Exhibit 10.1 March 31, 2005 Private and Confidential  Scotia Pacific Company LLC 125 Main Street, Second Floor Scotia, California 95565  Ladies and Gentlemen: This letter agreement (this "Agreement") confirms the agreement that
Scotia Pacific Company LLC, a Delaware limited liability company (together with
its subsidiaries, the "Company"), has engaged UBS Securities LLC ("UBS") to
act as its exclusive financial advisor and capital markets advisor in connection
with any Restructuring Transaction (as defined below). Notwithstanding the
exclusive nature of UBS' engagement hereunder, UBS agrees and acknowledges that
the Company has retained Corporate Revitalization Partners, LLC, and may during
the effective period of this Agreement retain other professionals to provide
financial or capital markets advice; provided however that no other firm or
professional shall engage in negotiations with holders of the Obligations (as
defined below), including, without limitation, the holders of the Obligations
(as defined below), their advisors or other representatives. UBS shall act on
behalf of the Company and at the direction of the Independent Managers (as
defined in the Company's Agreement of Limited Liability Company dated as of July
20, 1998, as the same may be amended from time to time, such Independent
Managers currently being Sid Weiss and Jack Webb). This Agreement is separate
from the engagement letter, dated May 27, 2004, between MAXXAM Inc., the parent
of the Company ("Maxxam"), and UBS (the "Maxxam Agreement") with respect to a
potential Private Placement or Alternative Transaction (as defined therein). The term of UBS' engagement shall commence on the date hereof and
continue until July 27, 2005, unless such engagement expires or is terminated
earlier by the Company or UBS pursuant to the terms of this Agreement (the
"Term"). In the event that the Company becomes a debtor in a case under chapter
11 of Title 11 of the United States Code (the "Bankruptcy Code"), the ongoing
retention of UBS by the Company will be subject to the approval of the
bankruptcy court with jurisdiction over the bankruptcy case. UBS and the Company
acknowledge and agree that in the event that the Company becomes a debtor in a
case under the Bankruptcy Code, UBS agrees to comply, and that this Agreement
shall be construed in a manner that complies, with all applicable provisions of
the Bankruptcy Code and applicable rules and agrees and acknowledges that the
bankruptcy court shall have jurisdiction over the adjudication of this Agreement
and any disputes relating to the engagement of professionals. As used in this Agreement, the term "Restructuring Transaction" means,
whether effected directly or indirectly, any restructuring of a material amount
of the Company's liabilities outstanding      on the date of this Agreement listed on Annex A hereto (the
"Obligations"), including, without limitation, any exchange, conversion,
repurchase or repayment of a material amount of such liabilities, or any
material modification, amendment, deferral, restructuring, recapitalization,
rescheduling, moratorium, or adjustment of the terms and/or conditions of any
such liabilities;provided,however, that any restructuring
of the principal amount of Obligations held by the Company in the Scheduled
Amortization Reserve Account on the date of this Agreement ($53,600,000) will
not be included within the definition of Restructuring Transaction.
1.On the terms
and subject to the conditions of this Agreement, UBS will provide the Company,
upon request by the Company, the following financial and market related advisory
services:
(a)
    advising and assisting the Company in analyzing, structuring and
      negotiating the financial aspects of any Restructuring Transaction; and(b)
    assisting the Company in soliciting tenders and consents in
      connection with any Restructuring Transaction (except in connection with a
      Restructuring Transaction intended to comply with the requirements of
      Section 3(a)(9) of the Securities Act of 1933, as amended (the "Securities
      Act")), subject to the separate Transaction Agreement referred to in
      Section 4 hereof.2.For UBS'
services hereunder, the Company agrees to pay to UBS the following
non-refundable fees in cash:
(a) A monthly cash advisory fee of $150,000 (each, a "Monthly Advisory
Fee"), payable in advance for the period commencing on the date of this
Agreement with the first payment due upon execution of this Agreement and
subsequent payments due on each monthly anniversary of the date of this
Agreement;providedthat 100% of
such Monthly Advisory Fee shall be credited, to the extent actually paid,
against the Restructuring Transaction Fee (as defined below).
(b)
    A transaction fee equal to $5,600,000 (a "Restructuring Transaction
      Fee"). The Restructuring Transaction Fee shall be payable upon the
      consummation of a Restructuring Transaction;provided,however, that if the Restructuring
      Transaction is effectuated as part of a plan of reorganization (a "Plan")
      under the Bankruptcy Code, then the Restructuring Transaction Fee shall be
      payable upon the consummation of the Plan, or if earlier, the effective
      date (or any similar term) of the Plan.(c) If the Restructuring Transaction is effectuated as part of a Plan,
the Restructuring Transaction Fee will be an administrative expense entitled to
first priority under Section 503(b)(1)(A) and 507(a)(1) of the Bankruptcy Code
and shall be paid in full as a condition precedent to consummation of such Plan.
In addition to any fees payable to UBS, the Company will reimburse UBS,
upon request made from time to time, for all of its reasonable expenses incurred
in connection with this engagement from

