Document:

Exhibit

Exhibit 10.12 

Description of Director Compensation Arrangements 
Effective Fiscal 2015* 
The compensation arrangements for the non-employee members of the Board of Directors of Diamond Foods, Inc. (who receive compensation) are as follows: 
One-time compensation upon a director becoming a member of the Board: 
 
		
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	Grant of restricted stock units (RSUs) under our 2015 Equity Incentive Plan. The number of RSUs will equal $95,000 divided by the closing price of our stock on the date of grant, pro-rated based on the remaining Board term until the next scheduled annual RSU grant date (as set forth below). In general, the RSUs will vest in quarterly installments until the next scheduled annual RSU grant date, provided the director remains in continuous service as a director through that date, and will settle upon the earlier of the third anniversary of the grant date and termination of Board service.  In addition, each RSU will become fully vested if we are acquired prior to or at the time of the director’s termination of service. 

 Annual payments for each non-employee member of the Board: 
 
		
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	Retainer of $60,000. 

		
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	Grant of RSUs under our 2015 Equity Incentive Plan in an amount equal to $95,000 divided by the closing price of our stock on the date of grant, to be granted on the first trading day following each annual meeting of stockholders; provided, however, that the initial grants under this compensation program were pro-rated based on the number of days from the director’s last option grant date under our previous director compensation arrangements to the date following the 2015 Annual Meeting. In general, the RSUs will vest in quarterly installments over a one-year period, provided the director remains in continuous service as a director through that date, and will settle upon the earlier of the third anniversary of the grant date and termination of Board service. In addition, each RSU will become fully vested if we are acquired prior to or at the time of the director’s termination of service.

Potential additional payments for Board and committee assignments: 
		
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	Annual retainer of $145,000 for the Chairman of the Board. 

		
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	Annual retainers of $18,000 for the Chair of the Audit Committee and $8,000 for other Audit Committee members.  

		
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	Annual retainers of $12,000 for the Chair of the Compensation Committee and $7,000 for other Compensation Committee members. 

		
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	Annual retainers of $11,000 for the Chair of the Nominating & Governance Committee and $4,000 for other Nominating & Governance Committee members. 

		
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	Per meeting fee of $1,500 per Board meeting in the event a director attends more than seven Board meetings per fiscal year. 

		
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	Per meeting fee of $1,500 per Committee meeting in the event a director attends more than seven meetings of that Committee per fiscal year. 

 In addition to the foregoing, non-employee members of our Board of Directors are reimbursed for their reasonable expenses in attending Board and Board committee meetings. 

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* Directors with service anniversaries in fiscal 2015 occurring prior to January 14, 2015 also received a grant in fiscal 2015 of an option to purchase 10,000 shares of our stock under our 2005 Equity Incentive Plan at the fair market value at the time of the award pursuant to our previous director compensation arrangements.Exhibit

Exhibit 10.13

Annual Incentive Plan 

I. Purpose and Administration: 

The Annual Incentive Plan (“AIP”) is designed to reward Diamond Foods, Inc. (the “Company” or “Diamond”) employees and employees of participating subsidiaries of the Company for their outstanding performance in support of Diamond’s business objectives and to align variable compensation with the financial performance of the Company. 

The AIP is administered by the Compensation Committee of the Company’s Board of Directors (the “Committee”). The Committee may prescribe, amend, or rescind rules, regulations, policies, interpretations, and guides as deemed appropriate for the proper and effective administration of the AIP.  All decisions, determinations, and interpretations of the Committee will be final and binding. If the Committee determines that the established performance measures or objectives are no longer suitable because of a change in the Company’s business, operations, corporate structure, capital structure, or other conditions the Committee may modify the measures, objectives, or related awards as it deems appropriate in its discretion.

With respect to any “Senior Executive” (as such term is defined in the Diamond Foods, Inc. Senior Executive Incentive Plan), the terms of the AIP will be used by the Committee to exercise “negative discretion” to reduce awards otherwise payable under the Senior Executive Incentive Plan.  No separate payment will be made to any Senior Executive under the AIP.

II. Eligibility: 

An employee of the Company or a participating subsidiary will be eligible to participate in the AIP for a particular fiscal year if the employee (i) is employed as of May 1 of the such fiscal year, (ii) is employed continuously through and including the last day of such fiscal year, except for an approved leave of absence and (iii) meets other eligibility criteria as may be established by the Compensation Committee (the “Committee”) or, except with respect to himself, the CEO from time to time (each, an “Eligible Employee”). Eligibility to participate in the AIP one year does not guarantee eligibility in any following year, nor does participation in the AIP in any year guarantee payment of any award with respect to such year.  

