Document:

Exhibit 10.2

FIRST AMENDMENT TO LOAN AGREEMENT

      THIS FIRST AMENDMENT TO LOAN AGREEMENT dated effective as of August 20th,
1999 (“First Amendment”) is made and entered into by and between FIRST SECURITY
BANK, N.A., a national banking association, hereinafter referred to as “First
Security Bank”; FIRST INTERSTATE BANCSYSTEM, INC., a Montana corporation,
hereinafter referred to as “Borrower” and First Security Bank, N.A., a national
banking association, as Agent.

W I T N E S S E T H :

      WHEREAS, First Security Bank, Wells Fargo Bank, National Association, a
national banking association, hereinafter referred to as “Wells Fargo Bank”, and
Colorado National Bank, a national banking association (now known as U.S. Bank
National Association), hereinafter referred to as “Colorado National Bank”, and
Borrower entered into that certain Loan Agreement dated effective as of October
1, 1996, hereinafter referred to as “Loan Agreement”; and

      WHEREAS, the total commitment under the Loan Agreement is currently
$8,000,000; and

      WHEREAS, pursuant to agreement reached between Borrower, Wells Fargo Bank,
Colorado National Bank and First Security Bank, Wells Fargo Bank and Colorado
National Bank have agreed that First Security Bank will advance funds to Wells
Fargo Bank and Colorado National Bank to satisfy any outstanding indebtedness
owed to them by Borrower pursuant to the Loan Agreement and Wells Fargo Bank
and Colorado National Bank will terminate their

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respective
remaining commitments under and any interest they may have in the Loan
Agreement, cancel their respective Notes and release their respective interest
in the Collateral; and

      WHEREAS, Borrower desires that First Security Bank (i) increase its
commitment to $10,000,000, (ii) lend to Borrower under its new $10,000,000
commitment whatever funds are necessary to pay all outstanding indebtedness
owed by Borrower to Wells Fargo Bank and Colorado National Bank under the Loan
Agreement, (iii) release its interest in the Collateral, and (iv) agree to
certain other amendments to the Loan Agreement; and

      WHEREAS, First Security Bank is willing (i) to increase its commitment to
$10,000,000, (ii) to fund Borrower’s payment of all outstanding indebtedness,
if any, remaining owed to Wells Fargo Bank and Colorado National Bank, (iii) to
release its interest in the Collateral, and (iv) to amend and modify the Loan
Agreement on the terms and conditions herein.

      NOW, THEREFORE, for and in consideration of the premises and mutual
promises hereinafter set forth, the parties agree as follows:

      Section 1. Conditions of Effectiveness. This First Amendment shall become
effective only upon satisfaction in full of the following conditions precedent:

      (a) All of the representations and warranties set forth in Section 6 of
the Loan Agreement shall be true and correct at and as of the time of the
effective date of this First Amendment.

      (b) Wells Fargo Bank and Colorado National Bank shall have marked their
respective $13,500,000 Promissory Notes executed by Borrower and given to each
of them “Cancelled” and delivered the same to Agent. Upon closure of this
First Amendment, Agent is authorized and directed to deliver the cancelled
$13,500,000 Promissory Notes dated October 1, 1996 to Borrower.

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      (c) First Security Bank shall have received in replacement of the
$18,000,000 Revolving
Credit Promissory Note dated October 1, 1996, given to it by Borrower a duly
executed Replacement Revolving Credit Promissory Note in the amount of
$10,000,000 (“Replacement Revolving Credit Note”), substantially in the form of
Exhibit “A” attached hereto, dated the date of the original $18,000,000
Promissory Note.

      (d) First Security Bank shall have received a certificate, dated as of the
effective date of this First Amendment and signed by a duly authorized
Responsible Officer of Borrower, confirming that, as of such date, (i) Borrower
is in compliance with all of the terms and provisions set forth in the Loan
Agreement on its part to be observed and performed, and (ii) no Event of
Default specified in Section 10 of the Loan Agreement, nor any event which with
notice or lapse of time or both would constitute such an Event of Default, has
occurred and is continuing.

      (e) First Security Bank shall have received (i) a certificate of the
Secretary of State of Montana, dated within thirty (30) days of the effective
date of this First Amendment, as to the good standing and charter documents of
Borrower on file in the office of the Secretary of State of Montana; (ii) a
certificate of the Secretary of Borrower dated as of the effective date of this
First Amendment and certifying (A) that neither the bylaws nor articles of
incorporation of Borrower have been amended since October 1, 1996 or if the
bylaws and/or the articles of incorporation of Borrower have been so amended
that attached to said certificate is a true and complete copy of the bylaws and
articles of incorporation, as amended, as of the date of such certificate, (B)
that attached to said certificate is a true and complete copy of the
resolutions adopted by the Board of Directors of Borrower authorizing (1) the
execution and delivery of this

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First Amendment and (2) the
execution and delivery of the Replacement Revolving Credit Note, (C) as to the
incumbency and signatures of the officers signing this First Amendment, the
Replacement Revolving Credit Note and any other documents contemplated or
delivered under this First Amendment; (iv) a certificate from a Responsible
Officer as to the incumbency and signature of the Secretary of Borrower; and
(v) such other documents as the First Security Bank may reasonably request.

