DEBT

On October 1, 2012, the Company entered into a senior credit agreement, (the “Credit Agreement”), by and among itself, the KEYW Corporation, as the borrower (the “Borrower”), the domestic direct and indirect subsidiary guarantors of KEYW (the “Subsidiary Guarantors”), the lenders and Royal Bank of Canada, as administrative agent. Under the Credit Agreement, the Company provided a guaranty of all of the obligations of the Borrower. The Credit Agreement provides the Borrower a $60 million term loan and a $40 million revolving credit facility, (the “Revolver”). The Revolver includes a $10 million swing line and a $15 million letter of credit sub-facility. The Credit Agreement includes an uncommitted accordion facility, permitting the Borrower to obtain up to an additional $35 million, subject to certain conditions. The five year Credit Agreement bears cash interest at either selected LIBOR plus a specified margin based on the Company's then existing Senior Leverage Ratio (as defined in the Credit Agreement) or an alternative base rate plus a specified margin. The Term Loan and the Revolver are secured by a security interest and lien on substantially all of KEYW's, the Borrower's and the Subsidiary Guarantor's assets including a pledge of one hundred percent of the equity securities of the Borrower and the Subsidiary Guarantors.

On November 20, 2012, the Company amended the Credit Agreement to increase both the term loan and the amount available under the Revolver by $10 million each as well as adding additional lenders to the Credit Agreement. This brings the term loan to $70 million and the Revolver to $50 million. The Company is required to comply with certain financial covenants contained in the Credit Agreement. As of December 31, 2012, the Company was in compliance with all covenants as under the Credit agreement.

In connection with the issuance of the term loan and revolving credit facility in 2012 the Company incurred $3,199,000 in financing costs. These financing costs are being amortized ratably over a five year period, the life of the related debt. The Company recognized $159,000 in amortization expense in the year ended December 31, 2012. The Company is estimated to incur $640,000, $640,000, $640,000, $640,000, $480,000 in future amortization expense for the subsequent years ended December 31, 2013 - 2017 respectively. The agreement also has a $37,500 quarterly agency payable as incurred. This amount is not included in the deferred financing costs as it only applies until the loans are repaid.

At December 31, 2012, the Company had fully drawn the $70 million available under the term loan and had $21.0 million outstanding under the revolver. The Company has recorded the revolver as a current debt due to the unstructured repayment terms and the Company's practice of using free cash flow to pay down debt. The term loan requires certain quarterly payments and the first of those payments was made on December 31, 2012 in the amount of $1.3 million, bringing the term loan balance to $68.7 million. The payment schedule for the term loan by year is as follows:



Required Loan Payments (In thousands) :
2013	2014	2015	2016	2017
$5,688	$7,000	$7,000	$7,000	$42,000

Interest expense recorded under the new facilities was $1.0 million during 2012.

In February 2011, the Company entered into a $50 million credit facility that included an accordion feature allowing for an additional $25 million in borrowing. The credit facility was a three year agreement multi-bank facility with Bank of America as lead bank. In conjunction with the FLD acquisition, the Company increased the credit facility to $65 million and reloaded the accordion to $25 million. The borrowing availability under this facility was based on KEYW's 'Total Leverage Ratio' which was a relationship between 'Funded Indebtedness' to EBITDA as defined in the credit agreement. The agreement contains standard financial covenants. When drawing funds on this facility we had the option of choosing between a 'Euro Rate Loan' which was based on the British Bankers Association LIBOR or a 'Base Rate Loan' which was based on the higher of (a) the Federal Funds Rate plus ½ of 1.0%, (b) the Prime Rate, or (c) The Eurodollar Rate plus 1.0%. If we had selected the 'Euro Rate Loan' the actual 'applicable rate' would have been 200 to 300 basis points above the stated rate depending on our most recent quarterly calculation of our 'Total Leverage Ratio'. If we had selected the 'Base Rate Loan' the actual 'applicable rate' would have been 100 to 200 basis points above the stated rate depending on our most recent quarterly calculation of our 'Total Leverage Ratio'. We were able to lock in our selected interest rates for periods of up to six months. Interest expense recognized in the year ended December 31, 2012 related to this agreement was approximately $1,286,000. Interest expense for the years ended December 31, 2011 and December 31, 2010 was $907,000 and $1,076,000, respectively. This agreement was paid in full and terminated on September 28, 2012.