Announcement PDF SCHEME IMPLEMENTATION DEED WITH STRIKE ENERGY 14 AUGUST 2023 Strike Energy to acquire Talon for scrip consideration ▪ Talon has entered into a binding Scheme Implementation Deed with Strike Energy (ASX: STX) under which Strike Energy will acquire all the issued shares in Talon. ▪ On Implementation of a Scheme of Arrangement, Talon shareholders will receive 0.4828 new Strike shares for each Talon share held at the Record Date (Scheme Consideration). As a result of the transaction, Talon shareholders will own approximately ~11% of Strike Energy. ▪ The Scheme Consideration has an implied offer price of A$0.212 per Talon share for Talon’s Perth Basin assets based on Strike Energy’s closing price of $0.440 per share on 11 August. This represents a 29.3% premium to Talon’s 30 day VWAP, 26.1% to Talon’s 60 day VWAP, and 21.4% to Talon’s closing share price as at 11 August 2023. ▪ In parallel with the Scheme, Talon will explore options to spin-out Talon’s 33% interest in the Gurvantes XXXV Project (Mongolian Project) to Talon shareholders.1 ▪ The Scheme is unanimously recommended by the Talon Board of Directors in the absence of a superior proposal and subject to the independent expert concluding and continuing to conclude that the Scheme is in the best interests of Talon shareholders. Transaction and Mongolian Project Spin-Out Overview Talon Energy Ltd (ASX: TPD, “Talon” or “the Company”) is pleased to advise that the Company has entered a binding scheme implementation deed (“Scheme Implementation Deed” or “SID”) with Strike Energy Limited (ASX: STX, “Strike Energy”) under which Strike Energy will, subject to the satisfaction of various conditions, acquire all the issued shares in Talon by way of a Scheme of Arrangement under Part 5.1 of the Corporations Act 2001 (Cth) (Corporations Act) (“Scheme”). As part of the Scheme transaction, an interim convertible funding facility for up to $6m has been made available by Strike Energy to fund Talon’s capital requirements through the Scheme process. The Board of Talon consider that the Scheme, if successfully implemented, delivers Talon shareholders significant benefits including: o 1 Ownership in the only pure play Perth Basin energy company with a combination of near term cash-flow (potential for initial annualised revenue of in excess of $82 million from the Walyering gas field alone) and a strong pipeline of growth and development assets; At this stage there is no certainty that the demerger will eventuate or that any such transaction will deliver any value to Talon shareholders. Talon Energy Ltd. ABN 88 153 229 086 1202 Hay Street, West Perth WA 6005 www.talonenergy.com.au ASX: TPD PAGE 1 OF 4 14 AUGUST 2023 o Exposure to the value created from corporate and operational synergies associated with bringing the project interests and companies together; and Subject to successfully executing the intended spin-out of the Mongolian Project, a separate shareholding in an entity with exposure to the 33% interest in the Mongolian Gurvantes XXXV Project.2 If the Scheme is implemented, each Talon shareholder on the record date for the Scheme (“Scheme Record Date”) will receive 0.4828 new Strike Energy shares for each Talon share held on the scheme record date (“Scheme Consideration”). The Scheme Consideration implies an offer price of $0.212 per Talon share based on Strike Energy’s closing price of $0.440 per share on 11 August 2023. This represents a premium of: • 21.4% to Talon’s last close price of $0.175 per share • 32.5% to the Talon 10 day VWAP of $0.160 per share • 29.3% to the Talon 30 day VWAP of $0.164 per share • 26.1% to the Talon 60 day VWAP of $0.168 per share In addition, it is proposed that Talon will seek to demerge the Mongolian Project to allow Talon shareholders to retain an ownership interest in Talon’s Mongolian Project along with A$850,000 cash (net of costs incurred in connection with the demerger and certain other costs and funding provided for the Mongolian Project during the Scheme/demerger process) via a spin-out of those assets into a new separate vehicle (“SpinCo”). In order for Talon shareholders to realise any value, this demerger must be completed during the Scheme process (“Mongolian Demerger”). SpinCo represents potential additional value that Talon shareholders may retain subject to the spin-out transaction completing. Talon Board Recommendation The Board of Talon unanimously recommends that Talon shareholders vote in favour of the Scheme, in the absence of a superior proposal and subject to the independent expert (to be appointed by Talon) concluding, and continuing to conclude, that the Scheme is in the best interests of Talon shareholders.3 Each of the directors of Talon has committed to vote in favour of the Scheme in respect of the shares they control in the absence of a superior proposal and subject to the independent expert concluding, and continuing to conclude, that the Scheme is in the best interests of Talon shareholders. Details of the recommendation, commitment to vote in favour and a copy of the independent expert report will be included in a Scheme Booklet expected to be provided to shareholders in November 2023. 