Document:

Ex-10.2

 

Exhibit 10.2

AMENDMENT TO SERVICE AGREEMENTS

     THIS AMENDMENT (“Amendment”) entered into this 15th day of March, 2005, by and between
TRANSCONTINENTAL GAS PIPE LINE CORPORATION, a Delaware corporation, hereinafter referred to as
Seller, first party, and PIEDMONT NATURAL GAS COMPANY, INC., hereinafter referred to as Buyer,
second party,

W I T N E S S E T H:

     WHEREAS, Seller and Buyer entered into that certain Service Agreement dated February 1, 1992
under Seller’s Rate Schedule FT pursuant to which Seller provides firm transportation service for
Buyer of a Transportation Contract Quantity of 212,382 dt per day (Seller’s Contract No. 1003702),
and Seller and Buyer entered into that certain Service Agreement dated February 1, 1992 under
Seller’s Rate Schedule FT pursuant to which Seller provides firm transportation service for Buyer
of a Transportation Contract Quantity of 6,935 dt (Seller’s Contract No. 1003045), and Seller and
Buyer entered into that certain Service Agreement dated February 1, 1992 under Seller’s Rate
Schedule FT pursuant to which Seller provides firm transportation service for Buyer of a
Transportation Contract Quantity of 10,764 dt (Seller’s Contract No. 1003922), and Seller and Buyer
entered into that certain Service Agreement dated February 1, 1992 under Seller’s Rate Schedule FT
pursuant to which Seller provides firm transportation service for Buyer of a Transportation
Contract Quantity of 145,935 dt (Seller’s Contract No. 1003717) (such Service Agreements
hereinafter referred to individually as “Service Agreement #1003702”, “Service Agreement #1003045”,
“Service Agreement #1003922”, and “Service Agreement #1003717”, respectively, and collectively as
the “Service Agreements”); and

     WHEREAS, Section 22 of the General Terms and Conditions of Seller’s FERC Gas Tariff (“Section
22”) permits Seller and Buyer to mutually agree to consolidate (and terminate, as necessary)
multiple service agreements into a single service agreement provided certain conditions are
satisfied; and

     WHEREAS, Buyer has requested consolidation of the Service Agreements, and Seller has
determined that such consolidation is permitted under Section 22 subject to the receipt of Natural
Gas Act section 7 certificate amendment and abandonment authorization from the Federal Energy
Regulatory Commission (“Commission”) in a manner acceptable to Seller and Buyer (“Regulatory
Authorizations”); and

     WHEREAS, Seller and Buyer have agreed to accomplish that consolidation by amending Service
Agreement #1003702 to include Buyer’s Transportation Contract Quantity from Service Agreement
#1003045, Service Agreement #1003922 and Service Agreement #1003717, and terminating Service
Agreement #1003045, Service Agreement #1003922 and Service Agreement #1003717, following receipt of
the Regulatory Authorizations; and

 

 

     WHEREAS, the Commission has granted the Regulatory Authorizations by order issued January 28,
2005 in Docket No. CP05-23-000, which Regulatory Authorizations are final and no longer subject to
rehearing.

     NOW, THEREFORE, Seller and Buyer agree as follows:

1. Effective 9:00 a.m. Central Clock Time on April 1, 2005 (the “Effective Date”), Article I of
Service Agreement #1003702 is hereby deleted in its entirety and replaced by the following:

“ARTICLE I

GAS TRANSPORTATION SERVICE

1. Subject to the terms and provisions of this agreement and of Seller’s
Rate Schedule FT, Buyer agrees to deliver or cause to be delivered to
Seller gas for transportation and Seller agrees to receive, transport and
redeliver natural gas to Buyer or for the account of Buyer, on a firm
basis, up to a Transportation Contract Quantity “TCQ”) of 376,016 dt per
day.

2. Transportation service rendered hereunder shall not be subject to
curtailment or interruption except as provided in Section 11 and, if
applicable, Section 42 of the General Terms and Conditions of Seller’s
FERC Gas Tariff.”

