Document:

<PAGE>
                                                                   EXHIBIT 10.17

                               SUBLEASE AGREEMENT
                                     BETWEEN
                              PHOENICIAN PROPERTIES
                                       AND
                                KIRKLAND'S, INC.

                            DUPLICATE ORIGINAL 1 OF 2

                                February 1, 2002

                                   William C. Bell, Jr.
                                   Rainey, Kizer, Butler, Reviere & Bell, P.L.C.
                                   P. O. Box 1147 - 105 South Highland Ave.
                                   Jackson, TN  38302-1147
                                   (731) 423-2414
                                   File No. 01436\53316

<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<S>     <C>                                                                                                     <C>
1.       Leased Premises..........................................................................................1

2.       Construction of Renovations..............................................................................1

3.       Lease Term...............................................................................................2

4.       Option Terms.............................................................................................2

5.       Holdover By Tenant.......................................................................................3

6.       Rent.....................................................................................................4
         (a)      Base Rent.......................................................................................4
         (b)      3 Year Option Term..............................................................................4
         (c)      First 5 Year Option Term........................................................................5
         (d)      Second 5 Year Option Term.......................................................................5
         (e)      Third 5 Year Option Term........................................................................6
         (f)      Proration of Rent...............................................................................6
         (g)      Late Charges....................................................................................7

7.       Utilities................................................................................................7

8.       Taxes....................................................................................................7

9.       Repairs And Maintenance..................................................................................7
         (a)      Maintenance and Repair Obligations..............................................................7
         (b)      Default with Respect to Tenant's Repair and Maintenance Obligations.............................8
         (c)      Default with Respect to Landlord's Repair and Maintenance Obligations...........................9

10.      Insurance................................................................................................9

11.      Improvements............................................................................................10

12.      Damage or Destruction to Improvements on Leased Premises................................................11

13.      Use of Premises.........................................................................................12

14.      Condemnation............................................................................................13
         (a)      Total Taking in the Event of Condemnation......................................................13
         (b)      Partial Taking in the Event of Condemnation....................................................13

15.      Quiet Enjoyment.........................................................................................14

16.      Subordination Of Lease/Attornment.......................................................................15
</TABLE>

                                      -i-

<PAGE>

<TABLE>
<S>     <C>                                                                                                      <C>
17.      Surrender Upon Termination..............................................................................15

18.      Assignment And Sub-letting..............................................................................15

19.      Events of Default by Tenant and Remedies of Landlord....................................................16
         (a)      Events of Default Defined......................................................................16
         (b)      Remedies on Default............................................................................17
         (c)      Effect Of Termination Rights...................................................................18
         (d)      No Remedy Exclusive............................................................................18
         (e)      No Additional Waiver Implied By One Waiver.....................................................19
         (f)      Right of Entry.................................................................................19
         (g)      Notice of Default to IDB.......................................................................20

20.      Landlord Defaults and Tenant Remedies...................................................................20

21.      Tenant's Indemnity of Landlord..........................................................................22

22.      Landlord Indemnity of Tenant............................................................................23

23.      Notices.................................................................................................24

24.      Periodic Financial Reporting by Tenant..................................................................24

25.      Environmental Requirements of Tenant....................................................................25
         (a)      Landlord's Warranty............................................................................25
         (b)      Environmental Covenants of Tenant..............................................................25
         (c)      Definition of Environmental Laws...............................................................26
         (d)      Definition of Hazardous Materials..............................................................27
         (e)      Definition of Environmental Contamination......................................................27

26.      Environmental Requirements of Landlord..................................................................27

27.      Expansions to Building(s) on Leased Premises............................................................28

28.      Lease Termination Rights Of Tenant......................................................................30

29.      Miscellaneous...........................................................................................31
         (a)      Entire Agreement...............................................................................31
         (b)      Recordation....................................................................................31
         (c)      Binding Effect.................................................................................31
         (d)      Governing Law..................................................................................32
         (e)      Captions.......................................................................................32
         (f)      Severability...................................................................................32
         (g)      Rules of Construction..........................................................................32
         (h)      Duplicate Originals............................................................................32
         (i)      Attorney's Fees................................................................................33
         (j)      Estoppel Certificate...........................................................................33
         (k)      No Landlord Liens..............................................................................33
</TABLE>

                                      -ii-

<PAGE>

                               SUBLEASE AGREEMENT

         THIS SUBLEASE AGREEMENT made and entered into to be effective the 1st
day of February, 2002, by and between Phoenician Properties, a Tennessee general
partnership ("Landlord"), and Kirkland's, Inc., a Tennessee corporation
("Tenant").

                                R E C I T A L S:

         A.       Landlord has leased the Leased Premises (defined below) from
the Industrial Development Board of the City of Jackson, Tennessee (the "IDB"),
pursuant to that certain Industrial Lease Agreement effective February 1, 2002
(the "IDB Lease").

         B.       Landlord desires to sublease its interest in the Leased
Premises under the IDB Lease to Tenant as provided herein.

         In consideration of the parties' respective representations, covenants
and agreements herein contained, the Landlord and Tenant agree as follows:

                  1.       LEASED PREMISES. The Landlord does hereby sublease to
the Tenant, and the Tenant subleases from the Landlord, in accordance with the
terms and conditions of this Agreement, the premises described in EXHIBIT A
located in Madison County, Tennessee, in good repair at the date of the
beginning of this Lease Term, which shall herein be referred to as the "Leased
Premises."

                  2.       CONSTRUCTION OF RENOVATIONS. Landlord, at Landlord's
expense, agrees to make certain renovations to the Leased Premises described in
the scope of work attached hereto as EXHIBIT B (the "Renovations") not later
than June 15, 2002. Upon execution of this Sublease, Landlord and Tenant shall
sign EXHIBIT B to signify their

                                        1

<PAGE>

approval of the scope of work. The dates for beginning and completing
construction of the Renovations shall be deferred for a period equal to any
delay caused by reason of labor controversy, act of God, fire, or other
casualty, governmental regulations, or other causes beyond the reasonable
control of Landlord. Tenant shall have the right after Tenant takes possession
of the Leased Premises to submit to Landlord a "punch list" of incomplete or
defective renovation items within the Leased Premises within sixty (60) days
after Tenant takes possession, and Landlord agrees to correct the items on the
punch list. Landlord will remain liable for any latent defects in the Leased
Premises (established by engineering and architectural experts who have to be
mutually acceptable to both parties).

                  3.       LEASE TERM. The initial term of this Sublease
Agreement shall commence effective February 1, 2002 (the "Commencement Date"),
and subject to the Lease Termination Rights of Tenant set forth in paragraph 28
of this Lease, shall continue until March 31, 2005 (the "Initial Term").

                  4.       OPTION TERMS. At the expiration of the Initial Term,
if this Sublease then shall be in full force and effect, and the Tenant shall
not be in default hereunder beyond any applicable cure period, and if Landlord
is still the Lessee under the IDB Lease, or if Landlord is the fee, simple owner
of the Leased Premises, the Tenant shall have the option to extend the term of
this Sublease, upon the same terms, provisions, and conditions provided herein,
for one three year term through March 31, 2008 (the "3 Year Option Term"), and
then for three (3) consecutive five (5) year terms (the "5 Year Option Term"),
with the 3 Year Option Term beginning as of and from the expiration of the
Initial Term and the first such 5 Year Option Term beginning as of and from the
expiration of the 3 Year

                                        2

<PAGE>

Option Term and the second and third 5 Year Option Terms beginning from the
expiration of the previous extended terms. Each Option Term year would begin on
April 1 of the respective year. Each such Option Term must be exercised by
written notice in the manner provided in this Lease Agreement below, not less
than six (6) months prior to the expiration of the Initial Term, or the subject
Option Term, as the case may be. Time is of the essence for providing written
notice not less than six (6) months prior to the expiration of the applicable
term, and failure to provide such notice shall render any exercise of Options
null and void. As used in this Lease Agreement and unless otherwise specified,
"Lease Term" shall mean the Initial Term and any Option Terms properly exercised
by Tenant. The Option Terms shall be subject to the Lease Termination Rights of
Tenant set forth in paragraph 28 of the Lease.

                  5.       HOLDOVER BY TENANT. In the event the Tenant remains
in possession of the Leased Premises beyond the expiration of the Initial Term
without properly exercising the first Option Term or if Tenant remains in
possession beyond the expiration of any validly exercised Option Term, or if
Tenant remains in possession after termination of this Lease as provided in
paragraph 28 hereof, such tenancy shall be deemed month-to-month only, with
thirty (30) days' written notice required by either party to terminate such
tenancy. Except as provided in the last sentence in this Paragraph 5, the Rent
during such holdover tenancy shall be 125% of the amount of the Rent that was
payable immediately prior to the commencement of the holdover occupancy.
Otherwise, the holdover tenancy shall be subject to all provisions of this
Sublease Agreement. However, in the event that Tenant and Landlord engage in
good faith negotiations for an extension of the term of this

                                        3

<PAGE>

Sublease for a period up to two (2) months after the expiration of the Sublease,
then Tenant shall be obligated to pay rent in the amount of Rent at the
expiration of the preceding term for such sixty (60) day period.

         6.       RENT.

                  (A)      BASE RENT. The Tenant shall pay the Landlord monthly
base rent ("Base Rent") for the use of the Leased Premises as provided below:

<TABLE>
<CAPTION>
                           Period                    Monthly Rent
                           ------                    ------------
                    <S>                              <C>
                    2/1/02 - 12/31/02                $  4,545.45
                    1/1/03 - 12/31/03                $ 34,300.00
                    1/1/04 - 12/31/04                $ 37,520.00
                    1/1/05 - 3/31/05                 $ 37,520.00
</TABLE>

The Base Rent shall be due and payable on the first day of each month, without
setoff rights, except as provided in Paragraphs 9(c) and 20. Rent shall be paid
to Landlord at the address shown in Paragraph 23 until such time as Landlord
shall notify Tenant of a different address for payment of rent.

                  (B) 3 YEAR OPTION TERM. If Tenant exercises its option for the
3 Year Option Term, the monthly rent during the 3 Year Option Term (the "3 Year
Option Term Rent") shall be:

<TABLE>
                    <S>                               <C>
                    3/31/05 - 12/31/05                $ 37,520.00
                    1/1/06 - 12/31/06                 $ 37,520.00
                    1/1/07 - 12/31/07                 $ 39,760.00
                    1/1/08 - 3/31/08                  $ 39,760.00
</TABLE>

                                        4

<PAGE>

The 3 Year Option Term Rent shall be due and payable on the first day of each
month, without setoff rights, except as provided in Paragraphs 9(c) and 20. Rent
shall be paid to Landlord at the address shown in Paragraph 23 until such time
as Landlord shall notify Tenant of a different address for payment of rent.

                  (C)      FIRST 5 YEAR OPTION TERM. If Tenant exercises its
option for the first 5 Year Option Term, the monthly rent during the first three
(3) years of the first 5 Year Option Term ("Years 7-9") shall be in the amount
of Thirty Nine Thousand Seven Hundred Sixty and No/100 Dollars ($39,760.00).
After Years 7-9, and for the remainder of the first 5 Year Option Term, the
monthly rent shall increase to Forty-Two Thousand One Hundred Forty and No/100
Dollars ($42,140.00). The rent during the first 5 Year Option Term (the "First 5
Year Option Term Rent") shall become due and payable in advance on the first day
of each month, without setoff rights, except as provided in Paragraphs 9(c) and
20. The First 5 Year Option Term Rent shall be paid to the Landlord at the
address contained below in this Sublease Agreement, until such time as the
Landlord shall notify the Tenant, in writing, of a different address to which
the payment shall be sent.

                  (D)      SECOND 5 YEAR OPTION TERM. If Tenant exercises its
option for the second 5 Year Option Term, the monthly rent during the first
three (3) years of the second 5 Year Option Term ("Years 12-14") shall be in the
amount of Forty-Two Thousand One Hundred Forty and No/100 Dollars ($42,140.00).
After Years 12-14, and for the remainder of the second 5 Year Option Term, the
monthly rent shall increase to Forty-Four Thousand Six Hundred Sixty and No/100
Dollars ($44,660.00) during the second 5 Year Option Term (the "Second Option
Term Rent"). The Second 5 Year Option Term Rent shall become

                                        5

<PAGE>

due and payable in advance on the first day of each month, without setoff
rights, except as provided in Paragraphs 9(c) and 20. The Second 5 Year Option
Term Rent shall be paid to the Landlord at the address contained below in this
Sublease Agreement, until such time as the Landlord shall notify the Tenant, in
writing, of a different address to which the payment shall be sent.