    
    
	
			
	
	 
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III. Description: 
		
	A.
	 Bonus Potential.  Each Eligible Employee is assigned a target bonus, which is a percentage (the “Target Bonus Percentage”) of base salary, and a maximum bonus, which is a percentage (the “Max Bonus Percentage”) of base salary.  Each Eligible Employee’s target incentive bonus (the “Target Bonus”) is equal to the Target Bonus Percentage multiplied by such employee’s base salary earned throughout the fiscal year, and the maximum incentive bonus (the “Max Bonus”) is equal to the Max Bonus Percentage multiplied by such employee’s base salary earned throughout the fiscal year.  The Target Bonus Percentage and Max Bonus Percentage of each employee are subject to adjustment by the Company and the Committee.

The AIP will be funded based on the level of performance achieved by the Company against one or more financial objectives (the “AIP Metrics”) established by the Committee at the beginning of the applicable fiscal year.  The AIP Metrics will be one or more company-wide financial metrics and may relate to, without limitation, EBITDA, revenues, gross margin, gross profit, operating margin, operating profit, earnings growth, earnings per share, and non-GAAP calculations of any such metrics, at the sole discretion of the Committee.  For purposes hereof, non-GAAP refers to metrics that are not calculated in accordance with generally accepted accounting principles.

		
	B.
	 Bonus Pool Funding.  The AIP pool funds as follows:

		
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	The AIP pool would be funded at the target level (the “Target Funding”) if the target level of performance (“Target Performance”) against the AIP Metrics is achieved by the Company.  The Target Funding is calculated as the sum of all Eligible Employee’s Target Bonuses.

		
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	The AIP pool begins to fund at a threshold level (the “Threshold Funding”) only if a threshold level of performance (“Threshold Performance”) against one of the AIP Financial Metrics is achieved by the Company.  The Threshold Funding amount will be a portion of the Target Funding amount and will be established by the Company and the Committee each year. 

		
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	The AIP pool would fund at a maximum level (the “Max Funding”) if a maximum level of performance (“Max Performance”) against all AIP Financial Metrics is achieved by the Company.  The Max Funding amount is 200% of the Target Funding amount, and the determination of what 

    
    
	
			
	
	 
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constitutes Max Performance will be established by the Company and the Committee each year.  

		
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	In between the Threshold Performance, Target Performance and Max Performance levels, the level of funding increases as established by the Company and the Committee each year.  

		
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	The Company and the Committee retain discretion to limit funding in the event of extraordinary events.

		
	C.
	Bonus Pool Allocation.  Once the aggregate amount of AIP pool funding is established, the pool is allocated to each department of the Company based on the ratio of (i) the total Target Bonus of the Eligible Employees in such department to (ii) the total Target Bonus of all Eligible Employees in the Company.  

Each Eligible Employee will then be awarded a bonus from the AIP pool allocated to his or her department (the “Departmental Pool”).  Each year, the Company and the Committee will determine the mix of corporate and/or individual or departmental objectives that must be achieved for an Eligible Employee to receive a bonus from the Departmental Pool.  Additionally, the Company may establish certain performance ratings that would result in a reduced bonus or would result in the Eligible Employee becoming ineligible for a bonus.  The Company may reallocate funds between Departmental Pools.  
Each year, the Compensation Committee will determine the mix of employee bonus based on Company performance against specific metrics and performance against individual and/or departmental goals (e.g., 80% weighting on Company performance and 20% weighting on individual performance).  The Committee may establish a different mix ratio for different categories of employees.
		
	D.
	Performance Assessment.  Each Eligible Employee will receive a rating (the “Performance Rating”) based on the employee’s contributions toward overall Company and individual or departmental objectives, which will be used to determine the amount of such employee’s bonus.  The Performance Rating scale and associated level of bonus payment will be established by the Company within the first 90 days of the applicable fiscal year. 

		
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	The individual objectives against which an Eligible Employee may be measured may include, without limitation, corporate goals (such as revenues, gross margin, gross profit, operating margin, earnings growth, earnings per share, and non-GAAP calculations of any such metrics), departmental goals (such as category 

    
    
	
			
	
	 
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business team or functional goals relating to accomplishment of strategic initiatives, brand or category financial performance, market share, revenue, profitability, cost efficiency, products, brand equity, human capital or other goals) or individual goals as determined in conjunction with the Eligible Employee’s manager. The Company and individual performance objectives are confidential information to be treated as such under Company policies.
IV. Payment of Bonus: 

Bonuses under the AIP will be paid on or before March 15 of the calendar year following the end of the applicable fiscal year.  Award payments are subject to withholding for all applicable taxes.   Employee agrees to pay any taxes owed on any benefits provided pursuant to the AIP.  As outlined in the Company’s Compensation Recovery Policy, certain executives may be required under certain circumstances to reimburse the Company for Incentive-Based Compensation.  Please refer to that policy for more details.

    
    
	
			
	
	 
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