon the Disability or death of Executive;
and (v) any additional terms mutually agreed upon by Executive and the Company.

        9. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the Company and Executive and their respective successors,
executors, administrators, heirs and/or permitted assigns; provided, however,
that neither Executive nor the Company may make any assignments of this
Agreement or any interest herein, by operation of law or otherwise, without the
prior written consent of the other party, except that, without such consent, the
Company may assign this Agreement to any successor to all or substantially all
of its assets and business by means of liquidation, dissolution, merger,
consolidation, transfer of assets, or otherwise.

        10. Subordination. The obligations of the Company set forth in this
Agreement with respect to $149,500 of the Annual Salary are intended to be and
are subordinated in all respects to the Bank Debt and Mezzanine Debt, as such
terms are defined in the Recapitalization Agreement. In the event that any
payment of the Annual Salary is deferred by reason of this Section 10, payment
shall be made to the Executive as soon its allowable under the terms of the Bank
Debt and Mezzanine Debt and the payment shall be increased by nine percent (9%)
per annum, compounded semi-annually from the date originally due until the date
paid. Except as otherwise required by law, the Company agrees not to treat the
Executive for any purpose as having received any payment of compensation any
earlier than the date actually paid to the Executive by cash or check if the
Executive's compensation is reduced because of subordination under this Section
10 or because of any other reason whatsoever.

        11. Notice. Any notice or communication required or permitted under this
Agreement shall be made in writing and (i) sent by overnight courier, (ii)
mailed by certified or registered mail, return receipt requested or (iii) sent
by telecopier, addressed to the addresses of the parties set forth herein (and,
in the case of the Company, with a copy to Pepper Hamilton & Scheetz, 3000 Two
Logan Square, 18th and Arch Streets, Philadelphia, PA 19103, Attention: Cary S.
Levinson, Esquire); or to such other address as either party may from time to
time duly specify by notice given to the other party in the manner specified
above.

        12. Entire Agreement; Amendments. This Agreement along with the Stock
option Agreement contains the entire agreement and understanding of the parties
hereto relating to the subject matter hereof, and merges and supersedes all
prior and contemporaneous discussions, agreements and understandings of every
nature between the parties hereto relating to the employment of Executive with
the Company. This Agreement may not be changed or modified, except by an
Agreement in writing signed by each of the parties hereto.

        13. Waiver. The waiver of the breach of any term or provision of this
Agreement shall not operate as or be construed to be a waiver of any other or
subsequent breach of this Agreement.

        14. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Tennessee.

        15. Survival of Provisions. The provisions of this Agreement set forth
in Sections 6 and 15 hereof shall survive the termination of Executive's
employment hereunder.

        16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.

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        Please indicate your acceptance of employment and your agreement to
render services to the Company subject to the terms set forth above by executing
and returning the enclosed copy of this letter.

                                          Sincerely,

 ATTEST:                                  KIRKLANDS, INC.

 By: /s/ Bruce Moore                               By: /s/ Carl Kirkland
     ---------------                                   -----------------
     Title: V.P.                                       Name:
                                                       Title: President

 Agreed to and Accepted:

 /s/ Robert Alderson
 -------------------
 Robert Alderson

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                                   SCHEDULE A

                                EMPLOYEE BENEFITS

1. Automobile. An allowance of $600 per month during the Term for an automobile.

2. Life Insurance. The Company shall purchase term life insurance in the face
amount of $500,000.00 for Executive (with a person designated by Executive as
named beneficiary of such insurance) for the period of the Term. The policy for
the life insurance shall (i) contain a waiver of premium in the event of
Disability (to the extent available at commercially reasonable rates) and (ii)
provide for transfer to Executive in the event of Executive's termination under
the terms of the Agreement so that Executive may then continue coverage under
such policy after such termination.

3. Expense Reimbursement. Executive shall be entitled to receive reimbursement
from the Company for all reasonable out-of-pocket expenses incurred by Executive
in performing his duties under the Agreement, without regard to applicable
deductions available to the Company, upon presentation of expense statements or
vouchers and such other supporting information as may be required pursuant to
any expense reimbursement policy adopted by the Company and in force from time
to time.

