Document:

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                                                                      10(e)(iii)

                               SECURITY AGREEMENT

         THIS SECURITY AGREEMENT, dated as of February 25, 2002 (as restated,
amended, modified, or supplemented from time to time, this "AGREEMENT"), is
given, jointly and severally, by Big Lots Stores, Inc., an Ohio corporation
(formerly known as Consolidated Stores Corporation, an Ohio corporation), Big
Lots, Inc. (formerly known as Consolidated Stores Corporation, a Delaware
corporation), a Delaware corporation, Mac Frugal's Bargains o Close-Outs, Inc.,
a Delaware corporation, Capital Retail Systems, Inc., an Ohio corporation, PNS
Stores, Inc., a California corporation, West Coast Liquidators, Inc., a
California corporation, C.S. Ross Company, an Ohio corporation, CSC
Distribution, Inc., an Alabama corporation, Closeout Distribution, Inc., a
Pennsylvania corporation, Industrial Products of New England, Inc., a Maine
corporation, Tool and Supply Company of New England, Inc., a Delaware
corporation, Midwestern Home Products, Inc., a Delaware corporation, Midwestern
Home Products Company, Ltd., an Ohio corporation, Consolidated Property
Holdings, Inc., a Nevada corporation, Great Basin LLC, a Delaware limited
liability company, Sonoran LLC, a Delaware limited liability company, and Sahara
LLC, a Delaware limited liability company, and Durant DC, LLC (f/k/a DDC, LLC),
a Delaware limited liability company, and any other of the undersigned parties
listed as Debtors on the signature pages hereto and each of the other persons
and entities that become bound hereby as a Debtor from time to time by joinder,
assumption, or otherwise (each of the foregoing, a "DEBTOR" and all of the
foregoing, collectively the "DEBTORS"), in favor of National City Bank, as agent
(the "AGENT") for the Banks (as defined below).

                                   WITNESSETH:

         WHEREAS, the Debtors are jointly and severally party as the Borrower
and Guarantors to that Credit Agreement, dated as of May 8, 2001, as amended by
that First Amendment to Credit Agreement, dated as of October 20, 2001, and as
further amended by that Second Amendment, dated as of the date hereof (as so
amended and as the same may be amended, restated, refinanced, modified,
supplemented, or the like from time to time, the "CREDIT AGREEMENT"), among Big
Lots Stores, Inc., an Ohio corporation (formerly known as Consolidated Stores
Corporation) (the "BORROWER"), each of the Guarantors from time to time party to
the Credit Agreement, the Banks from time to time party to the Credit Agreement
(the "BANKS"), National City Bank, as Administrative Agent for the Banks, Lead
Arranger, and a Managing Agent, Fleet National Bank, as Syndication Agent and a
Managing Agent, PNC Bank, National Association, and First Union National Bank,
as Documentation Agents and Managing Agents, and Bank of America, N.A., The Bank
of New York, and U.S. Bank National Association (formerly known as Firstar Bank,
N.A.), as Managing Agents;

         WHEREAS, pursuant to the Credit Agreement, the Agent and the Banks have
agreed to make certain revolving credit loans, issue letters of credit, and make
other financial accommodations to or for the Debtors; and

         WHEREAS, to induce the Banks and Agent to enter into the Second
Amendment dated as of the date hereof, the parties desire that all obligations,
liabilities, and indebtedness of the Debtors under the Credit Agreement and the
other Loan Documents (as defined in the Credit Agreement) be secured by security
interests in the Collateral (defined below at Section 1(b)) as more fully set
forth below.

         NOW, THEREFORE, intending to be legally bound hereby and incorporating
the above-defined terms herein, the parties hereto covenant and agree as
follows:

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         1. Definitions. Except as set forth in this Agreement, terms defined in
the Credit Agreement and not otherwise defined herein are used herein as defined
in the Credit Agreement. The term "including" when used herein shall have the
meaning represented by the phrase "including without limitation". The following
words and terms shall have the following respective meanings unless the context
hereof otherwise clearly requires:

                  (a) "Accounts" means all now owned or hereafter acquired or
arising accounts, as defined in the UCC, of each Debtor, including any rights to
payment for the sale or lease of goods or rendition of services, whether or not
they have been earned by performance, together with all products and proceeds of
any of the foregoing.

                  (b) "Collateral" means all Accounts, Inventory, and General
Intangibles of each Debtor together with all present and future business records
and information relating to any of the Accounts, Inventory, or General
Intangibles of each Debtor, including computer tapes and other storage media
containing the same and computer programs and software (including source code,
object code and related manuals and documentation and all licenses to use such
software) for accessing and manipulating such information.

                  (c) "Debt" means (i) all now existing and hereafter arising
indebtedness, liabilities, and obligations of each and every of the Debtors to
the Agent or any of the Banks under the Credit Agreement or any of the other
Loan Documents, including the Debt, whether for principal, interest, fees,
expenses, or otherwise of each and every of the Debtors to the Agent or the
Banks, now existing or hereafter incurred or arising under the Credit Agreement,
the Notes, the Guaranty, or any of the other Loan Documents, and as any of the
same may from time to time be amended, restated, modified, or supplemented,
together with any and all extensions, renewals, refinancings, and refundings
thereof in whole or in part; (ii) all reimbursement and other obligations of
each and every Debtor with respect to any one or more Letters of Credit issued
by Agent or any Bank; and (iii) any sums advanced by the Agent or any of the
Banks or which may otherwise become due pursuant to the provisions of the Credit
Agreement, the Notes, or this Agreement, or any other Loan Document, or pursuant
to any other document or instrument at any time delivered to the Agent in
connection therewith, including fees and charges and indemnification
obligations, and all interest payable on any of the foregoing in all cases,
whether such sums are advanced or otherwise become due before or after the entry
of any judgment for foreclosure or any judgment on any Loan Document or with
respect to any default under any of the Debt.

                  (d) "General Intangibles" means all now owned or hereafter
acquired or arising general intangibles, as defined in the UCC, of each Debtor,
together with all products and proceeds of any of the foregoing.

                  (e) "Inventory" means all now owned or hereafter acquired
inventory (as defined in the UCC), goods, merchandise, and other personal
property of each Debtor, wherever located, held for sale or lease or which are
or might be furnished under any contract of service, all raw materials, work in
process, finished goods (including embedded software), returned goods, and
materials and supplies of any kind, nature or description which are or might be
used or consumed in the business of each Debtor or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
such merchandise or such other personal property, and all documents of title or
other documents representing them, together with all products and proceeds of
any of the foregoing.

                  (f) "UCC" means the Uniform Commercial Code, as in effect from
time to time, of the State of Ohio or of any other state the laws of which are
required as a result thereof to be applied in connection with the issue of
perfection of security interests; provided, that to the extent that the UCC is

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used to define any term herein or in any other documents and such term is
defined differently in different Articles or Divisions of the UCC, the
definition of such term contained in Article or Division 9 shall govern.

