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                                                                  Exhibit 10-7

(Official translation from German)


                                                                           156

                                                                      Annex 14
                              Agreement on the obligations of the shareholders


                Agreement on the obligations of the shareholders
                                     Between

                           Mercer International, Inc.
                      (hereinafter referred to as "MERCER")

                      Spezialpapierfabrik Blankenstein GmbH
               (hereinafter referred to as "SPEZIALPAPIERFABRIK"),

             Zellstoff- und Papierfabrik Rosenthal Verwaltungs-GmbH
                 (hereinafter referred to as "VERWALTUNGS-GMBH")

                                 on the one side

                                       and

               BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHFT
                 (hereinafter referred to as "HypoVereinsbank")

                                on the other side


Zellstoff- und Papierfabrik Rosenthal GmbH & Co KG (hereinafter referred to
as "BORROWER") is a joint-venture company founded in the legal form of a GmbH
& Co KG on 31.12.1997, with Zellstoff- und Papierfabrik Rosenthal
Verwaltungs-GmbH as partner with unlimited liability, and Spezialpapierfabrik
Blankenstein GmbH as limited partner.

The BORROWER intends to convert the existing pulp mill in Blankenstein/
Thuringen into a mill producing on sulphate basis, in which bleached kraft
pulp from softwood is to be produced (hereinafter referred to as "PROJECT").

MERCER agreed to function as a sponsor.

MERCER owns (indirectly through Zellstoff- und Papierfabrik Rosenthal Holding
GmbH, Heidenau) 99% of shares in the SPEZIALPAPIERFABRIK, (indirectly through
SPEZIALPAPIERFABRIK) 100% of shares in the VERWALTUNGS-GMBH, and (indirectly
through SPEZIALPAPIERFABRIK) 100% of participation in a limited partnership
of the BORROWER.

SPEZIALPAPIERFABRIK owns 100% of shares in VERWALTUNGS-GMBH.

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BAYERISCHE VEREINSBANK AKTIENGESELLSCHAFT and BAYERISCHE HYPOTHEKEN- UND
WECHSEL-BANK agreed, as INITIAL LENDERS, to provide the BORROWER with a
project financing loan in the amount of DM 508 million on the basis of the
LOAN CONTRACT of 6.7.1998 (hereinafter referred to as "LOAN CONTRACT").

Effective as of 31.8.1998, BAYERISCHE HYPOTHEKEN- UND WECHSEL-BANK
AKTIENGESELLSCHAFT merged with BAYERISCHE VEREINSBANK AKTIENGESELLSCHAFT,
wherein the name of the acquiring company was simultaneously changed into
BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT.

The signing of this agreement on the obligations of the shareholders is a
suspense condition for the obligations of the BANKS under the LOAN CONTRACT.

This point having been cleared, MERCER, SPEZIALPAPIERFABRIK, and
VERWALTUNGS-GMBH (hereinafter referred to as "SHAREHOLDERS") have agreed with
the BANKS on the following:

    1.  DEFINITIONS

        The terms and notions used in this Agreement, unless otherwise defined,
        shall have the meaning ascribed to them in the LOAN CONTRACT.

    2.  Obligations of Mercer

        MERCER undertakes towards the banks:

            a)  to maintain a direct or indirect participation interest of at
                least 51% in the capital of SPEZIALPAPIERFABRIK and
                VERWALTUNGS-GMBH as well as in the limited liability capital
                of the BORROWER, unless a third party that owns at least 51%
                of the particular capital or of the participation in the
                limited liability company, assumes all obligations of MERCER
                resulting from this Agreement after consent has been given,
                in advance and in writing, by the REPRESENTATIVE (as
                subsequently defined in Point 6 (d) of this Agreement), which
                must not be wilfully refused taking into account the
                interests of the BANKS, and

            b)  to sufficiently fund SPEZIALPAPIERFABRIK so that
                SPEZIALPAPIER-FABRIK can meet its obligations set out under
                Points 3 (a) or 3 (b) of this Agreement, and further to
                guarantee that SPEZIALPAPIERFABRIK and VERWALTUNGS-GMBH take
                proper care to meet their obligations towards the BANKS
                resulting from this Agreement.