                  (E)      THIRD 5 YEAR OPTION TERM. If Tenant exercises its
option for the third 5 Year Option Term, the monthly rent during the first three
(3) years of the third 5 Year Option Term ("Years 17-19") shall be in the amount
of Forty-Four Thousand Six Hundred Sixty and No/100 Dollars ($44,660.00). After
Years 17-19, and for the remainder of the third 5 Year Option Term, the monthly
rent shall increase to Forty-Seven Thousand Three Hundred Twenty and No/100
Dollars ($47,320.00). The rent payable during the third 5 Year Option Term (the
"Third Option Term Rent") shall become due and payable in advance on the first
day of each month, without setoff rights, except as provided in Paragraphs 9(c)
and 20. The Third 5 Year Option Term Rent shall be paid to the Landlord at the
address contained below in this Sublease Agreement, until such time as the
Landlord shall notify the Tenant, in writing, of a different address to which
the payment shall be sent. As used in this Lease Agreement, the term "Rent"
shall include the "Base Rent, the "3 Year Option Term Rent", the "First 5 Year
Option Term Rent", the "Second 5 Year Option Term Rent", and the "Third 5 Year
Option Term Rent", unless otherwise specified.

                  (F)      PRORATION OF RENT. All Rent shall be prorated if the
Initial Term or any Option Term does not commence on the first (1st) day of a
calendar month or expire on the last day of a calendar month.

                                        6

<PAGE>

                  (G)      LATE CHARGES. A late charge shall be payable in the
amount of one percent (1%) of the Rent then in effect in the event that Tenant
shall fail to pay any installment of monthly Rent when due or additional rent
when due within fifteen (15) days after the due date thereof and such failure
shall have occurred two (2) times during any calendar year.

         7.       UTILITIES. Tenant shall contract for all utility service
required on the Leased Premises and shall be liable for payment of all utility
services received during its occupancy of the Leased Premises.

         8.       TAXES. Tenant acknowledges that the Leased Premises are owned
by the IDB, and that assets owned by the Board are exempt from ad valorem
taxation in the State of Tennessee under TCA ss.7-53-305. Landlord agrees to
"pass on" to Tenant any payment in lieu of tax ("PILOT") benefits granted to
Landlord in its lease with the IDB, and Tenant agrees to make all PILOT payments
required to be made pursuant to the PILOT Program attached as EXHIBIT C, and any
and all other taxes assessed against Landlord as a lessee of the Leased Premises
from the IDB, including within such taxes to be paid by Tenant, any leasehold
taxes if such are assessed against Landlord by any taxing authority, all of such
taxes to be paid before becoming delinquent.

         9.       REPAIRS AND MAINTENANCE.

                  (A)      MAINTENANCE AND REPAIR OBLIGATIONS. Landlord shall be
responsible for maintaining the roof, foundation, slab, HVAC units (including
all necessary replacements thereof), and structural walls of the Leased Premises
during the Lease Term

                                        7

<PAGE>

and for repaving parking lots at the time of the end of the useful life of the
prior paving of such parking lots ("Landlord's Repair Obligations"). With the
exception of Landlord's Repair Obligations, Tenant shall at all times put, keep
and maintain the Leased Premises in good repair and appearance, including
without limitation: the landscaping; windows; plumbing and electrical systems;
and routine maintenance and patching and sealing of parking lots.

         Tenant shall promptly make all repairs and replacements (substantially
equivalent in quality and workmanship to the original work) of every kind and
nature, which may be required to be made upon or in connection with any of the
Leased Premises in order to keep and maintain the Leased Premises in as good
repair and appearance as they were as of the commencement of the Initial Term,
ordinary wear and tear excepted. Tenant shall, in all events, make all repairs
for which it is responsible hereunder promptly, and all repairs shall be done in
a good, proper, and workmanlike manner. Landlord shall, in all events, make the
Landlord repair obligations promptly, and all repairs shall be done in a good,
proper, and workmanlike manner.

                  (B)      DEFAULT WITH RESPECT TO TENANT'S REPAIR AND
MAINTENANCE OBLIGATIONS. If Tenant shall be in default of Tenant's maintenance
and repair obligations hereunder, Landlord may, after thirty (30) days' notice
to Tenant and failure of Tenant to cure such default, but immediately upon
notice in the event of an emergency, do whatever is necessary to cure such
default for the account of and at the expense of Tenant. All actual and
reasonable costs and expenses so incurred by Landlord shall constitute
additional Rent payable by Tenant under this Lease Agreement and shall be paid
with the next installment of Rent that becomes due.

                                        8

<PAGE>

                  (C)      DEFAULT WITH RESPECT TO LANDLORD'S REPAIR AND
MAINTENANCE OBLIGATIONS. If Landlord shall be in default of Landlord's Repair
Obligations hereunder after notice to Landlord of the Repair Obligations, and a
reasonable opportunity to complete such Repair Obligations, Tenant may, after
thirty (30) days notice to Landlord of Landlord's failure to make such repairs
within a reasonable time, but immediately upon notice in the event of an
emergency, do whatever is reasonably necessary to cure such default at the
expense of Landlord. If Landlord does not pay the cost and expenses so incurred
by Tenant within thirty (30) days after invoiced by Tenant, Tenant shall have
the right to offset such amount against its rent obligations hereunder.

         10.      INSURANCE. Landlord shall maintain fire and extended coverage
insurance and earthquake coverage on the building and appurtenances located on
the Leased Premises with the replacement cost endorsement, in accordance with
comparable industry standards, with a financially responsible insurer duly
authorized to do business in the State of Tennessee. The costs of and premiums
thereof shall be charged to and paid to Landlord by the Tenant as additional
rent. Tenant shall, at Tenant's expense, obtain and keep in force during the
Initial Term and all Option Terms and holdover Tenancy, commercial general
liability insurance coverage with limits of not less than $2,000,000 per
occurrence for bodily injury and property damage, insuring both Landlord and
Tenant against liability arising out of Tenant's use and occupancy of the Leased
Premises and all areas appurtenant thereto. All such liability policies shall
name Tenant as the insured party, and Landlord and Landlord's designated
mortgagees as additional insureds. The

                                        9

<PAGE>

Tenant shall furnish the Landlord with a certificate from the insurance
companies indicating the issuance of the required liability insurance coverage
required in this paragraph. Landlord may, but shall not be obligated, to
maintain time element insurance coverage (loss of rents) covering the loss of
rental income for a period chosen by Landlord that may occur as a result of loss
or damage to the building(s) located on the Leased Premises.

         11.      IMPROVEMENTS. Tenant agrees that it will not make any
alterations to the Leased Premises that would diminish the value of the Leased
Premises, after giving consideration to the completed alteration, without
Landlord's prior written consent. Any alterations by Tenant, at Tenant's
expense, the cost of which (per alteration or group of related alterations)
exceeds One Hundred Thousand and No/100 Dollars ($100,000.00) shall be deemed a
"Significant Alteration." All Significant Alterations shall require Landlord's
prior written consent. Prior to making any Significant Alterations, Tenant shall
submit written plans and specifications for such work to Landlord and shall
obtain Landlord's prior written consent to the same. Tenant may make alterations
other than Significant Alterations or alterations that would not diminish the
value of the Leased Premises without the prior written consent of Landlord. Any
alterations or additions will be at Tenant's expense and will remain a portion
of the Leased Premises upon expiration of the rights of Tenant under this Lease.
Trade fixtures and other equipment owned by the Tenant and installed on or
within the Leased Premises by Tenant shall remain as personal property, and may
be removed upon termination of the Lease, but only upon the condition that any
repairs necessary due to removal of such trade fixtures or equipment be made by
Tenant at its own expense.

                                       10

<PAGE>

         12.      DAMAGE OR DESTRUCTION TO IMPROVEMENTS ON LEASED PREMISES.
Except as provided in the next two (2) grammatical paragraphs of this Paragraph
12, if the improvements on the Leased Premises (excluding the parking lot,
lights, landscaping, and fences) are damaged or destroyed by fire or other
casualty insured under the fire and extended casualty insurance policy
applicable to the Leased Premises (the "Casualty"), the insurance proceeds from
such policy shall be used to repair and/or restore the Leased Premises to
substantially the condition it was in immediately prior to the Casualty within
one hundred eighty (180) days following the date of Landlord's receipt of the
insurance proceeds.

         However, if the Casualty renders the improvements on the Leased
Premises untenantable, in the reasonable opinion of Tenant, and the estimated
time for restoration thereof exceeds one hundred-eighty (180) days from the date
of the Landlord's receipt of the insurance proceeds, then Tenant may terminate
this Sublease Agreement by the delivery of written notice to the Landlord within
fifteen (15) days following the date on which Landlord notifies Tenant of the
estimated time for restoration. Landlord must provide that estimate to Tenant
within sixty (60) days following its receipt of the insurance proceeds.

         Further, (i) if there are less than three (3) years remaining in the
existing term of this Lease (whether the Initial Term or any Option Term) at the
time of any Casualty; and (ii) if Tenant does not provide written notice to
Landlord within thirty (30) days of the date of the Casualty that it is waiving
its Termination Rights as set forth in paragraph 28 for a period of five (5)
years from the date of completion of the repairs or restoration of the Leased
Premises; and (iii) if the Casualty renders the improvements on the Leased

                                       11

<PAGE>

Premises untenantable, in the reasonable opinion of Landlord; and (iv) if Tenant
does not exercise the next renewal Option Term, then Landlord shall have no
obligation to repair or restore the Leased Premises, and Landlord may terminate
this Lease Agreement by the delivery of written notice to Tenant within sixty
(60) days following the date of the Casualty, unless Tenant exercises the next
renewal Option Term at such time and waives its Termination Rights for such five
(5) year period as described above at such time. If Tenant exercises the next
renewal Option and waives its Termination Rights before such sixty (60) day
period, Landlord shall be obligated to repair and restore the Leased Premises to
substantially the condition it was in immediately prior to the Casualty.

         The obligation to repair or restore the Leased Premises shall not
exceed the scope of the original construction of the improvements on the Leased
Premises. If the Lease is not terminated, Tenant shall replace and/or restore
its furniture, equipment and trade fixtures.

         Rent payable under this Sublease Agreement shall be abated
proportionately according to the floor area of the building improvements on the
Leased Premises which is usable by the Tenant, and such abatement shall continue
for the period commencing with such damage or destruction and ending with the
completion of such work of repair and/or reconstruction of the Leased Premises
as provided herein. Landlord shall be entitled to receive the proceeds payable
in respect of any time element insurance that Landlord maintains in accordance
with the terms of this Sublease Agreement.

         13.      USE OF PREMISES. The Tenant agrees that the Leased Premises
are to be used solely and exclusively for storage, warehouse, and distribution,
with appropriate

                                       12

<PAGE>

offices for the management of such distribution center, unless otherwise
consented to in writing in advance by Landlord, in its sole and absolute
discretion. Further, Tenant agrees: (i) to use and occupy the Leased Premises in
a careful, safe, proper and lawful manner; and (ii) not to permit any unlawful
nuisance, trade or custom, or condition thereon; and (iii) not to commit any
waste upon, or do any damage to the Leased Premises, ordinary wear and tear
excepted. Further Tenant agrees that it shall not bring or knowingly allow any
hazardous materials or hazardous substances (as defined by the state of
Tennessee statutes and United States of America statutes) to be brought onto the
Leased Premises, unless done in accordance with applicable laws for hazardous
materials or substances.

         14.      CONDEMNATION.

                  (A)      TOTAL TAKING IN THE EVENT OF CONDEMNATION. In the
event of a "taking" of all or a substantial part of the Leased Premises (defined
as greater than one-half of the usable floor space of the building improvements
on the Leased Premises) by any governmental authority under eminent domain
proceedings, this Lease shall terminate on the date when the Leased Premises
shall be so taken, and the rent shall be abated as of that date. No part of any
award for the property and improvements shall belong to the Tenant. However, the
Tenant shall have the right to make a separate claim with the condemning
authority for the value of the Tenant's leasehold interest and/or moving or
relocation expenses; provided, however, that such separate claim shall not
reduce or adversely affect the amount of the Landlord's award.