2. Effective 9:00 a.m. Central Clock Time on the Effective Date, Article IV of Service
Agreement #1003702 is hereby deleted in its entirety and replaced by the following:

“ARTICLE IV

TERM OF AGREEMENT

     This agreement shall be effective as of February 1, 1992 and shall remain in
force and effect until 9:00 a.m. Central Clock Time February 1, 2013, and
thereafter until terminated by Seller or Buyer upon at least three (3) years
written notice; provided, however, this agreement shall terminate immediately and,
subject to the receipt of necessary authorizations, if any, Seller may discontinue
service hereunder if (a) Buyer, in Seller’s reasonable judgment fails to
demonstrate credit worthiness, and (b) Buyer fails to provide adequate security in
accordance with Section 32 of the General Terms and Conditions of Seller’s Volume
No. 1 Tariff. As set forth in Section 8 of Article II of Seller’s August 7, 1989
revised Stipulation and Agreement in Docket Nos. RP88-68 et.al. (a) pregranted
abandonment under Section 284.221(d) of the Commission’s Regulations shall not
apply to any long term conversions from firm sales service to transportation
service under Seller’s Rate Schedule FT and (b) Seller shall not exercise its
right to terminate this service agreement as it applies to

 

 

transportation service resulting from conversions from firm sales service so long
as Buyer is willing to pay rates no less favorable than Seller is otherwise able
to collect from third parties for such service.

3. Effective 9:00 a.m. Central Clock Time on the Effective Date, Exhibit A of Service Agreement
#1003702 is hereby deleted in its entirety and replaced by the Exhibit A attached hereto.

4. Effective 9:00 a.m. Central Clock Time on the Effective Date, Exhibit B of Service Agreement
#1003702 is hereby amended to include the following additional Points of Delivery, at Seller’s
available pipeline pressure except where noted. Deliveries to or for the account of Buyer at the
points of delivery shall be subject to the limits of the Delivery Point Entitlement (“DPEs”) of the
entities receiving the gas at the points of delivery, as such DPEs are set forth in Seller’s FERC
Gas Tariff, as amended from time to time.

     Gaffney Meter Station, located at milepost 1233.66 on Seller’s main transmission line
in Cherokee County, South Carolina.

     Tidewater Meter Station, located at milepost 1287.10 on Seller’s main transmission
line in Iredell County, North Carolina, at the discharge side of Seller’s Compressor
Station No. 150.

     Bethany Meter and Regulator Station, located at milepost 1365.98 on Seller’s main
transmission line adjacent to North Carolina State Highway No. 65, (approximately 3.2 miles
southwest from Seller’s Compressor Station No. 160), Rockingham County, North Carolina.

     Reidsville Meter and Regulator Station located at milepost 1377.73 on Seller’s main
transmission line on the northeasterly side of State Highway No. 87, approximately 6.5
miles northwesterly from the City of Reidsville, Rockingham County, North Carolina.

     Draper Meter and Regulator Station, located at milepost 1386.34 on Seller’s main
transmission line on the southeasterly side of State Highway No. 770, approximately 7 miles
easterly of the City of Leaksville, Rockingham County, North Carolina.

     Spray Meter Station, located at milepost 1382.53 on Seller’s main transmission line
adjacent to Transco’s Dan Diver Meter Station, approximately 0.5 miles south of Dan River,
Rockingham County, North Carolina.

     Pleasant Hill Meter Station, located on Seller’s Virginia-North Carolina sales
lateral, adjacent to State Highway No. 48 approximately 1.5 miles west of the intersection
of State Highway No. 48 and U.S. Highway No. 301 Northampton County, North Carolina. At
the Pleasant Hill Meter Station, upon at least twelve hours advance written notice from
Buyer to Seller’s Gas Control Department, Seller will deliver gas at a pressure not less
than 650 pounds per square inch gauge (psig) during the period October 1 through April 1
and not less

 

 

than 550 pounds psig during the period May 1 through September 30, or at such other
pressures as may be agreed upon in the day-to-date operations of Buyer and Seller.

     Conway Meter Station, located on Seller’s Virginia-North Carolina sales lateral, on
State Highway No. 35 approximately 0.5 miles north of the intersection of State Highway No.
35 and State Highway No. 1535, Northampton County, North Carolina.