2 See note above. You should note when considering this recommendation that: • Greg Columbus (Non-Executive Chairman) and his associates have an interest in 2,413,794 fully paid ordinary shares, 2,000,000 Talon performance rights (which, subject to the Scheme becoming Effective, are expected to be vested and exercised in full) and 2,000,000 Talon unlisted options (which may be vested in full or cancelled, at the Talon Board's discretion and subject to agreement with the counterparty, in connection with the Scheme). Greg Columbus and his associates also have an interest in 31,000,000 fully paid Strike shares; • David Casey (Non-Executive Director) and his associates have an interest in 2,381,896 fully paid ordinary shares, 8,000,000 Talon performance rights (which, subject to the Scheme becoming Effective, are expected to be vested and exercised in full) and 2,000,000 unlisted Talon options (which may be vested in full or cancelled, at the Talon Board's discretion and subject to agreement with the counterparty, in connection with the Scheme). David Casey and his associates also have an interest in 1,725,619 fully paid Strike shares; • Colby Hauser (Managing Director and CEO) and his associates have an interest in 3,533,742 fully paid ordinary shares, and 7,500,000 Talon performance rights (which, subject to the Scheme becoming Effective are expected to be vested and exercised in full); and • Matthew Worner (Non-Executive Director) and his associates have an interest in 2,076,667 fully paid ordinary shares and 2,000,000 Talon unlisted options (which may be vested in full or cancelled, at the Talon Board's discretion and subject to agreement with the counterparty, in connection with the Scheme). These arrangements and the amounts payable on implementation of the Scheme to each of the directors, will be described in more detail in the Scheme Booklet. Despite their interest in the outcome of the Scheme, each Director considers that, given the importance of the Scheme, and their roles as a Talon Director, it is important and appropriate for them to provide a recommendation in relation to voting on the Scheme. 3 Talon Energy Ltd. ABN 88 153 229 086 1202 Hay Street, West Perth WA 6005 www.talonenergy.com.au ASX: TPD PAGE 2 OF 4 14 AUGUST 2023 Talon MD & CEO, Colby Hauser, commented: “Talon is pleased to be entering into this scheme process with Strike Energy. Upon successful implementation of the Scheme Talon shareholders will benefit from receiving an attractive premium for their shares and may also realise additional value from continued exposure to the Gurvantes development in Mongolia should the Mongolia Demerger complete. Talon shareholders will benefit from becoming shareholders in the combined Strike Energy, which is expected to have a strong cashflow profile with a number of medium-term growth and development projects.” Details of the Scheme Implementation Deed (SID) The Scheme Implementation Deed is subject to customary conditions for a transaction of this nature, including: ▪ Talon shareholders approving the Scheme by the requisite majorities under the Corporations Act; ▪ Approval by the Court in accordance with section 411(4)(b) of the Corporations Act; ▪ An Independent Expert concluding that the scheme is in the best interests of Talon shareholders and not changing, withdrawing or qualifying that conclusion; ▪ No material adverse change or regulated events for either Strike Energy or Talon; and ▪ Other conditions customary for a transaction of this nature. The Scheme Implementation Deed contains customary exclusivity provisions, including reciprocal break fees, no shop, no talk and no due diligence obligations. A copy of the Scheme Implementation Deed is attached to this announcement. Mongolian Demerger Talon will explore opportunities for Talon shareholders to retain an ownership interest in Talon’s Mongolian assets. It is proposed that on completion of the Mongolian Demerger, the Mongolian assets and A$850,000 cash (net of costs incurred in connection with the demerger and certain other costs and funding provided for the Mongolian assets by Talon during the Scheme/demerger process) will be demerged to Talon shareholders. The Mongolian Demerger is expected to be implemented by way of an in-specie distribution of shares in SpinCo to Talon shareholders. The Mongolian Demerger is expected to be subject to shareholder approval at a separate general meeting of Talon shareholders and any other necessary approvals. The Scheme is not conditional on completion of the Mongolian Demerger, which will occur (or not occur, as the case may be) independently of the Scheme becoming effective, and the status of