      (f) First Security Bank shall have received a counterpart original of this
First Amendment duly executed on behalf of Borrower.

      (g) First Security Bank shall have received a non-refundable amendment fee
from Borrower of ten (10) basis points of the Commitment amount of $10,000,000.

      (h) First Security Bank, as Agent, shall deliver to Borrower all of the
Pledged Stock in Agent’s possession pursuant to the terms and provisions of the
General Pledge and Security Agreement and this First Amendment.

      (i) All legal matters in connection with this First Amendment shall be
satisfactory to Hawley Troxell Ennis & Hawley LLP, special counsel for First
Security Bank.

      Section 2. Representation and Warranties. In order to induce First
Security Bank to enter into this First Amendment, Borrower acknowledges and
reaffirms as true, correct and complete in all material respects on and as of
the date of this First Amendment all representations, warranties and covenants
made by Borrower in the Loan Agreement to the same extent as though made on and
as of the effective date of this First Amendment. Borrower further represents
and warrants to First Security Bank as follows:

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      (a) Borrower has the corporate power to execute, deliver and perform this
First Amendment and to execute and deliver the Replacement Revolving Credit
Note.

      (b) The execution, delivery and performance of this First Amendment and
the execution and delivery of the Replacement Revolving Credit Note (i) are
within Borrower’s corporate powers; (ii) have been duly authorized by all
necessary corporate action; (iii) require no action by or in respect of or
filing with, any governmental body, agency or official; and (iv) do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by laws of Borrower or any
of its Subsidiaries.

      (c) This First Amendment has been duly executed and delivered by Borrower
and constitutes, and the Replacement Revolving Credit Note when delivered
hereunder will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms.

      (d) There is no action, suit or proceeding pending, or to the knowledge of
Borrower, threatened against or affecting Borrower or any of its Subsidiaries
before any court or arbitrator or any governmental body, agency or official in
which there is a reasonable probability of an adverse determination that would
have or cause a Material Adverse Effect or which in any manner draws into
question the validity of this First Amendment, the Replacement Revolving Credit
Note, the Loan Agreement or any of the other Loan Documents except as listed on
Exhibit “B” attached hereto.

      Section 3. Amendment of the Loan Agreement. Upon the effectiveness of
this First Amendment, the Loan Agreement shall be and hereby is amended as
follows:

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      (a) Section 2.11 of the Loan Agreement is deleted in its entirety
and the following is
inserted in place thereof:

		
	 	      2.11 “Borrower” means First Interstate BancSystem, Inc., a
bank holding company organized and existing under the laws of the
State of Montana.

      (b) Section 2.22 of the Loan Agreement is deleted in its entirety and the
following is inserted in place thereof:

		
	 	      2.22 “Commitment” means the sum of Ten Million Dollars
($10,000,000) committed by First Security Bank.

      (c) Section 2.47 of the Loan Agreement is deleted in its entirety and the
following is inserted in place thereof:

		
	 	      2.47 “Lender” or “Lenders” means First Security Bank, N.A., a
national banking association, and its successors and assigns.

      (d) Section 2.63 of the Loan Agreement is deleted in its entirety and the
following is inserted in place thereof:

		
	 	      2.63 “Note” and/or “Notes” means the Replacement Revolving
Credit Note in the amount of $10,000,000 in the form of EXHIBIT
“A” attached hereto given by the Borrower to First Security Bank
hereunder.

      (e) Section 2.7 of the Loan Agreement is deleted in its entirety and the
chart attached hereto as Exhibit “C” is inserted in place thereof.

      (f) Section 2.89 of the Loan Agreement is deleted in its entirety and the
following is inserted in place thereof:

		
	 	      2.89 “Termination Date” means the earlier to occur of (i)
June 30, 2004, or (ii) the occurrence of an Event of Default as
defined in Section 10.1 hereof, or (iii) such later date agreed to
by the Lender or, if in any case such day is not a Business Day,
the next succeeding Business Day.