     Murfreesboro Meter Station, located on Seller’s Virginia-North Carolina sales lateral,
adjacent to State highway No. 1159, just east of the Northampton-Hertford County line,
Hertford County, North Carolina.

     Ahoskie Meter Station, located at the terminus of Seller’s Virginia-North Carolina
sales lateral approximately 1.2 miles west of Ahoskie, Hertford County, North Carolina.

5. Except as specifically amended hereby, all of the terms and conditions of Service Agreement
#1003702 shall remain in full force and effect.

6. Effective 9:00 a.m. Central Clock Time on the Effective Date, Service Agreement #1003045,
Service Agreement #1003922 and Service Agreement #1003717 are hereby terminated and shall be of no
further force or effect from and after that date. Termination of Service Agreement #1003045,
Service Agreement #1003922 and Service Agreement #1003717 as set forth herein shall not relieve
either party of rights, duties or obligations under Service Agreement #1003045, Service Agreement
#1003922 and Service Agreement #1003717 that accrue during or relate to the period prior to the
termination date.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be signed by their
respective officers or representatives thereunto duly authorized.

	 	 	 	 	 
	TRANSCONTINTENAL GAS PIPE

	 	PIEDMONT NATURAL GAS	 	 
	LINE CORPORATION (“Seller”)

	 	COMPANY, INC. (“Buyer”)	 	 
	 
	 	 	 	 
	By /s/ Frank J. Ferazzi

	 	By /s/ Franklin H. Yoho	 	 
	 

	 	 	 	 
	Frank J. Ferazzi

	 	Franklin H. Yoho	 	 
	Vice President

	 	Senior Vice President	 	 
	

	 	Commercial Operations<PAGE>

                                                                   EXHIBIT 10.20

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT is entered into effective as of June 1, 2005,
between Jack Lewis ("Executive") and KIRKLAND'S, INC., a Tennessee corporation
with principal offices in Jackson, Tennessee (the "Company").

                                     RECITAL

      Executive and the Company desire to memorialize the terms of Executive's
employment with the Company as Chief Executive Officer and President of the
Company. The Company operates a chain of retail stores (the "Stores"). The
parties have agreed concerning the terms of Executive's employment.

      NOW, THEREFORE, in consideration of the premises and the parties' mutual
covenants, it is agreed:

      1. Employment; Scope of Duties. The Company hereby employs Executive, and
Executive accepts employment as Chief Executive Officer and President. Executive
shall report to the Board of Directors of the Company, and shall perform those
duties as from time to time assigned by the Board of Directors of the Company.

      2. Term. The term of this Agreement shall commence on June 1, 2005 and
continue until terminated as provided herein.

      3. Compensation and Benefits.

      (a) Salary and Annual Bonus. As base compensation for the services
      rendered hereunder to the Company, Executive shall be paid an annual base
      salary of $375,000, payable in accordance with the Company's standard
      payroll practices as in effect from time to time. The Board's Compensation
      Committee will review the base salary amount annually. In addition,
      beginning in fiscal 2005, Executive's target annual bonus opportunity will
      be $375,000, with $250,000 of that first year's bonus guaranteed. The
      bonus criteria, and the actual amount of any annual bonus (other than the
      first year's guaranteed amount), shall be determined by the Board of
      Directors Compensation Committee. The Board's Compensation Committee will
      review the bonus annually in accordance with the Company's Management
      Bonus Plan, as in effect from time to time.

      (b) Stock Options. Effective upon the commencement of employment, the
      Company will grant Executive an incentive stock option for the purchase of
      200,000 shares of Kirkland's common stock, with the option price set as
      the closing price for the stock on the date of the award. The option will
      vest over four years based on Executive's continued employment by the
      Company over that period. The remaining terms of this option will be
      determined by the Company's Board and set forth in a separate stock option
      agreement.

<PAGE>

      In addition, provided Executive is still employed in good standing with
      the Company, the Company will, during 2006, grant Executive an additional
      incentive stock option for the purchase of 100,000 shares of Kirkland's
      common stock, with the stock price set as the closing price of the stock
      on the date of the award. The vesting schedule for this option will be the
      same as for the first option, and the remaining terms of this second
      option will be determined by the Company's Board and set forth in a
      separate stock option agreement.