                  (B)      PARTIAL TAKING IN THE EVENT OF CONDEMNATION. If any
part of the Leased Premises (being less than a substantial part) of the Leased
Premises shall be

                                       13

<PAGE>

taken as aforesaid, and such partial taking shall render that portion not so
taken unsuitable for the business of the Tenant as reasonably determined by
Tenant, then this Lease shall terminate as set forth in subparagraph (a) above.
If such partial taking is not sufficiently extensive to render the Leased
Premises unsuitable for the business of the Tenant as reasonably determined by
Tenant, then this Lease shall continue in effect except that the monthly rental
payment shall be reduced in the same proportion that floor space of any building
improvements so taken bears as to the original floor space leased. Upon receipt
of the award in condemnation, Landlord shall make all necessary repairs or
alterations so as to constitute the Leased Premises a complete architectural
unit. However, in no event shall the Landlord be required to spend for such work
an amount in excess of the net amount received free and clear by Landlord's
damages for the part of the Leased Premises so taken.

         Tenant shall not be entitled to and expressly waives any claims or any
condemnation or other award for such taking, whether whole or partial, and
whether for diminution in value of the leasehold or to the fee, or otherwise;
except that the Tenant shall have the right, to the extent permitted by law, and
provided by the same shall not reduce the Landlord's award, to claim from the
condemnor, but not the Landlord, such compensation as may be recoverable by
Tenant in its own right for the damage to the Tenant's business.

         15.      QUIET ENJOYMENT. Landlord covenants that it is seized of a
leasehold interest in the Leased Premises pursuant to the IDB Lease and has the
full right to enter into this Sublease Agreement, and that the Tenant shall have
the quiet and peaceful

                                       14

<PAGE>

possession of the Leased Premises during the Initial Term and all Option Terms,
as against lawful acts of third parties and as against the acts of all parties
claiming title to, or right to possession of the Leased Premises.

         16.      SUBORDINATION OF LEASE /ATTORNMENT. This Sublease shall be
subordinate to the rights of the IDB under the IDB Lease. Tenant shall enter
into a subordination, nondisturbance, and attornment agreement in a form
acceptable to Landlord's lender and Tenant. Further, this Sublease shall be
subordinate to any renewal, amendment, or modification of the IDB Lease to the
extent that such amendment or modification does not change Tenant's right of
quiet enjoyment of the Leased Premises in accordance with the terms hereof.

         17.      SURRENDER UPON TERMINATION. At the expiration of the Initial
Term or Option Terms, or any holdover tenancy, or after termination of the Lease
because of Tenant's Termination Rights set forth in paragraph 28 hereof, as the
case may be, Tenant shall surrender the Leased Premises in as good a condition
as it was at the beginning of the Initial Term, reasonable use and wear and tear
and damages by casualty or the elements excepted. At such expiration, the Tenant
shall have the right to remove any fixtures or equipment owned by it, provided,
however, that in so doing, the Tenant shall repair, at its expense, any damage
caused by such removal.

         18.      ASSIGNMENT AND SUB-LETTING. Tenant shall not have the right to
assign or sub-let the Leased Premises without the prior written consent of
Landlord, such consent not to be unreasonably delayed or withheld.

                                       15

<PAGE>

         19.      EVENTS OF DEFAULT BY TENANT AND REMEDIES OF LANDLORD.

                  (A)      EVENTS OF DEFAULT DEFINED. The following shall be
"Events of Default" under this Sublease Agreement and the term "Events of
Default" or "Default" shall mean, whenever they are used in this Sublease
Agreement, any one or more of the following events:

                           (1)      Delinquency in the due and punctual payment
                                    of any Rent, additional rent, or additional
                                    payment under this Sublease Agreement when
                                    such Rent or additional payment shall become
                                    payable, and such default shall continue for
                                    ten (10) days after payment is due;
                                    provided, however, that for the two
                                    delinquent payments for any calendar year
                                    (January - December) Landlord must give
                                    written notice of non-payment, and Tenant
                                    shall have ten (10) days from the date of
                                    delivery of such notice before a default
                                    hereunder.

                           (2)      Delinquency by the Tenant in the performance
                                    or compliance with any of the conditions or
                                    covenants contained in this Sublease
                                    Agreement, other than payment of Rent or
                                    additional payments (which is provided for
                                    in subparagraph (1) above), for a period of
                                    thirty (30) days after written notice
                                    thereof from the Landlord to the Tenant,
                                    except for any default not susceptible of
                                    being cured within such thirty (30) day
                                    period, in which event the time permitted to
                                    the Tenant to cure such default shall be
                                    extended for so long as shall be reasonably
                                    necessary to cure such default, provided the
                                    Tenant commences promptly and proceeds
                                    diligently to cure such default, and
                                    provided further that such period of time
                                    shall not be so extended as to jeopardize
                                    the interest of the Landlord in this
                                    Sublease Agreement or the Leased Premises or
                                    so as to subject the Landlord or the Tenant
                                    to any civil or criminal liabilities.

                           (3)      The filing by the Tenant of a voluntary
                                    petition in bankruptcy, or adjudication of
                                    the Tenant as a bankrupt, or assignment,
                                    partial or general, by the Tenant for the

                                       16

<PAGE>

                                    benefit of its creditors, or the entry by
                                    the Tenant into an agreement of composition
                                    with creditors, or the approval by a court
                                    of competent jurisdiction of a petition
                                    applicable to the Tenant in any proceeding
                                    for their reorganization instituted under
                                    the provisions of the general bankruptcy
                                    act, as amended, or under any similar act
                                    which may hereafter be enacted.

                           (4)      The assignment or sub-letting of the Leased
                                    Premises in violation of this Sublease
                                    Agreement.

                           (5)      Contravention of the use restriction
                                    provision contained in this Sublease
                                    Agreement and continues for thirty (30) days
                                    after notice by Landlord.

                  (B)      REMEDIES ON DEFAULT. Whenever any Event of Default
referred to herein shall have occurred, the Landlord may take any one or more of
the following remedial steps:

                           (1)      Landlord may re-enter and take possession of
                                    the Leased Premises without terminating this
                                    Sublease Agreement, and sublease the Leased
                                    Premises for the account of the Tenant,
                                    holding the Tenant liable for the difference
                                    in the rent and other amounts payable by
                                    such Subtenant in such subleasing and the
                                    rents and other amounts payable by the
                                    Tenant hereunder.

                           (2)      In the event of payment default hereunder,
                                    Landlord may terminate this Sublease
                                    Agreement and demand and collect from Tenant
                                    as damages the discounted present value
                                    (determined based on then commercially
                                    reasonable rates) of the entire unpaid
                                    balance of Rent for balance of the Initial
                                    Term or any exercised Option Terms that
                                    remains as of the effective date of
                                    termination.

                           (3)      Landlord may terminate this Sublease
                                    Agreement and exclude the Tenant from
                                    possession of the Leased Premises and may
                                    lease the Leased Premises to another for the
                                    account of the Tenant, holding the Tenant
                                    liable for all rent and other payments due
                                    up to

                                       17

<PAGE>

                                    the effective date of such leasing and for
                                    the excess, if any, of the Rent and other
                                    amounts payable by the Tenant under this
                                    Sublease Agreement had the Initial Term or
                                    any exercised Option Term not have been
                                    terminated over the rents and other amounts
                                    which are payable by such new Tenant under
                                    such new lease.

                           (4)      The remedies herein specified are to be
                                    exercised by the Landlord in pursuance of
                                    the availability of these remedies as
                                    provided for under the laws of the State of
                                    Tennessee; and in pursuance of these laws
                                    the Landlord may take whatever action at law
                                    and equity is available in the enforcement
                                    of these remedies, and otherwise as may
                                    appear necessary or desirable to collect
                                    rents due, or to become due, or to enforce
                                    specific performance and observation of any
                                    obligation, agreement or covenant of the
                                    Tenant under this Sublease Agreement.

                  (C)      EFFECT OF TERMINATION RIGHTS. If an Event of Default
occurs as to Tenant, Tenant shall have the option of termination the Lease as
provided in paragraph 28. However, in order to prevent all available remedies to
Landlord, Tenant must complete the following within thirty (30) days of
Landlord's notice of its intent to exercise its remedies:

                           (1)      cure the Event of Default; and

                           (2)      give the Notice of Intent to Terminate six
                                    (6) months before the desired termination
                                    date required in paragraph 28, or
                                    alternatively pay the rent that would be due
                                    during the succeeding six (6) months after
                                    Notice of Intent to Terminate; and

                           (3)      pay the Lease Termination Fee set forth in
                                    paragraph 28.

                  (D)      NO REMEDY EXCLUSIVE. No remedy herein conferred upon
or reserved to the Landlord is intended to be exclusive of any other available
remedy or

                                       18

<PAGE>

remedies, but each and every remedy shall be cumulative and alternative and
shall be in addition to every other remedy given under this Sublease Agreement,
now or hereafter existing at law or in equity or by statute, unless Tenant takes
the actions permitted in subparagraph (c) above. No delay or omission to
exercise any right or power shall be construed to be a waiver thereof, but any
such right and power may be exercised from time to time as often as may be
deemed expedient. In order to entitle the Landlord to exercise any remedy
reserved to them in this paragraph, it shall not be necessary to give any notice
other than such notice as may be herein expressly required, or as required by
law.

                  (E)      NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the
event any agreement contained in this Sublease Agreement should be breached and
thereafter waived, such waiver shall be limited to the particular breach so
waived and shall not be deemed to waive any other breach hereunder.

                  (F)      RIGHT OF ENTRY. Landlord and/or its representatives
may enter the Leased Premises at any reasonable time, before or after default by
Tenant, for purposes including without limitation taking possession after
default, inspecting the Leased Premises, performing any work which the Landlord
may elect to undertake made necessary by reason of the Tenant's default under
the terms of this Sublease Agreement, exhibiting the Leased Premises for sale or
posting any appropriate notices, including those pertaining to availability for
leasing during the last six (6) months of any term if Tenant has not exercised
the next Option Term. Such right of entry may be exercised by the Landlord or
its representatives without the same constituting an eviction of the Tenant in
whole or in part.

                                       19

<PAGE>

         Notwithstanding the foregoing, if Tenant is not in default hereunder,
Landlord shall give reasonable notice to Tenant before entering the Leased
Premises (provided that no notice shall be required in the event of an
emergency). Landlord agrees that it will not materially interfere with Tenant's
use of the Leased Premises, and Landlord agrees to repair any damage it causes
as a result of such activity.

                  (G)      NOTICE OF DEFAULT TO IDB. Tenant shall give written
notice to the IDB of any alleged default by Landlord.

         20.      LANDLORD DEFAULTS AND TENANT REMEDIES. Any one or more of the
following shall constitute a default by the Landlord:

                  (A)      if Landlord is adjudicated bankrupt or insolvent and
                           such adjudication is not vacated within thirty (30)
                           days from the date of such adjudication;

                  (B)      the admission in writing by Landlord of its inability
                           to pay its debts when due;

                  (C)      the appointment of a receiver or trustee for the
                           business or property of Landlord, unless such
                           appointment is vacated within ninety (90) days after
                           its entry;

                  (D)      Landlord making an assignment for the benefit of its
                           creditors;

                  (E)      the failure of Landlord to pay any amounts due to
                           Tenant within thirty (30) days after written notice
                           from Tenant that the same is due; or

                  (F)      the failure by Landlord to cure any failure to
                           perform or observe any of its covenants under this
                           Lease within sixty (60) days after written notice
                           thereof from Tenant, unless such failure is of such
                           nature that it cannot be cured within such sixty (60)
                           day period, in which case Landlord shall have such
                           additional time as is necessary to cure so long as
                           Landlord commences the curing within such sixty (60)
                           day period and thereafter diligently pursues the
                           curing.

                                       20

<PAGE>

         Upon any occurrence of any default by Landlord, Tenant shall have the
right to sue for damages, or specific performance, or other remedies it may have
at law or in equity. Upon the occurrence of any default by Landlord, in addition
to notice to the IDB and to Landlord, Tenant agrees to also give notice to the
holder of any mortgage (the "Mortgage Holder") on the Leased Premises, to the
extent Tenant shall have received written notice of any such Mortgage Holder.
Tenant agrees that such Mortgage Holder shall have sixty (60) days after written
notice thereof from Tenant to cure such default, unless such failure or default
is of such nature that it cannot be cured within such sixty (60) day period, in
which case the Mortgage Holder shall have such additional time to cure so long
as Mortgage Holder commences the curing within such sixty (60) days and
thereafter diligently pursues the curing. In addition, Tenant may cure
Landlord's default and offset the reasonable expense thereof against Rent
thereafter accruing. Finally, if in Tenant's reasonable business judgment,
Landlord's default materially interferes with Tenant's use of the Leased
Premises ("Landlord's Material Default"); and if Tenant reasonably determines
that it is impractical for Tenant to attempt to cure such default and offset the
cost thereof against Rent, and if the original written notice of default in this
Paragraph 20 to Landlord indicated that the default was a Landlord's Material
Default, then Tenant shall have the right to terminate this Sublease with no
further liability to Landlord (except for sums already due prior to the
termination), and exercise any other legal or equitable right or remedy it may
have if Landlord does not cure the Landlord's Material Default within the time
allowed.

