<PAGE>

                                                                     EXHIBIT 4.6

                               GUARANTEE AGREEMENT

                  GUARANTEE AGREEMENT dated as of May 6, 2003 (the "Agreement"),
by and among KMART CORPORATION ("Guarantor") on the one hand, and CRK Partners,
L.P. ("CRK"), CRK Partners II, L.P. ("CRK II"), ESL Institutional Partners, L.P.
("ESL LP") and ESL Investors L.L.C. ("ESL LLC"; and together with CRK, CRK II
and ESL LP, collectively the "Beneficiaries") on the other hand.

                  Reference is made to (i) the 9% Convertible Subordinated Note
dated as of May 6, 2003, between Kmart Holding Corporation (the "Borrower") and
CRK; (ii) the 9% Convertible Subordinated Note dated as of May 6, 2003, between
the Borrower and CRK II; (iii) the 9% Convertible Subordinated Note dated as of
May 6, 2003, between the Borrower and ESL LP; and (iv) the 9% Convertible
Subordinated Note dated as of May 6, 2003, between the Borrower and ESL LLC
(each as amended, restated, supplemented, modified or waived from time to time,
a "Note" and, collectively, the "Notes"). Capitalized terms used herein and not
defined herein shall have the meanings assigned to such terms in the Notes or,
if not defined in the Notes, then in the Investment Agreement, dated as of
January 24, 2003, among Kmart Corporation, ESL Investments, Inc. and the other
parties thereto (as amended, restated, supplemented, modified or waived from
time to time, the "Investment Agreement").

                  WHEREAS, pursuant to the terms and provisions of the
Investment Agreement, the Beneficiaries have the right, under certain
circumstances, to purchase the Notes from the Borrower;

                  WHEREAS, it is a condition to the Beneficiaries' voluntary
purchase of the Notes that the Guarantor guarantee payment of all obligations of
the Borrower thereunder (the "Guarantee");

                  WHEREAS, the Guarantor desires that the Beneficiaries purchase
the Notes and has determined that such purchase will be in the best interests of
the Guarantor; and

                  WHEREAS, therefore, the Guarantor is willing to give this
Guarantee as an inducement to the Beneficiaries to purchase the Notes and the
Beneficiaries are willing to purchase the Notes partially in reliance on the
Guarantor's agreement to enter into this Guarantee;

                  NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration received and to induce the Beneficiaries to
purchase such Notes, the Guarantor covenants, agrees, represents and warrants to
the Beneficiaries as follows:

                  SECTION 1. Guarantee. (a) The Guarantor hereby irrevocably and
unconditionally guarantees to the Beneficiaries, as primary obligors and not
merely as surety, the due and punctual payment in full of the principal,
interest and all other sums due on the Notes, whether now existing or hereafter
incurred (hereinafter collectively, the "Obligations") when and as the same
shall become due and payable, whether at the stated maturity thereof, by
accelera-

<PAGE>

tion, or otherwise. Payments by the Guarantor shall be paid upon demand
in the lawful money of the United States of America. The Guarantor further
agrees that the Obligations may be extended or renewed, in whole or in part,
without notice to or further assent from the Guarantor, and that the Guarantor
will remain bound upon its guarantee notwithstanding any extension or renewal of
any Obligation. No amount shall be payable hereunder unless and until an Event
of Default shall have occurred and be continuing and all of the Obligations
shall have become due and payable, it being understood and agreed that the
obligations of the Guarantor shall be due and payable hereunder immediately upon
the Obligations becoming due and payable.

                  (a)      Each and every default in the payment of the
principal or interest or any other sum due under the Notes shall give rise to a
separate cause of action hereunder, and separate suits may be brought hereunder
as each cause of action arises.

