EXHIBIT 10.2

GUARANTY

THIS GUARANTY (this “Guaranty”) is executed as of September 15, 2014 by SEARS
HOLDINGS CORPORATION, a Delaware corporation (together with any permitted
successors and assigns, “Guarantor”), for the benefit of JPP II, LLC, a Delaware
limited Partnership and JPP, LLC, a Delaware limited liability company
(collectively, together with their respective successors and assigns, “Lender”).
W I T N E S S E T H
WHEREAS, Lender has agreed to make a loan (the “Loan”) to the parties listed on
Schedule A hereto (“Borrower”), in the original principal amount of $400,000,000
(the “Loan Amount”), pursuant to that certain Loan Agreement, dated as of the
date hereof, by and between Borrower and Lender (the “Loan Agreement”;
capitalized terms used herein but not otherwise defined shall have the
respective meanings ascribed to such terms in the Loan Agreement);
WHEREAS, to evidence the Loan, Borrower has executed and delivered to Lender a
promissory note, dated as of the date hereof, in the original principal amount
of the Loan Amount (as the same may be amended, restated, replaced,
supplemented, or otherwise modified from time to time, the “Note”), and Borrower
has or will become indebted, and may from time to time become further indebted,
to Lender with respect to the Loan;
WHEREAS, Lender requires as a condition to making the Loan that Guarantor agrees
to unconditionally guaranty for the benefit of Lender and its successors and
assigns, the full and timely payment and performance of the Guaranteed
Obligations (as hereinafter defined);
WHEREAS, Guarantor directly and/or indirectly owns an interest in Borrower and
will derive substantial economic benefit from the making of the Loan by Lender
to Borrower; and
WHEREAS, Guarantor has agreed to execute and deliver this Guaranty in order to
induce Lender to make the Loan.
NOW, THEREFORE, to induce Lender to make the Loan to Borrower and in
consideration for the substantial benefit Guarantor will derive from the making
of the Loan and for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I

NATURE AND SCOPE OF GUARANTY
1.1    Guaranty of Obligations. Guarantor hereby absolutely, irrevocably and
unconditionally guarantees to Lender the full and timely payment and performance
of all of the Guaranteed Obligations as and when the same shall be due and
payable, whether by lapse of

W/2381468
 
1
 

--------------------------------------------------------------------------------

time, by acceleration of maturity or otherwise. Guarantor hereby absolutely,
irrevocably and unconditionally covenants and agrees that it is liable for the
Guaranteed Obligations as primary obligor.
1.2    Definitions of Guaranteed Obligations. As used herein, the term
“Guaranteed Obligations” means all obligations and liabilities of Borrower under
the Loan Agreement, the Note and the other Loan Documents.
1.3    Nature of Guaranty. This Guaranty is an irrevocable, absolute and
continuing guaranty of payment and not a guaranty of collection. No exculpatory
language contained in any of the other Loan Documents shall in any event or
under any circumstances modify, qualify or affect the personal recourse
obligations and liabilities of Guarantor hereunder. This Guaranty may not be
revoked by Guarantor and shall continue to be effective with respect to the
Guaranteed Obligations arising or created after any attempted revocation by
Guarantor. It is the intent of Guarantor and Lender that the obligations and
liabilities of Guarantor hereunder are absolute and unconditional under any and
all circumstances and that so long as any portion of the Indebtedness shall be
outstanding, such obligations and liabilities shall not be discharged or
released in whole or in part, by any act or occurrence (including the fact that
at any time or from time to time the Indebtedness or the Guaranteed Obligations
may be increased or reduced) that might, but for the provisions of this
Guaranty, be deemed a legal or equitable discharge or release of Guarantor. This
Guaranty may be enforced by Lender and any subsequent holder of the Note or any
part thereof and shall not be discharged by the assignment or negotiation of all
or any part of the Note.
1.4    [RESERVED]
1.5    Guaranteed Obligations Not Reduced by Set-Off. The Guaranteed Obligations
and the liabilities and obligations of Guarantor to Lender hereunder shall not
be reduced, discharged or released because or by reason of any existing or
future set-off, offset, claim or defense of any kind or nature that Borrower,
Guarantor or any other Person has or may hereafter have against Lender or
against payment of the Indebtedness or the Guaranteed Obligations, whether such
set-off, offset, claim or defense arises in connection with the Guaranteed
Obligations or otherwise.
1.6    No Duty to Pursue Others; No Duty to Mitigate. It shall not be necessary
for Lender (and Guarantor hereby waives any rights that Guarantor may have to
require Lender) to take any action, obtain any judgment or file any claim prior
to enforcing this Guaranty, including to (i) institute suit or otherwise enforce
Lender’s rights, or exhaust its remedies, against Borrower or any other Person
liable on all or any part of the Indebtedness or the Guaranteed Obligations, or
against any other Person, (ii) enforce Lender’s rights, or exhaust any remedies
available to Lender, against any collateral that shall ever have been given to
secure all or any part of the Indebtedness or the Guaranteed Obligations, (iii)
join Borrower or any other Person liable on the Guaranteed Obligations in any
action seeking to enforce this Guaranty or (iv) resort to any other means of
obtaining payment of all or any part of the Indebtedness or the Guaranteed
Obligations. Lender shall not be required to mitigate damages or take any other
action to reduce, collect or enforce the Guaranteed Obligations.

