**Exhibit 10.02****SEPARATION AGREEMENT AND RELEASE OF CLAIMS**          SETH HALIO (“Employee”) and Diamond Foods, Inc. (“Employer”) agree as follows:          1. Employer and Employee have agreed that Employee will leave employment and all otherpositions he occupied with or on behalf of Employer effective February 12, 2008 (“TerminationDate”) to pursue other interests.          2. Employee, for himself and his heirs, attorneys, agents, spouse, and assigns, agrees towaive, release and forever discharge fully any claims Employee has or may have in law or equity asof the date of this Agreement, whether now known or later discovered, against Employer, or itscurrent, future, or former directors, officers, shareholders, attorneys, employees, agents,members, trustees, representatives, benefit plans, plan administrators, predecessors, successors,affiliates or assigns, arising out of or concerning in any way Employee’s employment by orseparation from Employer, including but not limited to any claim based on any alleged contract ortort, arising out of or concerning Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e etseq., the Americans With Disabilities Act, the Rehabilitation Act of 1973, the California LaborCode, the California Fair Employment and Housing Act, the California Family Rights Act, theSarbanes-Oxley Act, or any similar state or local law, or any claims for wages, bonuses, vacationpay, PTO pay, severance pay, sick pay, attorneys’ fees, penalties or interest, any othercompensation or benefits, back pay, front pay, or emotional distress damages. Nothing contained inthis Section 2 will constitute a waiver of any claims that may arise from any breach of thisAgreement.          3. Employer has advised Employee by this Agreement to consult an attorney prior to signing theAgreement because Employee may have, by virtue of Employee’s age, rights or claims arising on orprior to signing this Agreement under the Age Discrimination in Employment Act, 29 U.S.C. §§ 621 etseq. Employee understands and agrees that these rights or claims will be barred by signing thisAgreement.          4. This Agreement will remain open for Employee’s consideration and signature for twenty-one(21) days from presentation to Employee, unless rejected or rescinded by either party earlier.Employee may sign this Agreement sooner if Employee chooses to do so voluntarily. Subject to thisSection 4, if this offer is not accepted on or before 21 days from presentation, it is null andvoid. After Employee signs this Agreement, Employee will have seven (7) days to rescind theAgreement in writing. This Agreement will not become effective until the expiration of this seven(7) day period.          5. In exchange for this Agreement, Employer will provide Employee the following benefitscommencing on the eighth (8th) day after execution by Employee and Employer, provided that it hasnot been revoked earlier pursuant to paragraph 4 above (the “Effective Date”) and that Employeecomplies with this Agreement in all respects:     (a) an amount equal to six (6) months of the Employee’s salary as of the TerminationDate, less legally required and authorized deductions, such amount to be
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paid in the Employer’s regular payroll cycle commencing on the first pay day occurringon or after the Effective Date and remitted by direct deposit to Employee’s bank account onrecord with Employer as of the Termination Date for payment of base salary;     (b) Employer will pay the entire cost of continuation of medical insurance coverage forEmployee and his dependents pursuant to the Consolidated Omnibus Budget Reconciliation Actof 1985 (“COBRA”) until the earlier of: nine (9) months from the Termination Date or thedate Employee obtains such coverage through another employer. After this period, Employeeshall have the option to continue these benefits at his own expense to the extent permittedby law;     (c) 21,000 shares of unvested restricted common stock that are currently scheduled tovest on July 20, 2008 will vest and be immediately exercisable on March 14, 2008;     (d) 15,834 shares of common stock subject to options that are currently scheduled tovest on July 20, 2008 shall vest and be immediately exercisable on the Effective Date;     (e) Employer will transfer title for the Employee’s current company-provided vehicle toEmployee at no cost to Employee. Employee shall be solely responsible for any and all costsof insuring and registering such vehicle upon transfer of title, and any taxes owed on suchvehicle as a result of such transfer;     (f) Employer will reimburse Employee for up to $10,000 in outplacement servicesselected by Employee and used before December 31, 2008, provided that Employee providesreceipts to Employer for such services within 90 days of the date of such receipts;     (g) Employer will maintain existing financial planning and tax preparation servicesprovided by Ayco for Employee until April 15, 2008;     (h) Employer acknowledges that Employee is covered by the Company’s Exec-u-Care programfor medical expenses incurred on or prior to the Termination Date; and     (i) Employer will reimburse Employee for all appropriate business expenses incurredprior to the Termination Date by Employee in the ordinary course of business.Except as provided above, Employee will not accrue any additional benefits after the TerminationDate. Employee agrees to pay any taxes owed on any benefits provided pursuant to this Agreement.Employee understands and agrees that no other stock options or restricted stock grants provided tohim will vest after the Termination Date, unless specifically provided in this Agreement.          6. Employee agrees that this Agreement is a full and final general release of all claims,including, but not limited to unknown, unanticipated and undisclosed losses, wrongs, injuries,claims and special, general or compensatory damages that arise wholly or in part from
