**Exhibit 10.16****IN THE MATTER OF ARBITRATION BETWEEN**     **RONALD W. PARKER** **§** **American Arbitration**  **§** **Association**  **§**        **-and-** **§** **No. 71 166 00025 05**  **§**  **PIZZA INN, INC.** **§**  **Compromise and Settlement Agreement**     This Compromise and Settlement Agreement (the “Agreement”) is entered into by and betweenRonald W. Parker (“Parker”), on the one hand, and Pizza Inn, Inc. (“Pizza Inn”) on the other hand.(Parker and Pizza Inn are sometimes referred to jointly as the “Parties”.)**Recitals**     WHEREAS the above-styled arbitration proceeding (the “Arbitration”) commenced following PizzaInn’s termination of Parker’s employment as Pizza Inn CEO in December 2004; and     WHEREAS Parker and Pizza Inn have alleged various claims against each other and the pleadingsfiled in the Arbitration more fully describe their respective allegations and positions withrespect to the claims being made; and     WHEREAS the Parties now desire to resolve by settlement any and all disputes between themincluding the claims being made in the Arbitration.**Settlement Terms and Provisions**     NOW, THEREFORE, for good and valuable consideration, the adequacy, receipt, and sufficiency ofwhich is hereby acknowledged, the Parties hereby agree as follows:
 

 
     1. Pizza Inn agrees to pay to Parker the sum of $2,800,000 for Parker’s claims of defamation,defamation per se, loss of reputation, malicious civil prosecution, breach of contract and anyother claims, known or unknown, to be paid as follows:       First Installment: $100,000 payable upon execution by Parker of this Agreementand no later than September 24, 2006.       Second Installment: $200,000 payable 45 days following Parker’s executionof this Agreement.       Third Installment: $150,000 payable 75 days following Parker’s execution ofthis Agreement.       Fourth Installment: $100,000 payable 105 days following Parker’s executionof this Agreement.       Fifth Installment: $100,000 payable 135 days following Parker’s executionof this Agreement.       Sixth Installment: $100,000 payable 165 days following Parker’s executionof this Agreement.       Final Installment: The remaining balance shall be payable on the earlier of(i) 180 days following execution of this Agreement by Parker or (ii) the dateof closing of any sale by Pizza Inn of the main office building or warehouseat Pizza Inn’s corporate headquarters located at or near 3551 Plano Parkway.In the event the closing of any sale of the main office building or warehouseat Pizza Inn’s corporate headquarters occurs prior to 180 days followingParker’s execution of this Agreement, the full amount of $2.8 million (lessany amounts already paid) will be due at the closing of any such sale.     2. Pizza Inn agrees to pay interest of 5% per annum on any unpaid balance due to Parkerpursuant to Paragraph 1. Such interest shall begin to   **COMPROMISE AND SETTLEMENT AGREEMENT** **Page 2**
 

 
accrue on the date of Parker’s execution of this Agreement. Upon Pizza Inn’s payment ofthe First Installment interest shall accrue on the $2.7 million unpaid balance; after payment byPizza Inn of the Second Installment, interest will accrue on the $2.5 million unpaid balance and soforth. The accrued interest shall be due and payable upon payment of the Final Installmentreferenced in Paragraph 1 above.     3. Parker agrees that all payments or other claims allowed by this Agreement are not and willnot be secured by a lien on any assets of Pizza Inn and will be subordinate to PizzaInn’s indebtedness to Wells Fargo Bank or its assigns.     4. Parker agrees to sell all shares of Pizza Inn stock that he directly or indirectly ownswithin 60 days from the date he is paid in full the amounts referenced in Paragraphs 1 and 2 above.     5. Parker agrees that he will not attend Pizza Inn’s 2006 annual meeting of shareholderscurrently scheduled for December 13, 2006 (or any other meeting if the currently scheduled meetingis adjourned, postponed or rescheduled). However, this prohibition shall not apply if any paymentreferenced in Paragraph 1 or 2 is past due to Parker.     6. Parker, his heirs, assigns, agents, representatives, insurers, and attorneys hereby foreverrelease, acquit and discharge Pizza Inn, its directors, officers, employees, agents, representatives, attorneys, heirs and assigns and NewcastlePartners, L.P., its affiliated entities and their officers, employees, directors, shareholders(hereafter collectively “Newcastle”) from any and all   **COMPROMISE AND SETTLEMENT AGREEMENT** **Page 3**
 