--------------------------------------------------------------------------------

1.7    Payment by Guarantor. If all or any part of the Guaranteed Obligations
shall not be punctually paid or performed when due, whether at demand, maturity,
acceleration or otherwise, Guarantor shall, immediately upon demand by Lender
and without presentment, protest, notice of protest, notice of non-payment,
notice of intention to accelerate the maturity, notice of acceleration of the
maturity or any other notice whatsoever, pay in lawful money of the United
States of America, the amount due thereon to Lender. Amounts not paid when due
hereunder shall accrue interest at the Default Rate, unless such amounts already
include interest at the Default Rate pursuant to the terms of the other Loan
Documents. Such demands may be made at any time coincident with or after the
time for payment of all or any part of the Guaranteed Obligations and may be
made from time to time with respect to the same or different Guaranteed
Obligations.
1.8    [RESERVED]
1.9    Waivers.
(a)    Guarantor hereby assents to all of the terms and agreements heretofore or
hereafter made by Borrower with Lender (including the provisions of the Loan
Documents) and hereby waives diligence, presentment, protest, demand on Borrower
for payment or otherwise, filing of claims, requirement of a prior proceeding
against Borrower and all notices (other than notices expressly provided for
hereunder or required to be delivered under applicable law), including notice
of:
(i)    the acceptance of this Guaranty;
(ii)    the present existence or future incurring of all or any part of the
Indebtedness, or any future change to the time, manner or place of payment of,
or in any other term of all or any part of the Indebtedness or the Guaranteed
Obligations;
(iii)    any amendment, modification, replacement or extension of any of the
Loan Documents;
(iv)    the execution and delivery by Borrower and Lender of any other loan or
credit agreement or of Borrower’s execution and delivery of any promissory note
or other documents arising under the Loan Documents or in connection with any
Property;
(v)    Lender’s transfer, participation, componentization or other disposition
of all or any part of the Loan or this Guaranty, or an interest therein;
(vi)    the sale or foreclosure (or posting or advertising for sale or
foreclosure), or assignment-in-lieu of foreclosure, of any collateral for the
Guaranteed Obligations;
(vii)    any protest, proof of non-payment or default by Borrower, or the
occurrence of a breach or an Event of Default, or the intent to accelerate or of
acceleration in relation to any instrument relating to the Indebtedness or the
Guaranteed Obligations;

--------------------------------------------------------------------------------

(viii)     the obtaining or release of any guaranty or surety agreement, pledge,
assignment or other security for the Indebtedness or the Guaranteed Obligations,
or any part thereof; or
(ix)    any other action at any time taken or omitted to be taken by Lender
generally and any and all demands and notices of every kind in connection with
this Guaranty, the other Loan Documents and any other documents or agreements
evidencing, securing or relating to the Indebtedness or the Guaranteed
Obligations, or any part thereof.
(b)    Guarantor hereby waives any and all rights it may now or hereafter have
to, and covenants and agrees that it shall not at any time, insist upon, plead
or in any manner whatsoever claim or take the benefit or advantage of, any and
all appraisal, valuation, stay, extension, marshaling-of-assets or redemption
laws, or right of homestead or exemption, whether now or at any time hereafter
in force, that may delay, prevent or otherwise affect the performance by
Guarantor of its obligations under, or the enforcement by Lender of, this
Guaranty. Guarantor hereby further waives any and all rights it may now or
hereafter have to, and covenants and agrees that it shall not, set up or claim
any defense, counterclaim, cross-claim, set-off, offset, right of recoupment or
other objection of any kind to any action, suit or proceeding in law, equity or
otherwise, or to any demand or claim that may be instituted or made by Lender
hereunder, except for the defense of the actual timely performance of the
Guaranteed Obligations hereunder.
(c)    Guarantor specifically acknowledges and agrees that the waivers made by
it in this Section and in the other provisions of this Guaranty are of the
essence of the Loan transaction and that, but for this Guaranty and such
waivers, Lender would not make the Loan to Borrower.
1.10    Waiver of Subrogation, Reimbursement and Contribution. Notwithstanding
anything to the contrary contained herein, until the repayment in full of the
Indebtedness, Guarantor hereby unconditionally and irrevocably waives, releases
and abrogates any and all rights it may now or hereafter have under any
agreement, at law or in equity (including any law subrogating the Guarantor to
the rights of Lender), to assert any claim against or seek contribution,
indemnification or any other form of reimbursement from Borrower or any other
Person liable for payment of any or all of the Guaranteed Obligations for any
payment made by Guarantor under this Guaranty.
1.11    Reinstatement; Effect of Bankruptcy. Guarantor agrees that if at any
time all or any part of any payment at any time received by Lender from, or on
behalf of, Borrower or Guarantor under or with respect to this Guaranty is held
to constitute a Preferential Payment (as defined in Section 4.4), or if Lender
is required to rescind, restore or return all or part of any such payment or pay
the amount thereof to another Person for any reason (including the insolvency,
bankruptcy reorganization, receivership or other debtor relief law or any
judgment, order or decision thereunder), then the Guaranteed Obligations
hereunder shall, to the extent of the payment rescinded, restored or returned,
be deemed to have continued in existence notwithstanding such previous receipt
by Lender, and the Guaranteed Obligations hereunder