4. Vacation. Executive shall be entitled to reasonable vacation time as
determined by the Board consistent with past practices of the Company.

5. Other Benefits. Executive shall be permitted, if and to the extent eligible,
to participate in any group life, hospitalization or disability insurance plan,
health program, pension plan, similar benefit plan or other so-called "fringe
benefits" of the Company, which may be no less favorable to Executive than the
terms offered to such other senior executives of the Company during the Term.

6. Extended Benefits. Following the expiration or termination of the Term,
Executive and his immediate family members shall be permitted to continue to
participate, at his own expense, in the Company's health insurance programs, to
the extent permitted by the insurance company (if any) then providing such
programs for the Company's executives and their immediate family members.

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                                                                    EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT

                       (AS AMENDED THROUGH JULY 31, 2000)

        THIS AGREEMENT (the "Agreement"), made as of the 2nd day of February,
1998, by and between KIRKLAND'S, INC., a Tennessee corporation, (the "Company"),
and REYNOLDS C. FAULKNER ("Executive").

        Executive is an individual who, by education, training and experience,
is skilled in matters of corporate finance, accounting and administration. The
Company desires to employ Executive as its Senior Vice President and Chief
Financial Officer and thereby gain the benefit of Executive's knowledge and
experience, and Executive desires to accept such employment pursuant to the
terms of this Agreement.

        NOW THEREFORE, in consideration of these premises and the mutual
promises contained herein, and intending to be legally bound hereby, the parties
agree as follows:

SECTION 1. Definitions.

        1.1. "Affiliate" of a Person means any Person which, directly or
indirectly, controls, is controlled by, or is under common control with such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to elect
a majority of the board of directors (or other governing body) or to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise. In any
event and without limiting the generality of the foregoing, any Person owning
10% or more of the voting securities of another Person shall be deemed to
control that Person.

        1.2. "Board" means the Board of Directors of the Company.

        1.3. "Cause" means the occurrence of any of the following material
violations, as determined in good faith by the Board: (i) Executive's failure,
refusal or inability (other than due to mental or physical disability) to
perform, in any material respect, his duties to the Company, which failure
continues for more than fifteen (15) days after written notice thereof from the
Company, (ii) alcohol abuse or use of controlled drugs (other than in accordance
with a physician's prescription), (iii) illegal conduct or gross misconduct of
Executive which is materially and demonstrably injurious to the Company, its
affiliates or subsidiaries including, without limitation, fraud, embezzlement,
theft or proven dishonesty in the course of his employment, (iv) conviction of a
misdemeanor involving moral turpitude or a felony, or (v) the entry of a plea of
guilty or nolo contendere to a misdemeanor involving moral turpitude or a
felony.

        1.4. "Competing Business" means any business primarily engaged in the
retail sale of specialty gifts, decorative accessories or home furnishings, or
any Significant Supplier.

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        1.5. "Financial Advisory Services" means financial advisory services
other than consulting or advisory services regarding wholesale or retail
purchasing, store location planning, store or display configuration, inventory
control or purchase tracking systems or retail marketing strategy.

        1.6. "Good Reason" means that any of the following has occurred with
respect to the Executive:

             (a) the assignment to Executive of any duties inconsistent in
any respect with Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 2 of this Employment Agreement, or any other action by the Company
which results in a material diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by Executive;

             (b) a reduction by the Company in Executive's Annual Salary;
provided, however, that if the salaries of substantially all of the Company's
senior executive officers (including the Company's President and CEO) are
contemporaneously and proportionately reduced, a reduction in the Executive's
Annual Salary to an amount not less than $225,000 will not constitute "Good
Reason" hereunder;

             (c) the failure by the Company, without Executive's consent, to pay
to him any portion of his current compensation, except pursuant to a
compensation deferral elected by Executive, or to pay to Executive any portion
of an installment of deferred compensation under any deferred compensation
program of the Company within thirty days of the date such compensation is due;
other than an isolated, insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by Executive;

             (d) a material diminution in the 401(k), medical, health and life
insurance benefits, if any, enjoyed by Executive under the Company's plans or
arrangements as of the date hereof, except as required by law, or the failure by
the Company to provide Executive with a minimum of three (3) weeks of paid
vacation days annually;

             (e) the relocation of the Company's principal executive offices
to a location more than 35 miles from the location of such offices on the
Effective Date, or the Company's requiring Executive to be based anywhere other
than the Company's principal executive offices, except for required travel on
the Company's business; or

             (f) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement.

