<PAGE>
 
                                                                  EXHIBIT 10.15
                                                                 EXECUTION COPY
 
                        DEVELOPMENT SERVICES AGREEMENT
 
  THIS DEVELOPMENT SERVICES AGREEMENT (as further supplemented or amended from
time to time, the "Development Agreement") is made this 7th day of February,
1998 between the Mohegan Tribal Gaming Authority (as further defined below,
the "Authority"), an instrumentality of The Mohegan Tribe of Indians of
Connecticut, a federally recognized Indian tribe (as further defined below,
the "Tribe"), and Trading Cove Associates, a Connecticut partnership (the
"Developer").
 
                                   RECITALS
 
  A. The Tribe is the beneficial owner of land located in the State of
Connecticut which is owned by the United States of America in trust for the
benefit of the Tribe pursuant to the Tribe's recognized powers of self-
government, and the statutes and ordinances of the Tribe (the "Property").
 
  B. On behalf of the Tribe, the Authority has constructed a casino known as
Mohegan Sun on the Property to improve the economic conditions of the Tribe's
members and is now seeking development and expertise from Developer for the
following "Project": the construction of a new casino consisting of
approximately 100,000 square feet of gaming and related commercial space
within such casino, a luxury hotel containing approximately 1,500 guest rooms
and customary amenities, a convention/events center with indoor seating for
approximately 10,000 patrons and 100,000 square feet of convention space and
related food and beverage and parking facilities and other related
infrastructure, and any modifications of the foregoing elements agreed to by
the parties.
 
  C. The Authority, on its own behalf and on behalf of the Tribe, and
Developer desire to replace, supersede and terminate all existing and prior
agreements, arrangements and understandings with respect to the design,
construction, equipping and opening of any gaming or non gaming facilities
between the Tribe and/or the Authority and Developer, including, without
limitation, (i) that certain Amended and Restated Gaming Facility Development
and Construction Agreement dated September 1, 1995 and approved by the Bureau
of Indian Affairs on September 29, 1995 (the "Gaming Development Agreement"),
which grants to Developer the exclusive right to develop certain facilities as
described therein, and (ii) that certain Hotel/Resort Facility Development and
Construction Agreement dated July 12, 1994 (the "Hotel Development
Agreement"), which grants Developer the exclusive right to develop certain
hotel/resort facilities described therein.
 
  D. The Authority desires to grant Developer the exclusive right and
obligation to provide development services in respect of the design,
construction, equipping and opening of the Project upon the terms and
conditions set forth herein.
 
  NOW THEREFORE, in consideration of the mutual covenants, conditions and
promises herein contained, the receipt and sufficiency of which hereby are
acknowledged, the Authority and Developer agree as follows:
 
                                   ARTICLE 1
 
                              Certain Definitions
 
  Capitalized terms used in this Development Agreement shall have the meanings
set forth below:
 
    "Affiliate" means, with respect to the Person in question, any Person
  controlling, controlled by or under common control with, such Person. For
  the purposes hereof, "control" means the possession, directly or
  indirectly, of the power to direct or cause the direction of the management
  or policies of the Person in question.
 
    "Architect" means, as applicable from time to time, the design architect
  (if retained) and/or the architect of record for the Project employed
  pursuant to Section 4.2 below.
 
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    "Authority" means the Mohegan Tribal Gaming Authority, acting by the
  Management Board, or any other instrumentality of the Tribe with the
  authority to exercise the regulatory and proprietary authority of the Tribe
  over the gaming and/or non-gaming facilities located on the Property in
  accordance with the Mohegan Tribal Constitution, the Tribe's Gaming
  Ordinance, the Tribe's ordinance establishing the Mohegan Tribal Gaming
  Authority, the Compact, the IGRA or other applicable law, and any successor
  and assignee thereto.
 
    "Authority Representative" has the meaning set forth in Article 3 below.
 
    "Bid Packages" has the meaning set forth in Section 5.1 below.
 
    "Bureau of Indian Affairs" is the Bureau of Indian Affairs of the
  Department of the Interior of the United States of America.
 
    "Certified Entities" has the meaning set forth in Section 8.1 below.
 
    "Compact" means the tribal-state Compact entered into between the Tribe
  and the State of Connecticut pursuant to the IGRA, as the same may be
  amended from time to time, or such other Compact as may be substituted
  therefor.
 
    "Completion Date" means the date upon which the Authority receives, with
  respect to the Project: (i) a certificate from the Architect, as required
  pursuant to the terms of the Architect's agreement, certifying that the
  Project has been constructed in accordance with the Plans and
  Specifications therefor and all applicable building, life/safety,
  environmental and other laws and regulations applicable to the design and
  construction of the Project; (ii) a certificate from Developer stating that
  it has completed all of its obligations hereunder; (iii) certificates of
  such professional designers, inspectors or consultants or opinions of
  counsel as the Authority reasonably may determine to be appropriate
  verifying completion of the Project in compliance with all Legal
  Requirements; and (iv) the Project is fully stocked, staffed (including,
  without limitation, compliance with Section 8.8 below) and ready to open to
  the public.
 
    "Contract Documents" has the meaning set forth in Section 5.2 below.
 
    "Contractors" has the meaning set forth in Section 5.1 below.
 
    "Construction Financing" means the financing to be obtained by, and/or
  committed to, the Authority sufficient, as determined by the Authority, for
  the purposes of the design, construction, equipping and staffing of the
  Project.
 
    "Construction Manager" means the professional employed pursuant to
  Section 4.3 below.
 
    "Cost Estimator" has the meaning set forth in Section 2.3 below.
 
    "Design Development Documents" has the meaning set forth in Section 4.5
  below.
 
    "Developer" has the meaning set forth in the introductory paragraph
  hereof.
 
    "Development Agreement" has the meaning set forth in the introductory
  paragraph hereof.
 
    "Development Fee" has the meaning set forth in Article 9 below.
 
    "Director of Regulation" means the director of gaming operations
  appointed by the Authority pursuant to the Tribe's Gaming Ordinance.
 
    "Effective Date" means, the first (1st) day of the first (1st) calendar
  month following the later of (a) the date the Authority receives all
  Required Approvals with respect to the Development Agreement, or (b)
  closing of the Proposed Financing.
 
    "Executive Project Committee" means the Authority Representative, the
  Project Executive and senior executives of each of the Architect and the
  Construction Manager.
 
    "Final Budget" has the meaning set forth in Section 5.3 below.
 
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    "Force Majeure Causes" means causes beyond the reasonable control of a
  party to this Development Agreement, including casualties, war,
  insurrection, strikes, lockouts and governmental actions (but excluding
  causes which can be controlled by the expenditure of money in accordance
  with good business practices).
 
    "Gaming Development Agreement" has the meaning set forth in Recital C
  hereof.
 
    "Hotel Development Agreement" has the meaning set forth in Recital C
  hereof.
 
    "IGRA" means the Indian Gaming Regulatory Act of 1988, 25 U.S.C. (S) 2701
  et seq., as amended from time to time.
 
    "Key Personnel" means collectively the general manager of operations for
  each major element of the Project, and the director of sales for each major
  element of the Project, (or the equivalent of either of the foregoing
  positions).
 
    "Legal Requirements" means singularly and collectively all applicable
  laws, including, without limitation, the Tribe's Gaming Ordinance, the
  Tribal Employment Rights Ordinance, all other laws or regulations of the
  Tribe, the IGRA, the Compact and applicable federal and Connecticut
  statutes, laws and regulations.
 
    "MTC Court" means the Gaming Disputes Court of the Tribe.
 
    "NIGC" means the commission established pursuant to 25 U.S.C. Section
  2704.
 
    "Person" means any individual, sole proprietorship, corporation, general
  partnership, limited partnership, limited liability company or partnership,
  joint venture, association, joint stock company, unincorporated
  association, instrumentality or other form of entity.
 