                                      -2-
<PAGE>

                  SECTION 2. Obligations Not Waived. To the fullest extent
permitted by applicable law, the Guarantor waives presentment to, demand of
payment from and protest to the Borrower or any other guarantor of any of the
Obligations, and also waives notice of acceptance of its guarantee and notice of
protest for nonpayment. To the fullest extent permitted by applicable law, the
obligations of the Guarantor hereunder shall not be affected by (a) the failure
of the Beneficiaries to assert any claim or demand or to exercise or enforce any
right or remedy against the Borrower or any other guarantor under the provisions
of this Agreement, the Notes, any Transaction Document or otherwise, (b) any
rescission, waiver, amendment or modification of, or any release from any of the
terms or provisions of this Agreement, the Notes any other Transaction Document,
any other guarantee or any other agreement, or (c) the failure to give notice to
the Guarantor of the occurrence of any Event of Default under the terms and
provisions of the Notes.

                  SECTION 3. Guarantee of Payment. The Guarantor agrees that
this Guarantee constitutes an absolute, unconditional, present and continuing
guarantee of payment and not of collection, and waives any right to require that
any resort be had by the Beneficiaries to (i) any security held by or for its
benefit for payment of the principal, interest or any other sums due under the
Notes, (ii) the Beneficiaries' rights against any other person including the
Borrower or any other guarantor of the Notes, or (iii) any other right or remedy
available to the Beneficiaries by contract, applicable law or otherwise. It is
the intent of this Guarantee that the Beneficiaries shall have resort to the
Guarantor without resorting to any remedy against the Borrower and without
demand to it, as though the Guarantor were primarily liable for the repayment of
the indebtedness.

                  SECTION 4. No Discharge or Diminishment of Guarantee. The
obligations of the Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason (other than the payment in
full in cash of the Obligations), including any claim of waiver, release,
surrender, alteration or compromise of any of the Obligations, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of the Guarantor hereunder shall not be discharged or impaired or
otherwise affected by:

                  (a)      the failure of the Beneficiaries to assert any claim
or demand or to enforce any remedy under the Notes, any other Transaction
Document, any other guarantee or any other agreement;

                  (b)      any compromise, settlement, release, extension,
indulgence, change, waiver or modification (including without limitation, a
change in the principal amounts or in the interest rate) or termination of the
Notes, any other Transaction Document, any other guarantee or any other
agreement;

                  (c)      the extension of the time for payment of the
principal, interest or any other sum due under the Notes;

                  (d)      any default, failure or delay, willful or otherwise,
in the performance of the Obligations by the Borrower;

                                      -3-
<PAGE>

                  (e)      the voluntary or involuntary commencement of a case
or proceeding under the United States Bankruptcy Code or under any state or
foreign bankruptcy, insolvency or similar statute affecting the Borrower; the
liquidation, dissolution, merger, consolidation, sale or other disposition of
all or substantially all the assets of the Borrower; the marshaling of assets
and liabilities; receivership, insolvency, assignment for the benefit of
creditors, reorganization, arrangement, composition with creditors or
readjustment of debts; or other similar events or proceedings affecting the
Borrower or any allegation or contest of the validity of this Guarantee or the
Notes in any such proceeding; it being specifically understood, consented and
agreed to that this Guarantee shall remain and continue in full force and effect
and shall be enforceable against the Guarantor to the same extent and with the
same force and effect as if such events and proceedings had not been instituted;
and it is the intent and purpose of this Guarantee that the Guarantor shall and
does hereby waive all rights and benefits which might accrue to the Guarantor by
reason of any such proceedings;

                  (f)      any impairment, whether by negligence or otherwise,
of any rights of subrogation of the Guarantor;

                  (g)      any failure of the Beneficiaries to mitigate damages
resulting from any default by the Borrower under the Notes;

                  (h)      the actual or purported assignment of any of the
obligations, covenants and agreements contained in this Guarantee; or

                  (i)      any other act or omission that may or might in any
manner or to any extent vary the risk of the Guarantor or that would otherwise
operate as a discharge of the Guarantor as a matter of law or equity (other than
the payment in full in cash of all the Obligations).