                                       21

<PAGE>

         21.      TENANT'S INDEMNITY OF LANDLORD. Unless caused by the
negligence or willful misconduct of Landlord, its agents, contractors, or
employees, the Tenant shall indemnify the Landlord against all claims, actions,
damages, liabilities and expenses, including reasonable attorney's fees and
other professional fees incurred by the Landlord as a result of:

                  (A)      Failure of the Tenant to perform any covenant
required to be performed by the Tenant hereunder; and

                  (B)      Any accident, occurrence, injury or damage which
shall happen in or on the Leased Premises, or resulting from the operation of
Tenant's business; and

                  (C)      The failure to comply with any requirements of any
governmental authorities; and

                  (D)      Any mechanics' lien, security agreement or mortgage
filed, with regard to the Leased Premises, and equipment therein, or any
materials used to repair or alteration of the Leased Premises incurred by
Tenant. In the event any mechanics or materialmen's, or other liens shall be
filed against the Leased Premises or any improvements or appurtenances thereon
by reason of or arising out of any labor or material services furnished or
alleged to have been furnished to or for the Tenant at or on the Leased
Premises, the Tenant shall, within thirty (30) days after written notice from
the Landlord, pay or bond the same or procure the discharge thereof in such
manner as may be provided by law or cause other acts to be done which will
provide reasonable assurance that the Leased Premises shall not be sold to
satisfy any such lien. The Tenant shall defend, on behalf of the Landlord, at
the expense of Tenant, any action, suit or proceeding

                                       22

<PAGE>

which may be brought for the enforcement of any such lien or liens or similar
claims against the Leased Premises, and the Tenant shall pay any damage and
discharge any judgment entered thereon and save harmless the Landlord from any
claim or damage resulting therefrom. Notwithstanding the foregoing, Landlord
shall be responsible for any materialmen's or mechanic's liens filed against the
Leased Premises in connection with any of Landlord's work (including without
limitation the work described on EXHIBIT B hereto), and any work in fulfillment
of Landlord's repair obligations under this Lease;

                  (E)      Any environmental contamination to the Leased
Premises, caused by Tenant, its agents, employees, contractors, or invitees.

                  (F)      Tenant's indemnity shall not include the intentional
or negligent acts or omissions of Landlord, its officers, agents, contractors,
or employees.

                  (G)      Tenant's indemnity obligations under this Paragraph
21 shall survive the termination of this Sublease with respect to any occurrence
that arose or took place prior to such termination.

         22.      LANDLORD INDEMNITY OF TENANT. Landlord shall indemnify the
Tenant against any and all claims, actions, damages, liability, and expenses,
including reasonable attorney's fees and other professional fees, in connection
with any accident, occurrence, injury, or damage which shall happen in or on the
Leased Premises as a result of the negligence or intentional misconduct of
Landlord, its officers, agents, contractors, or employees. Notwithstanding the
foregoing, Landlord's indemnity shall not include the intentional or negligent
acts or omissions of Tenant, its officers, agents, contractors, employees, or
licensees. Landlord's indemnity obligations under this Paragraph 22 shall

                                       23

<PAGE>

survive the termination of the Lease with respect to any such occurrence that
took place prior to such termination.

         23.      NOTICES. All notices hereunder shall be in writing and shall
be delivered in person or sent by certified mail or overnight courier service or
sent by facsimile transmission to the address or facsimile numbers of the
parties shown below. Notice shall be effective upon delivery when received by
the party to whom delivered and shall be effective two (2) days after mailing
and one (1) day after overnight courier when deposited with the United States
Postal Service, or an overnight courier service, respectively. If such notice is
sent by facsimile, such notice shall be deemed received by the recipient upon
receipt by the sender of an acknowledgment or transmission report generated by
the machine from which the facsimile was sent indicating that the facsimile was
sent in its entirety to the recipient's facsimile number.

<TABLE>
<CAPTION>
LANDLORD:                                   TENANT:                              IDB:
--------                                    ------                               ---
<S>                                         <C>                                  <C>
Phoenician Properties                       Kirkland's, Inc.                     Industrial Development
529 Old Hickory Blvd., Suite D              805 North Parkway                    Board of the City of
Jackson, TN  38305                          Jackson, TN  38305                      Jackson
Fax No. 731-661-0195                        ATTN:  General Counsel               c/o General Counsel
                                            Fax No. (731) 664-9345               312 East Lafayette Street
                                                                                 Jackson, TN  38301
                                                                                 Fax No. (731) 424-0562
</TABLE>

         24.      PERIODIC FINANCIAL REPORTING BY TENANT. During the Initial
Term, and Option Terms, if applicable, Tenant shall provide to Landlord,
annually, within thirty (30) days of request by Landlord, copies of all
financial statements, including at least Tenant's Annual Profit and Loss
Statement and Annual Balance Sheet, required to be furnished by

                                       24

<PAGE>

Landlord to Landlord's primary lender, or requested by any potential purchaser
of the Leased Premises. The form of such statements shall be as customarily
prepared by Tenant. Landlord agrees to keep all financial statements
confidential and request Landlord's lender and any potential purchaser do the
same.

         25.      ENVIRONMENTAL REQUIREMENTS OF TENANT.

                  (A)      LANDLORD'S WARRANTY. Landlord warrants that to
Landlord's knowledge, the Leased Premises are not in violation of any
Environmental Laws.

                  (B)      ENVIRONMENTAL COVENANTS OF TENANT. Throughout the
Tenant's occupancy of the Leased Premises, Tenant agrees to comply with all
requirements of Environmental Laws relating to air quality, water quality, solid
waste disposal, hazardous waste disposal, hazardous or toxic substances, and the
protection of health and environment. Further, Tenant immediately shall notify
Landlord should Tenant become aware of:

                           (I)      any hazardous substance or other
                                    environmental problems or liability with
                                    respect to the Leased Premises; or

                           (II)     any lien, action, or notice of environmental
                                    problems with respect to Tenant's business
                                    or with respect to the Leased Premises.

Tenant shall at its own cost and expense take all action as shall be necessary
for the "cleanup" of any environmental contamination to the Leased Premises
caused by Tenant, its agents, employees, contractors, or invitees, including all
removal and remedial action in accordance with all applicable Environmental
Laws. Further, Tenant shall pay or cause to be paid at its own expense all clean
up, administrative, and enforcement cost of all

                                       25

<PAGE>

applicable governmental agencies which may be asserted against the Leased
Premises with respect to any environmental contamination caused by Tenant. All
costs, including without limitation, those costs set forth above, damages,
liabilities, claims, and expenses (including reasonable attorney's fees and
expenses) which are incurred by Landlord with respect to environmental
contamination caused by Tenant, without the requirement of waiting for the
ultimate outcome of any litigation, claim, or other proceedings, shall be paid
by Tenant to Landlord, as incurred, within ten (10) days after notice from
Landlord, itemizing the amount incurred to the date of such notice. Tenant shall
provide Landlord with copies of all environmental permits from any governmental
agency or organization as to Tenant's storage, processing, or locating of
Hazardous Materials on or about the Leased Premises.

         Notwithstanding anything herein to the contrary, Tenant shall not be
responsible for any Hazardous Materials in or environmental contamination to the
Leased Premises that exists prior to Tenant's possession of the Leased Premises.

                  (C)      DEFINITION OF ENVIRONMENTAL LAWS. The term
"Environmental Law" means any and all federal, state, regional, county, or local
laws, statutes, rules, regulations or ordinances; and any state, regional,
county or local statute, law, rule, regulation or ordinance relating to public
health, safety or the discharges, emissions, or disposal to air, water, land or
groundwater, to the withdrawal or use of groundwater, to the use, handling or
disposal or polychlorinated biphenyls (PCBs), asbestos, or urea formaldehyde, to
the treatment, storage, disposal or management of Hazardous Materials, to
exposure to Hazardous Materials, to the transportation, storage, disposal,
management or release or

                                       26

<PAGE>

gaseous or liquid substances, and any regulation, order, injunction, judgment,
declaration, notice or demand issues thereunder.

                  (D)      DEFINITION OF HAZARDOUS MATERIALS. The term
"Hazardous Materials" means any hazardous, toxic or dangerous materials,
substances, chemicals, waste or pollutants that is from time to time defined by
pursuant to or is regulated under any of the Environmental Laws, including
without limitation, asbestos, PCBs petroleum derivatives or by-products, other
hydrocarbons, including without limitation any material, substances, pollutants
or wastes that are defined as a hazardous waste under RCRA or defined as a
hazardous substance under CERCLA.

                  (E)      DEFINITION OF ENVIRONMENTAL CONTAMINATION. The term
"Environmental Contamination" shall be defined by applicable federal and state
cleanup standards.

         26.      ENVIRONMENTAL REQUIREMENTS OF LANDLORD. In the event any
environmental survey, assessment, or inspection is required for any construction
permit, Landlord shall be responsible for the cost of such survey, assessment,
or inspection. Landlord shall remove any existing known Hazardous Materials from
the Leased Premises prior to delivery of possession thereto to Tenant. Landlord
has provided Tenant with a Phase I Environmental Assessment of the Leased
Premises at the time of the execution of this Lease, and Landlord agrees to
indemnity Tenant from any and all claims, actions, liens, demands, costs,
damages, expenses, fines, and judgments (including legal costs and attorneys
fees) as a result of any conditions identified in the Phase I Environmental
Assessment.

                                       27

<PAGE>

         27.      EXPANSIONS TO BUILDING(S) ON LEASED PREMISES. Upon written
request from Tenant (the "Expansion Notice") received by Landlord at any time
prior to the expiration of the Initial Term, and provided that Tenant exercises
its option to renew for the 3 Year Option and 5 Year Option Term, Landlord
agrees, at Landlord's expense, to use diligent, good faith efforts to develop
schematic plans and specifications ("Plans") for an addition to the building(s)
on the Leased Premises (the "Expansion") that are satisfactory to Tenant.
Tenant's Expansion Notice must contain details as to the desired size of the
Expansion, which must be at least 80,000 square feet, and not more than 160,000
square feet, the desired location of the Expansion, current and historical
financial condition of Tenant, and other reasonable details necessary to allow
Landlord to develop Plans for the Expansion and obtain financing for the
Expansion. The Plans for the Expansion must, in all events, be consistent with
and must not exceed plans and specifications for a normal and customary,
non-airconditioned, typical distribution/warehouse center.

         Landlord shall have ninety (90) days from the date of receipt of the
Expansion Notice to develop the Plans for the Expansion. Landlord and Tenant
must agree upon the Plans for the Expansion. If Landlord and Tenant cannot agree
on the Plans for Expansion, Landlord will have thirty (30) days after the date
Landlord and Tenant determine they cannot agree on the Plans for Expansion
within which to develop alternative Plans for the Expansion. If Landlord and
Tenant still do not agree on the alternative Plans for Expansion, either side
may cancel the Expansion Notice, and Tenant may cancel its exercise of the
option to renew for the first Option Term, provided such Cancellation Notice of
the exercise of the First Option is delivered within sixty (60) days of the date
that either Landlord or Tenant cancels the Expansion Notice.

                                       28

<PAGE>

         The additional rent payable by Tenant for the Expansion shall range
between Two and 68/100 Dollars ($2.68) per square foot and Three and 00/100
Dollars ($3.00) per square foot. The rental amount for the Expansion shall be
agreed upon by Landlord and Tenant prior to the commencement of construction of
the Expansion, and be subject to the six percent (6%) increases in rent from the
previous rent amount at every time the rent in paragraph 6 increases, i.e., 5
years, 10 years, 15 years after the beginning of the Initial Term. (For example,
if an Extension occurs in year 3 of the Initial Term, and the rent is agreed
upon at $2.80 per square foot, the rent for the Expansion will increase to $2.97
per square foot in year 2 of the 3 Year Option Term, even though it is only 2
years after the Expansion. The next rent increase will occur in year 10 of the
Lease (during the first 5 Year Option Term). Upon the agreement of Landlord and
Tenant as to the Plans for the Expansion and the rental amount to be paid
therefor, the parties shall execute an addendum to this Lease setting forth
relevant terms relating to the Expansion.

