Exhibit 10.2


 


[            ],
2021


 


DiamondHead Holdings Corp.

250 Park Ave.

7th Floor

New York, New York 10177


 


Re: Initial Public Offering


 


Gentlemen:


 


This letter (this “Letter Agreement”)
is being delivered to you in accordance with the Underwriting Agreement (the “Underwriting Agreement”)
to be entered into between DiamondHead Holdings Corp., a Delaware corporation (the “Company”), and Goldman
Sachs & Co. LLC, (the “Underwriter”), relating to an underwritten initial public offering (the
 “Public Offering”), of 34,500,000 of the Company’s units (including up to 4,500,000 units that
may be purchased at the Underwriter’s option) (the “Units”), each comprised of one share of the
Company’s Class A common stock, par value $0.0001 per share (the “Common Stock”), and one-fourth
of one warrant. Each whole Warrant (each, a “Warrant”) entitles the holder thereof to purchase one share
of Common Stock at a price of $11.50 per share, subject to adjustment. The Units shall be sold in the Public Offering pursuant
to a registration statement on Form S-1 and prospectus (the “Prospectus”) filed by the Company with
the Securities and Exchange Commission (the “Commission”) and the Company shall apply to have the Units
listed on the Nasdaq Capital Market. Certain capitalized terms used herein are defined in paragraph 11 hereof.


 


In order to induce the Company and the Underwriter
to enter into the Underwriting Agreement and to proceed with the Public Offering and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, DHP SPAC-II Sponsor LLC (the “Sponsor”)
and each of the undersigned individuals, each of whom is a member of the Company’s board of directors and/or management team
(each, an “Insider” and collectively, the “Insiders”), hereby agrees with the
Company as follows:


 


1.            The
Sponsor and each Insider agrees that if the Company seeks stockholder approval of a proposed Business Combination, then in connection
with such proposed Business Combination, it, he or she shall (i) vote any shares of Capital Stock owned by it, him or her
in favor of any proposed Business Combination and (ii) not redeem any shares of Common Stock owned by it, him or her in connection
with such stockholder approval.


 


2.            The
Sponsor and each Insider hereby agrees that in the event that the Company fails to consummate a Business Combination within 24
months from the closing of the Public Offering or such later period approved by the Company’s stockholders in accordance
with the Company’s certificate of incorporation, the Sponsor and each Insider shall take all reasonable steps to cause the
Company to (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but
not more than 10 business days thereafter, subject to lawfully available funds therefor, redeem 100% of the Common Stock sold as
part of the Units in the Public Offering (the “Offering Shares”), at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account
and not previously released to the Company to pay its taxes (less up to $100,000 of interest to pay dissolution expenses), divided
by the number of then outstanding Offering Shares, which redemption will completely extinguish all Public Stockholders’ rights
as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders
and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under
Delaware law to provide for claims of creditors and other requirements of applicable law. The Sponsor and each Insider agree not
to propose any amendment to the Company’s certificate of incorporation that would modify (i) the substance or timing
of the Company’s obligation to redeem 100% of the Offering Shares if the Company does not complete a Business Combination
within 24 months from the closing of the Public Offering or (ii) the other provisions relating to stockholders’ rights
or pre-initial business combination activities, unless the Company provides its Public Stockholders with the opportunity to redeem
their Offering Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the Trust Account, including interest (which interest shall be net of amounts released for payment of taxes)
divided by the number of then outstanding Offering Shares. The Sponsor and each Insider agree to waive its redemption rights with
respect to shares of Capital Stock owned by it in connection with a stockholder vote to approve an amendment to the Company’s
certificate of incorporation (A) to modify the substance or timing of the Company’s obligation to redeem 100% of the
Offering Shares if the Company does not complete a Business Combination within 24 months from the closing of the Public Offering
or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity.


 






     


     


    

 


The Sponsor and each Insider acknowledges
that it, he or she has no right, title, interest or claim of any kind in or to any monies held in the Trust Account or any other
asset of the Company as a result of any liquidation of the Company with respect to the Founder Shares held by it, him or her. The
Sponsor and each Insider hereby further waives, with respect to any shares of Common Stock held by it, him or her, if any, any
redemption rights it, he or she may have in connection with the consummation of a Business Combination, including, without limitation,
any such rights available in the context of a stockholder vote to approve such Business Combination or in the context of a tender
offer made by the Company to purchase shares of Common Stock (although the Sponsor, the Insiders and their respective affiliates
shall be entitled to redemption and liquidation rights with respect to any Offering Shares it or they hold if the Company fails
to consummate a Business Combination within 24 months from the date of the closing of the Public Offering).


