Exhibit 10.2

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. HOLDERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER
OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.

SENIOR SECURED NOTE

 

$2,595,000.00    May 30, 2008

Subject to the terms and conditions of this Note, for good and valuable
consideration received, EDIETS.COM, INC., a Delaware corporation (the
“Company”), promises to pay to the order of Prides Capital Fund I, L.P. or its
assigns (“Holder”), the principal amount of Two Million Five-Hundred Ninety-Five
Thousand and 00/100 Dollars ($2,595,000.00), as increased as provided in
Section 2 below, and interest thereon as provided herein. This Note is issued
pursuant to the Note and Warrant Purchase Agreement, dated as of May 30, 2008
(as from time to time amended, the “Note Purchase Agreement”), between the
Company and the respective purchaser(s) named therein and is subject to the
terms thereof and the Holder is entitled to the benefits and rights therein.
Unless otherwise indicated, capitalized terms used in this Note shall have the
respective meanings ascribed to such terms in the Note Purchase Agreement. The
following is a statement of the rights of the Holder and the terms and
conditions to which this Note is subject, and to which the Company, by the
issuance of this Note, and the Holder, by the acceptance of this Note, agrees:

1. Payments.

1.1 Payment Obligation. Unless paid earlier as provided herein, the Company
shall pay all principal and accrued interest under this Note on June 30, 2011
(the “Maturity Date”). All payments of principal and/or interest under this Note
will be made by electronic wire transfer to an account designated by the Holder.

1.2 Optional Prepayment. All or any portion of the principal and accrued and
unpaid interest under this Note may be paid prior to the Maturity Date without
the written consent of the Holder upon fifteen (15) days prior written notice to
the Holder, provided, however, that (i) if any such prepayment is made on or
before June 30, 2009, such prepayment shall include a prepayment premium of 5%
of the prepaid amount, and (ii) if any such prepayment is made after June 30,
2009 and on or before June 30, 2010, such prepayment shall include a prepayment
premium of 3% of the prepaid amount, and provided, further, that any such
prepayment made pursuant to subclause (i) or (ii) of this Section 1.2 shall
include accrued interest on the amount so prepaid.

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1.3 Mandatory Prepayment. Not later than 15 days after the closing of any public
or private sale by the Company of its equity except for Exempt Sales (as defined
below), the Company shall prepay 100% of the outstanding Notes plus any accrued
and unpaid interest to the date of such prepayment, provided, however, that
(i) if any such prepayment is made on or before June 30, 2009, such prepayment
shall include a prepayment premium of 5% of the prepaid amount, and (ii) if any
such prepayment is made after June 30, 2009 and on or before June 30, 2010, such
prepayment shall include a prepayment premium of 3% of the prepaid amount, and
provided, further, that any such prepayment made pursuant to subclause (i) or
(ii) of this Section 1.3 shall include accrued interest on the amount so
prepaid. For the purposes of this Section 1.3, “Exempt Sales” shall mean the
issuance of shares of Common Stock and/or options, warrants or other Common
Stock purchase rights and the Common Stock issued pursuant to such options,
warrants or other rights (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like after the date hereof) issued or to be
issued after the date hereof (i) to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase, stock option or employee benefit plans or other arrangements that are
approved by the board of directors of the Company; (ii) upon conversion of any
options, warrants or other rights to acquire shares of Common Stock that are
outstanding on the day immediately preceding the date hereof, provided, however,
that the terms of such options, warrants or rights are not amended, modified or
changed on or after the date hereof; or (iii) in connection with shares of
Common Stock issued as consideration for the acquisition of another company or
business in which the shareholders of the Company do not have a majority
ownership interest, which acquisition has been approved by the board of
directors of the Company and provided that after giving effect to such
acquisition the Company is the surviving entity.

2. Interest. Interest (computed on the basis of a 360-day year and for the
actual number of days in the respective period) shall accrue daily and is
payable quarterly (on March 31, June 30, September 30 and December 31),
commencing on June 30, 2008, on the unpaid principal amount of this Note then
outstanding at the rate of eighteen percent (18%) per annum from and after the
date of this Note and, unless paid earlier as provided herein, shall be paid on
the Maturity Date. Accrued interest shall be paid in cash on the respective
interest payment date provided that the Holder has notified the Company of its
election to have such payment made in cash not less than 15 days prior to such
payment date, and provided, further, that if such notice is not given, such
accrued interest shall be capitalized and added to the principal amount of this
Note. Each amount so capitalized shall be considered part of the principal
amount outstanding under this Note and shall bear interest as provided in the
first sentence of this Section 2.

