Document:

<PAGE>

                                                            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

                                  Page 1

<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

                                  Page 2

<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 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

                                  Page 3

<PAGE>

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.

                                  Page 4

<PAGE>

             (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

                                  Page 5

<PAGE>

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

                                  Page 6

<PAGE>

     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,

                                  Page 7

<PAGE>

     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

                                  Page 8

<PAGE>

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.

                                  Page 9<PAGE>

                                                               Exhibit 10(o)(i)

                      FIRST AMENDMENT TO CREDIT AGREEMENT

         THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as
of August 27, 2001, is made by and among POTLATCH CORPORATION, a Delaware
corporation (the "Company"), the Subsidiary Guarantors party hereto, the several
financial institutions party hereto, and BANK OF AMERICA, N.A., as
administrative agent for the Lenders (in such capacity, the "Agent"). Terms used
but not otherwise defined herein shall have the meanings provided in the Credit
Agreement described below.

                                    RECITALS

                  The Company, the Subsidiary Guarantors party thereto, the
several financial institutions from time to time party thereto (each a "Lender"
and, collectively, the "Lenders") and the Agent are parties to a Credit
Agreement dated as of June 29, 2001, (as may be amended, modified, restated and
supplemented from time to time, the "Credit Agreement").

                  The Company, the Subsidiary Guarantors, the Required Lenders
and the Agent have agreed to deliver and execute this Amendment on the terms and
conditions set forth herein.

                                   AGREEMENT

         NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                  SECTION 1  Amendment to Section 1.1. Section 1.1 to the Credit
Agreement is hereby amended by adding the following definition in the
appropriate alphabetical order:

                  "IRB Letters of Credit" means those certain irrevocable
                  Letters of Credit issued by Bank of America, as Issuing
                  Lender, in substitution of certain irrevocable letters of
                  credit issued by Bank One, NA (formerly known as The First
                  National Bank of Chicago) as more specifically set forth on
                  Schedule 8.1.

                  SECTION 2  Amendment to Section 2.2(a). Section 2.2(a) of the
Credit Agreement is hereby amended in its entirety to read as follows with the
additions and deletions set forth below:

                  (a)      Issuance. The Existing Letters of Credit have
                  previously been issued by the applicable Issuing Lender and
                  subject to the terms and conditions hereof and in reliance
                  upon the representations and warranties set forth herein,
                  Bank of America, in its capacity as an Issuing Lender, agrees
                  to issue, the applicable Issuing Lender agrees to renew,
                  extend and modify and each Lender with a Revolving Commitment
                  severally agrees to participate in the issuance by such
                  Issuing Lender of, standby Letters of Credit in Dollars from
                  time to time from the Closing Date until the date thirty (30)
                  days prior to the Maturity Date as the Borrower may request,
                  by delivering a Letter of Credit Application to the applicable
                  Issuing Lender; provided,

<PAGE>

                  however, that (i) the LOC Obligations outstanding shall not
                  exceed (x) in the case of the issuance of the IRB Letters of
                  Credit, ONE HUNDRED THIRTY MILLION DOLLARS ($130,000,000)
                  until such date that the IRB Letters of Credit are issued
                  hereunder and each letter of credit issued by Bank One, NA
                  as more specifically set forth on Schedule 8.1, has
                  terminated or been cancelled by the applicable trustee and
                  (y) at all other times ONE HUNDRED TEN MILLION DOLLARS
                  ($110,000,000); (the "LOC Committed Amount") and (ii) the
                  sum of the aggregate outstanding principal amount of
                  Revolving Loans plus LOC Obligations shall not at any time
                  exceed the Revolving Committed Amount. No Letter of Credit
                  shall (x) have an original expiry date more than one year
                  from the date of issuance, except as otherwise agreed to by
                  the applicable Issuing Lender (provided that any such Letter
                  of Credit may contain customary "evergreen" provisions
                  pursuant to which the expiry date is automatically extended
                  by a specific time period unless the applicable Issuing
                  Lender gives notice to the beneficiary of such Letter of
                  Credit at least a specified time period prior to the expiry
                  date then in effect) or (y) as originally issued or as
                  extended, have an expiry date extending beyond the date
                  thirty (30) days prior to the Maturity Date. Each Letter of
                  Credit shall comply with the related LOC Documents. The
                  issuance date of each Letter of Credit shall be a Business
                  Day. All Existing Letters of Credit shall be deemed to have
                  been issued pursuant hereto, and from and after the Closing
                  Date shall be subject to and governed by the terms and
                  conditions hereof.

                  SECTION 3  Conditions of Effectiveness. The effectiveness of
         this Amendment shall be subject to the satisfaction of each of the
         following conditions precedent:

                  (a)      This Amendment. The Agent shall have received a duly
executed counterpart of this Amendment from the Required Lenders and the
Company;

                  (b)      Representations and Warranties; No Default. As of the
date hereof, after giving effect to the Amendment contemplated hereby:

                  (i)      the representations and warranties contained in
         Section 6 shall be true and correct in all material respects on and as
         of the date hereof as though made on and as of such date; and

                  (ii)     no Event of Default shall have occurred and be
         continuing.

         SECTION 4  Representations and Warranties. Each of the Company and the
Subsidiary Guarantors hereby represents and warrants to the Lenders and the
Agent that:

                  (a)      It has taken all necessary action to authorize the
         execution, delivery and performance of this Amendment.