                  SECTION 5. Defenses of Borrower Waived. To the extent
permitted by applicable law, the Guarantor waives any defense based on or
arising out of any defense of the Borrower or the unenforceability of the
Obligations or any part thereof from any cause (including, without limitation,
any present or future law or order of any government or agency thereof
purporting to reduce, amend or otherwise affect the Notes), or the cessation
from any cause of the liability of the Borrower, other than payment in full in
cash of the Obligations. The Beneficiaries, at their election, in accordance
with the terms and subject to the conditions set forth in the Notes, may
exercise, or fail to exercise, any right or remedy available to them against the
Borrower or any other guarantor, without affecting or impairing in any way the
liability of the Guarantor hereunder except to the extent the Obligations have
been paid in full in cash. The Guarantor waives any defense arising out of any
such election even though such election operates to impair or to extinguish any
right of reimbursement or subrogation or other right or remedy of the Guarantor
against the Borrower or any other guarantor, as the case may be.

                  SECTION 6. Subordination of Rights of Guarantor. Upon payment
by the Guarantor of any sums to the Beneficiaries as provided above (a
"Guarantor Payment"), all rights of the Guarantor against the Borrower arising
as a result thereof by way of right of subrogation, contribution, reimbursement,
indemnity or otherwise, shall in all respects be subordinate and junior in right
of payment to the prior payment in full in cash of the remaining Obligations
owing to the Beneficiaries (after giving effect to all Guarantor Payments). In
furtherance of the

                                      -4-
<PAGE>

preceding sentence, if any amount shall be paid to the Guarantor on account of
such subrogation, contribution, reimbursement, indemnity or similar right, such
amount shall be held in trust for the benefit of the Beneficiaries and shall be
credited against the payment of the Obligations in accordance with the terms of
the Notes.

                  SECTION 7. Subordination of Rights of the Beneficiaries.
Notwithstanding anything contained herein to the contrary, all obligations of
the Guarantor to the Beneficiaries evidenced by this Guarantee shall not become
due or be paid or payable except to the extent permitted under that certain
Subordination Agreement dated as of May 6, 2003, by and among the Beneficiaries,
Borrower, Guarantor and General Electric Capital Corporation, as Administrative
Agent (the "Subordination Agreement"), which Subordination Agreement is
incorporated herein with the same effect as if fully set forth herein.

                  SECTION 8. Information. The Guarantor assumes all
responsibility for being, as of the date hereof, and keeping itself informed of
the Borrower's financial condition and assets, and of all other circumstances
bearing upon the risk of nonpayment of the Obligations and the nature, scope and
extent of the risks that the Guarantor assumes and incurs hereunder, and agrees
that the Beneficiaries will have no duty to advise the Guarantor of information
known to them regarding such circumstances or risks.

                  SECTION 9. Representations and Warranties. The Guarantor
hereby represents and warrants to the Beneficiaries that all of the statements
contained in this Section 9 are true and correct as of the date of this
Agreement (or, if made as of a specified date, as of such date).

                  (i)      Corporate Existence; Compliance with Law. Each of
Guarantor and its Subsidiaries (a) is a corporation, limited liability company
or limited partnership duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation or organization
as of the date hereof, (b) is duly qualified to conduct business and is in good
standing in each other jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not result in exposure to losses or liabilities
which could reasonably be expected to have a Material Adverse Effect, (c) has
the requisite power and authority and the legal right to own, pledge, mortgage
or otherwise encumber and operate its properties, to lease the property it
operates under lease and to conduct its business as now conducted or proposed to
be conducted, except as would not reasonably be expected to have a Material
Adverse Effect and except as otherwise provided in Section 3.1 of the Credit
Agreement of even date hereof among Kmart Corporation, the other Credit Parties
signatory thereto, the Lenders signatory thereto, General Electric Capital
Corporation (as Administrative Agent, Co-Collateral Agent and Lender) and others
(the "Credit Agreement"), (d) has all licenses, permits, consents or approvals
from or by, and has made all filings with, and has given all notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct, except as which would not reasonably be
expected to have a Material Adverse Effect and except as otherwise provided for
in Section 3.1 of the Credit Agreement, (e) is in compliance with its charter
and bylaws or partnership or operating agreement, as applicable, and (f) is (and
its respective properties are) in compliance with all applicable provisions of
law, except where the failure to comply with such laws, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect
and except as otherwise provided for in Section 3.1 of the Credit Agreement.

