Document:

<PAGE>

                                                                    EXHIBIT 10.4

                                   GUARANTY

     This GUARANTY (this "Guaranty") is made as of December __, 2000 by SIZZLER
INTERNATIONAL, INC., a Delaware corporation ("Guarantor"), for the benefit of
HELLER FINANCIAL LEASING, INC., a Delaware corporation, and its successors and
assigns ("Lender"). Capitalized terms used herein and not otherwise defined
shall have the same meaning as provided in that certain Loan and Security
Agreement of even date herewith between the Person(s) listed on Schedule 1
hereto (if more than one, collectively, the "Borrower") and Lender, as it may be
amended or modified from time to time (the "Loan Agreement").

                             PRELIMINARY STATEMENT

     Guarantor is an Affiliate of the Borrower which has executed and delivered
the Loan Agreement, a Promissory Note or Notes, a Mortgage or Mortgages, and the
Loan Documents dated as of the date hereof to Lender.

     The Loan is more fully described on Schedule 2 and Guarantor has requested
that Lender make the Loan for business purposes.

     Lender's willingness to make the Loan to the Borrower is expressly
conditioned on Guarantor entering into this Guaranty.

     Guarantor will benefit from Lender's making the Loan to the Borrower.

     NOW, THEREFORE, the parties agree as follows:

                                   AGREEMENT

     1.  Guaranty of Each Borrower's Obligations to Lender. In order to induce
         -------------------------------------------------
Lender to make the Loan to the Borrower, Guarantor irrevocably, absolutely and
unconditionally guarantees to Lender the prompt and unconditional payment when
due of all of Borrower's Obligations. This Guaranty is in full force and effect
on the date hereof and shall constitute an independent obligation enforceable by
Lender.

     It is expressly understood and agreed that this is a continuing guaranty
and that the obligations of Guarantor hereunder are and shall be absolute under
any and all circumstances, without regard to the validity, regularity or
enforceability of the Notes, the Mortgages or the other Loan Documents, a copy
of each of said documents Guarantor hereby acknowledges having received and
reviewed.
<PAGE>

     2.  Time When the Obligations are Due. For purposes of this Guaranty, the
         ---------------------------------
Obligations of any Borrower are deemed due as and when provided in the Loan
Documents. Guarantor agrees that no notice is required by Lender of any kind in
order to enforce this Guaranty. Lender's delay or failure to give any default
notice shall not discharge, release, modify, reduce or impair Guarantor's
obligations under this Guaranty or the rights of and remedies available to
Lender. Guarantor agrees that any delay or default by Guarantor in making any
payment required hereunder for any reason whatsoever is a default by Guarantor
of its obligations under this Guaranty.

     3.  Nature of Obligations. This Guaranty is a guarantee of payment and not
         ---------------------
a guarantee of performance. The obligations of Guarantor to make payments to
Lender under this Guaranty are direct and primary obligations which shall not be
discharged for any reason until Lender has been paid in full. Guarantor
understands and agrees that Lender may, but is not required to, proceed against
Guarantor under this Guaranty without first or ever proceeding against any other
Person or party or any Collateral or any Property. Without limiting the
generality of the foregoing, the obligations of Guarantor shall remain in force
irrespective of (a) any defect in, or invalidity, illegality or unenforceability
of any of the Loan Documents or any defense which any Borrower may have with
respect thereto, (b) any claim, defense or offset which any Borrower or
Guarantor may have, (c) the existence or absence of any legal action to enforce
the Loan Documents or any security therefor, the issuance of any judgment
therefor or the execution of any such judgment, or (d) the death, dissolution or
termination of any Borrower or Guarantor or any other circumstance which might
otherwise constitute a defense available to or discharge of a guarantor or
surety of any type. No representation or warranty is made by Lender (or any of
its Affiliates, agents or representatives) (w) that Lender will pursue any
Borrower on any delinquent loans at all; in its sole discretion, Lender may look
solely to Guarantor under this Guaranty, (x) that any amounts will be recovered
on the Obligations, (y) that amounts recovered on the Obligations or other
moneys will be actually received by Lender and held by Lender for such credit or
payment or (z) that, to the extent, if any, that such moneys are so received and
held by Lender, such monies will be sufficient to reimburse or indemnify
Guarantor for amounts paid under this Guaranty. EXCEPT AS SET FORTH IN THIS
PARAGRAPH, GUARANTOR HEREBY IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT ANY
RIGHT OF SET OFF AND ANY CLAIM (AS DEFINED IN 11 U.S.C. SECTION 101), INCLUDING,
WITHOUT LIMITATION, ANY CLAIM OF SUBROGATION, REIMBURSEMENT, EXONERATION,
CONTRIBUTION OR INDEMNIFICATION, THAT GUARANTOR MAY NOW OR HEREAFTER MAY HAVE
AGAINST LENDER, ITS AFFILIATES, STOCKHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS AND REPRESENTATIVES AND ANY BORROWER, OR ANY SECURITY HELD BY OR
AVAILABLE TO LENDER FROM ANY BORROWER OR FOR THE OBLIGATIONS OR THE PAYMENT
THEREOF BECAUSE OF ANY PAYMENTS OR TRANSFERS MADE BY GUARANTOR OR ANY PAYMENT OR
TRANSFER WHICH GUARANTOR IS OBLIGATED TO MAKE, FOR ANY REASON. The provisions of
this paragraph are for the benefit of Lender, its affiliates, stockholders,
officers, directors, employees, agents and representatives, may be specifically
and separately enforced by each such Person, and shall survive indefinitely.

                                       2
<PAGE>

     GUARANTOR HEREBY SPECIFICALLY AGREES THAT GUARANTOR SHALL NOT BE RELEASED
FROM LIABILITY HEREUNDER BY ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY LENDER,
ANY BORROWER OR ANY OF THEIR RESPECTIVE AFFILIATES, EMPLOYEES, AGENTS OR
REPRESENTATIVES, INCLUDING WITHOUT LIMITATION, A NON-JUDICIAL SALE OF COLLATERAL
UNDER ANY LOAN DOCUMENT, MORTGAGE OR DEED OF TRUST THAT WOULD AFFORD A BORROWER
OR A GUARANTOR A DEFENSE BASED UPON THE LAWS (INCLUDING THE ANTI-DEFICIENCY
LAWS) OF ANY STATE. GUARANTOR EXPRESSLY WAIVES (i) ANY DEFENSE TO THE RECOVERY
OF A DEFICIENCY AGAINST BORROWER OR GUARANTOR HEREUNDER AFTER SUCH NON-JUDICIAL
SALE, NOTWITHSTANDING THAT SUCH SALE MAY RESULT IN A LOSS BY GUARANTOR OF THE
RIGHT TO RECOVER FROM THE BORROWER OF ANY SUCH DEFICIENCY, (ii) ALL SURETYSHIP
DEFENSES THAT IT WOULD OTHERWISE HAVE UNDER THE LAWS OF ANY JURISDICTION.
WITHOUT LIMITING THE FOREGOING, GUARANTOR UNDERSTANDS THAT IN THE ABSENCE OF THE
WAIVERS MADE HEREIN, INCLUDING THOSE MADE IN THIS PARAGRAPH, GUARANTOR MIGHT
HAVE A DEFENSE AGAINST AN ACTION BY LENDER TO RECOVER A DEFICIENCY FROM
GUARANTOR HEREUNDER FOLLOWING A NON-JUDICIAL FORECLOSURE SALE OF REAL PROPERTY
OR OTHER COLLATERAL SECURING THE LOAN, AND GUARANTOR IS SPECIFICALLY WAIVING
THESE DEFENSES AND ALL OTHER DEFENSES. Guarantor expressly agrees that Guarantor
shall be and remain liable for any deficiency remaining after foreclosure of any
Mortgage or security interest securing any of the Obligations, whether or not
the liability of any Borrower with respect to any of the Obligations for such
deficiency is discharged pursuant to statute or judicial decision.