    3.  Obligations of Spezialpapierfabrik

        Spezialpapierfabrik undertakes towards the banks to do the following:

            a)  It will ensure that the BORROWER has at its disposal, at the
                latest before the BORROWER'S first drawing from the loan under
                the LOAN CONTRACT, capital contributions and/or subordinated
                partner loans on the basis of the provision under Article 4.1
                (h) of the LOAN CONTRACT in the total amount of at least DM 45
                millions.

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            b)

                (i) in case the total construction costs (as shown in the
                    table on page 2 of the FIRST CASH FLOW MODEL under "Total
                    Construction Costs") exceed the amount of DM 572,150,000
                    (according to a confirmation issued by the TECHNICAL
                    ADVISOR) and/or the total financing costs (as shown in
                    the table on page 3 of the FIRST CASH FLOW MODEL under
                    "Total Financing Costs") exceed the amount of DM
                    89,709,000, upon request made by the REPRESENTATIVE,
                    SPEZIALPAPIERFABRIK shall provide additional funds from
                    own sources and/or additional subordinated partner loans
                    in the amount of up to DM 38,800,000, doing so in both
                    cases to an amount that is reasonably considered
                    necessary by the REPRESENTATIVE in order for the BORROWER
                    to be able to finance the amounts exceeding the
                    abovementioned costs (while taking into consideration the
                    availability of amounts under the MAIN TRANCHE pursuant
                    to Article 5.4 of the LOAN CONTRACT); however, this shall
                    not apply, if the BORROWER has arranged that sufficient
                    funds are transferred from the PARTNER ACCOUNT to the
                    REVENUE SUMMARY ACCOUNT, or has otherwise proved, to full
                    satisfaction of the REPRESENTATIVE, that the BORROWER has
                    at its disposal additional internal funds and/or
                    subordinated partner loans to pay for the exceeding costs.

               (ii) SPEZIALPAPIERFABRIK further undertakes, after the expiry
                    of the COMPLETION DATE, upon request made by the
                    REPRESENTATIVE, to provide the BORROWER with additional
                    internal funds from own resources and/or subordinated
                    partner loans up to the amount of the difference of DM 25
                    million less all actually provided internal funds from
                    own sources and/or subordinated partner loans including
                    all amounts actually drawn under the OWN CAPITAL
                    COLLATERAL, and to prevent the commencement of any
                    bankruptcy proceedings started against the BORROWER,
                    doing so to an amount that, in reasonable consideration
                    of the REPRESENTATIVE and under application of due
                    diligence of a prudent businessman, is necessary to
                    permanently ward off the circumstances causing the danger
                    of commencing bankruptcy proceedings against the BORROWER

            c)  In addition, SPEZIALPAPIERFABRIK undertakes make the BORROWER
                meet, in due form and time according to the applicable law,
                its obligations pursuant to Article 19.4.1 (r) of the LOAN
                CONTRACT.

            d)  SPEZIALPAPIERFABRIK undertakes not to demand any payment from
                the BORROWER under the SUBORDINATED LOANS, should this result
                in the BORROWER breaching his obligations under Article
                19.4.2 (d). Furthermore, SPEZIALPAPIERFABRIK shall ensure
                that the agreement on SUBORDINATED LOANS agree, in form and
                content, with the draft agreed upon with the BANKS (in
                accordance with Annex 1 to this Agreement), and that

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                no amendment be made to the agreements regarding the
                SUBORDINATED LOANS without a prior written approval by the
                REPRESENTATIVE.

            e)  SPEZIALPAPIERFABRIK undertakes not to approve any reduction in
                the limited-liability capital (as defined in Article 3 of the
                Memorandum of Association of the BORROWER) of the BORROWER, as
                long as principle amounts are owed under the LOAN CONTRACT.

            f)  SPEZIALPAPIERFABRIK undertakes to maintain its direct
                participation interest in the capital of VERWALTUNGS-GMBH and
                in the limited-liability capital of the BORROWER in the
                amount of at least 51% (unless a prior written consent given
                by the REPRESENTATIVE is procured, which must not be wilfully
                refused).

            g)  SPEZIALPAPIERFABRIK undertakes

                (i) not to recall Mr. Ron Aurell from his position of General
                    Manager of VERWALTUNGS-GMBH before the expiry of six
                    months from the COMPLETION DATE, unless another expert
                    experienced in the pulp and paper industry is appointed
                    to his position with consent given by the REPRESENTATIVE,
                    which consent must not be wilfully refused.

