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

                               -3-

                                          Exhibit (10)(n)(iii)  


<PAGE>
              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
                               -4-
                               
<PAGE>                      
                     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

                                           Outside Director Option
                               -5-

<PAGE>
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.

    	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.

                                          Outside	Director Option

                               -6-

<PAGE>
	    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;

         	(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

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

                                     Outside	Director Option

                               -7-

<PAGE>
     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 Valuer" 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
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

                                          Outside	Director	Option

                               -8-

<PAGE>
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
     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.

                                          Outside	Director Option

                               -9-

<PAGE>
    	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,
     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

                                     Outside Director Option

                               -10-

<PAGE>
     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
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

                                     Outside Director Option
                               -11-

<PAGE>
     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.

                                           Outside Director Option

                               -12-