     The Guarantor hereby waives all of the following: (1) the Guarantor's
rights of subrogation, reimbursement, indemnification, and contribution; (2) any
rights or defenses the Guarantor may have in respect of the Guarantor's
obligations as a guarantor by reason of any election of remedies of the Lender;
(3) any rights or defenses the Guarantor may have because the Borrower's note or
other obligation is secured by real property or an estate for years. The
Guarantor hereby waives all rights and defenses that the Guarantor may have
because the Borrower's debt is secured by real property. This means, among other
things: (1) Lender may collect from the Guarantor without first foreclosing on
any real or personal property collateral pledged by the Borrower; (2) If the
Lender forecloses on any real property collateral pledged by the Borrower: (A)
the amount of the debt may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price; and (B) the Lender may collect from the Guarantor even if
the Lender, by foreclosing on the real property collateral, has destroyed any
right the Guarantor may have to collect from the Borrower. This is an
unconditional and irrevocable waiver of any rights and defenses the Guarantor
may have because the Borrower's debt is secured by real property.

     4.  Guarantor's Waivers. Except to the extent required by law and to the
extent such requirement cannot be waived, Guarantor (a) waives notice

                                       3
<PAGE>

of acceptance of this Guaranty and notice of any liability to which it may
apply, (b) waives grace, diligence, presentment, demand of payment, protest,
notice of any kind (including disclosure of facts which materially increase
risks, notice of protest, acceptance, liability, suit, demand or action,
dishonor, payment or nonpayment, protest, intention to accelerate or
acceleration, extensions, or renewal), surety defenses of any kind (including
defenses relating to impairment, recourse, release or modification of underlying
obligation, extension of time, impairment of collateral or nondisclosure) and
diligence in collecting and bringing suit against any party, and (c) WAIVES ANY
AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN
CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS GUARANTY OR THE
OBLIGATIONS GUARANTEED HEREBY AND, BY ITS ACCEPTANCE HEREOF, LENDER ALSO WAIVES
ANY AND ALL SUCH RIGHTS TO TRIAL BY JURY. GUARANTOR ALSO WAIVES ANY RIGHTS IT,
BORROWER, ANY OTHER GUARANTOR OR ANY OTHER PERSON MAY NOW OR HEREAFTER HAVE TO
AN APPRAISAL OF ANY SECURITY OR COLLATERAL FOR EACH BORROWER'S OBLIGATIONS,
INCLUDING, WITHOUT LIMITATION, ANY SUCH RIGHTS PROVIDED BY STATUTE. Guarantor
acknowledges that the transaction of which this Guaranty is a part is a
commercial transaction and waives its rights to notice and hearing under state
or federal law with respect to any prejudgment remedy which Lender may desire to
use.

     5.  Additional Agreements of Guarantor. Guarantor understands and agrees
         ----------------------------------
that Lender may take any of the following actions, at any time or from time to
time without any notice, consent, terms or conditions and in whole or in part,
without incurring any responsibility to Guarantor, and without impairing,
reducing, modifying, amending, releasing or discharging the obligations of
Guarantor: (a) modify, amend, increase, extend or renew any of the Obligations
or any security therefor and this Guaranty will apply to the Obligations so
modified, amended, increased, extended or renewed; (b) fail to record, perfect
or protect, or sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order, from time to time, any property or
Person whatsoever at any time securing or guaranteeing the Obligations or
liabilities incurred directly or indirectly in respect thereof or in connection
with this Guaranty, or in respect of any offset against said Obligations or
liabilities, (c) exercise or refrain from exercising any rights against
Guarantor or any other Person (including any guarantor) or otherwise act or
refrain from acting, (d) settle or compromise any of the Obligations, any
security therefor or any liability incurred directly or indirectly in respect
thereof or in connection with this Guaranty, and may subordinate the payment (or
right to payment) of all or any part of the Obligations to the payment of any
other liability (whether due or not) of any Borrower to any Person (including
Lender and its Affiliates), (e) apply any sums by whomsoever paid or howsoever
realized to any liability or liabilities of any Borrower to Lender regardless of
what liability or liabilities of such Borrower remain unpaid, provided that
payments by the Guarantor pursuant to this Guaranty shall be applied to its
obligations hereunder, but in such order as Lender may determine, and (f)
consent to or waive any breach of any act, omission or default under, or modify
or amend any provision of, the Loan Documents.

                                       4
<PAGE>

     6.  Amounts Reclaimed. Guarantor understands that one or more claims may be
         -----------------
made upon Lender for repayment or recovery of any amount received on account of
any of the Obligations and that Lender may be required to repay (or otherwise
satisfy the recovery of) all or part of said amount by reason of (a) any
judgment, decree or order of any court, administrative body or trustee in
bankruptcy (or other person acting on behalf of any person or its estate), or
(b) any settlement or compromise of any such claim effected by Lender with any
such claimant (including any Borrower). Guarantor agrees that in such event any
such judgment, decree, order, settlement or compromise will be binding upon
Guarantor, notwithstanding any cancellation of the Loan Documents or this
Guaranty and that Guarantor will be and remain liable to Lender under this
Guaranty for the amount so repaid or recovered to the same extent as if such
amount had never been received by Lender. The provisions of this paragraph shall
survive indefinitely.

     7.  Interest. If Guarantor fails to make when due any payment required to
         --------
be made by it under this Agreement (a "Payment"), then, to the extent permitted
by law, such Payment shall bear interest from the due date thereof until paid at
the Default Rate. Guarantor agrees to pay interest accrued hereunder in respect
of any Payment on demand. All calculations of interest hereunder will be made on
the actual number of days elapsed on the basis of 360-day year of twelve 30-day
months, but in no event shall calculations result in Lender contracting for,
charging or receiving interest in excess of the maximum amount permitted by
applicable law.

     8.  Information. Guarantor will promptly furnish to Lender copies of its
         -----------
10-Q and 10-K filings with the Securities and Exchange Commission and such other
regularly prepared information regarding its business affairs and financial
condition as Lender may from time to time reasonably request.

     9.  Representations, Warranties and Agreements. Guarantor makes the
         -------------------------------------------
following representations, warranties and agreements which survive the execution
and delivery of this Guaranty:

     9.1 Organizational Status and Power. Guarantor:
         -------------------------------

         (a) if it is a corporation, limited liability company, partnership or
other legal entity, is and will continue to be, duly organized, validly existing
and in good standing under the law of its jurisdiction of organization and
qualified as a foreign entity and in good standing in each jurisdiction where
such qualification is required or appropriate in connection with the conduct of
Guarantor's business or the performance of its obligations under this Guaranty
and the other Loan Documents to which it is party, and

         (b) has the power and/or legal right to own its assets, to conduct its
business as now conducted, and to enter into and perform the provisions of this
Guaranty and the other Loan Documents to which it is party.

