ZOOZ Power Ltd (TASE:ZOOZ) entered into a business combination agreement to acquire Keyarch Acquisition Corporation (NasdaqCM:KYCH) in a reverse merger transaction for approximately $140 million on July 30, 2023. The transaction values ZOOZ immediately prior to the closing at an agreed equity value of up to $100 million, which reflects $60 million at closing and up to $40 million of additional contingent consideration through issuance of Earnout Shares following the closing upon ZOOZ?s achievement of the applicable earnout milestones as set forth in the Business Combination Agreement, such that following the closing, ZOOZ shareholders may receive up to 4,000,000 Earnout Shares as additional consideration. Existing ZOOZ shareholders will receive no cash consideration, and will retain all of their current equity interests (after giving effect to a pre-closing recapitalization). It is estimated that, immediately following the closing of the proposed transaction, existing ZOOZ shareholders will own between 40% to 50% of the Company?s issued share capital on an as-issued basis (estimated range is subject to various parameters, such as redemption by Keyarch?s public shareholders and possible PIPE or other financing transactions and not including, for the avoidance of doubt, shares issuable upon exercise of Keyarch warrants). In addition, ZOOZ shareholders will be issued rights (the ?Earnout Rights?) convertible into up to 4,000,000 ordinary shares of ZOOZ (the ?Earnout Shares?) as additional contingent consideration, subject to the Company achieving certain earnout milestones based on gross revenues or share price, as more particularly set forth in the Business Combination Agreement. The earnout rights, the conversion thereof and the issuance of the earnout shares will be subject to tax pursuant to applicable law. A newly formed wholly owned subsidiary of ZOOZ will merge with Keyarch, with Keyarch being the surviving entity and a wholly-owned subsidiary of ZOOZ, and with Keyarch shareholders and holders of Keyarch warrants receiving equivalent shares and warrants of ZOOZ as the successor company (ZOOZ, as the post-closing combined company, is referred to as the ?Company?). Following the completion of the acquisition, the Company is expected to retain its experienced management team, with Boaz Weizer as Chief Executive Officer and Ruth Smadja as Chief Financial Officer.

The board of directors of each of ZOOZ and Keyarch have unanimously approved the transaction. The transaction will require the approval of the shareholders of each of ZOOZ and Keyarch, the effectiveness of a registration statement to be filed with the Securities and Exchange Commission (the ?SEC?) in connection with the proposed transaction, the effectiveness of an Israeli shelf offering report (which will cover the issuance of the Earnout Rights) to be filed with the Israel Securities Authority, and the satisfaction of other customary closing conditions, including the receipt of certain regulatory approvals. The transaction is expected to close in the fourth quarter of 2023.

Ellenoff Grossman & Schole LLP is serving as U.S. legal advisor to Keyarch. Shibolet & Co. is serving as Israeli legal advisor to ZOOZ. Goldfarb Gross Seligman & Co. is serving as Israeli legal advisor to Keyarch. Lowenstein Sandler LLP is serving as U.S. legal advisor to ZOOZ.