Document:

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                                                                    EXHIBIT 10.6

                              EMPLOYMENT AGREEMENT

               THIS AGREEMENT (the "Agreement"), made as of the 1st day of June,
2002, by and between KIRKLAND'S, INC., a Tennessee corporation, (the "Company"),
and ROBERT E. ALDERSON ("Executive").

               WHEREAS, Executive is an individual qualified by education and
experience to serve the Company as its Chief Executive Officer and President;
and

               WHEREAS, the Company desires to employ Executive as its Chief
Executive Officer and President 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.     "Annual Bonus" means a bonus payable pursuant to Section 3.2.

         1.2.     "Benefits" means the benefits described in Sections 3.3, 3.4
and 3.5.

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

         1.4.     "Cause" means the occurrence of any of the following material
violations, as determined in good faith by the Board: (a) 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, (b) alcohol abuse or use of controlled drugs (other than in accordance
with a physician's prescription), (c) 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, (d) 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.

         1.5.     "COBRA" means 29 U.S.C.ss.ss. 1161-1169.

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

         1.7.     "Effective Date" means the date upon which this Agreement is
entered into by the Executive and the Company.

         1.8.     "Expiration Date" means the fourth anniversary of the
Effective Date; provided, however, that if written notice not to extend the Term
by either party is not received at least 90 days prior to the fourth anniversary
of the Effective Date (or any subsequent anniversary

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of the Effective Date, if this Agreement is extended pursuant to this Section
1.8), then the Expiration Date will be automatically extended to the next
anniversary of the Effective Date.

         1.9.     "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;

                  (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 $250,000 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; and

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

Provided, however, that the foregoing events or conditions will constitute "Good
Reason" hereunder only if the Executive provides the Company with written
objection to the event or condition within 60 days following the occurrence
thereof, the Company does not reverse or otherwise cure the event or condition
within 30 days of receiving that written objection and the Executive resigns his
employment within 90 days following the expiration of that cure period.

         1.10.    "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

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which have been or are developed or created in whole or in part by Executive:
(i) at any time and at any place while Executive is employed by the Company and
which are related to or used in connection with the business of the Company, or
(ii) as a result of tasks assigned to Executive by the Company.

         1.11.    "Proprietary Information" means confidential, proprietary,
business and technical information or trade secrets of the Company or of any
subsidiary or affiliate of the Company. Such Proprietary Information shall
include, but shall not be limited to, the following items and information
relating to the following items: (a) computer codes or instructions (including
source and object code listings, program logic algorithms, subroutines, modules
or other subparts of computer programs and related documentation, including
program notation), computer processing systems and techniques, all computer
inputs and outputs (regardless of the media on which stored or located),
hardware and software configurations, designs, architecture and interfaces, (b)
business research, studies, procedures and costs, (c) financial data, (d)
distribution methods, (e) marketing data, methods, plans and efforts, (f) the
identities of the Company's relationship(s) with actual and prospective
customers, contractors and suppliers, (g) the terms of contracts and agreements
with customers, contractors and suppliers, (h) the needs and requirements of,
and the Company's course of dealing with, actual or prospective customers,
contractors and suppliers, (i) personnel information, (j) customer and vendor
credit information, and (k) any Intellectual Property of the Company (whether
developed by Executive or others). 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.

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

         1.13.    "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.

         1.14.    "Term" means the period beginning on the date hereof and
ending on (i) the Expiration Date, or (ii) the date that Executive's employment
by the Company is terminated for any reason.

         1.15.    "Total After-Tax Payments" means the total of all "parachute
payments" (as that term is defined in Section 280G(b)(2) of the Internal Revenue
Code) made to or for the benefit of Executive (whether made hereunder or
otherwise), after reduction for all applicable federal taxes (including, without
limitation, the tax described in Section 4999 of the Internal Revenue Code).

SECTION 2. Duration of Agreement; Duties. Executive will be employed as the
Company's Chief Executive 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 Board 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

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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
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, provided,
however, that Executive may, at his discretion, serve as a director of
charitable, community and other not-for-profit entities, subject to Executive's
duty to inform the Company of his assumption of any such directorship.

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 $300,000 (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 and all other
payments made by the Company to Executive will be inclusive of all applicable
income, social security and other taxes and charges which are required by law to
be withheld by the Company, which taxes and other charges will be withheld and
paid in accordance with the Company's normal payroll practices from time to time
in effect. The Annual Salary will be reviewed on an annual basis by the
Compensation Committee of the Board and may be increased from time to time with
the approval of the Board; provided, however, that the Annual Salary will be
increased by not less than five percent (5%) as of the first day of each fiscal
year of the Company.

         3.2.     Annual Bonus.

                  (a)      With respect to each fiscal year of the Company
ending during the Term, Executive will be eligible to receive an Annual Bonus of
up to 100% of his Annual Salary if he meets or exceeds specified personal
performance goals and/or the Company meets or exceeds specified corporate
performance goals. Such personal and corporate performance goals will be
established each year by the Compensation Committee of the Board and
communicated to Executive prior to the end of the first quarter of the
applicable fiscal year.

                  (b)      The Compensation Committee of the Board, in its sole
discretion, will determine whether and to what extent the personal and corporate
performance goals have been achieved in any fiscal year and will compute the
amount of any Annual Bonus payable with respect to that fiscal year. From time
to time, the Compensation Committee of the Board may make adjustments to those
personal or corporate performance goals so that required departures from the
Company's operating budget, changes in accounting principles, acquisitions,
dispositions, mergers, consolidations and other corporate transactions, and
other factors influencing the achievement or calculation of those targets do not
affect the operation of this Section 3.2 in a manner inconsistent with the
achievement of its intended purposes.

                  (c)      Payment Timing. Any amount payable pursuant to this
Section 3.2 will be paid within 21 days following the Board's approval of the
Company's audited financial statements for the relevant fiscal year.

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         3.3.     Benefits. 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), as well
as the benefits described below in Sections 3.4 and 3.5.

         3.4.     Life Insurance. The Company will provide Executive with 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, which will be 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.

         3.5.     Automobile Allowance. Executive will receive a monthly
allowance of $600 to be applied against automobile leasing, insurance and
operating expenses.

