POTLATCH CORPORATION SEVERANCE PROGRAM FOR EXECUTIVE EMPLOYEES

Exhibit 10.3

POTLATCH CORPORATION

SEVERANCE PROGRAM FOR EXECUTIVE EMPLOYEES

( Effective December 5, 2008 )

TABLE OF CONTENTS

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POTLATCH CORPORATION

SEVERANCE PROGRAM FOR EXECUTIVE EMPLOYEES

Effective December 5, 2008

The Potlatch Corporation Severance Program for Executive Employees (the “Program”) was adopted effective December 5, 2008, by Potlatch Corporation (the “Corporation”) to provide a program of severance payments to certain employees of the Corporation, and their designated subsidiaries. The Program is an employee welfare benefit plan within the meaning of section 3(1) of ERISA and section 2510.3-1 of the regulations issued thereunder. The plan administrator of the Program for purposes of ERISA is the Corporation.

(a) “ Affiliate ” means any other entity which would be treated as a single employer with the Corporation under Section 414(b) or (c) of the Code, provided that in applying such Sections and in accordance with the rules of Treasury Regulations Section 1.409A-1(h)(3), the language “at least 50 percent” shall be used instead of “at least 80 percent.”

(b) “ Appeals Committee ” means the appeals committee described in Section 10.

(c) “ Base Compensation ” means an Eligible Employee’s base rate of pay as in effect at the time the Eligible Employee Separates from Service, or, if greater, the rate in effect at the time the material change described in Section 5(a)(iv) occurs or the time a Change of Control described in Section 5(b) occurs, if applicable. An Eligible Employee’s base rate of pay shall be determined without reduction for (i) any Deferred Contributions made by the Eligible Employee pursuant to the Salaried 401(k) Plan or (ii) any contributions made by the Eligible Employee pursuant to the Potlatch Custom Benefits Plan.

(d) “ Board ” means the Board of Directors of Potlatch Corporation.

(e) “ Change of Control ” means

(i) Upon consummation of a merger or consolidation involving the Corporation (a “Business Combination”), in each case, unless, following such Business Combination,

(A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of common stock of the Corporation (the “Outstanding Common Stock”) and the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the “Outstanding Voting Securities”) immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation or other entity resulting from such Business Combination

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(including, without limitation, a corporation or other entity which as a result of such transaction owns the Corporation either directly or through one or more subsidiaries),

(B) no individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act)) (a “Person”) (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any of its subsidiaries or such other corporation or other entity resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock or common equity of the corporation or other entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation or other entity except to the extent that such ownership is based on the beneficial ownership, directly or indirectly, of Outstanding Common Stock or Outstanding Voting Securities immediately prior to the Business Combination, and

(C) at least a majority of the members of the board of directors or similar governing body of the corporation or other entity resulting from such Business Combination were members of the Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(ii) On the date that individuals who, as of 11:59 p.m. (Pacific) on the date of the Distribution, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual who becomes a member of the Board on or subsequent to the day immediately following the date of the Distribution whose election, or nomination for election by the Corporation’s stockholders, was approved by a vote of at least a majority of the members of the Board then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for purposes of this proviso, any such individual whose appointment to the Board occurs as a result of an actual or threatened election contest with respect to the election or removal of a member or members of the Board, an actual or threatened solicitation of proxies or consents or any other actual or threatened action by, or on behalf of, any Person other than the Incumbent Board; or

(iii) Upon the acquisition on or after the date of the Distribution by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either

(A) the then Outstanding Common Stock, or

(B) the combined voting power of the Outstanding Voting Securities;

provided, however, that the following acquisitions shall not be deemed to be covered by this paragraph (iii):

(I) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by the Corporation,

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(II) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any employee benefit plan (or related trust) sponsored or maintained by the Corporation, or

(III) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of Section 2(e)(i); or

(iv) Upon the consummation of the sale, lease or exchange of all or substantially all of the assets of the Corporation; or

(v) Upon the approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation.

(f) “ COBRA ” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

(g) “ Code ” means the Internal Revenue Code of 1986, as amended.

(h) “ Committee ” means the Executive Compensation and Personnel Policies Committee of the Board of Directors of the Corporation.

(i) “ Corporation ” means Potlatch Corporation.

(j) “ Distribution ” means the distribution by the Corporation to its stockholders of all of the outstanding shares of the common stock of Clearwater Paper Corporation then owned by the Corporation, pursuant to the Separation and Distribution Agreement between the Corporation and Clearwater Paper Corporation.

(k) “ Eligible Employee ” means a Principal Officer of a Participating Company or other employee of a Participating Company who participates in the Program.

(l) “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

(m) “ Identification Date ” means each December 31.

(n) “ Incentive Plan ” means the Potlatch Corporation Management Performance Award Plan II, the Potlatch Corporation Annual Incentive Plan or any successor plan.