the Mongolian Demerger will not influence the timing of the Scheme transaction. Accordingly, there is no guarantee that the Mongolian Spin-Out will be implemented. Talon Shareholders are cautioned that the potential value of SpinCo is uncertain, and there can be no certainty that any value from SpinCo will flow to Talon shareholders (assuming a Mongolian Demerger transaction completes). Further details in relation to the Mongolian Demerger will be provided by Talon to its shareholders in due course. Talon Funding Facility As part of the transaction, Strike Energy and Talon have entered into a binding facility agreement pursuant to which Strike has Energy agreed to provide a A$6 million convertible financing facility to assist Talon fund its short-term working capital needs through the Scheme process. The key terms of this facility include: ▪ A maximum of A$6,000,000 provided in advances in accordance with an agreed budget. ▪ Establishment fee: 2% (capitalised). ▪ Commitment fee: 3.5% on undrawn funds (capitalised). ▪ Interest rate: BBSW plus 11% (capitalised). Talon Energy Ltd. ABN 88 153 229 086 1202 Hay Street, West Perth WA 6005 www.talonenergy.com.au ASX: TPD PAGE 3 OF 4 14 AUGUST 2023 ▪ Maturity date: The earlier to occur of: 30 days after the date on which Talon becomes a wholly owned subsidiary of Strike Energy; 30 days after a person other than Strike Energy or its subsidiaries becomes entitled to hold 50% or more of the Talon shares or otherwise acquires control of Talon; 60 days after termination of the Scheme Implementation Deed; 270 days following the date of the first advance. ▪ Conversion: Strike Energy may by written notice on or before the relevant maturity date elect to convert any outstanding principal and capitalised amounts into fully paid ordinary Talon shares at $0.180, being the 5-day VWAP to 26 July 2023. ▪ Prepayment: The facility is to be prepaid out of net petroleum proceeds received by Talon from the sale of Walyering gas and condensate. Next Steps Talon shareholders do not need to take any action at this time. Talon shareholders will be asked to approve the Scheme at the scheme meeting which is expected to be held in early December 2023 (“Scheme Meeting”). A scheme booklet containing information relating to the Scheme, the reasons for the Talon Directors’ recommendation, the Independent Expert’s Report and details of the Scheme Meeting will be dispatched to Talon shareholders in advance of the Scheme Meeting. Talon has appointed Sternship Advisers and RBC Capital as financial advisers and Allens as legal adviser. Strike Energy has appointed DLA Piper as legal advisor. Conference Call Strike Energy and Talon will host a joint conference call at 8:30am WST on Monday the 14th of August. Please register your interest at the following link to receive an invitation: https://events.teams.microsoft.com/event/9f2e3e55-8bfd-41c9-b52e-b8bd89d607d7@dda1f216-94f7-4d93-856fc105a1cbe657] This Announcement has been authorised for release by the Board of Directors. For further information, please contact: Talon Energy Limited Talon Energy Limited Colby Hauser Shannon Coates Managing Director and CEO Company Secretary +61 8 6319 1900 +61 8 6319 1900 info@talonenergy.com.au info@talonenergy.com.au Talon Energy Ltd. ABN 88 153 229 086 1202 Hay Street, West Perth WA 6005 www.talonenergy.com.au ASX: TPD PAGE 4 OF 4 EXECUTION VERSION Project Lancelin Scheme Implementation Deed Strike Energy Limited Talon Energy Limited Dated 13 August 2023 DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. A list of offices and regulatory information can be found at dlapiper.com Contents PARTIES ................................................................................................................................................. 1 BACKGROUND ...................................................................................................................................... 1 AGREED TERMS ................................................................................................................................... 1 1 Interpretation .............................................................................................................................. 1 2 Scheme of Arrangement .......................................................................................................... 15 3 Conditions Precedent ............................................................................................................... 16 4 Scheme and Scheme Consideration ....................................................................................... 19 5 Transaction Steps .................................................................................................................... 23 6 Demerger ................................................................................................................................. 