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

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

         5.1.     Restrictive Covenants. These Restrictive Covenants will
survive the expiration of this Agreement or the termination of Executive's
employment and will apply without regard to whether any such termination is
initiated by the Company or Executive, and without regard to the reason for that
termination.

                  (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

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                           (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, consultant, agent or distributor of the Company at
any time during the Restricted Period.

Notwithstanding the foregoing, Executive 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; 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.

                  (c)      Property of the Company. 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.     Acknowledgements. Executive acknowledges that the Restrictive
Covenants are reasonable and necessary to protect the legitimate interests of
the Company and its affiliates and that the duration and geographic scope of the
Restrictive Covenants are reasonable

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given the nature of this Agreement and the position Executive will hold within
the Company. Executive further acknowledges that the Restrictive Covenants are
included herein in order to induce the Company to compensate Executive pursuant
to this Agreement and that the Company would not have entered into this
Agreement or otherwise continued to employ Executive in the absence of the
Restrictive Covenants.

         5.3.     Rights and Remedies Upon Breach.

                  (a)      Specific Enforcement. Executive 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 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.

         5.4.     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.

         5.5.     Disclosure of Restrictive Covenants. Executive agrees to
disclose the existence and terms of the Restrictive Covenants to any employer
that Executive may work for during the Restricted Period.

         5.6.     Restrictions Enforceable in All 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.

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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.

         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, the Executive shall be entitled to:

                  (a)      payment of all accrued and unpaid Annual Salary and
Benefits through the date of such termination (including any earned but unpaid
Annual Bonus for a fiscal year ending prior to such termination);

                  (b)      payment of monthly severance payments equal to
one-twelfth of Executive's Annual Salary for a period of twenty-four (24)
months, or, at the discretion of the Board, a single sum payment equal to the
discounted present value of such monthly payments (discounted at the highest
interest rate in effect under any credit agreement to which the Company is then
a party); and

                  (c)      continuation of group health benefits for Executive
until the earlier of (i) the end of the COBRA continuation coverage period due
to Executive having other group health coverage or the Company ceasing to
maintain group health coverage or (ii) twenty-four (24) months following
termination, provided that if the continuation of group health benefits extends
beyond the COBRA continuation coverage period applicable to the Executive, the
provision of coverage beyond such period shall be subject to the Company's
insurance carrier agreeing to provide such coverage at a cost not in excess of
125% of the cost of providing such coverage to employees as of any date
following the expiration of the Executive's COBRA continuation coverage period.
The continuation of group health benefits provided hereby will be in lieu of any
benefits otherwise available to Executive pursuant to COBRA.

The severance benefits described in this Section 6.1 will be paid in lieu of and
not in addition to any other severance arrangement maintained by the Company.
Notwithstanding the foregoing, no amount will be paid under this Section 6.1
unless Executive executes and delivers to the Company a release substantially
identical to that attached hereto as Exhibit I in a manner consistent with the
requirements of the Older Workers Benefit Protection Act.

         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
(including, but not limited to, termination (a) by the Company for Cause, (b) as
a result of Executive's death, (c) as a result of Executive's disability or (d)
by Executive without Good Reason), 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, except as otherwise provided in this
Section 6.2 or pursuant to COBRA, the Company shall have no further liability or
obligation hereunder by reason of such termination.

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         6.3.     Adjustments to Maximize Payments to Executive. Payments under
this Agreement will be made without regard to whether the deductibility of such
payments (or any other payments) would be limited or precluded by Section 280G
of the Internal Revenue Code and without regard to whether such payments would
subject the Executive to the federal excise tax levied on certain "excess
parachute payments" under Section 4999 of the Code; provided, however, that if
the Total After-Tax Payments would be increased by the limitation or elimination
of any amount payable to Executive (whether under this Agreement of otherwise),
then the amount payable to Executive will be reduced to the extent necessary to
maximize the Total After-Tax Payments. The determination of whether and to what
extent payments to Executive are required to be reduced in accordance with the
preceding sentence will be made at the Company's expense by an independent,
certified public accountant selected by the Company and reasonably acceptable to
Executive. In the event of any underpayment or overpayment to Executive (as
determined after the application of this Section 6.3), the amount of such
underpayment or overpayment will be immediately paid by the Company to the
Executive or refunded by the Executive to the Company, as the case may be, with
interest at the applicable federal rate provided for in Section 7872(f)(2) of
the Internal Revenue Code.

SECTION 7. Miscellaneous.

         7.1.     Other Agreements. Executive represents and warrants to the
Company that there are no restrictions, agreements or understandings whatsoever
to which he is party (or by which he is otherwise bound) that would prevent or
make unlawful his execution of this Agreement or employment by the Company, or
that would in any way prohibit, limit or impair (or purport to prohibit, limit
or impair) his provision of services to the Company.

         7.2.     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 (in the case of the Company)
permitted assigns. The Company may, without the consent of Executive, 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. Executive may not make any assignment of this Agreement
or any interest therein.

         7.3.     Notice. Any notice or communication required or permitted
under this Agreement will be made in writing and (a) sent by overnight courier,
(b) mailed by certified or registered mail, return receipt requested or (c) sent
via facsimile. Any notice or communication to Executive will be sent to his most
current home address on file with the Company. Any notice or communication to
the Company will be sent to the Company's principal executive office, care of
the Company's General Counsel, with a copy to Robert A. Friedel, Esq., Pepper
Hamilton LLP, 3000 Two Logan Square, 18th & Arch Streets, Philadelphia,
Pennsylvania 19103 (or via facsimile to (215) 981-4750).

         7.4.     Entire Agreement; Amendments. This Agreement contains the
entire agreement and understanding of the parties hereto relating to the subject
matter hereof, and supersedes the Employment Agreement between the Company and
Executive dated June 12, 1996 and all other prior or contemporaneous
discussions, agreements and understandings of

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every nature relating to the employment of Executive by the Company. This
Agreement may not be changed or modified, except by an Agreement in writing
signed by each of the parties hereto.

         7.5.     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.

         7.6.     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 principles of conflicts or choice of laws.

         7.7.     Survival of Provisions. The provisions of this Agreement set
forth in Sections 5 and 7 (including any pertinent definitions) will survive the
termination or expiration of this Agreement.

         7.8.     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.

         7.9.     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.