                                      -5-
<PAGE>

                  (ii)     Corporate Power, Authorization, Enforceable
Obligations. The execution, delivery and performance by Guarantor of this
Guarantee: (a) is within Guarantor's power, (b) has been duly authorized by all
necessary corporate action, (c) does not contravene any provision of Guarantor's
charter or bylaws, (d) does not violate any law or regulation, or any order or
decree of any court or Governmental Authority, (e) does not conflict with or
result in the breach or termination of, constitute a default under or accelerate
or permit the acceleration of any performance required by, any material
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which Guarantor is a party or by which Guarantor or any of its property is
bound, (f) does not result in the creation or imposition of any Lien upon any of
the property of Guarantor, and (g) does not require the consent or approval of
any Governmental Authority or any other Person, other than the Confirmation
Order, which will have been duly obtained prior to the Closing Date, except, in
the case of clauses (d) through (g), as would not reasonably be expected to have
a Material Adverse Effect. This Guarantee shall be duly executed and delivered
by Guarantor and shall constitute the legal, valid and binding obligation of the
Guarantor enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

                  SECTION 10. Termination. The guarantee made hereunder shall
terminate when all of the Obligations have been paid in full and shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of any Obligation is rescinded or must otherwise be restored
by the Beneficiaries or the Guarantor upon the bankruptcy or reorganization of
the Borrower, the Guarantor or otherwise. Without limiting the generality of the
foregoing, if after receipt of any payment of all or any part of the Obligations
guaranteed hereunder, the Beneficiaries are for any reason compelled to
surrender or voluntarily surrender, such payment or proceeds to any person, (i)
because such payment or application of proceeds is or may be avoided,
invalidated, declared fraudulent, set aside, determined to be void or voidable
as a preference, fraudulent conveyance, impermissible setoff or a diversion of
trust funds; or (ii) for any other reason, including without limitation (A) any
judgment, decree or order of any court or administrative body having
jurisdiction over the Beneficiaries or any of their property, or (B) any
settlement or compromise of any claim effected by the Beneficiaries with any
such person (including the Borrower), then the obligations or part thereof
intended to be satisfied shall be reinstated and continue and this Guarantee
shall continue in full force as if such payment or proceeds had not been
received by the Beneficiaries, notwithstanding any revocation thereof or the
cancellation of the Notes or any other instrument evidencing any obligation of
the Borrower or otherwise; and the Guarantor shall be liable to pay to the
Beneficiaries, and hereby does indemnify the Beneficiaries and hold the
Beneficiaries harmless for the amount of such payment or proceeds so surrendered
and all expenses (including all attorneys' fees, court costs and expenses
attributable thereto) incurred by the Beneficiaries in the defense of any claim
made against the Beneficiaries that any payment or proceeds received by the
Beneficiaries in respect of all or any part of the Obligations must be
surrendered. The provisions of this Section 10 shall survive the termination of
this Guarantee, and any satisfaction and discharge of the Borrower by virtue of
any payment, court order or any federal or state law.

                  SECTION 11. Binding Agreement; Assignments. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors

                                      -6-
<PAGE>

and assigns of such party; and all covenants, promises and agreements by or on
behalf of the Guarantor that are contained in this Agreement shall bind and
inure to the benefit of each party hereto and their respective successors and
assigns. This Agreement shall become effective as to Guarantor when a
counterpart hereof executed on behalf of the Guarantor shall have been delivered
to the Beneficiaries and a counterpart hereof shall have been executed on behalf
of each of the Beneficiaries, and thereafter shall be binding upon the Guarantor
and the Beneficiaries and their respective successors and assigns, and shall
inure to the benefit of the Guarantor, the Beneficiaries, and their respective
successors and assigns, except that the Guarantor shall not have the right to
assign its rights or obligations hereunder or any interest herein (and any such
attempted assignment shall be void), except as expressly contemplated by this
Agreement, the Notes or the other Transaction Documents.

