STOCK OPTION AGREEMENT

              POTLATCH CORPORATION 1995 STOCK INCENTIVE PLAN


     THIS AGREEMENT made and entered into the day specified in
the attached addendum to this Agreement by and between
POTLATCH CORPORATION, a Delaware corporation (the "Corporation")
and the outside director of the Corporation named in the attached
addendum ("Outside Director"),

                         W I T N E S S E T H:

     That to encourage stock ownership by directors of the
Corporation and for other valuable consideration, the parties
agree as follows:

     1. Definitions.

     (a)	"Agreement" means this stock option agreement.

     (b)	"Board" means the Board of Directors of the
Corporation.

     (c)	"Change in Control" means an event or transaction
described in Subparagraph (a), (b), (c) or (d) of Paragraph 3.

     (d)	"Code" means the Internal Revenue Code of 1986, as
amended.

     (e)	"Common Stock" means the $1 par value Common Stock of
the Corporation.

     (f)	"Committee" means the committee appointed by the Board
to administer the Plan. If Outside Director is a member of such
Committee, Outside Director shall not participate in any actions
and determinations of the Committee with respect to this
Agreement.

     (g)	"Corporation" means Potlatch Corporation, a Delaware
corporation.

     (h)	"Date of Grant" means the date specified in Section 1
of the addendum to this Agreement.

     (i)	"Exercise Price" means the price per Share designated
in Section 2 of the addendum to this Agreement at which this
Option may be exercised.

                                                 EXHIBIT (10)(n)(vii)
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     (j)  "Fair Market Value" of a Share as of a specified date
means the closing price at which Shares are traded at the close
of business on such date as reported in the New York Stock
Exchange composite transactions published in the Western Edition
of The Wall Street Journal, or if no trading of Shares is
reported for that day, on the next preceding day on which trading
was reported.

     (k)	"Nonqualified Stock Option" means an Option other than
an incentive stock option described in Code section 422(b).

     (l)	"Option" means a stock option granted pursuant to the
Plan.

     (m)	"Option Period" means the term of this Option as
provided in Paragraph 3 of this Agreement.

     (n)	"Partial Exercise" means an exercise with respect to
less than all of the vested but unexercised Shares subject to
Option held by the person exercising the Option.

     (o)	"Plan" means the Potlatch Corporation 1995 Stock
Incentive Plan, pursuant to which the parties have entered into
this Agreement.

     (p)  "Purchase Price" means the Exercise Price times the
number of whole shares with respect to which this Option is
exercised.

     (q)	"Securities Act" means the Securities Act of 1933, as
amended.

     (r)	"Share" means one share of Common Stock, adjusted in
accordance with Section 13 of the Plan.

     (s)	"Subsidiary" means any corporation in an unbroken chain
of corporations beginning with the Corporation if each of the
corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.

     2.	The Corporation grants to Outside Director the option
to purchase that number of shares of Common Stock specified in
Section 3 of the addendum to this Agreement for the Exercise
Price specified in Section 2 of the addendum to this Agreement,
on the terms and conditions stated in this Agreement.

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     This Option has been granted pursuant to the Plan, a copy of
the text of which Outside Director may obtain upon request to the
Corporation.

     3.	Subject to the conditions stated in this Agreement, the
period during which the Option may be exercised (the "Vesting
Schedule") shall be as follows:

      Number of Shares               Vesting Schedule*

50% of the number of shares	     From one year from the Date
specified in Section 3 of	       of Grant to end of term for
the addendum	                    Option

50% of the number of shares	     From two years from the
specified in Section 3 of	       Date of Grant to end of
the addendum	                    term for Option


     Beginning six months after the Date of Grant, Outside
Director shall have the right to exercise the Option (or to call
the related stock appreciation right as described in Paragraph
4), in whole or in part:

     (a)   Upon consummation of a reorganization, merger or
     consolidation involving the Corporation (a "Business
     Combination"), in each case, unless, following such Business
     Combination, (A) all or substantially all of the individuals
     and entities who were the beneficial owners, respectively,
     of the then outstanding shares of Common Stock (the
     "Outstanding Common Stock") and the then outstanding voting
     securities of the Corporation entitled to vote generally in
     the election of directors (the "Outstanding Voting
     Securities") immediately prior to such Business Combination
     beneficially own, directly or indirectly, more than 50% of,
     respectively, the then outstanding shares of common stock
     and the combined voting power of the then outstanding voting
     securities entitled to vote generally in the election of
     directors of the corporation resulting from such Business
     Combination (including, without limitation, a corporation
     which as a result of such transaction owns the Corporation
     either directly or through one or more subsidiaries), (B) no
     Person (as defined in subparagraph (c) below) (excluding any
     corporation resulting from such Business Combination or any
     employee benefit plan (or related trust) sponsored or
     maintained by the Corporation or such other corporation
     resulting from such Business Combination) beneficially owns,
     directly or indirectly, 20% or more of, respectively, the


*See Paragraph 5 for further explanation of end of term for Option.

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     then outstanding shares of common stock of the corporation
     resulting from such Business Combination or the combined
     voting power of the then outstanding voting securities of
     such corporation except to the extent that such ownership is
     based on the beneficial ownership, directly or indirectly,
     of Outstanding Common Stock or Outstanding Voting Securities
     immediately prior to the Business Combination and (C) at
     least a majority of the members of the board of directors of
     the corporation resulting from such Business Combination
     were members of the Board at the time of the execution of
     the initial agreement, or of the action of the Board,
     providing for such Business Combination provided, however,
     if the Corporation and the other party to the Business
     Combination agree that the transaction is to be treated as a
     pooling of interests for financial reporting purposes, and
     if the transaction in fact is so treated, then the right to
     exercise the Option (or to call the related stock
     appreciation right) shall not be accelerated upon
     consummation of the Business Combination to the extent that
     the Corporation's independent accountants and the other
     party's independent accountants separately determine in good
     faith that the acceleration would preclude the use of
     pooling of interests accounting; or

	         (b)   On the date that individuals who, as of December
     2, 1999 constitute the Board (the "Incumbent Board") cease
     for any reason to constitute at least a majority of the
     Board; provided, however, that any individual becoming a
     director subsequent to December 2, 1999 whose election, or
     nomination for election by the Corporation's stockholders,
     was approved by a vote of at least a majority of the
     directors then comprising the Incumbent Board shall be
     considered as though such individual were a member of the
     Incumbent Board, but excluding, for this purpose, any such
     individual whose initial assumption of office occurs as a
     result of an actual or threatened election contest with
     respect to the election or removal of directors, an actual
     or threatened solicitation of proxies or consents or any
     other actual or threatened action by, or on behalf of any
     Person other than the Board; or

	         (c)   Upon the acquisition after December 2, 1999 by
     any individual, entity or group (within the meaning of
     Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
     of 1934, as amended (the "Exchange Act")) (a "Person") of
     beneficial ownership (within the meaning of Rule 13d-3
     promulgated under the Exchange Act) of 20% or more of either
     (A) the then Outstanding Common Stock or (B) the combined
     voting power of the Outstanding Voting Securities; provided,
     however, that the following acquisitions shall not be deemed

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     to be covered by this subsection (c): (x) any acquisition of
     Outstanding Common Stock or Outstanding Voting Securities by
     the Corporation, (y) any acquisition of Outstanding Common
     Stock or Outstanding Voting Securities by any employee
     benefit plan (or related trust) sponsored or maintained by
     the Corporation or (z) any acquisition of Outstanding Common
     Stock or Outstanding Voting Securities by any corporation
     pursuant to a transaction which complies with clauses (A),
     (B) and (C) of subsection (a) of this Paragraph 3; or

	         (d)   Upon the consummation of the sale of all or
     substantially all of the assets of the Corporation or
     approval by the stockholders of the Corporation of a
     complete liquidation or dissolution of the Corporation.