         7.10.    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 June 1, 2002, effective as of the date first above written.

                                             KIRKLAND'S, INC.

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

                                    Title:  Chairman

                                             EXECUTIVE

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

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                                    Exhibit I

                     Release and Non-Disparagement Agreement

                  THIS MUTUAL RELEASE AND NON-DISPARAGEMENT AGREEMENT (the
"Release") is made as of the ___ day of _______, _____ by and between
__________________________ ("Executive") and KIRKLAND'S, INC. (the "Company").

                  WHEREAS, Executive's employment by the Company will terminate;
and

                  WHEREAS, in connection with that termination and pursuant to
Section 6.1 of the Employment Agreement by and between the Company and Executive
dated June 1, 2002 (the "Employment Agreement"), the Company has agreed to pay
Executive certain amounts, subject to the execution 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.        Resignation. Executive hereby resigns as the Company's
__________________ _______________, as an employee of the Company, as a director
of the Company and as an employee, officer, director or board committee member
of any subsidiary or affiliate of the Company, effective as of the date of this
Release.

SECTION 2.        Acknowledgements. Executive acknowledges that: (i) the
payments described in Section 6.1 of the Employment Agreement constitute full
settlement of all his rights under the Employment Agreement, (ii) he has no
entitlement under any other severance or similar arrangement maintained by the
Company, and (iii) except as otherwise provided specifically in this Release,
the Company does not and will not have any other liability or obligation to him.
Executive further acknowledges that, in the absence of his execution of this
Release, he would not otherwise be entitled to the payments described in Section
6.1 of the Employment Agreement.

SECTION 3.        Mutual Release and Covenant Not to Sue.

                  3.1.     Mutual Release. The Company (including for purposes
of this Section 3, its parents, affiliates and subsidiaries) hereby fully and
forever releases and discharges Executive (and his heirs, executors and
administrators), and Executive hereby fully and forever releases and discharges
Company (including, for purposes of this Section 3, all predecessors and
successors, subsidiaries, affiliates, assigns, officers, directors, trustees,
employees, agents and attorneys, past and present) from any and all claims,
demands, liens, agreements, contracts, covenants, actions, suits, causes of
action, obligations, controversies, debts, costs, expenses, damages, judgments,
orders and liabilities, of whatever kind or nature, direct or indirect, in law,
equity or otherwise, whether known or unknown, arising through the date of this
Release, out of Executive's employment by the Company or the termination
thereof, including, but not limited to, any claims for relief or causes of
action under the Age Discrimination in Employment Act, 29 U.S.C. ss. 621 et
seq., or any other federal, state or local statute, ordinance or regulation
regarding discrimination in employment and any claims, demands or actions based
upon alleged wrongful or retaliatory discharge or breach of contract under any
state or federal law.

                                      I-1
<PAGE>

                  3.2.     Covenant Not to Sue. Executive expressly represents
that he has not filed a lawsuit or initiated any other administrative proceeding
against the Company and that he has not assigned any claim against the Company
to any other person or entity. The Company expressly represents that it has not
filed a lawsuit or initiated any other administrative proceeding against
Executive and that it has not assigned any claim against Executive to any other
person or entity. Both Executive and Company further promise not to initiate a
lawsuit or to bring any other claim against the other arising out of or in any
way related to Executive's employment by the Company or the termination of that
employment. This Release will not prevent Executive from filing a charge with
the Equal Employment Opportunity Commission (or similar state agency) or
participating in any investigation conducted by the Equal Employment Opportunity
Commission (or similar state agency); provided, however, that any claims by
Executive for personal relief in connection with such a charge or investigation
(such as reinstatement or monetary damages) will be barred.

                  3.3.     Claims Not Released. The forgoing will not be deemed
to release the Company or Executive from claims solely (a) to enforce this
Release, (b) to enforce Section 6.1 of the Employment Agreement, (c) to enforce
Section 5 of the Employment Agreement, or (c) for indemnification under the
Company's By-Laws, under applicable law, under any indemnification agreement
between the Company and Executive or under any similar arrangement.

SECTION 4.        Non-Competition and Confidentiality Obligations. Executive
acknowledges that Section 5 of the Employment Agreement survives the termination
of his employment. Executive affirms that the restrictions contained in Section
5 of the Employment Agreement are reasonable and necessary to protect the
legitimate interests of the Company, that he received adequate consideration in
exchange for agreeing to those restrictions, and that he will abide by those
restrictions.

SECTION 5.        Non-Disparagement. The Company will not disparage Executive or
Executive's performance or otherwise take any action which could reasonably be
expected to adversely affect Executive's personal or professional reputation.
Similarly, Executive will not disparage Company or any of its directors,
officers, agents or employees or otherwise take any action which could
reasonably be expected to adversely affect the personal or professional
reputation of Company or any of its directors, officers, agents or employees.

SECTION 6.        Cooperation. Executive further agrees that he will cooperate
fully with the Company and its counsel with respect to any matter (including
litigation, investigations, or governmental proceedings) which relates to
matters with which Executive was involved during his employment with Company.
Executive shall render such cooperation in a timely manner on reasonable notice
from the Company.

SECTION 7.        Rescission Right. Executive expressly acknowledges and recites
that (a) he has read and understands this Release in its entirety, (b) he has
entered into this Release knowingly and voluntarily, without any duress or
coercion; (c) he has been advised orally and is hereby advised in writing to
consult with an attorney with respect to this Release before signing it; (d) he
was provided twenty-one (21) calendar days after receipt of the Release to
consider its terms before signing it; and (e) he is provided seven (7) calendar
days from the date of signing to

                                      I-2
<PAGE>

terminate and revoke this Release in which case this Release shall be
unenforceable, null and void. Executive may revoke this Release during those
seven (7) days by providing written notice of revocation to the Company.

SECTION 8.        Challenge. If Executive violates or challenges the
enforceability of this Release, no further payments under Section 6.1 of the
Employment Agreement will be paid or provided to Executive.

SECTION 9.        Miscellaneous.

                  9.1.     No Admission of Liability. This Release is not to be
construed as an admission of any violation of any federal, state or local
statute, ordinance or regulation or of any duty owed by the Company to
Executive. There have been no such violations, and the Company specifically
denies any such violations.