                                       5
<PAGE>

     9.2  Legality. The entering into and performance by Guarantor of this
          --------
Guaranty and the other Loan Documents to which it is party:

          (a) if it is a corporation, limited liability company, partnership or
other legal entity, has been duly authorized by all necessary corporate,
stockholder, member, partner and other action, and

          (b) does not contravene any existing law or any legal order applicable
to, or license or permit granted to Guarantor, or any agreement or instrument to
which Guarantor is a party or to which it or any of its assets is subject, or,
if it is an entity, any provision of Guarantor's certificate of incorporation,
by-laws, operating agreement, partnership agreement or organizational papers.

     9.3  Solvency, Binding Effect and Enforceability. Guarantor is (and, after
          -------------------------------------------
giving effect to this Guaranty, will be) solvent. This Guaranty and the other
Loan Documents to which Guarantor is a party are the legal, valid and binding
obligation of Guarantor enforceable in accordance with their terms.

     9.4  Rights of Contribution. Each Guarantor hereby agrees, as between
          ----------------------
themselves, that if any Guarantor shall become an Excess Funding Guarantor (as
defined below) by reason of the payment by such Guarantor of any of the
Obligations, each other Guarantor shall, on demand of such Excess Funding
Guarantor (but subject to the next sentence), pay to such Excess Funding
Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below
and determined, for this purpose, without reference to the assets, debts and
liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined
below) made by such Excess Funding Guarantor in respect of such Obligations. The
payment obligation of a Guarantor to any Excess Funding Guarantor under this
Section shall be subordinate and subject in right of payment to the prior
payment in full of the obligations of such Guarantor under the other provisions
of this Guaranty and such Excess Funding Guarantor shall not exercise any right
or remedy with respect to such excess until payment and satisfaction in full of
all of such obligations.

     For purposes of this Section, (i) "Excess Funding Guarantor" shall mean, in
respect of any of the Obligations, a Guarantor that has paid an amount in excess
of its Pro Rata Share of such Obligations, (ii) "Excess Payment" shall mean, in
respect of any Obligations, the amount paid by an Excess Funding Guarantor in
excess of its Pro Rata Share of such Obligations, and (iii) "Pro Rata Share"
shall mean, for any Guarantor, the ratio (expressed as a percentage) of (x) the
amount by which the aggregate fair saleable value of all assets of such
Guarantor (excluding any shares of stock of any other Guarantor) exceeds the
amount of all the debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of such Guarantor hereunder and any obligations of any other
Guarantor that have been guaranteed by such Guarantor) to (y) the amount by
which the aggregate fair saleable value of all assets of the Borrower and all of
Guarantors hereunder exceeds the amount of all the debts and liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities, but
excluding the obligations of Guarantors

                                       6
<PAGE>

hereunder) of the Borrower and all of Guarantors as of the date hereof. If any
entity becomes a Guarantor hereunder subsequent to the date hereof, then for
purposes of this Section such subsequent Guarantor shall be deemed to have been
a Guarantor as of the date hereof and the aggregate present fair saleable value
of its assets and the amount of the debts and liabilities, of such Guarantor as
of the date hereof shall be deemed to be equal to such value and amount on the
date such Guarantor becomes a Guarantor hereunder.

     9.5  General Limitation on Guaranty Obligations. In any action or
          ------------------------------------------
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Guarantor under the terms of this
Guaranty would otherwise, taking into account the provisions of Section 9.4
hereof, be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under the terms of this Guaranty, then, notwithstanding any other
provision hereof to the contrary, the amount of such liability shall, without
any further action by such Guarantor, Lender or any other person or entity, be
automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.

     9.6  No Representation or Warranty. Guarantor acknowledges and agrees that
          -----------------------------
neither Lender nor any Borrower, nor any of their respective affiliates, agents
or representatives has made or is required to have made and no such Person is
making or shall be deemed to have made or shall have any duty to make or be
required to make any representations, warranties or disclosure with respect to
the Guaranty, including any representation, warranty or disclosure concerning
the financial condition of any Borrower or the ability of any Borrower to
perform its Obligations.

     9.7  Financial Statements; No Adverse Change.
          ---------------------------------------

          (a) All Financial Statements of the Guarantor heretofore furnished to
the Lender and/or the Franchisor are consistent with the books and records of
the Guarantor including all such books and records maintained with respect to
the operation of the Sites, and are complete and correct in all material
respects and fairly present the financial condition of the Guarantor (as the
case may be) on the relevant dates therein indicated.

          (b) Since the date of the most recent Financial Statements of the
Guarantor furnished to the Lender prior to the Closing Date, no material adverse
change has occurred in the properties, business, prospects, operations or
condition (financial or otherwise) of the Guarantor or the Sites.

     9.8  No Proceeding or Litigation. No litigation, investigation or
          ---------------------------
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the best knowledge of the Guarantor, threatened

                                       7
<PAGE>

against or affecting, the Guarantor, or against or affecting, any of its
properties, rights, revenues or assets or any portion of the Sites.

     9.9   No Default. The Guarantor is not in default in any material respect
           ----------
under or with respect to any contractual obligation, and no notice of default
has been given to the Guarantor under any such contractual obligations.

     9.10  Accuracy of Information. All reports, statements and financial data,
           -----------------------
and other information furnished (or hereafter furnished) by Guarantor to Lender,
its agents or representatives hereunder or in connection with the Loan
Application and the Obligations, are (and shall be on the date so furnished)
true, complete and correct and do not fail to state any facts which would make
any such information misleading.

     9.11  Notice of Material Events. Guarantor shall promptly inform Lender in
           -------------------------
writing of any of the following:

           (a) any Event of Default, or default or breach by the Guarantor of
any obligation under any loan document, or the occurrence or existence of any
event or circumstance that Guarantor reasonably expects will, with the passage
of time, become an Event of Default, or such a default or breach by the
Guarantor;

           (b) any material change in accounting policies or financial reporting
practices of the Borrower or the Guarantor; and

           (c) any event, circumstance or condition that has resulted, or has a
reasonable possibility of resulting, in either a material adverse change or a
material adverse effect with respect to the Borrower or the Guarantor.

     10.   Miscellaneous.
           -------------

     10.1  Payment of Expenses. Guarantor agrees to pay for all reasonable out-
           -------------------
of-pocket costs and expenses of Lender arising in connection with the
negotiation of, entering into, administration and enforcement of, or
preservation of rights under this Guaranty (including, without limitation,
attorneys' fees and expenses of counsel for Lender).

     10.2  Modification. This Guaranty may be modified only by an instrument in
           ------------
writing signed by the party against whom enforcement of the modification is
sought.