         2. Creation of Security Interests. As security for the due and punctual
payment and performance of the Debt in full, each Debtor hereby grants to and
creates in favor of the Agent for the benefit of the Banks and Agent a
continuing lien on and security interest in and to the Collateral. Without
limiting the generality of any of the following Sections below each Debtor
hereby authorizes (i) the execution and filing of all financing statements by
Agent on behalf of the Banks and Agent, without the execution thereof by any
Debtor, naming the Debtors as "debtors," and (ii) the exercise of "control," as
such term is defined in Article 9 of the UCC, over the Collateral in order to
fully perfect the security interests therein;

         3. Representations and Warranties. Each Debtor represents and warrants
to the Agent and the Banks that (a) each Debtor owns its Collateral, (b) except
for the security interest granted to and created in favor of the Agent for the
benefit of itself and the Banks hereunder and Permitted Liens, all the
Collateral is free and clear of any Lien, (c) each Debtor will defend the
Collateral against all claims and demands of all persons at any time claiming
the same or any interest therein, (d) each material Account is genuine and
enforceable in accordance with its terms and such Debtor will defend the same
against all claims, demands, recoupment, setoffs, and counterclaims at any time
asserted and no material Account will be subject to any material claim for
credit, allowance, setoff, recoupment, defense, counterclaim, or adjustment by
any account debtor, and (e) the exact legal name, the state of incorporation,
formation or organization, as applicable, the address and all other information
of such Debtor is as set forth on Schedule A hereto.

         4. Protection and Maintenance of Liens. Each Debtor will faithfully
preserve, defend, and protect the Agent's security interest in the Collateral as
a perfected security interest, superior and prior to the rights of all third
Persons, except for holders of Permitted Liens, and will do all such other acts
and things and will, upon request therefor by the Agent, execute, deliver, file
and record, and such Debtor hereby authorizes the Agent to so file, all such
other documents and instruments, including financing statements, security
agreements, assignments and documents and powers of attorney with respect to the
Collateral, and pay all filing fees and taxes related thereto (with prompt
reimbursement by Borrower), as the Agent in its reasonable discretion may deem
necessary or advisable from time to time in order to attach, continue, preserve,
perfect, and protect said security interest; and, each Debtor hereby irrevocably
appoints the Agent, its officers, employees and agents, or any of them, as
attorneys-in-fact for such Debtor to execute, deliver, file, and record such
items for such Debtor and in such Debtor's name, place and stead. This power of
attorney, being coupled with an interest, shall be irrevocable for the life of
this Agreement.

         5. Covenants. Each Debtor covenants and agrees that:

                  (a) it will not suffer or permit to exist on any Collateral
any Lien except for Permitted Liens;

                  (b) it shall bear the full risk of any loss of any nature
whatsoever with respect to the Collateral owned by it and at its own cost and
expense in amounts and with financially sound and reputable insurers, and each
Debtor shall (a) keep its Inventory insured against such hazards, and for such
amounts, as is customary in the case of companies engaged in businesses similar
to such Debtor's (it is acknowledged by the Agent that the insurance presently
maintained by the Debtors is acceptable for such purposes); (b) furnish Agent
with (i) evidence of the maintenance of such insurance and (ii) appropriate

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loss payable endorsements in form and substance satisfactory to Agent, naming
Agent (or any collateral agent for Agent) as a loss payee as its interests may
appear with respect to all insurance coverage of the Inventory, and providing
(A) that such policy and loss payable clauses may not be cancelled, amended or
terminated unless at least thirty (30) days' prior written notice is given to
Agent; and, if any Debtor fails to obtain insurance as hereinabove provided, or
to keep the same in force, Agent, if Agent so elects, may obtain such insurance
and pay the premium therefor on behalf of such Debtor, and add all liabilities,
obligations, costs, and expenses reasonably incurred in connection with such
insurance to the Debt, to be paid by the Debtors to the Agent for the benefit of
the Agent and the Banks upon demand;

                  (c) it will not sell, assign or otherwise dispose of any
portion of the Collateral except as permitted in Section 7.2.7 [Disposition of
Assets or Subsidiaries] of the Credit Agreement and Section 10.5 of the Senior
Note Purchase Agreement;

                  (d) it will maintain materially accurate and complete books
and records concerning the Collateral and such other books and records as the
Agent may from time to time reasonably require;

                  (e) it will promptly furnish to the Agent such documents and
papers relating to the Collateral as the Agent may reasonably request, including
all invoices, documents of title and other shipping and related documents,
contracts, and other writings pertaining to such Debtor's Inventory or contracts
or the performance thereof;

                  (f) to the extent Inventory held for sale or lease has been
produced by any Debtor, it has been and will be produced by such Debtor in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.

                  (g) if any material Account arises out of contracts with the
United States or any department, agency, or instrumentality thereof or any one
or more of the states of the United States or any department, agency, or
instrumentality thereof, it will upon request of the Agent, execute any
instruments and take any steps required by the Agent so that all monies due and
to become due under such contract shall be assigned (to the extent permitted by
Law and taking into account any necessity for consent as required by the
contracts and not otherwise made ineffective by Law) to the Agent and notice of
the assignment given to and acknowledged by the appropriate government agency or
authority under the Federal Assignment of Claims Act or similar applicable state
law; and

                  (h) such Debtor will not change its name or state of
incorporation, formation, or organization, as applicable, from that set forth on
Schedule A hereto without providing thirty (30) days prior written notice to the
Agent.

         6. Custody. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral in its possession, if any, if
the Agent takes such action for that purpose as such Debtor shall request in
writing, provided that such requested action shall not, in the judgment of the
Agent, impair the security interest in or lien on the Collateral or the Agent's
or the Banks' rights in, or the value of, the Collateral, and provided further
that such written request is received by the Agent in sufficient time to permit
the Agent to take the requested action.

         7. Protection of Liens and Collateral.

                  (a) At any time and from time to time whether or not an Event
of Default then exists and without prior notice to or consent of any Debtor, the
Agent may at its option take such actions as the Agent deems appropriate (i) to
attach, perfect, continue, and preserve the Agent's and the Banks'

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perfected security interest in or lien on the Collateral, and (ii) to add all
liabilities, obligations, costs, and expenses reasonably incurred in connection
with clause (i) to the Debt, to be paid by the Debtors to the Agent for the
benefit of the Agent and the Banks upon demand; and

                  (b) At any time and from time to time after an Event of
Default exists and is continuing and without prior notice to or consent of any
Debtor, the Agent may at its option take such action as the Agent deems
appropriate (i) to maintain, repair, protect, and insure the Collateral, (ii) to
perform, keep, observe, and render true and correct any and all covenants,
agreements, representations, and warranties of any Debtor hereunder, and (iii)
to add all liabilities, obligations, costs, and expenses reasonably incurred in
connection with the foregoing clauses (i) and (ii) to the Debt, to be paid by
any Debtor to the Agent for the benefit of the Agent and the Banks upon demand.