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      (g) Section 3.1 of the Loan Agreement is deleted in its entirety and the
following inserted
in place thereof:

		
	 	      3.1 Commitments to
Lend. Subject to the terms and conditions
herein, Lender agrees to make Advances to the Borrower from time
to time before the Termination Date; provided that immediately
after each Advance, the aggregate principal amount of Advances by
the Lender shall not exceed the amount of its Commitment. Each
Prime Rate Borrowing under Section 3.1 shall be in an aggregate
principal amount of Two Hundred Fifty Thousand Dollars ($250,000)
or more and each LIBOR Rate Borrowing under this Section 3.1 shall
be in an aggregate principal amount of One Million Dollars
($1,000,000) or more (except that any such Borrowing may be in the
aggregate amount of the Unused Commitment). Within the foregoing
limits, the Borrower may borrow under this Section 3.1, repay or,
to the extent permitted by Section 3.7(c), prepay Advances and
reborrow under this Section up to the then-remaining Unused
Commitment at any time before the Termination Date.

      (h) Sections 3.2 (Mandatory Reduction of Aggregate Commitment) and 3.3
(Optional Termination or Reduction of Aggregate Commitment) of the Loan
Agreement are hereby deleted in their entirety and any reference to Section 3.2
and Section 3.3 in the Loan Agreement are also hereby deleted.

      (i) Section 3.7(b) of the Loan Agreement is deleted in its entirety and
any reference to Section 3.7(b) in the Loan Agreement are also hereby deleted.

      (j) Section 3.16 of the Loan Agreement is deleted in its entirety and the
following inserted in place thereof:

		
	 	      3.16 Unused
Commitment Fee. Borrower agrees to pay to Lender
an Unused Commitment Fee as set forth in Exhibit “C” attached
hereto annualized on the basis of a 360-day year and actual days
elapsed on the daily unused portions of the Commitment for each
day from the date of the First Amendment until the Termination
Date or until this Agreement is sooner terminated. Said Unused
Commitment Fee is payable on the tenth Business Day following the
end of each calendar year quarter in arrears beginning with the
calendar quarter ending on September 30, 1999 or on the
Termination Date.

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      (k) A new Section 3.20 shall be and hereby is added to the Loan Agreement
as follows:

		
	 	      3.20 Annual
Commitment Fee. Borrower agrees to pay to Lender
an
Annual Commitment Fee equal to five (5) basis points of Lender’s
Commitment annualized on the basis of a 360-day year and actual
days elapsed from the date of the First Amendment until the
Termination Date or until this Agreement is sooner terminated.
Said Annual Commitment Fee is payable on June 30, 2000 and on June
30th of each and every year thereafter until the Termination Date.

      (l) Section 8 (Security) of the Loan Agreement is hereby deleted in its
entirety.

      (m) A new Section 13.16 shall be and hereby is added to the Loan Agreement
as follows:

		
	 	      13.16 Year 2000
Compliance. Borrower shall take all action
that may be necessary or desirable, or that Lender may reasonably
request, in order to be certain that the Borrower, its affiliates,
and, to the best of Borrower’s ability, all customers, suppliers
and vendors that are material to the Borrower’s business, become
Year 2000 Compliant on or before October 1, 1999. As used in this
section, “Year 2000 Compliant” shall mean, in regard to any
entity, that all software, hardware, firmware, equipment, goods or
systems used by or material to the business operations or
financial condition of such entity, will properly perform date
sensitive functions before, during and after January 1, 2000.
Borrower shall, promptly upon request, provide to Lender such
certifications or other evidence of Borrower’s compliance with the
terms of this section as Lender may from time to time reasonably
require.

      Section 4. Cancellation of Original Notes. At the time that Borrower
delivers this First Amendment and the Replacement Revolving Credit Note to
First Security Bank, Wells Fargo Bank, Colorado National Bank and First
Security Bank shall each cancel the Notes previously given to each of them in
connection with the Loan Agreement and mark the same “Cancelled.”

      Section 5. Release of Collateral. At the time that Borrower delivers this
First Amendment and the Replacement Revolving Credit Note to First Security
Bank, Agent shall and

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is
hereby directed to release the Collateral and to deliver to Borrower all of the
stock certificates it is holding in connection with the Loan Agreement. Upon
release and delivery of the stock certificates to Borrower, it is understood
and agreed that all of Lender’s right, title and interest in the Collateral is
terminated.

      Section 6. Fees and Costs. Borrower agrees to reimburse First Security
Bank for all reasonable out-of-pocket fees, costs, and expenses incurred and
paid by First Security Bank incident to or in connection with or in
anticipation of, and in effecting, the execution of this First Amendment,
including, without limitation, First Security Bank’s attorney fees incurred in
connection with the preparation of this First Amendment, and the miscellaneous
documents associated therewith. Borrower shall reimburse First Security Bank
for all such fees, costs, and expenses within ten (10) days of its receipt of
the billing for said items.

      Section 7. Governing Law. The Loan Agreement, this First Amendment shall
be construed in accordance with and governed by the law of the State of Idaho.