--------------------------------------------------------------------------------

shall continue to be effective or reinstated, as the case may be, as to such
payment as though such previous payment to Lender had never been made.
ARTICLE II    
EVENTS AND CIRCUMSTANCES NOT
REDUCING OR DISCHARGING GUARANTOR’S OBLIGATIONS
2.1        Events and Circumstances Not Reducing or Discharging Guarantor’s
Obligations. Guarantor hereby consents and agrees to each of the following and
agrees that Guarantor’s obligations under this Guaranty shall not be released,
diminished, impaired, reduced or adversely affected in any way by any of the
following, although without notice to or the further consent of Guarantor, and
waives any common law, equitable, statutory or other rights (including rights to
notice) or defenses that Guarantor might otherwise have as a result of or in
connection with any of the following:
(a)    Modifications. Any change in the time, manner or place of payment of all
or any part of the Indebtedness or the Guaranteed Obligations, or in any other
term thereof, or any renewal, extension, increase, alteration, rearrangement,
amendment or other modification to any provision of any of the Loan Documents or
any other document, instrument, contract or understanding between Borrower and
Lender or any other Person pertaining to the Indebtedness or the Guaranteed
Obligations.
(b)    Adjustment. Any adjustment, indulgence, forbearance, waiver, consent or
compromise that Lender might extend, grant or give to Borrower, Guarantor or any
other Person with respect to any provision of this Guaranty or any of the other
Loan Documents.
(c)    Condition of Borrower or Guarantor. Borrower’s or Guarantor’s voluntary
or involuntary liquidation, dissolution, sale of all or substantially all of
their respective assets and liabilities, appointment of a trustee, receiver,
liquidator, sequestrator or conservator for all or any part of Borrower’s or
Guarantor’s assets, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, consolidation, merger arrangement, composition,
readjustment or the commencement of any other similar proceedings affecting
Borrower or Guarantor or any of the assets of either of them, including (A) the
release or discharge of Borrower from the payment and performance of its
obligations under any of the Loan Documents by operation of law or (B) the
impairment, limitation or modification of the liability of Borrower, its
partners or Guarantor, or of any remedy for the enforcement of Lender’s rights,
under this Guaranty or any of the other Loan Documents, resulting from the
operation of any present or future provisions of the Bankruptcy Code or other
present or future federal, state or applicable statute of law or from the
decision in any court.
(d)    Invalidity of Guaranteed Obligations. The invalidity, illegality,
irregularity or unenforceability of all or any part of this Guaranty or of any
of the Loan Documents, or of any other document or agreement executed in
connection with the Indebtedness or the Guaranteed Obligations for any reason
whatsoever, including the fact that (i) the Indebtedness or the Guaranteed
Obligations, or any part thereof, exceeds the amount

--------------------------------------------------------------------------------

permitted by law, (ii) the act of creating the Indebtedness or the Guaranteed
Obligations, or any part thereof, is ultra vires, (iii) the officers or
representatives executing the Loan Documents or any other document or agreement
executed in connection with the creating of the Indebtedness or the Guaranteed
Obligations, or any part thereof, acted in excess of their authority, (iv) the
Indebtedness or the Guaranteed Obligations, or any part thereof, violates
applicable usury laws, (v) Borrower or Guarantor has valid defenses, claims or
offsets (whether at law, in equity or by agreement) that render the Indebtedness
or the Guaranteed Obligations wholly or partially uncollectible, (vi) the
creation, performance or repayment of the Indebtedness or the Guaranteed
Obligations, or any part thereof (or the execution, delivery and performance of
any document or instrument representing the Indebtedness or the Guaranteed
Obligations, or any part thereof, or executed in connection with the
Indebtedness or the Guaranteed Obligations, or given to secure the repayment of
the Indebtedness or the Guaranteed Obligations, or any part thereof), is
illegal, uncollectible, legally impossible or unenforceable or (vii) any of the
Loan Documents or any other document or agreement executed in connection with
the Indebtedness or the Guaranteed Obligations, or any part thereof, has been
forged or otherwise are irregular or not genuine or authentic.
(e)    Release of Obligors. Any compromise or full or partial release of the
liability of Borrower or any other Person now or hereafter liable, whether
directly or indirectly, jointly, severally, or jointly and severally, to pay,
perform, guarantee or assure the payment of the obligations under this Guaranty
or any of the other Loan Documents.
(f)    Release of Collateral; Other Collateral. Any release, surrender,
exchange, subordination, deterioration, waste, loss or impairment by Lender
(including negligent, willful, unreasonable or unjustifiable impairment) of, or
failure to perfect or obtain protection of, any collateral, property or security
at any time existing in connection with, or assuring or securing payment of, all
or any part of the Indebtedness or the Guaranteed Obligations; or the taking or
accepting of any other security, collateral or guaranty or other assurance of
payment for all or any part of the Indebtedness or the Guaranteed Obligations.
(g)    Offset. Any existing or future right of set-off, offset, claim,
counterclaim or defense of any kind or nature against Lender or any other
Person, which may be available to or asserted by Guarantor or Borrower.
(h)    Change in Law. Any change in the laws, rules or regulations of any
jurisdiction or any present or future action of any Governmental Authority or
court amending, varying, reducing or otherwise affecting, or purporting to
amend, vary, reduce or otherwise affect, any of the obligations of Borrower
under any of the Loan Documents or Guarantor under this Guaranty.
(i)    Event of Default. The occurrence of any Event of Default or any potential
Event of Default under any of the Loan Documents, whether or not Lender has
exercised any of its rights and remedies under the Loan Documents upon the
happening of any such Event of Default or potential Event of Default.