         8. After Default. After there exists any Event of Default which is
continuing under the Credit Agreement:

                  (a) The Agent may request, without limiting the rights and
remedies of the Agent on behalf of itself and the Banks otherwise provided
hereunder or under the other Loan Documents, that each Debtor do any of the
following: (i) give the Agent on behalf of itself and the Banks specific
assignments of the material accounts receivable of such Debtor after such
accounts receivable come into existence, and schedules of such accounts
receivable, the form and content of such assignment and schedules to be
reasonably satisfactory to Agent, and (ii) in order to better secure the Agent
on behalf of itself and the Banks, to the extent permitted by Law, enter into
such lockbox agreements and establish such lockbox accounts as the Agent may
require, with the local banks in areas in which the Debtors may be operating (in
such cases, all local lockbox accounts shall be depositary transfer accounts
titled in a manner acceptable to the Agent to indicate that the accounts are
established in trust for the benefit of the Agent and the holders of the Notes
issued under the Senior Note Purchase Agreement) which local banks shall have
agreed to in writing to the Agent's requirements for the handling of such
accounts and the transfer of account funds to the Agent on behalf of itself and
the Banks, all at the sole expense of such Debtor, and shall direct all payments
from all commercial payors and all other payors due to such Debtor, to such
lockbox accounts.

                  (b) in addition to the rights and remedies set forth herein,
Agent: (a) may from time to time take such steps as Agent deems necessary to
protect Agent's interest in and to preserve the Collateral, including the hiring
of such security guards or the placing of other security protection measures as
Agent may deem appropriate; (b) may employ and maintain at any of any Debtor's
premises a custodian who shall have full authority to do all acts necessary to
protect Agent's interests in the Collateral; (c) may lease warehouse facilities
to which Agent may move all or part of the Collateral; (d) may use any Debtor's
owned or leased lifts, hoists, trucks and other facilities or equipment for
handling or removing the Collateral; (e) may pursue landlords' or mortgagees'
lien waivers with respect to each premises on which any of the Collateral is now
or hereafter located and, in furtherance thereof, the Debtors agree to fully
assist and cooperate with the Agent in such endeavor, and (f) shall have, and is
hereby granted, a right of ingress and egress to the places where the Collateral
is located, and may proceed over and through any of Debtor's owned or leased
property; and, each Debtor shall cooperate fully with all of Agent's efforts to
preserve the Collateral and will take such actions to preserve the Collateral as
Agent may direct; and, all of Agent's expenses of preserving the Collateral,
including any expenses relating to the bonding of a custodian, shall be and
become a part of the Debt secured hereby.

                  (c) The Agent shall have and may exercise all the rights and
remedies available to a secured party under the UCC in effect at the time, and
such other rights and remedies as may be provided by Law and as set forth below,
including to take over and collect all of any Debtor's Collateral, and to

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this end each Debtor hereby appoints the Agent, its officers, employees and
agents, as its irrevocable, true and lawful attorneys-in-fact with all necessary
power and authority to, after an Event of Default: (i) take possession
immediately, with or without notice, demand, or legal process, of any or all of
the Collateral wherever found, and for such purposes, enter upon any premises
upon which the Collateral may be found and remove the Collateral therefrom, (ii)
require any Debtor to assemble the Collateral and deliver it to the Agent or to
any place designated by the Agent at such Debtor's expense, (iii) demand and
direct account debtors to make payment to Agent for the Banks of the Accounts,
(iv) enforce payment of the material Accounts by legal proceedings or otherwise,
(v) exercise all of any Debtor's rights and remedies with respect to the
collection of material Accounts, (vi) settle, adjust, compromise, extend or
renew the Accounts, (vii) settle, adjust or compromise any legal proceedings
brought to collect material Accounts, (viii) to the extent permitted by
applicable Law, sell or assign material Accounts upon such terms, for such
amounts and at such time or times as the Agent deems advisable, (ix) discharge
and release material Accounts, (x) take control, in any manner, of any item of
payment or proceeds from any account debtor, (xi) prepare, file and sign any
Debtor's name on any Proof of Claim in Bankruptcy or similar document against
any account debtor, (xii) prepare, file, and sign any Debtor's name on any
notice of Lien, assignment, or satisfaction of Lien or similar document in
connection with material Accounts, (xiii) do all acts and things necessary, in
the Agent's sole discretion, to fulfill any of any Debtor's obligations to the
Agent or the Banks under the Credit Agreement, Loan Documents, or otherwise,
(xiv) endorse the name of any Debtor upon any check, chattel paper, document,
instrument, invoice, freight bill, bill of lading or similar document or
agreement relating to Inventory or material Accounts; (xv) access and use the
information recorded on or contained in any data processing equipment or
computer hardware or software relating to the Inventory, material Accounts, or
other Collateral or proceeds thereof to which any Debtor has access, (xvi)
demand, sue for, collect, compromise, and give acquittances for any and all
Collateral, (xix) prosecute, defend, or compromise any action, claim or
proceeding with respect to any of the Collateral, and (xx) take such other
action as the Agent may deem appropriate, including extending or modifying the
terms of payment of any Debtor's debtors. This power of attorney, being coupled
with an interest, shall be irrevocable for the life of this Agreement. To the
extent permitted by Law, each Debtor hereby waives all claims of damages due to
or arising from or connected with any of the rights or remedies exercised by the
Agent pursuant to this Agreement, except claims arising from gross negligence or
willful misconduct by the Agent. The Agent hereby accepts this power of attorney
and all powers granted hereunder for the benefit of the Agent and the Banks.

                  (d) The Agent shall have the right to lease, sell, or
otherwise dispose of all or any of the Collateral at public or private sale or
sales for cash, credit or any combination thereof, with such notice as may be
required by Law (it being agreed by each Debtor that, in the absence of any
contrary requirement of Law, ten (10) days' prior notice of a public or private
sale of Collateral shall be deemed reasonable notice, except as to that part of
the Collateral which is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market in which case no notice
shall be required,), in lots or in bulk, for cash or on credit, all as the
Agent, in its sole discretion, may deem advisable. Such sales may be adjourned
from time to time with or without notice. The Agent shall have the right to
conduct such sales on any Debtor's premises or elsewhere and shall have the
right to use any Debtor's premises without charge for such sales for such time
or times as the Agent may see fit.

         9. Application of Proceeds. Any of the Collateral or proceeds thereof
held or realized upon at any time by the Agent shall be applied as set forth in
Section 8.2.5 [Application of Proceeds] of the Credit Agreement. Each Debtor
shall remain liable to the Agent and the Banks for and shall pay to the Agent
for the benefit of the Agent and the Banks any deficiency which may remain after
such sale or collection.

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         10. Lease of Debtors Premises. If the Agent repossesses or seeks to
repossess any of the Collateral pursuant to the terms hereof because of the
occurrence of an Event of Default, then to the extent it is commercially
reasonable for the Agent to store any Collateral on any of any Debtor's
premises, each Debtor hereby agrees to lease to the Agent on a month-to-month
tenancy for a period not to exceed one hundred eighty (180) days at the Agent's
election, at a rental of One Dollar ($1.00) per month, the premises on which the
Collateral is located, provided it is located on premises owned or leased by
such Debtor.

         11. Termination. Upon indefeasible payment in full of the Debt, the
expiration of all Commitments and Letters of Credit, and termination of the
Credit Agreement, this Agreement shall terminate and be of no further force or
effect, and the Agent shall thereupon promptly return to each Debtor such of the
Collateral and such other documents delivered by such Debtor hereunder as may
then be in the Agent's possession subject to the rights of third parties. Until
such time, however, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.