30 7 Board Recommendation .......................................................................................................... 33 8 Conduct of Business ................................................................................................................ 35 9 Representations, Warranties and Undertakings ...................................................................... 39 10 Releases, Insurance and Indemnification ................................................................................ 41 11 Exclusivity ................................................................................................................................ 43 12 Break Fee ................................................................................................................................. 47 13 Reverse Break Fee .................................................................................................................. 50 14 Termination .............................................................................................................................. 52 15 Announcements ....................................................................................................................... 55 16 Confidentiality ........................................................................................................................... 55 17 Payments ................................................................................................................................. 57 18 Goods and Services Tax .......................................................................................................... 58 19 Notices ..................................................................................................................................... 59 20 General..................................................................................................................................... 60 21 Governing Law and Jurisdiction ............................................................................................... 62 SIGNATURE PAGE .............................................................................................................................. 79 SCHEDULES SCHEDULE 1 TALON THRESHOLD EVENTS .................................................................................... 63 Part 1 Talon Material Adverse Change ................................................................................................. 63 Part 2 Talon Prescribed Occurrences ................................................................................................... 64 Part 3 Talon Regulated Events ............................................................................................................. 64 SCHEDULE 2 STRIKE THRESHOLD EVENTS ................................................................................... 67 Part 1 Strike Material Adverse Change ................................................................................................. 67 Part 2 Strike Prescribed Occurrences ................................................................................................... 68 Part 3 Strike Regulated Events ............................................................................................................. 68 SCHEDULE 3 TALON WARRANTIES AND UNDERTAKINGS ........................................................... 70 Part 1 Talon Warranties ........................................................................................................................ 70 Scheme Implementation Deed | AUM/1228875919.18 DLA Piper | 2 Part 2 Talon Undertakings .................................................................................................................... 72 SCHEDULE 4 STRIKE WARRANTIES AND UNDERTAKINGS .......................................................... 74 Part 1 Strike Warranties ........................................................................................................................ 74 Part 2 Strike Undertakings .................................................................................................................... 76 SCHEDULE 5 TALON AND STRIKE ISSUED CAPITAL ..................................................................... 77 Part 1 Talon Issued Capital ................................................................................................................... 77 Part 2 Strike Issued Capital................................................................................................................... 77 SCHEDULE 6 TIMETABLE................................................................................................................... 