EMPLOYMENT AGREEMENT



                  THIS AGREEMENT (the "Agreement"), made as of the 1st day of

June, 2002, by and between KIRKLAND'S, INC., a Tennessee corporation, (the

"Company"), and CARL KIRKLAND("Executive").



                  WHEREAS, Executive is an individual qualified by education and

experience to serve the Company as its Chairman; and



                  WHEREAS, the Company desires to employ Executive as its

Chairman and thereby gain the benefit of Executive's knowledge and experience,

and Executive desires to accept such employment pursuant to the terms of this

Agreement.



                  NOW THEREFORE, in consideration of these premises and the

mutual promises contained herein, and intending to be legally bound hereby, the

parties agree as follows:



SECTION 1.   Definitions.



                  1.1.     "Annual Bonus" means a bonus payable pursuant to

Section 3.2.



                  1.2.     "Benefits" means the benefits described in Sections

3.3, 3.4 and 3.5.



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



                  1.4.     "Cause" means the occurrence of any of the following

material violations, as determined in good faith by the Board: (a) Executive's

failure, refusal or inability (other than due to mental or physical disability)

to perform, in any material respect, his duties to the Company, which failure

continues for more than fifteen (15) days after written notice thereof from the

Company, (b) alcohol abuse or use of controlled drugs (other than in accordance

with a physician's prescription), (c) illegal conduct or gross misconduct of

Executive which is materially and demonstrably injurious to the Company, its

affiliates or subsidiaries including, without limitation, fraud, embezzlement,

theft or proven dishonesty in the course of his employment, (d) conviction of a

misdemeanor involving moral turpitude or a felony, or (v) the entry of a plea of

guilty or nolo contendere to a misdemeanor involving moral turpitude or a

felony.



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



                  1.6.     "Competing Business" means any business primarily

engaged in the retail sale of specialty gifts, decorative accessories or home

furnishings, or any Significant Supplier.



                  1.7.     "Effective Date" means the date upon which this

Agreement is entered into by the Executive and the Company.



                  1.8.     "Expiration Date" means the fourth anniversary of the

Effective Date; provided, however, that if written notice not to extend the Term

by either party is not received at least 90 days prior to the fourth anniversary

of the Effective Date (or any subsequent anniversary



<PAGE>



of the Effective Date, if this Agreement is extended pursuant to this Section

1.8), then the Expiration Date will be automatically extended to the next

anniversary of the Effective Date.



                  1.9.     "Good Reason" means that any of the following has

occurred with respect to the Executive:



                           (a)      the assignment to Executive of any duties

inconsistent in any respect with Executive's position (including status,

offices, titles and reporting requirements), authority, duties or

responsibilities as contemplated by Section 2 of this Employment Agreement, or

any other action by the Company which results in a material diminution in such

position, authority, duties or responsibilities;



                           (b)      a reduction by the Company in Executive's

Annual Salary; provided, however, that if the salaries of substantially all of

the Company's senior executive officers (including the Company's President and

CEO) are contemporaneously and proportionately reduced, a reduction in the

Executive's Annual Salary to an amount not less than $250,000 will not

constitute "Good Reason" hereunder;

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