                  9.2.     No Reinstatement. Executive agrees that he will not
apply for reinstatement with the Company or seek in any way to be reinstated,
re-employed or hired by the Company in the future.

                  9.3.     Successors and Assigns. This Release will inure to
the benefit of and be binding upon the Company and Executive and their
respective successors, executors, administrators, heirs and (in the case of the
Company) permitted assigns. The Company may assign this Release 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. Executive
may not make any assignment of this Release or any interest herein.

                  9.4.     Severability. The provisions of this Release are
severable. If any provision or the scope of any provision is found to be
unenforceable or is modified by a court of competent jurisdiction, the other
provisions or the affected provisions as so modified shall remain fully valid
and enforceable.

                  9.5.     Entire Agreement; Amendments. Except as otherwise
provided herein, this Release 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 relating subject matter hereof. This Release may
not be changed or modified, except by an agreement in writing signed by each of
the parties hereto.

                  9.6.     Governing Law. This Release shall be governed by, and
enforced in accordance with, the laws of the State of Tennessee, without regard
to the application of the principles of conflicts of laws.

                  9.7.     Counterparts and Facsimiles. This Release 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.

                                      I-3
<PAGE>

IN WITNESS WHEREOF, the Company has caused this Release to be executed by its
duly authorized officer, and Executive has executed this Release, in each case
as of the date first above written.

                                        KIRKLAND'S, INC.

                                        By:
                                                 -------------------------------

                                        Title:
                                                 -------------------------------

                                        EXECUTIVE

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

                                      I-4<PAGE>
                                                                   EXHIBIT 10.11

                                KIRKLAND'S, INC.
                           2002 EQUITY INCENTIVE PLAN

1. PURPOSE; DEFINITIONS.

      The purpose of the Kirkland's, Inc. 2002 Equity Incentive Plan (the
"Plan") are to (a) enable Kirkland's, Inc. (the "Company") and its affiliated
companies to recruit and retain highly qualified employees, directors and
consultants; (b) provide those employees, directors and consultants with an
incentive for productivity; and (c) provide those employees, directors and
consultants with an opportunity to share in the growth and value of the Company.

      For purposes of the Plan, the following initially capitalized words and
phrases have the meanings defined below, unless the context clearly requires a
different meaning:

      (a) "Award" means a grant of Options, SARs or Restricted Shares pursuant
to the provisions of this Plan.

      (b) "Award Agreement" means, with respect to any particular Award, the
written document that sets forth the terms of that particular Award.

      (c) "Board" means the Board of Directors of the Company, as constituted
from time to time; provided, however, that if the Board appoints a Committee to
perform some or all of the Board's administrative functions hereunder pursuant
to Section 2, references in this Plan to the "Board" will be deemed to also
refer to that Committee in connection with administrative matters to be
performed by that Committee.

      (d) "Cause" exists when a Participant (as determined by the Board, in its
sole discretion):

            (i) engages in any type of disloyalty to the Company, including
without limitation, fraud, embezzlement, theft, or dishonesty in the course of
his employment or engagement, or otherwise breaches any fiduciary duty owed to
the Company;

            (ii) is convicted of a felony or a misdemeanor involving moral
turpitude;

            (iii) enters a plea of guilty or nolo contendere to a felony or a
misdemeanor involving moral turpitude.

            (iv) discloses any proprietary information belonging to the Company
without the consent of the Company; or

            (v) breaches any agreement with or duty to the Company.

However, notwithstanding the foregoing, if an Participant is bound by the terms
of an employment agreement with the Company or any Subsidiary that includes a
definition of "cause," the determination of whether that Participant has been
terminated for "Cause" will be made in accordance with that employment
agreement.
<PAGE>
      (e) "Change in Control" means (i) the sale, transfer, assignment or other
disposition (including by merger or consolidation) by shareholders of the
Company, in one transaction or a series of related transactions, of more than
50% of the voting power represented by the then outstanding capital stock of the
Company to one or more persons, (ii) the sale of substantially all the assets of
the Company, or (iii) the liquidation or dissolution of the Company.

      (f) "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.

      (g) "Committee" means a committee appointed by the Board in accordance
with Section 2 of this Plan.

      (h) "Director" means a member of the Board.

      (i) "Disability" means a condition rendering a Participant Disabled.

      (j) "Disabled" means, with respect to any Participant (i) entitled to
benefits under a long-term disability policy or program of the Company, or (ii)
if the Participant is not covered by any such policy or program, when the
Participant is prevented by a physical or mental impairment from engaging in any
substantial, gainful activity for a period of at least six (6) months, as
determined by the Board, in its sole and absolute discretion; provided, however,
notwithstanding the foregoing, if an Participant is bound by the terms of an
employment agreement with the Company or any Subsidiary that includes a
definition of "disabled" or disability," the determination of whether that
Participant is "Disabled" for purposes of this Plan will be made in accordance
with that employment agreement.

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

      (l) "Fair Market Value" means, as of any date: (i) the closing price of
the Shares as reported on the principal nationally recognized stock exchange on
which the Shares are traded on such date, or if no Share prices are reported on
such date, the closing price of the Shares on the last preceding date on which
there were reported Share prices; or (ii) if the Shares are not listed or
admitted to unlisted trading privileges on a nationally recognized stock
exchange, the closing price of the Shares as reported by The Nasdaq Stock Market
on such date, or if no Share prices are reported on such date, the closing price
of the Shares on the last preceding date on which there were reported Share
prices; or (iii) if the Shares are 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 will be determined by the Board acting in
its discretion, which determination will be conclusive.

      (m) "Incentive Stock Option" means any Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.

      (n) "Non-Employee Director" will have the meaning set forth in Rule
16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and Exchange
Commission; provided, however, that the Board may, to the extent necessary to
comply with Section 162(m) of the Code or

                                      -2-
<PAGE>
regulations thereunder, require each "Non-Employee Director" to also be an
"outside director," as that term is defined in regulations under Section 162(m)
of the Code.

      (o) "Non-Qualified Stock Option" means any Option that is not an Incentive
Stock Option.

      (p) "Option" means any option to purchase Shares (including Restricted
Shares, if the Board so determines) granted pursuant to Section 5 hereof.

      (q) "Participant" means an employee, consultant or director of the Company
or a Subsidiary to whom an Award is granted.