3. Optional Conversion. The Holder shall have the sole right, but not the
obligation, on the Maturity Date to convert all or any portion of the unpaid
principal amount of this Note, in an amount not less than $100,000 (such portion
hereinafter referred to as a “Conversion Portion”), into the Company’s Common
Stock. In the event the Holder elects to convert any Conversion Portion into
Common Stock, such Conversion Portion shall convert into that number of shares
of Common Stock of the Company as shall equal such Conversion Portion divided by
$4.67134.

 

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4. Events of Default.

4.1 The occurrence of any of the following events shall be deemed to constitute
an “Event of Default” hereunder: (a) the failure of the Company to pay the
principal of this Note, together with all accrued interest, on the Maturity
Date; (b) (i) the failure of the Company to comply with any provision set forth
in Section 4 of the Note Purchase Agreement or (ii) the failure of any Note
Party to comply with any provision applicable to it set forth in any Note
Document (other than as set forth in clause (a) or (b)(i) above), and such
failure with respect to this clause (b)(ii) shall continue unremedied for a
period of thirty (30) days; (c) the failure of any Note Party to pay any amount
when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) in respect of any indebtedness (other than indebtedness
evidenced by this Note) in a principal amount of at least $100,000 and such
failure shall continue after the applicable grace period, if any, in the
agreement relating to such indebtedness; or any other event shall occur or
condition shall exist under any agreement relating to any such indebtedness and
shall continue after the applicable grace period, if any, specified in such
agreement, if the effect of such event or condition is to accelerate, or to
permit the holder thereof to cause, such indebtedness to mature, (d) any
representation or warranty made by any Note Party in any Note Document shall
prove to have been incorrect when made in any material respect; (e) the entry of
a judgment against any Note Party in the amount of $500,000 or more, if thirty
(30) days have elapsed and the judgment has not been vacated, satisfied, or
dismissed, and the enforcement of the judgment has not been stayed pending
appeal; and (f) any Liquidation Event (as defined below). As used herein,
“Liquidation Event” means the occurrence or institution by or against any Note
Party of (i) any bankruptcy, reorganization, receivership or insolvency
proceeding, (ii) any appointment of a receiver or custodian for all or a
substantial portion of the property of any Note Party; (iii) any assignment for
the benefit of, or composition or arrangement with, the creditors of any Note
Party (whether or not pursuant to bankruptcy or other insolvency laws), (iv) any
sale of all or substantially all of the assets of any Note Party, or (v) any
dissolution, liquidation, or other marshalling of the assets and liabilities of
any Note Party.

4.2 If there shall occur (a) any Liquidation Event, the entire unpaid principal
and accrued interest on this Note shall automatically become and be forthwith
due and payable, without any requirement by the Holder to give notice, present
the Note, make demand, protest or give other notice of any kind of character,
all of which are hereby expressly waived, anything herein to the contrary
notwithstanding, and (b) any Event of Default (other than a Liquidation Event),
then the Holder may declare the entire unpaid principal and accrued interest on
this Note immediately due and payable, by notice in writing to the Company,
whereupon the entire unpaid principal and accrued interest on this Note shall
automatically become and be forthwith due and payable, without any further
requirement by the Holder to present the Note, make demand, protest or give
other notice of any kind of character, all of which are hereby expressly waived,
anything herein to the contrary notwithstanding.

5. Offer to Repurchase. Within two (2) days of the Company obtaining knowledge
that any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under
the Securities Exchange Act of 1934, as amended), other than (a) Prides Capital
Partners, LLC (“Prides”) and any of its affiliates or (b) any “group” (within
the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
as amended) in which Prides is a member, has acquired at least 25% of the
Company’s Common Stock (exclusive of such Common Stock acquired by any Person
directly from Prides or any of its affiliates in a private transaction executed

 

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on or off the securities exchange or over-the-counter market on which the
Company’s securities are then traded) or the power to exercise, directly or
indirectly, a controlling influence over the management or policies of the
Company, the Company shall offer in writing to repay this Note from the Holder
for a purchase price equal to 100% of the outstanding principal amount of this
Note as of the date of such repayment, plus (i) any accrued and unpaid interest
due under this Note as of the date of such repayment and (ii) (x) a repayment
premium of 5% of the repaid amount, if such repayment is made on or before
June 30, 2009 and (y) a repayment premium of 3% of the prepaid amount, if such
repayment is made after June 30, 2009 and on or before June 30, 2010. The Holder
shall have 30 days following receipt of such written offer in which to provide
the Company with written acceptance of the Company’s offer to repay this Note.
The closing on the repayment of the Note shall occur not later than five
(5) days following the delivery of the Holder’s written acceptance.