78 APPENDICES APPENDIX 1 SCHEME APPENDIX 2 DEED POLL APPENDIX 3 STRIKE ANNOUNCEMENT APPENDIX 4 TALON ANNOUNCEMENT APPENDIX 5 CONDITIONS PRECEDENT CERTIFICATE Scheme Implementation Deed | AUM/1228875919.18 DLA Piper | 3 This deed is made on 13 August 2023 Parties Strike Name ACN Address Email Attention Strike Energy Limited 078 012 745 Level 1, 40 Kings Park Road West Perth WA 6005 stuart.nicholls@strikeenergy.com.au and lucy.gauvin@strikeenergy.com.au Stuart Nicholls and Lucy Gauvin Talon Name ACN Address Email Attention Talon Energy Limited 153 229 086 1202 Hay Street West Perth WA 6005 colby.hauser@talonenergy.com.au and greg@discol.net Colby Hauser and Greg Columbus Background A The parties have proposed that Strike will acquire all of the ordinary shares in Talon by means of a scheme of arrangement under Part 5.1 of the Corporations Act between Talon and the Scheme Shareholders. B The parties have agreed to propose and, if approved, implement the scheme of arrangement of the terms of this deed. Agreed terms 1 Interpretation Definitions 1.1 In this deed the following definitions apply: Adverse Decision means an order of Court where the Court does not make any order sought by Talon under clause 5.8(m). Anti-Corruption Laws means all applicable anti-bribery and anti-corruption laws and regulations, including the U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act 2010, the Australian Criminal Code Act 1995 (Cth), Criminal Code of Mongolia (2002), AntiCorruption Law of Mongolia (2006), laws implementing the Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or the rules and regulations promulgated thereunder, or any other applicable law, rule, or regulation of similar effect in other jurisdictions. ASIC means the Australian Securities and Investments Commission. ASIC Review Booklet means the draft of the Scheme Booklet which is provided to ASIC: Scheme Implementation Deed | AUM/1228875919.18 DLA Piper | 1 (a) for approval pursuant to section 411(2) of the Corporations Act; and (b) for ASIC’s review pursuant to ASIC Regulatory Guide 60. Associate has the meaning given in section 12(2) of the Corporations Act. ASX Listing Rules means the official listing rules of ASX as modified by any waiver instrument executed by ASX that applies to Talon. ASX means ASX Limited ABN 98 008 624 691 or the Australian Securities Exchange, as the context requires. ATO means the Australian Tax Office. Authorisation means any permit, licence, consent, approval, registration, accreditation, certification or other authorisation given or issued by any Government Agency. BidCo means a wholly owned subsidiary of Strike nominated in accordance with clause 2.4. Break Fee means $1,422,228 plus GST, if applicable. Break Fee Arrangements means the amount of the Break Fee or the circumstances in which it is to be paid in accordance with clause 12. Budget means the final budget prepared in connection with any financial accommodation to be provided by Strike to the Talon Group on or after the date of this deed. Business Day means a day (other than a Saturday, Sunday or public holiday) on which banks are generally open in Perth, Australia for normal business. Cash Out Shareholder means a Scheme Shareholder (not being an Ineligible Foreign Shareholder) who, based on their holding of Scheme Shares on the date of the Scheme Booklet, would, on implementation of the Scheme, be entitled to receive less than a marketable parcel of New Strike Shares (assessed by reference to the last traded price of Strike Shares on ASX on the trading day prior to the date of the Scheme Booklet). Certificate means the certificate of conditions precedent in the form attached in Appendix 5. Claim means any claim, demand, legal proceedings or cause of action including any claim, demand, legal proceedings or cause of action: (a) based in contract (including breach of any warranty); (b) based in tort (including misrepresentation or negligence); (c) under common law or equity; or (d) under statute. Commissioner means the Federal Commissioner of Taxation of Australia. Combined Business means: (a) all of the businesses, operations and activities undertaken by, or on behalf of, the Combined Group anywhere in the world at any time prior to the Implementation Date; and Scheme Implementation Deed | AUM/1228875919.18 DLA Piper | 2 (b) any other businesses, operations and activities that may be undertaken by, or on behalf of, the Combined Group anywhere in the world from time to time following the Implementation Date, excluding the Talon Mongolia Business. Combined Group means Strike and its Subsidiaries, following the Implementation Date (including, for the avoidance of doubt, the Talon Group and excluding, for the avoidance of doubt, the Talon Mongolia Group). Competing Proposal means, other than the Demerger, any proposed offer, proposal, transaction, or arrangement whether by way of takeover bid, scheme of arrangement, reverse takeover, capital reduction, sale or licence of assets, sale of securities, strategic alliance, joint venture, partnership, dual listed companies structure, economic or synthetic merger or combination or other