STOCK OPTION AGREEMENT

           POTLATCH CORPORATION 1989 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 employee of the Corporation named in 
the attached ("Employee"),

                      W I T N E S S E T H:

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

     1. Definitions.

     (a) "Agreement" shall mean this stock option agreement.

     (b) "Board" shall mean the Board of Directors of
the Corporation.

     (c) "Change in Control" shall mean an event or
transaction described in Subparagraph (a), (b), (c) or (d) of 
Paragraph 3 (without regard to the thirty (30) and three
hundred sixty-five (365) day periods also described in those 
Subparagraphs).

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

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

     (f) "Committee" shall mean the Committee appointed
by the Board to administer the Plan.

     (g) "Corporation" shall mean Potlatch Corporation,
a Delaware corporation.

     (h) "Date of Grant" shall mean the date on which
the Committee determined to grant this Option, as specified 
in Section 1 of the addendum to this Agreement.

     (i) "Disability" shall mean the Employee is unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than twelve
(12) months.     


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                                               Exhibit (10)(l)(iii)

<PAGE>
     (j) "Exercise Price" shall mean the price per 
Share designated in Section 2 of the addendum to this 
Agreement at which this Option may be exercised.

     (k) "Fair Market Value" of a Share as of a speci-
fied date shall mean the closing price at which such Shares 
are traded as of the close of business on such date as 
reported on the composite tape, or if no trading of the 
Common Stock is reported for that day, on the next preceding 
day on which trading was reported.

     (l) "Incentive Stock Option" shall mean an Option
described in Code section 422A(b).

     (m) "Nonqualified Stock Option" shall mean an
Option other than an Incentive Stock Option.

     (n) "Option" shall mean a stock option granted
pursuant to the Plan.

     (o) "Option Period" shall mean the term of this
Option as provided in Paragraph 3 of this Agreement.

     (p) "Partial Exercise" shall mean an exercise with 
respect to less than all of the accrued but unexercised 
Shares subject to Option held by the person exercising the 
Option.
    
     (q) "Plan" shall mean the Potlatch Corporation 
1989 Stock Incentive Plan, as adopted by the Board on 
December 8, 1988, and as amended by the Board on 
February 24, 1989 and February 22, 1990,to be effective 
on January 1, 1989, and pursuant to which the parties have 
entered into this Agreement.

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

     (s) "Rules" shall mean the regulations and rules
adopted from time to time by the Committee.

     (t) "Securities Act" shall mean the Securities Act
of 1933, as amended.

     (u) "Share" shall mean one share of Common Stock, 
adjusted in accordance with Section 11 of the Plan.

     (v) "Subsidiary" shall mean 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 fifty percent 
(50%) or more of the total combined voting power of all 
classes of stock in one of the other corporations in such
chain.

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<PAGE>
     2.  The Corporation hereby grants to Employee 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 hereinafter 
stated, and in consideration for which Employee hereby agrees 
to continue in the employment of the Corporation or its 
Subsidiaries for a period of at least one (1) year from the 
date of this Agreement .

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

     3.  Subject to the conditions stated herein,
unless a different period is specified in Section 5 of the 
addendum to this Agreement, the period during which the
option may be exercised (the "Vesting Schedule") and the Call 
Periods applicable to such Vesting Schedule pursuant to
Paragraph 4 shall be as follows:

Number of Shares          Vesting Schedule*          Call Period** 

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

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

No Partial Exercise of this Option may be for less than ten 
(10) Share lots or multiples thereof.

          If a period of six (6) months has elapsed from the
Date of Grant, Employee shall have the right to exercise the 
Option (or in lieu thereof to call the related stock
appreciation right), in whole or in part:

          (a)  Within thirty (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

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

** This column is applicable only if the Option is granted with a stock
   appreciation right as indicated in Section 6 of the addendum to this
   Agreement.

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     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 three hundred sixty-five (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 Corporation 
     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 three hundred sixty-five (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 twenty percent
     (20%) or more of the aggregate voting power of the
     capital stock of the Corporation issued and
     outstanding; and

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

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

     4. If the Option is designated in Section 6 of
the addendum to this Agreement as being granted with a stock
appreciation right, under the conditions described herein, 
Employee may surrender all or part of this Option and exer-
cise the stock appreciation right in lieu of exercising all 
or any part of this Option, provided 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 appreci-
ation right shall be referred to herein as the "call" 
thereof.  Upon the call of a stock appreciation right 
Employee 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 

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portion thereof) from the Fair Market Value of such Shares on 
the date of such call.  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 granted in conjunction with the Option and in the event 
of the call of the stock appreciation right the underlying
Option will be deemed to have been exercised for all
purposes under the Plan.