 


3.            Subject
to certain exceptions enumerated in Section 5(e) of the Underwriting Agreement, during the period commencing on the effective
date of the Underwriting Agreement and ending 180 days after such date, the Sponsor and each Insider shall not, without the prior
written consent of the Underwriter, (i) offer, sell, contract to sell, pledge, hedge or otherwise dispose of (or enter into
any transaction that is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition
or effective economic disposition due to cash settlement or otherwise) by the Company or any affiliate of the Company or any person
in privity with the Company or any affiliate of the Company), directly or indirectly, including the filing (or participation in
the filing) of a registration statement with the Commission in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated thereunder, with respect to any Units, shares of Capital
Stock, Warrants or any securities convertible into, or exercisable, or exchangeable for, shares of Common Stock owned by it, him
or her, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of any Units, shares of Capital Stock, Warrants or any securities convertible into, or exercisable, or
exchangeable for, shares of Common Stock owned by it, him or her, whether any such transaction is to be settled by delivery of
such securities, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction specified in clause
(i) or (ii). Each of the Insiders and the Sponsor acknowledges and agrees that, prior to the effective date of any release
or waiver of the restrictions set forth in this paragraph 3 or paragraph 7 below, the Company shall announce the impending release
or waiver by press release through a major news service at least two business days before the effective date of the release or
waiver. Any release or waiver granted shall only be effective two business days after the publication date of such press release.
The provisions of this paragraph will not apply if (i) the release or waiver is effected solely to permit a transfer of securities
that is not for consideration and (ii) the transferee has agreed in writing to be bound by the same terms described in this
Letter Agreement to the extent and for the duration that such terms remain in effect at the time of the transfer.


 


4.            In
the event of the liquidation of the Trust Account, the Sponsor (which for purposes of clarification shall not extend to any other
shareholders, members or managers of the Sponsor) agrees to indemnify and hold harmless the Company against any and all loss, liability,
claim, damage and expense whatsoever (including, but not limited to, any and all legal or other expenses reasonably incurred in
investigating, preparing or defending against any litigation, whether pending or threatened, or any claim whatsoever) to which
the Company may become subject as a result of any claim by (i) any third party (other than the Company’s independent
accountants) for services rendered or products sold to the Company or (ii) a prospective target business with which the Company
has entered into a letter of intent, confidentiality or other similar agreement for a Business Combination agreement (a “Target”);
provided, however, that such indemnification of the Company by the Sponsor shall apply only to the extent necessary to ensure that
such claims by a third party for services rendered (other than the Company’s independent public accountants) or products
sold to the Company or a Target do not reduce the amount of funds in the Trust Account to below (i) $10.00 per share of the
Offering Shares or (ii) such lesser amount per share of the Offering Shares held in the Trust Account due to reductions in
the value of the trust assets as of the date of the liquidation of the Trust Account, in each case, net of the amount of interest
earned on the property in the Trust Account which may be withdrawn to pay taxes, except as to any claims by a third party (including
a Target) who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the
Company’s indemnity of the Underwriter against certain liabilities, including liabilities under the Securities Act of 1933,
as amended. In the event that any such executed waiver is deemed to be unenforceable against such third party, the Sponsor shall
not be responsible to the extent of any liability for such third party claims. The Sponsor shall have the right to defend against
any such claim with counsel of its choice reasonably satisfactory to the Company if, within 15 days following written receipt of
notice of the claim to the Sponsor, the Sponsor notifies the Company in writing that it shall undertake such defense.


 






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5.            To
the extent that the Underwriter does not exercise its option to purchase up to an additional 4,500,000 Units within 45 days from
the date of the Prospectus (and as further described in the Prospectus), the Sponsor agrees to forfeit, at no cost, a number of
Founder Shares in the aggregate equal to the product of 1,125,000 multiplied by a fraction, (i) the numerator of which is
4,500,000 minus the number of Units purchased by the Underwriter upon the exercise of its option to purchase additional Units,
and (ii) the denominator of which is 4,500,000. The forfeiture will be adjusted to the extent that the Underwriter’s
option to purchase additional Units is not exercised in full by the Underwriter so that the Initial Stockholders will own an aggregate
of 20.0% of the Company’s issued and outstanding shares of Capital Stock after the Public Offering.


 


6.            The
Sponsor and each Insider hereby agrees and acknowledges that: (i) the Underwriter and the Company would be irreparably injured
in the event of a breach by such Sponsor or an Insider of its, his or her obligations under paragraphs 1, 2, 3, 4, 5, 6, 7(a),
7(b), and 9 of this Letter Agreement (ii) monetary damages may not be an adequate remedy for such breach and (iii) the
non-breaching party shall be entitled to injunctive relief, in addition to any other remedy that such party may have in law or
in equity, in the event of such breach.