         12. Waivers.

                  (a) No failure or delay on the part of the Agent in exercising
any right, remedy, power, or privilege hereunder shall operate as a waiver
thereof or of any other right, remedy, power, or privilege of the Agent
hereunder; nor shall any single or partial exercise of any such right, remedy,
power, or privilege preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. No waiver of a single
Event of Default shall be deemed a waiver of any other or subsequent Events of
Default. All waivers under this Agreement must be in writing and executed by
Agent on behalf of the Banks and Agent. The rights and remedies of the Agent
under this Agreement are cumulative and in addition to any rights or remedies
which it may otherwise have, and the Agent may enforce any one or more remedies
hereunder successively or concurrently at its option.

                  (b) Without releasing or diminishing any obligations of any
Debtor, Agent at any time and from time to time may release or impair any
portion or portions of the Collateral from the liens and security interests of
Agent therein, may take, impair, or release any other collateral for any Debt
secured thereby, may release, impair, or discharge any Debt of any Debtor may
waive, impair, or fail to enforce any of Agent's rights under this Agreement or
any of the other Loan Documents, may grant extensions, renewals, indulgences,
and leniencies with respect to any of the Debt or with respect to any of the
obligations of the Debtors and may apply to the Debt in such order as Agent
shall elect the proceeds of Collateral or any amount received in connection
therewith or in connection with any other Loan Document, without resort or
regard to other Collateral or any Debtor, and each Debtor hereby consents to all
of the foregoing. Any and all defenses which any Debtor may now or hereafter
have based on principles of suretyship, impairment of collateral, or the like
are hereby waived. Agent hereby expressly reserves its rights against each
Debtor.

                  (c) Each Debtor hereby waives, surrenders, and agrees not to
claim or enforce, so long as any Debt, Commitment, or Letter of Credit exists:
(a) any right to be subrogated in whole or in part to any right or claim of any
holder of any of the Debt, and (b) any right to require the marshalling of any
assets of any Debtor, which right of subrogation or marshalling might otherwise
arise for any reason including from any payment upon any of the Debt arising out
of the enforcement of the security interest granted hereby to Agent, or the
liquidation of or realization upon the Collateral, any other collateral

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granted by any Debtor or by any other person or entity to Agent, or any part
thereof, or by the payment of any amounts owing hereunder or under the Debt.

         13. Notices. All notices,  statements, requests, and demands
given to or made upon either party hereto in accordance with the provisions of
this Agreement shall be given or made as provided in Section 11.6 [Notices]
of the Credit Agreement.

         14. Security Interest Data Schedule. Within thirty (30) days of the
date hereof, each Debtor agrees to provide the Agent with a listing of all of
its offices, stores, warehouses and other locations where any of the Collateral
is stored or maintained, stating in case (1) the address of such premises, (2)
whether the premises is owned or leased by such Debtor, (3) if the premises are
leased, the name and address of the landlord, (4) the type and use of the
facility, and (5) such other information as may be reasonably requested by the
Agent. Each Debtor shall promptly notify the Agent of any changes in the
information set forth thereon.

         15. Specific Enforcement. Each Debtor acknowledges that the provisions
hereof and of the Credit Agreement giving the Agent rights of access to books,
records, and information concerning the Collateral and such Debtor's operations
and providing the Agent access to such Debtor's premises are a material right of
Agent and the Banks. Each Debtor further acknowledges that, should such Debtor
at any time fail to promptly provide such information and access to the Agent as
provided for herein or in the Credit Agreement, the Agent would have no adequate
remedy at Law to promptly obtain the same. Each Debtor agrees that such
provisions hereof and of the Credit Agreement may be specifically enforced by
the Agent and waives any claim or defense in any such action or proceeding that
the Agent has an adequate remedy at Law.

         16. Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Bank as any Debtor's agent for any purpose
whatsoever, nor shall Agent or any Bank be responsible or liable, in the absence
of the Agent's or any Bank's gross negligence or willful misconduct, for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof. Neither
Agent nor any Bank, whether by anything herein or in any assignment or
otherwise, assume any of any Debtor's obligations under any contract or
agreement assigned to Agent or such Bank, and neither Agent nor any Bank shall
be responsible in any way for the performance by any Debtor of any of the terms
and conditions thereof.

         17. Successors. This Agreement shall be binding upon and inure to the
benefit of the Agent, the Banks and their respective successors and assigns, and
each Debtor and each of its respective successors and assigns, except that no
Debtor may assign or transfer such Debtor's obligations hereunder or any
interest herein. All obligations of the Debtors for the payment of money
hereunder shall be joint and several.

         18. Governing Law. This Agreement shall be deemed to be a contract
under the laws of the State of Ohio and for all purposes shall be governed by
and construed in accordance with the laws of said Commonwealth excluding its
rules relating to conflicts of law.

         19. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall not invalidate the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

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         20. Counterparts; Telecopy. This Agreement may be signed in any number
of counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of executed
signature pages by facsimile transmission will constitute effective and binding
execution and delivery.

         21. This Agreement Included in Loan Documents. Each of the Debtors and
the Agent and Banks acknowledge and agree that this Agreement and each other
document, instrument, and agreement referred to herein are Loan Documents as
such term is used in the Credit Agreement.

         22. Collateral Agent. Upon notice to Debtors, the Agent and the Banks
may appoint a collateral agent with respect to their rights and obligations
hereunder and each Debtor agrees to permit such appointment and shall execute
and deliver any documents or agreements reasonably necessary to accomplish the
same.

                            [SIGNATURE PAGES FOLLOW]

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                  [SIGNATURE PAGE 1 OF 4 TO SECURITY AGREEMENT]

                  IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have caused this Security Agreement to be executed and
delivered as of the day and year first above written.

                             DEBTORS:

                             BIG LOTS STORES, INC. (formerly CONSOLIDATED STORES
                             CORPORATION, an Ohio corporation)

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Name:  Jeffrey G. Naylor
                             Title: Senior Vice President, CFO

                             BIG LOTS, INC., an Ohio corporation (formerly
                             CONSOLIDATED STORES CORPORATION, a Delaware
                             corporation)

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             MAC FRUGAL'S BARGAINS o CLOSE-OUTS, INC., a
                             Delaware corporation

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             CAPITAL RETAIL SYSTEMS, INC., an Ohio corporation

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             PNS STORES, INC.,  a California corporation

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

<PAGE>

                  [SIGNATURE PAGE 2 OF 4 TO SECURITY AGREEMENT]

                             WEST COAST LIQUIDATORS, INC., a California
                             corporation

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             C.S. ROSS COMPANY, an Ohio corporation

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             CSC DISTRIBUTION, INC., an Alabama corporation

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             CLOSEOUT DISTRIBUTION, INC., a Pennsylvania
                             corporation

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             INDUSTRIAL PRODUCTS OF NEW ENGLAND, INC., a
                             Maine corporation

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             TOOL AND SUPPLY COMPANY OF NEW ENGLAND, INC.,
                             a Delaware corporation

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

<PAGE>

                  [SIGNATURE PAGE 3 OF 4 TO SECURITY AGREEMENT]

                             MIDWESTERN HOME PRODUCTS, INC.,  a Delaware
                             corporation

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             MIDWESTERN HOME PRODUCTS COMPANY, LTD., an
                             Ohio corporation

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             CONSOLIDATED PROPERTY HOLDINGS, INC., a Nevada
                             corporation