      Section 8. Section Headings. The section headings used herein are for
convenience of reference only, are not part of this First Amendment and are not
to affect the construction of or be taken into consideration in interpreting
this First Amendment.

      Section 9. Loan Agreement. Except as expressly amended hereby, the Loan
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. As used therein, the terms “Agreement,”
“this Agreement,” “herein,” “hereinafter,” “hereto,” and words of similar
import shall, unless the context otherwise requires, mean the Loan Agreement as
amended hereby. Capitalized terms used in this First Amendment

9

which are
defined
in the Loan Agreement and not otherwise defined herein shall have the same
meanings herein as assigned to such terms in the Loan Agreement.

      Section 10. Counterparts; Effective Date. This First Amendment may be
executed in any number of counterparts and delivered by facsimile transmission,
all of which together shall constitute one and the same instrument. This First
Amendment shall become effective when copies hereof, which, when taken
together, bear the signatures of each of the parties hereto, shall have been
received by the First Security Bank and the conditions set forth in Section 1
hereof shall have been satisfied.

      IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed as of the day and year first above written.

	 	 	 
	LENDER:		
FIRST SECURITY BANK, N.A.
	 
			
By:     /s/ VICKI V. RIGA

____________________________________

Name:   Vicki V. Riga

______________________________

Vice President
	 
	BORROWER:		
FIRST INTERSTATE BANCSYSTEM, INC.
	 
			
By:     /s/ LYLE R. KNIGHT

____________________________________

Name:   Lyle R. Knight

_______________________________

Title:  President/COO
	 
			
(a duly authorized officer)

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EXHIBIT A

REPLACEMENT

REVOLVING CREDIT

PROMISSORY NOTE

PRINCIPAL AMOUNT: $10,000,000                                     
                                    
DATE: OCTOBER 1, 1996

DUE DATE: June 30, 2004

      FOR VALUE RECEIVED, the undersigned FIRST INTERSTATE BANCSYSTEM, INC., a
Montana corporation (formerly known as First Interstate Bancsystem of Montana,
Inc.), with its principal offices in Billings, Montana, hereinafter referred to
as “Maker”, promises to pay to the order of First Security Bank, N.A., a
national banking association, with its principal offices in Boise, Idaho,
hereinafter referred to as “Bank”, at the head office of First Security Bank,
N.A., 119 North Ninth Street, Boise, Idaho 83730, or such other place as the
Holder hereof may, from time to time designate in writing, in lawful money of
the United States of America and in immediately available funds, the principal
sum of TEN MILLION DOLLARS ($10,000,000) (provided, however, such principal
balance may be less depending upon the amount of principal drawn by Maker from
time to time pursuant to that certain Loan Agreement dated October 1, 1996, as
amended by that certain First Amendment to Loan Agreement dated
August        , 1999,
hereinafter referred to as “Loan Agreement”), with interest on the outstanding
principal balance payable to Bank hereunder at the rates set forth in said Loan
Agreement, as amended. Maker further agrees to pay the outstanding principal
balance together with the interest accrued thereon at the times and in the
amounts as required in said Loan Agreement, as amended with all unpaid principal
and accrued interest due and payable on June 30, 2004.

1

      This Replacement Revolving Credit Promissory Note, hereinafter referred to
as “Replacement Note,” is entitled to the benefits of the Loan Agreement, as
amended, which among other things, contains provisions for the acceleration of
the maturity hereof upon the happening of certain stated events and also for
voluntary prepayments on account of principal hereof prior to the maturity hereof
upon the terms and conditions therein specified.

      The Loan Agreement, as amended, is incorporated herein by this reference
and terms defined therein are used herein with their defined meanings unless
otherwise defined herein.

      This Replacement Note shall be governed as to validity, interpretation,
construction, effect and in all other respects by the laws and decisions of the
State of Idaho. All actions or proceedings arising in connection with this
Replacement Note shall be tried and litigated only in the state and federal
courts located in the County of Ada, State of Idaho.

      If Maker shall be in default in the payment of the principal and interest
as called for under the terms of this Replacement Note or in default under the
terms of the Loan Agreement, as amended, or the Loan Documents as defined
therein, and the balance then due and payable by Maker to Bank is collected with
the assistance of an attorney and before commencement of a suit thereon,
reasonable attorney fees and costs incurred by Bank shall be added to
the balance due and payable to Bank hereunder, and in case action
is instituted to collect this Replacement Note or any installments
thereof, Maker does further agree to pay such sum as the court may
adjudge reasonable as attorney fees and cost in such action. Furthermore, Maker agrees
to pay Bank for all attorney’s fees and costs incurred by Bank in enforcing its
rights hereunder and collecting the amount owed to it, including but not limited
to extracting any property given as security for the

2

payment of this Replacement Note from the Bankruptcy estate, during any period
in which Maker is subject to the rules, regulations and provisions of the United
States Bankruptcy Code.