and after the date of this Agreement (which reimbursable expenses shall
not include allocable overhead costs, including internal counsel expenses),
including the reasonable fees, disbursements and other charges of its legal
counsel, if any. Expenses reimbursable by the Company pursuant to this Section 2
shall not exceed $25,000 in the aggregate without the Company's prior written
(which shall include e-mail) consent. Notwithstanding any other provisions of
Section 2, in the event of termination of this Agreement, the Company shall only
be liable for reimbursement of expenses pursuant to this Section 2, to the
extent the same are incurred prior to the effective date of such termination.
The provisions of this Section 2 shall not apply to legal or other professional
fees and expenses to the extent that they are reimbursable by the Company
pursuant to Section 5 hereof. UBS agrees and acknowledges that although it has
investment banking professionals from several areas working on this matter, all
such professionals will coordinate efforts to avoid duplication, and in no event
shall the Company be obligated to pay any fees and expenses in connection with
this engagement in addition to those contemplated by this Agreement.
The Company agrees that if the Restructuring Transaction Fee has not been
paid to UBS during the term of this Agreement and at any time during the 12
months following termination or expiration of this Agreement, the Company
determines to retain a financial advisor, placement agent, arranger or lead
manager, as the case may be, to pursue (a) any sale, acquisition, merger or
similar transaction involving all or substantially all of the business,
securities or assets of the Company or another party (an "M&A Transaction")
or (b) any debt or equity financing, whether public, private or otherwise
(including any bank financing) (a "Financing"), UBS shall have the right of
first refusal (but not the obligation) to act as exclusive financial advisor,
exclusive placement agent, sole arranger, or sole book-running lead manager, as
the case may be, with respect thereto for compensation customarily charged by an
exclusive financial advisor, exclusive placement agent, sole arranger or sole
book-running lead manager, as the case may be, of similar standing as UBS, in
each case under a separate agreement containing customary terms and conditions.
3.In rendering
its services to the Company hereunder, UBS is not assuming any responsibility
for the Company's underlying business decision to pursue or not to pursue any
business strategy or to effect or not to effect any Restructuring Transaction.
UBS acknowledges and agrees that the Company shall have the unilateral right to
enter into and consummate any Restructuring Transaction (or no Restructuring
Transaction) in its sole discretion. The Company agrees that UBS shall not have
any obligation or responsibility to provide "crisis management" services for the
Company or to provide any solvency or fairness opinion in connection with any
Restructuring Transaction.
4.The Company
will furnish, or cause to be furnished, to UBS all data, material and other
information known to the Company as UBS believes appropriate to its assignment
(all such information so furnished being the "Information"). The Company
recognizes and confirms that UBS (a) will use and rely primarily on the
Information and on information available from generally recognized public
sources in performing the services contemplated by this Agreement without having
assumed responsibility for independently verifying the same, (b) does not assume
responsibility for the accuracy or completeness of the Information and such
other information and (c) will not make an appraisal of any assets or
liabilities (contingent or otherwise) of the Company or any party to a
Restructuring Transaction. To the best of the Company's knowledge, the
Information to be furnished