     10.3  Governing Law. This Guaranty shall be governed by and construed in
           -------------
accordance with the laws of the State of Illinois without reference to conflicts
of law rules. Accordingly, in all respects, including, without limitation,
matters of construction, validity, enforceability and performance, this

                                       8
<PAGE>

Agreement, the Note and the other Loan Documents and the obligations arising
hereunder and thereunder shall be governed by, and construed in accordance with,
the laws of the state of Illinois applicable to contracts made and performed in
such state, and any applicable law of the United States of America. Except as
provided in the immediately preceding sentence, Guarantor hereby unconditionally
and irrevocably waives, to the fullest extent permitted by law, any claim to
assert that the law of any jurisdiction other than Illinois governs this
Agreement, the Note and the other Loan Documents.

     10.4  Notices. All notices, requests and demands to or upon the respective
           -------
parties hereto to be effective shall be in writing and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made when
delivered by hand, or three (3) days after deposit in the mail, first class
postage prepaid, or in the case of transmission by telecopier, when confirmation
of receipt is obtained, to the Lender at the address set forth below, and to the
Guarantor at the address set forth on the signature page hereof (or to such
other address as the parties hereto may notify to one another from time to
time):

               Heller Financial Leasing, Inc.
               Commercial Equipment Finance Group
               500 West Monroe Street
               Chicago, Illinois 60661
               Attn: Portfolio Manager

     10.5  Cumulative Rights of and No Waiver by Lender. Lender's rights,
           --------------------------------------------
powers, privileges and remedies under this Guaranty or applicable law are
cumulative and not exclusive and shall not be waived, precluded or limited by
any failure or delay in the exercise thereof or by Lender's exercise, or partial
exercise, of any thereof or by any course of dealing between Guarantor and
Lender. No notice to or demand on Guarantor in any case shall entitle Guarantor
to any other or further notice or demand in similar or other circumstance or
constitute a waiver of the right of Lender to any other or further action in any
circumstance without notice or demand.

     10.6  Guarantor's Waiver of Claims. Until such time as the Obligations have
           ----------------------------
been paid in full and no Person who shall have made payment on the Obligations,
directly or indirectly, shall commence or have commenced against it as debtor
any bankruptcy or insolvency proceeding for a period of one hundred (100) days
following such payment, Guarantor hereby irrevocably waives, relinquishes and
agrees not to assert any "claim" (as defined in 11 U.S.C. Section 101),
including, without limitation, any right or claim of subrogation, payment,
indemnification or reimbursement, that Guarantor may now or hereafter may have
against any Borrower under any Loan Document or against any other security held
by or available to Lender for any Obligations or the payment thereof because,
arising out, or on account of any payments or transfers made by Guarantor, or
any payment or transfer which Guarantor agreed to or is obligated to make, for
any reason, whether any such right or claim is reduced to

                                       9
<PAGE>

judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured.

     10.7  Securitization. Lender may pool the Loan in a securitization (the
           --------------
"Securitization") with any or all other loans which may include sales to one or
more of its affiliates or third parties who will acquire such loans with the
proceeds of bonds or other securities sold to one or more investors.
Alternatively, Lender may sell or transfer such loans as whole loans in any
other manner. Guarantor acknowledges and agrees that the Loan guaranteed hereby
may be pooled together with loans made by Lender to other borrowers. Lender
reserves the right, in its sole and absolute discretion, to pool the Loan
guaranteed hereby (including the pooling of the Loan in connection with a
securitization) together with any other loans to other borrowers in any
combination.

     10.8  Time is of the Essence. For any payments to be made and obligations
           ----------------------
to be performed under this Guaranty, time is of the essence.

     10.9  Binding Effect, Assignment, Benefit of Agreement; Severability. This
           --------------------------------------------------------------
Guaranty shall be binding upon Guarantor and its successors and assigns and
shall inure to the benefit of, and be enforceable by, Lender and its successors
and assigns, including without limitation any holder or assignee from time to
time of the Loan Documents. Without limiting the foregoing, (i) this Guaranty is
freely assignable, in whole or in part, from time to time, by Lender, (ii) is
not assignable by Guarantor without the prior written consent of Lender, which
consent may be withheld or delayed by Lender in its sole discretion; and (iii)
the provisions of Section 10.6 also shall be for the benefit of and may be
enforced by Borrower. Whenever possible this Guaranty and each provision hereof
shall be interpreted in such manner as to be effective, valid and enforceable
under applicable law. If and to the extent that any such provision shall be held
invalid and unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provisions hereof, and
any determination that the application of any provision hereof to any person or
under any circumstance is illegal and unenforceable shall not affect the
legality, validity and enforceability of such provision as it may be applied to
any other person or in any other circumstance.

     10.10 Survival. The provisions of Sections 6 and 10.6 shall survive the
           --------
termination and cancellation of this Guaranty and, after cancellation and return
to Guarantor, a photocopy hereof may be submitted as evidence of such surviving
obligations. Nothing herein shall preclude Lender from establishing such
obligations by other means.

     10.11 Loan Documents. Guarantor acknowledges receipt of a copy, as
           --------------
executed, of the Loan Documents of the Borrower.

     10.12 Descriptive Headings. The descriptive headings used in this Guaranty
           --------------------
are for convenience only and shall not be deemed to affect the meaning or
construction of any provision hereof.

                                       10
<PAGE>

     10.13 Joint and Several Obligation. In the event that Guarantor consists of
           ----------------------------
more than one party, then each of such parties acknowledges and agrees that all
obligations of Guarantor hereunder shall be joint and several, and all
references to Guarantor hereunder shall be deemed to refer to each of such
parties comprising Guarantor both individually and collectively with the other
such party.

     10.14 ILLINOIS JURISDICTION AND VENUE. EACH OF THE GUARANTORS HEREBY
           -------------------------------
IRREVOCABLY AND UNCONDITIONALLY (TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW):
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY,
OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE
NONEXCLUSIVE GENERAL JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN THE
STATE OF ILLINOIS; (B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND
AGREES NOT TO PLEAD OR CLAIM THE SAME; AND (C) AGREES THAT SERVICE OF PROCESS IN
ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY SERVICE UPON GUARANTOR OR ITS
REGISTERED AGENT.

                            _______________________
                            Guarantor's Initials

     10.15 WAIVERS. THIS GUARANTY CONTAINS WAIVERS OF VARIOUS RIGHTS, INCLUDING
           -------
(WITHOUT LIMITATION) WAIVERS OF RIGHTS OF JURY TRIAL AND APPRAISAL AS SET FORTH
ABOVE. EACH OF THE GUARANTORS HEREBY MAKES AND ACKNOWLEDGES THAT IT MAKES ALL OF
THE WAIVERS SET FORTH IN THIS GUARANTY KNOWINGLY, INTENTIONALLY, VOLUNTARILY,
WITHOUT DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF
SUCH WAIVERS WITH ITS ATTORNEY; GUARANTOR FURTHER ACKNOWLEDGES THAT SUCH WAIVERS
ARE A MATERIAL INDUCEMENT TO LENDER TO MAKE THE LOAN TO BORROWER AND THAT LENDER
WOULD NOT HAVE MADE THE LOAN WITHOUT SUCH WAIVERS.

                                       11
<PAGE>

     IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty as of
the date first written above.