    "Plans and Specifications" means the detailed plans and specifications
  for the construction of the Project prepared pursuant to Section 4.6 below.
 
    "Preliminary Budget" has the meaning set forth in Section 2.3 below, as
  such may be modified from time to time in the Authority's sole and absolute
  discretion in accordance with this Development Agreement.
 
    "Project" has the meaning set forth in Recital B hereof, as modified in
  accordance with the terms of this Development Agreement.
 
    "Project Executive" has the meaning set forth in Section 2.1 below.
 
    "Project Program" has the meaning set forth in Section 2.2 below, as
  modified in accordance with the terms of this Development Agreement.
 
    "Project Schedule" has the meaning set forth in Section 2.3 below.
 
    "Property" has the meaning set forth in Recital A hereof.
 
    "Proposed Final Budget" has the meaning set forth in Section 5.3 below.
 
    "Proposed Financing" means the anticipated refinancing of certain of the
  Authority's existing indebtedness, together with the Construction
  Financing.
 
    "Proposed Project Program" has the meaning set forth in Section 2.2
  below.
 
    "Required Approvals" means the approval by the Bureau of Indian Affairs,
  and/or the NIGC, to the extent those agencies determine such approval may
  be required by law.
 
    "Retail Consultant" has the meaning set forth in Section 2.4 below.
 
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    "Retail Facilities" means, if the Authority elects to pursue construction
  of such facilities pursuant to Section 2.4 below, additional facilities
  consisting of approximately 200,000 square feet of retail and restaurant
  facilities and related parking facilities and other related infrastructure.
 
    "Retail Facilities Architect" means the meaning set forth in Section 4.2
  below.
 
    "Retail Facilities Costs" has the meaning set forth in Section 2.4 below.
 
    "Schematic Design Documents" has the meaning set forth in Section 4.5
  below.
 
    "Staffing Plan" has the meaning set forth in Section 8.8 below.
 
    "Sun" means Sun International Hotels Limited.
 
    "Term" has the meaning set forth in Article 10 below.
 
    "Total Project Costs" means all costs of programming, budgeting,
  designing, constructing, equipping and staffing the Project, including
  costs related to professional services, but excluding all financing fees
  and expenses, and interest payments on the Construction Financing prior to
  the opening of the Project, which costs shall not exceed Four Hundred Fifty
  Million Dollars ($450,000,000), without the prior written approval of the
  Authority, which may be withheld in its sole and absolute discretion.
 
    "Tribal Employment Rights Ordinance" means the Tribal Gaming Authority
  Employment Rights Ordinance enacted by the Authority on or about September
  25, 1995 and any replacements thereof or amendments thereto adopted from
  time to time, and all related or implementing ordinances and policies of
  the Authority to give preference in recruiting and hiring to employees and
  Certified Entities.
 
    "Tribe" means the Mohegan Tribe of Indians of Connecticut, a federally
  recognized Indian tribe and its permitted successors and assigns.
 
    "Tribe's Gaming Ordinance" means the Mohegan Tribal Gaming Ordinance No.
  94-1, and any replacements or amendments thereto adopted from time to time,
  and all related or implementing ordinances, which are enacted by the Tribe
  to authorize and regulate gaming on the Tribe's reservation pursuant to
  IGRA.
 
 
                                   ARTICLE 2
 
                                   Developer
 
  2.1 Retention of Developer. The Authority hereby retains Developer, as its
exclusive developer for the Project, to perform all required development
services relating to the programming (including concept development), design,
construction, equipping and staffing (pursuant to Section 8.8 below) of the
Project, upon, and subject to, the terms and conditions, and in consideration
of the payments, hereinafter set forth. Developer shall provide promptly and
diligently the services as hereinafter set forth as necessary to facilitate
the development of the Project and shall furnish, at its cost, a sufficient
number of trained personnel, as mutually agreed upon by Developer and the
Authority, with experience on projects of a scope and magnitude similar to the
Project, at all times as necessary to accomplish the same. The organizational
and reporting chart which describes the broad relationships and areas of
responsibilities to be used in the development of the Project is attached
hereto as Exhibit A. Within thirty (30) days of the full execution of this
Development Agreement, Developer, at its own cost and expense, shall (a)
appoint a senior executive with sufficient development, construction and
project management experience in the gaming and resort industry to be in
charge of coordinating the development, design and construction of the Project
(the "Project Executive"), and (b) provide to the Authority an initial staff
outline for the Project. The appointment of the Project Executive shall be
subject to the prior written approval of the Authority, in its sole and
absolute discretion. As soon as required (but in no event later than
completion of the Schematic Design Drawings), the Project Executive shall
maintain a full-time office and staff at the Property. Any substitution by
Developer of the Project Executive shall be subject to the Authority's prior
written approval, in its sole and absolute discretion.
 
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  2.2 Project Program. At a time which is mutually agreeable to the Authority
and Developer (but not later than thirty (30) days following full execution of
this Development Agreement), Developer and the Authority shall meet to review
and discuss an initial draft of a Project brief, budget program and schedule
which outlines the key tasks and objectives for the Project. Within thirty
(30) days after such initial meeting, the Authority and Developer shall meet a
second time to review and update such information. Within ninety (90) days
following the full execution of this Development Agreement (provided that the
Authority and Developer may agree to extend such period for an additional
thirty (30) days), Developer shall provide to the Authority a detailed program
outline of the requirements for the Project, that includes a conceptual
program, design and construction objectives and criteria, preliminary time
schedules, amenities, preliminary space requirements, infrastructure and
support, preliminary cost estimates (based on estimates prepared by the Cost
Estimator) for each major element of the Project and Developer's initial
recommendations regarding the appropriateness of proceeding with the design,
construction and completion of the Project in a series of independent stages
(taking into account the desire of the Authority to minimize disruptions to
the operation of the existing facilities on the Property) (the "Proposed
Project Program"). The Project's theme shall reflect the culture, history and
art of the Tribe. The Authority shall either approve, (in its sole and
absolute discretion) or return with comments consistent with the elements
described in Recital B hereof and reasonable construction practices and
consideration of the limit on Total Project Costs, on the Proposed Project
Program within fifteen (15) days of delivery by Developer. Developer shall
modify the Proposed Project Program as required by the Authority's comments
and shall resubmit it for final approval within fifteen (15) days (or such
additional time as the extent of the comments reasonably require). The final,
approved proposal is hereinafter referred to as the "Project Program".
 
  2.3 Initial Cost Estimate and Submission of Project Schedule. (a) Within
thirty (30) days following full execution of this Development Agreement,
subject to compliance with the requirement set forth in Section 8.1 below,
during the period that the Project Program is being developed, Developer shall
recommend the selection and terms of employment by the Authority of a
professional cost estimator for the Project or portions thereof (the "Cost
Estimator"), which recommendation shall be subject to the approval of the
Authority, in its sole and absolute discretion. The Cost Estimator shall be
retained on terms recommended by Developer and approved by the Authority.
Within thirty (30) days after approval of the Project Program, the Cost
Estimator, under the direction of Developer, shall prepare more detailed cost
estimates, based upon the preliminary estimates contained in the Project
Program, for each major element of the Project and including pre-opening costs
relating to Section 8.8 (the "Preliminary Budget"), which shall be subject to
the approval of the Authority (which may be withheld in its sole and absolute
discretion). If such Preliminary Budget exceeds the ceiling on Total Project
Costs, Developer and the Authority shall work together either to revise the
Project Program as agreed, or to revise the ceiling on Total Project Costs, as
determined in the Authority's sole and absolute discretion.
 
