COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE

EXHIBIT 10.5

CAUSE NO. 05-11334

COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE

     This Compromise Settlement Agreement and Mutual Release (“Agreement”) is entered into on December 14, 2006, (the “Execution Date”) by PepsiCo, Inc. (“PepsiCo”) and Pizza Inn, Inc., (“Pizza Inn”), and acknowledged and agreed by Timothy Taft and Jeff Ingram with respect to Paragraphs 7, 10 and 11 hereof, in consideration of and for the reasons set forth below.

RECITALS

     WHEREAS, PepsiCo filed the above-captioned Lawsuit against Pizza Inn on or about November 8, 2005, alleging that Pizza Inn was in breach of the Parties’ May 15, 1998, letter agreement (the “Beverage Agreement”) pursuant to which PepsiCo supplied to Pizza Inn and its Participating Franchisees, inter alia , packaged beverage products, dispensing equipment, marketing and support funds, and related support services (the “PepsiCo Claims”);

     WHEREAS, Pizza Inn denies the allegations of the PepsiCo Claims and, on or about February 20, 2006, filed its Original Counterclaim, alleging that PepsiCo was in breach of the Beverage Agreement, had breached certain express or implied warranties associated therewith, and had, through the actions of one of its employees, defamed Pizza Inn’s business interests and its Chief Executive Officer, and tortiously interfered with contracts between Pizza Inn and its franchisees (the “Pizza Inn Counterclaims”);

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     WHEREAS, Pizza Inn denies the PepsiCo Claims and PepsiCo denies the Pizza Inn Counterclaims (the PepsiCo Claims and Pizza Inn Counterclaims collectively referred to as the “Claims”);

     WHEREAS, in order to avoid further costs of litigation, PepsiCo and Pizza Inn (sometimes referred to collectively as the “Parties”) desire to fully resolve all differences between them, including but not limited to the Claims in the Lawsuit, and to enter into this agreement in full settlement and discharge of all claims asserted or that could be asserted in the Lawsuit by either Party against the other, from the beginning of time until the date of execution hereof, upon the terms and conditions hereinafter set forth.

SETTLEMENT TERMS AND CONDITIONS

     NOW THEREFORE, for good and valuable consideration, the adequacy, receipt, and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

SETTLEMENT AMOUNT AND PAYMENT TERMS

     1. In consideration of the mutual promises and releases contained herein, Pizza Inn shall pay to PepsiCo the sum of $410,000.00 in good funds (“Settlement Amount”) to be received and confirmed by wire transfer in PepsiCo’s account on or before 5:00 p.m. CST, on December 29, 2006. In order to secure payment of the Settlement Amount, Pizza Inn shall execute and deliver to PepsiCo contemporaneously with execution of this Agreement an Agreed Judgment in the form attached hereto as Exhibit A , which PepsiCo shall cause its counsel to hold in trust until the Settlement Amount is paid, PepsiCo has the right to file the Agreed Judgment to enforce this Agreement, or this Agreement is terminated, all as further provided below.

     2. It is expressly agreed and understood that time is of the essence with respect to PepsiCo’s receipt of the Settlement Amount, and that in the event the full Settlement Amount is not received by PepsiCo strictly within the time and in the manner specified herein, then, at PepsiCo’s sole option, PepsiCo may either terminate this Agreement, thereby rendering it null and void, or PepsiCo may ratify and enforce this Agreement by filing the Agreed Judgment with the Court.

     a. Should PepsiCo elect to terminate this Agreement, it shall provide written notice of same to Pizza Inn on or before January 15, 2007, and shall tender to Pizza Inn any amounts previously transferred to PepsiCo by Pizza Inn pursuant to this Agreement together with the Agreed Judgment. Upon delivery of same, this Agreement shall terminate, and all rights and liabilities, including but not limited to all Claims and defenses in the Lawsuit, restored to the Parties as if this Agreement never were executed.

     b. Should PepsiCo elect to ratify and enforce this Agreement, it may immediately file with the Court the Agreed Judgment and proceed to enforce same. To the extent that Pizza Inn has, prior to the filing of the Agreed Judgment, paid any portion of the Settlement Amount to PepsiCo, the principal balance of the Agreed Judgment shall be deemed to be reduced by such amount. It is expressly agreed and understood that, in the event that PepsiCo proceeds to enforce the Agreed Judgment, it shall be entitled to

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recover from Pizza Inn its attorney’s fees and other costs of collection, together with interest on any unpaid amounts at the rate of 10% per annum from January 1, 2007, until payment in full.

     3. Upon receipt by PepsiCo of the Settlement Amount strictly in accordance with the requirements of Paragraph 1 above, or upon the filing by PepsiCo of the Agreed Judgment, this Agreement shall become final and non-terminable by PepsiCo. With the sole exception of PepsiCo’s right to terminate this Agreement as provided in Paragraph 2(a) above, neither Party shall have the right to terminate this Agreement except based on a material breach by the other Party that remains uncured after written notice of same and a reasonable opportunity to cure.

RELEASE AND DISCHARGE

     4. The following releases shall become effective upon receipt by PepsiCo of the Settlement Amount strictly within the time and in the manner specified in Paragraph 1 above, or upon PepsiCo’s filing of the Agreed Judgment as provided in Paragraph 2(b) above (the “Release Date”).

     5. Upon the Release Date, PepsiCo, for and on behalf of itself and its officers, employees, representatives, assigns, and successors and all others in privity with it or any of them or who may claim under them or any of them by way of a derivative claim or assignment, do hereby compromise and settle all matters and FULLY RELEASE AND FOREVER DISCHARGE Pizza Inn, its attorneys, officers, part