      (r) "Restricted Shares" means Shares that are subject to restrictions
pursuant to Section 8 hereof.

      (s) "SAR" means a share appreciation right granted under the Plan and
described in Section 6 hereof.

      (t) "Share" means a share of common stock, no par value, of the Company,
subject to substitution or adjustment as provided in Section 3(c) hereof.

      (u) "Subsidiary" means, in respect of the Company, a subsidiary company,
whether now or hereafter existing, as defined in Sections 424(f) and (g) of the
Code.

2. ADMINISTRATION.

      The Plan will be administered by the Board; provided, however, that the
Board may at any time appoint a Committee to perform some or all of the Board's
administrative functions hereunder; and provided further, that the authority of
any Committee appointed pursuant to this Section 2 will be subject to such terms
and conditions as the Board may prescribe and will be coextensive with, and not
in lieu of, the authority of the Board hereunder.

      Any Committee established under this Section 2 will be composed of not
fewer than two members, each of whom will serve for such period of time as the
Board determines; provided, however, that if the Company has a class of
securities required to be registered under Section 12 of the Exchange Act, all
members of any Committee established pursuant to this Section 2 will be
Non-Employee Directors. From time to time the Board may increase the size of the
Committee and appoint additional members thereto, remove members (with or
without cause) and appoint new members in substitution therefore, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.

      Members of the Board who are eligible for Awards or have received Awards
may vote on any matters affecting the administration of the Plan or the grant of
Awards, except that no such member will act upon the grant of an Award to
himself or herself, but any such member may be counted in determining the
existence of a quorum at any meeting of the Board or Committee during which
action is taken with respect to the grant of Awards to himself or herself.

                                      -3-
<PAGE>
      The Board will have full authority to grant Awards under this Plan. In
particular, the Board will have the authority:

      (a) to select the persons to whom Awards may from time to time be granted
hereunder (consistent with the eligibility conditions set forth in Section 4);

      (b) to determine the type of Award to be granted hereunder;

      (c) to determine the number of Shares, if any, to be covered by each such
Award;

      (d) to establish the terms of each Award Agreement;

      (e) to determine whether and under what circumstances an Option may be
exercised without a payment of cash under Section 5(f); and

      (f) to determine whether, to what extent and under what circumstances
Shares and other amounts payable with respect to an Award may be deferred either
automatically or at the election of the Participant.

      The Board will have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it, from
time to time, deems advisable; to interpret the terms and provisions of the Plan
and any Award Agreement; to amend the terms of any Award Agreement, provided
that the Participant consents to such amendment or that such amendment does not
have a material adverse effect on the Participant; and to otherwise supervise
the administration of the Plan. The Board may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any Award in the
manner and to the extent it deems necessary to carry out the intent of the Plan.

      All decisions made by the Board pursuant to the provisions of the Plan
will be final and binding on all persons, including the Company and
Participants. No member of the Board will be liable for any good faith
determination, act or omission in connection with the Plan or any Award.

3. SHARES SUBJECT TO THE PLAN.

      (a) Shares Subject to the Plan. The Shares to be subject or related to
awards under the Plan will be authorized and unissued Shares of the Company,
whether or not previously issued and subsequently acquired by the Company. The
maximum number of Shares that may be the subject of awards under the Plan is
2,500,000 and the Company will reserve for the purposes of the Plan such number
of Shares. No Participant will receive Options or SARs with respect to more than
500,000 Shares in any calendar year.

      (b) Effect of the Expiration or Termination of Awards. If and to the
extent that an Award expires, terminates or is canceled or forfeited for any
reason without having been exercised in full, the Shares associated with the
expired, terminated, canceled or forfeited portion of the Award will again
become available for grant under the Plan. If any Share is received in
satisfaction of the exercise price payable upon exercise of an Option, or if any
Share is withheld

                                      -4-
<PAGE>
pursuant to Section 11(d) in settlement of a tax obligation associated with an
Award, that Share will become available for grant under the Plan.

      (c) Other Adjustment. In the event of any merger, reorganization,
consolidation, recapitalization, stock distribution or dividend, stock split or
combination, or other similar event or transaction affecting the Shares,
substitutions or adjustments may be made by the Board, in its sole and absolute
discretion, to the aggregate number, type and issuer of the securities reserved
for issuance under the Plan, to the limit on the number of shares that may be
subject to Options or SARs granted to a single Participant in any calendar year,
and to the number, type, issuer and price of securities subject to outstanding
Awards.

      (d) Change Control. Notwithstanding anything to the contrary set forth in
this Plan, upon or in anticipation of any Change in Control, the Board may, in
its sole and absolute discretion and without the need for the consent of any
Participant, take one or more of the following actions contingent upon the
occurrence of that Change in Control: (i) cause all outstanding Options and SARs
to become fully vested and immediately exercisable; (ii) cause all outstanding
Restricted Shares to become non-forfeitable; (iii) cancel any Option in exchange
for an option to purchase common stock of any successor corporation, which new
option satisfies the requirements of Treas. Reg. ss. 1.425-1(a)(4)(i) (without
regard to whether the original Option was intended to be an Incentive Stock
Option), (iv) cancel any Restricted Shares in exchange for a restricted shares
of the common stock of any successor corporation, (v) redeem any Restricted
Share for cash and/or other substitute consideration with a value equal to the
Fair Market Value of an unrestricted Share on the date of the Change in Control,
and/or (vi) cancel any Option or SAR in exchange for cash and/or other
substitute consideration with a value equal to the (A) the number of Shares
subject to that Option or SAR, multiplied by (B) the difference between the Fair
Market Value per Share on the date of the Change in Control and the exercise
price of that Option or SAR.

4. ELIGIBILITY.

      Employees, directors, consultants, and other individuals who provide
services to the Company or its Subsidiaries are eligible to be granted Awards.
Persons who are not employees of the Company or a Subsidiary are eligible to be
granted Awards, but are not eligible to be granted Incentive Stock Options.