  (b) Within thirty (30) days following the approval by the Authority of the
Project Program, based upon the Project Program, Developer shall submit to the
Authority, for its approval, a more detailed schedule, which schedule shall
include, without limitation, target dates for the selection of all
professionals and consultants, completion of design and construction plans as
described in Article 4 below and initial conceptual budgets for the Project
(the "Project Schedule"). The Authority and Developer shall mutually agree
upon target commencement and completion dates for the design, construction,
equipping and opening of the Project (including stages thereof, if
applicable).
 
  2.4 Retail Facilities. Within thirty (30) days following full execution of
this Development Agreement, the Authority may elect, by written notice to
Developer, to pursue the development of the Retail Facilities with Developer
and in consultation with a retail development firm selected by the Authority
(the "Retail Consultant"). If the Authority so elects to pursue the
development of the Retail Facilities, the definition of "Project" in this
Development Agreement shall be deemed to include the Retail Facilities and all
terms and conditions set forth in this Development Agreement shall apply to
the Retail Facilities, except as expressly set forth herein, and except that
the ceiling for Total Project Costs shall be revised to incorporate the total
costs of designing, constructing, equipping and opening the Retail Facilities
(the "Retail Facilities Costs"). Developer and the Authority shall work with
the Retail Consultant to develop a program and a schedule for the Retail
 
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Facilities in the manner described in Sections 2.2 and 2.3 above for the
Project and to determine the Retail Facilities Costs. Developer shall
integrate the construction of the Retail Facilities with the balance of the
Project in a manner agreed upon by the Authority, Developer and the Retail
Consultant.
 
                                   ARTICLE 3
 
                    Appointment of Authority Representative
 
  The Authority, at its own expense, shall appoint a representative (the
"Authority Representative"), that is qualified to act as the principal liaison
with Developer in connection with the Project. The Authority Representative
may, at the Authority's option, have an office within Developer's on-site
office, shall participate in progress meetings pursuant to Section 8.4,
inspect work pursuant to Section 5.4 and coordinate all matters that require
the approval of the Authority. Unless otherwise indicated by the Authority,
any provisions in this Development Agreement requiring notice to the Authority
may be complied with by the giving of notice to the Authority Representative.
Unless otherwise provided in this Development Agreement or pursuant to the
written authorization of the Authority, however, the Authority Representative
shall have no right or authority to make decisions or take actions which bind
or require the consent of the Authority.
 
                                   ARTICLE 4
 
                             Design of the Project
 
  4.1 General Supervision. Developer shall represent the Authority and act as
the Authority's liaison with respect to the selection, direction and
management of the Architect selected pursuant to Section 4.2 and the
Construction Manager selected pursuant to Section 4.3, and any other
professionals engaged, in accordance with the terms of the Project Program, to
perform services in connection with the design and construction of any portion
of the Project. Subject to the limitations described herein, the Authority
shall delegate to Developer its responsibilities under any construction
management, architectural and other agreements with development professionals
in order to allow Developer to supervise, direct and administer the duties,
activities and functions of the Architect and the Construction Manager. Both
the Architect and Construction Manager shall review and advise the Authority
and Developer with respect to the Project Program.
 
  4.2 Employment of the Architect. Within thirty (30) days of the approval of
the Project Program by the Authority, Developer shall prequalify and interview
architects with substantial and satisfactory experience in the design and
construction of hotel, resort, convention and gaming facilities. The Architect
shall be duly licensed to practice architecture in the State of Connecticut,
as required by applicable law, and (with respect to the architect of record
for the Project) shall be qualified to provide and/or secure and supervise all
necessary engineering and related consulting services in connection with the
design of the Project. The Authority shall advise Developer in writing if it
requires a design competition. The Authority shall review and approve, in
advance, the prequalification and design competition (if required) criteria
(which shall include, without limitation, a standard form agreement prepared
by Developer and all necessary specifications developed by Developer).
Developer shall advise the Authority Representative concerning the status of,
and the Authority may, at its option, participate in, the prequalification,
interview and design competition processes. Based on the results of the design
competition, subject to compliance with the requirement set forth in Section
8.1 that preference be given to Certified Entities, Developer shall recommend
the selection and employment by the Authority of the Architect to provide
design services for the Project, which recommendation shall be subject to the
approval of the Authority, in its sole and absolute discretion. Subject to the
Authority's final approval and right to participate in negotiations, Developer
shall be responsible for preparing and negotiating a contract with the
Architect, which contract shall contain such provisions for the protection of
the Authority that are deemed appropriate and are requested by the Authority.
In the event the Authority pursues the development of the Retail Facilities
pursuant to Section 2.4 hereof, upon the mutual agreement of the Authority,
Developer and the Retail Consultant, an
 
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architect other than the Architect may be selected, as described above in this
Section 4.2, to perform the Retail Facilities design services (the "Retail
Facilities Architect"), in which event all provisions regarding the
Architect's role under this Development Agreement with respect to the Retail
Facilities shall apply solely to the Retail Facilities Architect.
 
  4.3 Employment of Construction Manager. Within thirty (30) days of the
approval of the Project Schedule by the Authority, subject to compliance with
the requirement set forth in Section 8.1 that preference be given to Certified
Entities, Developer shall prequalify, interview and recommend the selection
and employment by the Authority of a construction manager with sufficient
experience in the construction of hotel, resort, convention and gaming
facilities, as necessary to complete the Project in the region where it is
located. The Construction Manager shall be properly licensed in the State of
Connecticut, as required by applicable law, and shall maintain a full-time
staff dedicated to a continuous presence at the Project. The Authority shall
review and approve, in advance, the prequalification and selection criteria
(which shall include, without limitation, a standard form agreement
(consistent with industry standards for owner/construction manager agreements)
prepared by Developer and all necessary specifications developed by
Developer). Subject to the Authority's final approval and right to participate
in negotiations, Developer shall be responsible for preparing and negotiating
a contract with the Construction Manager, which contract shall contain such
provisions for the protection of the Authority that are deemed appropriate and
are requested by the Authority.
 
  4.4 Design, Construction and Furnishings Budgets. From time to time,
Developer, with the advice and assistance of the Architect and the
Construction Manager, shall update in writing the Preliminary Budget,
consistent, in all respects, with the Project Program and the Project
Schedule, for the management, supervision, design, construction, equipping and
opening of the Project, which update shall be subject to the approval of the
Authority (which may be withheld in its sole and absolute discretion). If such
updated Preliminary Budget exceeds the ceiling on Total Project Costs,
Developer and the Authority shall work together either to revise the Project
Program and/or the Project Schedule as agreed, or to revise the ceiling on
Total Project Costs, as determined in the Authority's sole and absolute
discretion.
 
  4.5 Design Development. Based upon, and consistent with, the Preliminary
Budget, Project Program and Project Schedule, the Architect, under the
direction of Developer, and in consultation with the Construction Manager
and/or the Cost Estimator, shall prepare "Schematic Design Documents"
consistent with industry standards which shall include, without limitation,
drawings and other documents illustrating the scale and relationship of the
proposed Project and the major divisions of each major element of the Project,
as well as a preliminary estimate of construction costs based upon the
proposed area, size and scope of each major element of the Project. The
Schematic Design Documents shall be submitted to the Authority for its review
and comment (consistent with the Project Program, the Project Schedule and the
Preliminary Budget) or approval, which approval shall not be withheld
unreasonably so long as such documents are consistent with the Project
Program, Project Schedule and Preliminary Budget.
 