      Maker hereby waives presentment of payment, notice of nonpayment, protest
and notice of protest of nonpayment of this Replacement Note or any installment
or portion thereof.

      Each reference to Bank shall be deemed to include its agent, successors
and assigns, in whose favor the provisions of this Replacement Note shall also
inure. Each reference to Maker shall be deemed to include its successors,
assigns, sureties, and legal representatives, all of whom shall be bound by the
terms and provisions of this Replacement Note.

      This Replacement Note is given by the Maker to the Bank pursuant to that
certain First Amendment to Loan Agreement dated August___, 1999, and entered
into by Maker and the Bank.

FIRST INTERSTATE BANCSYSTEM, INC.

By:_________________________________

Name:____________________________

President                                        
         

(a duly authorized officer)                        

ATTEST:

_________________________________

Secretary

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EXHIBIT “C”

      2.7 “Applicable Margin” means the margin set forth in the chart below.

	 	 	 	 	 	 	 
							Unused Fee
	Consolidated Tier One		LIBOR		Prime Rate		per Section
	Capital Ratio		Advances		Advances		3.16
	
		
		
		

	 ** 10.0		
+ 125 bps
		+ 0 bps
		10 bps
	
	
	
	

	* 10.0; ** 8.0		
+ 150 bps
		+ 0 bps
		10 bps
	
	
	
	

	* 8.0; ** 6.0		
+ 175 bps
		+ 0 bps
		25 bps
	
	
	
	

	* 6.0 		
+ 200 bps
		+25 bps
		37.5 bps

* Indicates less than.

** Indicates greater than or equal to.Exhibit 10.12

EMPLOYMENT AGREEMENT

      THIS AGREEMENT is effective as of the 18th day of May, 1998 (the
“Agreement”), by and between FIRST INTERSTATE BANCSYSTEM, INC., a corporation
duly organized and validly existing under the laws of the State of Montana
(“Employer”) and LYLE R. KNIGHT, a married man currently residing in Mesa,
Arizona (“Employee”).

      WHEREAS, the parties hereto desire to enter into an agreement for the
purpose of engaging the services of Employee by reason of Employee’s
experience, training, reputation and ability in the management of financial
institutions,

      NOW, THEREFORE, IT IS MUTUALLY AGREED AS FOLLOWS:

      1. Employment and Duties. Employer, a holding company which currently
operates two wholly-owned bank subsidiaries, namely First Interstate Bank in
Montana and First Interstate Bank in Wyoming (collectively, the “Banks”) hereby
employs Employee and Employee hereby accepts employment with Employer upon the
terms and conditions hereinafter set forth. Employee is hereby employed as the
President and Chief Operating Officer of Employer. Employee shall perform the
customary duties of a President and Chief Operating Officer of a bank holding
company, as designated by the Board of Directors of Employer, by applicable
banking laws and regulations and such attendant duties as may, from time to
time, be reasonably requested of Employee by the Board of Directors of Employer
(the “Board”), including the assumption of the duties of a senior executive
officer or member of the Board of Directors of any subsidiary of Employer, or
both, if so requested. Employee shall have such authority to sign contracts,
bills, notes, drafts and other obligations of Employer, as granted to the
President by the Bylaws of Employer or the Board in accordance with appropriate
governmental regulation.

      2. Extent of Services.

      (a) With the single exception mentioned in the final sentence of this
Section 2(a), Employer shall devote Employee’s full time, ability and attention
to the business of Employer during the term of this Agreement, and shall,
except as hereinafter noted, neither directly nor indirectly render any
services of a business, commercial or professional nature to any other person,
firm, corporation or organization for compensation without the prior written
consent of the Board. Employer, however, acknowledges that Employee currently
serves as a member of the board of directors of SkyMall, Inc., an Arizona
corporation, and desires to continue serving in that capacity while employed by
Employer. Employer believes that such continued service will not interfere
with the duties of Employee as defined by this Agreement and, accordingly,
agrees to the continuing board membership of Employee for SkyMall, Inc. for
such period of time as Employee shall determine, in his discretion.

      (b) Nothing contained herein shall be construed to prevent Employee from
investing Employee’s assets in any legal form or manner which does not in any
manner or for any amount of time interfere with Employee’s performance of
services on behalf of Employer.

      (c) Except as expressly set forth in this Agreement, Employee shall be
subject to the Employer’s policies and practices as the same may be amended
from time to time.