5. OPTIONS.

      Options may be either: (i) Incentive Stock Options or (ii) Non-Qualified
Stock Options. The Award Agreement evidencing any Option will incorporate the
following terms and conditions and may contain such additional terms and
conditions (not inconsistent with the terms of this Plan) as the Board deems
appropriate, in its sole discretion:

      (a) Option Price. The exercise price per Share purchasable under a
Non-Qualified Stock Option will be determined by the Board. The exercise price
per Share purchasable under an Incentive Stock Option will not be less than 100%
of the Fair Market Value of one Share on the date of the grant. However, any
Incentive Stock Option granted to any Participant who, at the time the Option is
granted, owns more than 10% of the voting power of all classes of shares

                                      -5-
<PAGE>
of the Company or of a Subsidiary will have an exercise price per Share of not
less than 110% of Fair Market Value of one Share on the date of the grant.

      (b) Option Term. The term of each Option will be fixed by the Board, but
no Option will be exercisable more than ten (10) years after the date the Option
is granted. However, any Incentive Stock Option granted to any Participant who,
at the time such Option is granted, owns more than 10% of the voting power of
all classes of shares of the Company or of a Subsidiary may not have a term of
more than five (5) years. No Option may be exercised by any person after
expiration of the term of the Option.

      (c) Method of Exercise. Subject to the terms of the applicable Award
Agreement and the termination provisions set forth in Section 7, Options may be
exercised in whole or in part at any time and from time to time during the term
of the Option, by giving written notice of exercise to the Company specifying
the number of Shares to be purchased. Such notice will be accompanied by payment
in full of the purchase price, either by certified or bank check, or such other
means as the Board may accept. As determined by the Board, in its sole
discretion, at or after grant, payment in full or in part of the exercise price
of an Option may be made in the form of previously acquired Shares based on the
Fair Market Value of the Shares on the date the Option is exercised.

      No Shares will be issued upon exercise of an Option until full payment
therefore has been made. A Participant will not have the right to distributions
or dividends or any other rights of a shareholder with respect to Shares subject
to the Option until the Participant has given written notice of exercise, has
paid in full for such Shares, and, if requested, has given the representation
described in Section 11(a) hereof.

      (d) Incentive Stock Option Limitations. In the case of an Incentive Stock
Option, the aggregate Fair Market Value (determined as of the time of grant) of
the Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year under the Plan and/or any
other plan of the Company or any Subsidiary will not exceed $100,000. For
purposes of applying the foregoing limitation, Incentive Stock Options will be
taken into account in the chronological order in which they were granted. Any
Option not meeting such limitation will be treated for all purposes as a
Non-Qualified Stock Option.

      (e) Termination of Employment. Unless otherwise specified in the
applicable Award Agreement, Options will be subject to the terms of Section 7
with respect to exercise following termination of employment.

      (f) Transferability of Options. Except as may otherwise be specifically
determined by the Board with respect to a particular Option, no Option will be
transferable by the Participant other than by will or by the laws of descent and
distribution, and all Options will be exercisable, during the Participant's
lifetime, only by the Participant or, in the event of his Disability, by his
personal representative.

6. STOCK APPRECIATION RIGHTS.

      (a) Grant. The grant of an SAR provides the holder the right to receive
the appreciation in value of Shares between the date of grant and the date of
exercise. SARs may be

                                      -6-
<PAGE>
granted alone ("Stand-Alone SARs") or in conjunction with all or part of any
Option ("Tandem SARs"). In the case of a Non-Qualified Stock Option, a Tandem
SAR may be granted either at or after the time of the grant of such Option. In
the case of an Incentive Stock Option, a Tandem SAR may be granted only at the
time of the grant of such Option.

      (b) Exercise.

            (i) Tandem SARs. A Tandem SAR or applicable portion thereof will
terminate and no longer be exercisable upon the termination or exercise of the
related Option or portion thereof, except that, unless otherwise determined by
the Board, in its sole discretion at the time of grant, a Tandem SAR granted
with respect to less than the full number of Shares covered by a related Option
will be reduced only after such related Option is exercised or otherwise
terminated with respect to the number of Shares not covered by the Tandem SAR.

            A Tandem SAR may be exercised by a Participant by surrendering the
applicable portion of the related Option, only at such time or times and to the
extent that the Option to which such Tandem SAR relates will be exercisable in
accordance with the provisions of Section 5 and this Section 6. Options which
have been so surrendered, in whole or in part, will no longer be exercisable to
the extent the related Tandem SARs have been exercised.

            Upon the exercise of a Tandem SAR, a Participant will be entitled to
receive, upon surrender to the Company of all (or a portion) of an Option in
exchange for cash and/or Shares, an amount equal to the excess of (A) the Fair
Market Value, as of the date such Option (or such portion thereof) is
surrendered, of the Shares covered by such Option (or such portion thereof) over
(B) the aggregate exercise price of such Option (or such portion thereof).

            Upon the exercise of a Tandem SAR, the Option or part thereof to
which such Tandem SAR is related, will be deemed to have been exercised for the
purpose of the limitation set forth in Section 3 of the Plan on the number of
Shares to be issued under the Plan, but only to the extent of the number of
Shares issued under the Tandem SAR at the time of exercise based on the value of
the Tandem SAR at such time.

            A Tandem SAR may be exercised only if and when the Fair Market Value
of the Shares subject to the Option exceeds the exercise price of such Option.

            (ii) Stand-Alone SARs. A Stand-Alone SAR may be exercised by a
Participant giving notice of intent to exercise to the Company, provided that
all or a portion of such Stand-Alone SAR will have become vested and exercisable
as of the date of exercise.

            Upon the exercise of a Stand-Alone SAR, a Participant will be
entitled to receive, in either cash and/or Shares, an amount equal to the
excess, if any, of (A) the Fair Market Value, as of the date such SAR (or
portion of such SAR) is exercised, of the Shares covered by such SAR (or portion
of such SAR) over (B) the Fair Market Value of the Shares covered by such SAR
(or a portion of such SAR) as of the date such SAR (or a portion of such SAR)
was granted.

      (c) Terms and Conditions. The Award Agreement evidencing any SAR will
incorporate the following terms and conditions and will contain such additional
terms and

                                      -7-
<PAGE>
conditions, not inconsistent with the terms of the Plan, as the Board deems
appropriate in its sole and absolute discretion:

            (i) Term of SAR. Unless otherwise specified in the Award Agreement,
the term of a Tandem SAR will be identical to the term of the associated Option,
and the term of a Stand-Alone SAR will be ten (10) years.

