Offering:

Private placement of $1.00 (NZD1.10) unsecured convertible promissory notes ("Notes") maturing five (5) years from the Closing Date ("Maturity"). 

Size of Offering:

Offering of up to $1,000,000 in Canadian currency (NZD 1,100,000).

Minimum
Subscription:

The minimum subscription is $2,000 (NZD 2,200). 

Interest:

10% per annum calculated and payable annually, in arrears, on December 31 of each year of the term of the Notes, commencing on the first business day following the Closing Date (as defined under the heading "Closing Date" below) with the first payment being made on December 31, 2019 as set forth under the heading "Interest Payments" below.

Redemption:

The Notes will be redeemable at the Company's option at any time following the Closing Date upon payment of the outstanding principal amount of the Note and interest due or accruing up to the date of redemption, subject to the Investor's right of conversion as set forth under the heading "Conversion" below.  Payment of the redemption price for the Notes shall be satisfied, at the Company's option, in cash or, if redeemed within two years of the Closing Date, by issuance of units of the Company ("Units"), each Unit having the terms set forth under the heading "Unit Terms" below. If redeemed after two years following the Closing Date, payment of the redemption price for the Notes shall be satisfied, at the Company's option, in cash or common shares of the Company ("Shares"). If the Company elects to pay the redemption price in Units or Shares, as applicable, the deemed redemption price shall be the same as the conversion prices as set forth under the heading "Conversion" below. 

Conversion:

Investors shall have the right, at any time, to convert the principal amount of the Notes into Units or, if converted after two years following the Closing Date, into Shares, at any time prior to Maturity at the following conversion prices:

(a)

If converted on or before December 31, 2020, at a conversion price of Canadian $0.14286 per Unit (equivalent to seven (7) Units per $1.00 of Note principal);

(b)

If converted after December 31, 2020 and or before December 31, 2021, at a conversion price of Canadian $0.25 per Unit or Share, as applicable (equivalent to four (4) Units or Shares per $1.00 of Note principal);

(c)

If converted after December 31, 2021 and on or before December 31, 2022, at a conversion price of Canadian $0.3333 per Share (equivalent to three (3) Shares per $1.00 of Note principal); and

(d)

If converted after December 31, 2022 and on or before December 31, 2023, at a conversion price of Canadian $1.00 per Share (equivalent to one (1) Share per $1.00 of Note principal).

Unit Terms:

Each Unit issuable upon redemption or conversion of the Notes shall be comprised of one (1) Share and one-half of one (1/2) non-transferable Share purchase warrant ("Warrants"), each whole Warrant entitling the investor to purchase one (1) additional Share at a price of $0.45 per Share for a period of two years from the Closing Date.  If Notes are redeemed or converted after two years from the Closing Date, only Shares will be issued upon such redemption or conversion.

Interest Payments:

All interest payment obligations under the Notes will be satisfied by the issuance of Shares to the Investor at a deemed price equal to the volume weighted average trading price of the Shares on the TSXV during the ten (10) trading days prior to the date on which each of the interest payments are due. 

Subscription Bonus:

Investors will be entitled to receive ten (10) free common share of Pacific Rare Earths Limited for every one dollar ($1.00) of Note principal subscribed for. The Pacific Rare Earth shares will be transferred by the Company from its existing holdings to the Investor on the Closing Date.