      (c) Health/Life Insurance. Subject to the terms of the Company's group
      health insurance plans and policies from time to time in effect, Executive
      and his dependents are eligible for group health coverage, having such
      benefits as from time to time provided by the Company in its absolute
      discretion, together with the maximum life insurance coverage available
      for senior executives of the Company under such policies (up to such limit
      as from time to time set by the Company in the Company's absolute
      discretion). Executive understands and agrees that it is Executive's
      responsibility to promptly fill out and submit any insurance
      application(s) necessary for such coverage and that the Company has no
      control over any requirement by the insurer for medical "underwriting".
      The Company shall have no liability resulting from denial of coverage by
      the insurer or for the denial of one or more claims thereunder. Executive
      is solely responsible to make valid claims for benefits thereunder in
      order to generate benefits due and owing. Employee shall also be eligible
      to participate in the Company's voluntary life insurance program.

      (d) Company Car or Allowance. Executive shall receive a $600 per month car
      allowance.

      (e) Vacation and Other Benefits. Executive shall have such other benefits
      as from time to time provided by the Company in the Company's absolute
      discretion, including but not limited to paid vacation, and the right to
      participate in the Company's 401(k) plan, deferred compensation plan, and
      Employee Stock Purchase Plan, all on the terms applicable to such
      benefits. Executive is entitled to four (4) weeks of paid vacation in
      2005, and four (4) weeks of paid vacation each year thereafter. Accrued
      but unused vacation may not be carried over to a subsequent calendar year
      and will not be payable upon any termination of employment. After three
      years of service, Executive will be entitled to six (6) weeks of paid
      vacation each year.

      4. Expense Reimbursement.

      (a) Relocation Expenses. The Company agrees to reimburse Executive for
      reasonable moving expenses arising out of Executive's relocation to
      Jackson, Tennessee, as approved in advance by the Company. Upon
      Executive's purchase of a home in Jackson, Tennessee, the Company will
      reimburse Executive's closing costs (excluding any "points" charged on a
      mortgage), up to $5,000. The Company will also reimburse Executive for
      reasonable temporary living expenses for hotel, necessary travel, and
      meals for a reasonable period until Executive purchases a home in the
      Jackson, Tennessee vicinity.

                                      -2-

<PAGE>

      (b) Standard Business Expenses. Executive shall be reimbursed for those
      reasonable expenses (as determined by the Company in accordance with then
      existing policies) necessarily incurred by Executive in the performance of
      the duties herein as are specifically approved by the Company and as
      verified by vouchers, receipts, or other evidence of expenditure and
      business necessity as from time to time required by the Company.

      5. Other Employment; Conduct. Executive agrees to devote all working time
and efforts to performing the duties required hereunder so as to maximize the
sales volume and profitable operation of the Stores. Executive shall not engage
in other employment or become involved in other business ventures requiring
Executive's time, absent the prior written consent of the Board of Directors of
the Company. Executive shall at all times conduct such duties and his personal
affairs in a manner that is satisfactory to the Company and so as to not in any
manner injure the reputation of or unfavorably reflect upon the Kirkland's
organization or any Store or element thereof or any member thereof or third
persons or entities connected therewith.

      6. Confidentiality. Executive understands and agrees that information
developed by or disclosed to Executive in the performance of his duties
hereunder (including, without limitation, information relating to vendor
relations, inventory procurement and management, inventory distribution,
marketing and sales, and store operations) and any other business or technical
information or trade secret of the Company or the Stores (collectively, the
"Information") is proprietary and confidential and represents a valuable,
special and unique asset of the Company and the Stores, the disclosure of which
would cause continuing and irreparable injury to the Company and the Stores.
Accordingly, Executive agrees not to divulge in any manner, at any time, for any
purpose other than the exercise of his duties hereunder in the best interest of
the Company and the Stores, any of the Information.