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             GREAT BASIN LLC, a Delaware limited liability
                             company

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             SONORAN LLC, a Delaware limited liability company

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

                             SAHARA LLC, a Delaware limited liability company

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

<PAGE>

                  [SIGNATURE PAGE 4 OF 4 TO SECURITY AGREEMENT]

                             DURANT DC, LLC (formerly DDC, LLC), a Delaware
                             limited liability company

                             By: /s/ Jeffrey G. Naylor
                                 -----------------------------------------------
                             Title: Senior Vice President, CFO

<PAGE>

                                   SCHEDULE A
                                       TO
                               SECURITY AGREEMENT
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                     STATE OF                              ORGANIZATIONAL
                      ENTITY                         INCORPORATION              EIN             ID#
-----------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                     <C>              <C>
Big Lots, Inc.                                       Ohio                    06-111-9097      1215332
-----------------------------------------------------------------------------------------------------------------------
Big Lots Stores, Inc.                                Ohio                    31-1186811       669545
-----------------------------------------------------------------------------------------------------------------------
Mac Frugal's Bargains o Close-outs, Inc.             Delaware                95-2745285
-----------------------------------------------------------------------------------------------------------------------
Capital Retail Systems, Inc.                         Ohio                    31-1602827       1009905
-----------------------------------------------------------------------------------------------------------------------
PNS Stores, Inc.                                     California              95-2745262       C0636909
-----------------------------------------------------------------------------------------------------------------------
West Coast Liquidators, Inc.                         California              95-1813424       C0293778
-----------------------------------------------------------------------------------------------------------------------
C.S. Ross Company                                    Ohio                    31-1286182       763455
-----------------------------------------------------------------------------------------------------------------------
CSC Distribution, Inc.                               Alabama                 06-1108785
-----------------------------------------------------------------------------------------------------------------------
Closeout Distribution, Inc.                          Pennsylvania            31-1650309       2878048
-----------------------------------------------------------------------------------------------------------------------
Industrial Products of New England, Inc.             Maine                   01-0392472       19840699D
-----------------------------------------------------------------------------------------------------------------------
Tool and Supply Company of New England, Inc.         Delaware                51-0316540
-----------------------------------------------------------------------------------------------------------------------
Midwestern Home Products, Inc.                       Delaware                51-0316542
-----------------------------------------------------------------------------------------------------------------------
Midwestern Home Products Company, Ltd.               Ohio                    31-1455723       928329
-----------------------------------------------------------------------------------------------------------------------
Consolidated Property Holdings, Inc.                 Nevada                  86-0860984       C1345-1997
-----------------------------------------------------------------------------------------------------------------------
Great Basin LLC                                      Delaware                31-1686158
-----------------------------------------------------------------------------------------------------------------------
Sonoran LLC                                          Delaware                31-1686155
-----------------------------------------------------------------------------------------------------------------------
Sahara LLC                                           Delaware                31-1686162
-----------------------------------------------------------------------------------------------------------------------
Durant DC, LLC                                       Delaware                01-0562033
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S>                                                           <C>
Address for Debtors:                                          300 Phillipi Road
(except Consolidated Property Holdings, Inc.)                 Columbus, OH  43228

Address for Consolidated Property Holdings, Inc.:             2835 South Jones Blvd., Suite 8
                                                              Las Vegas, NV 89146
</TABLE><PAGE>
                                                                           10(L)

                      THE 1998 BIG LOTS, INC. KEY ASSOCIATE
                 ANNUAL INCENTIVE COMPENSATION PLAN, AS AMENDED

1.       NAME

         The 1998 Big Lots, Inc. Key Associate Annual Incentive Compensation
Plan (the "Plan").

2.       PURPOSE

         The Plan is designed to (i) assist Big Lots, Inc. in attracting,
retaining and motivating employees, (ii) align Participants' interests with
those of the Corporation's stockholders and (iii) qualify compensation paid to
Participants who are "Covered Employees" as "other performance-based
compensation" within the meaning of section 162(m) of the IRC or a successor
provision.

3.       DEFINITIONS

         "Award" means a payment subject to the provisions of this plan.

         "Base Salary" means as to a Performance Period, a Participant's actual
gross salary rate in effect on the Determination Date. Such salary shall be
before (1) deductions for taxes and benefits, and (2) deferrals of salary
pursuant to Company-sponsored plans.

         "Beneficiary" means the person or persons entitled to receive the
interest of a Participant in the event of the Participant's death.

         "Board" means the Board of Directors of Big Lots, Inc., an Ohio
corporation.

         "Change of Control" means a change of control as defined in the
Consolidated Stores corporation Stockholder Rights Plan dated April 18, 1989, as
from time-to-time amended or any successor thereto.

         "Committee" means the Compensation Committee of the Board, which shall
consist of not less than two (2) members of the Board each of whom is a
"disinterested person" as defined in Securities and Exchange Commission Rule
16b-3(c)(2)(i), or as such term may be defined in any successor regulation under
Section 16 of the Securities Exchange Act of 1934, as amended. In addition, each
member of the Committee shall be an outside director within the meaning of
Section 162(m) of the IRC.

         "Common Stock" means the common stock of Big Lots, Inc., an Ohio
corporation, its successors and assigns.

         "Company" means Big Lots, Inc., an Ohio Corporation, its successors and
assigns and any corporation which shall acquire substantially all its assets. In
addition, Company shall include any corporation or other entity, whether
domestic or foreign, in which the Corporation has or obtains, directly or
indirectly, a proprietary interest of more than 50% by reason of stock ownership
or otherwise.

         "Conditional Payment" means prepaying an Award before the date of
current payment in section 6.2 and subjects the prepayment (or a portion
thereof) to possible return to the Company.

         "Covered Associate(s)" means the chief executive officer (or an
individual acting in such capacity) as of the end of the Fiscal Year and any
other employee whose total compensation for the Fiscal Year is required to be
reported to stockholders under the Securities Exchange Act of 1934 by reason of
such employee being among the four highest compensated officers (other than the
chief executive officer or other individual acting in such capacity) for the
Fiscal Year.

<PAGE>

         "Determination Date" means as to a Performance Period: (1) the first
day of the Performance Period, or (2) such other date set by the Committee
provided such date will not jeopardize the Plan's Award as performance- based
compensation under IRC 162(m).

         "Eligible Position" means an employment position with the Company which
provides the employee in the position the opportunity to participate in the
Plan. The Committee or its designee determines Eligible Positions.

         "Fiscal Year" means a fiscal year of the Company (currently comprised
of a 52/53 week fiscal year which ends on the Saturday nearest to January 31).

         "IRC" means the Internal Revenue Code of 1986, as amended.

         "Participant" means a key associate of the Company who has been
approved for participation in the Plan by the Committee (or its designee) or a
key associate of a partnership designated by the Committee which the Company
maintains 50% or more profit sharing, loss sharing and ownership of capital
interests or a key associate of a limited liability company (LLC) in which the
Company maintains a 50% or more ownership interest.

         "Performance Period" means the Fiscal Year except in the following
cases:

         (1) The associate's service period within a Fiscal Year in the case of
         a new hire or promoted associate; or

         (2) A period of service determined at the discretion of the Committee
         (or its designee in the case of associates who are not Covered
         Associates).