     4.	In the event of a Change in Control, this Option shall
automatically include a stock appreciation right that may be
called by the Outside Director.   After a Change in Control
event, the Outside Director may surrender all or part of this
Option and exercise the stock appreciation right in lieu of
exercising all or any part of this Option, provided that at least
six months have elapsed from the Date of Grant and that the Fair
Market Value of the Common Stock on the date of such exercise is
higher than the Exercise Price specified in Section 2 of the
addendum to this Agreement. The exercise of a stock appreciation
right is referred to in this Paragraph 4 as the "call".  Upon the
call of a stock appreciation right, Outside Director shall be
entitled to receive payment of an amount equal to the difference
obtained by subtracting the aggregate option price of the shares
subject to the Option (or the portion of such Option) from the
Fair Market Value of such Shares on the date of such call. In the
case of a stock appreciation right that is called after an event
described in Paragraph 3(a) or 3(d), for purposes of measuring
the value of the stock appreciation right, "Fair Market Value"
shall be the greater of (a) the value of the consideration per
share that the Outside Director would have received in connection
with the transaction described in Paragraph 3(a) or 3(d) as a
stockholder of the Corporation if he or she had exercised the
Option immediately prior to the event described in Paragraph 3(a)
or 3(d) or (b) the value determined as of the date of the call in
good faith by the Committee (as composed on the day preceding the
date of consummation of the transaction described in Paragraph
3(a) or 3(d)), taking into consideration all relevant facts and
circumstances.

     For all purposes under this Agreement (unless the context
requires otherwise), the terms "exercise" or "exercisable" shall
be deemed to include the terms "call" or "callable" as such terms
may apply to a stock appreciation right, and in the event of the
call of a stock appreciation right the underlying Option

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will be deemed to have been exercised for all purposes under the
Plan.

     Payment of a stock appreciation right shall be made as soon
as reasonably practicable following receipt by the Corporation of
the notice described in Paragraph 8. Unless otherwise required by
the Plan, payment of the stock appreciation right shall be made
in such form as may be permitted pursuant to the rules and
regulations adopted from time to time by the Committee, as in
effect on the date the stock appreciation right is called.

     5.	The term of this Option shall end and this Option shall
not be exercisable after 10 years from the Date of Grant or, if
earlier, upon the termination of Outside Director's services as a
director of the Corporation subject to the following provisions:

          (a)	 If the termination of services is caused by
     Outside Director's death, this Option, to the extent that it
     was exercisable under Paragraph 3 of this Agreement at the
     date of death and had not previously been exercised, may be
     exercised at any time before the end of the Option Period as
     specified in the Option Agreement by Outside Director's
     executors or administrators or by any person or persons who
     shall have acquired this Option directly from Outside
     Director by bequest or inheritance.

          (b)   If the termination of services is caused by
     retirement after five years of service as an Outside
     Director of the Corporation, this Option, to the extent it
     was exercisable under Paragraph 3 of this Agreement at the
     date of such termination and had not previously been
     exercised, may be exercised at any time before the end of
     the Option Period as specified in the Option Agreement.

          (c)   If the termination of services is for any reason
     other than death or retirement, this Option, to
     the extent that it was exercisable under Paragraph 3 of this
     Agreement at the date of such termination and had not
     previously been exercised, may be exercised within three
     months after the date of such termination; provided that in
     such case the right to call a stock appreciation right as
     described in Paragraph 4 shall terminate on the date Outside
     Director's services terminate unless Outside Director
     requests and the Committee permits the call of the stock
     appreciation right within three months after the date of
     such termination. Notwithstanding the foregoing, if the
     termination of services is for cause, the option shall cease
     to be exercisable or callable at the time of such
     termination. The Board shall determine whether Outside
     Director's services are terminated for cause in accordance

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     with the Corporation's Restated Certificate of
     Incorporation.

     6.	The Corporation agrees that it will at all times during
the Option Period reserve and keep available sufficient
authorized but unissued or reacquired Common Stock to satisfy the
requirements of this Agreement. The number of Shares reserved and
the Exercise Price shall be proportionately adjusted for any
increase or decrease in the number of issued and outstanding
Shares by reason of stock dividends, stock splits,
consolidations, recapitalizations, reorganizations or like
events, as determined by the Committee pursuant to the Plan.

     7.   Subject to any required action by the stockholders, if
the Corporation shall be a party to any merger, consolidation or
other reorganization, this Option shall apply to the securities
to which a holder of the number of Shares subject to this Option
would have been entitled.

     8.	Outside Director, or Outside Director's representative,
may exercise this Option by giving written notice to the
Corporation at Spokane, Washington, attention of the Secretary,
specifying the election to exercise the Option, the number of
Shares for which it is being exercised and the method of payment
for the amount of the Purchase Price of the Shares for which this
Option is exercised. Such payment shall be made:

          (a)	In United States dollars delivered at the time of
     exercise;

          (b)	Subject to the conditions stated in rules and
     regulations adopted by the Committee, by the surrender of
     Shares in good form for transfer, owned by the person
     exercising this Option and having an aggregate Fair Market
     Value on the date of exercise equal to the Purchase Price;
     or

          (c) In any combination of Subparagraphs (a) and (b)
     above, if the total of the cash paid and the Fair Market
     Value of the Shares surrendered equals the Purchase Price of
     the Shares for which this Option is being exercised.