(o) “ Key Employee ” means an Eligible Employee who, on an Identification Date, is:

(i) An officer of the Corporation or an Affiliate having annual compensation greater than the compensation limit in Section 416(i)(1)(A)(i) of the Code, provided that no more than fifty officers of the Corporation and its Affiliates shall be determined to be Key Employees as of any Identification Date;

(ii) A five percent owner of the Corporation; or

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(iii) A one percent owner of the Corporation having annual compensation from the Corporation and its Affiliates of more than $150,000.

If an Eligible Employee is identified as a Key Employee on an Identification Date, then such Eligible Employee shall be considered a Key Employee for purposes of the Plan during the period beginning on the first April 1 following the Identification Date and ending on the next March 31.

(p) “ Misconduct ” means that the Eligible Employee

(i) Has been convicted of any felony or crime involving fraud, dishonesty or moral turpitude;

(ii) Has engaged in unfair competition with a Participating Company or any successor to a Participating Company;

(iii) Has induced any customer of a Participating Company or any successor to a Participating Company to breach any contract with a Participating Company or any successor to a Participating Company;

(iv) Has made any unauthorized disclosure of any of the secrets or confidential information of a Participating Company or any successor to a Participating Company;

(v) Has committed an act of embezzlement, fraud or theft with respect to the property of a Participating Company or any successor to a Participating Company; or

(vi) Has engaged in conduct, including any intentional, material violation of any contractual or statutory duty that is not corrected following thirty (30) days written notice, which is not in good faith and which directly results in material loss, damage or injury to the business, reputation or employees of a Participating Company or any successor to a Participating Company.

(q) “ Normal Retirement Date ” means “normal retirement date” as determined under the Retirement Plan.

(r) “ Participating Company ” means the Corporation and its subsidiaries designated by the Committee to participate in the Program.

(s) “ Present Value ” means the present value calculated using the assumed discount rate applied in projecting the Corporation’s pension benefit obligations for financial reporting purposes and the RP 2000 mortality table.

(t) “ Principal Officers ” means the president and chief executive officer, chief financial officer, secretary, treasurer and controller and any elected vice-president of a Participating Company.

(u) “ Program ” means the Potlatch Corporation Severance Program for Executive Employees.

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(v) “ Reduction in Authority or Responsibility ” means

(i) The assignment to the Eligible Employee of any duties that are materially inconsistent in any respect with the Eligible Employee’s position (which may include status, offices, titles and reporting requirements), authority, duties, or responsibilities as in effect immediately prior to such assignment, or

(ii) Any other action by a Participating Company or any successor to a Participating Company which results in a material diminution in such position, authority, duties, or responsibilities, excluding for this purpose (i) an isolated, insubstantial, and inadvertent action taken in good faith and which is remedied by the Corporation promptly after receipt of notice thereof given by the Eligible Employee, or (ii) any temporary Reduction in Authority or Responsibility while the Eligible Employee is absent from active service on any approved disability, or other approved leave of absence.

By way of example, a reduction under this definition shall include, but not be limited to:

(A) The removal of any material division, business or operating unit, or other business organization from the direct managerial responsibilities of the Eligible Employee, or material reduction in the size or scope of responsibility or operating budget of any division, business, operating unit, or other business organization for which the Eligible Employee has direct managerial responsibility; or

(B) A reduction in the Eligible Employee’s authority to legally bind a Participating Company or any successor to a Participating Company without first obtaining any additional authority or approval.

(w) “ Retirement Plan ” means the Potlatch Salaried Retirement Plan as in effect from time to time.

(x) “ Salaried 401(k) Plan ” means the Potlatch Salaried 401(k) Plan as in effect from time to time.

(y) “ Separation from Service ” means termination of an Eligible Employee’s service as an Eligible Employee consistent with Section 409A of the Code and the regulations promulgated thereunder. For purposes of the Plan, “Separation from Service” generally means termination of an Eligible Employee’s employment as a common-law employee of the Corporation and each Affiliate of the Corporation. A Separation from Service will not be deemed to have occurred if an Eligible Employee continues to provide services to the Corporation or an Affiliate in a capacity other than as an employee and if the former employee is providing a level of bona fide services that is fifty percent (50%) or more of the average level of services rendered, during the immediately preceding thirty-six (36) months of employment with the Corporation or Affiliate; provided, however, that a Separation from Service will be deemed to have occurred if it is reasonably anticipated that an Eligible Employee’s service with the Corporation and its Affiliates will terminate after a certain date or the level of bona fide services that the Eligible Employee will perform after such date (whether as an employee or another capacity) will permanently reduce to a rate that is less than twenty percent (20%) of the bona fide level of services rendered, on average, during the immediately preceding thirty-six (36) months (or if

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employed by the Corporation and its Affiliates less than thirty-six (36) months, such lesser period). However, the employment relationship is treated as continuing intact while the individual is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the individual’s right to reemployment with the service recipient is provided either by statute or by contract. If the period of leave exceeds six months and the individual’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period.