--------------------------------------------------------------------------------

(j)    Actions Omitted. The absence of any action to enforce any of Lender’s
rights under the Loan Documents or available to Lender at law, equity or
otherwise, to recover any judgment against Borrower or to enforce a judgment
against Borrower under any of the Loan Documents.
(k)    Other Dealings. The occurrence of any other dealing, transaction, matter
or thing between Guarantor and Lender.
(l)    Application of Sums. The application of any sums by whomsoever paid or
however realized to any amounts owing by Guarantor or Borrower to Lender in such
manner as Lender shall determine in its sole discretion, subject to, and
otherwise in accordance with, the terms of the Loan Agreement and the other Loan
Documents.
(m)    Ownership Interest. Any change in or termination of the ownership
interest of Guarantor (whether direct or indirect).
(n)    Other Circumstances. Any other circumstance that might otherwise
constitute a legal or equitable discharge or defense of a guarantor generally,
it being the unambiguous and unequivocal intention of Guarantor and Lender that
the liability of Guarantor hereunder shall be direct and immediate and that
Guarantor shall be obligated to pay the Guaranteed Obligations when due,
notwithstanding any occurrence, circumstance, event, action, or omission
whatsoever, whether contemplated or uncontemplated, and whether or not otherwise
or particularly described herein, except for the full and final payment and
satisfaction of the Guaranteed Obligations.
2.2    Indebtedness or Other Obligations of Guarantor. If Guarantor is or
becomes liable for any Indebtedness owed by Borrower to Lender by endorsement or
otherwise, other than under this Guaranty, such liability shall not be in any
manner impaired or affected by this Guaranty and the rights of Lender hereunder
shall be cumulative of any and all other rights that Lender may ever have
against Guarantor. The exercise by Lender of any right or remedy hereunder or
under any other instrument or at law or in equity shall not preclude the
concurrent or subsequent exercise of any right or remedy under any other
instrument or at law or in equity, including the making of multiple demands
hereunder. Further, without in any way diminishing or limiting the generality of
the foregoing, it is specifically understood and agreed that this Guaranty is
given by Guarantor as an additional guaranty to any and all guarantees as may
heretofore have been or may hereafter be executed and delivered by Guarantor in
favor of Lender, whether relating to the obligations of Borrower under the Loan
Documents or otherwise, and nothing herein shall ever be deemed to replace or be
in-lieu of any other such previous or subsequent guarantees.

--------------------------------------------------------------------------------

ARTICLE III    
REPRESENTATIONS AND WARRANTIES
3.1        Representations and Warranties. To induce Lender to enter into the
Loan Documents and extend credit to Borrower, Guarantor hereby represents and
warrants to Lender that, on the date hereof:
(a)    Due Formation, Authorization and Enforceability. Guarantor is duly
organized and validly existing under the laws of the jurisdiction of its
incorporation or formation, as the case may be, and has full power and legal
right to execute and deliver this Guaranty and to perform under this Guaranty
and the transactions contemplated hereunder. Guarantor has taken all necessary
action to authorize the execution, delivery and performance of this Guaranty and
the transactions contemplated hereunder. This Guaranty has been duly authorized,
executed and delivered by Guarantor and constitutes a legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms, subject to bankruptcy, insolvency and similar laws of general
applicability relating to or affecting creditors’ rights and general equity
principles (whether enforcement is sought by proceedings in equity or at law.)
(b)    Benefit to Guarantor. Guarantor hereby acknowledges that Lender would not
make the Loan but for the personal liability undertaken by Guarantor under this
Guaranty. Guarantor (i) is an affiliate of Borrower, (ii) has received, or will
receive, direct and/or indirect benefit from the making of the Loan to Borrower
and (iii) has received, or will receive, direct and/or indirect benefit from the
making of this Guaranty with respect to the Guaranteed Obligations.
(c)    Familiarity and Reliance. Guarantor is familiar with, and has
independently reviewed books and records regarding, the financial condition of
Borrower and is familiar with the value of any and all collateral granted, or
intended to be granted, as security for the Indebtedness or the Guaranteed
Obligations; provided, however, Guarantor is not relying on such financial
condition or such collateral as an inducement to enter into this Guaranty.
(d)    No Representation by Lender. Neither Lender nor any other Person has made
any representation, warranty or statement to Guarantor or to any other Person in
order to induce the Guarantor to execute this Guaranty.
(e)    Solvency. On the Closing Date, the fair salable value of Guarantor’s
aggregate assets is and will, immediately following the making of the Loan and
the use and disbursement of the proceeds thereof, be greater than Guarantor’s
probable aggregate liabilities (including subordinated, unliquidated, disputed
and Contingent Obligations). Guarantor’s aggregate assets do not and,
immediately following the making of the Loan and the use and disbursement of the
proceeds thereof will not, constitute unreasonably small capital to carry out
its business as conducted or as proposed to be conducted. Guarantor does not
intend to, and does not believe that it will, incur debts and liabilities
(including Contingent Obligations and other commitments) beyond its ability to
pay such debts as they mature (taking into account the timing and amounts to be
payable on or in respect of obligations of Guarantor).

