Item 1.01 Entry into a Material Definitive Agreement
Business Combination Agreement
On June 15, 2022, Digital Health Acquisition Corp.
(“DHAC” or the “Company”), entered into a business combination agreement, by and among DHAC Merger Sub I, Inc.,
a Delaware corporation and a wholly owned subsidiary of DHAC (“Merger Sub I”), DHAC Merger Sub II, Inc., a Texas corporation
and a wholly owned subsidiary of DHAC (“Merger Sub II” and together with Merger Sub I, the “Merger Subs”), VSee
Lab, Inc., a Delaware corporation (“VSee”) and iDoc Virtual Telehealth Solutions, Inc., a Texas corporation (“iDoc”)
(as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”). The Business
Combination Agreement and the transactions contemplated thereby (collectively, the “Business Combination”) were unanimously
approved by the boards of directors of each of DHAC, VSee and iDoc on June 15, 2022. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to such terms in the Business Combination Agreement.
Pursuant to the Business Combination Agreement
and subject to the terms and conditions set forth therein, Merger Sub I will merge with and into VSee (the “VSee Merger”),
with VSee surviving the VSee Merger as a wholly owned subsidiary of DHAC, and Merger Sub II will merge with and into iDoc (the “iDoc
Merger” and, together with the VSee Merger, the “Mergers”), with iDoc surviving the iDoc Merger as a wholly owned subsidiary
of DHAC. At the effective time of the Mergers (the “Effective Time”), DHAC will change its name to VSee Health, Inc.
Treatment of VSee and iDoc Securities in the Business Combination
VSee Preferred Stock. The Business
Combination Agreement provides that, among other things, immediately prior to the Effective Time, (i) each share of VSee Series A Preferred
Stock that is issued and outstanding immediately prior to the Effective Time will be converted into a number of shares of VSee common
stock, par value $0.0001 per share (“VSee Common Stock”), at the then-effective conversion rate as calculated pursuant to
and in accordance with the terms of the VSee Amended and Restated Certificate of Incorporation; and (ii) each share of VSee Series A-1
Preferred Stock (together with the VSee Series A Preferred Stock, the “VSee Preferred Stock”) that is issued and outstanding
immediately prior to the Effective Time will be automatically converted immediately prior to the Effective Time into a number of shares
of VSee Common Stock at the then-effective conversion rate as calculated pursuant to and in accordance with the terms of the VSee Amended
and Restated Certificate of Incorporation.
VSee Common Stock. At the Effective
Time, each share of VSee Common Stock that is issued and outstanding immediately prior to the Effective Time, which includes the VSee
Preferred Stock converted to VSee Common Stock immediately prior to the Effective Time (other than any shares of VSee Common Stock held
by dissenting stockholders), will be automatically canceled and extinguished and converted into the right to receive the VSee Per Share
Cash Consideration and the VSee Per Share Stock Consideration. The “VSee Per Share Cash Consideration” means the VSee Cash
Consideration divided by the aggregate number of shares of VSee Common Stock outstanding as of the Effective Time. The “VSee Per
Share Stock Consideration means a number of shares of DHAC Common Stock equal to (a) (1) the VSee Stock Consideration, divided by (2)
the aggregate number of shares of VSee Common Stock outstanding as of the Effective Time, divided by (b) 10. The “VSee Cash Consideration”
means 20% of the VSee Closing Consideration and the “VSee Stock Consideration” means 80% of the fair market value (determined
as of the Effective Time) of the VSee Closing Consideration. “VSee Closing Consideration” means (1) $60,500,000, minus
(2) an amount equal to a number of stock options exercisable for DHAC Common Stock granted to certain VSee individuals at the Effective
Time multiplied by the $10, minus (3) the aggregate amount of VSee’s transaction expenses. 55% of the Distributable Cash
will be paid (x) first, to the escrow agent as payment of the VSee indemnity escrow amount (which is 10% of the VSee Cash Consideration),
and (y) thereafter, to the VSee stockholders pro rata in accordance with the shares of VSee Common Stock outstanding as of the
Effective Time, until the aggregate proceeds received by the VSee stockholders equals the VSee Cash Consideration (minus the VSee indemnity
escrow amount). If the VSee Distributable Cash is less than the VSee Cash Consideration, the balance will be paid in DHAC convertible
notes. “Distributable Cash” means the excess, if any, of the Aggregate Transaction Proceeds, defined to mean the sum of the
aggregate cash proceeds available from the DHAC trust account (after giving effect to any redemptions by DHAC’s public stockholders)
and (ii) the aggregate proceeds from any PIPE financing, over $10,000,000.