4.       ELIGIBILITY AND PARTICIPATION

         4.1  Approval

         Each key associate of the Company who is approved for participation in
the Plan by the Committee (or under the authority conveyed by the Committee)
shall be a Participant as of the date designated. Written notice of such
approval shall be given to each key associate so approved as soon as practicable
following date of approval.

         4.2  Termination of Approval

         The Committee may withdraw its approval for participation for a
Participant at any time. In the event of such withdrawal, the key associate
concerned shall cease to be an active Participant as of the date selected by the
Committee and the key associate shall be notified of such withdrawal as soon as
practicable following such action.

         4.3  Notification

         In general, it is expected that key associates who are to be
Participants for a Performance Period shall be notified of that fact before the
beginning of the Performance Period. However, the Plan reserves the right to
include associates without prior notification.

         4.4  Transfers In, Out of and Between Eligible Positions

         (1) A key associate may be approved for participation during a portion
         of a Fiscal Year.

                  (a) With respect to associates that are not Covered
                  Associates, an associate newly hired or transferred into an
                  Eligible Position shall have his/her participation prorated
                  during the first

<PAGE>

                  Fiscal Year provided employment or transfer occurs at least
                  two months prior to the end of the Fiscal Year.

                  (b) An associate (other than a Covered Associate) transferred
                  out of an Eligible Position may receive a prorated Award at
                  the discretion of the Committee provided he/she served in the
                  Eligible Position for at least two full months during the
                  Fiscal Year.

                  (c) With respect to Covered Associates approved for
                  participation during a portion of a Fiscal Year, see Section
                  5.3 as it would relate to Performance Periods that are not
                  equivalent to a Fiscal Year.

         (2) Participants (which are not Covered Associates) transferring
         between Eligible Positions having different Award formulas will receive
         Awards prorated to months served in each Eligible Position. For Covered
         Associates transferring between Eligible Positions, Section 5.3 shall
         apply to each respective Performance Period applicable to the
         particular position.

         4.5  Termination of Employment

         Unless otherwise determined by the Committee (or its designee in the
case of Participants who are not Covered Associates), or in the case of amounts
accumulated in the various accounts under Section 6.4 of this Plan or as
required by applicable law, no payment pursuant to this Plan shall be made to a
Participant unless the Participant is employed by the Company on the day on
which payments determined under section 6.2 are in fact made (or would have been
made if a deferred payment election under section 6.4 - (1) had not been
executed).

         The Committee shall have the discretion not to make or to reduce an
Award for a Plan Year for a Participant whose employment with the Company
terminated during the Plan Year due to retirement, disability, or death.

5.       DETERMINATION OF AWARDS

         5.1 In addition to Section 4.5, Awards will vest solely on account of:
(1) the attainment of one or more pre-established performance goals/targets and
(2) the certification described in Section 5.6.

         5.2 With respect to Awards for Covered Associates, the material terms
of the performance goal(s) must be disclosed to, and subsequently approved by,
the stockholders before the payout is executed, unless they conform to one or
any combination of the following goals/targets each determined in accordance
with generally accepted accounting principles or similar objective standards (or
each as may appear in the annual report to stockholders):

         (a) Income (loss) per common share from continuing operations as
         disclosed in the Company's annual report to stockholders for a
         particular Fiscal Year; or

         (b) Income (loss) per common share from income as disclosed in the
         Company's annual report to stockholders for a particular Fiscal Year;
         or

         (c) Operating income or Income from operations (as the case may be); or

         (d) Income before unusual or infrequent items; or

         (e) Income (loss) from continuing operations; or

         (f) Income (loss) from continuing operations before extraordinary item
         and/or cumulative effect of a change in accounting principle (as the
         case may be); or

<PAGE>

         (g) Income (loss) before extraordinary item and/or cumulative effect of
         a change in accounting principle (as the case may be); or

         (h) Any other objective and specific income (loss) category that
         appears as a line item in the annual report to shareholders; or

         (i) Any of items (c) through (h) on a weighted average common shares
         outstanding basis; or

         (j) Any of items (a) through (i) on a diluted basis as described in
         Statement of Financial Accounting Standards No. 128 including official
         interpretations or amendments thereof which may be issued from time to
         time as long as such interpretations or amendments are utilized on the
         face of the income statement or in the notes to the financial
         statements disclosed in the Company's annual report to stockholders; or

         (k) Common Stock price; or

         (l) Total stockholder return expressed on a dollar or percentage basis
         as is customarily disclosed in the proxy statement accompanying the
         notice of annual meetings of stockholders; or

         (m) Net income (loss); or

         (n) Percentage increase in comparable store sales as disclosed in the
         Company's annual report; or

         (o) Gross profit or gross margin; or

         (p) Earnings before interest and taxes ("EBIT"); or

         (q) Earnings before interest, taxes, depreciation and amortization
         ("EBITDA"); or

         (r) Economic value added; or

         (s) Any of items (a) through (r) above with respect to any subsidiary,
         affiliate, business unit, business group, business venture or legal
         entity including any combination thereof or controlled directly or
         indirectly by the Company whether or not such information is included
         in the Company's annual report to stockholders, proxy statement or
         notice of annual meeting of stockholders; or

         (t) Any of items (a) through (r) above may be determined before or
         after a minority interest's share as designated by the Committee; or

         (u) Any of items (a) through (r) above with respect to a Performance
         Period whether or not such information is included in the Company's
         annual report to stockholders, proxy statement or notice of annual
         meetings of stockholders; or

         (v) Total Stockholder Return Ranking Position meaning the relative
         placement of the Company's Total Stockholder Return (as defined in (l)
         above) compared to those publicly held companies in the company's peer
         group as established by the Committee prior to the beginning of a
         vesting period or such later date as permitted under the IRC. The peer
         group shall be comprised of not less than six (6) companies, including
         the Company.

         With respect to items (a), (b), (i) and (j) above, other terminology
         may be used for "income (loss) per common share" (such as "Basic EPS",
         "earnings per common share", "diluted EPS", or "earnings per common
         share-assuming dilution") as contemplated by Statement of Financial
         Accounting Standards No. 128.

         The Committee in its sole discretion in setting the goals/targets in
         the time prescribed in Section 5.3 may make equitable adjustments
         (singularly or in combination) to the goals/targets in recognition of

<PAGE>

         unusual or non-recurring events for the following qualifying objective
         items: asset impairments under Statement of Financial Accounting
         Standards No. 121, as amended or superceded; acquisition-related
         charges; accruals for restructuring and/or reorganization program
         charges; merger integration costs; merger transaction costs; any profit
         or loss attributable to the business operations of any entity or
         entities acquired during the Performance Period; tax settlements; any
         extraordinary, unusual in nature, infrequent in occurrence, or other
         non-recurring items (not otherwise listed) as described in Accounting
         Principles Board Opinion No. 30; any extraordinary, unusual in nature,
         infrequent in occurrence, or other non-recurring items (not otherwise
         listed) in management's discussion and analysis of financial condition
         and results of operations, selected financial data, financial
         statements and/or in the footnotes each as appearing in the annual
         report to stockholders; unrealized gains or losses on investments;
         charges related to derivative transactions contemplated by Statement of
         Financial Accounting Standards No. 133, as amended or superceded; and
         compensation charges related to stock option activity.