by the Company, when delivered, will be true and correct in all material
respects and will not contain any material misstatement of fact or omit to state
any material fact necessary to make the statements contained therein not
misleading. The Company will promptly notify UBS if it learns of any material
inaccuracy or misstatement in, or material omission from, any Information
theretofore delivered to UBS.
The Company represents and warrants to UBS that the information (whether
written or oral) supplied to any prospective purchaser or seller of a security
in a Restructuring Transaction by or on behalf of the Company, when supplied and
through the closing of such Transaction, will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein not misleading. In the event any Restructuring Transaction
involves an exchange offer, tender offer or consent solicitation, prior to the
commencement thereof the Company shall enter into with UBS a separate dealer
manager or other appropriate agreement (a "Transaction Agreement") containing
terms and conditions, including appropriate representations and legal opinions,
customary for UBS in similar transactions; provided, that no separate fee shall
be payable to UBS pursuant to such Transaction Agreement.
UBS will keep confidential any material non-public information of the
Company made available to UBS by the Company in connection with its engagement
hereunder; provided, such confidential information shall not include (1) any
information that is or becomes generally available to the public, or (2) any
information which is or becomes available to UBS on a non-confidential basis
from a third party who is not known by recipient to be bound by a
confidentiality obligation to the Company; and provided further, that such
confidential information may be disclosed (a) to UBS' employees, agents,
advisors and representatives in connection with its engagement hereunder who
shall be informed of the confidential nature of the information and agree to be
bound by confidentiality obligations similar to those set forth in this
Agreement; (b) to any holder of obligations subject to a confidentiality
agreement with the Company; (c) any person with the consent of the Company; or
(d) if UBS is required to disclose such information pursuant to law, judicial or
administrative process, or regulatory demand or request of any body having
jurisdiction over UBS. In the event that UBS is requested or required by law to
disclose any such confidential information, UBS shall provide the Company with
prompt written notice of any such request or requirement so that the Company may
seek a protective order or other appropriate remedy; provided that no such prior
notification shall be required in respect of any disclosure to regulatory
authorities in response to a request concerning UBS' business. This subparagraph
supersedes any prior agreement between the Company and UBS respecting
confidentiality.
5.The Company
agrees to the indemnification and other agreements set forth in the
Indemnification Agreement attached hereto, the provisions of which are
incorporated herein by reference and shall survive the termination, expiration
or supersession of this Agreement.
6.Except to the
extent required by a court or similar order or as may be required under
applicable law (after consultation with, and approval as to form and substance
by, UBS and its counsel, which approval shall not be unreasonably withheld),
none of (i) the name of UBS, (ii) any advice rendered by UBS to the Company, or
(iii) the terms of this Agreement or any communication from UBS in connection
with the services performed by UBS pursuant to this Agreement will be