 


7.            (a) Subject
to the exceptions set forth herein, the Sponsor and each Insider agrees not to transfer, assign or sell any Founder Shares (or
shares of Common Stock issuable upon conversion thereof) until the earlier of (A) one year after the completion of the Company’s
initial Business Combination or (B) the earlier to occur of, subsequent to a Business Combination, (x) the first date
on which the last reported sale price of the Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing
at least 150 days after the Company’s initial Business Combination or (y) the date on which the Company completes a
liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s
stockholders having the right to exchange their shares of Common Stock for cash, securities or other property (the “Founder
Shares Lock-up Period”).


 


(b)          Subject
to the exceptions set forth herein, the Sponsor and each Insider agrees that it, he or she shall not to transfer, assign or sell
any Private Placement Warrants (or shares of Common Stock issued or issuable upon exercise of the Private Placement Warrants) until
30 days after the completion of a Business Combination (the “Private Placement Warrants Lock-up Period”,
together with the Founder Shares Lock-up Period, the “Lock-up Periods”).


 


(c)           Notwithstanding
the provisions set forth in paragraphs 7(a) and (b), transfers, assignments and sales by the undersigned of the Founder
Shares, Private Placement Warrants and shares of Common Stock issued or issuable upon the exercise or conversion of the
Private Placement Warrants or the Founder Shares and that are held by the Sponsor, any Insider or any of their permitted
transferees (that have complied with any applicable requirements of this paragraph 7(c)), are permitted (a) to the
Company’s officers or directors, any affiliates or family members of any of the Company’s officers or directors,
any members of the Sponsor, or any affiliates of the Sponsor or any of its affiliates, officers, directors, direct and
indirect equityholders; (b) in the case of an individual, by gift to a member of the individual’s immediate
family, to a trust, the beneficiary of which is a member of the individual’s immediate family or an affiliate of such
person, or to a charitable organization; (c) in the case of an individual, transfers by virtue of laws of descent and
distribution upon death of the individual; (d) in the case of an individual, transfers pursuant to a qualified domestic
relations order; (e) transfers by private sales or transfers made in connection with the consummation of a Business
Combination at prices no greater than the price at which the securities were originally purchased; (f) transfers in the
event of the Company’s liquidation prior to the completion of an initial Business Combination; (g) transfers by
virtue of the laws of the State of Delaware or the Sponsor’s limited liability company agreement upon dissolution of
the Sponsor; (h) in the event of completion of a liquidation, merger, stock exchange or other similar transaction which
results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash,
securities or other property subsequent to the completion of a Business Combination; or (i) from the Sponsor to certain
qualified institutional buyers or institutional accredited investors, which are acting as anchor investors as described in
the Registration Statement, upon the consummation of a Business Combination, in an aggregate amount of 1,250,625 Founder
Shares provided; however, that in the case of clauses (a) through (h), these permitted transferees must enter into a
written agreement agreeing to be bound by the restrictions herein.


 






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8.            The
Sponsor and each Insider represents and warrants that it, he or she has never been suspended or expelled from membership in any
securities or commodities exchange or association or had a securities or commodities license or registration denied, suspended
or revoked. Each Insider’s biographical information furnished to the Company (including any such information included in
the Prospectus) is true and accurate in all respects and does not omit any material information with respect to the Insider’s
background. The Sponsor and each Insider’s questionnaire furnished to the Company is true and accurate in all respects. The
Sponsor and each Insider represents and warrants that: it, he or she is not subject to or a respondent in any legal action for,
any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering
of securities in any jurisdiction; it, he or she has never been convicted of, or pleaded guilty to, any crime (i) involving
fraud, (ii) relating to any financial transaction or handling of funds of another person, or (iii) pertaining to any
dealings in any securities and it, he or she is not currently a defendant in any such criminal proceeding.


 


9.            (a) Except
as disclosed in the Prospectus, neither the Sponsor nor any Insider nor any affiliate of the Sponsor or any Insider, nor any director
or officer of the Company, shall receive from the Company any finder’s fee, reimbursement, consulting fee, monies in respect
of any repayment of a loan or other compensation prior to, or in connection with any services rendered in order to effectuate the
consummation of the Company’s initial Business Combination (regardless of the type of transaction that it is), other than
the following, none of which will be made from the proceeds held in the Trust Account prior to the completion of the initial Business
Combination: repayment of a loan and advances up to an aggregate of $300,000 made to the Company by the Sponsor; payment to the
Sponsor for office space, utilities and secretarial and administrative support for a total of $10,000 per month; reimbursement
for any out-of-pocket expenses related to identifying, investigating and consummating an initial Business Combination; and repayment
of loans, if any, and on such terms as to be determined by the Company from time to time, made by the Sponsor or any of the Company’s
officers or directors to finance transaction costs in connection with an intended initial Business Combination, provided,
that, if the Company does not consummate an initial Business Combination, a portion of the working capital held outside
the Trust Account may be used by the Company to repay such loaned amounts so long as no proceeds from the Trust Account are used
for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant at the option
of the lender. Such warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability
and exercise period.


