<PAGE>
                                                                    EXHIBIT 10.2


                               SECURITY AGREEMENT


         SECURITY AGREEMENT, dated as of October 29, 2004, between Big Lots
Capital, Inc., an Ohio corporation, having an address at 300 Phillipi Road,
Columbus, Ohio 43228 (the "Company"), and Big Lots Stores, Inc., an Ohio
corporation, having an address at 300 Phillipi Road, Columbus, Ohio 43228
(hereinafter, the "Secured Party").

         WHEREAS, the Company is a subsidiary of the Secured Party;

         WHEREAS, the Secured Party may make loans and other extensions of
credit from time to time to the Company;

         WHEREAS, as a condition of excluding the Company from (1) being a
guarantor of the Secured Party's obligations under the Secured Party's Credit
Agreement (the "Secured Party Credit Agreement") dated as of even date herewith
and (2) the other restrictions imposed by the Secured Party Credit Agreement on
certain of the Secured Party's subsidiaries, the Company must grant the Secured
Party a security interest in substantially all of the Company's personal
property; and

         WHEREAS, the Company wishes to grant security interests in favor of the
Secured Party as herein provided;

         NOW, THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

         1. DEFINITIONS. The term "State", as used herein, means the State of
Ohio. All terms defined in the Uniform Commercial Code of the State and used
herein shall have the same definitions herein as specified therein; provided,
however, that the term "instrument" shall be such term as defined in Article 9
of the Uniform Commercial Code of the State rather than Article 3. The term
"Obligations"; as used herein, means all of the indebtedness, obligations and
liabilities of the Company to the Secured Party, whether direct or indirect,
joint or several, absolute or contingent, due or to become due, now existing or
hereafter arising under or in respect of any loan agreement from time to time
between the Company and the Secured Party (collectively, the "Credit Agreement),
any promissory notes or other instruments or agreements executed and delivered
pursuant thereto or in connection therewith or this Agreement, and the term
"Event of Default", as used herein, means the failure of the Company to pay or
perform any of the Obligations as and when due to be paid or performed under the
terms of any Credit Agreement.

         2. GRANT OF SECURITY INTEREST. The Company hereby grants to the Secured
Party, to secure the payment and performance in full of all of the Obligations,
a security interest in and so pledges and assigns to the Secured Party the
following properties, assets and rights of the Company, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and
products thereof (all of the same being hereinafter called the "Collateral"):
all personal property of every kind and nature including without limitation all
goods (including


<PAGE>

inventory, equipment and any accessions thereto), instruments (including
promissory notes), documents, accounts, chattel paper (whether tangible or
electronic), deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), commercial tort claims, securities
and all other investment property, supporting obligations, any other contract
rights or rights to the payment of money, insurance claims and proceeds, tort
claims, and all general intangibles including, without limitation, all payment
intangibles, patents, patent applications, trademarks, trademark applications,
trade names, copyrights, copyright applications, software, engineering drawings,
service marks, customer lists, goodwill, and all licenses, permits, agreements
of any kind or nature pursuant to which the Company possesses, uses or has
authority to possess or use property (whether tangible or intangible) of others
or others possess, use or have authority to possess or use property (whether
tangible or intangible) of the Company, and all recorded data of any kind or
nature, regardless of the medium of recording including, without limitation, all
software, writings, plans, specifications and schematics.

         3. AUTHORIZATION TO FILE FINANCING STATEMENTS. The Company hereby
irrevocably authorizes the Secured Party at any time and from time to time to
file in any Uniform Commercial Code jurisdiction any initial financing
statements and amendments thereto that (a) indicate the Collateral (i) as all
assets of the Company or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of Article 9
of the Uniform Commercial Code of the State or such jurisdiction, or (ii) as
being of an equal or lesser scope or with greater detail, and (b) contain any
other information required by part 5 of Article 9 of the Uniform Commercial Code
of the State for the sufficiency or filing office acceptance of any financing
statement or amendment. The Company agrees to furnish any such information to
the Secured Party promptly upon request. The Company also ratifies its
authorization for the Secured Party to have filed in any Uniform Commercial Code
jurisdiction any like initial financing statements or amendments thereto if
filed prior to the date hereof.