  Upon final approval of the Schematic Design Drawings for the Project by the
Authority (but not before receipt of the Required Approvals and closing of the
Construction Financing), the Architect, under the direction of Developer and
in consultation with the Construction Manager, shall prepare "Design
Development Documents" for the Project consistent with industry standards
which shall include, without limitation, drawings and other documents to fix
and describe the size and character of each major element of the Project as to
architectural, structural, mechanical and electrical systems, materials and
such other elements as may be appropriate. Further, the Architect,
Construction Manager and/or the Cost Estimator shall advise Developer and,
subject to the requirements of Section 4.4 above, update the Preliminary
Budget to the extent necessary. Following completion of any revisions which
Developer deems necessary to the Design Development Documents, Developer shall
submit copies thereof to the Authority, together with any necessary updates to
the Preliminary Budget (subject to the requirement of Section 4.4 above), for
the Authority's review and comment (consistent with the Project Program, the
Project Schedule, the Project Budget and the Schematic Design Documents) or
approval, which approval shall not be withheld unreasonably so long as the
Design Development Documents are consistent with the Project Program, Project
Schedule and approved Schematic Design Documents.
 
                                      B-7
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  4.6 Construction Documents. Based upon, and consistent with, the Project
Schedule, approved Design Development Documents and Preliminary Budget, the
Architect shall prepare for Developer's approval, full construction documents
(the "Plans and Specifications") prepared so as to conform to all Legal
Requirements and to allow bids to be obtained on the work described therein.
The Plans and Specifications shall be consistent with industry standards and
shall include, without limitation, all architectural, mechanical, electrical
and plumbing drawings and specifications necessary to complete the
construction of the Project. In addition, subject to the requirements of
Section 4.4 above, the Architect and Construction Manager shall advise
Developer and update the Preliminary Budget to the extent necessary based upon
the Plans and Specifications. Following completion of any revisions which
Developer deems necessary to the Plans and Specifications, Developer shall
submit the Plans and Specifications, together with any necessary updates to
the Preliminary Budget, to the Authority for its review and approval, which
approval shall not be withheld unreasonably so long as the Plans and
Specifications are consistent with the Project Program, Project Schedule and
approved Design Development Documents.
 
  4.7 Compliance with Construction Standards, Environmental Laws and
Regulations. The Project shall be designed and constructed so as to protect
the environment and the public heath and safety, as agreed upon by Developer
and the Authority. The design, construction and maintenance of the Project
shall, except to the extent waived in writing by the Authority, meet or exceed
all established standards pertaining to the Tribe or all building codes, fire
codes and safety and traffic requirements (but excluding planning, zoning and
land use laws, ordinances, regulations and requirements) which would be
imposed on the Project by existing local, state or federal laws or regulations
which would be applicable if the Project were located outside of the
jurisdictional boundaries of the Tribe, even though those requirements may not
apply within the Tribe's jurisdictional boundaries. Nothing in this
Development Agreement shall grant to the State of Connecticut or any political
subdivision thereof any jurisdiction (including but not limited to
jurisdiction regarding zoning or land use) over the Property or the design,
construction, equipping and opening of the Project.
 
  4.8 Suspension of Obligations. On the earlier of (a) the date on which the
NIGC or the Bureau of Indian Affairs gives notice to Developer, the Tribe or
the Authority that the Required Approvals with respect to the Relinquishment
Agreement dated February 7, 1998 between the Authority and Trading Cove
Associates (the "Relinquishment Agreement") or this Development Agreement in
their current forms (including any changes mutually acceptable to the parties)
will not be granted or (b) the earlier of (i) six (6) months after the date of
execution of this Development Agreement or (ii) the date that the Schematic
Design Drawings are approved, if no response has been received from the NIGC
or the Bureau of Indian Affairs with respect to the Required Approvals of the
Relinquishment Agreement or this Development Agreement in their current forms
(including any changes mutually acceptable to the parties), Developer shall
not be authorized or required to provide any further services under this
Development Agreement, and all work relating to the development of the Project
shall cease, and shall not recommence until forms of the Relinquishment
Agreement and this Development Agreement agreeable to the Authority and
Developer have received the Required Approvals.
 
                                   ARTICLE 5
 
                          Construction of the Project
 
  5.1 Employment of Contractors. Within thirty (30) days of the Authority's
approval of the Design Development Documents, the Construction Manager, under
the direction of Developer, shall begin to prequalify (in accordance with
criteria approved by the Authority) and interview contractors with significant
experience in the construction of comparable hotel, resort, convention and
gaming facilities in the region where the Property is located based upon the
need for such contractors as provided in the Project Schedule. Thereafter, as
may be required by the Project Schedule, the Construction Manager, under the
direction of Developer, shall prepare detailed bid packages based upon the
Plans and Specifications, which shall include, without limitation, the
Construction Manager's standard form agreement prepared under the direction of
Developer and approved by the Authority, and all necessary performance
specifications developed by or for Developer, with the assistance of the
Construction Manager (the "Bid Packages"). The Bid Packages shall be subject
to the Authority's prior
 
                                      B-8
<PAGE>
 
written approval, in its sole and absolute discretion. The Bid Packages shall
be sent to at least three (3) pre-approved contractors. Any bids not returned
within the bidding period set forth in the Bid Packages shall be disregarded
unless the Authority elects to extend the bidding period. Developer shall
advise the Authority Representative concerning the status of, and the
Authority may, at its option, participate in, the bidding processes. Based on
the results of the bidding process and subject to compliance with the
requirement set forth in Section 8.1 that preference be given to Certified
Entities, Developer shall recommend the selection and employment by the
Authority of the contractors to construct and equip the Project, which
recommendation shall be subject to the approval of the Authority, in its sole
and absolute discretion. The approved contractors shall be referred to herein
as the "Contractors." Each of the Contractors shall be properly licensed as
required by applicable law and, if required by the Authority, shall furnish a
payment and performance bond or other guaranty of performance reasonably
satisfactory to the Authority, to cover the construction and equipping of the
Project. Neither Developer nor any Affiliate of Developer shall be eligible to
serve or be employed as a Contractor.
 
  5.2 Contract Documents. Subject to the Authority's final approval and its
right to participate in negotiations, Construction Manager, under the
direction of Developer, shall be responsible for preparing and negotiating a
contract and other contract documents with the Contractors. The contract and
other contract documents with the Contractors (the "Contract Documents") shall
require the Contractors to construct and equip the Project in accordance with
the directives of the Construction Manager, the approved Plans and
Specifications and their approved bids and to be responsible for providing all
surety, administrative and other services, materials, equipment and labor
defined in the Contract Documents. The Contract Documents shall contain such
provisions for the protection of the Authority that are reasonably deemed
appropriate and are requested by the Authority and provide for insurance,
appropriate lien waivers and for construction schedules which include progress
payments and may include liquidated damages for delayed performance.
 
  5.3 Final Budget. Within thirty (30) days following approval of the Design
Development Documents and commencement of preparation of the Plans and
Specifications, Developer, in consultation with the Architect, Construction
Manager and/or Cost Estimator shall prepare a proposed final budget for the
Project, which shall contain all costs related to the design, construction and
equipping of the Project, plus a contingency of ten percent (10%) of the hard
construction costs (the "Proposed Final Budget"). If the Proposed Final Budget
exceeds Total Project Costs, then Developer and the Authority shall work
together to either revise the Design Development Documents and/or the Plans
and Specifications as agreed, or revise the ceiling on Total Project Costs, as
determined in the Authority's sole and absolute discretion. Within fifteen
(15) days of submission thereof, the Authority shall either approve or comment
upon the Proposed Final Budget, which approval may be withheld in the
Authority's sole and absolute discretion. Developer shall modify the Proposed
Final Budget as required to conform to the Authority's comments and shall
resubmit it for final approval within fifteen (15) days (or such additional
time as the extent of the comments reasonably require) following receipt of
the Authority's comments. The approved budget shall be the "Final Budget."
Subject to the approval requirements set forth below, Developer may, after at
least fifteen (15) days prior written notice to the Authority (which shall
include an explanation): (i) revise the line items in the Final Budget from
time-to-time as necessary to reflect any unforeseen changes, variables or
events or to include additional, unanticipated items of expense, (ii)
reallocate part or all of the amount budgeted with respect to any line item to
another line item, and (iii) to make such other modifications to the Final
Budget, as Developer deems necessary. Any allocation of the contingency
contained in the Final Budget shall require the approval of the Authority. In
addition, the Authority shall receive written notices of all change orders,
and any change orders in excess of (x) Seven Hundred Fifty Thousand Dollars
($750,000) in any single instance, (y) Three Million Dollars ($3,000,000) in
the aggregate in any one month or, (z) Twelve Million Dollars ($12,000,000) in
the aggregate over the duration of the Project, shall, at the Authority's
option, require the prior written approval of the Authority (which may be
withheld in its sole and absolute discretion).
 