      3. Term of Employment. Subject to prior termination of this Agreement as
hereinafter provided, Employer hereby employs Employee and Employee hereby
accepts employment with Employer commencing on May 18, 1998, and continuing for
a period of ten (10) years thereafter (the “Employment Term”). Either party to
this Agreement shall have the right to give ninety (90) days’ written notice of
termination to the other party; provided, however, that in the event such
notice is provided by Employer to Employee for any reason other than for cause
or disability, the provisions of Section 5(a) of this Agreement shall apply.

      4. Compensation and Benefits. In consideration of Employee’s services to
Employer during the Employment Term, Employer agrees to compensate Employee,
subject to such limiting laws or regulations as shall be binding upon Employer,
as follows:

      (a) Base Compensation. Employer shall pay or cause to be paid to Employee
a base compensation of $230,000 per year, payable in conformity with Employer’s
normal payroll procedures (the “Base Salary”) and prorated for any partial year
in which this Agreement is in effect. Employee’s performance shall be reviewed
annually by the Board, and Employee’s Base Salary may be increased as the
Board, in its sole discretion, may determine.

      (b) Severance Payment. Employee shall be entitled to receive a cash
severance payment in an amount equal to five (5) times Employee’s Base Salary
then in effect, payable in conformity with Employer’s normal payroll
procedures, in the event that Employee’s employment hereunder is terminated by
Employer for any reason other than for cause or disability as described in
Section 5 of this Agreement.

      (c) Non-Incentive Stock Options. Employee shall be entitled to
participate in a stock option plan as adopted and implemented by Employer and
upon execution of this Agreement shall be granted a non-incentive stock option
to purchase 25,000 shares of Common Stock of Employer at a purchase price of
$32.00 per share. The stock option grant provided for herein shall be subject
to the July 22, 1993, First Interstate BancSystem of Montana Stock Option and
Stock Appreciation Rights Plan, the May 18, 1998, First Interstate BancSystem,
Inc. Stock Option and Stock Appreciation Rights Agreement, and the
Shareholder’s Agreement to be executed upon execution of this Agreement between
Employer, as a shareholder of Employer, and Employer, as each such instrument
may be amended from time to time (collectively the “Stock Option

2

Documents”). The non-incentive stock options granted under this Agreement
shall each expire on May 18, 2008, at 11:59 p.m. Montana time unless the same
shall have previously expired under the Stock Option Documents.

      (d) Other Benefits. Employee shall be entitled to participate during the
Employment Term in such other benefits and plans of Employer as Employer, or
any successor or assign of employer, now or hereafter shall provide for its
employees and/or senior executives generally or as may be established by the
Board from time to time.

      (e) Special Reimbursements. Upon execution of this Agreement, Employee
shall receive a cash reimbursement of $50,000 as an agreed-upon reimbursement
for costs incurred or to be incurred in the sale of Employee’s existing
property in Mesa, Arizona. In addition, Employee shall receive a reasonable
temporary living allowance equal to that amount necessary to reimburse Employee
for rent and utilities paid to live in an apartment of his selection for a
period of up to three (3) months following the execution of this Agreement and
Employer shall reimburse Employee for the cost of air fare for each trip taken
by Employee to and from Employee’s current Arizona residence throughout the
three-month period. Further, Employer shall reimburse Employee for all moving
expenses for his family’s household goods and vehicles, as well as for the cost
of title insurance upon the purchase of Employee’s residence in or about the
City of Billings, Montana.

      5. Termination of Agreement. This Agreement may be terminated with or
without cause during the Employment Term in accordance with this Section 5 and
the applicable provisions of Section 3. In the event of such termination,
Employee shall be released from all obligations under this Agreement, except
that Employee shall remain subject to Sections 6, 10 and 14, and Employer shall
be released from all obligations under this Agreement, except as otherwise
provided in this Section 5 and Sections 10 and 14.

      (a) Early Termination by Employer Without Cause. This Agreement and
Employee’s employment may be terminated by Employer without cause for any
reason whatsoever, in the sole, absolute and unreviewable discretion of
Employer, upon ninety (90) days’ written notice by the Board to Employee. In
such event, however, as of the date of termination, Employee shall be entitled
to receive (1) Severance Pay, as that amount shall be calculated pursuant to
Section 4(b) hereof, (2) bonus compensation, if any, and (3) the reimbursement
by Employer of all premiums for the group health insurance coverage for such
period as shall be permitted by then existing law and regulation, but in any
event not to exceed five years from the date of termination, subject, however,
to the applicable restrictions, if any, imposed by federal C.O.B.R.A.
provisions, the group health insurance plan and policy provisions and to other
laws and regulations of similar effect. The benefit of insurance coverage
shall terminate immediately upon the acceptance by Employee of full-time
employment from any person or entity other than Employer or any of its
subsidiaries. The Severance Pay, bonus compensation and insurance coverage as
provided herein shall constitute liquidated

3

damages in lieu of any and all claims by Employee against Employer, and shall be in full and
complete satisfaction of any and all rights which Employee may enjoy hereunder
or at law or equity.