                  SECTION 12. Waivers; Amendment. (a) No failure or delay of the
Beneficiaries in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Beneficiaries hereunder,
under the Notes, and under the other Transaction Documents are cumulative and
are not exclusive of any rights or remedies that it would otherwise have. No
waiver of any provisions of this Agreement or consent to any departure by the
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Guarantor in any case shall entitle the Guarantor to any
other or further notice or demand in similar or other circumstances.

                  (b)      Neither this Agreement nor any provision hereof may
be waived, amended or modified except pursuant to a written agreement entered
into by and among the Guarantor and the Beneficiaries.

                  SECTION 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT
GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES THEREOF.

                  SECTION 14. Notices. All communications and notices hereunder
shall be in writing and shall be delivered (a) if to the Guarantor, to it at
3100 West Big Beaver Road, Troy, MI 48084, Attn: General Counsel, with copies to
Skadden, Arps, Slate, Meagher & Flom (Illinois), 333 West Wacker Drive, Chicago,
Illinois, 60606, Attn: John Wm. Butler, Jr. and Eric J. Ivester, and (b) if to
any of the Beneficiaries, to it care of ESL Investments, Inc. at One Lafayette
Place, Greenwich, CT 06830, Attn: Edward S. Lampert.

                  SECTION 15. Survival of Agreement; Severability. (a) All
covenants, agreements, representations and warranties made by the Guarantor
herein and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement, the Notes, or any other
Transaction Document shall be considered to have been relied upon by the
Beneficiaries, regardless of any investigation made by the Beneficiaries or on
their behalf, and

                                      -7-
<PAGE>

shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or other amount payable under the Notes
is outstanding and unpaid.

                  (b) In the event any one or more of the provisions contained
in this Agreement, the Notes or in any other Transaction Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdictions).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

                  SECTION 16. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one contract, and shall become effective as
provided in Section 11.

                  SECTION 17. Jurisdiction; Consent to Service of Process. (a)
Each of the Guarantor, on the one hand, and the Beneficiaries, on the other
hand, hereby irrevocably and unconditionally submits, for themselves and their
property, to the exclusive jurisdiction of the courts of Illinois, New York and
of the United States of America, in each case located in Cook Country or New
York County (the "Selected Courts"), including the Bankruptcy Court, for any
proceeding arising out of or relating to this Agreement (and agrees not to
commence any proceeding relating thereto except in such courts) and waives any
objection to venue being laid in any of the Selected Courts whether based on the
grounds of forum non conveniens or otherwise; provided that each of the
Beneficiaries, on the one hand, and the Guarantor, on the other hand, hereby
irrevocably submits to the exclusive jurisdiction of the Bankruptcy Court for so
long as the Bankruptcy Court retains jurisdiction.

                  SECTION 18. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

                  SECTION 19. Effectiveness. The obligations of the Guarantor
hereunder shall arise absolutely and unconditionally when the Notes are executed
and delivered by the Borrower to the Holders.

                                      -8-
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

KMART CORPORATION                          CRK PARTNERS, L.P.

 By /s/ Ronald B. Hutchison                 By /s/ William Crowley
    ----------------------------------         ---------------------------------
 Name: Ronald B. Hutchison                  Name: William Crowley
 Title:                                     Title:
 Address:_____________________________      Address:____________________________
         _____________________________              ____________________________
         _____________________________              ____________________________

ESL INVESTORS L.L.C.                       CRK PARTNERS II, L.P.

 By /s/ William Crowley                     By /s/ William Crowley
    ----------------------------------         ---------------------------------
 Name: William Crowley                      Name: William Crowley
 Title:                                     Title:
 Address:_____________________________      Address:____________________________
         _____________________________              ____________________________
         _____________________________              ____________________________

ESL INSTITUTIONAL PARTNERS, L.P.

 By /s/ William Crowley
    ----------------------------------
 Name: William Crowley
 Title:
 Address:_____________________________
         _____________________________
         _____________________________

                                      -9-