     If the Option is not designated in Section 6 of the
addendum to this Agreement as being granted with a stock
appreciation right, the Option shall nevertheless automati-
cally include a stock appreciation right that may be called 
in the event of a Change in Control, only during the periods 
described in Subparagraphs (a), (b), (c) or (d) of Para-
graph 3 In the case of any stock appreciation right that
is called during either of the thirty (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 Employee would have 
received in connection with such transaction as a 
stockholder of the Corporation if he or she had exercised
the Option prior to the consummation of the transaction 
described in Paragraph 3(a) or Paragraph 3(d) 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.

     Payment of a stock appreciation right shall be 
made as soon as reasonably practicable following receipt by 
the Corporation of the form described in Paragraph 8.  Pay-
ment of the stock appreciation right shall be made in such 
form as may be permitted pursuant to the Rules as in effect 
on the date the stock appreciation right is called.

     5.  The term of this Option shall end and (any 
other provision of the Plan to the contrary notwithstanding) 
this Option shall not be exercisable after seven (7) years 
from the Date of Grant if this Option is designated as an 
Incentive Stock Option in Section 4 of the addendum to this 
Agreement or ten (10) years from the Date of Grant if this
Option is designated as a Nonqualified Stock Option in 
Section 4 of such addendum, or, if earlier, upon the
termination of Employee's employment with the Corporation or 
its Subsidiaries, subject to the following provisions:

       (a)  If the termination of employment is 
   caused by Employee'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 or called, may be 

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<PAGE>
   exercised or called at any time before the end of the
   Option Period as specified in the Option Agreement by
   Employee's executors or administrators or by any person or 
   persons who shall have acquired this Option directly from
   Employee by bequest or inheritance.

       (b)  If the termination of Employees' 
   employment is caused by Disability or Early, Normal or Late
   Retirement under the Potlatch Corporation Salaried Employees' 
   Retirement Plan, 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 or called at any time before
   the end of the Option Period as specified in the Option Agreement.

       (c)  If the termination of Employee's 
   employment is for any reason other than death, 
   Disability, or Early, Normal or Late Retirement under the Potlatch 
   Corporation Salaried Employees' Retirement Plan, 
   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 (3) months 
   after the date of such termination; provided, 
   however, that in such case the right to call a 
   stock appreciation right shall terminate on the 
   date Employee's employment terminates unless 
   Employee requests and the Committee permits the 
   call of the stock appreciation right within three
   (3) months after the date of such termination.
   Notwithstanding the foregoing, if the termination 
   of employment is by reason of Employee's
   misconduct, the option shall cease to be 
   exercisable or callable at the time of such 
   termination.   As used herein "misconduct" means 
   that Employee has engaged in unfair competition 
   with the Corporation or a Subsidiary, induced any 
   customer of the Corporation or a Subsidiary to 
   breach any contract with the Corporation or a 
   Subsidiary, made any unauthorized disclosure of any 
   of the secrets or confidential information of the 
   Corporation or a Subsidiary, committed an act of 
   embezzlement, fraud or theft with respect to the 
   property of the Corporation or a Subsidiary, or 
   engaged in conduct which is not in good faith and 
   which directly results in material loss, damage or 
   injury to the business, reputation or employees of 
   the Corporation or a Subsidiary.  The Committee 
   shall determine whether Employee's employment is 
   terminated by reason of misconduct.  In making such 
   determination the Committee shall act fairly and
   shall give Employee an opportunity to be heard and
   present evidence on Employee's behalf.

     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 

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<PAGE>
number of Shares so reserved and the Exercise Price thereof 
shall be proportionately adjusted for any increase or 
decrease in the number of issued and outstanding Shares by 
reason of stock dividends, split-ups, 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 pertain and apply to the 
securities to which a holder of the number of Shares subject 
to this Option would have been entitled.  Except insofar as 
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 effective 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, 
Employee (or Employee's representative) shall be entitled to 
receive the same consideration in such transaction 
(including, without limitation, cash) as other shareholders 
are entitled to receive .