--------------------------------------------------------------------------------

(f)    No Conflicts. The execution and delivery of this Guaranty by Guarantor,
and the performance of transactions contemplated hereunder do not and will not
(i) conflict with or violate any Legal Requirements or any governmental
statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and
injunctions of Governmental Authorities (including Environmental Laws) affecting
Guarantor or any of its assets or property, (ii) conflict with, result in a
breach of, or constitute a default (including any circumstance or event that
would be a default but for the lack of due notice or lapse of time or both)
under any of the terms, conditions or provisions of any of Guarantor’s
organizational documents or any agreement or instrument to which Guarantor is a
party, or by which Guarantor or its assets or property are bound or (iii) result
in the creation or imposition of any Lien on any of Guarantor’s assets or
property, except, in the case of clauses (i), (ii) and (iii) as would not affect
Guarantor’s performance of its obligations under this Guaranty.
(g)    Litigation. There is no action, suit, proceeding, arbitration or
investigation pending or, to Guarantor’s knowledge after due and diligent
inquiry, threatened against Guarantor in any court or by or before any other
Governmental Authority, in each case, which might have consequences that would
materially and adversely affect the performance of Guarantor’s obligations and
duties under this Guaranty. There are no outstanding or unpaid judgments against
Guarantor.
(h)    Consents. No consent, approval, authorization, order or filings of or
with any court or Governmental Authority is required for the execution, delivery
and performance by Guarantor of, or compliance by Guarantor with, this Guaranty
or the consummation of the transactions contemplated hereunder, other than those
that have been obtained by Guarantor and those which, if not obtained, would not
affect Guarantor’s performance of its obligations under this Guaranty.
(i)    Compliance. Guarantor is not in default or violation of any regulation,
order, writ, injunction, decree or demand of any Governmental Authority, the
violation or default of which might have consequences that would materially and
adversely affect its performance hereunder.
(j)    No Defenses. This Guaranty and the obligations of Guarantor hereunder are
not subject to, and Guarantor has not asserted, any right of rescission, offset,
counterclaim, cross-claim, recoupment or affirmative or other defense of any
kind and neither the operation of any of the terms of this Guaranty nor the
exercise of any right hereunder will render the Guaranty unenforceable in whole
or in part.
(k)    Tax Filings. Guarantor has filed all material tax returns (federal,
state, local and foreign) required to be filed (taking into account any
applicable extensions) and paid all material amounts of taxes due (including
interest and penalties) except for taxes that are not yet delinquent and taxes
the amount or validity of which are currently being contested in good faith by
appropriate proceedings.
(l)    Survival. All representations and warranties made by Guarantor herein
shall survive the execution hereof.

--------------------------------------------------------------------------------

ARTICLE IV    
SUBORDINATION OF CERTAIN DEBT
4.1        Subordination of Guarantor’s Conditional Rights. As used herein, the
term “Guarantor’s Conditional Rights” shall mean any and all debts and
liabilities of Borrower owed to Guarantor, whether such debts and liabilities
now exist or are hereafter incurred or arise, or whether the obligations of
Borrower thereon be direct, contingent, primary, secondary, several, joint and
several or otherwise, and irrespective of whether such debts or liabilities be
evidenced by note, contract, open account or otherwise, and irrespective of the
Person or Persons in whose favor such debts or liabilities may, at their
inception, have been or may hereafter be created or the manner in which they
have been or may hereafter be acquired by Guarantor.
4.2        Liens Subordinate; Standstill. Notwithstanding any other provision of
this Guaranty to the contrary, until the repayment in full of the Indebtedness,
Guarantor hereby agrees that, while any Event of Default has occurred and is
continuing, (i) all Guarantor’s Conditional Rights and any and all liens,
security interests, judgment liens, charges or other encumbrances upon
Borrower’s assets securing payment of the Guarantor’s Conditional Rights shall
be and remain, at all times, inferior and subordinate in all respects to the
payment and performance in full of the Indebtedness and any and all liens,
security interests, judgment liens, charges or other encumbrances upon
Borrower’s assets securing payment of the Indebtedness, regardless of whether
such encumbrances in favor of Guarantor or Lender presently exist or are
hereafter created or attach, (ii) Guarantor shall not be entitled to, and shall
not, receive or collect, directly or indirectly, from Borrower or any other
Person any amount pursuant to or in satisfaction of any of the Guarantor’s
Conditional Rights and (iii) Guarantor shall not, without the prior written
consent of Lender, (x) exercise or enforce any creditor’s right it may have
against Borrower in respect of any of the Guarantor’s Conditional Rights or (y)
foreclose, repossess, sequester or otherwise take steps or institute any action
or proceedings (judicial or otherwise, including the commencement of, or joinder
in, any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency
proceeding) to enforce any liens, mortgages, deeds of trust, security interests,
collateral rights, judgments or other encumbrances on assets of Borrower held by
Guarantor.
4.3        Claims in Bankruptcy. In the event of receivership, bankruptcy,
reorganization, arrangement, debtor’s relief or other insolvency proceedings
involving Guarantor as debtor, Lender shall have the right and authority, either
in its own name or as an attorney-in-fact for Guarantor, to prove its claim in
any such proceeding and to take such other steps as may be necessary so as to
establish its rights hereunder and receive directly from the receiver, trustee
or other court custodian, payments that would otherwise be payable pursuant to
or in satisfaction of any of the Guarantor’s Conditional Rights. Guarantor
hereby assigns any and all such payments to Lender.
4.4        Payments Held in Trust. In the event that, notwithstanding anything
to the contrary in this Guaranty, Guarantor should receive any funds, payment,
claim or distribution that is prohibited by this Guaranty on account of any of
the Guarantor’s Conditional Rights and either (i) such amount is paid to
Guarantor at any time when any part of the Indebtedness or the