  5.4 Supervision of the Contractor and Construction. The Construction
Manager, under the direction of Developer, shall supervise the Contractors
engaged to perform services in connection with the construction of the
Project. All Contractors shall be selected and employed in compliance with
Section 8.1 of this Development Agreement. The Construction Manager, under the
direction of Developer, shall be responsible for the
 
                                      B-9
<PAGE>
 
supervision, review and administration of any and all Contract Documents or
invoices during the construction and close-out of the Project. Unless
otherwise provided in this Development Agreement, Developer shall have full
power and authority to act on behalf of the Authority in connection with any
Contract Documents which have been approved by the Authority; provided,
however, that Developer shall not have any authority to declare a default or
exercise remedies under any Contract Documents without the Authority's prior
written approval, which may be withheld in its sole and absolute discretion.
 
  Developer and/or the Construction Manager, shall have control of and charge
and responsibility for, supervision of any Persons performing work on the
Property in connection with the Project. The Construction Manager, under the
direction of Developer and subject to review by the Architect, shall cause the
Contractors to construct the Project in accordance with the Plans or
Specifications and other requirements of the Contract Documents, including,
without limitation, any changes or modifications thereto approved by the
Authority, and shall not authorize the Contractors to pay or incur any
obligations not approved by the Authority (to the extent such approval is
required hereunder). Developer, in consultation with the Architect, the
Construction Manager and the Authority's Representative, shall review
applications for payment for submission to the Authority and review and
certify the amounts due. In addition, Developer, in consultation with the
Authority's Representative, shall supervise and assist the Architect and the
Construction Manager in: (a) interpreting and deciding matters concerning the
performance of any Contractor and the requirements of the Contract Documents;
(b) observing and evaluating the work performed and rejecting work which does
not conform to construction contracts and related documents; (c) using
reasonable efforts to cause the Contractors to pay punctually all sums due for
labor, materials, fixtures or equipment used or purchased in connection with
the construction of the Project; and (d) inspecting the work to determine the
dates of temporary occupancy, partial, substantial and final Completion of the
Project (which must be agreed to by the Architect and the Authority).
 
  5.5 Late Payment Fees; Bonus; Delay Claims. The Authority and Developer
agree that time is of the essence in completing the Project and, together with
the Construction Manager, they may seek to include in certain material
Contract Documents, certain provisions that if a Contractor fails to meet
project schedules, the Contract Documents shall provide that such Contractor
shall pay to the Authority an amount to be determined by Developer and the
Authority for each calendar day that it fails to meet such project schedules,
as liquidated damages and not a penalty. In addition, subject to the approval
of the Authority (which may not be unreasonably withheld), the Contract
Documents may include a bonus payment if a Contractor completes its work on
the Project prior to the deadline therefor.
 
                                   ARTICLE 6
 
               Selection of Equipment, Furniture and Furnishings
 
  Subject to the Final Budget for the Project, Developer shall, through itself
or a purchasing agent retained by the Authority, arrange for the selection of
vendors and suppliers for purchase by the Authority of equipment, furniture
and furnishings required to operate the Project. Alternatively, at the
Authority's option, Developer shall arrange for the procurement of equipment,
furniture and furnishings on lease terms approved by the Authority. All
vendors and suppliers shall be selected and employed in compliance with
Section 8.1 below. Developer shall be responsible for the negotiation,
preparation, supervision, review and administration of any and all contracts,
agreements or invoices with vendors and suppliers, and, unless otherwise
provided in this Development Agreement, Developer, consistent with the terms
of the Final Budget, shall have full power and authority to act on behalf of
the Authority in connection with any contracts which have been approved by the
Authority with vendors and suppliers. Notwithstanding the foregoing, with
respect to any such contract in excess of Seven Hundred Fifty Thousand Dollars
($750,000), Developer shall not terminate such contract or exercise other
remedies with respect thereto without the Authority's prior written consent,
which may be withheld in its sole and absolute discretion.
 
                                     B-10
<PAGE>
 
                                   ARTICLE 7
 
                      Funding Requirements of the Project
 
  7.1 Tribe's Funding Obligations. Developer agrees to cooperate fully with
the Authority in the Authority's efforts to arrange the Construction
Financing. The Authority shall, prior to commencement of construction of the
Project, make available or otherwise cause to be established a development
fund into which shall be deposited all of the proceeds of the Construction
Financing. Said funds shall be designated exclusively for performing the
Authority's obligations under any agreements entered into with respect to the
management, supervision, design, construction, equipping and opening of the
Project. The funds procured under the Construction Financing shall be used to
discharge the Authority's obligations under any and all agreements entered
into for the management, supervision, design, construction, equipping and
opening of the Project, including, without limitation, consulting fees,
professional fees, on-site and off-site improvements, architectural,
engineering, contractors' fees and costs, furniture, signs, trade fixtures and
equipment necessary for implementing the operation of the Project, closing and
financing related costs, and interest as provided under the Construction
Financing.
 
  7.2 Deadline for Construction Financing. Notwithstanding any contrary
provision contained herein, if the Authority fails to obtain Construction
Financing on or before December 1, 1998, the Authority shall provide Developer
with written notice that the Construction Financing has not been obtained,
together with written notice either, at its sole option that (a) the Authority
has elected to proceed with the design, construction, equipping and opening of
the Project based upon alternative financing arrangements or (b) the Project
has been suspended. Upon any such election to suspend the Project, the
Authority shall pay all amounts due to the Architect, the Construction Manager
or other Contractors for the period prior to the date of such suspension and
shall pay to Developer its reasonable out of pocket expenses directly related
to the Project Executive and the services provided in connection with the
performance of its duties hereunder prior to the date of such suspension. If
the Authority elects to proceed with the Project, the Authority shall provide
Developer with proof of alternative financing, whereupon Developer shall
proceed with its obligations pursuant to this Development Agreement. If the
Authority elects to suspend the Project, Developer shall suspend its services
under this Development Agreement pending receipt from the Authority of a
notice to proceed. If the Authority subsequently obtains financing for the
Project, the parties' obligations under this Development Agreement shall be
reinstated.
 
                                   ARTICLE 8
 
                      Additional Duties, Obligations and
                            Authority of Developer
 
  8.1 Approval of Contractors, Vendors and Suppliers. Upon notice to the
Authority, Developer shall be responsible for determining the acceptability of
Contractors, vendors and suppliers proposed by the Architect and the
Construction Manager; provided, however, that if any Contractor, vendor or
supplier is to perform work with respect to the Project, including, without
limitation, performing labor or other services or delivering or installing any
materials, goods, equipment, furniture or furnishings, for an amount greater
than Seven Hundred Fifty Thousand Dollars ($750,000), the selection of such
Contractor, vendor or supplier must be approved in writing by the Authority.
In order to maximize the benefits of the Project to the Tribe and the
Authority, Developer shall implement procedures described in the Tribal
Employment Rights Ordinance or otherwise developed by the Authority so that
preference be given in the recruiting, prequalification, negotiation and
selection of the Architect and the Construction Manager and all Contractors,
vendors and suppliers to business entities or persons which have been approved
by the Authority (the "Certified Entities") in all employment categories
relating to the design, construction, equipping and opening of the Project. If
there are Certified Entities that are experienced in the relevant employment
category, the opportunity to compete for employment in such employment
category shall be made available to such Certified Entities. Only in the event
that the bids by such Certified Entities are unreasonable based on
commercially competitive standards or that the Certified Entities lack the
capability to complete the contract, shall the bidding with respect to such
employment category be reopened to entities or persons that are not Certified
Entities. If Developer or the Construction Manager
 
                                     B-11
<PAGE>
 
determines that a Certified Entity lacks the capability to complete a
contract, Developer shall so notify the Authority at least five (5) days
before bidding therefor is opened to entities or persons that are not
Certified Entities, and Developer and the Construction Manager shall require
that the Certified Entities be considered as a subcontractor with respect to
portions of such contract for which they are qualified.
 