     8.  Employee, or Employee's representative, may
call twenty percent (20%) or more of that portion of the 
Option which has become vested in accordance with Paragraph 3 
of this Agreement at any time during each applicable Call 
Period, except as requested by Employee or Employee's 
representative and approved by the Committee.  For purposes 
of the Plan, the date of call shall be the date a form
provided by the Corporation for this purpose is filed by the 
Employee or the Employee's representative and received by the 
Vice President, Employee Relations of the Corporation.

     Employee, or Employee's representative, may exercise
this Option by giving written notice to the Corporation at 
Spokane, Washington, attention of the Vice President, 
Employee Relations, specifying the election to exercise
the Option, the number of Shares in respect of which it is 
being exercised and the method of payment for the amount of 
the Purchase Price of the Shares as to 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 Corporation to 
    govern its stock option program, by the surrender 
    of Shares in good form for transfer, owned by the 
    person exercising this Option and having an 

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    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 so paid and 
    the Fair Market Value of the Shares so surrendered  
    equals the Purchase Price of the Shares with 
    respect to 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 Employee, it 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 therefor has been made.
The Corporation shall thereafter cause to be issued a cer-
tificate or certificates for the Shares as to which this
Option shall have been so exercised, registered in the name 
of the person or persons so 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.  Payments or transfers to the Employee under 
this Agreement shall be limited to the amount (the "Capped 
Amount") necessary to avoid characterization of any amount 
payable to the Employee (including, but not limited to, 
amounts payable under this Agreement) as an "excess 
parachute payment" as defined in section 280G of the Code,
except in the event that the total amount that the Employee 
would receive from all "parachute payments" (as defined in 
Code section 280G), net of all applicable taxes, including 
the excise tax that would be imposed pursuant to Code section 
4999, would exceed the Capped Amount, net of all applicable 
taxes.

         The firm of independent certified public accountants
serving as the Corporation's outside auditor as of the date of 
a Change in Control shall determine whether any amount would 
constitute an "excess parachute payment," disregarding any 
payments or benefits available to the Employee under any plan, 
contract or program if the Employee irrevocably elects to
relinquish or not exercise such payments or benefits before 
the payment or enjoyment thereof.

     10.  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, Employee will make arrangements 
satisfactory to the Corporation to enable it to satisfy such 
withholding requirements.

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<PAGE>
     11.  Neither Employee nor Employee'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 and delivered to Employee or 
Employee's representative.

     12.  Unless the Shares to be acquired are regis-
tered under the Securities Act, Employee represents and 
agrees that upon the exercise of the Option herein granted 
Employee will purchase such Shares for the purpose of 
investment and without present intention of resale.  Unless 
at the time Employee 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 in respect of 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 
therefrom, 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 be in contravention of 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 with respect to which the exercise 
of this Option has been made, 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."

     13.  Except as otherwise provided herein, the 
Option herein granted and the rights and privileges 
conferred hereby 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 hereby,
contrary to the provisions hereof, or upon any attempted 
sale under any execution, attachment or similar process upon 
the rights and privileges conferred hereby, this Option and 
the rights and privileges conferred hereby shall immediately 
become null and void.

     14.  Nothing in this Agreement shall be construed
as giving Employee the right to be retained as an employee or 
as impairing the rights of the Corporation to terminate his 
or her employment at any time, with or without cause.

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<PAGE>
     15.  This Agreement shall be interpreted and con-
strued in accordance with the laws of the State of Delaware
without regard to choice  of law principles.

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<PAGE>
                  ADDENDUM TO STOCK OPTION AGREEMENT
            POTLATCH CORPORATION 1989 STOCK INCENTIVE PLAN

Name of Employee:___________________________

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 Stock Option 
   Agreement is ___________, subject to adjustment as provided
   in Section 11 of the Plan and Paragraph 6 of this 
   Agreement.

4. This Option is:   A Nonqualified Stock option

5. The Vesting Schedule for this Option is: The schedule 
   specified in Paragraph 3 of the Stock Option Agreement,
   except that no exercise or call will be permitted for a 
   fractional Share.

6. This Option is granted without a Stock Appreciation Right,
   other than as specified in Paragraph 4 of the Stock Option
   Agreement describing Stock Appreciation Rights in the event
   of a change in control.


The document entitled Stock Option Agreement Potlatch
Corporation 1989 Stock Incentive Plan is hereby incorporated
by 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 Employee 
has executed the same on the date indicated below. 

                                 POTLATCH CORPORATION

Date:__________________    By__________________________________
                             Vice President, Employee Relations


Date:__________________    By__________________________________
                             Employee

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