MERCER INTERNATIONAL INC

Our 2022 Plan allows the Committee to grant equity awards to our executives in the form of options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance share units and deferred stock units.

Pursuant to our LTIP, the Committee primarily uses "performance share units", or "PSUs", to provide long-term equity-based compensation to our executives, including our NEOs.

Such PSUs vest after a three-year period and, as such, are designed to reward sustained performance over the period, rather than over a single year. As a result, we believe PSUs incent executives to drive long-term performance, thereby aligning our executives' interests with the long-term interests of Shareholders.

Pursuant to the LTIP, we make annual grants of PSUs to our executives that vest based on the Committee's assessment of the achievement of certain prescribed three-year performance criteria. Commencing in 2019, the performance criteria for PSUs is comprised of:

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"Absolute Return on Average Assets" ("ROAA"); and

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"Relative Total Shareholder Return" ("TSR"),

(the "LTIP Performance Criteria").

To incent performance, each component of the LTIP Performance Criteria has a scale so that an executive can achieve from 0% to 200% of the target award amount, with the Committee "interpolating" performance between ranges above the stipulated minimum threshold, below which there will be no payment. Each of the following LTIP Performance Criteria elements are weighted equally:

(1)

ROAA. Calculated by dividing our net income by average assets, with the result for the three-year performance period being a simple average of the ROAA for each of the three years.

The ROAA component for the PSUs granted in 2021, 2022 and 2023 is as follows:

(2)

Relative TSR. The return on the Shares, including price appreciation and dividend payouts, over the three-year performance period relative to the TSR Peer Group Companies (as listed below).

The TSR component for the PSUs granted in 2021, 2022 and 2023 is as follows:

For fiscal 2023, the TSR Peer Group Companies are:

The TSR Peer Group Companies against which TSR is measured were selected to ensure a global comparator with a comparable product mix, which we believe is the best comparator for shareholder returns. The Committee regularly adds and removes companies that no longer meet relevant comparator criteria. In fiscal 2023, Empresas CMPC S.A., International Paper, Klabin S.A., Metsä Board Oyj and Svenska Cellulosa AB SCA were added and Resolute Forest Products was removed as its shares are no longer publicly traded.

For each component of the LTIP Performance Criteria, the Committee will "interpolate" performance between ranges. For the TSR component of the 2023 PSUs, the Committee uses, as the starting price of the various securities, the average trading price of the securities, including dividend reinvestments, for the first 20 days of trading of 2023 and, as the end price, including dividend reinvestments, the average trading price of the securities for the last 20 days of trading in 2025. Any awards under the LTIP that do not vest pursuant to the applicable performance criteria are forfeited.

The Committee assesses the applicable performance criteria for PSUs based upon the audited financial statements of a completed three-year performance period.

The Committee believes that: (i) having a multi-year performance period increases executive focus on long-term performance and better aligns the interests of our executives with our Shareholders; and (ii) the components of the applicable performance criteria are important measures of our overall business performance and shareholder return.

The annual granting of PSUs ensures the continuity of these incentives, as the performance periods of PSUs granted in different years overlap and expired or vested awards are "replaced" each year with new grants. Each PSU is equivalent to one Share. As a result, the number of PSUs issued to executives was 200% of the target level, being the maximum amount of Shares that our executives may earn.

The Committee assesses the effectiveness of the LTIP each year and makes adjustments, if needed, to the LTIP.

Under the 2022 Plan, with respect to performance shares or PSUs, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions will be deemed met, and each such outstanding performance share or PSUs achieved at 100% target level shall become immediately payable upon the occurrence of a triggering event occurring within 12 months of a change of control. See "Narrative Discussion on Potential Payments upon Termination or Change of Control".