         4. OTHER ACTIONS. Further to insure the attachment, perfection and
first priority of, and the ability of the Secured Party to enforce, the Secured
Party's security interest in the Collateral, the Company agrees, in each case at
the Company's own expense, to take any other action reasonably requested by the
Secured Party to insure the attachment, perfection and first priority of, and
the ability of the Secured Party to enforce, the Secured Party's security
interest in any and all of the Collateral including, without limitation, (a)
executing, delivering and, where appropriate, filing financing statements and
amendments relating thereto under the Uniform Commercial Code, to the extent, if
any, that the Company's signature thereon is required therefor, (b) causing the
Secured Party's name to be noted as secured party on any certificate of title
for a titled good if such notation is a condition to attachment, perfection or
priority of, or ability of the Secured Party to enforce, the Secured Party's
security interest in such Collateral, (c) complying with any provision of any
statute, regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment, perfection or
priority of, or ability of the Secured Party to enforce, the Secured Party's
security interest in such Collateral, (d) obtaining governmental and other third
party consents and approvals, including without limitation any consent of any
licensor, lessor or other person obligated on Collateral, (e) obtaining waivers
from mortgagees and landlords in form and substance satisfactory to the Secured
Party and (f) taking all actions required by any earlier versions of the Uniform



                                       2
<PAGE>

Commercial Code or by other law, as applicable in any relevant Uniform
Commercial Code jurisdiction, or by other law as applicable in any foreign
jurisdiction.

         5. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL, ETC. The
Company represents and warrants to the Secured Party as follows: (a) the Company
is the owner of or has other rights in the Collateral, free from any adverse
lien, security interest or other encumbrance, as defined in Section 9-102(a)(32)
of the Uniform Commercial Code of the State, except for the security interest
created by this Agreement, and (b) none of the account debtors or other persons
obligated on any of the Collateral is a governmental authority subject to the
Federal Assignment of Claims Act or like federal, state or local statute or rule
in respect of such Collateral.

         6. COVENANTS CONCERNING COLLATERAL, ETC. The Company further covenants
with the Secured Party as follows: (a) except for the security interest herein
granted, the Company shall be the owner of or have other rights in the
Collateral free from any lien, security interest or other encumbrance, and the
Company shall defend the same against all claims and demands of all persons at
any time claiming the same or any interests therein adverse to the Secured
Party, (b) the Company shall not pledge, mortgage or create, or suffer to exist
a security interest in the Collateral in favor of any person other than the
Secured Party, (c) the Company will not use the Collateral in violation of law
or any policy of insurance thereon, (d) the Company will permit the Secured
Party, or its designee, to inspect the Collateral at any reasonable time,
wherever located, (e) the Company will pay when due all taxes, assessments,
governmental charges and levies upon the Collateral or incurred in connection
with the use or operation of such Collateral or incurred in connection with this
Agreement except those disputed by the Company in good faith, and (f) the
Company will not sell or otherwise dispose, or offer to sell or otherwise
dispose, of the Collateral or any interest therein except for sales in
accordance with the Company's business plan in effect at the time of such
disposition or as otherwise agreed by Secured Party.

         7. INSURANCE.

                  7.1. MAINTENANCE OF INSURANCE. The Company will cause to be
         maintained with reputable insurers insurance with respect to its
         properties and business against such casualties and contingencies as
         shall be in accordance with general practices of businesses engaged in
         similar activities in similar geographic areas. Such insurance shall be
         in such minimum amounts that the Company will not be deemed a
         co-insurer under applicable insurance laws, regulations and policies
         and otherwise shall be in such amounts, contain such terms, be in such
         forms and be for such periods as may be reasonably satisfactory to the
         Secured Party.