     The notice shall be signed by the person or persons
exercising this Option, and in the event this Option is being
exercised by the representative of Outside Director, shall be
accompanied by proof satisfactory to the Corporation of the right
of the representative to exercise the Option. No Share shall be
issued until full payment has been made. After receipt of full
payment, the Corporation shall cause to be issued a certificate
or certificates for the Shares for which this Option has been

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exercised, registered in the name of the person or persons
exercising the Option (or in the name of such person or persons
and another person as community property or as joint tenants),
and cause such certificate or certificates to be delivered to or
upon the order of such person or persons.

     9.	In the event the Corporation determines that it is
required to withhold state or federal income tax as a result of
the exercise of this Option, as a condition to the exercise of
the Option, Outside Director will make arrangements satisfactory
to the Corporation to enable it to satisfy such withholding
requirements.

     10.	Neither Outside Director nor Outside Director's
representative shall have any rights as a stockholder with
respect to any Shares subject to this Option until such Shares
shall have been issued to Outside Director or Outside Director's
representative.

     11.	Unless at the time Outside Director gives notice of the
exercise of this Option, the Shares to be issued are registered
under the Securities Act, the notice shall include a statement to
the effect that all Shares for which this Option is being
exercised are being purchased for investment, and without present
intention of resale, and will not be sold without registration
under the Securities Act or exemption from registration, and such
other representations as the Committee may require. The
Corporation may permit the sale or other disposition of any
Shares acquired pursuant to any such representation if it is
satisfied that such sale or other disposition would not
contravene applicable state or federal securities laws. Unless
the Corporation shall determine that, in compliance with the
Securities Act or other applicable statute or regulation, it is
necessary to register any of the Shares for which this Option has
been exercised, and unless such registration, if required, has
been completed, certificates to be issued upon the exercise of
this Option shall contain the following legend:

          "The Shares represented by this certificate have not
     been registered under the Securities Act of 1933 and may be
     offered, sold or transferred only if registered pursuant to
     the provisions of that Act or if an exemption from
     registration is available."

     12.	Except as otherwise provided in this Agreement, this
Option and the rights and privileges conferred by this Agreement
shall not be transferred, assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar
process. Upon any attempt to transfer, assign, pledge,

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hypothecate or otherwise dispose of this Option, or of any right
or privilege conferred by this Agreement, contrary to the
provisions of this Paragraph, or upon any attempted sale under
any execution, attachment or similar process upon the rights and
privileges conferred by this Agreement, this Option and the
rights and privileges conferred by this Agreement shall
immediately become null and void.

     13.	Nothing in this Agreement shall be construed as giving
Outside Director the right to be retained as a director of the
Corporation.

     14. This Agreement shall be interpreted and construed in
accordance with the laws of the State of Delaware without regard
to choice of law principles.

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                 	ADDENDUM TO STOCK OPTION AGREEMENT

           	POTLATCH CORPORATION 1995 STOCK INCENTIVE PLAN


Name of Outside Director:  _____________________________

1.  Date of Grant:  _______________________

2.	 Exercise Price:  $ ____________ per share, which is agreed
    to be one hundred percent (100%) of the Fair Market Value of
    the common stock subject to the Option on the Date of Grant.

3. 	The number of Shares subject to this Option is (check one):


     ___  	5,000 Shares (Director Election)


     ___  	2,500 Shares (Annual Grant)


     This number is subject to adjustment as provided in
     Section 13 of the Plan and Paragraph 6 of this stock option
     agreement.

The document entitled Stock Option Agreement - Potlatch
Corporation 1995 Stock Incentive Plan is incorporated by this
reference into this addendum.

     IN WITNESS WHEREOF, the Corporation has caused this addendum
to the stock option agreement to be executed on its behalf by its
duly authorized representative and the Outside Director has
executed the same on the date indicated below.

                           POTLATCH CORPORATION


Date:                      By
                                 Secretary



Date:                      By ___________________________________
                                     Outside Director


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