            (ii) Exercisability. SARs will vest and become exercisable at such
time or times and subject to such terms and conditions as will be determined by
the Board at the time of grant; provided that, unless otherwise specified in the
Award Agreement, a Tandem SAR will vest and become exercisable in the same
manner and at the same time as the associated Option.

            (iii) Termination of Employment. Unless otherwise specified in the
Award Agreement, SARs will be subject to the terms of Section 7 with respect to
exercise upon termination of employment.

7. TERMINATION OF SERVICE.

      Unless otherwise specified with respect to a particular Award, Options or
SARs granted hereunder will remain exercisable after termination of employment
only to the extent specified in this Section 7.

      (a) Termination by Reason of Death. If a Participant's service with the
Company or any Subsidiary terminates by reason of death, any Option or SAR held
by such Participant may thereafter be exercised, to the extent then exercisable
or on such accelerated basis as the Board may determine, at or after grant, by
the legal representative of the estate or by the legatee of the Participant
under the will of the Participant, for a period expiring (i) at such time as may
be specified by the Board at or after the time of grant, or (ii) if not
specified by the Board, then one (1) year from the date of death, or (iii) if
sooner than the applicable period specified under (i) or (ii) above, then upon
the expiration of the stated term of such Option or SAR.

      (b) Termination by Reason of Disability. If a Participant's service with
the Company or any Subsidiary terminates by reason of Disability, any Option or
SAR held by such Participant may thereafter be exercised by the Participant or
his personal representative, to the extent it was exercisable at the time of
termination, or on such accelerated basis as the Board may determine at or after
grant, for a period expiring (i) at such time as may be specified by the Board
at or after the time of grant, or (ii) if not specified by the Board, then one
(1) year from the date of termination of service, or (iii) if sooner than the
applicable period specified under (i) or (ii) above, then upon the expiration of
the stated term of such Option or SAR.

      (c) Cause. If a Participant's service is terminated for Cause: (i) any
Option or SAR not already exercised will be immediately and automatically
forfeited as of the date of such termination, and (ii) any Shares for which the
Company has not yet delivered share certificates will be immediately and
automatically forfeited and the Company will refund to the Participant the
Option exercise price paid for such Shares, if any.

      (d) Other Termination. If a Participant's service with the Company or any
Subsidiary terminates for any reason other than death, Disability, or Cause, any
Option or SAR held by such

                                      -8-
<PAGE>
Participant may thereafter be exercised by the Participant, to the extent it was
exercisable at the time of such termination or on such accelerated basis as the
Board may determine at or after the time of grant, for a period expiring at such
time as may be specified by the Board at or after the time of grant, but in no
event later than the expiration of the stated term of such Option or SAR;
provided, however, that if the Board does not specifically provide for any
post-termination exercise period, then any Option or SAR held by such terminated
Participant will expire immediately upon the date of such termination.

8. RESTRICTED SHARES.

      (a) Issuance. Restricted Shares may be issued either alone or in
conjunction with other Awards. The Board will determine the time or times within
which Restricted Shares may be subject to forfeiture, and all other conditions
of such Awards.

      (b) Awards and Certificates. The Award Agreement evidencing the grant of
any Restricted Shares will contain such terms and conditions, not inconsistent
with the terms of the Plan, as the Board deems appropriate in its sole and
absolute discretion. The prospective recipient of an Award of Restricted Shares
will not have any rights with respect to such Award, unless and until such
recipient has executed an Award Agreement and has delivered a fully executed
copy thereof to the Company, and has otherwise complied with the applicable
terms and conditions of such Award. The purchase price for Restricted Shares
may, but need not, be zero.

      A share certificate will be issued in connection with each Award of
Restricted Shares. Such certificate will be registered in the name of the
Participant receiving the Award and will bear the following legend and/or any
other legend required by this Plan, the Award Agreement, the Company's
shareholders' agreement, if any, and any applicable law:

            THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED
            HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE KIRKLAND'S,
            INC. 2002 INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE
            REGISTERED OWNER AND KIRKLAND'S, INC. COPIES OF THAT PLAN AND
            AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF KIRKLAND'S, INC.
            AND WILL BE MADE AVAILABLE TO THE HOLDER OF THIS CERTIFICATE WITHOUT
            CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY.

      Share certificates evidencing Restricted Shares be held in custody by the
Company or in escrow by an escrow agent until the restrictions thereon have
lapsed. As a condition of any Restricted Share award, the Participant may be
required to deliver to the Company a share power, endorsed in blank, relating to
the Shares covered by such Award.

      (c) Restrictions and Conditions. The Restricted Shares awarded pursuant to
this Section 8 will be subject to the following restrictions and conditions:

                                      -9-
<PAGE>
            (i) During a period commencing with the date of an Award of
Restricted Shares and ending at such time or times as specified by the Board
(the "Restriction Period"), the Participant will not be permitted to sell,
transfer, pledge, assign or otherwise encumber Restricted Shares awarded under
the Plan. The Board may condition the lapse of restrictions on Restricted Shares
upon the continued employment or service of the recipient, the attainment of
specified individual or corporate performance goals, or such other factors as
the Board may determine, in its sole and absolute discretion.

            (ii) Except as provided in this Paragraph (ii) or Section 8(c)(i),
once the Participant has been issued a certificate or certificates for
Restricted Shares, the Participant will have, with respect to the Restricted
Shares, all of the rights of a shareholder of the Company, including the right
to vote the Shares, and the right to receive any cash distributions or
dividends. The Board, in its sole discretion, as determined at the time of
award, may permit or require the payment of cash distributions or dividends to
be deferred and, if the Board so determines, reinvested in additional Restricted
Shares to the extent Shares are available under Section 3 of the Plan. Any
distributions or dividends paid in the form of securities with respect to
Restricted Shares will be subject to the same terms and conditions as the
Restricted Shares with respect to which they were paid, including, without
limitation, the same Restriction Period.

            (iii) Subject to the applicable provisions of the Award Agreement,
if a Participant's service with the Company terminates prior to the expiration
of the Restriction Period, all of that Participant's Restricted Shares which
then remain subject to forfeiture will then be forfeited automatically.