quoted or referred to orally or in writing, or in the case of (ii) and
(iii), reproduced or disseminated, by the Company or any of its affiliates or
any of their agents, without UBS' prior written consent.
7.UBS' services
hereunder may be terminated by the Company or UBS upon 30 days prior written
notice without liability or continuing obligation of the Company or UBS, except
as provided in this Section 7. If UBS' engagement pursuant to this Agreement
expires at the end of the Term or is terminated earlier by the Company or UBS
pursuant to the terms of this Agreement (the "Termination Date"), (i) UBS shall
be entitled to any fees earned prior to the Termination Date and payable
pursuant to Section 2 hereof, (ii) as set forth in the following sentences of
this Section, (iii) expenses incurred by UBS as a result of services rendered
prior to the Termination Date shall become immediately payable in full, and (iv)
Sections 4 (other than the first sentence thereof) and 5 through 14 hereof shall
remain operative and in full force and effect regardless of the occurrence of
the Termination Date. UBS shall be entitled to payment in full of the fees
referred to in Section 2(b) if at any time prior to the expiration of 12 months
after the Termination Date, (x) a Restructuring Transaction is consummated (by
virtue of the consummation, or if earlier, the effective date (or any similar
term), of a Plan or otherwise) or (y) the Company enters into a letter of intent
or any agreement that subsequently results in the consummation of a
Restructuring Transaction.
8.UBS shall not
make any public announcements regarding any matter relating to this Agreement
without the Company's prior written consent, which consent shall not be
unreasonably withheld.
9.If the
Company or any entity comprising part of the Company becomes a debtor in a case
under the Bankruptcy Code, the Company shall file an application and use
reasonable commercial efforts to obtain a Bankruptcy Court order pursuant to
Section 328(a) of the Bankruptcy Code authorizing the Company to retain UBS (the
"Retention Order") on the terms set forth in this Agreement. Reasonable
commercial efforts in this Agreement shall include, among other things,
diligently supporting UBS' retention. If the Company does not obtain a Retention
Order reasonably satisfactory to UBS, UBS shall not be required to serve as the
Company's financial advisor during its Chapter 11 case, and the Company agrees
that it will recognize in its bankruptcy any and all of UBS' claims for
compensation arising under or in connection with the tail provisions contained
in Section 7 herein. If UBS (i) cannot be retained in the Company's bankruptcy
case because it is finally determined by a court of competent jurisdiction that
UBS is not a "disinterested person" within the meaning of Section 101(14) of the
Bankruptcy Code, provided that UBS is afforded a reasonable opportunity to
undertake any actions to cure any problems or concerns related to its
"disinterested" status, or (ii) declines to serve on the ground that the
Retention Order is not reasonably satisfactory to it because the court with
jurisdiction over the case (a) declines to permit payment of the Monthly
Advisory Fee on a "flat fee" basis (this clause (a) shall not apply if the Court
indicates that it would be willing to approve a Monthly Advisory Fee on a flat
fee basis if the amount were lower than the Monthly Advisory Fee provided for in
this Agreement) or (b) declines to approve the indemnification provisions of
this Agreement, provided that the terms and conditions of the indemnification
provisions that the court approves or indicates that it would be willing to
approve are customary for cases of similar size and complexity in the
jurisdiction in which the bankruptcy case is filed , then no Restructuring
Transaction Fee shall be payable to UBS under this Agreement, including pursuant
to Section 7 hereof.

10.The Company
acknowledges and agrees that UBS has been retained to act solely as advisor to
the Company, and not as an advisor of any other person, and the Company's
engagement of UBS is not intended to confer rights upon any person (including
shareholders, employees or creditors of the Company) not a party hereto as
against UBS or its affiliates, or their respective directors, officers,
employees or agents, successors or assigns. UBS shall act as an independent
contractor under this Agreement, and any duties arising out of its engagement
shall be owed solely to the Company. UBS shall not have any liability or
responsibility for any action or omission of Corporate Revitalization Partners,
LLC or any other advisor to the Company.
UBS AG (the parent of UBS) and its subsidiaries, branches and affiliates
(the "UBS Group") is involved in a wide range of commercial banking, investment
banking and other activities (including investment management, corporate finance
and securities issuing, trading and research) from which conflicting interests,
or duties may arise. Information which is held elsewhere within UBS or within
the UBS Group, but of which none of the individuals in the Investment Banking
Department of UBS involved in carrying out this engagement actually has
knowledge, will not for any purpose be taken into account in determining UBS'
responsibilities to the Company under this engagement. Neither UBS nor any other
part of the UBS Group will have any duty to disclose to the Company or utilize
for the Company's benefit any non-public information acquired in the course of
providing services to any other person, engaging in any transaction (on its own
account or otherwise) or otherwise carrying on its business. In addition, in the
ordinary course of its business, UBS and its affiliates may trade the securities
of the Company and any party to a Restructuring Transaction for its own or their
account and for the accounts of customers, and UBS and its affiliates may at any
time hold a long or short position in such securities. UBS maintains and will
maintain information barriers between the investment banking team working on
this engagement and UBS' trading business restricting the information flow from
the investment banking team to the trading business.