iDoc Common Stock. At the Effective
Time, each share of iDoc common stock, par value $1 per share (“iDoc Common Stock”), that is issued and outstanding immediately
prior to the Effective Time (other than any shares of iDoc Common Stock held by dissenting stockholders), will be automatically canceled
and extinguished and converted into the right to receive the iDoc Per Share Cash Consideration and the iDoc Per Share Stock Consideration.
The “iDoc Per Share Cash Consideration” means the iDoc Cash Consideration divided by the aggregate number of shares of iDoc
Common Stock outstanding as of the Effective Time. The “iDoc Per Share Stock Consideration means a number of shares of DHAC Common
Stock equal to (a) (1) the iDoc Stock Consideration, divided by (2) the aggregate number of shares of iDoc Common Stock outstanding as
of the Effective Time, divided by (b) 10. The “iDoc Cash Consideration” means 20% of the iDoc Closing Consideration and the
“iDoc Stock Consideration” means 80% of the fair market value (determined as of the Effective Time) of the iDoc Closing Consideration.
“iDoc Closing Consideration” means (1) $49,500,000, minus (2) the aggregate amount of iDoc’s transaction expenses.
45% of the Distributable Cash will be paid (x) first, to the escrow agent as payment of the iDoc indemnity escrow amount (which
is 10% of the iDoc Cash Consideration), and (y) thereafter, to the iDoc stockholders pro rata in accordance with the shares of
iDoc Common Stock outstanding as of the Effective Time, until the aggregate proceeds received by the iDoc stockholders equals the iDoc
Cash Consideration (minus the iDoc indemnity escrow amount). If the iDoc Distributable Cash is less than the iDoc Cash Consideration,
the balance will be paid in DHAC convertible notes.
VSee Stock Options. On or prior to
the Effective Time, VSee will take all actions necessary to terminate all options to purchase shares of VSee Common Stock and any other
awards (collectively, the “VSee Options”) granted under the VSee Lab, Inc. 2008 Stock Plan as amended through July 20, 2021
(the “VSee Equity Plan”) that are outstanding immediately prior to the Effective time, whether vested or unvested, and such
VSee Options will cease to represent the right to purchase VSee Common Stock as of the Effective Time.
DHAC Convertible Notes. Any
DHAC convertible notes issued to VSee and iDoc stockholders as described above will be convertible at the option of the holder into shares
of DHAC Common Stock at a conversion price of $10 per share, bear no interest and will mature in one year unless earlier converted.
Representations and Warranties
The Business Combination Agreement contains customary
representations and warranties of the parties thereto with respect to, among other things, (a) entity organization, good standing and
qualification, (b) capital structure, (c) authorization to enter into the Business Combination Agreement, (d) compliance with laws and
permits, (e) taxes, (f) financial statements and internal controls, (g) real and personal property, (h) material contracts, (i) environmental
matters, (j) absence of changes, (k) employee matters, (l) product liability, (m) litigation, and (n) brokers and finders.