  8.2 Employment of Other Professionals. The Authority, in consultation with
Developer, shall select and employ other professionals, including, without
limitation, surveyors, attorneys, accountants and public relations or
advertising firms, to perform services required for the Project.
 
  8.3 Expenditures. Subject to variances and change orders specifically
permitted hereunder, Developer shall not authorize any expenditure of funds
other than expenditures authorized by the Authority as set forth in the
Preliminary Budget (as modified from time to time in accordance with the terms
hereof) or the Final Budget for the Project (as modified from time to time in
accordance with the terms hereof).
 
  8.4 Progress Reports and Meetings. The Authority, the Project Executive and
the Construction Manager shall have weekly meetings (and other meetings as may
be needed) to discuss the progress of the Project. In addition, on a monthly
basis, the Executive Project Committee shall meet to discuss all issues with
respect to the Project, including, without limitation, updates to the Project
Schedule and Preliminary or Final Budget (as applicable), any claims or
disputes, the status of the work and all other relevant items. Prior to such
monthly meetings, Developer shall submit to the Authority monthly progress
reports showing the then present status of design and/or construction of the
Project. If the progress reports reflect a substantial deviation from the
budget or design or construction progress schedules approved by the Authority,
Developer shall submit to the Authority with Developer's design or
construction report an explanation thereof and proposed corrective steps, as
applicable.
 
  8.5 Submission of Contracts. Developer agrees promptly to submit to the
Authority copies of all contracts and subcontracts relating to the Project
from time to time received by Developer and all other documents related to the
Project. Developer, with the assistance of the Construction Manager, shall
assist the Authority in complying with the terms of and maintain in full force
all contracts for design or construction of the Project and any surety bonds
issued in connection therewith. Developer shall give the Authority immediate
notice of any known failure of any party to comply with the terms of any such
contract or bonds and shall submit to the Authority copies of any
correspondence regarding an alleged default by any person in relation to any
contract or agreement relating to the Project, together with an explanation
thereof and proposed corrective steps.
 
  8.6 Permits and Licenses. Except for permitting and licensing requirements
of the Tribe, Developer shall advise the Authority as to all permitting and
licensing requirements for the Project, and the Authority, in consultation
with Developer, shall obtain or cause to be obtained all permits and licenses
required for the design, construction equipping and opening of the Project.
 
  8.7 Maintenance of Records. Developer, the Construction Manager and the
Architect, shall maintain on the Property all books and records in connection
with the design, construction, equipping and opening of the Project, together
with all documents and papers pertaining to the Project, including, without
limitation, general maintenance of such full and detailed accounts as may be
necessary for proper financial management of the Project. All such documents
shall at all times be open to the inspection of the Authority. Copies of such
documents shall be provided to the Authority or the Authority's
Representative, and Developer shall cooperate with any audit of such books and
records. After the expiration or termination of this Development Agreement,
Developer shall deliver all such books and records together with all such
related documents and papers to the Authority, and Developer shall be entitled
to retain a copy.
 
  8.8 Staffing of Project. (a) Developer shall have the responsibility and
authority to direct the selection, retention and training of all initial
employees performing regular services in connection with the management,
operation and maintenance of the Project on the Completion Date. No later than
sixty (60) days prior to the anticipated Completion Date of the Project (or
any portion thereof that will be opened for business), Developer
 
                                     B-12
<PAGE>
 
shall submit to the Authority, for its approval, a detailed staffing plan for
all personnel necessary to operate the Project (or portion thereof) in a first
class manner, which staffing plan shall include, without limitation,
organizational charts, a job classification system with job descriptions,
salary levels and wage scales (the "Staffing Plan"). The Staffing Plan shall
be subject to the Authority's review and approval (which approval may be
withheld in its sole and absolute discretion) and to compliance with the
Tribal Employment Rights Ordinance.
 
  (b) All prospective employees shall be subject to the Authority's approval,
which approval, with respect to Key Personnel, may be withheld in the
Authority's sole and absolute discretion. All Key Personnel and any and all
other employees as required by the Director of Regulation of the Authority
shall be subject to background checks to be performed by the Authority (and
the Authority shall have the right to reject any candidate for any position
based on the results thereof). In order to maximize the benefits of the
Project to the Tribe and the Authority, in accordance with the Tribal
Employment Rights Ordinance, Developer shall give preference in employment and
training for Key Personnel positions to qualified candidates recommended by
the Authority. In addition, in accordance with the Tribal Employment Rights
Ordinance, Developer shall give preference in recruiting, training and
employment by the Authority for all positions to qualified members of the
Tribe and their spouses and children in all job categories of the Project,
including, without limitation, management positions. Only if no tribal
members, spouses or children are qualified for a particular job opening may
other candidates be considered. Thereafter, preference shall be given to
qualified, enrolled members of other federally recognized Indian tribes.
Developer shall supervise all activities determined necessary by the Authority
to recruit and train Tribe members, spouses and children, including, without
limitation, providing job fairs for members of the Tribe and clearly
specifying in all job advertisements the preference for Tribe members.
 
  (c) Notwithstanding anything contained herein to the contrary, from and
after the Completion Date of the Project (or any portion thereof which is
sooner opened for business), all decisions with respect to the management,
operation and maintenance of the Project (or portion thereof) shall be made
exclusively by the Authority.
 
  8.9 Force Majeure Events. Notwithstanding anything in this Development
Agreement to the contrary, the parties hereto shall be excused from their
obligations hereunder to the extent and for so long as such party shall be
prevented from compliance by reason of "Force Majeure Causes", provided notice
of such inability to comply is given to the other party to this Development
Agreement within ten (10) days after the occurrence of the applicable Force
Majeure Cause.
 
                                   ARTICLE 9
 
                           Compensation to Developer
 
  The Authority shall pay to Developer as compensation for the services set
forth herein, a fee in the amount of Fourteen Million Dollars ($14,000,000)
(the "Development Fee"). The Development Fee shall be paid as follows: on
January 15, 2000 and thereafter within fifteen (15) days following the end of
each calendar quarter until the Completion Date, the Authority shall pay to
Developer a percentage of the Development Fee equal to the completion
percentage of the Project certified by Developer as of December 31, 1999 and
the end of each successive calendar quarter. The Authority shall make payments
of the Development Fee to Developer upon receipt of an application for payment
from Developer, which statement shall include evidence of satisfaction of the
foregoing conditions to payment.
 
                                  ARTICLE 10
 
                                     Term
 
  The "Term" of this Development Agreement shall commence on the Effective
Date and shall expire upon the earlier of (i) the Completion Date of the
Project in the event construction has commenced or (ii) ten (10) years from
the Effective Date of this Development Agreement.
 