      (b) Early Termination by Employer for Cause. This Agreement and
Employee’s employment may be terminated for cause by Employer upon written
notice to Employee, and Employee shall not be entitled to receive compensation
or other benefits for any period after termination for cause. Employee
understands and agrees that his satisfactory performance of this Agreement
requires conformance with the standards of diligence, competence, skill,
judgment and efficiency of a person holding the position of President and Chief
Operating Officer of a holding company of a size and function similar to
Employer and as prescribed by applicable banking laws and regulations, and that
failure to conform to such standards is cause for termination of this Agreement
by Employer. Termination for cause pursuant to this Section 5(b) shall be
defined as Employee’s personal dishonesty, willful misconduct (including
knowingly violating any Bylaw or policy of the Board), breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, regulation constituting a felony of any
degree or similar violations involving moral turpitude, or failure to report or
cause others to report to the Board any known violation by others of any policy
of the Board or any applicable banking law, rule or regulation or breach of
this Agreement by Employee. Termination for cause by Employer shall not
constitute a waiver of any remedies which may otherwise be available to
Employer under law, equity, or this Agreement.

      (c) Early Termination by Employee. Employee may terminate this Agreement
upon ninety (90) days’ written notice by Employer. Employee shall not be
entitled to receive compensation or other benefits for any period after the
date of termination by Employee.

      (d) Early Termination upon Disability. If Employee becomes disabled
during any Employment Term because of physical or mental disability so that he
is unable to perform his duties hereunder, Employer may at its option terminate
this Agreement. Employee shall be entitled to the reimbursement by Employer of
all premiums for the group health insurance coverage for such period as shall
be permitted by then existing law and regulation, but in any event not to
exceed five years from the date of termination, subject, however, to the
applicable restrictions, if any, imposed by federal C.O.B.R.A. provisions and
to other laws and regulations of similar effect and the insurance plan and
policy provisions, plus pro rata bonus, if any, and accrued but unused vacation
leave. All other compensation and benefits provided for under this Agreement
shall cease as of the date of termination, except that employer shall use its
reasonable efforts to assure that Employee shall have the option to assume such
insurance coverage at his individual expense from and after termination of
insurance coverage under this Section 5(d). For purposes of this Agreement
Employee shall be considered disabled upon a determination of disability under
the then existing disability insurance policy maintained by the Employer.

4

      (e) Change in Control. Employee may elect to terminate this Agreement
upon the occurrence of a change in control (as later defined) by giving ninety
(90) days’ written notice to Employer at any time on or after the first
anniversary, but on or prior to the second anniversary of the change in
control. If Employee properly terminates this Agreement under this paragraph
5(e), Employer shall pay Employee the Severance Payments set forth in paragraph
4(b). As used in this Agreement, the term “change in control” shall mean (a)
the dissolution of Employer; (b) the sale of all or substantially all of the
assets of Employer; (c) the merger of Employer in a transaction in which
Employer shareholders immediately prior to such merger own, legally or
beneficially, less than 50 percent of the voting stock of the surviving
corporation in the merger; or (d) a transaction or series of transactions
resulting in the sale or transfer of greater than 50 percent of the Employer
voting stock; provided, however, a change in control shall not include (i)
transfers of legal or beneficial ownership among shareholders currently owning,
legally or beneficially, five percent or more of employer’s common stock, and
their respective affiliates, siblings, ancestors, descendants or spouses or any
entity controlled by, or the beneficial interests in which are substantially
held by, any of the foregoing, or (ii) transfers arising from an initial public
offering of Employer stock upon a national exchange.

      (f) Death During Employment. This Agreement and all benefits hereunder,
including, without limitation, Severance Payments, shall terminate immediately
upon the death of Employee.

      6. Non-Competition by Employee. Employee shall not, during the Employment
Term, and for a period of five (5) years thereafter, serve as an officer,
director, employee, consultant or agent of, or own, legally or beneficially,
any equity interest in, an insured depository organization, depository
organization holding company, a financial services company or an affiliate of
any of the foregoing if such company or organization then conducts business
operations in (a) the states of Wyoming or Montana or (b) any state in which
the employer or an Employer affiliate maintains an office, excluding, however,
a state in which the sole office or offices become affiliated with Employer by
reason of a change in control of Employer within the meaning ascribed to that
term in Section 5(e) of this Agreement. If Employee shall fail to perform the
terms of this Section 6 fully and faithfully, Employer shall be entitled, in
addition to any other right or remedy provided under this Agreement, at law or
in equity, to terminate its obligations under this Agreement including, without
limitation, to terminate its obligation, if any, to make Severance Payments,
and to demand and receive the return of all Severance Payments previously made
by Employer to Employee during any period of time in which such failure shall
have existed. Nothing in this paragraph 6 shall be interpreted to prohibit
Employee from owning less than five percent of any class of equity securities
of a company or organization the equity securities of which are traded on a
national exchange.