         5.3 Prior to the completion of 25% of the Performance Period or such
earlier date as required under IRC Section 162(m), the Committee shall in its
sole discretion, for each such Performance Period determine and establish in
writing a performance goal or performance goals (in accordance with Section 5.2)
applicable to the Performance Period to any Covered Associate. Within the same
period of time, the Committee (or its designee) for each such Performance Period
shall determine and establish in writing the performance goal(s) applicable to
the Performance Period for Participants who are not Covered Associates. Such
preestablished performance goal(s) must state, in terms of an objective formula
or standard, the method for computing the amount of the Award payable to the
Participant if the goal(s) is (are) obtained. A formula or standard is objective
if a third party having knowledge of the relevant performance results could
calculate the amount to be paid to the Participant. The Committee may establish
any number of Performance Periods, goals and Awards for any associate running
concurrently, in whole or in part, provided, that in so doing the Committee does
not jeopardize the Company's deduction for such Awards under IRC Section 162(m).

         5.4 On or prior to the date specified in Section 5.3, the Committee, in
its sole discretion, shall either (i) assign each Participant a target Award
expressed as a percentage of Base Salary or a whole dollar amount (for Covered
Associates, Base Salary must be fixed prior to the establishment of performance
goals applicable to a particular Performance Period) or (ii) establish a payout
table or formula for purposes of determining the Award (if any) payable to each
Participant. The Committee may authorize a designee to establish a payout table
or formula for those Participants who are not Covered Associates.

         Each payout table or formula:

         (a) shall be in writing;

         (b) shall be based on a comparison of actual performance to the
         performance goals;

         (c) may include a "floor" which is the level of achievement of the
         performance goal in which payout begins; and

         (d) shall provide for an actual Award equal to or less than the
         Participant's target Award, depending on the extent to which actual
         performance approached or reached the performance goal(s).

         5.5 In lieu of Awards based on a percentage of Base Salary (Section
5.4), Awards may be based on a percentage or share of an Award pool. The
Committee (or its designee) shall determine (by the date specified in Section
5.3) the total dollar amount available for Awards (or a formula to calculate the
total dollar amount available) known as an Award pool. The Committee, in it sole
discretion, may establish two or more separate Award pools and assign the
Participants to a particular Award pool. The Committee (or its designee in the
case of Participants who are not Covered Associates) shall establish in writing
a performance payout table or formula detailing the Award pool and the payout
(or payout formula) based upon the relative level of attainment of performance
goals. Each payout table or formula shall (a) be based on a comparison of actual
performance to the performance goals, (b) provide the amount of a Participant's
Award or total pool dollars available (or a formula to calculate pool dollars
available), if the performance goals for the Performance

<PAGE>

Period are achieved, and (c) provide for an actual Award (which may be based on
a formula to calculate the percentage of the pool to be awarded to a particular
Participant) based on the extent to which the performance goals were achieved.
The payout table or formula may include a "floor" which is the level of
achievement of the performance goals in which payout begins. In the case of
Awards which are stated in terms of a percentage of an Award pool, the sum of
the individual percentages for all Participants in the pool cannot exceed 100
percent. In no case shall a reduction in an Award of one Participant result in
an increase in another Participant's Award.

         5.6 After the end of each Performance Period or such earlier date if
the performance goal(s)/target(s) are achieved, the Committee shall certify in
writing, prior to the unconditional payment of any Award, that the performance
goal(s)/target(s) for the Performance Period were satisfied and to what extent
they were satisfied. The Committee (or its designee) shall determine the actual
Award for each Participant based on the payout table/formula established in
section 5.4 or 5.5, as the case may be.

         5.7 The Committee, in its discretion, may cancel or decrease an Award,
but with respect to Covered Associates, may not under any circumstances increase
such Award.

         5.8 Any other provision of the Plan notwithstanding, the maximum
aggregate Award a Participant may earn for a particular Fiscal Year is
$3,000,000.

6.       PAYMENT OF INCENTIVE AWARDS

         6.1  In General

         Once an Award has vested and the amount thereof determined, payment of
the Award (or the portion thereof not deferred under section 6.4) shall be made
pursuant to section 6.2 or, if properly and timely elected, shall be deferred in
accordance with section 6.4.

         6.2  Current Payment

         A Participant's Award for a Performance Period, which is not deferred
in accordance with the provisions of Section 6.4 hereof, and a Participant's
Award, whether or not he/she elected deferred-payment thereof, for the Fiscal
Year in which his/her employment terminates, shall be paid in cash to the
Participant, or his/her Beneficiary in the event of his/her death, between the
date on which certification by the Committee was made in accordance with section
5.6 and the 75th day (inclusive) following the end of the Performance Period.
Should the Committee elect to postpone the payments for any reason, the
Committee may, in its discretion, also elect to pay interest at a reasonable
rate (consistent with IRC Section 162(m)) for period between the 75th day
following the end of the Performance Period and the day on which the payments
are in fact made.

         6.3  Conditional Payment

         The Committee may authorize a Conditional Payment of a Participant's
Award based upon the Committee's good faith determination. The Conditional
Payment, at the discretion of the Committee (or, except for Covered Associates,
under authority granted to its designee) may be discounted to reasonably reflect
the time value of money for the prepayment. Conditional Payments to Covered
Associates shall only be made in circumstances where the Covered Associate's
compensation deduction will not be jeopardized under IRC Section 162(m). The
amount of the Conditional Payment that will be returned to the Company is equal
to the Conditional Payment less the Award payment that has vested, if any. For
example, if the floor (see Section 5.4) was not attained for the performance
goal or target for the Performance Period, all of the Conditional Payment made
for that Performance Period to the Participant must be returned to the Company.
Return of all or a portion of the Conditional Payment shall be made reasonably
soon after it is determined the extent to which the performance goal or target
was not achieved.

         6.4  Deferred Payment

<PAGE>

         6.4 - (1)  Election

         Before the first day of each Performance Period (or such other date as
permissible to properly defer the Award for income tax purposes), a Participant
may irrevocably elect in writing to have a part or all of an Award for the year
under the Plan (but not less than $1,000) deferred. Such deferred payment shall
be credited to a bookkeeping reserve account which shall be established for the
Participant and set up on the books of the Company and known as his/her
"Interest Account".

         6.4 - (2)  Credits To Interest Account

         When a Participant has elected to have a part or all of his/her Award
credited to an "Interest Account", the unpaid balance in such account shall be
credited with a simple annual interest equivalent, as follows: As of the May 1
next following the Fiscal Year for which the deferred Award was made, such Award
shall become part of the unpaid balance of such Interest Account. Such Interest
Account shall be credited on April 30 of each year with an amount equal to
interest on the unpaid balance of such account from time to time outstanding
during the year ending on such April 30 at the rate determined by adding
together the Three-month Treasury Bill rate on the last banking day prior to the
beginning of such year and the Three-month Treasury Bill rate in effect on the
last banking days of each of the calendar months of May through March of such
year and dividing such total by 12. In the event that the interest Account shall
be terminated for any reason prior to April 30 of any year, such account shall
upon such termination date be credited with an amount equal to interest at the
average Three-month Treasury Bill rate determined as aforesaid on the unpaid
balance from time to time outstanding during that portion of such year prior to
the date of termination.