                                     B-13
<PAGE>
 
                                  ARTICLE 11
 
                                  Termination
 
  Subject to Section 12.5 below, this Development Agreement may only be
terminated by the Authority or Developer if the other party commits any
material breach or fails to perform any material duty or obligation of this
Development Agreement. Upon learning of a material breach or default, the non-
breaching party shall send written notice of such material breach or default
to the breaching party. Subject to Section 12.5 below, if the breaching party
fails to cure the material breach or default within thirty (30) days of
receipt of such written notice from the non-breaching party, the non-breaching
party may terminate this Development Agreement by providing the defaulting
party with a notice of termination (which shall be immediately effective).
 
                                  ARTICLE 12
 
                              Dispute Resolution
 
  12.1 Authority's Consent to Suit. Subject to Section 12.5 below, the
Authority expressly waives its immunity from unconsented suit for the purpose
of permitting or compelling arbitration as provided in this Article 12, and to
be sued in any court of competent jurisdiction for any claims by Developer for
the purpose of compelling arbitration or enforcing any arbitration award or
judgment arising out of this Development Agreement. In no instance shall any
enforcement of any kind whatsoever be allowed against any assets of the
Authority other than the limited assets of the Authority specified in Section
12.4.
 
  12.2 Arbitration. All disputes controversies or claims arising out of or
relating to this Development Agreement, or the termination of this Development
Agreement, shall be settled by binding arbitration in accordance with the
commercial arbitration rules of the American Arbitration Association and the
Federal Arbitration Act. The parties agree that binding arbitration shall be
the sole remedy as to all disputes arising out this Development Agreement,
unless the parties mutually agree otherwise. The arbitrator(s) shall have no
authority to award punitive damages and the parties and the arbitrator(s)
shall maintain strict confidentiality with respect to the arbitration. In
determining any matter, the arbitrator(s) shall apply the terms of this
Development Agreement, including, without limitation, Section 12.5, without
adding to, modifying or changing the terms in any respect, and shall apply the
laws of the Tribe. All arbitration hearings shall be held at a place
designated by the arbitrator(s) in New London County, Connecticut.
 
  12.3 Limitation of Actions. The Authority's waiver of immunity from
unconsented suit is specifically limited to the following actions and judicial
remedies: (i) the enforcement of an award of actual damages by arbitration
subject to Section 12.4; provided, however, that the arbitrator(s) and/or the
court shall have no authority or jurisdiction to order execution against any
assets or revenues of the Authority except undistributed or future revenues of
the Project and the existing Mohegan Sun casino; (ii) the enforcement of a
determination by an arbitrator that prohibits the Authority from taking an
action that would prevent Developer from performing this Development Agreement
pursuant to its terms, or that requires the Authority to specifically perform
any obligation under this Development Agreement; (iii) an action to compel
arbitration pursuant to Section 12.2; and (iv) an action to preserve the
status quo during disputes pursuant to Section 12.5.
 
  12.4 Authority's or Tribe's Assets. Nothing in this Development Agreement
shall obligate or authorize the payment or encumbrance of any assets or
revenues of the Authority or the Tribe other than undistributed or future
revenues of the Project or the existing Mohegan Sun casino. Neither the Tribe
nor any director, officer or office holder, employee, agent, representative or
member of the Authority or the Tribe, as such, shall have any liability for
any obligations of the Authority under this Development Agreement or for any
claim based upon, in respect of, or by reason of such obligations or their
creation.
 
  12.5 Limit of Damages Payable by Developer. Notwithstanding anything in this
Development Agreement to the contrary, Developer shall not be liable hereunder
for the payment of damages to the Authority in excess of the amount of the
Development Fee paid hereunder.
 
                                     B-14
<PAGE>
 
  12.6 Performance During Disputes. The parties mutually agree that during any
kind of controversy, claim, disagreement or dispute, including, without
limitation, a dispute as to the validity of this Development Agreement, the
Authority and Developer shall continue their performance of the provisions of
this Development Agreement for a period of forty-five (45) days, provided
funds necessary to pay Project costs which continue to be incurred (other than
amounts in dispute) continue to be available.
 
                                  ARTICLE 13
 
                           Miscellaneous Provisions
 
  13.1 Authorization. The Authority and Developer represent and warrant to
each other that each has full power and authority to execute this Development
Agreement and to be bound by and perform the terms hereof. Each party shall
furnish evidence of such authority to the other. The Authority and Developer
each represent and warrant to the other that the execution, delivery and
performance of this Development Agreement shall not conflict with the terms of
their organizational documents, any agreement to which it is a party or by
which it is bound or any law, rule or regulation to which its subject.
 
  13.2 Relationship. Developer and the Authority shall not be construed as
joint venturers or partners of each other by reason of this Development
Agreement, and neither shall have the power to bind or obligate the other
except as set forth in this Development Agreement. Developer is retained by
the Authority only for the purposes and to the extent set forth in this
Development Agreement, and Developer's relationship to the Authority shall be
that of an independent contractor.
 
  13.3 Governing Law. The rights and obligations of the parties and the
interpretation and performance of this Development Agreement shall be governed
by the law of the Tribe, and, to the extent not addressed by the law of the
Tribe, by applicable federal law, and, to the extent not addressed by the law
of the Tribe or applicable federal law, the law of the State of Connecticut,
without regard to its principles regarding conflicts of law.
 
  13.4 Amendment. No modification or amendment to this Development Agreement
shall be effective unless mutually agreed upon by both parties in writing and
unless such modification or amendment has received any required regulatory
approval.
 
  13.5 Notices. All notices, demands, requests or other communications which
may be or are required to be given, served or sent to either party in
connection with the matters which are the subject of this Development
Agreement shall be in writing and shall be personally delivered to such party
or mailed first class, postage prepaid, or transmitted by a major overnight
commercial courier or by facsimile to the address for such party as set forth
below, or to such other address furnished by such parties for such purpose by
means of notice pursuant to this Section 13.5:
 
    If to the Authority:
 
    The Mohegan Tribal Gaming Authority
    One Mohegan Sun Boulevard
    Uncasville, CT 06382
    Attention: Chairman of the Management Board
    Phone: (860) 848-6100
    Facsimile: (860) 848-6162
 
    with a copy to:
 
    Mohegan Tribal Gaming Authority
    One Mohegan Sun Boulevard
    Uncasville, CT 06382
    Attention: Mr. Thomas Acevedo
    Phone: (860) 848-6126
    Facsimile: (860) 848-6162
 
                                     B-15
<PAGE>
 
    If to Developer:
 
    Trading Cove Associates
    914 Hartford Turnpike
    P.O. Box 60
    Waterford, CT 06385
    Attention: Mr. Len Wolman
    Phone: (860) 442-4559
    Facsimile: (860) 437-7752
 
    with a copy to:
 
    Sun International Hotels Limited
    Coral Towers
    P.O. Box N-4777
    Paradise Island
    Nassau, The Bahamas
    Attention: Mr. Charles Adamo
    Phone: (242) 363-2509
    Facsimile: (242) 363-4581
 
  Notices delivered by mail shall be deemed given five (5) days after such
mailing. Notices given by hand delivery shall be deemed given on the date of
delivery. Notices given by overnight commercial courier shall be deemed given
on the business day immediately following transmittal, and notices delivered
by facsimile shall be deemed given on the date of transmission if the
transmission is confirmed.
 
  13.6 Third Party Beneficiary. This Development Agreement is exclusively for
the benefit of the parties hereto and it may not be enforced by any party
other than the parties to this Development Agreement and shall not give rise
to liability to any third party other than the authorized successors and
assigns of the parties pursuant to Section 13.7.
 