                                           GUARANTOR:
                                           SIZZLER INTERNATIONAL, INC.,
                                           a Delaware corporation

                                           By:  _______________________________
                                                Name: _________________________
                                                Its:  _________________________

                                           Guarantor Notice Address:

                                           6101 W. Centinela Avenue
                                           Culver City, CA 90230
                                           Attn: Beth Arnold

                                       12
<PAGE>

                                  SCHEDULE 1

                            (Borrower information)

     NOTE TO GUARANTOR: IF ANY OF THE FOLLOWING INFORMATION IS NOT CORRECT OR
COMPLETE, PLEASE MAKE APPROPRIATE CHANGES OR ADDITIONS IN THE APPROPRIATE PLACES
ON THIS SCHEDULE.

<TABLE>
<CAPTION>
   Borrower Name                          Borrower  Address                Relationship of Guarantor to
   -------------                          -----------------                ----------------------------
                                                                           Borrower
                                                                           -------
<S>                                       <C>                              <C>
   Sizzler USA, Inc.,                     6101 W. Centinela Avenue         Parent corporation
   a Delaware corporation                 Culver City, CA 90230

   Sizzler USA Restaurants, Inc.,         6101 W. Centinela Avenue         Parent corporation
   a Delaware corporation                 Culver City, CA 90230

   Sizzler USA Real Property, Inc.,       6101 W. Centinela Avenue         Parent corporation
   a Delaware corporation                 Culver City, CA 90230
</TABLE>

                                       13
<PAGE>

                                  SCHEDULE 2

                              (Loan information)

     NOTE TO GUARANTOR: IF ANY OF THE FOLLOWING INFORMATION IS NOT CORRECT OR
COMPLETE, PLEASE MAKE APPROPRIATE CHANGES OR ADDITIONS IN THE APPROPRIATE PLACES
ON THIS SCHEDULE. ALL REFERENCES TO PROMISSORY NOTE(S) ARE TO THE PROMISSORY
NOTE(S) DATED AS OF THE DATE HEREOF BY BORROWER IN FAVOR OF LENDER HAVING ON ITS
OR THEIR FIRST PAGE THE AMOUNT OF NOTE APPEARING BELOW. THERE IS A SEPARATE
PROMISSORY NOTE FOR EACH SUCH NUMBER. BY EXECUTING THIS GUARANTY, GUARANTOR
HEREBY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED EACH SUCH PROMISSORY NOTE
AND IS FULLY AWARE OF THE DOLLAR AMOUNT AND NATURE OF THE OBLIGATIONS GUARANTEED
BY THIS GUARANTY.

     LOAN AND SECURITY AGREEMENT dated as of December __, 2000 by and between
HELLER FINANCIAL LEASING, INC. and SIZZLER USA, INC., a Delaware corporation,
SIZZLER USA RESTAURANTS, INC., a Delaware corporation and SIZZLER USA REAL
PROPERTY, INC., a Delaware corporation, in the aggregate amount of up to
$10,000,000.00 as evidenced by the following notes:

                                      Amount of Note
                                      --------------
                                      $ 5,000,000.00

                                      $ 5,000,000.00

                                       14<PAGE>

                                                                    EXHIBIT 10.5

                       ENVIRONMENTAL INDEMNITY AGREEMENT

     THIS ENVIRONMENTAL INDEMNITY AGREEMENT (the "Agreement") is made as of
December ___, 2000, by SIZZLER USA, INC., a Delaware corporation, SIZZLER USA
RESTAURANTS, INC., a Delaware corporation, SIZZLER USA REAL PROPERTY, INC., a
Delaware corporation, and SIZZLER INTERNATIONAL, INC., a Delaware corporation
(individually and collectively, the "Indemnitor") for the benefit of HELLER
FINANCIAL LEASING, INC., a Delaware corporation (together with its successors
and assigns, the "Lender").

                                   RECITALS

     1.   Lender has agreed to make a loan (the "Loan") to the Borrower (as
named in the Loan Agreement defined below) pursuant to the Loan and Security
Agreement of even date herewith (the "Loan Agreement," and together with all
other documents executed or delivered to Lender in connection with the Loan are
hereinafter referred to as the "Loan Documents").

     2.   Lender has required, as a condition of funding the Loan, that
Indemnitor indemnify and hold Lender harmless against and from certain
obligations for which Lender may incur liability, whether as beneficiary of any
mortgage, mortgagee in possession, or successor-in-interest to Borrower by
foreclosure or deed in lieu of foreclosure, by reason of the threat or presence
of any Hazardous Substances (as defined below), with respect to, at or near any
Property (as defined below).

     NOW, THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Indemnitor, intending to be legally bound, hereby
agrees as follows:

          a.   Recitals. The foregoing recitals are incorporated into this
               --------
Agreement by this reference.

          b.   Definitions. As used herein, the following terms shall have the
               -----------
following meanings:

               i.   The term "Customary Business Materials" shall mean those
products and substances as are commonly used by businesses in the restaurant and
food service business and which are used in compliance with applicable law and
for which no permit or approval of any governmental agency is required prior to
the use thereof (other than water discharge permits and the like).

               ii.  The term "Hazardous Substances" shall mean (i) any substance
or mixture which is, or shall be listed, defined, or otherwise determined by any
agency or court to be,
<PAGE>

hazardous, toxic, dangerous or otherwise regulated, affected, controlled or
giving rise to liability under any Hazardous Waste Laws; (ii) asbestos or
asbestos-containing materials; (iii) polychlorinated biphenyls (PCBs); (iv)
radon gas; (v) laboratory wastes; (vi) experimental products, including
genetically engineered microbes and other recombinant DNA products; (vii)
petroleum, crude oil, natural gas, natural gas liquid, liquefied natural gas,
other petroleum product, or synthetic gas usable as fuel; (viii) "source",
"special nuclear" and "by-product" material, as defined in the Atomic Energy
Act of 1954, 42 U.S.C. (S) 3011 et seq.; (ix) any substance the presence of
which requires investigation or remediation under any federal, state or local
statute, regulation, ordinance, order, action, policy or common law; (x) any
substance the presence of which on any Site causes or threatens to cause a
nuisance upon any Site or to adjacent properties or poses or threatens to pose a
hazard to the health or safety of persons on or about any Site; or (xi) any
substance the presence of which on adjacent properties could constitute a
trespass by Borrower.

               iii.  The term "Hazardous Waste Laws" shall mean, collectively,
any local, state or federal law, statute or regulation, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. (S) 9601 et seq.; the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976,
as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. (S)
6901 et seq.; the Federal Water Pollution Control Act, as amended by the Clean
Water Act of 1977, 33 U.S.C. (S) 1251 et seq.; the Toxic Substances Control Act
of 1976, 15 U.S.C. (S) 2601 et seq.; the Emergency Planning and Community Right-
to-Know Act of 1986, 42 U.S.C. (S) 11001 et seq.; the Clean Air Act of 1966, as
amended, 42 U.S.C. (S) 7401 et seq.; the National Environmental Policy Act of
1975, 42 U.S.C. (S) 4321; the Rivers and Harbors Act of 1988, 33 U.S.C. (S) 401
et seq.; the Endangered Species Act of 1973, as amended, 16 U.S.C.(S) 1531 et
seq.; the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. (S)
651 et seq.; the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. (S) 300
(f) et seq.; the Hazardous Materials Transportation Act, 42 U.S.C. (S)(S) 1471,
1472, 1655, 1801 et seq.; the Federal Insecticide, Fungicide & Rodenticide Act,
7 U.S.C. (S) 136 et seq.; the Atomic Energy Act, 42 U. S.C. (S) 3011 et seq.;
and any other rule, guidance, guideline or common law which relates to (a) the
existence and/or remedy of contamination on property; (b) the protection of
persons, property, animals, or the environment from any Hazardous Substances
exposure or contamination by Hazardous Substances, radiation or other
emanations; (c) the use, generation, storage, removal, recovery, treatment,
transport, disposal, and control of Hazardous Substances, including hazardous
wastes and building materials; (d) the prevention of, control of, or response to
the exposure of employees or other persons to any Hazardous Substances or
radiation; or (e) the prevention of, control of, or response to the emission,
discharge, release or threat of release of Hazardous Substances in the work
place or environment.

