RELATED PARTY TRANSACTIONS:

Distributions

Distributions to the Tribe totaled $60.0 million, $53.0 million and $50.0 million for the fiscal years ended September 30, 2017, 2016 and 2015, respectively.

Under the terms of Salishan-Mohegan’s operating agreement, management fees are allocated to the current members of Salishan-Mohegan based on their respective membership interests (refer to Note 12). Distributions to the Tribe in connection with this agreement totaled $512,000 for the fiscal year ended September 30, 2017.

Services

The Tribe provides certain governmental and administrative services in connection with the operation of Mohegan Sun. Expenses incurred for such services were recorded within operating costs and expenses in the accompanying consolidated statements of income and comprehensive income as follows (in millions):



	For the Fiscal Years Ended
	September 30, 2017		September 30, 2016		September 30, 2015
Gaming	$	4.5	$	3.9	$	3.1
Advertising, general and administrative	21.0		20.9		19.8
Corporate	5.9		6.0		5.4
Total	$	31.4	$	30.8	$	28.3

The Company purchases most of its utilities, including electricity, gas, water and waste water services, from an instrumentality of the Tribe, the Mohegan Tribal Utility Authority. The Company incurred costs for such utilities totaling $16.8 million, $16.4 million and $17.4 million for the fiscal years ended September 30, 2017, 2016 and 2015, respectively. These costs were recorded within advertising, general and administrative costs and expenses in the accompanying consolidated statements of income and comprehensive income.

In February 2017, Mitchell Grossinger Etess, a senior advisor to the Tribe, was appointed as the interim Chief Executive Officer of the Company. In connection with his appointment, the Company and the Tribe entered into an agreement pursuant to which the Company agreed to pay, or reimburse the Tribe for, Mr. Etess’s compensation, benefits and any other amounts payable to him by the Tribe during the period of his appointment. This agreement expired upon the effectiveness of the appointment of Mario C. Kontomerkos as the Company's Chief Executive Officer on October 16, 2017. The Company incurred costs for Mr. Etess’s services totaling $375,000 for the fiscal year ended September 30, 2017. These costs were recorded within Corporate costs and expenses in the accompanying consolidated statements of income and comprehensive income.

Interest Expense on Promissory Notes

The Company incurred interest expense associated with borrowings from the Mohegan Tribe totaling $32,000, $1.8 million and $2.1 million for the fiscal years ended September 30, 2017, 2016 and 2015, respectively.

Leases

The Company leases the land on which Mohegan Sun is located from the Tribe under a long-term lease agreement. This lease agreement was amended and restated in October 2016. The lease agreement requires the Company to make a nominal annual rental payment. This lease has an initial term of 25 years and is renewable for an additional 25-year term upon expiration.

In July 2008, the Company entered into an additional land lease agreement with the Tribe relating to property located adjacent to the Tribe's reservation that is utilized by Mohegan Sun for employee parking. This lease agreement required the Company to make monthly payments equaling $75,000 until maturity on June 30, 2018. The Company classified this lease as a capital lease for financial reporting purposes due to the existence of a bargain purchase option at the expiration of the lease. This land lease was paid off and terminated in October 2016 and the property was merged into the land under the long-term lease agreement referenced above.

In March 2015, the Company entered into a sublease agreement with a subsidiary of the Tribe, the Mohegan Tribal Finance Authority, to sublease the Earth Hotel Tower and related improvements for the purpose of operating the hotel on a triple net basis for a term of 28 years and 4 months. The Company also entered into a similar sublease agreement with the Tribe to sublease a related connector which connects the Earth Hotel Tower to the Sky Hotel lobby. Rental payments under these leases commenced with the opening of the Earth Hotel Tower, which occurred in November 2016. The Company classified these leases as operating leases for financial reporting purposes in accordance with authoritative guidance issued by the FASB pertaining to the accounting for leases. The Company incurred lease expenses associated with these leases totaling $8.8 million for the fiscal year ended September 30, 2017. These expenses were recorded within hotel operating costs and expenses in the accompanying consolidated statements of income and comprehensive income. On December 15, 2017, the Company purchased the connector for a purchase price of $8.5 million and terminated the related sublease agreement.

Due from Mohegan Tribe

As of September 30, 2017 and 2016, due from Mohegan Tribe consisted primarily of a long-term loan receivable due from the Tribe. The Company, together with the Tribe, offer a benefit plan for certain eligible employees (the “Mohegan Benefit Plan”). The Mohegan Benefit Plan is sponsored by the Tribe for the benefit of participants who authorize the purchase of life insurance policies as a means of providing certain life insurance benefits to the participants and their spouses as joint insured. The life insurance policies are established on the life of each participant, and each premium contribution provided by the Company to the Tribe on behalf of the participant is treated as a loan from the Company to the Tribe and, in turn, as a loan from the Tribe to the participant, for legal, tax and financial reporting purposes. The loans from the Company to the Tribe are recorded as a long-term loan receivable. This loan receivable is required to be repaid by the Tribe. Accordingly, the Tribe retains an interest in each participant’s death benefit from the life insurance policies that will provide the Company with full repayment of the accumulated loan receivable at the death of the applicable participants insured under the life insurance policies.

Due to Mohegan Tribe

As of September 30, 2017, due to Mohegan Tribe consisted primarily of outstanding lease payments related to the Earth Hotel Tower and connector. As of September 30, 2016, due to Mohegan Tribe consisted primarily of outstanding payments related to governmental and administrative services.

Other

As of September 30, 2017 and 2016, funds loaned, including accrued interest, to Salishan Company, LLC and its owner in connection with the Cowlitz Project which are included in other assets, net in the accompanying consolidated balance sheets totaled $5.1 million and $2.8 million, respectively.

Mohegan Tribal Employment Rights Ordinance

In September 1995, the Tribe adopted the Mohegan Tribal Employment Rights Ordinance, as amended from time to time (the “TERO”), which sets forth hiring and contracting preference requirements for employers and entities conducting business on Tribal lands on or adjacent to the Mohegan Reservation. Pursuant to the TERO, the Company and other covered employers are required to give hiring, promotion, training, retention and other employment-related preferences to Native Americans who meet the minimum qualifications for the applicable employment position. However, this preference requirement does not apply to key employees as such persons are defined under the TERO.

Similarly, any entity awarding a contract or subcontract valued up to $250,000 to be performed on Tribal lands must give preference, first, to certified Mohegan entities submitting commercially responsible bids, and second, to other certified Native American entities. This contracting preference is conditioned upon the bid by the preferred certified entity being within 5% of the lowest bid by a non-certified entity. Contracts in excess of $250,000 are awarded to the lowest commercially responsible bidder, on a competitive basis, with preference to certified Mohegan entities and then other certified Native American entities in the event of a matching bid. In addition, for contracts valued at any amount, other than those with federal or other special financing, a certified Mohegan entity which submits a bid that is not more than 10% higher than the lowest bid shall be awarded the contract for work to be performed on Tribal lands, if the certified Mohegan entity accepts the bid at the amount proffered by the lowest bidder and meets all other requirements. The TERO establishes procedures and requirements for certifying Mohegan entities and other Native American entities. Certification is based largely on the level of ownership and control exercised by the members of the Tribe or other Native American tribes, as the case may be, over the entity bidding on a contract.

As of September 30, 2017, the Company employed approximately 125 members of the Tribe.