 


10.          The
Sponsor and each Insider has full right and power, without violating any agreement to which it is bound (including, without limitation,
any non-competition or non-solicitation agreement with any employer or former employer), to enter into this Letter Agreement and,
as applicable, to serve as an officer and/or a director on the board of directors of the Company and hereby consents to being named
in the Prospectus as an officer and/or a director of the Company.


 


11.          As
used herein, (i) “Business Combination” shall mean a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination, involving the Company and one or more businesses; (ii) “Capital
Stock” shall mean, collectively, the Common Stock and the Founder Shares; (iii) “Founder Shares”
shall mean the 8,625,000 shares of the Company’s Class B common stock, par value $0.0001 per share, (or 7,500,000 shares
if the Underwriter’s option to purchase additional Units is not exercised by the Underwriter) initially held by the Sponsor;
(iv) “Initial Stockholders” shall mean the Sponsor and any other holder of Founder Shares immediately
prior to the Public Offering; (v) “Private Placement Warrants” shall mean the warrants to purchase
up to 5,333,333 shares of Common Stock of the Company (or 5,933,333 shares of Common Stock if the Underwriter’s option to
purchase additional Units is exercised in full) that the Sponsor has agreed to purchase for an aggregate purchase price of $8,000,000
in the aggregate (or $8,900,000 if the Underwriter’s option to purchase additional Units is exercised in full), or $1.50
per warrant, in a private placement that shall occur simultaneously with the consummation of the Public Offering; (vi) “Public
Stockholders” shall mean the holders of securities issued in the Public Offering; (vii) “Trust Account”
shall mean the trust fund into which a portion of the net proceeds of the Public Offering and the sale of the Private Placement
Warrants shall be deposited.


 






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12.          This
Letter Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof
and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the
extent they relate in any way to the subject matter hereof or the transactions contemplated hereby. This Letter Agreement may not
be changed, amended, modified or waived (other than to correct a typographical error) as to any particular provision, except by
a written instrument executed by all parties hereto.


 


13.          No
party hereto may assign either this Letter Agreement or any of its rights, interests, or obligations hereunder without the prior
written consent of the other parties. Any purported assignment in violation of this paragraph shall be void and ineffectual and
shall not operate to transfer or assign any interest or title to the purported assignee. This Letter Agreement shall be binding
on the Sponsor and each Insider and their respective successors, heirs and assigns and permitted transferees.


 


14.          Nothing
in this Letter Agreement shall be construed to confer upon, or give to, any person or corporation other than the parties hereto
any right, remedy or claim under or by reason of this Letter Agreement or of any covenant, condition, stipulation, promise or agreement
hereof. All covenants, conditions, stipulations, promises and agreements contained in this Letter Agreement shall be for the sole
and exclusive benefit of the parties hereto and their successors, heirs, personal representatives and assigns and permitted transferees.


 


15.          This
Letter Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.


 


16.          This
Letter Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of this Letter Agreement or of any other term or provision hereof. Furthermore, in lieu of any such
invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Letter Agreement
a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.


 


17.          This
Letter Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without
giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction.
The parties hereto (i) all agree that any action, proceeding, claim or dispute arising out of, or relating in any way to,
this Letter Agreement shall be brought and enforced in the courts of New York City, in the State of New York, and irrevocably submit
to such jurisdiction and venue, which jurisdiction and venue shall be exclusive and (ii) waive any objection to such exclusive
jurisdiction and venue or that such courts represent an inconvenient forum.


 


18.          Any
notice, consent or request to be given in connection with any of the terms or provisions of this Letter Agreement shall be in writing
and shall be sent by express mail or similar private courier service, by certified mail (return receipt requested), by hand delivery
or facsimile transmission.


 


19.          This
Letter Agreement shall terminate on the earlier of (i) the expiration of the Lock-up Periods or (ii) the liquidation
of the Company; provided, however, that this Letter Agreement shall earlier terminate in the event that the Public Offering is
not consummated and closed by June 30, 2021; provided further that paragraph 4 of this Letter Agreement shall survive such
liquidation.


 


[Signature Page Follows]


 






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	 	Sincerely,
	 	 	 
	 	DHP SPAC-II SPONSOR LLC
	 	 	 
	 	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 
	 	 	 
	 	 	 
	 	By:	 
	 	Name:	Keith Feldman
	 	 	 
	 	 	 
	 	By:	
	 	Name:	David T. Hamamoto
	 	 	 
	 	 	 
	 	By:	
	 	Name:	Judith A. Hannaway
	 	 	 
	 	 	 
	 	By:	
	 	Name:	Jonathan Langer
	 	 	 
	 	 	 
	 	By:	
	 	Name:	Charles W. Schoenherr


 


[Signature Page to Letter Agreement]


 






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