      7. Restrictive Non-Competition Covenant. Executive agrees that during his
employment by the Company and for the Restriction Period, Executive will not,
directly or indirectly, own, manage, operate, control, be employed by,
participate in, lend money, advise or furnish services or information of any
kind (including consulting services) to, be compensated in any manner by, or be
connected in any way with the management, ownership, operation or control of any
business similar to the type of retail business conducted by the Company or as
operated by the Stores during the term of this Agreement, at the time of
termination of this Agreement, or during the Restriction Period. Executive
understands and acknowledges that the type of retail business conducted by the
Company is national in scope, and that similar businesses include national or
regional chain retail operations (including "big box" operators, discounters,
and "specialty stores" operating in malls, strip centers, and freestanding
locations) specializing in or having a substantial inventory mix involving gifts
and home decor, including but not limited to decorative accessories, home
furnishings, and related items.

As used herein, the term "Restriction Period" means a period of three years
after the end of the term of this Agreement, but the Restriction Period shall be
extended for the period, if any, that Executive is in default under the
restrictions in this Agreement.

During the term hereof and for the Restriction Period, Executive agrees to (a)
notify any prospective employer of the existence of this restrictive
non-competition covenant, and (b) notify

                                      -3-

<PAGE>

the Company of Executive's commencement of employment with any other employer,
along with the identity of such new employer.

      8. Covenant Not to Hire Company Employees. During his employment by the
Company and for the Restriction Period, Executive agrees not to enter into or
engage in any discussion or negotiation, or assist in such actions to encourage
or cause present employees of the Company to disassociate their employment
relationship with the Company and induce such present employees to go into the
employment of any other entity. This restriction shall not apply to any
personnel that Executive hires from Garden Ridge during his employment with the
Company.

      9. Termination.

      (a) Definitions. As used herein, the term "Average Compensation" means an
      amount equal to Executive's average annual cash compensation received with
      respect to the three immediately preceding years of employment with the
      Company (or such lesser time period as Executive has been employed with
      the Company), paid over a period of one year in substantially equal
      installments on a biweekly basis.

      As used herein, the term "Cause" means the occurrence of any of the
      following, as determined in good faith by the Board of Directors of the
      Company: (i) the death of Executive; (ii) any physical or mental condition
      reasonably expected to or which does prevent the Executive from performing
      any essential element of his job for more than 90 days; (iii) alcohol
      abuse or use of controlled drugs (other than in accordance with a
      physician's prescription); (iv) illegal conduct or gross misconduct of
      Executive which is materially and demonstrably injurious to the Company,
      its affiliates or subsidiaries including, without limitation, fraud,
      embezzlement, theft or proven dishonesty in the course of his employment;
      (v) conviction of a misdemeanor involving moral turpitude or a felony;
      (vi) the entry of a guilty or nolo contendere plea to a misdemeanor
      involving moral turpitude or a felony, (vii) material breach of any
      agreement with, or duty owed to, the Company or Stores, or (viii)
      Executive's failure, refusal or inability to perform, in any material
      respect, his duties to the Company or Stores, which failure continues for
      more than fifteen (15) days after written notice thereof from the Company.

      As used herein, the term "Good Reason" means the occurrence of any of the
      following: (i) the assignment to Executive of any duties inconsistent with
      Executive's position, authority, duties or responsibilities, or any other
      action by the Company which results in a material diminution in such
      position, authority, duties or responsibilities (excluding any isolated
      action not taken in bad faith); (ii) a reduction by the Company in
      Executive's annual salary, provided that if the salaries of substantially
      all of the Company's senior executive officers (including the Company's
      President and CEO) are contemporaneously and proportionately reduced, a
      reduction in the Executive's salary will not constitute "Good Reason"
      hereunder; (iii) the failure by the Company, without Executive's consent,
      to pay to him any portion of his current compensation, except pursuant to
      a compensation deferral elected by Executive, other than an isolated and
      inadvertent failure which is remedied by the Company promptly after
      receipt thereof given by Executive; (iv) the relocation of the Company's
      principal executive offices to a location more than 35 miles

                                      -4-

<PAGE>

      from the location of such offices on the Effective Date, or the Company's
      requiring the Executive to be based anywhere other than the Company's
      principal executive offices, except for required travel on the Company's
      business; or (v) the failure of the Company to obtain a satisfactory
      agreement from any successor to assume and agree to perform this
      Agreement; provided, however, that the foregoing events or conditions will
      constitute "Good Reason" hereunder only if the Executive provides the
      Company with written objection to the event or condition within 60 days
      following the occurrence thereof, the Company does not reverse or
      otherwise cure the event or condition within 30 days of receiving that
      written objection and the Executive resigns his employment within 90 days
      following the expiration of that cure period.