--------------------------------------------------------------------------------

Guaranteed Obligations shall not have been paid or performed in full or,
(ii) regardless of when such amount is paid to Guarantor, any payment made by,
or on behalf of, Borrower to Lender is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid by Lender or paid
over to a trustee, receiver or any other Person, whether under any bankruptcy
act or otherwise (such payment, a “Preferential Payment”), then such amount paid
to Guarantor shall be held in trust for the benefit of Lender and shall
forthwith be paid to Lender to be credited and applied upon the Indebtedness or
the Guaranteed Obligations, whether matured or unmatured, in such order as
Lender, in its sole and absolute discretion, shall determine. To the extent that
any of the provisions of this Article 4 shall not be enforceable, Guarantor
agrees that until such time as the Indebtedness and the Guaranteed Obligations
have been paid and performed in full and the period of time has expired during
which any payment made by Borrower to Lender may be determined to be a
Preferential Payment, all of the Guarantor’s Conditional Rights, to the extent
not validly waived, shall be subordinate to Lender’s right to full payment and
performance of the Indebtedness and the Guaranteed Obligations and Guarantor
shall not enforce any of the Guarantor’s Conditional Rights during such period.
ARTICLE V    
MISCELLANEOUS
5.1    Lender’s Benefit; No Impairment of Loan Documents. This Guaranty is for
the benefit of Lender and its successors and assigns and nothing contained
herein shall impair, as between Borrower and Lender, the obligations of Borrower
under the Loan Documents. Lender and its successors and assigns shall have the
right to assign, in whole or in part, this Guaranty and the other Loan Documents
to any Person and to participate all or any portion of the Loan, including any
servicer or trustee in connection with a Securitization.
5.2    Successors and Assigns; Binding Effect. This Guaranty shall be binding
upon Guarantor and its heirs, executors, legal representatives, successors and
assigns, whether by voluntary action of the parties or by operation of law.
Notwithstanding anything to the contrary herein, Guarantor may in no event
delegate or transfer its obligations under, or be released from, this Guaranty,
except in accordance with the terms of the Loan Agreement and this Guaranty.
5.3    Borrower. The term “Borrower” as used herein shall include any new or
successor corporation, association, partnership (general or limited), limited
liability company, joint venture, trust or other individual or organization
formed as a result of any merger, reorganization, sale, transfer, devise, gift
or bequest of or by Borrower or any interest in Borrower.
5.4    Costs and Expenses. If Guarantor should breach or fail to timely perform
any provision of this Guaranty, Guarantor shall, immediately upon demand by
Lender, pay to Lender any and all costs and expenses (including court costs and
attorneys’ fees and expenses) incurred by Lender in connection with the
enforcement hereof or the preservation of Lender’s rights hereunder. The
covenant contained in this Section shall survive the payment and performance of
the Guaranteed Obligations.

--------------------------------------------------------------------------------

5.5    Not a Waiver; No Set-Off. The failure of any party to enforce any right
or remedy hereunder, or to promptly enforce any such right or remedy, shall not
constitute a waiver thereof, nor give rise to any estoppel against such party,
nor excuse any other party from its obligations hereunder, nor shall a single or
partial exercise thereof preclude any other future exercise, or the exercise of
any other right, power, remedy or privilege. In particular, and not by way of
limitation, by accepting payment after the due date of any amount payable under
this Guaranty, Lender shall not be deemed to have waived any right either to
require prompt payment when due of all other amounts due under this Guaranty or
to declare a default for failure to effect prompt payment of any such other
amount. Lender shall not be required to mitigate damages or take any other
action to reduce, collect or enforce any of the Indebtedness or the Guaranteed
Obligations. No set‑off, counterclaim (other than compulsory counterclaims),
reduction, diminution of any obligations or any defense of any kind or nature
that Guarantor has or may hereafter have against Borrower or Lender shall be
available hereunder to Guarantor.
5.6    PRIOR AGREEMENTS. THIS GUARANTY CONTAINS THE ENTIRE AGREEMENT OF THE
PARTIES HERETO IN RESPECT OF THE GUARANTY DESCRIBED HEREIN, AND ALL PRIOR
AGREEMENTS AMONG OR BETWEEN SUCH PARTIES, WHETHER ORAL OR WRITTEN, INCLUDING ANY
TERM SHEETS, CONFIDENTIALITY AGREEMENTS AND COMMITMENT LETTERS, ARE SUPERSEDED
BY THE TERMS OF THIS GUARANTY AS THEY RELATE TO THE GUARANTY DESCRIBED HEREIN.
5.7    No Oral Change. No modification, amendment, extension, discharge,
termination or waiver of any provision of this Guaranty, nor consent to any
departure by Guarantor therefrom, shall in any event be effective unless the
same shall be in a writing signed by Lender, and then such waiver or consent
shall be effective only in the specific instance, and for the purpose, for which
given. Except as otherwise expressly provided herein, no notice to, or demand
on, Guarantor, shall entitle Guarantor to any other or future notice or demand
in the same, similar or other circumstances.
5.8    Separate Remedies. Each and all of Lender’s rights and remedies under
this Guaranty and each of the other Loan Documents are intended to be distinct,
separate and cumulative and no such right or remedy herein or therein mentioned
is intended to be in exclusion of or a waiver of any other right or remedy
available to Lender.
5.9    Severability. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Guaranty.
5.10    Rules of Construction. All references to sections and exhibits are to
sections and exhibits in or to this Guaranty unless otherwise specified. Unless
otherwise specified: (i) all meanings attributed to defined terms in this
Guaranty shall be equally applicable to both the singular and plural forms of
the terms so defined, (ii) “including” means “including, but not limited to” and
“including, without limitation” and (iii) the words “hereof,” “herein,”