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any act or omission occurring before this Agreement becomes effective. Therefore, Employeeagrees that this Agreement waives and releases any claims which would otherwise be preserved byoperation of section 1542 of the California Civil Code, which provides:**A general release does not extend to claims which the creditor doesnot know or suspect to exist in his or her favor at the time ofexecuting the release, which if known to him or her must havematerially affected his or her settlement with the debtor.**          7. Employee warrants that he has not made any assignment, transfer, conveyance or alienationof any potential claim, cause of action, or any right of any kind whatsoever, including but notlimited to, potential claims and remedies for discrimination, harassment, retaliation, or wrongfultermination, and that no other person or entity of any kind has had, or now has, any financial orother interest in any of the demands, obligations, causes of action, debts, liabilities, rights,contracts, damages, costs, expenses, losses or claims which could have been asserted by theEmployee against Employer.          8. Employee agrees that he remains bound by the terms of all prior written agreementsregarding the protection of confidential and proprietary information and continuing obligations.Nowithstanding the foregoing, the noncompetition provision set forth in Employee’s offer letterdated October 11, 2004 is waived by Employer. Such agreements remain in full force and effect, andare incorporated into this Agreement. Employee represents and agrees that all tangibleconfidential and proprietary information has been returned to the Employer. Confidential andproprietary information includes, but is not limited to, all information protected under theUniform Trade Secrets Act; processes, trade secrets, computer programs, electronic codes,inventions, improvements, and research projects; information about costs, profits, markets, and/orsales; lists of customers or clients; business, marketing, and/or strategic plans; and confidentialinformation regarding employees. Employer acknowledges that as of the next opening of the tradingwindow established by Employer’s Insider Trading Compliance program, Employee shall not be subjectto the pre-clearance procedures established by such program.          9. Except as expressly provided in paragraph 5 above, Employee represents and agrees that hehas returned all Employer-provided tangible property to Employer, including but not limited to cellphones, personal digital assistants, pagers, and computer equipment.          10. Employee represents and agrees that effective as of the Effective Date, after receivinghis final wages including accrued PTO and refund of all outstanding ESPP contributions, he willhave been paid all wages owed to him on the Termination Date, that the benefits provided in thisAgreement are in excess of any amounts owed to him, and that good and sufficient consideration hasbeen provided for this Agreement. Employee further agrees that he has waived any right to recoveryin any action that could have been alleged by Employee, and any action alleged by any other entityon his behalf, and that he will not recover upon, or otherwise enforce or accept monies from anyjudgment, decision or award upon any claim released by him in this Agreement.          11. Employee shall not make any disparaging remarks about Employer, or its officers, agents,employees, practices or products. Employer’s executive officers shall not make
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disparaging remarks about Employee. Notwithstanding the foregoing, it shall not be aviolation of this non-disparagement provision for either party to provide information in good faithif compelled by law or legal process, such as subpoena, or in response to a request by governmentalor regulatory agency.          12. The parties acknowledge that this Agreement is a settlement of disputed potential claimsand is not an admission of liability or of the accuracy of any alleged fact or claim. Employerexpressly denies any violation of any federal, state, or local statute, ordinance, rule,regulation, order, common law or other law in connection with Employee’s employment and hisseparation. The parties expressly agree that this Agreement shall not be construed as an admissionby any of the parties of any violation, liability or wrongdoing, and shall not be admissible in anyproceeding as evidence of or an admission by any party of any violation or wrongdoing.          13. Employee expressly agrees to keep the fact and terms of this Agreement confidential, andnot to publicize, discuss, or disclose this Agreement or any of its terms to anyone except hisimmediate family, governmental taxing authorities, tax preparers and retained attorneys andaccountants, unless otherwise required by law.          14. Employer also agrees that Employee will be provided any and all indemnity available to himpursuant to applicable insurance policies and law, including without limitation, California LaborCode Section 2802, and that nothing in paragraph 2 of this Agreement diminishes the right ofEmployee to enforce this paragraph concerning any cooperation provided or claim alleged after thedate of this Agreement.          15. Employee and Employer agree that, except as otherwise set forth in this Agreement, thisAgreement fully replaces any other agreements they have had, is the exclusive agreement coveringEmployee’s separation from employment, and that this Agreement may not be changed except in writingsigned by both parties.          16. The parties agree that this Agreement may be executed in counterparts and as executedshall constitute one Agreement, binding on all parties. The parties further agree that executionof this Agreement may be accomplished by receipt of facsimile signatures of the parties. ThisAgreement shall be of no force or effect until executed by all the signatories.          17. Should any provision of this Agreement be declared or be determined by a court ofcompetent jurisdiction to be illegal or invalid, the validity of the remaining parts, terms orprovisions shall not be affected thereby and the illegal or invalid part, term, or provision shallbe deemed not to be a part of this Agreement.
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**THIS AGREEMENT CONTAINS A RELEASE.****PLEASE READ CAREFULLY BEFORE SIGNING.**         SETH HALIO                 /s/ Seth Halio