                                       2.
<PAGE>

               iv.  The term "Site(s)" shall mean each of the parcel(s) of land
on which the business(es) of the Borrower are located (i) which are subject to a
mortgage securing the Loan and/or (b) upon which any collateral of Lender is
located.

               v.   "Property" shall mean any Collateral (as defined in the Loan
Agreement) and any Site.

          c.   Representations and Warranties. Indemnitor represents and
               ------------------------------
warrants and covenants as follows:

               i.   Indemnitor has no knowledge of any deposit, storage,
disposal, burial, discharge, release, threat of release, spillage, uncontrolled
loss, seepage or filtration of Hazardous Substances, excluding Customary
Business Materials, at, upon, under or within any Property or any contiguous
real estate.

               ii.  Indemnitor has not caused or permitted to occur, and shall
not permit to exist, any condition which may cause a discharge, release or
threat of release of any Hazardous Substances, excluding Customary Business
Materials, at, upon, under, within, or from any Property or, to the extent
Borrower has the right to do so, on any contiguous real estate.

               iii. Neither Indemnitor nor any other person has been, is or will
be involved in operations at or near any Property, which operations could lead
to (i) the imposition of liability under any Hazardous Waste Laws on Borrower,
or on any subsequent or former owner of any Property or (ii) the creation of a
lien on any Property under any Hazardous Waste Laws or under any similar laws or
regulations.

               iv.  Indemnitor has not permitted, and will not permit, any
tenant, occupant or operator of any Property to engage in any activity that
could impose liability under any Hazardous Waste Laws on Borrower or on any
tenant, occupant or operator of any part of any Property for a release or
discharge of Hazardous Substances.

          d.   Covenants.
               ---------

               i.   Indemnitor shall cause any Property to be in compliance
strictly and in all respects with the requirements of the Hazardous Waste Laws
and shall notify Lender immediately in the event of any discharge, release, or
threat of release or discovery of any Hazardous Substances at, upon, under,
within, or from any Property in violation of Hazardous Waste Laws. Indemnitor
shall promptly forward to Lender copies of all writings in the possession of or
known or suspected to exist by Indemnitor relating to any alleged or suspected
discharge, release or threat of release or the alleged or suspected presence of
any Hazardous Substance or any other matters relating to the Hazardous

                                       3.
<PAGE>

Waste Laws as they may affect any Property, including without limitation any
reports, citations, notices or other writings by, to or from any governmental or
quasi-governmental authority empowered to regulate or oversee the disposition of
Hazardous Substances, whether demonstrating compliance with applicable law or
giving notice of any request for information or commencement of investigation,
or constituting an informal request for action or to show cause why action is
not required, a formal request, or any other administrative or court document.

               ii.  If Lender has a good faith justification to believe that a
release or discharge of Hazardous Substances onto or from any Property has
occurred, Indemnitor shall, promptly upon the request of Lender, provide Lender,
at Indemnitor's expense, with an environmental site assessment or environmental
audit report prepared by an environmental engineering firm acceptable to Lender
to assess with a reasonable degree of certainty the presence or absence of any
Hazardous Substances and the potential costs in connection with abatement,
cleanup or removal of any Hazardous Substances found on, under, at or within any
Property. Indemnitor will cooperate with Lender and allow Lender and Lender's
representatives access to any and all parts of any Property and to the records
of Indemnitor and historical data with respect to any Property for environmental
inspection purposes at any time. In connection therewith, Indemnitor hereby
agrees that Lender or Lender's representatives may perform any testing upon or
of any Property that Lender deems reasonably necessary for the evaluation of
environmental risks, costs or procedures, including soils or other sampling or
coring.

          e.   Indemnity.
               ---------

               i.   Indemnitor shall at all times indemnify and hold Lender
harmless against and from any and all claims, suits, liabilities, actions,
debts, damages, costs, losses (including diminution on the value of any Property
or the imposition of any lien thereon under any Hazardous Waste Laws),
obligations, judgments, charges and expenses, including sums paid in settlement
of claims, of any nature whatsoever suffered or incurred by Lender, whether as
beneficiary under any mortgage or deed of trust, as mortgagee in possession, or
as successor-in-interest to Borrower by foreclosure deed or deed in lieu of
foreclosure, with respect to :

                    (1)  any actual or suspected discharge, release or threat of
release of Hazardous Substances, or the actual or suspected presence of any
Hazardous Substances on, in, upon, under or affecting any Property excluding
that which relates to a release or discharge which first occurs after the date
("Possession Transfer Date") when Borrower is no longer in possession of the
Property in question whether or not the same originates or emanates from any
Property or any other source, including any loss of value of any Property as a
result of any of the foregoing;

                    (2)  any cost of removal or remedial action incurred by the
United States Government or any state or local governmental authority, and any
response costs incurred by

                                       4.
<PAGE>

any other person pursuant to any Hazardous Waste Laws excluding that which
relates to a release of Hazardous Substances first occurring after the
Possession Transfer Date;

                    (3)  any damages from injury to, destruction of, or loss of
natural resources, including reasonable costs of assessing such injury,
destruction or loss excluding that which relates to a release of Hazardous
Substances first occurring after the Possession Transfer Date;

                    (4)  any liability for personal injury or property damage
arising under any statutory or common law tort theory, including without
limitation, damages assessed for the maintenance of a public or private nuisance
or for the carrying on of an abnormally dangerous activity at or near any
Property excluding that which relates to a release of Hazardous Substances first
occurring after the Possession Transfer Date; and/or

                    (5)  any other environmental matter or condition affecting
any Property within the jurisdiction of the Environmental Protection Agency, any
other federal agency, or any state or local environmental agency or political
subdivision or any court, administrative panel or tribunal excluding that which
relates to a release of Hazardous Substances first occurring after the
Possession Transfer Date.

