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                                                            Exhibit 10(n) (iii)

                      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):

     __   1,000 Shares (Director Election)

     __   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 of 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

                                                        Effective 12/05/96

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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):

     __   1,000 Shares (Plan Approval/Director Election)

     __   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.

The options specified in Section 3 of this Addendum shall be canceled and the
Agreement with respect to the options specified in this Addendum shall be
without force and effect if the 1995 Stock Incentive Plan adopted by the Board
of Directors of this Corporation on December 7, 1995 is not approved by the
stockholders of this Corporation at the 1996 annual meeting of stockholders or
any adjournment thereof.

     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

                                                              Effective 12/07/95

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                            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 (without regard to the 30- and
365-day periods also described in those Subparagraphs).

        (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.

        (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

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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.

        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

        No Partial Exercise of this Option may be for less than a multiple of
10 Shares.

        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) Within 30 days following the consummation of any transaction
     approved by the stockholders of the Corporation in which the Corporation
     will cease to be an independent publicly owned corporation (including,
     without limitation, a reverse merger transaction in which the Corporation
     becomes the subsidiary of another corporation) or the sale or other
     disposition of all or substantially all of the assets of the Corporation;

             (b) Within 365 days following the date on which more than one-third
     (determined by rounding down to the next whole number) of the individual
     members of the Board neither (i) were directors of the Corpora-tion on a
     date three years earlier nor (ii) are individuals whose election or
     nomination for election as directors was affirmatively voted on by at least
     a majority of those directors described in (i) above who were still in
     office as of the date the Board approved such election or nomination;

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

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             (c) Within 365 days following the date on which any "person"
     (as such term is used in sections 13(d) and 14(d) of the Securities
     Exchange Act of 1934, as amended (the "1934 Act") that has acquired Shares
     pursuant to a tender offer subject to section 14(d) of the 1934 Act becomes
     entitled to vote 20% or more of the aggregate voting power of the capital
     stock of the Corporation issued and outstanding; and

             (d) Within 30 days prior to any dissolution or liquidation of the
     Corporation or any merger or consolidation in which the Corporation is not
     the surviving corporation, but not earlier than the date on which any
     required stockholder approval is obtained.

If an option in not exercised during any 30-day period described in (a) or (d)
above, the option shall terminate at the close of business on the last day of
the 30-day period; provided that if periods described in (a) and (d) are
contiguous or overlap, unexercised options shall terminate at the close of
business on the last day of the second 30-day period,

        4.  In the event of a Change in Control, this Option shall automatically
include a stock appreciation right that may be called only during the periods
described in Subparagraphs (a), (b), (c) or (d) of Paragraph 3. During any such
period, 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 during either of the 30-day periods 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 prior to
the consummation of such transaction, or (b) the value determined in good faith
by the Committee (as composed on the day preceding



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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 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. 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 if 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 if 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 within 36 months after Outside Director's death
     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 within 36 months after the date of such
     termination.

             (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

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     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 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 the surviving corporation in 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.
Except to the extent Paragraph 3 (and Paragraph 4) permit the exercise of
Options (and stock appreciation rights) within a specified time period before
or after a Change in Control, a dissolution or liquidation of the Corporation
or a merger, consolidation or other reorganization in which the Corporation is
not the surviving corporation shall cause this Option to terminate on the
effectlve date of such dissolution, liquidation or reorganization, unless the
agreement of merger, consolidation or reorganization shall otherwise provide.
In the event that the Corporation undergoes a reverse merger transaction,
Outside Director (or Outside Director's representative) shall be entitled to
receive the same consideration in such transaction (including, without
limitation, cash) as other stockholders are entitled to receive.

        8.  Outside Director, or Outside Director's representative, may exercise
this Option by giving written notice to the Corporation at San Francisco,
California, 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,

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     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 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

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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, 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 California.

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