               (ii) To appoint only experts experienced in the pulp and paper
                    industry or financial experts to the position of general
                    manager of VERWALTUNGS-GMBH after the expiry of this
                    period.

            h)  SPEZIALPAPIERFABRIK undertakes not to approve any addendum or
                amendment to or waive of in relation to the Memorandum of
                Association of the BORROWER, if this would substantially affect
                the rights of the REPRESENTATIVE and the BANKS under the LOAN
                CONTRACT.

            i)  SPEZIALPAPIERFABRIK undertakes to arrange for the issuance of
                an EQUITY COLLATERAL in favour of the BANKS and the BORROWER
                in the amount of DM 25 million, that serves as collateral for
                its own obligation to provide internal funds from own sources
                in accordance with the preceding Point 3 b (1) and (ii), and,
                to the extent that it is provided in the form of a collateral
                for provision of internal funds from own sources, must
                essentially correspond with the draft attached in Annex 2 to
                this Agreement. The EQUITY COLLATERAL shall be released by
                the BANKS (A) to the extent, to which SPEZIALPAPIERFABRIK
                provides funds in accordance with Point 3 (b) (i) or (ii), or
                (B) after the COMPLETION DATE to the extent, to which funds -
                that would otherwise be available for payout to
                SPEZIALPAPIERFABRIK pursuant to Article 20.2 (b) of the LOAN
                CONTRACT - the are remitted from the PARTNER ACCOUNT to a
                security account held with VEREINSBANK, branch office in
                Dresden under the name of the BORROWER, which security
                account serves as a collateral for the obligations of
                SPEZIALPAPIERFABRIK in accordance with Point 3 (b) (ii)
                (irrespective of the fact, whether or not the BORROWER made
                any profit in the immediately preceding business year). This
                account must be pledged to the BANKS and the BORROWER as a
                collateral for the SPEZIALPAPIERFABRIK's obligation to
                provide funds from own sources

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                in accordance with Point 3 (b) (ii) of this Agreement
                according to a reasonable pledge contract demanded by the
                REPRESENTATIVE.

            j)  SPEZIALPAPIERFABRIK undertakes, as long as there exist any
                due amounts to be repaid under the LOAN CONTRACT or some
                other payment obligation under the LOAN CONTRACT, to provide
                the REPRESENTATIVE with copies, in sufficient numbers for all
                LENDERS, of the following documentation that must be prepared
                in conformity with all relevant statutory and professional
                requirements as well as according to generally accepted
                accounting principles.

                -   as soon as available, however no later than ninety (90)
                    days after the end of every business year, a set of its
                    audited financial statements including a balance sheet,
                    income statement, auditor's report for
                    SPEZIALPAPIERFABRIK, and the additional taxation balance
                    sheet with regard to its participation as
                    limited-liability partner in the BORROWER;

                -   as soon as available, however no later than sixty (60)
                    days after the end of every business half-year, a set of
                    interim half-year financial statements including a
                    balance sheet and income statement;

                -   as soon as available, the tax returns and tax assessments
                    of SPEZIALPAPIERFABRIK as well as uniform and separate
                    determination of profits of the BORROWER in relation to
                    the revenue of SPEZIALPAPIERFABRIK and/or the BORROWER.

                This financial information (except for the tax return and the
                statements of determination of profits) must be prepared in the
                English language or in English translation and certified by
                SPEZIALPAPIERFABRIK, and handed over to the REPRESENTATIVE.

            k)  SPEZIALPAPIERFABRIK undertakes to provide the REPRESENTATIVE
                with a copy of any SUBORDINATED LOAN [agreement] agreed upon
                with the BORROWER.

            The obligations of SPEZIALPAPIERFABRIK in accordance with
            paragraphs (a), (b), (c), and (i) are valid also towards the
            BORROWER as the beneficiary party pursuant to Section 328 of BGB
            [German Civil Code].

    4.  Obligations of Mercer and Spezialpapierfabrik

        MERCER and SPEZIALPAPIERFABRIK undertake to meet all essential
        aspects of the obligations assumed under the PURCHASE CONTRACT of
        July 3, 1994 concluded with the TREUHANDANSTALT, ANSTALT DES
        OFFENTLICHEN RECHTS, with respect to the participation interests of
        the BORROWER (in its subsequently amended version).