            (iv) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Shares subject to such Restriction Period (or if
and when the restrictions applicable to Restricted Shares lapse pursuant to
Sections 3(d)), the certificates for such Shares will be replaced with new
certificates, without the portion restrictive legends described in Section 8(b)
applicable to such lapsed restrictions, and such new certificates will be
promptly delivered to the Participant, the Participant's representative (if the
Participant has suffered a Disability), or the Participant's estate or heir (if
the Participant has died).

9. AMENDMENTS AND TERMINATION.

      The Board may amend, alter or discontinue the Plan at any time, but,
except as otherwise provided in Section 3(d) of the Plan, no amendment,
alteration or discontinuation will be made that would impair the rights of a
Participant with respect to an Award that is outstanding under the Plan without
the Participant's consent, or that, without the approval of such amendment
within one year (365 days) of its adoption by the Board, by a majority of the
votes cast at a duly held shareholder meeting at which a quorum representing a
majority of the Company's outstanding voting shares is present (either in person
or by proxy), would: (i) increase the total number of Shares reserved for the
purposes of the Plan (except as otherwise provided in Section 3(c)), or (ii)
change the persons or class of persons eligible to receive Awards.

                                      -10-
<PAGE>
10. UNFUNDED STATUS OF PLAN.

      The Plan is intended to be "unfunded." With respect to any payments not
yet made to a Participant by the Company, nothing contained herein will give any
such Participant any rights that are greater than those of a general creditor of
the Company. In its sole discretion, the Board may authorize the creation of
grantor trusts or other arrangements to meet the obligations created under the
Plan to deliver Shares or payments in lieu of Shares or with respect to Awards.

11. GENERAL PROVISIONS.

      (a) The Board may require any Participant to represent to and agree with
the Company in writing that the Participant is acquiring securities of the
Company for investment purposes and without a view to distribution thereof and
as to such other matters as the Board believes are appropriate. The certificate
evidencing any Award and any securities issued pursuant thereto may include any
legend which the Board deems appropriate to reflect any restrictions on transfer
and compliance with securities laws. All certificates for Shares or other
securities delivered under the Plan will be subject to such share-transfer
orders and other restrictions as the Board may deem advisable under the rules,
regulations, and other requirements of the Securities Act of 1933, as amended,
the Exchange Act, any stock exchange upon which the Shares are then listed, and
any other applicable Federal or state securities laws, and the Board may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.

      (b) Nothing contained in the Plan will prevent the Board from adopting
other or additional compensation arrangements, subject to shareholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.

      (c) The adoption of the Plan will not confer upon any person the right to
continued employment or engagement by the Company or such Subsidiary, nor will
it interfere in any way with the right of the Company or such Subsidiary to
terminate the employment or engagement of any of its service providers at any
time.

      (d) No later than the date as of which an amount first becomes includable
in the gross income of the Participant for Federal income tax purposes with
respect to any Award, the Participant will pay to the Company, or make
arrangements satisfactory to the Board regarding the payment, of any Federal,
state or local taxes of any kind required by law to be withheld with respect to
such amount. Unless otherwise determined by the Board, the minimum required
withholding obligations may be settled with Shares, including Shares that are
part of the Award that gives rise to the withholding requirement. The
obligations of the Company under this Plan are conditioned on such payment or
arrangements and the Company will, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to the
Participant.

                                      -11-
<PAGE>
12. EFFECTIVE DATE OF PLAN.

      This Plan will become effective on the date that it is adopted by the
Board; provided, however, that all Options intended to be Incentive Stock
Options will automatically be converted into Non-Qualified Stock Options if the
Plan is not approved by the Company's stockholders within one year (365 days) of
its adoption by the Board, by a majority of the votes cast at a duly held
shareholder meeting at which a quorum representing a majority of the Company's
outstanding voting shares is present, either in person or by proxy.

13. TERM OF PLAN.

      This Plan will continue in effect until terminated in accordance with
Section 9; provided, however, that no Incentive Stock Option will be granted
hereunder on or after the tenth (10th) anniversary of the date of shareholder
approval of the Plan; but provided further, that Incentive Stock Options granted
prior to such tenth (10th) anniversary may extend beyond that date.

14. INVALID PROVISIONS.

      In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability will not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions will
be given full force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.

15. GOVERNING LAW.

      This Plan and all Awards made and actions taken thereunder will be
governed by and construed in accordance with the laws and judicial decisions of
the State of Tennessee, without regard to the application of the principles of
conflicts of laws.

16. BOARD ACTION.

      Notwithstanding anything to the contrary set forth in this Plan, any and
all actions of the Board taken under or in connection with this Plan and any
agreements, instruments, documents, certificates or other writings entered into,
executed, granted, issued and/or delivered pursuant to the terms hereof, will be
subject to and limited by any and all votes, consents, approvals, waivers or
other actions of all or certain stockholders of the Company or other persons
required by:

            (i) the Company's Articles of Incorporation (as the same may be
amended and/or restated from time to time);

            (ii) the Company's Bylaws (as the same may be amended and/or
restated from time to time); and

            (iii) any other agreement, instrument, document or writing now or
hereafter existing, between or among the Company and its stockholders or other
persons (as the same may be amended from time to time).

                                      -12-
<PAGE>
17. NOTICES. Any notice to be given to the Company pursuant to the provisions of
the Plan will be addressed to the Company in care of its Secretary (or such
other person as the Company may designate from time to time) at its principal
executive office, and any notice to be given to a Participant will be delivered
personally or addressed to him or her at the address given beneath his or her
signature on his or her Award Agreement, or at such other address as such
Participant may hereafter designate in writing to the Company. Any such notice
will be deemed duly given on the date and at the time delivered via personal,
courier or recognized overnight delivery service or, if sent via telecopier, on
the date and at the time telecopied with confirmation of delivery or, if mailed,
on the date five (5) days after the date of the mailing (which will be by
regular, registered or certified mail). Delivery of a notice by telecopy (with
confirmation) will be permitted and will be considered delivery of a notice
notwithstanding that it is not an original that is received.

                          ADOPTION AND APPROVAL OF PLAN

                   DATE PLAN ADOPTED BY BOARD: April 17, 2002
                DATE PLAN APPROVED BY STOCKHOLDERS: May 24, 2002
                     EFFECTIVE DATE OF PLAN: _____________

                                      -13-

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