         After the Addendum to the Lease has been signed, Landlord will have a
period of sixty (60) days from such date to obtain financing for the Expansion,
if necessary, and engage a contractor or construction manager for construction
of the Expansion, and ninety (90) days from the Date the Addendum To Lease is
signed to begin work on the Expansion construction. Except as provided in the
paragraph below, if Landlord has not begun the Expansion construction within
ninety (90) days of the date of the Addendum to the Lease, Tenant shall be
allowed to give Landlord notice of its intent to terminate this Lease ("Notice
Of Intent To Terminate"). Except as provided in the paragraph below, if Landlord
has not

                                       29

<PAGE>

begun construction of the Expansion within forty-five (45) days after the date
of the Notice Of Intent To Terminate, Tenant shall be allowed to terminate this
Lease, irrespective of and in addition to the rights under paragraph 28, without
payment of a termination fee by giving its notice to terminate ("Notice To
Terminate") to Landlord of its right to exercise termination of the Lease, one
(1) year after the date of the Notice To Terminate, provided that such notice is
delivered to Landlord within ninety (90) days after the expiration of the
forty-five (45) days after the date of the Notice of Intent to Terminate.

         Notwithstanding any of the above referenced provisions as to
termination of the Lease to the contrary, Tenant shall not have the right to
terminate the Lease if the reason that Landlord has not begun construction of
the Expansion within the time allowed is because Landlord's lender has declined
to make a loan for construction of the Expansion because of the creditworthiness
(or lack thereof) of Tenant.

         If the Expansion Notice is not given during the Initial Term, none of
the provisions of this paragraph 27 shall apply, but Landlord and Tenant agree
to negotiate in good faith toward any expansion plans of Tenant after the
Initial Term.

         28.      LEASE TERMINATION RIGHTS OF TENANT. The Tenant shall have the
right during the Initial Term, and any Option Terms to terminate the Lease by
giving not less than six (6) months written advance notice to Landlord ("Notice
Of Intent To Terminate") of the desired termination date, and paying a lease
termination fee as a condition precedent to the termination of the Lease
equivalent to the greater of: (i) $450,240.00; or (ii) what the rent would be
for the next twelve (12) months after the desired termination date ("Lease
Termination Fee"), payable in cash to Landlord at the time of the Lease
termination ("Termination Rights") and as a condition precedent to the Lease
termination.

                                       30

<PAGE>

         At any time after an Expansion Notice, as defined in paragraph 27, the
Lease Termination Rights would continue to apply. However, the Lease Termination
Fee shall change and would be the greater of $675,360.00; or (ii) the equivalent
to what the rent would be for the next eighteen (18) months after the desired
termination date, payable in cash to Landlord at the time of the Lease
termination and as a condition precedent to the Lease termination.

         29.      MISCELLANEOUS.

                  (A)      ENTIRE AGREEMENT. This Sublease Agreement contains
the entire agreement and understanding between the parties. There are no oral
understandings, terms or conditions and no party hereto has relied upon any
representations, express or implied, not contained in this Sublease Agreement.
This Sublease Agreement cannot be changed or supplemented orally, but only by an
agreement in writing and signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.

                  (B)      RECORDATION. Landlord or Tenant may record a Short
Form Sublease, at the expense of whomever wants to record such instrument.

                  (C)      BINDING EFFECT. All covenants, conditions and
obligations contained herein or implied by law shall be binding upon the
Landlord, the Tenant, their heirs, successors, legal representatives and
assigns; provided, however, in the event of a sale of the Leased Premises,
Landlord shall be personally relieved of all obligations hereunder and the
Tenant bound to such new owner as a Landlord.

                                       31

<PAGE>

                  (D)      GOVERNING LAW. This Sublease Agreement is prepared
and entered into with the intention that the laws of the State of Tennessee
shall govern its construction.

                  (E)      CAPTIONS. The captions or headings in this Sublease
Agreement are for convenience only and in no way define, limit or describe the
scope or intent of any provision of this Sublease Agreement.

                  (F)      SEVERABILITY. If any clause, paragraph or part of
this Sublease Agreement, for any reason, should be finally adjudged by any court
of competent jurisdiction to be unconstitutional or invalid, such judgment shall
not affect, impair or invalidate the remainder of this Sublease Agreement but
shall be confined in its operation to the clause, sentence, paragraph or any
part thereof directly involved in the controversy in which such judgment has
been rendered. The unconstitutionality, invalidity or ineffectiveness of any one
or more provisions or covenants contained in this Lease Agreement shall not
relieve the Tenant from liability to make the payments of Rent provided for in
this Sublease Agreement.

                  (G)      RULES OF CONSTRUCTION. The normal rules of
construction which require the terms of an agreement to be construed most
strictly against the drafter of such agreement are hereby waived since each
party has been represented by counsel or has had the opportunity to be
represented by counsel in the drafting and negotiations of this Sublease
Agreement.

                  (H)      DUPLICATE ORIGINALS. This Sublease Agreement may be
executed in one or more counterparts, each of which should be deemed an
original, but all of which together shall constitute but one and the same
instrument.

                                       32

<PAGE>

                  (I)      ATTORNEY'S FEES. In the event of any dispute or claim
arising out of the terms and provisions of this Agreement, the parties agree
that the prevailing party in any court proceeding shall be entitled to recover,
in addition to any award made in such proceeding, from the non-prevailing party,
the prevailing party's reasonable attorney's fees.

                  (J)      ESTOPPEL CERTIFICATE. Tenant shall at any time upon
not less than thirty (30) days' prior written notice from Landlord, execute and
deliver to Landlord a statement in writing certifying that: (i) this Sublease is
unmodified and is in full force and effect and the date to which Rent or other
payments are paid in advance; (ii) to Tenant's knowledge, there are not any
uncured defaults by Landlord under this Sublease, or specifying any defaults if
any such defaults are claimed; and (iii) any such other information as may
reasonably be required by Landlord.

                  (K)      NO LANDLORD LIENS. Landlord hereby waives and
releases any Landlord's liens it might have in Tenant's personal property
located on the Leased Premises.

         IN WITNESS WHEREOF, the parties have executed this Lease Agreement, to
be effective the day and date first shown above.

                            SEPARATE SIGNATURE PAGES

                                       33

<PAGE>

                              SIGNATURE PAGE 1 OF 2

                                          LANDLORD:

                                          PHOENICIAN PROPERTIES

                                          By: /s/ Larry P. Becker
                                             ----------------------------------

                                          Title: Managing Partner
                                                -------------------------------

                                                         (NOTARY SEAL)

STATE OF FLORIDA  :
COUNTY OF OKALOOSA :

         Personally appeared before me Larry P. Becker, with whom I am
personally acquainted, and who acknowledged that he/she executed the within
instrument for the purposes therein contained, and who further acknowledged that
he/she is the Managing Partner of PHOENICIAN PROPERTIES, a Tennessee General
Partnership, and is authorized by said partnership to execute this instrument on
its behalf.

         Witness my hand, at office this the 13TH day of May, 2002.

                                             /s/ Nicole Julia Merritt
                                            ---------------------------------
                                                      Notary Public

My Commission Expires: 3-29-2003.

                                       34

<PAGE>

                              SIGNATURE PAGE 2 OF 2

                                      TENANT:

                                      KIRKLAND'S, INC.

                                      By:  /s/ Robert E. Alderson
                                           ------------------------------
                                      Title:  Pres/CEO
                                            -----------------------------

STATE OF TENNESSEE :
COUNTY OF MADISON  :

         Personally appeared before me Robert E. Alderson, with whom I am
personally acquainted, and who acknowledged that he/she executed the within
instrument for the purposes therein contained, and who further acknowledged that
he/she is the Pres./CEO of KIRKLAND'S, INC., a Tennessee Corporation, and is
authorized by said corporation to execute this instrument on its behalf.

         Witness my hand, at office this the 15TH day of May, 2002.

                                         /s/ Teresa A. Riley
                                        --------------------------------------
                                        Notary Public

My Commission Expires: Feb. 23, 2005.
                                                     (NOTARY SEAL)

                                       35

<PAGE>
                                   EXHIBIT A

                                LEASED PREMISES

LOCATED IN JACKSON, MADISON COUNTY, TENNESSEE:

Beginning at the intersection of the North margin of Highway 70 with the East
margin of Bobrick Drive, which point is the Southwest corner of the herein
described tract:

Thence, with the East margin of Bobrick Drive the following calls:

North 08 degrees 04 minutes 49 seconds East 300.00 feet; North 82 degrees
04 minutes 48 seconds West 69.87 feet; North 08 degrees 04 minutes 49 seconds
East 892.36 feet to the Southwest corner of the property of Madison County,
Tennessee;

Thence, with the South line of the property of Madison County, Tennessee, South
81 degrees 55 minutes 11 seconds East 1000.00 feet to the Northwest corner of
the property of Allsteel Inc.;

Thence, with the West line of the property of Allsteel Inc., South 08 degrees
04 minutes 49 seconds West 956.62 feet to a point in the North margin of
Highway 70;

Thence, with the North margin of Highway 70, South 83 degrees 52 minutes
11 seconds West 959.49 feet to the point of beginning, containing 24.37 acres.

                                       36
<PAGE>

                                   EXHIBIT B

                                  RENOVATIONS

Kerr Building Renovations:

NEW DOCK POSITIONS

-None at this time

MECHANICAL:
-raise the existing HVAC discharge plenums to a level above proposed storage
height.
-demolish existing warehouse ceiling sprinkler system. Replace 96,000 SF of
area with a system designed to provide a density of .495 GPM/sq. ft. over the
most remote 2000 sq. ft. with a 500 GPM hose allowance. This design is for 24'
high storage of Class IV non-encapsulated commodities, using conventional
pallets, with single or double row racks having 8' aisle widths. The remainder
of the warehouse is sprinkled with a system of at least the density set forth
above.

                                       37
<PAGE>
                                   EXHIBIT C

                                    RESTATED
                         PAYMENT IN LIEU OF TAX SUMMARY
                               [JANUARY 15, 2002]

     1. DEFINITIONS. For purposes of this summary, the following terms or
phrases shall have the meanings assigned in this paragraph:

          (a) "Base Period" means the time period beginning January 1, 2001
and ending June 30, 2010.

          (b) "Board" means the Industrial Development Board of the City of
Jackson.

          (c) "Company" means Kirkland's, Inc., a corporation organized under
the laws of the State of Tennessee.

          (d) "Company Site" means (1) the Southwind Property, (2) the
Phoenician Property, or (3) any other warehouse or distribution facility
constructed after January 1, 2001 on the Phase III Land and, with respect to
each of the foregoing, either owned by the Company or leased by the Company (as
Lessee) for purposes of conducting the Company's business operations.

          (e) "Equipment" means all industrial machinery and equipment
purchased by the Company and installed by the Company at a Company Site during
the Base Period.

          (f) "Equipment Component" means the aggregate items of Equipment
installed during any single calendar year during the Base Period.

          (g) "Headquarters Facility" means a new office headquarters building
which will serve as the principal executive offices of the Company to be
constructed on any site in Jackson, Tennessee during the Base Period.

          (h) "Phase I Project" means the Southwind Property.

          (i) "Phase II Project" means collectively the Southwind Property
together with the Southwind Building Addition.

          (j) "Phase III Improvements" means either of (i) the Southwind
Building Addition, (ii) the Phoenician Building Addition, or (iii) a proposed
warehouse or distribution facility, or facilities, and related building
improvements to be constructed on the Phase III Land, and in each case, by or
for the benefit of the Company and used exclusively by the Company in
conducting its business operations.

          (k) "Phase III Land" means that certain unimproved parcel of land
presently owned by Madison County, Tennessee consisting of approximately 22.02
acres which lies immediately north of and contiguous to the Southwind Property.
<PAGE>
                  (l)  "Phase III Project" means and includes the Phase III
         Improvements.

                  (m)  "Phase III Project Notice" means written notice from the
         Company to the Board given at least forty-five (45) days prior to the
         date that the Company intends to identify the property or facility
         which will constitute the Phase III Project.

                  (n)  "Phase IV Improvements" means either of (i) the
         Southwind Building Addition, (ii) the Phoenician Building Addition, or
         (iii) a distribution facility to be constructed by or for the benefit
         of the Company on the Phase III Land to be used exclusively by
         the Company in conducting its business operations.