  13.7 Successors and Assigns. The benefits and obligations of this
Development Agreement shall inure to and be binding upon the parties hereto
and their respective successors and assigns. This Development Agreement shall
not be assigned by Developer to an entity other than Sun or an Affiliate of
Sun without the prior written consent of the Authority (which may be withheld
in its sole and absolute discretion) and any required approvals by the Bureau
of Indian Affairs or its authorized representatives. At all times during the
term of this Development Agreement, Sun, or a wholly-owned subsidiary of Sun
must own at least fifty percent (50%) of the partnership interests in
Developer. The Authority may, without the consent of Developer, but subject to
any required approvals of the Bureau of Indian Affairs or its authorized
representative, assign this Development Agreement to the Tribe, another
instrumentality of the Tribe or an entity wholly owned by the Tribe organized
to conduct the Authority's gaming enterprise and the business of the Project.
In the event of any such permitted assignment by the Authority or its
authorized assignee, the assigning party shall be relieved of its obligations
under this Development Agreement which accrue from and after the date of the
assignment, provided that the assignee shall assume in writing the obligations
of the assignor under this Development Agreement and agree to perform and be
bound by the terms and provisions hereof effective from and after the date of
such assignment.
 
  13.8 Severability. The invalidity of any one or more provisions hereof or of
any other agreement or instrument given pursuant to or in connection with this
Development Agreement shall not affect the remaining portions of this
Development Agreement or any such other agreement or instrument or any part
thereof, all of which are inserted conditionally on their being held valid in
law; and in the event that one or more of the provisions contained herein or
therein should be invalid, or should operate to render this Development
Agreement or any such other agreement or instrument invalid, the parties agree
to negotiate, in good faith, to modify or amend such invalid provision to
obtain for the parties the intended benefits of such provision (or this
Development Agreement and such other agreements and instruments shall be
construed as if such invalid provision had not been inserted).
 
                                     B-16
<PAGE>
 
  13.9 Entire Agreement. This Development Agreement (including any exhibits
referred to herein) represents the entire agreement between the parties hereto
with respect to the subject matter hereof. No other representations,
warranties, promises or agreements, express or implied, shall exist between
the parties unless such representations, warranties, promises or agreements
are in writing and bear a date subsequent to the date of this Development
Agreement.
 
  13.10 Headings. The headings used in this Development Agreement are for the
convenience of the parties only and shall not modify nor restrict any of the
terms or provisions hereof.
 
  13.11 Waivers. No failure or delay by Developer or the Authority to insist
upon the strict performance of any covenant, agreement, term or condition of
this Development Agreement, or to exercise any right or remedy consequent upon
the breach thereof, shall constitute a waiver of any such breach or any
subsequent breach of such covenant, agreement, term, or condition. No
covenant, agreement, term or condition of this Development Agreement and no
breach thereof shall be waived, altered or modified except by written
instrument. No waiver of any breach shall affect or alter this Development
Agreement, but each and every covenant, agreement, term and condition of this
Development Agreement shall continue in full force and effect with respect to
any other then existing or subsequent breach thereof.
 
  13.12 Periods of Time. Unless otherwise specified herein, all references to
"days" shall mean calendar days. Whenever any determination is to be made or
action is to be taken on a date specified in this Development Agreement, if
such date shall fall on a Saturday, Sunday or legal holiday under the laws of
the State of Connecticut or the Tribe, then in such event said date shall be
extended to the next day which is not a Saturday, Sunday or legal holiday.
 
  13.13 Consents and Approvals. Where approval or consent or other action of
the Authority, or any agent or political subdivision of the Authority, is
required, such approval shall mean the written approval of the Management
Board evidenced by a duly enacted resolution thereof, or, if not provided by
resolution of the Management Board, the written approval of the Authority
Representative (to the extent authorized by the Management Board) or such
other person or entity designated by resolution of the Management Board. If
the approval of Developer or the Authority is required hereunder, Developer or
the Authority, as the case may be, shall request such approval in writing,
which request shall specify the matter as to which such approval is requested
and provide reasonable detail regarding such matter. If Developer or the
Authority, as the case may be, does not receive a negative response or a
notice that more time and/or information is necessary to make a decision
(which notice shall specify the amount of time and/or the information
necessary), in writing, from such other party within fifteen (15) days
thereafter, such other party shall be deemed to have approved the matter
referred to in such request.
 
  13.14 Government Savings Clause. This Development Agreement shall be
submitted to the Bureau of Indian Affairs for its approval pursuant to its
authority under 25 U.S.C. (S) 81 and the NIGC, to the extent required by law.
In addition, each party agrees to pursue such approval and execute, deliver,
and if necessary, record any and all additional instruments, certifications,
amendments, modifications and other documents as may be required by the United
States Department of the Interior, Bureau of Indian Affairs, the office of the
Field Solicitor, or any applicable statute, rule or regulation in order to
effectuate, complete, perfect, continue or preserve the respective rights,
obligations and interest of the parties to the fullest extent permitted by
law; provided that any such instrument, certification, amendment, modification
or other document shall not materially change the respective rights, remedies
or obligations of the parties under this Development Agreement or related
agreements or documents.
 
  13.15 Termination of Prior Agreements. As of the Effective Date, the
Authority and Developer terminate all prior agreements, arrangements or
understandings and all covenants, terms and provisions contained therein with
respect to development and construction of facilities on the Property,
including, without limitation, the Gaming Development Agreement and the Hotel
Development Agreement.
 
                                     B-17
<PAGE>
 
  13.16 Representation before Public Bodies. Without the prior written consent
of the Authority, Developer shall have no right or authority to represent the
Authority before public and governmental bodies in connection with any zoning,
environmental, site, easement, title, design, construction or other matter
related to the Project.
 
  13.17 Non-Impairment of Agreement. The Tribe shall not take any action,
enter into any agreement, amend its constitution or enact any ordinance, law,
rule or regulation that would prejudice or have a material adverse affect on
the rights of Developer under this Development Agreement. Neither the Tribe
nor any committee, agency, board or other official body of the Tribe shall, by
exercise of the police power, eminent domain or otherwise, act to modify,
amend or in any manner impair the obligations of the parties under this
Development Agreement without the written consent of Developer. Any such
action or attempted action shall be void ab initio. The Tribe acknowledges
that the MTC Court has the authority to provide equitable relief to enforce
this provision.
 
                     [SIGNATURES APPEAR ON FOLLOWING PAGE]
 
                                     B-18
<PAGE>
 
  IN WITNESS WHEREOF, the parties hereto have executed this Development
Agreement on and as of the date first written above.
 
                                          THE AUTHORITY:
 
                                          MOHEGAN TRIBAL GAMING AUTHORITY
 
                                          By: _________________________________
                                          Name: Roland Harris
                                          Its: Chairman of the Management
                                               Board
 
                                          DEVELOPER:
 
                                          By:WATERFORD GAMING, L.L.C.
                                          Its:General Partner
 
                                              By:LMW INVESTMENTS, INC.
                                                 member
 
                                              By: _____________________________
                                              Name: Len Wolman
                                              Its: President
 
                                              By:SLAVIK SUITES, INC., member
 
                                              By: _____________________________
                                              Name: Len Wolman
                                              Its: Vice President
 
                                          By:SUN COVE LTD.
                                          Its:General Partner
 
                                              By: _____________________________
                                              Name: Howard B. Kerzner
                                              Its: President
 
Date:                                     Approved Pursuant to 25 U.S.C.
                                           (S) 81
 
                                          United States Department of Interior
                                          Bureau of Indian Affairs:
 
                                              By: _____________________________
                                              Name: ___________________________
                                              Title: __________________________
 
                                      B-19
<PAGE>
 
                                    JOINDER
 
  The Mohegan Tribe of Indians of Connecticut hereby agrees to comply with
Section 13.17 of this Development Agreement.
 
Date:                                     THE MOHEGAN TRIBE OF INDIANS OF
                                          CONNECTICUT
 
                                          By: _________________________________
                                          Name: Roland Harris
                                          Title: Chairman of the Management
                                                 Board
 
                                      B-20