                  7.2. INSURANCE PROCEEDS. The proceeds of any casualty
         insurance in respect of any casualty loss of any of the Collateral
         shall, subject to the rights, if any, of other parties with a prior
         interest in the property covered thereby, (i) so long as no Event of
         Default has occurred and is continuing, be disbursed to the Company for
         direct application by the Company solely to the repair or replacement
         of the Company's property so damaged or destroyed and (ii) in all other
         circumstances, be held by the Secured Party as cash collateral for the
         Obligations. The Secured Party may, at its sole option, disburse from
         time to time all or any part of such proceeds so held as cash
         collateral, upon such terms and conditions as the Secured Party may
         reasonably prescribe,


                                       3
<PAGE>

         for direct application by the Company solely to the repair or
         replacement of the Company's property so damaged or destroyed, or the
         Secured Party may apply all or any part of such proceeds to the
         Obligations.

         8. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.

                  8.1. EXPENSES INCURRED BY SECURED PARTY. In its discretion,
         the Secured Party may discharge taxes and other encumbrances at any
         time levied or placed on any of the Collateral, make repairs thereto
         and pay any necessary filing fees. The Company agrees to reimburse the
         Secured Party on demand for any and all expenditures so made. The
         Secured Party shall have no obligation to the Company to make any such
         expenditures, nor shall the making thereof relieve the Company of any
         default.

                  8.2. SECURED PARTY'S OBLIGATIONS AND DUTIES. Anything herein
         to the contrary notwithstanding, the Company shall remain liable under
         each contract or agreement comprised in the Collateral to be observed
         or performed by the Company thereunder. The Secured Party shall not
         have any obligation or liability under any such contract or agreement
         by reason of or arising out of this Agreement or the receipt by the
         Secured Party of any payment relating to any of the Collateral, nor
         shall the Secured Party be obligated in any manner to perform any of
         the obligations of the Company under or pursuant to any such contract
         or agreement, to make inquiry as to the nature or sufficiency of any
         payment received by the Secured Party in respect of the Collateral or
         as to the sufficiency of any performance by any party under any such
         contract or agreement, to present or file any claim, to take any action
         to enforce any performance or to collect the payment of any amounts
         which may have been assigned to the Secured Party or to which the
         Secured Party may be entitled at any time or times. The Secured Party's
         sole duty with respect to the custody, safe keeping and physical
         preservation of the Collateral in its possession, under Section 9-207
         of the Uniform Commercial Code of the State or otherwise, shall be to
         deal with such Collateral in the same manner as the Secured Party deals
         with similar property for its own account.

         9. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON
COLLATERAL. If an Event of Default shall have occurred and be continuing, the
Company shall, at the request of the Secured Party, notify account debtors and
other persons obligated on any of the Collateral of the security interest of the
Secured Party in any account, chattel paper, general intangible, instrument or
other Collateral and that payment thereof is to be made directly to the Secured
Party or to anyone designated by the Secured Party as the Secured Party's agent
therefor, and the Secured Party may itself, if an Event of Default shall have
occurred and be continuing, without notice to or demand upon the Company, so
notify account debtors and other persons obligated on Collateral. After the
making of such a request or the giving of any such notification, the Company
shall hold any proceeds of collection of accounts, chattel paper, general
intangibles, instruments and other Collateral received by the Company as trustee
for the Secured Party without commingling the same with other funds of the
Company and shall turn the same over to the Secured Party in the identical form
received, together with any necessary endorsements or assignments. The Secured
Party shall apply the proceeds of collection of accounts, chattel paper, general
intangibles, instruments and other Collateral received by the Secured Party to
the


                                       4
<PAGE>

Obligations, such proceeds to be immediately entered after final payment in
cash or other immediately available funds of the items giving rise to them.