11.THIS
AGREEMENT AND ANY CLAIM, COUNTERCLAIM OR DISPUTE OF ANY KIND OR NATURE
WHATSOEVER ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT ("CLAIM"),
DIRECTLY OR INDIRECTLY, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, DIRECTLY OR INDIRECTLY,INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW.EXCEPT AS SET FORTH BELOW, NO CLAIM
MAY BE COMMENCED, PROSECUTED OR CONTINUED IN ANY COURT OTHER THAN IN COURTS OF
THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK OR IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WHICH COURTS
SHALL HAVE EXCLUSIVE JURISDICTION OVER THE ADJUDICATION OF SUCH MATTERS, AND THE
COMPANY AND UBS CONSENT TO THE JURISDICTION OF SUCH COURTS AND PERSONAL SERVICE
WITH RESPECT THERETO. EACH OF UBS AND THE COMPANY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH OF UBS
AND THE COMPANY AGREES THAT A FINAL JUDGMENT IN ANY PROCEEDING OR COUNTERCLAIM
BROUGHT IN ANY SUCH COURT SHALL BE CONCLUSIVE AND BINDING UPON THE COMPANY AND
UBS AND MAY BE

ENFORCED IN ANY OTHER COURTS TO THE JURISDICTION OF WHICH THE COMPANY OR
UBS, AS APPROPRIATE, IS OR MAY BE SUBJECT, BY SUIT UPON SUCH
JUDGMENT.
12.This
Agreement shall be binding upon UBS and the Company and their respective
successors and assigns and any successor or assign of any substantial portion of
the Company's and UBS' respective businesses and/or assets.
13.This
Agreement (including the attached Indemnification Agreement) embodies the entire
agreement and understanding between the parties hereto and supersedes all prior
agreements and understandings relating to the subject matter hereof. If any
provision of this Agreement is determined to be invalid or unenforceable in any
respect, such determination will not affect such provision in any other respect
or any other provision of this Agreement, which will remain in full force and
effect. This Agreement may not be amended or otherwise modified or waived except
by an instrument in writing signed by both UBS and the Company. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same
Agreement.

[Signature page follows]
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below, whereupon this Agreement
and your acceptance shall constitute a binding agreement between us.
Very truly yours,
UBS SECURITIES LLC


By: /s/ Thomas Benninger
_________________________
Thomas Benninger
Managing Director


By: /s/ Chetan Bhandari
_________________________
Chetan Bhandari
Executive Director

Accepted and agreed to as of
the date first above written:
SCOTIA PACIFIC COMPANY LLC

By: /s/ Sid Weiss
________________________________
Name: Sid Weiss
Title: Independent Manager

By: /s/ Jack Webb
________________________________
Name: Jack Webb
Title: Independent Manager

Annex A
(Obligations)


1.
    6.55% Class A-1 Timber Collateralized Notes due July 20, 2008 ($45
      million aggregate principal amount)2.
    7.11% Class A-2 Timber Collateralized Notes due July 20, 2008 ($243
      million aggregate principal amount)3.
    7.71% Class A-3 Timber Collateralized Notes due July 20, 2008 ($463
      million aggregate principal amount)UBS SECURITIES LLC INDEMNIFICATION AGREEMENT


March 31, 2005
Private and Confidential

UBS Securities LLC
299 Park Avenue
New York, New York 10171

Ladies and Gentlemen:

