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. In 2026, such long-term equity-based compensation will also include RSUs and cash-settled PSUs. See " - 2026 LTIP Re-Design" for more information.

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. RSUs also vest after a three-year period and are designed to promote long-term retention. As a result, we believe PSUs and RSUs 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 has been comprised of the following, weighted equally:

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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 2023, 2024 and 2025 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 2023, 2024 and 2025 is as follows:

For fiscal 2025, the TSR Peer Group companies were:

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.

For each component of the LTIP Performance Criteria, the Committee will "interpolate" performance between ranges. For the TSR component of the 2025 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 2025 and, as the end price, including dividend reinvestments, the average trading price of the securities for the last 20 days of trading in 2027. 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 and RSUs ensures the continuity of these incentives, as the performance or vesting periods, as applicable, of PSUs and RSUs granted in different years overlap and expired or vested awards are "replaced" each year with new grants. Each PSU and each RSU is equivalent to one Share. As a result, the number of PSUs granted 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". With respect to RSUs, all RSUs shall become fully and immediately vested upon the occurrence of a triggering event occurring within 12 months of a change of control.

2026 LTIP Re-Design

For awards in fiscal 2026, following a compensation review conducted by MCL, the Committee approved a re-design of certain elements of the LTIP, including with respect to the variable compensation vehicle mix, PSU performance metrics and weightings and determination of the TSR Peer Group (the "LTIP Re-Design"). Such LTIP Re-Design comes into effect in 2026. The Committee believes that the LTIP Re-Design better aligns our incentive compensation program with prevailing market practices and our strategic debt reduction goals, promotes retention and will incent management to take more accountability in improving balance sheet flexibility and becoming more disciplined in capital resource management.

Pursuant to the LTIP Re-Design, the variable compensation vehicle mix was re-designed from a mix of 100% PSUs for all eligible executives, managing directors and employees, to a 70% PSU and 30% "restricted stock unit" or "RSU" mix for our executives, including our NEOs, and managing directors, and a 100% RSU mix for all other employees below the managing director level. For 2026, our Board and Committee determined to address the PSU portion of the LTIP through the grant of cash-settled PSUs in order to preserve equity usage and minimize burn rate. See "Executive Compensation Objectives and Program Design - 2026 Compensation Updates" for more information.

Each RSU is equivalent to one Share. Such RSUs vest after a three-year period, which we believe, like the PSUs, will incent managing directors and employees to drive long-term performance and will additionally promote executive and employee retention. Under the 2022 Plan, each Share of outstanding RSUs shall become fully and immediately vested and all forfeiture and transfer restrictions thereon shall lapse 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".

In addition, in 2026, the Board instituted and utilized a floor price of $4.00 for all annual equity grants and awards for 2026, including to executives, employees and members of the Board (not including pursuant to elections made by applicable directors to receive grants in lieu of their cash retainers).

Commencing in 2026, pursuant to the LTIP Re-Design, the performance criteria for PSUs, including cash-settled PSUs, will be comprised of the following:

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TSR, weighted at 50%;

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ROAA, weighted at 25%; and

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"Net Leverage Ratio" ("NLR"), weighted at 25%,

(the "LTIP Re-Design Performance Criteria").

After careful review by the Committee and in consultation with MCL, the Committee has determined that it would be appropriate to transition from a custom-selected TSR Peer Group to an index-based peer group for the purposes of measuring relative TSR. Although we have historically used a custom peer group designed to consist of companies that share a comparable product mix, the identification of strong natural peers has become increasingly challenging. Furthermore, we believe that a shift to an index-based approach will simplify administration and communication, remove potential subjectivity, and better reflects the broader scope of capital competition. Accordingly, for PSUs granted in 2026, the TSR Peer Group will shift to a 50/50 blend of European and Canadian small-cap indices composed of the S&P/TSX Small Cap Index and STOXX Europe Small 200 Index, which better aligns with our asset base, exposure, valuation context and macroeconomic environment.

Each component of such LTIP Re-Design Performance Criteria has an achievement scale as described above in respect of the LTIP Performance Criteria, with the NLR component scaled and measured as follows:

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NLR. Calculated by dividing our "net debt" by Operating EBITDA, with the result for the three-year performance period being the lowest ratio achieved and sustained, on average, over three consecutive quarters, with the relevant "Last Twelve Months" periods falling entirely within the performance period and starting no earlier than the quarter ending December 31, 2025.

The NLR component for the PSUs granted in 2026 will be as follows:

The NLR component was selected as a new performance criteria as it reflects our long term goal to enhance our balance sheet flexibility and reduce indebtedness. NLR is widely used by equity and credit analysts, and we believe it is highly aligned with our strategic debt reduction objectives and long-term goals.