                  (o)  "Phoenician Property" means the Land owned currently by
         Phoenician Partners, being approximately 24.37 acres.

                  (p) "Phoenician Building" means the building structure
         presently situated on the Phoenician Property as of the date hereof,
         consisting of approximately 168,000 square feet.

                  (q)  "Phoenician Building Addition" means a proposed
         addition to the Phoenician Building, consisting of a minimum addition
         of 50,000 square feet and having a minimum cost of $1,000,000.00.

                  (r)  "PILOT" means payments to the City of Jackson, Tennessee
         and Madison County, Tennessee in lieu of ad valorem taxes ordinarily
         assessable against the Equipment and the Phase I Project, Phase II
         Project, Phase III Project, and Phase IV Project and/or Headquarters
         Facility, as applicable.

                  (s)  "Southwind" means Southwind Properties, a Tennessee
         partnership.

                  (t)  "Southwind Building" means the building structure
         situated on the Southwind Property as of the date hereof, consisting
         of approximately 303,000 square feet.

                  (u)  "Southwind Building Addition" means a proposed addition
         to the Southwind Building, consisting of a minimum addition of 50,000
         square feet and having a minimum cost of $1,000,000.00.

                  (v)  "Southwind Property" means that certain parcel of land
         owned by the Board consisting of approximately 28 acres and currently
         leased to Southwind by the Board pursuant to Lease Agreement dated
         February 4, 2000, and as amended by "Restated Lease Agreement" dated
         December 29, 2000.

         2.  PHASE I AND PHASE II PROJECT - PILOT. If Southwind Building is
acquired by the Company or leased exclusively by the Company (as Lessee) and
used exclusively by the Company in conducting its business operations no later
than June 30, 2002, then the PILOT incentive for the Phase I Project will be
based upon the following PILOT schedule:

                                       2
<PAGE>
                  (A) PHASE I PILOT

<Table>
<Caption>
                  YEAR                                                    PILOT PERCENTAGE
                  ----                                                    ----------------
                  <S>                                                     <C>
                   1  Year of Occupancy by the Company                           0%
                   2                                                            25%
                   3                                                            25%
                   4                                                            25%
                   5                                                            25%
                   6                                                            25%
                   7                                                            25%
                   8                                                            25%
                   9                                                            25%
                  10                                                            25%
                  11                                                            25%
                  12                                                            25%
                  13                                                            25%
                  14                                                            25%
                  15                                                            25%
</Table>

                  (b)  PHASE II PILOT. If the Southwind Building Addition is
         completed and occupied exclusively by the Company on or prior to June
         30, 2005, then the PILOT schedule for the Phase II Project shall be
         revised and shall be as follows:

<Table>
<Caption>
                  YEAR                                                   PILOT PERCENTAGE
                  ----                                                   ----------------
                  <S>                                                    <C>
                   1  Year of Completion of Southwind Building Addition        25%
                   2                                                           25%
                   3                                                           25%
                   4                                                           25%
                   5                                                           25%
                   6                                                           25%
                   7                                                           25%
                   8                                                           25%
                   9                                                           25%
                  10                                                           25%
                  11                                                           25%
                  12                                                           25%
                  13                                                           25%
                  14                                                           25%
                  15                                                           25%
</Table>

                                       3
<PAGE>
         3. PHOENICIAN PROPERTY - PILOT. If the Phoenician Property is acquired
by the Company or leased exclusively by the Company (as Lessee) and used
exclusively by the Company in conducting its business operations no later than
June 30, 2002, then the PILOT incentive for the Phoenician Property will be
based upon the following PILOT schedule:

<Table>
<Caption>
         YEAR                                         PILOT PERCENTAGE
         ----                                         ----------------
         <S>                                          <C>
         1 Year of Occupancy by the Company                 25%
         2                                                  25%
         3                                                  25%
         4                                                  25%
         5                                                  25%
         6                                                  25%
         7                                                  25%
         8                                                  25%
         9                                                  25%
         10                                                 25%
         11                                                 25%
         12                                                 25%
         13                                                 25%
         14                                                 25%
         15                                                 25%
</Table>

         4. PHASE III PROJECT - PILOT. Upon the Company identifying the Phase
III Project pursuant to the Phase III Project Notice, the PILOT incentive for
the Phase III Project will be as follows:

                  (a) If on or prior to June 30, 2006, the Phase III Project
consists of Phase III Improvements upon the Phase III Land having minimum
square footage of 75,000 square feet (the "First Phase III Improvement"), the
PILOT incentive for the Phase III Project will be based upon the following
PILOT schedule:

<Table>
<Caption>
                  YEAR                                                              PILOT PERCENTAGE
                  ----                                                              ----------------
                  <S>                                                               <C>
                  1 Year of Completion of the First Phase III Land Improvement            25%
                  2                                                                       25%
                  3                                                                       25%
                  4                                                                       25%
                  5                                                                       25%
                  6                                                                       25%
                  7                                                                       25%
                  8                                                                       25%
                  9                                                                       25%
                  10                                                                      25%
                  11                                                                      25%
                  12                                                                      25%
                  13                                                                      25%
                  14                                                                      25%
                  15                                                                      25%
</Table>

                                       4
<PAGE>
                  (b) If by June 30, 2008, there is constructed additional
facilities added to the First Phase III Improvements, with such additions being
in a minimum square footage of 100,000 square feet (the Second Phase III
Improvements), then the PILOT incentive shall be revised for the Phase III
Project as follows:

<Table>
<Caption>
                  YEAR                                                              PILOT PERCENTAGE
                  ----                                                              ----------------
                  <S>                                                               <C>
                  1 Year of Completion of the Second Phase III Improvements               25%
                  2                                                                       25%
                  3                                                                       25%
                  4                                                                       25%
                  5                                                                       25%
                  6                                                                       25%
                  7                                                                       25%
                  8                                                                       25%
                  9                                                                       25%
                  10                                                                      25%
                  11                                                                      25%
                  12                                                                      25%
                  13                                                                      25%
                  14                                                                      25%
                  15                                                                      25%
</Table>

                  (c) If by June 30, 2009, there is constructed additional
facilities, to be added to the First Phase III Improvements and Second Phase
III Improvements, with such additions having a minimum square footage of
100,000 square feet (the "Third Phase III Improvements"), then, in such event
the PILOT schedule for the Phase III Project shall be revised and shall be as
follows:

<Table>
<Caption>
                  YEAR                                                              PILOT PERCENTAGE
                  ----                                                              ----------------
                  <S>                                                               <C>
                  1 Year of Completion of the Third Phase III Improvements                25%
                  2                                                                       25%
                  3                                                                       25%
                  4                                                                       25%
                  5                                                                       25%
                  6                                                                       25%
                  7                                                                       25%
                  8                                                                       25%
                  9                                                                       25%
                  10                                                                      25%
                  11                                                                      25%
                  12                                                                      25%
                  13                                                                      25%
                  14                                                                      25%
                  15                                                                      25%
</Table>

                                       5
<PAGE>
                  (d) If on or prior to June 30, 2006, the Company designates
         either the Southwind Building Addition or the Phoenician Building
         Addition as the Phase III Project, then in such event, the PILOT
         incentive for the Phase III Project will be based upon the following
         PILOT schedule:

<Table>
<Caption>
                  YEAR                                         PILOT PERCENTAGE
                  ----                                         ----------------
                  <S>                                          <C>
                  1 Year of Occupancy of Phase III Project           25%
                  2                                                  25%
                  3                                                  25%
                  4                                                  25%
                  5                                                  25%
                  6                                                  25%
                  7                                                  25%
                  8                                                  25%
                  9                                                  25%
                  10                                                 25%
                  11                                                 25%
                  12                                                 25%
                  13                                                 25%
                  14                                                 25%
                  15                                                 25%
</Table>

         5. EQUIPMENT - PILOT. For each Equipment Component installed on a
Company Site, the PILOT schedule for such Equipment Component shall be as
follows:

<Table>
<Caption>
                  YEAR                                                              PILOT PERCENTAGE
                  ----                                                              ----------------
                  <S>                                                               <C>
                  1 Year of Installation of Equipment Component                            0%
                  2                                                                        0%
                  3                                                                        0%
                  4                                                                        0%
                  5                                                                        0%
                  6                                                                       35%
                  7                                                                       35%
                  8                                                                       55%
                  9                                                                       55%
                  10                                                                      75%
                  11                                                                      75%
                  12                                                                      90%
                  13                                                                      90%
                  14                                                                      90%
                  15                                                                     100%
</Table>

                                       6
<PAGE>
         6. HEADQUARTERS FACILITY - PILOT. In the event there is constructed a
Headquarters Facility, the PILOT schedule for the Headquarters Facility shall
be as follows:

<Table>
<Caption>
         YEAR                                                              PILOT PERCENTAGE
         ----                                                              ----------------
         <S>                                                               <C>
         1 Year of Completion of Headquarters Facility                            0%
         2                                                                        0%
         3                                                                        0%
         4                                                                        0%
         5                                                                        0%
         6                                                                       35%
         7                                                                       35%
         8                                                                       55%
         9                                                                       55%
         10                                                                      75%
         11                                                                      75%
         12                                                                      90%
         13                                                                      90%
         14                                                                      90%
         15                                                                     100%
</Table>

                                       7<PAGE>

                                                                   EXHIBIT 10.18

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

                           STOCK REPURCHASE AGREEMENT

                                      Among

                                KIRKLAND'S, INC.

                                       AND

                       THE OTHER PARTIES SPECIFIED HEREIN

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

                            Dated as of May 31, 2002

<PAGE>

                           STOCK REPURCHASE AGREEMENT

                  THIS STOCK REPURCHASE AGREEMENT (the "Agreement") is made as
of the 31st day of May, 2002, by and among

                  -        KIRKLAND'S INC., a corporation incorporated under
                           Tennessee law ("Kirkland's"),

                  -        KIRKLAND HOLDINGS L.L.C. ("Holdings"),

                  -        SSM VENTURE PARTNERS, L.P.,

                  -        JOSEPH R. HYDE, III,

                  -        JOHNSTON C. ADAMS, JR.,

                  -        JOHN H. PONTIUS,

                  -        CT/KIRKLAND EQUITY PARTNERS, L.P.,

                  -        R-H CAPITAL PARTNERS, L.P.,

                  -        CAPITAL RESOURCE LENDERS II, L.P.,

                  -        ALLIED CAPITAL CORPORATION,

                  -        CRESCENT/MACH I PARTNERS, L.P.,

                  -        THE MARLBOROUGH CAPITAL INVESTMENT FUND, L.P.,

                  -        GLOBAL PRIVATE EQUITY II LIMITED PARTNERSHIP,

                  -        ADVENT DIRECT INVESTMENT PROGRAM LIMITED PARTNERSHIP,

                  -        ADVENT PARTNERS LIMITED PARTNERSHIP,

                  -        ROBERT E. KIRKLAND,

                  -        THE ROBERT E. KIRKLAND ANNUITY TRUST - 2002, and

                  -        ROBERT ALDERSON.

                  WHEREAS, on April 23, 2002, Kirkland's filed a registration
statement on Form S-1 with the U.S. Securities and Exchange Commission in
connection with an initial public offering of Kirkland's common stock (the
offering pursuant to such registration statement, as the same may be hereafter
amended, including any related registration statement filed pursuant to Rule 462
under the Securities Act of 1933, as amended, being referred to as the "IPO");

                  WHEREAS, in connection with the IPO, Kirkland's desires to
repurchase certain shares of capital stock from the parties to this Agreement
immediately prior to the conversion of

<PAGE>

Kirkland's convertible preferred stock into shares of Common Stock of
Kirkland's, as more particularly set forth in this Agreement; and

                  WHEREAS, in connection with the IPO, the parties to this
Agreement desire to sell certain shares of capital stock to Kirkland's
immediately prior to the conversion of Kirkland's convertible preferred stock
into shares of Common Stock of Kirkland's, as more particularly set forth in
this Agreement.