      As used herein, the term "Health Insurance Benefit" means, a one-year
      waiver of the portion of the applicable premium otherwise payable for
      COBRA coverage equal to the amount the Company had contributed toward the
      cost of group health insurance for the Executive and his eligible
      dependents immediately prior to his termination.

      (b) Termination Rights. The Company may terminate Executive's employment
      hereunder at any time for Cause (as defined below), and either the Company
      or Executive may terminate Executive's employment hereunder at any time
      without Cause. Upon termination, Executive shall be entitled only to such
      compensation and benefits described in this Section 9. The Company will,
      in any event, have such rights and remedies as may be available to it
      under this Agreement, at law, in equity (to include injunctive relief) or
      otherwise, for any breach by the Executive of any material provision of
      this Agreement. The provisions of this Section 9 shall survive the
      termination of Executive's employment hereunder.

      (c) Termination For Cause; Resignation Without Good Reason. If the
      Executive's employment with the Company ceases for any reason other than
      those described below in Section 9(d) (including, without limitation,
      termination by the Company for Cause or resignation by the Executive
      without Good Reason), the Company's obligation to the Executive will be
      limited solely to the payment of accrued and unpaid annual salary and
      benefits through the date of such termination. All salary and benefits
      will cease at the time of such termination, subject to the terms of any
      benefits or compensation plans then in force and applicable to Executive,
      and the Company shall have no further liability or obligation by reason of
      such termination.

      (d) Company Terminates Executive Without Cause or Executive Resigns With
      Good Reason. If the Company terminates the Executive's employment without
      Cause or if the Executive resigns with Good Reason, the Company will pay
      Executive the Average Compensation and provide him the Health Insurance
      Benefit. The severance benefits described in this paragraph will be paid
      in lieu of, and not in addition to, any other severance arrangement
      maintained by the Company. Notwithstanding the foregoing, no amount will
      be paid or benefit provided under this paragraph unless Executive executes
      and delivers to the Company a release substantially identical to that
      attached hereto as Exhibit I in a manner consistent with the requirements
      of the Older Workers Benefit Protection Act.

                                      -5-

<PAGE>

      10. Injunctive Relief. Executive understands and agrees that any breach by
him of Sections 6, 7 or 8 of this Agreement will cause continuing and
irreparable injury to the Company for which monetary damages would not be an
adequate remedy. Executive shall not, in any action or proceeding to enforce any
of the provisions of this Agreement, assert the claim or defense that such an
adequate remedy at law exists. In the event of such breach by Executive, the
Company shall have the right to enforce such sections by seeking injunctive or
other relief in any court and this Agreement shall not in any way limit remedies
of law or in equity otherwise available to the Company.

      11. Acknowledgements. Executive acknowledges that Sections 6, 7 and 8 of
this Agreement are reasonable and necessary to protect the legitimate interests
of the Company and its affiliates and that the duration and geographic scope of
those provisions are reasonable given the nature of this Agreement and the
position Executive will hold within the Company. Executive further acknowledges
that Sections 6, 7 and 8 of this Agreement are included herein in order to
induce the Company to employ him and to enter into this Agreement and that the
Company would not have entered into this Agreement or otherwise employed
Executive in the absence of those provisions. Executive further acknowledges and
agrees that Sections 6, 7 and 8 of this Agreement will survive the termination
of this Agreement or his employment hereunder and will apply without regard to
whether any termination of his employment is initiated by the Company or the
Executive, and without regard to the reason for that termination.