(z) “ Supplemental Plans ” means the Potlatch Corporation Salaried Employees’ Supplemental Benefit Plan and Potlatch Corporation Salaried Supplemental Benefit Plan II and any successor plan.

(aa) “ Year of Vesting Service ” means a year of vesting service as determined under the Retirement Plan.

All Principal Officers and appointed vice presidents of the Participating Companies and such other employees of the Participating Companies who are designated by the Committee to participate in the Program shall be eligible to participate in the Program. As a condition to participation in the Program, each Eligible Employee shall agree in writing to become bound by its terms, including, without limitation, the provisions of Section 11.

(a) Basic Severance Benefits . Upon the occurrence of any of the events specified in Section 5(a), an Eligible Employee shall receive (in lieu of any other severance benefit payable under any other plan or program now or hereafter maintained by a Participating Company) Basic Severance Benefits under the Program as follows:

(i) A cash benefit equal to three (3) weeks of the Eligible Employee’s Base Compensation for each full Year of Vesting Service completed by such Eligible Employee;

(ii) The Eligible Employee’s unused and accrued vacation pay, if any, determined as of the date when the Eligible Employee Separates from Service under the terms of the Participating Company’s officer vacation policy as in effect when the applicable event specified in Section 5(a) occurs (which, in the case of Separation from Service pursuant to Section 5(a)(iv), shall be the date of the material change rather than the date the Eligible Employee Separates from Service);

(iii) Eligibility for an “Award” under the Incentive Plan for the “Award Year” in which he or she Separates from Service, determined under all the terms and conditions of the Incentive Plan; and

(iv) Continued coverage as an employee during a period of weeks equal to three (3) times the number of full Years of Vesting Service completed by the Eligible Employee, under the following employee benefit plans of the Corporation:

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(A) Medical coverage in the amount, if any, that the Eligible Employee had in effect on the day preceding the date of his or her Separation from Service;

(B) Dental coverage in the amount, if any, that the Eligible Employee had in effect on the day preceding the date of his or her Separation from Service; and

(C) Basic life insurance coverage in the amount, if any, that the Eligible Employee had in effect on the day preceding the date of his or her Separation from Service.

Notwithstanding any of the foregoing provisions of this Section 4(a)(iv):

(1) Any such continued coverage shall terminate when the Eligible Employee becomes eligible for coverage by the life insurance, medical or dental plan of another employer.

(2) In the event that after an Eligible Employee’s Separation from Service with a Participating Company he or she is otherwise entitled to continued coverage under the Corporation’s basic life insurance, medical and dental plans pursuant to any employee benefit plan or program of the Corporation (other than this Program), the total benefits paid for by the Participating Companies during the period described above shall not exceed the benefits to which the Eligible Employee is entitled under this Section 4(a)(iv).

(3) For purposes of this Section 4(a)(iv), the Corporation’s basic life insurance plan shall not include any other type of life insurance coverage provided through or by the Corporation to or on behalf of its employees.

(4) During the period of such continued coverage, the Eligible Employee shall not be eligible to participate in the Corporation’s disability income plan or as an employee in the Retirement Plan, the Salaried 401(k) Plan, any qualified or nonqualified stock incentive or phantom stock plan of the Corporation or any employee benefit plan or program now or hereafter maintained by any Participating Company other than those plans listed in Section 4(a)(iv)(A)-(C).

Notwithstanding the foregoing provisions of this subsection (a), the sum of the amounts payable under (i) above shall be not less than six (6) months of the Eligible Employee’s Base Compensation nor greater than one (1) year of the Eligible Employee’s Base Compensation and the period of continued coverage described in (iv) above shall be not less than six (6) months nor more than one (1) year from the Eligible Employee’s Separation from Service. The Committee may, in its discretion, increase the benefit payable to any Eligible Employee without regard to the foregoing limitation.

(b) Change of Control Benefits . Upon the occurrence of any of the events specified in Section 5(b), an Eligible Employee shall receive (in lieu of any severance benefit payable under Section 4(a) or any other severance benefit payable under any other plan or program now or hereafter maintained by a Participating Company) Change of Control Benefits under the Program as follows:

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(i) Within ten (10) business days following the effective date an Eligible Employee Separates from Service, a lump sum cash benefit equal to the Eligible Employees’ annual Base Compensation plus his or her annual Base Compensation multiplied by his or her standard bonus percentage (as determined pursuant to the Incentive Plan), determined as of the date of the Change of Control or the effective date the Eligible Employee Separates from Service, whichever produces the larger amount, multiplied by the appropriate factor from the following table:

Notwithstanding the foregoing, if the Eligible Employee Separates from Service on or after the date thirty (30) months prior to the Eligible Employee’s Normal Retirement Date, the applicable factor shall be a fraction, the numerator of which is the number of full months between the date the Eligible Employee Separates from Service and such Normal Retirement Date and the denominator of which is twelve (12). An Eligible Employee described in the preceding sentence shall be entitled to an additional benefit equa