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        1.7. "Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, (b) all trademarks, service marks, trade
dress, logos, trade names, fictitious names, brand names, brand marks and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data, source codes and
related documentation), (g) all other proprietary rights, (h) all copies and
tangible embodiments thereof (in whatever form or medium), or similar intangible
personal property created by, created for, or otherwise belonging to the
Company.

        1.8. "Option Agreement" means the option agreement between Executive and
the Company dated as of February 2, 1998.

        1.9. "Person" means an individual, a sole proprietorship, a corporation,
a partnership, a joint venture, an association, a trust, or any other entity or
organization, including a government or a political subdivision, agency or
instrumentality thereof.

        1.10. "Proprietary Information" means confidential, proprietary,
business and technical information or trade secrets of the Company or of any
subsidiary or Affiliate of the Company.

        1.11. "Restrictive Covenants" means the provisions contained in Section
5.1 of this Agreement.

        1.12. "Significant Supplier" means, as of a given date, a supplier of
specialty gifts, decorative accessories or home furnishings whose aggregate
sales to the Company, its affiliates or subsidiaries during the three (3) year
period immediately preceding that given date exceeded $400,000.

        1.13. "Term" means the period beginning on the date hereof and ending on
the earlier of: (i) June 12, 2002, or (ii) the date that Executive's employment
by the Company is terminated.

SECTION 2. Duration of Agreement; Duties. Executive will be employed as the
Company's Chief Financial Officer. Executive's employment by the Company may be
terminated by the Company at any time; provided, however, that during the Term,
the terms and conditions of Executive's employment by the Company shall be as
herein set forth. Executive will report to the President and the CEO of the
Company. Executive will render his services hereunder to the Company and its
Affiliates and shall use his best efforts, judgment and energy in the
performance of the duties assigned to him. During the Term, Executive will
devote substantially all of his business time and services to the Company to
perform such duties as may be

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customarily incident to his position and as may reasonably be assigned from time
to time by the Board. During the Term, Executive will not serve as a director of
any other corporation without the prior consent of the Company.

SECTION 3. Compensation and Benefits.

        3.1. Annual Salary. Executive hereby agrees to accept, as compensation
for all services rendered by Executive in any capacity hereunder and for the
Restrictive Covenants made by Executive in Section 5 hereof, an initial base
salary at an annual rate of $225,000 (as the same may hereafter be increased,
the "Annual Salary") commencing on the date hereof and continuing until
expiration or termination of the Term. The Annual Salary shall be inclusive of
all applicable income, social security and other taxes and charges which are
required by law to be withheld by the Company, and which shall be withheld and
paid in accordance with the Company's normal payroll practices for its similarly
situated employees from time to time then in effect.

        3.2. Signing Bonus. Within six months of the date hereof, the Company
shall pay Executive a signing bonus in an amount equal to $100,000.

        3.3. Annual Bonus. To the extent determined by the Board, in its
absolute discretion, Executive will be eligible to receive a bonus of up to
$100,000 per annum with respect to each fiscal year of the Company during the
Term, commencing with the fiscal year ending December 31, 1998.

        3.4. Benefits. Executive will be entitled to the benefits provided on
Schedule I hereto. In addition, Executive will be entitled to receive the same
benefits enjoyed by other executive officers of the Company from time to time
(as determined by the Board in good faith, in its absolute discretion), which
benefits, as of this date, include the benefits set forth on Schedule II hereto.
For purposes of this Agreement, "Benefits" means the benefits contemplated by
this Section 3.3.