--------------------------------------------------------------------------------

“hereby,” “hereunder” and words of similar import when used in this Guaranty
shall refer to this Guaranty as a whole and not to any particular provision,
article, section or other subdivision of this Guaranty. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms and the singular form of nouns and pronouns shall
include the plural and vice versa.
5.11    Headings. The Section headings in this Guaranty are included in this
Guaranty for convenience of reference only and shall not constitute a part of
this Guaranty for any other purpose.
5.12    Recitals. The recitals and introductory paragraphs of this Guaranty are
incorporated herein, and made a part hereof, by this reference.
5.13    Counterparts; Facsimile Signatures. This Guaranty may be executed in any
number of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. Any counterpart delivered by facsimile, pdf or other electronic
means shall have the same import and effect as original counterparts and shall
be valid, enforceable and binding for the purposes of this Guaranty.
5.14    Notices. All notices, consents, approvals and requests required or
permitted hereunder shall be given in writing by expedited prepaid delivery
service, either commercial or United States Postal Service, with proof of
delivery or attempted delivery, addressed as follows (or at such other address
and person as shall be designated from time to time by any party to this
Guaranty, as the case may be, in a written notice to the other parties to this
Guaranty in the manner provided for in this Section). A notice shall be deemed
to have been given when delivered or upon refusal to accept delivery.
If to Lender:     c/o ESL Investments, Inc.
1170 Kane Concourse, Suite 200
Bay Harbor Islands, FL 33154
Attention: Edward S. Lampert, CEO

with copies to:

ESL Investments, Inc.
1170 Kane Concourse, Suite 200
Bay Harbor Islands, FL 33154
Attention: Harold R. Talisman
    
and
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006

--------------------------------------------------------------------------------

Attention: Steven G. Horowitz, Esq.

If to Guarantor:    c/o Kmart Corporation
            3333 Beverly Road
            Hoffman Estates, Illinois 60179
            Attention: General Counsel    
 

with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Scott Charles, Esq.

 

5.15    GOVERNING LAW. (A)     THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF, WITHOUT REGARD TO CHOICE OF LAW RULES, TO
THE EXTENT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
(B)    ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST GUARANTOR OR LENDER ARISING
OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS (OTHER
THAN ANY ACTION IN RESPECT OF THE CREATION, PERFECTION OR ENFORCEMENT OF A LIEN
OR SECURITY INTEREST CREATED PURSUANT TO ANY LOAN DOCUMENTS NOT GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK) MAY BE INSTITUTED IN ANY FEDERAL OR STATE COURT
IN NEW YORK, NEW YORK. GUARANTOR AND, BY ACCEPTANCE OF THIS GUARANTY, LENDER
HEREBY EACH (i) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, (ii) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH
COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING AND (iii) IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS BY MAIL, PERSONAL SERVICE OR IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW, AT THE RESPECTIVE ADDRESS SPECIFIED HEREIN (AND AGREES THAT SUCH
SERVICE AT SUCH ADDRESS IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER
ITSELF IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY SUCH COURT, AND OTHERWISE
CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT).

--------------------------------------------------------------------------------

5.16    TRIAL BY JURY. GUARANTOR AND, BY ACCEPTANCE OF THIS GUARANTY, LENDER, TO
THE FULLEST EXTENT THAT EACH MAY LAWFULLY DO SO, HEREBY AGREE NOT TO ELECT A
TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY
CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER
OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY GUARANTOR AND
LENDER AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS
TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY GUARANTOR AND LENDER.
5.17    Brokers and Financial Advisors. Guarantor hereby represents that none of
Borrower, Guarantor or any of their respective affiliates has dealt with any
financial advisors, brokers, underwriters, placement agents, agents or finders
in connection with the transactions contemplated by this Guaranty and/or the
other Loan Documents. Guarantor agrees to indemnify and hold Lender harmless
from and against any and all claims, liabilities, costs and expenses of any kind
in any way relating to or arising from a claim by any Person that such Person
acted on behalf of Borrower, Guarantor or any of their respective affiliates in
connection with the transactions contemplated in this Guaranty and/or the other
Loan Documents. The provisions of this Section shall survive the expiration and
termination of this Guaranty and the repayment of the Indebtedness.
5.18    Impairment of Subrogation Rights; Waivers of Rights Under the
Anti-Deficiency Rules. Without limiting any of the other waivers and provisions
set forth in this Guaranty, Guarantor hereby irrevocably and unconditionally
waives all rights and defenses that Guarantor may have because the Indebtedness
is secured in whole or in part by real property, including any rights or
defenses that Guarantor may have or be entitled to assert based on or arising
out of any one or more of California Code of Civil Procedure Sections 580a,
580b, 580d or 726 or California Civil Code Section 2848. This means, among other
things that:
(a)Guarantor hereby agrees that during the continuation of an Event of Default,
Lender may elect to foreclose either judicially or nonjudicially against any
real or personal property collateral or security it holds for all or any part of
the Indebtedness or the Guaranteed Obligations, or accept an assignment of any
such collateral or security in-lieu of foreclosure, or compromise or adjust any
part of such obligations, or make any other accommodation with Borrower or
Guarantor, or exercise any other remedy against Borrower, Guarantor or any
collateral or security. No such action by Lender will release or limit the
liability of Guarantor to Lender, who shall remain liable under this Guaranty
after any such action, even if the effect of any such action is to deprive
Guarantor of the right to collect reimbursement from Borrower or any other
Person for any sums paid to Lender or of its rights of subrogation, contribution
or indemnity against Borrower or any other Person.