                  (b)      This Amendment has been duly executed and delivered
         by such Person and constitutes such Person's legal, valid and binding
         obligations, enforceable in accordance with its terms, except as such
         enforceability may be subject to (i) bankruptcy, insolvency,
         reorganization, fraudulent conveyance or transfer, moratorium or
         similar laws

                                      2

<PAGE>

         affecting creditors' rights generally and (ii) general principles of
         equity (regardless of whether such enforceability is considered in a
         proceeding at law or in equity).

                  (c)      No consent, approval, authorization or order of, or
         filing, registration or qualification with, any court or governmental
         authority or third party is required in connection with the execution,
         delivery or performance by such Person of this Amendment.

                  (d)      The representations and warranties of the Credit
         Parties set forth in Section 6 of the Credit Agreement are, subject to
         the limitations set forth therein, true and correct in all material
         respects as of the date hereof (except for those which expressly relate
         to an earlier date).

                  (e)      Subsequent to the execution and delivery of this
         Amendment and after giving effect hereto, no Default or Event of
         Default exists under the Credit Agreement or any of the other Credit
         Documents.

                  (f)      All of the provisions of the Credit Documents, except
         as amended hereby, are in full force and effect.

                  SECTION 5         Miscellaneous.

                  (a)      Credit Agreement Otherwise Not Affected. Except as
expressly modified pursuant hereto, the Credit Agreement shall remain unchanged
and in full force and effect and is hereby ratified and confirmed in all
respects. The Lenders' and the Agent's execution and delivery of, or acceptance
of, this Amendment and any other documents and instruments in connection
herewith shall not be deemed to create a course of dealing or otherwise create
any express or implied duty by any of them to provide any other or further
amendments, consents or waivers in the future.

                  (b)      No Reliance. The Credit Parties hereby acknowledge
and confirm to the Agent and the Lenders that they are executing this Amendment
on the basis of its own investigation and for its own reasons without reliance
upon any agreement, representation, understanding or communication by or on
behalf of any other Person.

                  (c)      Costs and Expenses. The Company agrees to pay to the
Agent on demand its reasonable out-of-pocket costs and expenses, and the
reasonable fees and disbursements of its counsel, in connection with the
negotiation, preparation, execution and delivery of this Amendment and any other
documents to be delivered in connection herewith.

                  (d)      Binding Effect. This Amendment shall be binding upon,
inure to the benefit of and be enforceable by the Company, Subsidiary
Guarantors, the Agent and each Lender and their respective successors and
assigns.

                  (e)      Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

                                      3

<PAGE>

                  (f)      Complete Agreement; Amendments. This Amendment
contains the entire and exclusive agreement of the parties hereto with reference
to the matters discussed herein. This Amendment supersedes all prior
commitments, drafts, communications, discussion and understandings, oral or
written, with respect thereto. This Amendment may not be modified, amended or
otherwise altered except in accordance with the terms of Section 11.3 of the
Credit Agreement.

                  (g)      Severability. Whenever possible, each provision of
this Amendment shall be interpreted in such manner as to be effective and valid
under all applicable laws and regulations. If, however, any provision of this
Amendment shall be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed so modified, it shall be ineffective and invalid only
to the extent of such prohibition or invalidity without affecting the remaining
provisions of this Amendment, or the validity or effectiveness of such
provision in any other jurisdiction.

                  (h)      Counterparts/Telecopy. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart by telecopy shall be effective as an
original and shall constitute a representation that an original will be
delivered.

                  (i)      Interpretation. This Amendment is the result of
negotiations between and have been reviewed by counsel to the Agent, the Credit
Parties and other parties, and are the product of all parties hereto.
Accordingly, this Amendment shall not be construed against any of the Lenders or
the Agent merely because of the Agent's or any Lender's involvement in the
preparation thereof.

                  (j)      Credit Document.  This Amendment shall constitute a
"Credit Document" under and for all purposes of the Credit Agreement and the
other Credit Documents.

                                      4

<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment, as of the date first above written.

BORROWER:                POTLATCH CORPORATION

                         By: __________________________
                         Name: ________________________
                         Title: _______________________

                        [signature pages continue]

                                      5

<PAGE>

SUBSIDIARY
GUARANTORS:              DULUTH & NORTHEASTERN RAILROAD CO.

                         By: __________________________
                         Name: ________________________
                         Title: _______________________

                         THE PRESCOTT AND NORTHWESTERN
                         RAILROAD COMPANY

                         By: __________________________
                         Name: ________________________
                         Title: _______________________

                         ST. MARIES RIVER RAILROAD COMPANY

                         By: __________________________
                         Name: ________________________
                         Title: _______________________

                         WARREN AND SALINE RIVER RAILROAD
                         COMPANY

                         By: __________________________
                         Name: ________________________
                         Title: _______________________

                        [signature pages continue]

                                      6

<PAGE>

AGENT:                   BANK OF AMERICA, N.A.,
                         in its capacity as Agent

                         By:
                         Name:
                         Title:

                        [signature pages continue]

                                      7

<PAGE>

LENDERS:                 BANK OF AMERICA, N.A.
                         individually in its capacity as Lender and as
                         an Issuing Lender

                         By:
                         Name:
                         Title:

                        [signature pages continue]

                                      8

<PAGE>

                         _________________________________
                         Lender

                         By:
                         Name:
                         Title:

                        [signature pages continue]

                                      9

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