In connection with the engagement of UBS Securities LLC ("UBS") to advise
and assist the undersigned (together with its subsidiaries, referred to as the
"Company") with the matters set forth in the Agreement, dated March 1, 2005,
between the Company and UBS (the "Agreement"), in the event that UBS becomes
involved in any capacity in any claim, suit, action, proceeding, investigation
or inquiry (including, without limitation, any shareholder or derivative action
or arbitration proceeding) (collectively, a "Proceeding") (i) in connection with
or arising out of any untrue statement or alleged untrue statement of a material
fact contained in any disclosure document in connection with any transaction
arising out of the Agreement or any omission or alleged omission to state
therein a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading or (ii) otherwise
in connection with any matter in any way relating to or referred to in the
Agreement or arising out of the matters contemplated by the Agreement,
including, without limitation, related services and activities prior to the date
of the Agreement, the Company agrees to indemnify, defend and hold UBS harmless
to the fullest extent permitted by law, from and against any losses, claims,
damages, liabilities and expenses in connection with any matter in any way
relating to or referred to in the Agreement or arising out of the matters
contemplated by the Agreement, including, without limitation, related services
and activities prior to the date of the Agreement, except, in the case of clause
(ii) above only, to the extent that it shall be determined by a court of
competent jurisdiction in a judgment that has become final in that it is no
longer subject to appeal or other review that such losses, claims, damages,
liabilities and expenses resulted solely from the gross negligence or willful
misconduct of UBS, including, without limitation, its breach of the Agreement.In addition, in the event
that UBS becomes involved in any capacity in any Proceeding in connection with
any matter in any way relating to or referred to in the Agreement or arising out
of the matters contemplated by the Agreement, the Company will reimburse UBS for
its reasonable legal and other third party expenses (including the cost of any
investigation and preparation) as such expenses are incurred by UBS in
connection therewith; provided however, that UBS shall promptly repay to the
Company any such expenses the Company has previously reimbursed to the extent
UBS is finally judicially determined not to be entitled to indemnification
hereunder as a result of the exception in the first sentence of this
Indemnification Agreement. If such indemnification were not to be available for
any reason (other than as a result of a final judicial determination of the
gross negligence or willful misconduct of UBS, including, without limitation,
its breach of the Agreement as provided in the exception in the first sentence
of this Indemnification Agreement), the Company agrees to contribute to the
losses, claims, damages, liabilities and expenses involved (i) in the

proportion appropriate to reflect the relative benefits received or
sought to be received by the Company, its stockholders and its creditors, on the
one hand, and UBS, on the other hand, in connection with the matters
contemplated by the Agreement or (ii) if (but only if and to the extent) the
allocation provided for in clause (i) is for any reason held unenforceable, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) but also the relative fault of the Company, its
stockholders and its creditors, on the one hand, and the party entitled to
contribution, on the other hand, as well as any other relevant equitable
considerations. The Company agrees that for the purposes of this paragraph the
relative benefits received, or sought to be received, by the Company, its
stockholders and its creditors, on the one hand, and the party entitled to
contribution, on the other hand, in connection with the matters contemplated by
the Agreement shall be deemed to be in the same proportion that the total value
received or paid or contemplated to be received or paid by the Company, its
stockholders and its creditors, as the case may be, as a result of or in
connection with the matters (whether or not consummated) for which UBS has been
retained to perform financial services bears to the fees paid to UBS under the
Agreement;providedthat, in no
event shall the Company contribute less than the amount necessary to assure that
UBS is not liable for losses, claims, damages, liabilities and expenses in
excess of the amount of fees actually received by UBS pursuant to the Agreement.
Relative fault shall be determined by reference to, among other things, whether
any alleged untrue statement or omission or any other alleged conduct relates to
information provided by the Company or other conduct by the Company (or its
employees or other agents), on the one hand, or by UBS, on the other hand. The
Company will not settle any Proceeding in respect of which indemnity may be
sought hereunder, whether or not UBS is an actual or potential party to such
Proceeding, without UBS' prior written consent, which, in the case of a
settlement involving monetary damages only, shall not be unreasonably withheld;
unless such settlement (i) includes an unconditional release of UBS from all
liability in any way related to or arising out of such Proceeding and (ii) does
not impose any actual or potential liability upon UBS and does not contain any
factual or legal admission by or with respect to UBS or any adverse statement
with respect to the character, professionalism, due care, loyalty, expertise or
reputation of UBS or any action or inaction by UBS. For purposes of this
Indemnification Agreement, UBS shall include UBS Securities LLC, any of its
affiliates, each other person, if any, controlling UBS or any of its affiliates,
their respective officers, current and former directors, employees and agents,
and the successors and assigns of all of the foregoing persons. The foregoing
indemnity and contribution agreement shall be in addition to any rights that any
indemnified party may have at common law or otherwise.
UBS promptly will notify the Company upon receipt of actual notice of a
Proceeding with respect to which indemnity is sought hereunder if the Company is
not a party to such Proceeding,providedthat the failure to so notify the Company will not relieve the Company
from any liability that the Company may have on account of this indemnity or
otherwise, except to the extent the Company is materially prejudiced by such
failure. The Company shall have the right to assume, and if requested by UBS
shall assume, the defense of any such Proceeding, including the employment of
counsel reasonably satisfactory to UBS. UBS shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
UBS, unless (i) the Company has agreed to pay such fees and expenses, (ii) the
Company shall have failed promptly to assume the defense thereof and employ
counsel as provided above or (iii) the named parties to any such Proceeding
(including impleaded parties) include UBS and the Company, and UBS shall have
been advised by counsel that there may be one or