SECTION 4. Payment of Expenses. The Company will pay all reasonable and
necessary expenses incurred by Executive in the performance of his duties
hereunder, in accordance with the Company's standard practices and policies
regarding the payment or reimbursement of expenses.

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SECTION 5. Non-Compete; Confidentiality; Non-Solicitation.

        5.1. Restrictive Covenants.

             (a) Non-Compete. Executive shall not, during the Term and for a
period of three (3) years thereafter (the "Restricted Period"), in the United
States do any of the following, directly or indirectly, without the prior
written consent of the Company (except in Executive's capacity as an employee of
the Company, and in the best interests of the Company):

                 (i) engage or participate in any Competing Business;

                 (ii) become interested in (as owner, stockholder, lender,
partner, co-venturer, director, officer, employee, agent or consultant) any
person, firm, corporation, association or other entity engaged in any Competing
Business;

                 (iii) arrange or facilitate the solicitation by a Competing
Business of any Significant Supplier;

                 (iv) influence or attempt to influence any supplier, customer
or potential customer of the Company to terminate or modify any written or oral
agreement or course of dealing with the Company; or

                 (v) influence or attempt to influence any Person to either (1)
terminate or modify any employment, consulting, agency, distributorship or other
arrangement with the Company, or (2) employ, or arrange to have any other Person
or entity employ, any Person who has been employed by the Company as an
employee, agent or distributor of the Company at any time during the Restricted
Period.

Notwithstanding the foregoing, Executive may provide investment banking or other
Financial Advisory Services to a Competing Business and may hold less than five
percent (5%) of the outstanding securities of any class of any publicly-traded
securities of any company.

             (b) Confidentiality. Executive recognizes and acknowledges that the
Proprietary Information is a valuable, special and unique asset of the business
of the Company. As a result, both during the Term and five (5) years thereafter,
Executive shall not, without the prior written consent of the Company, for any
reason either directly or indirectly divulge to any third-party or use for his
own benefit, or for any purpose other than the exclusive benefit of the Company,
any Proprietary Information revealed, obtained or developed in the course of his
employment by the Company. Such Proprietary Information shall include, but shall
not be limited to, the intangible personal property described in Section 5.1(c),
any information relating to business plans or studies, business procedures,
costs, finances, marketing data, methods, the identities of customers,
contractors and suppliers and prospective customers, contractors and suppliers,
the terms of contracts and agreements with customers, contractors and suppliers,
the Company's

                                      -5-
<PAGE>

relationship with actual and prospective customers, contractors and suppliers,
and the Company's course of dealing with, any such actual or prospective
customers, contractors and suppliers, personnel information, customer and vendor
credit information, and any other materials that have not been made available to
the general public, information, pricing information, marketing methods and
plans, identities of customers and suppliers, the Company's relationship with
actual or potential customers and the needs and requirements of any such actual
or potential customers, and any other confidential information relating to the
business of the Company; provided, however, that nothing herein contained shall
restrict Executive's ability to make such disclosures during the Term as may be
necessary or appropriate to the effective and efficient discharge of his duties
as an employee hereunder or as such disclosures may be required by law; and
further provided, that nothing herein contained shall restrict Executive from
divulging or using for his own benefit or for any other purpose any Proprietary
Information which is publicly available, so long as such information did not
become available to the public as a direct or indirect result of Executive's
breach of this Section 5.1(b). In the event that Executive or any of its
representatives becomes legally compelled to disclose any of the Proprietary
Information, Executive will provide the Company with prompt written notice so
that the Company may seek a protective order or other appropriate remedy.
Failure by the Company to mark any of the Proprietary Information as
confidential or proprietary shall not affect its status as Proprietary
Information under the terms of this Agreement.