    5.  Obligations of the shareholders

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        The SHAREHOLDES undertake towards the BANKS:

            a)  not to demand any distribution of dividends or other payment
                from the BORROWER and/or, in the case of MERCER, not to
                demand such payout, that would result in the BORROWER to
                breach its obligations under the LOAN CONTRACT.

            b)  Not to initiate any judicial proceedings against the BORROWER
                and not to adopt any resolution on the liquidation or
                dissolution of the BORROWER without prior written approval by
                the REPRESENTATIVE, which must not be wilfully refused while
                taking into consideration the interests of the BANKS; and

            c)  To immediately pay back the BORROWER any amount that they have
                received from the BORROWER (including by way of offsetting
                mutual receivables) (in their respective functions of a partner
                of unlimited liability, partner with limited liability and, in
                the case of SPEZIALPAPIERFABRIK, as lender of subordinated
                loans), if this payment would result in the BORROWER to breach
                its obligations under the LOAN CONTRACT, or - in the case of a
                re-payment instalment under the SUBORDINATED LOAN - if such
                payment was not yet due.


    6.  MISCELLANEOUS

            a)  This Agreement as well as the rights and obligations of the
                SHAREHOLDERS and the BANKS are governed by the law of the
                Federal Republic of Germany and shall be interpreted in
                conformity with the law of the Federal Republic of Germany.
                The place of performance of this Agreement shall be Munich.
                Munich shall be the place of jurisdiction for any disputes
                arising from or in connection with this Agreement. However,
                the REPRESENTATIVE has the right, at his discretion, to
                initiate judicial proceedings in any other jurisdiction,
                where some assets of the SHAREHOLDERS are located.

            b)  MERCER herewith appoints SPEZIALPAPIERFABRIK to be its
                domestic representative, however, only with regard to such
                judicial proceedings that have been initiated against MERCER
                in the Federal Republic of Germany in connection with this
                Agreement.

            c)  Should a provision of this Agreement be or become fully or
                partially invalid, the remaining provisions shall remain in
                force. The invalid provisions shall be interpreted in
                conformity with the will expressed by the parties and the
                purpose of this Agreement.

            d)  HypoVereinsbank (called "REPRESENTATIVE" in this capacity)
                represents any other bank, to which any rights and
                obligations from this Agreement devolve, in all aspects of
                this Agreement.

            e)  The BANKS have the right to transfer their rights and
                obligations resulting from this Agreement to a third party,
                as long as they transfer to this third party the shares of
                their credit line [balances] in accordance with Article 30 of
                the LOAN CONTRACT. The SHAREHOLDERS took note that according
                to the terms and conditions of the DEUTSCHE AUSGLEICHSBANK
                (hereinafter referred to as "DtA")

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                and/or of the KREDITANSTALT FUR WIEDERAUFBAU (hereinafter
                referred to as "KfW) the BANKS my be bound to transfer their
                rights and obligations resulting from this Agreement to DtA
                and/or KfW, if the BANKS have committed themselves, towards
                DtA and/or KfW, to assumption of liability for the loans
                provided to the BORROWER.

            f)  Any addenda and amendments to this Agreement must be made in
                writing.

            g)  This Agreement shall remain in force as long as any amounts
                (capital, interest, dues or other) are owed under the LOAN
                CONTRACT, wherein MERCER shall be released from all
                obligations as soon as MECER, in conformity with Point 2 (a)
                no longer owns at least 51% of shares or limited-liability
                partner share in SPEZIALPAPIERFABRIK, VERWALTUNGS-GMBH, and
                the BORROWER.

<Table>
<S>                                 <C>
.....................                .................................
                                    Mercer International, Inc.

....................                 ............................................
                                    Spezialpapierfabrik Blankenstein GmbH

.....................                ..........................................................
                                    Zellstoff- und Papierfabrik Rosenthal Verwaltungs-GmbH
Munich, 2.11.99
....................                 .........................................................
                                    Bayerische Hypo- und Vereinsbank Aktiengesellschaft

</Table>


We herewith undertake to act a domestic representative of Mercer
International, Inc. in accordance with the above Point 6 b).

<Table>
<S>                                 <C>
....................                 ............................................
                                    Spezialpapierfabrik Blankenstein GmbH
</Table>