          Except as otherwise provided, Borrower's obligations under this
Agreement shall arise upon the discovery of, or the threat or suspected presence
of, any Hazardous Substances, whether or not the Environmental Protection
Agency, any other federal agency or any state or local environmental agency or
political subdivision or any court, administrative panel or tribunal has taken
or threatened any action in connection with the presence of, or the threat or
suspected presence of, any Hazardous Substances.

               ii.  In the event of any discharge, release or threat of release
of any Hazardous Substances, or the presence of any Hazardous Substances
affecting any Property, whether or not the same originates or emanates from any
Property or any other source excluding that which relates to a release of
Hazardous Substances first occurring after the Possession Transfer Date, and/or
if Indemnitor shall fail to comply with any of the requirements of the Hazardous
Waste Laws or related regulations or any other environmental law or regulation,
Lender may, at its election, but without the obligation to do so, give such
notices and/or cause such work to be performed at any Property and/or take any
and all other actions as Lender shall deem necessary or advisable in order to
abate the discharge, release or threat of release of any Hazardous Substances,
remove the Hazardous Substances or cure Indemnitor's noncompliance.

               iii. Indemnitor acknowledges that Lender has agreed to make the
Loan in reliance upon Indemnitor's representations, warranties and covenants in
this Agreement. For this reason, it is the intention of Indemnitor and Lender
that the provisions of this Agreement shall supersede

                                       5.
<PAGE>

any provisions in the Loan Documents which in any way limit the personal
liability of Borrower or any other Indemnitor and that Indemnitor shall be
personally liable for any obligations arising under this Agreement even if the
amount of liability incurred exceeds the amount of the Loan. All of the
representations, warranties, covenants and indemnities of this Agreement shall
survive the repayment of the Note and the release of the lien of any mortgage or
deed of trust from any Property and shall survive the transfer of any or all
right, title and interest in and to any Property by Borrower to any party,
whether or not affiliated with Borrower.

               iv.  In any circumstance in which this Agreement applies, Lender
may, but shall not be obligated to, employ its own legal counsel and consultants
to investigate, prosecute, negotiate, or defend any claims indemnified hereunder
and Lender shall, following an Event of Default or, if Indemnitor is not
diligently seeking to cure said circumstance, an event that with the passage of
time, or the giving of notice, or both, could constitute an Event of Default,
have the right to compromise or settle the same without the necessity of showing
actual liability therefor, and without the consent of Indemnitor. Indemnitor
shall reimburse Lender, upon demand, for all costs and fees, including without
limitation attorneys' fees and consultants' fees, incurred by Lender, including
the amount of all costs of settlements entered into by Lender.

               v.   Indemnitor shall not, without the prior written consent of
Lender, settle or compromise any action, suit, proceeding, or claim relating in
any material respect directly or indirectly to any claim indemnified hereunder.

          f.   Attorneys' Fees. If Lender, or someone on Lender's behalf,
               ---------------
retains the services of attorneys in connection with this Agreement or any term
or provision hereof, Indemnitor shall pay Lender's costs, expenses and
reasonable attorneys' fees (including consultant fees) thereby incurred. By way
of clarification and not limitation, Indemnitor hereby expressly acknowledges
that Indemnitor shall pay the costs, expenses and fees of Lender incurred in
connection with (i) Lender's evaluation or interpretation of any environmental
audits, investigations or site assessments relating to any Property or obtained
pursuant to the terms hereof, (ii) the enforcement of and costs of collection
under this Agreement, and (iii) any claims against Lender or impairing Lender's
security for the repayment of the Loan resulting from the presence or suspected
presence of Hazardous Substances affecting any Property. Lender may employ
attorneys of Lender's own choice.

          g.   Interest. In the event that Lender incurs any obligations, costs
               --------
or expenses under this Agreement, Indemnitor shall pay Lender immediately upon
demand, and if such payment is not received within ten (10) days, interest on
such amount shall, after the expiration of the ten-day period, accrue at the
lesser of (i) the rate of eighteen percent (18%) per annum or (ii) the highest
rate of interest permitted under the laws of the State of Illinois, until such
amount, plus interest, is paid in full.

                                       6.
<PAGE>

          h.   Joint and Several Liability. In the event that this Agreement is
               ---------------------------
executed by more than one party as Indemnitor, the liability of such parties is
joint and several. If any Indemnitor is a general partner of a general or
limited partnership, such Indemnitor shall be jointly and severally liable with
all other general partners of such partnership. In addition, Indemnitor's
obligations hereunder are joint and several with any other person now or
hereafter obligated under the Loan Documents and are independent of the
obligations of Indemnitor. A separate action or actions may be brought and
prosecuted against any Indemnitor hereunder, whether or not actions is brought
against Borrower or any other person or whether or not Borrower or any other
person is joined in such action or actions.

          i.   Lender Subrogated to Claims of Indemnitor. Indemnitor shall take
               -----------------------------------------
any and all reasonable actions, including institution of legal action against
third-parties, necessary or appropriate to obtain reimbursement, payment or
compensation from such persons responsible for the presence of any Hazardous
Substances at, in, on, under or near any Property or otherwise obligated by law
to bear the cost. Lender shall be and hereby is subrogated to all of Borrower's
rights now or hereafter in such claims.

          j.   Notice. All notices, demands, requests and other communications
               ------
required hereunder shall be given pursuant to the terms of the Loan Agreement
dated as of the date hereof.

          k.   No Third-Party Beneficiary. The terms of this Agreement are for
               --------------------------
the sole and exclusive protection and use of Lender. No party shall be a third-
party beneficiary hereunder, and no provision hereof shall operate or inure to
the use and benefit of such third party.

          l.   Cumulative Remedies.
               -------------------

               i.   All rights and remedies of Lender hereunder or under any of
the Loan Documents shall be cumulative and may be exercised singularly or
concurrently. It is the purpose and intent hereof to provide safeguards,
protection and rights to Lender in addition to those provided in the Note, any
mortgage or deed of trust or any other Loan Documents and to better secure
Lender for and on account of the Loan.

               ii.  If Indemnitor has also executed any other indemnity or
guaranty in favor of Lender, Indemnitor acknowledges that Lender reserves the
right to proceed against Indemnitor on such other indemnity or guaranty or this
Agreement in any order Lender may choose, without having to first exhaust its
remedies under any other.

          m.   Right to Modify Conditions. Indemnitor hereby agrees that the
               --------------------------
terms, covenants, and provisions contained in this Agreement, the Note and any
other Loan Documents may be altered, extended, modified, waived, released or
canceled by Lender, and Indemnitor agrees that this Agreement and Indemnitor's
liability hereunder shall in no way be affected, diminished or released

                                       7.
<PAGE>

by any such alteration, extension, modification, release, waiver or
cancellation. The failure of Lender to insist upon strict compliance with any of
the terms of this Agreement shall not be considered to be a waiver of any such
terms, nor shall it prevent Lender from insisting upon strict compliance with
this Agreement or any other Loan Document at any time thereafter.

          n.   Waivers.
               -------

               i.   Indemnitor hereby waives and renounces any and all homestead
exemption rights against the obligations hereunder and the benefits of any
statutes of limitations or repose, and also waives presentment for payment,
demand, protest, notice of protest and of dishonor, notice of acceptance hereof,
notices of default and all other notices now or hereafter provided by law.

               ii.  Indemnitor hereby waives any and all legal requirements that
Lender (i) shall institute any action or proceedings at law or in equity against
Borrower or anyone else in respect of the Loan or this Agreement or any Loan
Document or (ii) shall foreclose any mortgage or deed of trust or resort to or
seek to realize upon any other security held by Lender, as a condition precedent
to bringing an action against Indemnitor upon this Agreement. Indemnitor
consents, without notice to Indemnitor, to the release of all or any part of the
security for the Loan or the release of any Indemnitor or any other Indemnitor
or guarantor of the Loan.

          o.   SUBMISSION TO JURISDICTION; WAIVERS. THE INDEMNITOR HEREBY
               -----------------------------------
IRREVOCABLY AND UNCONDITIONALLY (TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW):
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY,
OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE
NONEXCLUSIVE GENERAL JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN THE
STATE OF ILLINOIS; (B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND
AGREES NOT TO PLEAD OR CLAIM THE SAME; AND (C) AGREES THAT SERVICE OF PROCESS IN
ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY SERVICE UPON BORROWER OR ITS
REGISTERED AGENT.

