TWO RIVERS CORPORATE CENTRE
OFFICE LEASE AGREEMENT

THIS LEASE is made and entered into on this first day of March, 2007, by and between Two Rivers Corporate Centre, L.P. a Tennessee Limited Partnership, (Landlord), and Kirklands, Inc., a Tennessee Corporation (Tenant).

1. Leased Premises .

Subject to and upon the terms hereinafter set forth, and in consideration of the sum of Ten Dollars ($10.00) and the mutual covenants set forth herein, the receipt and sufficiency of which are hereby acknowledged, Landlord does hereby lease and demise to Tenant and Tenant does hereby lease and take from Landlord those certain premises consisting of Twenty Seven Thousand Five Hundred Forty Seven (27,547) square feet of Net Rentable Area (the Premises) located in Building Two of the Two Rivers Corporate Centre, Suite 1000 located at 2501 McGavock Pike, in Davidson County, Tennessee (the Building), and more particularly described in Exhibit A, attached hereto and incorporated herein by this reference. The Building is part of a complex known as Two Rivers Corporate centre (the Project).

a. Net Rentable Area as used herein, shall refer to (i) the total square footage of all floor area measured from the outside of the exterior wall of the Building and to the mid-point of walls separating the Premises from areas leased to or held for lease to other tenants (the Usable Area). No deductions from Net Rentable Area shall be made for columns or projections.

b. Tenants taking possession of the Premises or any portion thereof shall be conclusive evidence against Tenant that such portion of the Premises was then in good order and satisfactory condition, excepting those items set forth on a written punch list delivered by Tenant to Landlord within thirty calendar days next following Tenants taking possession. Tenant acknowledges that no promise by or on behalf of Landlord, any of Landlords beneficiaries, the managing agent of the Building, the leasing agent of the Building or any of their respective agents, partners or employees to alter, remodel, improve, repair, decorate or clean the Premises has been made to or relied upon by Tenant, and that no representation respecting the condition of the Premises or the Building by or on behalf of Landlord, any of Landlords beneficiaries, the managing agent of the Building, the leasing agent of the Building or any of their respective agents, partners or employees has been made to or relied upon by Tenant, except to the extent expressly set forth in this Lease.

c. In addition, Tenant shall have the right of first refusal to lease additional space in contiguous Suites P-7, P-8, and P-9 throughout the term of the Lease, at the same rental rate as set forth herein, with the Tenant Improvement Allowance of $35.00 per rentable square foot to be prorated based on the original 84 month term.

2. Term. Subject to and upon the terms and conditions set forth herein, or in any exhibit hereto, the term of this Lease shall commence on the Commencement Date and shall expire eighty four (84) months after the Commencement Date at midnight. Commencement Date shall mean the earlier of (i) thirty (30) days next following the date Landlord delivers possession of the Premises to Tenant with all of Landlords Work, as such term is defined in Exhibit B, substantially completed; or (ii) the date upon which Tenant commences conducting its business from all or any portion of the Premises. Following the Commencement Date, the parties shall execute Exhibit C, attached hereto and incorporated herein, which shall contain an acknowledgment of the date upon which the Commencement Date of this Lease occurred. In addition, Tenant shall have the right to renew the Lease Term hereof for an additional eighty-four months (the Option Term), at the fair market value for Base Rental. Upon request from Tenant, not less than nine months prior to the expiration of the Lease Term, Landlord will give Tenant Landlords quoted market Base Rental for the Premises (the Market Rental Rate), and thereafter Tenant may exercise its option by giving written notice to Landlord at least six months prior to the expiration of the Lease Term.

If Landlord and Tenant are unable to agree on the Market Rental Rate for purposes of the renewal option granted in this Section 2, the Market Rental Rate shall be determined pursuant to this Section, and unless Landlord and Tenant mutually agree and instruct the arbitrators otherwise, the Market Rental Rate shall be determined on the assumption that no refurbishment allowance or other concession or inducement will be provided by Landlord and that there will be no change to the Expense Stop for Operating Expenses.  Within ten (10) days following written demand from either party that the Market Rental Rate be determined pursuant to this Section, each party shall appoint an MAI appraiser with not less than ten (10) years experience appraising commercial real estate in the Nashville, Tennessee metropolitan area.   The two appraisers so selected shall choose a third appraiser with similar qualifications (such third appraiser the Appointed Arbiter).  Each of the Landlord appointed appraiser and the Tenant appointed appraiser shall make their own independent determination as to the Market Rental Rate within thirty (30) days following the selection of the third appraiser and shall deliver a detailed report of their conclusions to the Appointed Arbiter.   The Appointed Arbiter shall review such reports and the Market Rental Rate shall be the appraised value which the Appointed Arbiter decides is the closest to the actual Market Rental Rate.  If the appraisers appointed by the parties are unable to agree upon the Appointed Arbiter within ten (10) days following their appointment, either party shall have the right to apply to the American Arbitration Association for appointment of the third appraiser.   Each party shall be responsible for the fees and expenses of its own appraiser and one-half of the fees and expenses of the third appraiser.
 

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