             (c) Property. All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of the Company.
During the Term, Executive shall not remove from the Company's offices or
premises any documents, records, notebooks, files, correspondence, reports,
memoranda or similar materials of or containing Proprietary Information, or
other materials or property of any kind belonging to the Company unless
necessary or appropriate (as reasonably determined by Executive) in accordance
with Executive's duties and responsibilities to the Company and, in the event
that such materials or property are removed, all of the foregoing shall be
returned to their proper files or places of safekeeping as promptly as possible
after the removal shall serve its specific purpose. Executive shall not make,
retain, remove and/or distribute any copies of any of the foregoing for any
reason whatsoever except as may be necessary in the discharge of his assigned
duties and shall not divulge to any third person the nature of and/or contents
of any of the foregoing or of any other oral or written information to which he
may have access or with which for any reason he may become familiar, except as
disclosure shall be necessary or appropriate (as reasonably determined by
Executive) in the performance of his duties; and upon the termination of his
employment with the Company, he shall leave with or return to the Company all
originals and copies of the foregoing then in his possession, whether prepared
by Executive or by others.

        5.2. Rights and Remedies Upon Breach.

             (a) Specific Enforcement. Executive acknowledges that the
Restrictive Covenants are reasonable and necessary to protect the legitimate
interests of the Company and its Affiliates and that the Company would not have
entered into this Agreement in the absence of such restrictions. Executive also
acknowledges that any breach by him of the Restrictive Covenants will cause
continuing and irreparable injury to the Company for which monetary damages
would not be an adequate remedy. Executive shall not, in any action or
proceeding to enforce any of the provisions of this Agreement, assert the claim
or defense that such an adequate remedy at law exists. In the event of such
breach by Executive, the Company shall have the right to enforce the Restrictive
Covenants by seeking injunctive or other relief in any court and this Agreement
shall not in any way limit remedies of law or in equity otherwise available to
the Company. If an action at law or in equity is necessary to enforce or
interpret the

                                      -6-
<PAGE>

terms of this agreement, the prevailing party shall be entitled to recover, in
addition to any other relief, reasonable attorneys' fees, costs and
disbursements.

             (b) Extension of Restrictive Period. In the event that Executive
breaches any of the Restrictive Covenants contained in Section 5.1(a), then the
Restricted Period shall be extended for a period of time equal to the period of
time that Executive is in breach of such restriction.

             (c) Accounting. If Executive is determined by any court,
arbitrator, mediator or other adjudicative body to have breached any of the
Restrictive Covenants, the Company will have the right and remedy to require
Executive to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by Executive
as the result of any action constituting a breach of the Restrictive Covenants.
This right and remedy will be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or in equity.

        5.3. Judicial Modification. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, such court shall have the
power to modify such provision and, in its modified form, such provision shall
then be enforceable.

        5.4. Disclosure of Restrictive Covenants. Executive agrees to disclose
the existence and terms of the restrictive covenants set forth in this Section 5
to any employer that Executive may work for after the termination of Executive's
employment at the Company.

        5.5. Acknowledgments. Executive acknowledges that the Restrictive
Covenants contained in Section 5.1(a) are included herein in order to induce the
Company to employ Executive pursuant to the other terms of this Agreement.
Executive further acknowledges that the duration and geographic scope of Section
5.1(a) are reasonable given the nature of this Agreement.

        5.6. Enforceability in Jurisdictions. If a court of any jurisdiction
holds the Restrictive Covenants unenforceable by reason of their breadth or
scope or otherwise, it is the intention of the parties hereto that such
determination not bar or in any way affect the right of the Company to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of such Restrictive Covenants.

                                      -7-
<PAGE>

SECTION 6. Termination. Executive's employment hereunder may be terminated by
the Company or Executive at any time. Upon termination, Executive shall be
entitled only to such compensation and benefits as described in this Section 6.
In the event of any termination, the Company and Executive will have such rights
and remedies as may be available to either of them under this Agreement, at law,
in equity or otherwise, for any breach by the other of this Agreement.