                  NOW THEREFORE, in consideration of the premises and the mutual
terms and provisions hereof, the parties hereto hereby agree as follows:

                  1.       Sale and Purchase of the Repurchased Shares.

                           (a)      Purchase Price. Effective immediately prior
to the conversion (the "Conversion") that will take place upon the initial
closing of the IPO (the "IPO Closing"), of shares of Kirkland's Class A
Preferred Stock, Class B Preferred Stock and Class D Preferred Stock, in each
case into Kirkland's Common Stock, each party to this Agreement other than
Kirkland's (the "Redeemed Shareholders") hereby sells, assigns, delivers and
transfers to Kirkland's, and effective immediately prior to the Conversion,
Kirkland's hereby repurchases and acquires from each of the Redeemed
Shareholders, all right, title and interest in and to the shares of capital
stock indicated on Schedule 1 attached hereto (collectively, the "Redeemed
Shares") (or such lesser amount of such shares as may be provided for pursuant
to Section 1(b) hereof), for a purchase price determined in accordance with
Section 1(c) hereof. The purchase price for the Redeemed Shares shall be paid by
Kirkland's at the IPO Closing by wire transfer of immediately available funds to
the Wire Account (as defined below) of each of the Redeemed Shareholders. Except
with respect to Robert E. Kirkland and his annuity trust, the number of shares
to be sold by the Redeemed Shareholders hereunder will depend on the amount of
gross proceeds to be received by Kirkland's at the IPO Closing, as more
particularly described in Section 1(b) below. The term "Wire Account" shall mean
with respect to each Redeemed Shareholder, the account capable of accepting wire
transfers of immediately available funds designated by such Redeemed Shareholder
to Kirkland's in writing not later than three (3) days prior to the IPO Closing.

                           (b)      Order of Priority in Applying Kirkland's Net
IPO Proceeds. The net proceeds to Kirkland's from the IPO Closing (after
underwriting discounts and commissions and after offering expenses) shall be
applied in the following declining order or priority:

                                    (i)      to purchase all of the capital
stock in Kirkland's owned by Robert Kirkland and his annuity trust, as set forth
beside his name in the stock chart set forth in Schedule 1 hereto;

                                    (ii)     to pay all accrued and unpaid
consulting payments to Robert Kirkland pursuant to the Consulting Agreement
between Robert Kirkland and Kirkland's dated June 12, 1996;

                                    (iii)    to repay all of Kirkland's
outstanding subordinated debt, including accrued and unpaid interest;

                                      -2-
<PAGE>

                                    (iv)     to purchase all of the outstanding
Class C Preferred Stock of Robert Alderson, as set forth beside his name in the
stock chart set forth in Schedule 1 hereto;

                                    (v)      to pay all accrued and unpaid
compensation payments to Carl Kirkland and Robert Alderson pursuant to their
employment agreements with Kirkland's (or pursuant to any Special Bonus
Agreement(s) entered into by either of them and Kirkland's), to the extent such
compensation payments had previously been subordinated to Kirkland's senior and
subordinated debt.

                                    (vi)     to establish a working capital
reserve of up to $1 million to be retained by the Company and used from time to
time for general corporate and working capital purposes.

                                    (vii)    to purchase the shares of Class A
Preferred Stock indicated in the stock chart set forth in Schedule 1 hereto. The
amount of Class A Preferred Stock to be repurchased from each Redeemed
Shareholder will be equal to the lesser of (1) all shares of all Class A
Preferred Stock held by such Redeemed Shareholder, (2) the number of shares or
dollar value (including accrued dividends) of shares of Class A Preferred Stock
indicated for such Redeemed Shareholder in Schedule 1 hereto, including any
limitations described in the footnotes thereto, or (3) the number of shares of
Class A Preferred Stock having a value (including accrued dividends) equal to
such Redeemed Shareholder's pro rata share of the lesser of (A) the value of all
equity securities (other than Class C Preferred Stock) in the Company held by
all Redeemed Shareholders (other than Robert Alderson and Robert Kirkland and
his annuity trust), or (B) the amount available for the purchase of Class A
Preferred Stock pursuant to this paragraph (vi). For purposes of this Agreement,
each Redeemed Shareholder's "pro rata share" shall be equal to the quotient of
the value of all equity securities (other than Class C Preferred Stock) in the
Company held by such Redeemed Shareholder, divided by the value of all equity
securities (other than Class C Preferred Stock) in the Company held by all
Redeemed Shareholders (other than Robert Alderson and Robert Kirkland and his
annuity trust).

                                    (viii)   except as otherwise provided in
Section 1(d) below, to purchase shares of Class D Preferred Stock indicated in
the stock chart set forth in Schedule 1 hereto. The amount of Class D Preferred
Stock to be repurchased from each Redeemed Shareholder will be equal to the
lesser of (1) all shares of all Class D Preferred Stock held by such Redeemed
Shareholder, (2) the number of shares or dollar value (including accrued
dividends) of shares of Class D Preferred Stock indicated for such Redeemed
Shareholder in Schedule 1 hereto, including any limitations described in the
footnotes thereto, or (3) the number of shares of Class D Preferred Stock having
a value (including accrued dividends) equal to such Redeemed Shareholder's pro
rata share of the lesser of (A) the value of all equity securities (other than
Class C Preferred Stock) in the Company held by all Redeemed Shareholders (other
than Robert Alderson and Robert Kirkland and his annuity trust), or (B) the
amount available for the purchase of Class D Preferred Stock pursuant to this
paragraph (vii).

                                    (ix)     to repay all amounts outstanding
under Kirkland's revolving credit facility.

                           (c)      Purchase Price.

                                    (i)      The purchase price for each share
of Class A Preferred Stock sold pursuant to this Agreement shall be an amount
equal to (x) 100% minus the underwriting discount in the IPO, expressed as a
percentage (the "Net Percentage"), multiplied by (y) the sum of (1) the stated
value of such share, plus (2) all dividends with respect to such share accrued
and unpaid through the IPO Closing. For purposes of illustration, in the event
the underwriting discount in the IPO were 7% and the stated value plus accrued
dividends per share

                                      -3-
<PAGE>

for each share of Class A Preferred Stock were $16.59, the Net Percentage would
be 93% and the purchase price for each share of Class A Preferred Stock would be
$15.43.

                                    (ii)     The purchase price for each share
of Class B Preferred Stock sold pursuant to this Agreement shall be an amount
equal to the Net Percentage multiplied by the sum of (x) the stated value of
such share, plus (y) all dividends with respect to such share accrued and unpaid
through the IPO Closing.

                                    (iii)    The purchase price for each share
of Class C Preferred Stock sold pursuant to this Agreement shall be an amount
equal to 100% of the stated value of each such share.

                                    (iv)     The purchase price for each share
of Class D Preferred Stock sold pursuant to this Agreement shall be an amount
equal to the Net Percentage multiplied by the sum of (x) the stated value of
such share, plus (y) all dividends with respect to such share accrued and unpaid
through the IPO Closing.

                                    (v)      The purchase price for each share
of Common Stock sold pursuant to this Agreement shall be an amount equal to the
Net Percentage multiplied by the initial public offering price of Common Stock
in the IPO.

                           (d)      Allocation of Proceeds for Sales in the IPO
by Certain Shareholders. The rights of the Redeemed Shareholders (other than
shareholders who are holders of Kirkland's subordinated notes (the "Sub Debt
Holders") and other than Robert Kirkland and his annuity trust) to have their
shares of Class A Preferred Stock and Class D Preferred Stock redeemed pursuant
to this agreement shall be contingent upon the Sub Debt Holders' right to be
granted the ability to sell shares of Common Stock held by such Sub Debt Holders
as selling shareholders at the IPO Closing such that each of the Sub Debt
Holders will have the opportunity to sell not less than approximately the same
percentage (within a variance not to exceed 1.5%) of the aggregate value of
their capital stock in Kirkland's (determined immediately prior to the
effectiveness of the IPO by reference to the initial public offering price in
the IPO), through a combination of the purchase price being paid pursuant to
this Agreement and the net proceeds from sales of shares of Common Stock at the
IPO Closing, than any other stockholder (other than Robert Kirkland and his
annuity trust) who holds shares of capital stock of Kirkland's with an aggregate
value of at least $5 million (as determined by reference to the initial public
offering price).

For avoidance of doubt, if the Sub Debt Holders are not granted the opportunity
to sell all of the shares of the capital stock of Kirkland's held by them either
as selling shareholders in the IPO or as Redeemed Shareholders hereunder and are
instead only permitted to sell some lesser percentage of the aggregate value of
their shares of Kirkland's's capital stock, then no other stockholder of
Kirkland's (with the exception of Robert Kirkland and his annuity trust and the
holders of Class C Preferred Stock) holding shares of capital stock of
Kirkland's with an aggregate value of at least $5 million (as determined by
reference to the initial public offering price) shall have any shares redeemed
pursuant to this agreement or sell any shares at the IPO Closing except for
redemptions and/or sales which shall yield such stockholder in the aggregate a
percentage of the aggregate value of the shares of Kirkland's capital stock held
by such stockholder equal to no more than 1.5% in excess of the percentage of
the aggregate value of the shares of the Kirkland's capital stock that the Sub
Debt Holders were granted the opportunity to have redeemed under this Agreement
or to sell in the IPO.

                                      -4-
<PAGE>

                           (e)      Transfer/Surrender of Stock Certificates.
Contemporaneously with the execution of this Agreement, each of the Redeemed
Shareholders has deposited with StockTrans, Inc., the Custodian (the
"Custodian") under the Power of Attorney and Custody Agreements dated on or
about the date of this Agreement and executed by the Redeemed Shareholders (the
"POA and Custody Agreements"), one or more certificates representing each such
Redeemed Shareholder's Redeemed Shares. Each of the Redeemed Shareholders hereby
represents and warrants to Kirkland's that each certificate delivered has (i)
been duly executed and is in negotiable form or (ii) is accompanied by a duly
executed stock power or powers in blank. The Custodian shall hold the
certificates representing the Redeemed Shares, and shall dispose of them in
accordance with the terms of the POA and Custody Agreements.

                           (f)      Share Lot Notification. In the event a
Redeemed Shareholder owns shares of the same class with different holding
periods or tax bases, such Redeemed Shareholder may notify the Custodian and
Kirkland's in writing which lots of shares of each class of such Redeemed
Shareholder's Redeemed Shares will be sold hereunder, and such lots of shares
shall be those that are sold hereunder.

                  2.       Termination.

                           (a)      If the IPO Closing does not occur on or
before December 31, 2002, this Agreement shall terminate and shall be of no
further force or effect, and no sales and purchases of Kirkland's capital stock
will be deemed to have taken place pursuant to this Agreement.

                           (b)      Except as provided in Section 2(a), the
Redeemed Shareholders shall have no right to decline to sell their Redeemed
Shares as contemplated by this Agreement.

                  3.       Kirkland Holdings L.L.C.

                           (a)      As of the date hereof, the members of
Holdings are: SSM Venture Partners, L.P.; Joseph R. Hyde, III; Johnston C.
Adams, Jr.; John H. Pontius; CT/Kirkland Equity Partners, L.P.; R-H Capital
Partners, L.P.; Crescent/Mach I Partners, L.P.; The Marlborough Capital
Investment Fund, L.P.; Global Private Equity II Limited Partnership; Advent
Direct Investment Program Limited Partnership; and Advent Partners Limited
Partnership (collectively, the "Members"). In accordance with the Operating
Agreement of Holdings dated as of June 12, 1996, as amended, each of the Members
hereby agrees to sell to Kirkland's in accordance with this Agreement the shares
of Class A Preferred Stock indicated on Schedule 1 attached hereto.

                           (b)      Unless Holdings shall have been liquidated
prior thereto, then immediately prior to the sale and purchase of the
Repurchased Shares under this Agreement, Holdings shall distribute all of its
assets to its Members in accordance with each such Member's percentage interest
in Holdings.

                  4.       Waiver of Registration Rights Agreement. Each of the
Redeemed Shareholders agrees that his or its execution of this Agreement shall
be deemed to satisfy in full, and constitutes a waiver of, his or its rights
under that certain Registration Rights Agreement dated June 12, 1996 by and
among Kirkland's and certain shareholders of Kirkland's with respect to the IPO,
as same may have been or may hereafter be amended or amended and restated

                                      -5-
<PAGE>

(as so amended or amended and restated, the "Registration Rights Agreement")
(collectively, the "IPO Registration Rights Waiver"). Notwithstanding the
foregoing, if this Agreement is terminated for any reason prior to the IPO
Closing, the IPO Registration Rights Waiver shall be null and void. Nothing in
this Agreement shall be construed as a waiver of any rights that the parties
hereto may have pursuant to the Registration Rights Agreement with respect to
any future registration of Kirkland's securities other than the IPO.

                  5.       Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, except with respect to any Redeemed
Shareholder from whom Kirkland's has obtained a written waiver or consent.