         6.4 - (3)  Alternate Deferral Plans

         The Committee, at its discretion, may provide alternate deferral plans
of which Awards under this Plan may be included.

         6.4 - (4)  Trust Deposits

         The Committee, at its discretion, may establish an irrevocable trust in
which the assets of the trust are subject to the general creditors of the
Company. Such trust may upon the occurrence of certain events, as determined by
the Committee, receive assets equal to the value of all participants Interest
Accounts on the date of the event.

         6.4 - (5)  Distribution Upon Termination of Employment

         Upon termination of a Participant's employment with the Company for any
reason, the Participant, or his/her Beneficiary in the event of his/her death,
shall be entitled to payment of the entire Interest Account in ten annual
installment payments. The amount accumulated in such Participant's Interest
Account shall be distributed as hereinafter provided.

         a.  The Interest Account shall be paid in cash as follows:

         i. The first annual payment shall be made no earlier than the thirtieth
         day following the date of termination of employment, and shall be in an
         amount equal to the value of one-tenth (th) of the total amount
         credited to the Participant's Interest Account as of the end of the
         month immediately preceding the date of termination.

         ii. A second annual payment shall be made no earlier than the first day
         of the Fiscal Year following the year during which the first
         anniversary of the date of termination of employment occurs, and shall
         be in an amount equal to the value of the of the amount credited (which
         includes accumulated interest) to the Participant's Interest Account as
         of January 1 next following the first anniversary of the termination of
         employment.

<PAGE>

         iii. Each succeeding installment payment shall be determined in a
         similar manner, i.e., the fraction of Participant's Interest Account
         balance to be paid out shall increase each year to 1/8, , etc., until
         the tenth installment which shall equal the then remaining balance of
         the account.

         The annual installment payments are intended to qualify the deferred
compensation portion of this Plan under Chapter 4 of Title 4, United States
Code, Section 114(b)(1)(I).

         6.4 - (6)  Distribution In Event Of Financial Emergency

         If requested by a Participant while in the employ of the Company and if
the Committee (or in the case of Participants who are not Covered Associates,
its designee) determines that a financial emergency has occurred in the
financial affairs of the Participant, the Interest Account of the Participant on
the date the Participant makes the request may be paid out at the sole
discretion of the Committee (or its designee) in the same manner it would have
been paid out had the Participant terminated his employment with the Company on
the date of such request. In the event of a payout due to a financial emergency,
a second Interest Account shall be established for the Participant and any
Awards made to the Participant thereafter shall be credited to this second
Interest Account. The Participant's rights to the second Interest Account shall
be the same as his/her rights to the initial Interest Account.

         6.4 - (7)  Acceleration Of Payment

         Notwithstanding the provisions in Item 6.4 - (5) and 6.4 - (6), if the
amount remaining in a Participant's Interest Account at any time is less than
$50,000, or in the event of a financial emergency (including death or
disability) occurring in the personal affairs of the Participant, or his/her
Beneficiary in case of his/her death, during the payout period, the Committee
may elect to accelerate the payout thereafter of the Participant's Interest
Account.

         6.4 - (8)  Beneficiary Designation

         A Participant may designate a Beneficiary who is to receive, upon
his/her death or disability, the distributions that otherwise would have been
paid to him/her. All designations shall be in writing and shall be effective
only if and when delivered to the Secretary of the Company during the lifetime
of the Participant. If a Participant designates a Beneficiary without providing
in the designation that the Beneficiary must be living at the time of each
distribution, the designation shall vest in the Beneficiary all of the
distribution whether payable before or after the Beneficiary's death, and any
distributions remaining upon the Beneficiary's death shall be made to the
Beneficiary's estate.

         A Participant may from time to time during his lifetime change his
Beneficiary by a written instrument delivered to the Secretary of the Company.
In the event a Participant shall not designate a Beneficiary as aforesaid, or if
for any reasons such designation shall be ineffective, in whole or in part, the
distribution that otherwise would have been paid to such Participant shall be
paid to his estate and in such event the term "Beneficiary" shall include his
estate.

         6.4 - (9)  Corporate Changes

                  i.  Dissolution or Liquidation of Company

         The Company shall cause the dollar balance of an Interest Account
(adjusted to the end of the month immediately preceding the date of dissolution
or liquidation) to be paid out in cash in a lump sum to the Participants, or
their Beneficiaries as the case may be, within 60 days following the date of
dissolution or liquidation of the Company.

                  ii.  Merger, Consolidation or Sale of Assets

         Notwithstanding anything herein to the contrary, in the event that the
Company desires to consolidate with, merge into, sell or otherwise transfer all
or substantially all of its assets to another

<PAGE>

corporation (hereinafter referred to as "Successor Corporation"), such Successor
Corporation may assume the obligation under this Plan, provided those
appropriate amendments are made to the Plan. In the event the Plan is not
continued within a reasonable period of time by the Successor Corporation, then
as of the date preceding the date of such consolidation, merger, or transfer,
the account of each Participant shall be converted into dollars and distributed
as provided in section 6.

7.       RIGHTS OF PARTICIPANTS

         No Participant or Beneficiary shall have any interest in any fund or in
any specific asset or assets of the Company by reason of any account under the
Plan. It is intended that the Company has merely a contractual obligation to
make payments when due hereunder and it is not intended that the Company hold
any funds in reserve or trust to secure payments hereunder. No Participant may
assign, pledge, or encumber his/her interest under the Plan, or any part
thereof, except that a Participant may designate a Beneficiary as provided
herein.

         Nothing contained in this Plan shall be construed to:

         A. Give any associate or Participant any right to receive any Award
         other than in the sole discretion of the Committee;

         B. Give a Participant any rights whatsoever with respect to share(s) of
         Common Stock of the Company;

8.       NO EMPLOYEE RIGHTS

         Nothing in the Plan or participation in the Plan shall confer upon any
Participant the right to be employed by the Company or to continue in the employ
of the Company, nor shall anything in the Plan, or participation in the Plan
amend, alter or otherwise affect any rights or terms of employment or other
benefits arising from that employment.

9.       ADMINISTRATION

         The Plan shall be administered by the Committee. The Committee may,
from time to time, establish rules for the administration of the Plan that are
not inconsistent with the provisions of the Plan.

10.      AMENDMENT OR TERMINATION

         The Committee may modify or amend, in whole or in part, any or all of
the provisions of the Plan, except as to those terms or provisions that are
required by IRC Section 162(m) to be approved by the stockholders, or suspend or
terminate it entirely; provided, however, that no such modifications, amendment,
or suspension or termination may, without the consent of the Participant, or his
Beneficiary in the case of his/her death, reduce the right of a Participant, or
his/her Beneficiary, as the case may be, to any Payment due under the Plan.

11.      TAX WITHHOLDING

         The Company shall have the right to deduct from all cash payments any
federal, state, or local taxes or other withholding amounts required by law or
valid court order to be withheld with respect to such cash payments.

12.      EFFECTIVE DATE

         The Plan shall be effective as of February 2, 1998, subject to approval
and modification by the Company's stockholders no later than September 1, 1998.

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