Covenants
The Business Combination Agreement includes customary
covenants of the parties with respect to operation of their respective businesses prior to consummation of the Mergers and efforts to
satisfy conditions to consummation of the Mergers. The Business Combination Agreement also contains additional covenants of the parties,
including, among others, covenants providing for DHAC, VSee and iDoc to use reasonable best efforts to cooperate in the preparation of
the registration statement on Form S-4 relating to transactions contemplated by the Business Combination Agreement containing a prospectus
and proxy statement of DHAC (the “Registration Statement / Proxy Statement”) that is required to be filed in connection with
the Mergers and to obtain all requisite approvals of their respective stockholders including, in the case of DHAC, the Incentive Plan
(as defined below).
The Business Combination Agreement provides that
on or prior to the closing, the parties will enter into PIPE subscription agreements related to the PIPE financing, a registration rights
agreement to provide registration rights with respect to the shares of DHAC Common Stock issuable upon conversion of the DHAC convertible
notes, a lock up agreement, and an escrow agreement, in forms agreed to by the parties. In addition, prior to the closing, VSee will complete
a short form merger of one of its subsidiaries, This American Doc, Inc. with and into VSee with VSee surviving.
VSee Health, Inc. Incentive Plan
DHAC has agreed to approve and adopt the VSee Health,
Inc. 2022 Equity Incentive Plan (the “Incentive Plan”) to be effective as of one day prior to the closing of the transactions
contemplated by the Business Combination Agreement (“Closing”) and in a form mutually acceptable to DHAC, VSee and iDoc. The
Incentive Plan shall provide for an initial aggregate share reserve equal to 15% of the number of shares of DHAC common stock, par value
$0.0001 per share (the “DHAC Common Stock”), outstanding following the Closing after giving effect to the Mergers and the
transactions contemplated hereby, including without limitation, the PIPE Financing (as defined below). Subject to approval of the Incentive
Plan by DHAC’s stockholders, DHAC has agreed to file a Form S-8 Registration Statement with the SEC following the Effective Time
with respect to the shares of DHAC Common Stock issuable under the Incentive Plan.
Exclusive Dealing/Non-Solicitation Restrictions
Each of DHAC, VSee and iDoc has agreed that from
the date of the Business Combination Agreement to the Effective Time or, if earlier, the valid termination of the Business Combination
Agreement in accordance with its terms, it will not solicit, initiate, encourage, facilitate any discussions or negotiations with any
party, or provide non-public information or data concerning it or its subsidiaries to any party relating to a Company Acquisition Proposal
(as defined in the Business Combination Agreement) or enter into any agreement relating to such a proposal. Each of DHAC, VSee, and iDoc
has also agreed to notify each other upon receipt of any Company Acquisition Proposal and inform each other of any modifications to such
offer or information.
Conditions to Closing
The obligations of DHAC, VSee and iDoc to consummate
the Business Combination are subject to certain closing conditions, including, but not limited to, (i) the expiration or termination of
any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (ii) the approval of DHAC’s
shareholders, (iii) the approval of VSee’s stockholders, (iv) the approval of iDoc’s stockholders and (v) after giving effect
to the transactions contemplated by the Business Combination Agreement, including the PIPE Financing, DHAC having at least $5,000,001
of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Securities Exchange Act of 1934, as amended) immediately
after the Effective Time.
In addition, the obligations of VSee and iDoc to
consummate the Business Combination are subject to the fulfillment of other closing conditions, including, but not limited to, (i) the
aggregate cash proceeds available for release from DHAC’s trust account (after giving effect to any redemptions of public shares,
if any), together with the proceeds from the PIPE Financing, if any, equaling no less than $10,000,000, (ii) the approval by the Nasdaq
Capital Market of DHAC’s listing application in connection with the Business Combination and (iii) the DHAC board of directors consisting
of the number of directors, and comprising the individuals, as contemplated by the Business Combination Agreement.