      12. Waiver of Breach. Any waiver by the Company of a breach of any
provision hereof shall not operate as or constitute a waiver of any of the terms
hereof with regard to any subsequent breach.

      13. Assignment. Neither this Agreement nor any rights or obligations
hereunder may be assigned except by the Company to a business entity which is a
successor to the Company by merger, stock exchange, consolidation, or other
reorganization, or to an entity which results from a purchase or sale or other
transfer or transaction involving third parties, or except to an entity owned or
controlled by the principals of the Company. This Agreement (and all rights and
benefits hereunder) is for Executive's personal services and is, therefore, not
assignable by Executive.

      14. Entire Agreement; Modification. This Agreement is the entire agreement
of the parties with regard to Executive's employment and all other agreements
and understandings, whether written or oral, if prior hereto, are merged herein
so that the provisions of any prior agreement(s) are void and of no further
force and effect. This Agreement may not be modified except by a writing signed
by both parties.

      15. Applicable Law; Venue. This Agreement shall be construed in accordance
with the laws of the State of Tennessee, without regard to the principles of
conflicts of law, even if Employee executed this Agreement outside Tennessee or
Madison County, Tennessee, and even if some or all of Executive's services are
to be rendered outside Tennessee. All legal disputes between the parties shall
have a venue in the courts of Madison County, Tennessee.

                                      -6-

<PAGE>

      16. Notices. All notices required or permitted under this Agreement shall
be in writing and effective upon mailing, postage prepaid, by certified mail,
return receipt requested, to the addresses indicated herein, or as from time to
time modified by notice:

            EXECUTIVE:
            Jack Lewis
            74 Briar Hollow Lane
            Houston, TX 77027

            COMPANY:
            Kirkland's, Inc.
            805 North Parkway
            Jackson, TN  38305
            ATTN: General Counsel

      17. Provisions Severable. Any provision hereof adjudged void or voidable
by a court of competent jurisdiction shall be deemed severable such that the
remaining provisions are in full force and effect. To the extent that any
provision hereof is adjudged to be overly broad, then such provision shall be
deemed automatically replaced by a similar provision as near to the original
provision as possible but still enforceable.

      18. Parties Bound. This Agreement shall bind the parties' respective
heirs, legal representatives, successors and permitted assigns.

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

      19. Effective Date. The Effective Date hereof for all purposes shall be
June 1, 2005.

         [This space left blank intentionally; signature page follows.]

                                      -7-

<PAGE>

      IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer, and Executive has executed this Agreement, on
May 16, 2005, effective as of the date first above written.

EXECUTIVE:                                  COMPANY:
                                            KIRKLAND'S, INC.

/s/ Jack E. Lewis                           /s/ Robert E. Alderson
-----------------                           ------------------------------------
Jack Lewis                                  Robert E. Alderson
                                            Chairman of the Board, President and
                                            Chief Executive Officer

                                      -8-

<PAGE>

                                    Exhibit I

                     RELEASE AND NON-DISPARAGEMENT AGREEMENT

      THIS MUTUAL RELEASE AND NON-DISPARAGEMENT AGREEMENT (the "Release") is
made as of the 13th day of May 2005 by and between JACK LEWIS ("Executive") and
KIRKLAND'S, INC. (the "Company").

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

      WHEREAS, in connection with that termination and pursuant to Section 9(d)
of the Employment Agreement by and between the Company and Executive dated as of
June 1, 2005 (the "Employment Agreement"), the Company has agreed to pay
Executive certain amounts, subject to the execution of this Agreement.

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

SECTION 1. Resignation. Executive hereby resigns as an officer and employee of
the Company, and as an officer, employee director or board committee member of
any subsidiary or affiliate of the Company, effective as of the date of this
Release.

SECTION 2. Acknowledgements. Executive acknowledges that: (a) the payments
described in Section 9 of the Employment Agreement constitute full settlement of
all his rights under the Employment Agreement, (b) he has no entitlement under
any other severance or similar arrangement maintained by the Company, and (c)
except as otherwise provided specifically in this Release, the Company does not
and will not have any other liability or obligation to him. Executive further
acknowledges that, in the absence of his execution of this Release, he would not
otherwise be entitled to the payments described in Section 9 of the Employment
Agreement.