 
claims, obligations, demands, actions, causesof action, complaints, lawsuits (pending or otherwise), costs, charges, judgments, attorneys’ fees,damages and liabilities of any kind whatsoever, known or unknown, direct or indirect, asserted orunasserted, liquidated or unliquidated, in tort, contract, or any other legal theory, statutory orotherwise, arising out of, resulting from, or in any manner related to any cause or thingwhatsoever that was brought, or that could have been brought in the Arbitration or a lawsuit,including but not limited to any and all claims relating to Parker’s employment at Pizza Inn or thetermination of Parker’s employment at Pizza Inn.     7. Pizza Inn, its directors, officers, employees, assigns, agents, representatives, insurers,attorneys and Newcastle hereby forever release, acquit and discharge Parker, his agents,representatives, attorneys, heirs and assigns from any and all claims, obligations, demands,actions, causes of action, complaints, lawsuits (pending or otherwise), costs, charges, judgments,attorneys’ fees, damages and liabilities of any kind whatsoever, known or unknown, direct orindirect, asserted or unasserted, liquidated or unliquidated, in tort, contract, or any other legaltheory, statutory or otherwise, arising out of, resulting from, or in any manner related to anycause or thing whatsoever that was brought, or that could have been brought in the Arbitration ora lawsuit, including but not limited to any and all claims relating to Parker’s employment at Pizza Inn,Parker’s service as a director or board member, the termination of Parker’s employment at Pizza Innor any of the allegations or claims asserted in Cause No. 04-10265 in the 191st DistrictCourt of Dallas County, Texas (the “Akin   **COMPROMISE AND SETTLEMENT AGREEMENT** **Page 4**
 

 
Gump Lawsuit”). Nothing in this Paragraph 7 shall beconstrued as a release by Pizza Inn of its claims against Akin Gump Strauss Hauer & Feld, L.L.P.and Kenneth Menges, Jr. If any director, officer or employee of Pizza Inn or Newcastle initiates alawsuit or legal proceeding against Parker concerning a matter being released in this Paragraph 7,then Parker’s release of that person only pursuant to this Agreement is withdrawn and is no longerbinding on Parker.     8. In addition to the release in Paragraph 7 above, Pizza Inn agrees to sign a release in aform similar to Paragraph 7 with respect to potential claims, if any, by Pizza Inn against ShawnPreator (the “Preator Release”). However, Pizza Inn shall only be obligated to execute the PreatorRelease upon the execution by Mr. Preator of a release in a form similar to Paragraph 7 withrespect to potential claims, if any, by Mr. Preator against Pizza Inn.     9. The parties wish both (1) to allow the parties to make comments and express opinionsconcerning the Arbitration and claims made therein and (2) to prevent their engaging in negative orharmful communications about each other. Therefore the parties agree to each of the specificundertakings set forth in paragraphs 10-13 below.     10. Parker agrees to strictly refrain from making any disparaging statements about Pizza Inn,its directors, officers, employees and Newcastle. Pizza Inn, its directors, officers, employees andNewcastle agree to strictly refrain from making any disparaging statements about Parker. Forpurposes of this paragraph, “disparage” shall mean any “false or injurious statement of fact thatdiscredits or detracts from the reputation” of Parker or Pizza Inn, its directors,   **COMPROMISE AND SETTLEMENT AGREEMENT** **Page 5**
 

 
officers,employees or Newcastle. The Parties further agree and acknowledge that this provision shallsurvive the execution and delivery of this Agreement.     11. In addition to the provisions of Paragraph 10, Parker agrees that he will not knowinglymake any oral or written statement that is critical of or casts in a negative light Pizza Inn’sbusiness model, business strategies, financial performance, current management (including itsofficers, directors and employees), or Newcastle. Pizza Inn, its directors, officers, employeesand Newcastle agree that they will not knowingly make an oral or written statement that is criticalof or casts Parker in a negative light. The Parties agree that nothing in this Agreement shallprohibit the Parties from commenting or stating their opinions regarding the allegations or claimsmade in the Arbitration (AAA No. 71-166-00025-05), including but not limited to comments oropinions about the dispute between the Parties, the settlement amount, or comments or opinionsregarding the outcome of the Arbitration and any such statements by the Parties shall not be aviolation of this Agreement. The Parties agree and acknowledge that this provision shall survivethe execution and delivery of this Agreement     12. Pizza Inn, its directors, officers and employees and Parker further agree that they shallnot knowingly make or publish, or cause to be made or published, any oral or written statement toany person or entity: (i) that discusses or otherwise discloses the substance of any settlementdiscussions or negotiations relating to the claims asserted in the Arbitration prior to thesettlement of the Arbitration (other than the specific terms of this Agreement); or (ii) regardingthe reasonableness or necessity of legal fees and expenses   **COMPROMISE AND SETTLEMENT AGREEMENT** **Page 6**
 