more legal defenses available to it that are different from or in
addition to those available to the Company,providedthat the Company shall not in any event
be responsible hereunder for the fees and expenses of more than two law firms,
one of which shall be local counsel, in connection with any Proceeding in the
same jurisdiction. UBS also agrees that it will not settle any proceeding in
respect of which indemnification may be sought hereunder without the prior
written consent of the Company (which consent shall not be unreasonably
withheld).
The Company agrees that neither UBS nor any of its affiliates, directors,
agents, employees or controlling persons shall have any liability to the Company
or any person asserting claims on behalf of or in right of the Company in
connection with or as a result of either UBS' engagement under the Agreement or
any matter referred to in the Agreement, including, without limitation, related
services and activities prior to the date of the Agreement, except to the extent
that it shall be determined by a court of competent jurisdiction in a judgment
that has become final in that it is no longer subject to appeal or other review
that any losses, claims, damages, liabilities or expenses incurred by the
Company resulted solely from the gross negligence or willful misconduct of UBS
in performing the services that are the subject of the Agreement, including,
without limitation, its breach of the Agreement.
THIS INDEMNIFICATION AGREEMENT AND ANY CLAIM, COUNTERCLAIM OR DISPUTE OF
ANY KIND OR NATURE WHATSOEVER ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT ("CLAIM"), DIRECTLY OR INDIRECTLY, SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS SET FORTH BELOW,
NO CLAIM MAY BE COMMENCED, PROSECUTED OR CONTINUED IN ANY COURT OTHER THAN THE
COURTS OF THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK OR IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WHICH
COURTS SHALL HAVE EXCLUSIVE JURISDICTION OVER THE ADJUDICATION OF SUCH MATTERS,
AND THE COMPANY AND UBS CONSENT TO THE JURISDICTION OF SUCH COURTS AND PERSONAL
SERVICE WITH RESPECT THERETO. EACH OF UBS AND THE COMPANY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY PROCEEDING OR CLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT. THE COMPANY
AGREES THAT A FINAL JUDGMENT IN ANY PROCEEDING OR CLAIM ARISING OUT OF OR IN ANY
WAY RELATING TO THIS AGREEMENT BROUGHT IN ANY SUCH COURT SHALL BE CONCLUSIVE AND
BINDING UPON THE COMPANY AND MAY BE ENFORCED IN ANY OTHER COURTS TO THE
JURISDICTION OF WHICH THE COMPANY IS OR MAY BE SUBJECT, BY SUIT UPON SUCH
JUDGMENT.

[Signature page follows]
The foregoing Indemnification Agreement shall remain in full force and
effect notwithstanding any termination of UBS' engagement. This Indemnification
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the same
agreement.

Very truly yours,

SCOTIA PACIFIC COMPANY LLC

By: /s/ Sid Weiss
_________________________
Name: Sid Weiss
Title: Independent Manager

By: /s/ Jack Webb
_________________________
Name: Jack Webb
Title: Independent Manager

Accepted and agreed to as of
the date first above written:

UBS SECURITIES LLC


By: /s/ Thomas Benninger
_________________________
Thomas Benninger
Managing Director


By: /s/ Chetan Bhandari
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Chetan Bhandari
Executive Director