        6.1. Termination Without Cause or For Good Reason. If Executive's
employment by the Company is terminated by the Company without Cause or by
Executive for Good Reason prior to the third anniversary of the date hereof, the
Executive shall be entitled to payment of (i) all accrued and unpaid Annual
Salary and Benefits through the date of such termination, (ii) a lump sum amount
equal to the present value of (determined by applying the highest interest rate
then in effect under any credit agreement to which the Company is a party)
twelve (12) months of his Annual Salary, and (iii) a pro-rated annual bonus
(determined by the Board in good faith, in its absolute discretion) based on the
portion of the year during which Executive was employed by the Company. All
Annual Salary and other Benefits shall cease at the time of such termination,
subject to the terms of any benefits or compensation plan then in force and
applicable to Executive, and the Company shall have no further liability or
obligation by reason of such termination; provided, however, that this paragraph
will not affect stock options granted to Executive by the Company, the terms of
which are governed by the Option Agreement.

        6.2. Any Other Termination. If Executive's employment by the Company is
terminated for any reason other than as set forth in Section 6.1, the Company's
obligation to Executive (or, in the case of Executive's death, to Executive's
estate) will be limited solely to the payment of accrued and unpaid Annual
Salary and Benefits through the date of such termination. All Annual Salary and
Benefits will cease at the time of such termination, subject to the terms of any
benefits or compensation plans then in force and applicable to Executive, and
the Company shall have no further liability or obligation hereunder by reason of
such termination; provided, however, that this paragraph will not affect stock
options granted to Executive by the Company, the terms of which are governed by
the Option Agreement.

SECTION 7. Other Agreements. Executive represents, warrants and, where
applicable, covenants to the Company that:

             (a) there are no restrictions, agreements or understandings
whatsoever to which Executive is a party which would prevent or make unlawful
Executive's execution of this Agreement or Executive's employment hereunder, or
which is or would be inconsistent or in conflict with this Agreement or
Executive's employment hereunder, or would prevent, limit or impair in any way
the performance by Executive of his obligations hereunder;

                                      -8-
<PAGE>

             (b) Executive's execution of this Agreement and Executive's
employment hereunder shall not constitute a breach of any contract, agreement or
understanding, oral or written, to which Executive is a party or by which
Executive is bound; and

             (c) Executive is free to execute this Agreement and to be employed
by the Company as an employee pursuant to the provisions set forth herein.

             (d) Executive shall disclose the existence and terms of this
Agreement to any employer that the Executive may work for during the Restricted
Period.

SECTION 8. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the Company and Executive and their respective successors,
executors, administrators, heirs and/or permitted assigns; provided, however,
that neither Executive nor the Company may make any assignments of this
Agreement or any interest herein, by operation of law or otherwise, without the
prior written consent of the other party, except that, without such consent, the
Company may assign this Agreement to any successor to all or substantially all
of its assets and business by means of liquidation, dissolution, merger,
consolidation, transfer of assets, or otherwise.

SECTION 9. Notice. Any notice or communication required or permitted under this
Agreement shall be made in writing and (a) sent by overnight courier, (b) mailed
by certified or registered mail, return receipt requested or (c) sent by
telecopier, addressed as follows:

                  If to Executive:

                           Mr. Reynolds C. Faulkner
                           c/o Kirkland's, Inc.
                           805 N. Parkway
                           P.O. Box 7222
                           Jackson, Tennessee 38308-7222
                           Fax: (901) 664-9345

                                      -9-
<PAGE>

                  If to Company:

                           Kirkland's, Inc.
                           805 N. Parkway
                           P.O. Box 7222
                           Jackson, Tennessee 38308-7222
                           Fax: (901) 664-9345
                           Attn:  Robert Alderson, Esquire

                  and to:

                           Mr. David Mussafer
                           Advent International Corporation
                           101 Federal Street
                           Boston, Massachusetts  21110
                           Fax: (617) 443-0322

                  with a copy to:

                           Julia D. Corelli, Esquire
                           Pepper Hamilton LLP
                           3000 Two Logan Square
                           18th & Arch Streets
                           Philadelphia, Pennsylvania 19103
                           Fax: (215) 981-4750

or to such other address as either party may from time to time duly specify by
notice given to the other party in the manner specified above.