 
incurred by Parker or Pizza Inn in theArbitration or any related litigation. The Parties agree and acknowledge that this provision shallsurvive the execution and delivery of this Agreement     13. In addition, Parker further agrees not to knowingly initiate or voluntarily communicatewith any third-party regarding any claim or potential claim by such third-party against Pizza Inn,its officers or directors. Pizza Inn, its officers and directors and Newcastle agree not toknowingly initiate or voluntarily communicate with any third-party regarding any claim or potentialclaim by such third-party against Parker. The Parties agree and acknowledge that this provisionshall survive the execution and delivery of this Agreement     14. Notwithstanding the provisions of Paragraphs 10-13 above, the Parties agree that PizzaInn, its witnesses and Parker shall have absolute immunity for statements made in filings ortestimony provided in the Akin Gump Lawsuit. The Parties further agree that any alleged breach ofParagraphs 10-13 of this Agreement shall not entitle Pizza Inn to delay, withhold, or not make any paymentscheduled to be made under this Agreement.     15. The Parties agree to cooperate to take all action necessary to effectuate the dismissal ofthe Arbitration with prejudice. In this regard, the Parties agree to execute and cause to be filedan Agreed Order of Dismissal with Prejudice in the form of *Exhibit A*attached.     16. The Parties do not release one another from their respective obligations under thisAgreement or for torts or other wrongful acts committed after the execution of this Agreement.   **COMPROMISE AND SETTLEMENT AGREEMENT** **Page 7**
 

 
     17. Parker and Pizza Inn represent and warrant (which representations and warranties shallsurvive the execution and delivery of this Agreement) the following: a. Each party possesses all capacities, including but not limited to, the legal capacityand authority to execute this Agreement;  b. No party has received or relied upon any oral or written representation ofany other party or any other party’s employees, agents, partners, or representativesregarding any fact in executing this Agreement, other than those specifically includedin this Agreement;  c. Breach of this Agreement, if any, shall not affect the non-breaching party’scontinuing right to full observance of the release; and  d. Each party solely owns and has not assigned or otherwise transferred to anyperson, party, or entity any of the claims, causes of action, liabilities, orpotential liabilities being released hereby or any portion thereof.     18. This Agreement and any proceedings taken hereunder are not and shall not in any way beconstrued as or deemed to be evidence of or anyadmission or concession of wrongdoing or liability on the part of either Party, their counsel, orany of them, which liability is expressly denied.     19. This Agreement, including all matters of construction, validity and performance, shall begoverned by and construed and enforced in accordance with the laws of the State of Texas. TheParties agree that the American Arbitration Association in Dallas County, Texas shall be theexclusive forum for any litigation arising under or relating to this Agreement, includingenforcement thereof.   **COMPROMISE AND SETTLEMENT AGREEMENT** **Page 8**
 

 
     20. This Agreement contains the entire understanding and agreement of the Parties with respectto the matters addressed herein, and supersedes all prior and contemporaneous agreements,negotiations, correspondence, undertakings and communications of the parties or theirrepresentatives, oral or written, with respect to the subject matter set forth in this Agreement.No amendment, modification, waiver or cancellation of any term or condition of this Agreement shallbe effective unless executed in writing by all of the Parties.     21. Each Party acknowledges on its own behalf that it has been represented by independentlegal counsel of its own choice throughout all of the negotiations that have preceded the executionof this Agreement, and that its respective legal counsel had the requisite experience andsophistication to understand, interpret, and provide advice regarding the particular language ofthe provisions hereof. Each Party further acknowledges that it has executed this Agreementvoluntarily and of its own free will, without duress.     22. This Agreement shall inure to the benefit of, and shall be binding upon, the undersignedParties and each of their respective successors, heirs and assigns.     23. Any captions and headings contained in this Agreement are inserted only as a matter ofconvenience and in no way define, limit, extend or describe the scope of this Agreement or theintent of any provision hereof. Whenever the text hereof requires, use of a singular number shallinclude the appropriate plural number.   **COMPROMISE AND SETTLEMENT AGREEMENT** **Page 9**
 

 
     24. The provisions of this Agreement are severable, and if any part of it is found to beunenforceable, the other portions shall remain fully valid and enforceable to the extent possiblewhile maintaining the essential purposes of this Agreement.     25. This Agreement may be signed in any number of counterparts and via facsimile with the sameeffect as if the signatures to each counterpart were upon a single instrument, and all suchcounterparts together shall be deemed to be an original of this Agreement.Executed as of the 24th day of September 2006.        Ronald W. Parker       PIZZA INN, INC.       By:           Rod McDonald, Secretary  Newcastle Partners, L.P. and its affiliates execute this Agreement for the purposes of agreeing toand acknowledging the provisions of Paragraphs 6-7, 10-13.Newcastle Partners, L.P. and its affiliates     By: Newcastle Capital Management, L.P.Its general partner       By:           Steven J. Pully