                  6.       Notices. All notices that are required or permitted
hereunder shall be in writing and shall be sufficient if personally delivered or
sent by mail, facsimile message or by a nationally recognized overnight delivery
courier. Any notices shall be deemed given upon the earlier of the date when
received at, or the third day after the date when sent by registered or
certified mail or the day after the date when sent by overnight delivery courier
to, the address or fax number set forth below, unless such address or fax number
is changed by notice to the other party hereto:

                  If to Kirkland's, to:

                           Kirkland's, Inc.
                           P.O. Box 7222
                           Jackson, TN 38303-7222
                           Attention: Robert Alderson
                           Fax Number: (731) 664-9345

                  With a copy to:

                           Pepper Hamilton LLP
                           3000 Two Logan Square
                           Philadelphia, PA 19103
                           Attention: Robert A. Friedel, Esq.
                           Fax Number: (215) 981-4750

                  If to Holdings, Global Private Equity II Limited Partnership,
                  Advent Direct Investment Program Limited Partnership and
                  Advent Partners Limited Partnership:

                           c/o Advent International Corporation
                           75 State Street
                           Boston, MA  02109
                           Attention: David M. Mussafer
                           Fax Number: (617) 951-0568

                                      -6-
<PAGE>

                  With a copy to:

                           Pepper Hamilton LLP
                           3000 Two Logan Square
                           Philadelphia, PA 19103
                           Attention: Robert A. Friedel, Esq.
                           Fax Number: (215) 981-4750

                  If to Robert Alderson, to:

                           Kirkland's, Inc.
                           P.O. Box 7222
                           Jackson, TN 38303-7222
                           Attention: Robert Alderson
                           Fax Number: (731) 664-9345

                  With a copy to:

                           Baker, Donelson, Bearman & Caldwell
                           20th Floor
                           First Tennessee Building
                           165 Madison Avenue
                           Memphis, TN 38103
                           Attention: Robert Walker, Esq.
                           Fax Number: (901) 577-2303

                  If to Robert E. Kirkland or The Robert E. Kirkland Annuity
                  Trust - 2002, to:

                           Robert E. Kirkland
                           760 Sanders Chapel Road
                           Union City, Tennessee 38261
                           Fax Number: (731) 885-7850

                  With a copy to:

                           Warner Law Firm PLC
                           308 West Church Street
                           Union City, Tennessee 38261
                           Attention: John L. Warner, Jr., Esquire
                           Fax Number: (731) 885-2440

                  If to Capital Resource Lenders II, L.P., Allied Capital
                  Corporation or The Marlborough Capital Investment Fund, L.P.,
                  to:

                           Capital Resource Lenders II, L.P.
                           85 Merrimac Street
                           Suite 200
                           Boston, MA 02114
                           Attention: Alexander S. McGrath
                           Fax Number: (617) 723-9819

                                      -7-
<PAGE>

                           Allied Capital Corporation
                           1919 Pennsylvania Ave N.W., 3rd Floor
                           Washington, DC 20006
                           Attention: Gay Truscott
                           Fax Number: (202) 659-2053

                           The Marlborough Capital Investment Fund, L.P.
                           9 Newbury Street
                           Boston, MA 02116
                           Attention: Margaret Lanoix
                           Fax Number: (617) 421-9631

                  With a copy to:

                           Testa, Hurwitz & Thibeault, LLP
                           High Street Tower
                           125 High Street
                           Boston, MA 02110
                           Attention: Andrew E. Taylor, Jr., Esquire
                           Fax Number: (617) 248-7100

                  If to SSM Venture Partners, L.P., to:

                           SSM Venture Partners, L.P.
                           845 Crossover Lane
                           Suite 140
                           Memphis, TN 38117
                           Attention: R. Wilson Orr, III
                           Fax Number: (901) 767-1135

                  With a copy to:

                           Bass Berry & Sims PLC
                           315 Deaderick Street
                           AmSouth Center, Suite 2700
                           Nashville, TN 37238-3001
                           Attn: Howard H. Lamar III
                           Fax Number: (615) 742-2709

                  If to Joseph R. Hyde, III, Johnston C. Adams, Jr. or John H.
                  Pontius, to:

                           c/o John H. Pontius
                           Pittco Management, LLC
                           6075 Poplar Avenue
                           Suite 335
                           Memphis, TN 38119
                           Fax Number: (901) 683-3147

                                      -8-
<PAGE>

                  If to CT/Kirkland Equity Partners, L.P., to:

                           CT/Kirkland Equity Partners, L.P.
                           75 Fifth Avenue
                           22nd Floor
                           New York, NY 10017
                           Attention: John Oswald, Managing Director
                           Fax Number: (212) 277-1011

                  With a copy to:

                           LeBoeuf, Lamb, Greene & MacRae, L.L.P.
                           125 West 55th Street
                           New York, NY 10019
                           Attention: John R. Fallon, Partner
                           Fax Number: (212) 424-8500

                  If to R-H Capital Partners, L.P., to:

                           R-H Capital Partners, L.P.
                           303 Peachtree Road, 25th Floor
                           Atlanta, GA 30308
                           Attention: Ken Millar
                           Fax Number: (404) 588-7501

                  With a copy to:

                           R-H Capital Partners, L.P.
                           333 Peach Road
                           Atlanta, GA 30326
                           Attention: David Prince, Esquire
                           Fax Number: (404) 926-5229

                  If to Crescent/Mach I Partners, L.P., to:

                           c/o TCW Asset Management Company
                           200 Park Avenue
                           Suite 2200
                           New York, NY  10168-0228
                           Attention: Matthew Miller
                           Fax Number: (212) 771-4159

                                      -9-
<PAGE>

                  With a copy to:

                           c/o TCW Asset Management Company
                           200 Park Avenue
                           Suite 2200
                           New York, NY  10168-0228
                           Attention:  Rich Kurth, Esquire
                           Fax Number: (212) 771-4089

                  Notice of any change in any such contact information shall
also be given in the manner set forth above. Whenever the giving of notice is
required, the giving of such notice may be waived by the party entitled to
receive such notice.

                  7.       Counterparts. This Agreement may be executed in two
or more counterparts and by facsimile, each of which shall be binding as of the
date first written above, and all of which shall constitute one and the same
instrument. Each such copy shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.

                  8.       Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  9.       Governing Law. This Agreement shall be governed by
and construes in accordance with the laws of the State of Tennessee.

                  10.      Further Assurances. Each of the Redeemed Shareholders
shall do or cause to be done such further acts and things and deliver or cause
to be delivered such additional assignments, agreements, documents, powers, and
instruments as may reasonably be required to carry into effect the purposes of
this Agreement

                  11.      Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

                  12.      Entire Agreement. Other than the POA and Custody
Agreement, this Agreement is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

                  13.      Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, personal representatives, successors and assigns.

                                      -10-
<PAGE>

                  IN WITNESS WHEREOF, this Stock Repurchase Agreement has been
executed as of the date and year first above written.

                                          KIRKLAND'S, INC.

                                          By:
                                             ----------------------------------
                                             Name:
                                             Title:

                                          KIRKLAND HOLDINGS L.L.C.

                                          By:
                                             ----------------------------------
                                             Name:
                                             Title:

                                          SSM VENTURE PARTNERS, L.P.

                                          By:
                                             ----------------------------------
                                             Name:
                                             Title:

                                          -------------------------------------
                                                   JOSEPH R. HYDE, III

                                          -------------------------------------
                                                 JOHNSTON C. ADAMS, JR.

                                          -------------------------------------
                                                     JOHN H. PONTIUS

                                      -11-
<PAGE>

                                          CT/KIRKLAND EQUITY PARTNERS, L.P.

                                          By:
                                             ----------------------------------
                                             Name:
                                             Title:

                                          R-H CAPITAL PARTNERS, L.P.

                                          By:
                                             ----------------------------------
                                             Name:
                                             Title:

                                          CAPITAL RESOURCE LENDERS II, L.P., by
                                          CAPITAL RESOURCE PARTNERS II, L.P.,
                                          its General Partner

                                          By:
                                             ----------------------------------
                                             Name:
                                             Title:

                                          ALLIED CAPITAL CORPORATION

                                          By:
                                             ----------------------------------
                                             Name:
                                             Title:

                                          CRESCENT/MACH I PARTNERS, L.P., by
                                          TCW ASSET MANAGEMENT COMPANY,
                                          its investment manager

                                          By:
                                             ----------------------------------
                                             Name:
                                             Title:

                                      -12-
<PAGE>

                                          THE MARLBOROUGH CAPITAL
                                          INVESTMENT FUND, L.P., by
                                          MARLBOROUGH CAPITAL
                                          MANAGEMENT, L.P., its general partner

                                          By:
                                             ----------------------------------
                                             Margaret Lanoix, its
                                             authorized partner

                                          GLOBAL PRIVATE EQUITY II LIMITED
                                          PARTNERSHIP

                                          By:
                                             ----------------------------------
                                             Name:
                                             Title:

                                          ADVENT DIRECT INVESTMENT PROGRAM
                                          LIMITED PARTNERSHIP

                                          By:
                                             ----------------------------------
                                             Name:
                                             Title:

                                          ADVENT PARTNERS LIMITED PARTNERSHIP

                                          By:
                                             ----------------------------------
                                             Name:
                                             Title:

                                          --------------------------------------
                                                   ROBERT E. KIRKLAND

                                          THE ROBERT E. KIRKLAND ANNUITY
                                          TRUST - 2002

                                          By:
                                             ----------------------------------
                                             Robert E. Kirkland, Trustee

                                         --------------------------------------
                                                   ROBERT ALDERSON

                                      -13-
<PAGE>

                                   SCHEDULE 1

                                   STOCK CHART

<TABLE>
<CAPTION>
                                                 Class A                           Class C
                                                Preferred         Class B         Preferred         Class D
            Name                                  Stock       Preferred Stock       Stock       Preferred Stock   Common Stock(1)
            ----                                ----------    ---------------     ----------    ---------------   ---------------
<S>                                             <C>           <C>                 <C>           <C>               <C>
Kirkland Holdings, Inc.                              --                  --               --            --                   --

SSM Venture Partners, L.P.                      312,808*(2)              --               --         1,219(2)                --

Joseph R. Hyde, III                             146,622*(2)              --               --           590(2)                --

Johnston C. Adams, Jr                             4,880*(3)              --               --            --                   --

John H. Pontius                                      --                  --               --            --                   --

CT/Kirkland Equity Partners, L.P.               390,992*                 --               --         1,781                   --

R-H Capital Partners, L.P.                      146,472*                 --               --           571                   --

Capital Resource Lenders II, L.P.                    --                  --               --         1,146                   --

Allied Capital Corporation                           --                  --               --           917                   --

Crescent/Mach I Partners, L.P.                   48,724*                 --               --           190                   --

The Marlborough Capital Investment               19,550*                 --               --            --                   --
Fund, L.P.

Global Private Equity II Limited              1,355,238*                 --               --        13,510                   --
Partnership

Advent Direct Investment Program                528,740*                 --               --         2,060                   --
Limited Partnership

Advent Partners Limited Partnership              48,724*                 --               --           403                   --

Robert Kirkland                                      --             347,745          246,250         1,353                   --

The Robert E. Kirkland Annuity                       --                  --               --            --               10,727(4)
Trust - 2002                                                                                                             pre-split
Robert Alderson                                      --                  (5)          54,218            --                   --
</TABLE>

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

*        The number of shares of Class A Preferred Stock held by such Member
         indirectly through Holdings.

(1)      Including common stock issuable upon the exercise of warrants pursuant
to irrevocable exercise notices previously delivered by the Redeemed
Shareholders to Kirkland's.

(2)      The maximum amount of all classes of preferred stock to be repurchased
from this shareholder is the amount having a value equal to one-third (1/3) of
the value of all equity securities held by this shareholder, with the value
determined on the basis of the initial public offering price in the IPO.

                                      -14-
<PAGE>

(3)      The maximum amount of all classes of preferred stock to be repurchased
from this shareholder is the amount having a value equal to one-quarter (1/4) of
the value of all equity securities held by this shareholder, with the value
determined on the basis of the initial public offering price in the IPO.

(4)      The 10,727 shares of common stock for The Robert E. Kirkland Annuity
Trust - 2002 is based upon the number of shares of common stock before the split
of Kirkland's common stock which will take place after the date hereof but
before the IPO Closing, and will be adjusted to give effect to the split of
Kirkland's common stock which will take place after the date hereof but before
the IPO Closing.

(5)      Class B Preferred Stock having a value (including accrued dividends) of
$10,000.00 will be repurchased from this shareholder.

                                      -15-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00040-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00040-of-00352.parquet"}]]