transaction or arrangement which, if completed, would result in a Third Party: (a) directly or indirectly acquiring or being entitled to acquire a Relevant Interest or any other direct or indirect interest in more than 20% of the Talon Shares or more than 20% of the shares in any other member of the Talon Group whose assets represent 20% or more of the total consolidated assets of the Talon Group; (b) directly or indirectly acquiring or being entitled to acquire the whole of the business or assets of the Talon Group or any part of the business or assets of the Talon Group that represents 20% or more of the total consolidated assets of the Talon Group; (c) directly or indirectly acquiring the Talon Group’s interest in the Key Licences; or (d) acquiring Control of Talon or merging or amalgamating with Talon or any other member of the Talon Group that represents 20% or more of the total consolidated assets of the Talon Group, or which would otherwise require Talon to abandon, or otherwise fail to proceed with, the Scheme. Condition means each condition set out in the first column of the table in clause 3.1. Condor Option Agreement means the binding acquisition agreement, dated 17 March 2021, between Talon (Aust) Pty Ltd, Talon and Macallum Group Limited. Confidential Information means confidential information that is made available by or on behalf of a party to the other party (whether directly or indirectly, and whether before, on or after the date of this deed) and relates to that party (or any Related Entity of it) or any part of the business, assets or affairs of the party (or any Related Entity of it), including: (a) commercial, financial, legal and technical information and know-how (including forecasts and projections); or (b) information which is derived or produced wholly or partly from any information that is Confidential Information by virtue of this definition by or on behalf of the party or any person (including a Representative) to whom it has made such information available including an analysis, note, calculation, report, conclusion or summary. Constitution means the constitution of Talon, as amended. Control has the meaning given in section 50AA of the Corporations Act disregarding section 50AA(4) of the Corporations Act. Corporations Act means the Corporations Act 2001 (Cth). Scheme Implementation Deed | AUM/1228875919.18 DLA Piper | 3 Corporations Regulations means Corporations Regulations 2001 (Cth). Counterproposal means Strike’s offer to amend the terms of the Scheme or make an alternative proposal to Talon or Shareholders with a view to providing an equivalent or a superior outcome for Shareholders than that offered under the relevant Competing Proposal. Court means the Federal Court of Australia, Western Australian Division. D&O Run Off Policy means the directors’ and officers’ run-off insurance policy in respect of any members of the Talon Board and relevant former directors and officers of any member of the Talon Group that applies for no less than a 7 year period following the Implementation Date. Deductible Amounts means the aggregate of the following (without duplication): (a) any incurred but unpaid Demerger Costs as at the Demerger Implementation Date; (b) any financial accommodation made available by a member of the Talon Group (excluding a member of the Talon Mongolia Group) to any member of the Talon Mongolia Group or otherwise for the benefit of the Talon Mongolia Business on or after 28 July 2023; and (c) any amount paid or payable to a financial adviser engaged by a member of the Talon Group in respect of the Transaction in excess of the Financial Adviser Fee Cap. Deed Poll means the deed poll to be entered into by Strike in favour of the Scheme Shareholders in the form attached at Appendix 2 or in such other form as the parties agree in writing. Demerger means a pro rata distribution in-specie of the shares in the ultimate holding company of the Talon Mongolia Group with a view to conferring directly on Shareholders 100% of the value and obligations of the Demerger Assets, but excludes the Transaction. Demerger Assets means: (a) the Talon Mongolia Group and all of their assets including the Mongolian Project; and (b) the Demerger Cash Amount (if greater than nil). Demerger Booklet means the notice of meeting, explanatory memorandum and, only if required, the related prospectus to be prepared by Talon and issued to Shareholders in respect of the resolution of Shareholders approving the Demerger for the purposes of section 256C of the Corporations Act and for all other purposes, in accordance with all applicable laws. Demerger Cash Amount means $850,000 less the aggregate of the Deductible Amounts. Demerger Costs means all costs incurred by the Talon Group in connection with preparations for and the giving effect to the Demerger, being costs that would not have been incurred but for the Demerger (and the actions necessarily