Termination
The Business Combination Agreement may be terminated
under certain customary and limited circumstances prior to the closing of the Business Combination (the “Closing”), including,
but not limited to the following:
| (i) | by mutual written consent of each of DHAC, VSee and iDoc; |
| (ii) | by DHAC, subject to certain exceptions, if any of the representations or warranties of VSee or iDoc are not true and correct or if
either of VSee or iDoc fails to perform any of its respective covenants or agreements under the Business Combination Agreement (including
an obligation to consummate the Closing) such that certain conditions to the obligations of DHAC could not be satisfied and the breach
of such representations or warranties or failure to perform such covenants or agreements is not cured or cannot be cured within the earlier
of (a) thirty (30) days after written notice thereof, and (b) December 31, 2022 (the “Termination Date”); |
| (iii) | by VSee or iDoc, subject to certain exceptions, if any of the representations or warranties made by DHAC, Merger Sub I and Merger
Sub II (together, the “DHAC Parties”) are not true and correct or if any DHAC Party fails to perform any of its covenants
or agreements under the Business Combination Agreement (including an obligation to consummate the Closing) such that certain conditions
to the obligations of VSee or iDoc could not be satisfied and the breach of such representations or warranties or failure to perform such
covenants or agreements is not cured or cannot be cured within the earlier of (a) thirty (30) days after written notice thereof, and (b)
the Termination Date; |
| (iv) | by any of DHAC, VSee or iDoc, if the transactions contemplated by the Business Combination Agreement have not been consummated on
or prior to the Termination Date, unless the breach of any covenants or obligations under the Business Combination Agreement by the party
seeking to terminate proximately caused the failure to consummate the transactions contemplated by the Business Combination Agreement; |
| (v) | by any of DHAC, VSee or iDoc, if any governmental entity has issued an order or taken any other action permanently enjoining, restraining
or otherwise prohibiting the transactions contemplated by the Business Combination Agreement and such order or other action has become
final and nonappealable; |
| (vi) | by any of DHAC, VSee or iDoc, if the approval of the required transaction proposals is not obtained at the DHAC shareholders’
meeting called to consider matters related to the Business Combination (including any adjournment thereof); and |
| (vii) | by DHAC, if VSee and iDoc do not deliver, or cause to be delivered to DHAC, written consents of the VSee stockholders and the iDoc
stockholders, respectively, sufficient to approve the Business Combination Agreement, the related documents and the transactions contemplated
thereby (including the Business Combination), duly executed by the VSee stockholders and the iDoc stockholders, respectively, required
to approve and adopt such matters (the “VSee Stockholder Written Consent” and the “iDoc Stockholder Written Consent,”
respectively) or the Transaction Support Agreement (as defined in the Business Combination Agreement) duly executed by the Supporting
Stockholders (as defined below) when required under the Business Combination Agreement. |
The Business Combination is expected to close in
the third quarter of 2022, following the receipt of the required approval by DHAC’s shareholders and the fulfillment of other customary
closing conditions.
A copy of the Business Combination Agreement is
filed with this Current Report on Form 8-K as Exhibit 2.1 and is incorporated herein by reference, and the foregoing description of the
Business Combination Agreement is qualified in its entirety by reference thereto. The Business Combination Agreement contains representations,
warranties and covenants that the respective parties made to each other as of the date of the Business Combination Agreement or other
specific dates. The assertions embodied in those representations, warranties and covenants were made for purposes of the contract among
the respective parties and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating
such agreement. The representations, warranties and covenants in the Business Combination Agreement are also modified in part by the underlying
disclosure schedules, which are not filed publicly and which are subject to a contractual standard of materiality different from that
generally applicable to stockholders and were used for the purpose of allocating risk among the parties rather than establishing matters
as facts. DHAC does not believe that these schedules contain information that is material to an investment decision. Accordingly, the
representations and warranties in the Business Combination Agreement are not necessarily characterizations of the actual state of facts
about DHAC, VSee, iDoc or the other parties thereto at the time they were made or otherwise and should only be read in conjunction with
the other information that DHAC makes publicly available in reports, statements and other documents filed with the SEC. DHAC, VSee and
iDoc investors and securityholders are not third-party beneficiaries under the Business Combination Agreement.