     ______________      ______________      ______________      ______________
     Indemnitor's        Indemnitor's        Indemnitor's        Indemnitor's
     Initials            Initials            Initials            Initials

                                       8.
<PAGE>

          p.   WAIVER OF TRIAL BY JURY. EXCEPT AS MAY BE PROHIBITED BY LAW, THE
               -----------------------
INDEMNITOR AND THE LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION NOW EXISTING OR HEREAFTER ARISING RELATING TO THIS AGREEMENT, ANY
DEALINGS OR TRANSACTIONS RELATED THERETO, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. IF THE
SUBJECT MATTER OF ANY SUCH LITIGATION IS ONE IN WHICH THE WAIVER OF A JURY TRIAL
IS PROHIBITED, NEITHER THE INDEMNITOR NOR THE LENDER SHALL PRESENT A NON-
COMPULSORY COUNTERCLAIM IN SUCH LITIGATION OR ANY CLAIM ARISING OUT OF OR IN
CONNECTION WITH ANY OF THE FOREGOING. FURTHERMORE, NEITHER THE LENDER NOR THE
INDEMNITOR SHALL SEEK TO CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL HAS
NOT BEEN WAIVED. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER'S
EXTENSION OF CREDIT TO THE BORROWER.

          q.   Waiver of Subrogation.
               ---------------------

               i.   Notwithstanding any other provision of this Agreement to the
contrary, each Indemnitor other than Borrower hereby waives any claim or other
rights which such Indemnitor may now have or hereafter acquire against Borrower
or any other guarantor of all or any of the Loan that arise from the existence
or performance of such Indemnitor's obligations under this Agreement or any
other Loan Documents (all such claims and rights are referred to as such
Indemnitor's "Conditional Rights"), including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, or indemnification, any
right to participate in any claim or remedy of Lender against Indemnitor or any
collateral which Lender now has or hereafter acquires, whether or not such
claim, remedy or right arises in equity or under contract, statute or common
law, by any payment made hereunder or otherwise, including without limitation,
the right to take or receive from Indemnitor, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim or other rights until ninety-one (91) days following the
date that the Obligations are paid in full. If, notwithstanding the foregoing
provisions, any amount shall be paid to any Indemnitor hereunder on account of
any such Indemnitor's Conditional Rights and either (i) such amount is paid to
such Indemnitor at any time when the Loan or Indemnitor's obligations under this
Agreement shall not have been paid or performed in full, or (ii) regardless of
when such amount is paid to such Indemnitor, any payment made by Indemnitor to
Lender is at any time determined to be a Preferential Payment (as hereinafter
defined), then such amount paid to such Indemnitor shall be held in trust for
the benefit of Lender and shall forthwith be paid to Lender to be credited and
applied upon the Loan, whether matured or unmatured, in such order as Lender, in
its sole and absolute discretion, shall determine. As used herein, the term
"Preferential Payment" shall mean any payment made by any Indemnitor or any
guarantor on account of the Loan or this Agreement, all or any part of which

                                       9.
<PAGE>

payment 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 entity, whether pursuant to any bankruptcy act or otherwise.

               ii.  To the extent that any of the provisions of subparagraph (a)
of this Section shall not be enforceable, each Indemnitor other than Borrower
agrees that until such time as the Loan has been paid and performed in full and
the period of time has expired during which any payment made by Indemnitor or
such Indemnitor to Lender may be determined to be a Preferential Payment, such
Indemnitor's Conditional Rights to the extent not validly waived shall be
subordinate to Lender's right to full payment and performance of the Loan and
such Indemnitor shall not enforce such Indemnitor's Conditional Rights during
such period.

          r.   Successors and Assigns. This Agreement shall be binding upon
               ----------------------
Borrower's successors, assigns, heirs, personal representatives and estate and
shall inure to the benefit of Lender and its successors and assigns.

          s.   Controlling Law. This Agreement shall be governed by and
               ---------------
construed in accordance with the laws of the State of Illinois without reference
to conflicts of law rules. Accordingly, in all respects, including, without
limitation, matters of construction, validity, enforceability and performance,
this Agreement, the Note and the other Loan Documents and the obligations
arising hereunder and thereunder shall be governed by, and construed in
accordance with, the laws of the state of Illinois applicable to contracts made
and performed in such state, and any applicable law of the United States of
America. Except as provided in the immediately preceding sentence, the
Indemnitor hereby unconditionally and irrevocably waives, to the fullest extent
permitted by law, any claim to assert that the law of any jurisdiction other
than Illinois governs this Agreement, the Note and the other Loan Documents.

          t.   Securitization. Lender may pool the Loan in a securitization (the
               --------------
"Securitization") with any or all other loans which may include sales to one or
more of its affiliates or third parties who will acquire such loans with the
proceeds of bonds or other securities sold to one or more investors.
Alternatively, Lender may sell or transfer such loans as whole loans in any
other manner. INDEMNITOR ACKNOWLEDGES AND AGREES THAT THE LOAN MAY BE POOLED
TOGETHER WITH LOANS MADE BY LENDER TO OTHER BORROWERS. LENDER RESERVES THE
RIGHT, IN ITS SOLE AND ABSOLUTE DISCRETION, TO POOL THE LOAN (INCLUDING THE
POOLING OF THE LOAN IN CONNECTION WITH A SECURITIZATION) TOGETHER WITH ANY OTHER
LOANS TO OTHER BORROWERS IN ANY COMBINATION.

                                      10.
<PAGE>

                           [signature page follows]

                                      11.
<PAGE>

     IN WITNESS WHEREOF, Indemnitor has executed this Environmental Indemnity
Agreement as of the date first written above.

                              INDEMNITOR:

                              SIZZLER USA, INC., a Delaware corporation

                              By:  ________________________________
                                   Name: __________________________
                                   Its:  __________________________

                              SIZZLER USA RESTAURANTS, INC., a Delaware
                              corporation

                              By:  ________________________________
                                   Name: __________________________
                                   Its:  __________________________

                              SIZZLER USA REAL PROPERTY, INC., a Delaware
                              corporation

                              By:  ________________________________
                                   Name: __________________________
                                   Its:  __________________________

                              SIZZLER INTERNATIONAL, INC., a Delaware
                              corporation

                              By:  ________________________________
                                   Name: __________________________
                                   Its:  __________________________

                                      12.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00019-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00019-of-00352.parquet"}]]