         10. REMEDIES. If an Event of Default shall have occurred and be
continuing, the Secured Party may, without notice to or demand upon the Company,
declare this Agreement to be in default, and the Secured Party shall thereafter
have in any jurisdiction in which enforcement hereof is sought, in addition to
all other rights and remedies, the rights and remedies of a secured party under
the Uniform Commercial Code of the State or of any jurisdiction in which
Collateral is located, including, without limitation, the right to take
possession of the Collateral, and for that purpose the Secured Party may, so far
as the Company can give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom. The Secured Party may
in its discretion require the Company to assemble all or any part of the
Collateral at such location or locations within the jurisdiction(s) of the
Company's principal office(s) or at such other locations as the Secured Party
may reasonably designate. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Secured Party shall give to the Company at least five Business Days
prior written notice of the time and place of any public sale of Collateral or
of the time after which any private sale or any other intended disposition is to
be made. The Company hereby acknowledges that five Business Days prior written
notice of such sale or sales shall be reasonable notice. In addition, the
Company waives any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Secured Party's rights hereunder,
including, without limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights with respect
thereto.

         11. STANDARDS FOR EXERCISING REMEDIES. To the extent that applicable
law imposes duties on the Secured Party to exercise remedies in a commercially
reasonable manner, the Company acknowledges and agrees that it is not
commercially unreasonable for the Secured Party (a) to fail to incur expenses
reasonably deemed significant by the Secured Party to prepare Collateral for
disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (b) to fail to obtain
third party consents for access to Collateral to be disposed of, or to obtain
or, if not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (c) to fail to exercise collection remedies against account debtors
or other persons obligated on Collateral or to remove liens or encumbrances on
or any adverse claims against Collateral, (d) to exercise collection remedies
against account debtors and other persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (e) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (f) to
contact other persons, whether or not in the same business as the Company, for
expressions of interest in acquiring all or any portion of the Collateral, (g)
to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the collateral is of a specialized nature, (h) to
dispose of Collateral by utilizing Internet sites that provide for the auction
of assets of the types included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets, (i) to
dispose of assets in wholesale rather than retail markets, (j) to disclaim
disposition warranties, (k) to purchase insurance or credit enhancements to
insure the Secured Party against risks of loss, collection or disposition of
Collateral or to provide to the Secured Party a guaranteed return from the
collection or disposition of Collateral, or (1) to the


                                       5
<PAGE>

extent deemed appropriate by the Secured Party, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist the
Secured Party in the collection or disposition of any of the Collateral. The
Company acknowledges that the purpose of this Section 11 is to provide
non-exhaustive indications of what actions or omissions by the Secured Party
would not be commercially unreasonable in the Secured Party's exercise of
remedies against the Collateral and that other actions or omissions by the
Secured Party shall not be deemed commercially unreasonable solely on account of
not being indicated in this Section 11. Without limitation upon the foregoing,
nothing contained in this Section 11 shall be construed to grant any rights to
the Company or to impose any duties on the Secured Party that would not have
been granted or imposed by this Agreement or by applicable law in the absence of
this Section 11.

         12. NO WAIVER BY SECURED PARTY, ETC. The Secured Party shall not be
deemed to have waived any of its rights upon or under the Obligations or the
Collateral unless such waiver shall be in writing and signed by the Secured
Party. No delay or omission on the part of the Secured Party in exercising any
right shall operate as a waiver of such right or any other right. A waiver on
any one occasion shall not be construed as a bar to or waiver of any right on
any future occasion. All rights and remedies of the Secured Party with respect
to the Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly,
alternatively, successively or concurrently at such time or at such times as the
Secured Party deems expedient.