Indemnification and Escrow
The representations and warranties of VSee and
iDoc survive for twelve (12) months following the closing. VSee and iDoc have each agreed to indemnify and defend DHAC and its respective
managers, officers, directors, employees, agents, successors and assigns (the “DHAC Indemnified Parties”) against, and shall
hold them harmless from, any and all losses (excluding losses that are consequential, special or punitive in nature) arising out of: (i)
any breach or inaccuracy of the representations and warranties of VSee or iDoc, respectively, in the Business Combination Agreement; (ii)
any breach or non-fulfillment of any covenant, undertaking, agreement or other obligation of VSee, iDoc or their respective subsidiaries,
respectively, contained in the Business Combination Agreement at or prior to the Closing; (iii) the fraud, intentional misrepresentation
or willful breach of VSee, iDoc or their respective subsidiaries, respectively, at or prior to the Closing; (iv) pre-closing taxes of
VSee and iDoc, respectively; and (v) certain specified matters set forth in the Business Combination Agreement and the schedules thereto.
VSee and iDoc shall not be liable for indemnity
claims until the aggregate amount of losses equals or exceeds $75,000 (except with respect to fundamental representations of VSee and
iDoc). However, the aggregate liability of VSee or iDoc for indemnification shall not exceed an amount equal to the VSee Indemnity Escrow
Amount (as defined below) with respect to VSee, and the iDoc Indemnity Escrow Amount (as defined below) with respect to iDoc. The sole
and exclusive source of recovery for indemnity by VSee and iDoc shall be the funds in the VSee indemnity escrow account and the iDoc indemnity
escrow account, respectively. Fifty percent (50%) of the funds in each of the VSee indemnity escrow account and the iDoc indemnity escrow
account will be released six (6) months after the closing date, and the remaining fifty percent (50%) will be released twelve (12) months
after the closing date, in accordance with the terms of the Business Combination Agreement and an escrow agreement to be entered into
among the parties and an escrow agent.
Certain Related Agreements
Transaction Support Agreement. In
connection with the execution of the Business Combination Agreement, DHAC, Milton Chen, the Executive Vice Chairman of VSee, Dr. Imoigele
Aisiku, the Executive Chairman of the Board of Directors of iDoc, and certain other stockholders of VSee and iDoc (collectively, the “Supporting
Stockholders”) entered into a Transaction Support Agreement, dated as of June 15, 2022 (the “Transaction Support Agreement”),
pursuant to which the Supporting Stockholders have agreed to, among other things, (i) support and vote in favor of the Business Combination
Agreement and the related transactions contemplated therein at DHAC’s stockholder meeting; (ii) not affect any sale or distribution
of any shares of capital stock of DHAC, VSee, or iDoc; and (iii) take or cause to be done such further acts and things as may be reasonably
necessary or advisable to cause the parties to fulfill their respective obligations under the Business Combination Agreement and consummate
the transactions contemplated thereby.
The foregoing description of the Transaction Support
Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Transaction Support Agreement
filed as Exhibit 10.1 hereto and incorporated by reference herein.
Support Agreement. In connection
with the execution of the Business Combination Agreement, Digital Health Sponsor LLC (the “Sponsor”), certain other stockholders
of DHAC (together with Sponsor, the “DHAC Supporting Stockholders”), DHAC, VSee and iDoc entered into a support agreement,
dated as of June 15, 2022 (the “Support Agreement”), pursuant to which the Sponsor and each other DHAC Supporting Stockholder
has agreed to, among other things (a) vote in favor of the Business Combination Agreement and the transactions contemplated hereby (including
the Mergers), (b) not effect any sale or distribution of any equity securities of DHAC held by such stockholders subject to the terms
described therein and (c) not to redeem any of the equity securities of DHAC such stockholder owns, in each case, on the terms and subject
to the conditions set forth in the Support Agreement.
The foregoing description of the Support Agreement
does not purport to be complete and is qualified in its entirety by the terms and conditions of the Support Agreement filed as Exhibit
10.2 hereto and incorporated by reference herein.