      7. Notices. Any notices to be given hereunder by either party to the
other may be effected in writing by personal delivery, by telecommunication of
a facsimile

5

therefor, by any system of electronic communication then employed
by Employer and Employee or by mail, registered or certified, postage prepaid with return
receipt requested. Notices to Employer shall be sent or delivered to its then
current principal office, C/O Chairman of the Board of Directors. Notices to
Employee shall be sent to Employee’s then current personal residence. Notices
delivered personally, by facsimile copy or by electronic communication shall be
deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of five (5) days after mailing.

      8. Entire Agreement. This Agreement, and any appendices hereto, supersede
any and all other agreements, either oral or in writing, between the parties
hereto with respect to the employment of Employee by Employer, and contain all
of the covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein,
and that no other agreement, statement or promise not contained in this
Agreement shall be valid and binding. Any modification of this Agreement will
be effective only if it is in writing signed by all parties to the Agreement.

      9. Severability. In the event that any term or condition contained in
this Agreement shall, for any reason, be held by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or non-enforceability shall not affect any other term or
condition of this Agreement, but this Agreement shall be construed as if such
invalid or illegal or unenforceable term or condition had never been contained
herein.

      10. Choice of Law and Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Montana, except to the
extent preempted by the laws of the United States. Any action or proceeding
brought upon, or arising out of, this Agreement or its termination shall be
brought in the forum of appropriate jurisdiction located within the State of
Montana, and Employee hereby agrees to be subject to service of process in
Montana.

      11. Waiver. The parties hereto shall not be deemed to have waived any of
their respective rights under this Agreement unless the waiver is in writing
and signed by such waiving party. No delay in exercising any rights shall be a
waiver nor shall a waiver on one occasion operate as a waiver of such right on
a future occasion.

      12. Indemnification. Employer and each subsidiary of Employer of which
Employee is a director or officer shall indemnify Employee as provided in the
respective Articles of Incorporation, Bylaws or policies in effect for the
indemnification of officers or directors.

      13. Assignment. Neither this Agreement nor any of the rights or benefits
hereunder shall be subject to execution, attachment or similar process, nor may
this Agreement or any rights or benefits hereunder be assigned, transferred,
pledged or hypothecated without the written consent of both parties hereto. In
he event of any sale

6

of substantially all of the assets of, or merger, consolidation, conversation or
other reorganization involving Employer, any successor of Employer by reason of
such transaction shall succeed to all of Employer’s rights and benefits and
shall be subject to all of Employer’s duties and obligations hereunder.

      14. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or breach of this Agreement, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment on the award rendered by the arbitrators may be
entered in any court having appropriate jurisdiction. There shall be three
arbitrators, one to be chosen directly by each party, and the third arbitrator
to be selected by the two arbitrators so chosen. Each party shall pay the fees
of the arbitrator he or it selects and of his or its own attorneys, and the
expenses of his or its witnesses and all other expenses connected with
representing his or its case. Other costs of the arbitration, including the
cost of any record or transcripts of the arbitration, administrative fees, the
fee of the third arbitrator, and all other fees and costs, shall be borne
equally by the parties, subject to the provisions of Section 16, below.

      15. Interpretation. This Agreement, and all of its provisions, shall be
interpreted in accordance with the plain meaning of the language used herein,
and its provisions shall not be interpreted or construed against the perceived
interests of either of the parties hereto for the reason that one or the other
party shall have been responsible for preparing or revising, or both, the
initial and successive drafts hereof.

      16. Attorneys’ Fees. In the event that either party shall bring an action
or commence arbitration in connection with the performance, breach, or
interpretation hereof, the prevailing party in such proceeding shall be
entitled to recover from Employer all reasonable costs and expenses of
litigation or arbitration, including reasonable attorneys’ fees, court costs,
costs of investigation and other costs reasonably related to such proceeding,
in such amounts as may be determined in accordance with the laws of the State
of Montana.

      17. Time of the Essence. Time is of the essence of this Agreement and
each and every provision hereof.

      Executed on the date and year first above written.

	 	 	 
	EMPLOYER:		
EMPLOYEE:
	 
	First Interstate BancSystem, Inc.,

a Montana corporation
	 
	By:   /s/ THOMAS W. SCOTT

Its:  Chief Executive Officer		
/s/ LYLE R. KNIGHT

Lyle R. Knight

7

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