--------------------------------------------------------------------------------

Without limiting the foregoing, Guarantor hereby waives all rights and defenses
arising out of an election of remedies by Lender, even though such an election
of remedies, such as nonjudicial foreclosure with respect to security for any of
the Guaranteed Obligations, has impaired or destroyed any right or ability that
Guarantor may have to seek reimbursement, contribution, or indemnification for
any amounts paid by Guarantor under this Guaranty, by the operation of Section
580d of the California Code of Civil Procedure. Guarantor further understands
and acknowledges that in the absence of this waiver such potential impairment or
destruction of Guarantor’s rights, if any, may entitle Guarantor to assert a
defense to this Guaranty based on California Code of Civil Procedure Section
580d as interpreted in Union Bank v. Gradsky, 265 Cal. App. 2d 40, 71 Cal. Rptr.
64 (1968), on the grounds, among others, that Lender should be estopped from
pursuing Guarantor because Lender’s election to foreclose may have impaired or
destroyed such subrogation, reimbursement, contribution, or indemnification
rights of Guarantor. By execution of this Guaranty, Guarantor hereby
intentionally, freely, irrevocably, and unconditionally waives and relinquishes
any such defense and agrees that (i) Guarantor will be liable under this
Guaranty even though Lender has foreclosed judicially or nonjudicially against
any real or personal property collateral or security for Borrower’s obligations,
(ii) Guarantor will not assert any such defense in any action or proceeding that
Lender may begin to enforce this Guaranty and (iii) Guarantor shall in no event
be deemed to have any right, title, interest or claim under any circumstance in
or to any real or personal property held by Lender or any third party following
any foreclosure or assignment-in-lieu thereof of any such collateral or
security.
(a)    Guarantor hereby intentionally, freely, irrevocably and unconditionally
waives and relinquishes all rights that may be available to Guarantor under any
provision of California law or under any California judicial decision, including
Sections 580a and 726(b) of the California Code of Civil Procedure, to limit the
amount of any deficiency judgment or other judgment that may be obtained against
Guarantor under this Guaranty to not more than the amount by which the unpaid
Guaranteed Obligations, plus all other Indebtedness due from Borrower under the
Loan Documents, exceeds the fair market value or fair value of any real or
personal property securing such obligations and any other Indebtedness due from
Borrower under the Loan Documents, including all rights to an appraisement of,
judicial or other hearing on, or other determination of the value of such
property. Guarantor understands and agrees that, as a result of the waiver of
the foregoing rights, privileges, benefits and defenses, and without limiting
the effect of the foregoing waiver, (i) Lender may have the ability to pursue
Guarantor or any other guarantor for a judgment on the Guaranteed Obligations
without having first foreclosed on the real or personal property collateral or
security for all or any part of the Indebtedness or the Guaranteed Obligations,
(ii) Lender may have the ability to sue Guarantor or any other guarantor for a
deficiency judgment on the Indebtedness or the Guaranteed Obligations after a
non-judicial foreclosure sale or, regardless of any election of remedies by
Lender, if the Guaranteed Obligations or any of the other Indebtedness of
Borrower to Lender under the Loan Documents is considered to have been provided
by a vendor to a buyer and to evidence part of the purchase price for the real
or personal property collateral or security and (iii) Lender may be entitled to
recover from Guarantor an amount that, when combined with the value of any real
or personal property foreclosed upon by Lender (or the proceeds of the sale of
which have been received by Lender) and any sums collected by Lender from
Borrower or other Person, might

--------------------------------------------------------------------------------

exceed the amount of the Guaranteed Obligations plus all other Indebtedness due
from Borrower under the Loan Documents.
(b)    Notwithstanding the foregoing, nothing contained in this Section shall in
any way be deemed to imply that California law or any other state’s law other
than New York shall govern this Guaranty or any of the Loan Documents in any
respect, except as may be expressly set forth therein, including with respect to
the exercise of Lender’s remedies under the Loan Documents.
5.19    Release. Subject to the provisions of Section 1.11, upon payment in full
of the Indebtedness and performance in full of all of the outstanding
obligations (other than contingent obligations such as environmental or other
indemnities under the Loan Agreement that have not matured at the time of
payment in full of the Indebtedness), this Guaranty shall automatically be
released and terminate and Lender, at Guarantor’s expense, shall take such
actions and execute such documentation as Guarantor shall reasonably request to
evidence or effect such release and termination.
[No Further Text on this Page; Signature Page Follows]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the undersigned has executed this Guaranty all as of the day
and year first above written.
 
GUARANTOR:
SEARS HOLDING CORPORATION,
a Delaware corporation
 

By: /s/ Robert A. Schriesheim
      Name: Robert A. Schriesheim
Title: Executive Vice President and Chief
Financial Officer
 
 

--------------------------------------------------------------------------------

Schedule A

Borrowers

1.
Sears, Roebuck and Co.

2.
Sears Development Co.

3.
Kmart Corporation