6. Expenses; Indemnity.

6.1 The Company shall pay all reasonable out-of-pocket expenses incurred by the
Holder (including the reasonable fees, costs and disbursements of any counsel
for the Holder), in connection with the enforcement of its rights under this
Note and the other Note Documents, including all such out-of-pocket expenses
incurred during any workout, restructuring or related negotiations.

6.2 The Company shall indemnify the Holder and each of its partners, directors,
officers, employees, agents and advisors (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses (including the
reasonable fees, charges and disbursements of any counsel for any Indemnitee),
incurred by any Indemnitee or asserted against any Indemnitee by any third party
arising out of, in connection with, or as a result of (i) the execution or
delivery of this Note, any other Note Document or any agreement or instrument
contemplated hereby or thereby, the performance by the parties of their
respective obligations hereunder or thereunder or the consummation of the
transactions contemplated hereby or thereby or (ii) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory, brought by a third party;
provided, that such indemnity shall not be available to any Indemnitee if any of
the Indemnitees initiate any such claim, litigation, investigation or
proceeding; provided further, that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.

6.3 The Company hereby agrees that none of the Indemnitees shall have any
liability (whether direct or indirect, in contract, tort or otherwise) to the
Company or any of its affiliates or any of their respective officers, directors,
employees, agents and advisors, and the Company hereby agrees not to assert any
claim against any Indemnitee, for special, indirect, consequential or punitive
damages arising out of or otherwise relating to the Note Documents, the actual
or proposed use of the proceeds of the Note or any of the transactions
contemplated by the Note Documents.

7. Assignment. Subject to any legal limitations arising under the securities
laws, the Holder has the right to transfer all or any portion of this Note to
any other entity as provided in the Note Purchase Agreement. The rights and
obligations of the Company and the Holder will be binding upon and inure to the
benefit of the successors, assigns, heirs, administrators and transferees of the
parties.

 

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8. Waiver and Amendment. Any provision of this Note may be amended, waived or
modified upon the written consent of the Company and the holders of at least 51%
in principal amount of the Notes at the time then outstanding.

9. Notices. Any notice shall be deemed to have been duly given if personally
delivered or sent by United States mail or by facsimile transmission confirmed
by letter in the case of the Company, at eDiets.com, Inc., 1000 Corporate Drive,
Suite 600, Ft. Lauderdale, Florida 33334, Attn: General Counsel, Tel:
954-703-6375, Fax: 954-727-2601, and in the case of the Holder, at Prides
Capital Fund I, L.P., c/o Prides Capital Partners, LLC, 200 High Street, Suite
700, Boston, Massachusetts 02110, Attn: Hank Lawlor, Tel: 617-778-9200, Fax:
617-778-9299, or in each case at such other address as is noticed to the
respective party in accordance with the terms hereof, and will be deemed given,
unless earlier received (i) if sent by certified or registered mail, return
receipt requested, five calendar days after being deposited in the United States
mails, postage prepaid; (ii) if sent by United States Express Mail, two calendar
days after being deposited in the United States mails, postage prepaid; (iii) if
sent by facsimile transmission, on the date sent provided confirmatory notice
was sent by first-class mail, postage prepaid; and (iv) if delivered by hand, on
the date of receipt. Any party hereto may by notice so given change its address
for future notice hereunder.

10. Governing Law; Jurisdiction; Waiver of Jury Trial.

10.1 This Note shall be governed by and construed in accordance with the laws of
the State of New York.

10.2 The Company hereby irrevocably and unconditionally submits to the
nonexclusive jurisdiction of any New York State or Federal court of the United
States of America sitting in the Borough of Manhattan, New York City, in any
action or proceeding arising out of or relating to this Note or any other Note
Document to which it is a party and irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the fullest extent permitted
by law, in such Federal court. Nothing in this Section 10 shall affect any right
that any party may otherwise have to bring any action or proceeding relating to
any Note Document in the courts of any jurisdiction. The Company hereby
irrevocably and unconditionally waives, to the fullest extent it may legally and
effectively do so, (a) any objection that it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of any Note
Document in any New York State or Federal court and (b) the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

10.3 THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE NOTE DOCUMENTS OR THE
ACTIONS OF THE HOLDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT THEREOF.

 

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11. Headings; References. All headings used herein are used for convenience only
and will not be used to construe or interpret this Note. Except where otherwise
indicated, all references herein to Sections refer to Sections hereof.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date
first set forth above.

 

COMPANY:

EDIETS.COM, INC.

By:

 

/s/ James A. Epstein

Name:

  James A. Epstein

Title:

  Secretary

Signature Page to Initial Note