SECTION 3. Release and Covenant Not to Sue.

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

      (b) Covenant Not to Sue. Executive expressly represents that he has not
filed a lawsuit or initiated any other administrative proceeding against the
Company and that he has not assigned any claim against the Company to any other
person or entity. Executive further

                                      I-1

<PAGE>

promises not to initiate a lawsuit or to bring any other claim against the
Company arising out of or in any way relating to Executive's employment by the
Company or the termination of that employment. This Release will not prevent
Executive from filing a charge with the Equal Employment Opportunity Commission
(or similar state agency) or participating in any investigation conducted by the
Equal Employment Opportunity Commission (or similar state agency); provided,
however, that any claims by Executive for personal relief in connection with
such a charge or investigation (such as reinstatement or monetary damages) will
be barred.

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

SECTION 4. Non-Competition and Confidentiality Obligations. Executive
acknowledges that Sections 6, 7 and 8 of the Employment Agreement survive the
termination of his employment. Executive affirms that the restrictions contained
in Section 6, 7 and 8 of the Employment Agreement are reasonable and necessary
to protect the legitimate interests of the Company, that he received adequate
consideration in exchange for agreeing to those restrictions, and that he will
abide by those restrictions.

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

SECTION 6. Cooperation. Executive further agrees that he will cooperate fully
with the Company and its counsel with respect to any matter (including
litigation, investigations, or governmental proceedings) that relates to matters
with which Executive was involved during his employment with Company. Executive
shall render such cooperation in a timely manner on reasonable notice from the
Company. The Company will (a) reimburse reasonable expenses incurred by
Executive in the course of fulfilling his obligations under this paragraph and
(b) will exercise commercial reasonable efforts to schedule the time for
Executive's cooperation so as to avoid interfering with the Executive's other
personal and professional obligations.

SECTION 7. Rescission Right. Executive expressly acknowledges and recites that
(a) he has read and understands this Release in its entirety, (b) he has entered
into this Release knowingly and voluntarily, without any duress or coercion; (c)
he has been advised orally and is hereby advised in writing to consult with an
attorney with respect to this Release before signing it; (d) he was provided
twenty-one (21) calendar days after receipt of the Release to consider its terms
before signing it; and (e) he is provided seven (7) calendar days from the date
of signing to terminate and revoke this Release in which case this Release shall
be unenforceable, null and void. Executive may revoke this Release during those
seven (7) days by providing written notice of revocation to the Company, care of
its general counsel, at the address and in the manner indicated in Section 16 of
the Employment Agreement.

                                      I-2

<PAGE>

SECTION 8. Challenge. If Executive violates or challenges the enforceability of
this Release, no further benefits under Section 9 of the Employment Agreement
will be paid or provided to Executive.

SECTION 9. Miscellaneous.

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

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

      (c) Successors and Assigns. This Release will inure to the benefit of and
be binding upon the Company and Executive and their respective successors,
executors, administrators, heirs and (in the case of the Company) permitted
assigns. The Company may assign this Release to any successor to all or
substantially all of its assets and business by means of liquidation,
dissolution, merger, consolidation, transfer of assets, or otherwise. Executive
may not make any assignment of this Release or any interest herein.

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

      (e) Entire Agreement; Amendments. Except as otherwise provided herein,
this Release contains the entire agreement and understanding of the parties
hereto relating to the subject matter hereof, and merges and supersedes all
prior and contemporaneous discussions, agreements and understandings of every
nature relating subject matter hereof. This Release may not be changed or
modified, except by a Release in writing signed by each of the parties hereto.

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

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

         [This space left blank intentionally; signature page follows.]

                                      I-3

<PAGE>

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

                                        KIRKLAND'S, INC.

                                        By: /s/ Robert E. Alderson
                                            ------------------------------------
                                            CHAIRMAN OF THE BOARD, PRESIDENT AND
                                            CHIEF EXECUTIVE OFFICER

                                        JACK LEWIS

                                            /s/ Jack E. Lewis
                                            -----------------

                                      I-4

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