SECTION 10. Entire Agreement; Amendments. This Agreement and the Option
Agreement contain the entire agreement and understanding of the parties hereto
relating to the subject matter hereof, and merges and supersedes all prior and
contemporaneous discussions, agreements and understandings of every nature
relating to the employment of Executive with the Company. This Agreement may not
be changed or modified, except by an Agreement in writing signed by each of the
parties hereto.

SECTION 11. Waiver. Any waiver by either party of any breach of any term or
condition in this Agreement shall not operate as a waiver of any other breach of
such term or condition or of any other term or condition, nor shall any failure
to enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof or constitute or be deemed a waiver or release of any
other rights, in law or in equity.

                                      -10-
<PAGE>

SECTION 12. Governing Law. This Agreement shall be governed by, and enforced in
accordance with, the laws of the State of Tennessee without regard to the
application of the principals of conflicts or choice of laws.

SECTION 13. Survival of Provisions. The provisions of this Agreement set forth
in Sections 4 through 8 and, 10 through 15 hereof shall survive the termination
of Executive's employment hereunder.

SECTION 14. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.

SECTION 15. Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.

SECTION 16. Counterparts and Facsimiles. This Agreement may be executed,
including execution by facsimile signature, in one or more counterparts, each of
which shall be deemed an original, and all of which together shall be deemed to
be one and the same instrument.

        IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officers, and Executive has executed this Agreement, on
July 15th, 1998, effective as of the date first above written.

                                            KIRKLAND'S, INC.

                                   By:      /s/ Carl Kirkland
                                            ------------------------------------

                                   Title:   Chief Executive Officer
                                            ------------------------------------

                                            EXECUTIVE

                                            /s/ Reynolds C. Faulkner
                                            ------------------------------------

                                      -11-
<PAGE>

                                KIRKLAND'S, INC.

                    REYNOLDS C. FAULKNER EMPLOYMENT AGREEMENT

                                   SCHEDULE I

                               ADDITIONAL BENEFITS

1.      Life Insurance. A life insurance policy (in addition to life insurance
benefits generally provided or available to other employees of the Company) with
a face amount of $500,000 with the beneficiary to be designated by Executive and
issued on the basis of being paid up at age 65. The policy will (a) contain a
waiver of premium in the event of disability (to the extent available at
commercially reasonable rates), and (b) permit (upon termination of employment
with the Company) the transfer of ownership of such policy to Executive, such
transfer to be with all benefits, values and other ownership rights incident
thereto at the time of such transfer, without cost to Executive, who may
thereafter continue coverage under such policy at his own cost.

2.      Relocation Expenses. Reasonable and necessary moving expenses, as
follows:

        a. Agent's commissions on sale of existing home, if any; provided,
        however, that Executive will engage in independent efforts to sell his
        existing home for a period of at least one (1) month prior to engaging
        an agent for that purpose.

        b. Attorney's fees incurred in the sale of Executive's existing home.

        c. Airfare for two (2) trips from Atlanta for Executive's wife to shop
        for a home in Tennessee.

        d. Payment of moving company fees incurred in the transport of
        Executive's personal belongings to Tennessee.

3.      Car Allowance. $600 per month.

4.      Commuting Expenses. Airfare, lodging, telephone, and other reasonable
and necessary commuting expenses incurred by Executive prior to relocating to
Tennessee; provided, however, that such commuting expenses will be paid only
through June, 1998.

5.      Legal Fees. Reasonable and necessary legal fees and costs incurred in
the review and negotiation of this contract; provided, however, that if such
fees and costs exceed $2500, Executive will receive $2500, plus one-half of the
amount of such fees and costs in excess of $2500.

                                      -12-
<PAGE>

                                KIRKLAND'S, INC.

                    REYNOLDS C. FAULKNER EMPLOYMENT AGREEMENT

                                   SCHEDULE II

                       BASIC BENEFITS AS OF FEBRUARY 1998

1.       Group health insurance (partially subsidized by the Company).

2.       401(k) plan participation, after completion of one (1) year of service.

3.       Three weeks of paid vacation annually.

                                      -13-

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