         13. SURETYSHIP WAIVERS BY COMPANY. The Company waives demand, notice,
protest, notice of acceptance of this Agreement, notice of loans made, credit
extended, Collateral received or delivered or other action taken in reliance
hereon and all other demands and notices of any description. With respect to
both the Obligations and the Collateral, the Company assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of or failure to perfect any security interest
in any Collateral, to the addition or release of any party or person primarily
or secondarily liable, to the acceptance of partial payment thereon and the
settlement, compromising or adjusting of any thereof, all in such manner and at
such time or times as the Secured Party may deem advisable. The Secured Party
shall have no duty as to the collection or protection of the Collateral or any
income thereon, nor as to the preservation of rights against prior parties, nor
as to the preservation of any rights pertaining thereto beyond the safe custody
thereof as set forth in Section 9.2 hereof. The Company further waives any and
all other suretyship defenses.

         14. MARSHALLING. The Secured Party shall not be required to marshal any
present or future collateral security (including but not limited to this
Agreement and the Collateral) for, or other assurances of payment of, the
Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of its rights hereunder
and in respect of such collateral security and other assurances of payment shall
be cumulative and in addition to all other rights, however existing or arising.
To the extent that it lawfully may, the Company hereby agrees that it will not
invoke any law relating to the marshalling of collateral which might cause delay
in or impede the enforcement of the Secured Party's rights under this Agreement
or under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the
Obligations is secured or


                                       6
<PAGE>

payment thereof is otherwise assured, and, to the extent that it lawfully may,
the Company hereby irrevocably waives the benefits of all such laws.

         15. PROCEEDS OF DISPOSITIONS; EXPENSES. The Company shall pay to the
Secured Party on demand any and all expenses, including reasonable attorneys'
fees and disbursements, incurred or paid by the Secured Party in protecting,
preserving or enforcing the Secured Party's rights under or in respect of any of
the Obligations or any of the Collateral. After deducting all of said expenses,
the residue of any proceeds of collection or sale of the Obligations or
Collateral shall, to the extent actually received in cash, be applied to the
payment of the Obligations in such order or preference as the Secured Party may
determine, proper allowance and provision being made for any Obligations not
then due. Upon the final payment and satisfaction in full of all of the
Obligations and after making any payments required by Sections 9-608(A)(1)(c) or
9-615(A)(3) of the Uniform Commercial Code of the State, any excess shall be
returned to the Company, and the Company shall remain liable for any deficiency
in the payment of the Obligations.

         16. OVERDUE AMOUNTS. Until paid, all amounts due and payable by the
Company hereunder shall be a debt secured by the Collateral and shall bear,
whether before or after judgment, interest at the rate of interest equal to
twelve percent (12%) per annum or the highest rate permitted by law, whichever
is less.

         17. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE. The
Company agrees that any suit for the enforcement of this Agreement may be
brought in the courts of Franklin County in this State or any federal court
sitting in Columbus, Ohio and consents to the non-exclusive jurisdiction of such
court and to service of process in any such suit being made upon the Company by
mail at the address stated in the preamble. The Company hereby waives any
objection that it may now or hereafter have to the venue of any such suit or any
such court or that such suit is brought in an inconvenient court.

         18. WAIVER OF JURY TRIAL. THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF
ANY SUCH RIGHTS OR OBLIGATIONS.

         19. MISCELLANEOUS. The headings of each section of this Agreement are
for convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon the
Company and its respective successors and assigns, and shall inure to the
benefit of the Secured Party and its successors and assigns. If any term of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity of
all other terms hereof shall in no way be affected thereby, and this Agreement
shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. The Company acknowledges
receipt of a copy of this Agreement.


                                       7
<PAGE>



         IN WITNESS WHEREOF, intending to be legally bound, the Company has
caused this Agreement to be duly executed as of the date first above written.


                                       BIG LOTS CAPITAL, INC.


                                       By:  /s/ Charles W. Haubiel II
                                          -------------------------------------
                                       Print Name:  Charles W. Haubiel II
                                       Title:  Vice President


Accepted:

BIG LOTS STORES, INC.


By:  /s/ Joe R. Cooper
   -----------------------------------------
Print Name:  Joe R. Cooper
Title:  SVP and CFO




                                       8