SECOND AMENDMENT TO LOAN AGREEMENT

Exhibit 10.16

EXECUTION COPY

SECOND AMENDMENT TO LOAN AGREEMENT

THIS SECOND AMENDMENT TO LOAN AGREEMENT, dated as of September 28, 2009 (this “Amendment”), is among KELLY SERVICES, INC., a Delaware corporation (the “Borrower”), KELLY PROPERTIES, LLC, a Delaware limited liability company, KELLY RECEIVABLES SERVICES, LLC, a Delaware limited liability company, KELLY SERVICES (IRELAND), LTD., a Delaware corporation, KELLY SERVICES OF DENMARK, INC., a Delaware corporation, KELLY SERVICES CIS, INC., a Delaware corporation, KELLY SERVICES (AUSTRALIA), LTD., a Delaware corporation, KELLY SERVICES (NEW ZEALAND), LTD., a Delaware corporation, KELLY STAFF LEASING, INC., a California corporation, KHCS, INC., a Delaware corporation, and KSI ACQUISITION CORPORATION, a Delaware corporation (each a “Guarantor”, and collectively, the “Guarantors”), the lenders set forth on the signature pages hereof (collectively, the “Lenders”) and JPMORGAN CHASE BANK, N.A. a national banking association, as administrative agent for the Lenders (in such capacity, the “Agent”).

RECITALS

A. The Borrower, the Agent and the Lenders are parties to a Loan Agreement, dated as of October 3, 2008, as amended by a First Amendment to Loan Agreement dated as of April 24, 2009 and a waiver letter dated as of July 29, 2009 (as amended, the “Waiver”) (as now and hereafter amended, the “Loan Agreement”), pursuant to which the Lenders agreed, subject to the terms and conditions thereof, to extend credit to the Borrower.

B. The Borrower desires to amend the Loan Agreement and the Agent and the Lenders are willing to do so strictly in accordance with the terms hereof.

TERMS

In consideration of the premises and of the mutual agreements herein contained, the parties agree as follows:

ARTICLE 1.
WAIVER

1.1 The Borrower informed the Lenders and the Agent that (i) a Default occurred as of June 30, 2009 due to a breach of the covenant under Section 6.18 of the 2005 Loan Agreement for the twelve month period ending June 30, 2009 (the “6/30 EBITDA Default”) and (ii) a Default also occurred under Section 7.5 of the Loan Agreement due to the default of a substantially similar EBITDA covenant for the twelve month period ending June 30, 2009 (the “Cross-Default”) contained in a credit facility between The Bank of Tokyo – Mitsubishi UFJ, Ltd. and the Borrower with outstanding principal amount of 5,451,052,623 Japanese Yen (the “Yen Facility”). Pursuant to the terms of the Waiver, the Lenders agreed to temporarily waive the 6/30 EBITDA Default and the Cross-Default until September 30, 2009. The Borrower has now requested that the Lenders waive the 6/30 EBITDA Default and the Cross-Default.

1.2 All of the covenants and agreements of the Borrower set forth in Article VI of the 2005 Loan Agreement (including without limitation Section 6.18 of the 2005 Loan Agreement) are incorporated into the Loan Agreement by reference pursuant to Section 6.1 of the Loan Agreement. Section 6.1 of the Loan Agreement provides that any supplement, amendment, modification or waiver of such provisions of said Article VI shall be deemed a supplement, amendment, modification or waiver, as the case may be, of such provisions as incorporated in the Loan Agreement only if the Lenders or Required Lenders, as determined in accordance with the Loan Agreement, shall have consented to such supplement, amendment, modification or waiver, in accordance with the terms of the Loan Agreement.

1.3 Pursuant to such request and in accordance with Section 6.1 of the Loan Agreement, subject to (a) the accuracy of the representations of the Borrower hereunder, and (b) the satisfaction of the conditions to the effectiveness of this Amendment specified in Article 4, the Lenders hereby waive the 6/30 EBITDA Default and the Cross-Default. The Borrower acknowledges and agrees that the waiver contained herein is a limited, specific, and one-time waiver as described above. Such limited waiver shall not modify or waive any other term, covenant or agreement contained in any of the Loan Documents or apply for any other time, and shall not be deemed to have prejudiced any present or future right or rights which the Agent or the Lenders now have or may have under the Loan Agreement or the other Loan Documents and, in addition, shall not entitle the Borrower to a waiver, amendment, modification or other change to, of or in respect of any provision of any of the Loan Documents in the future in similar or dissimilar circumstances.

ARTICLE 2.
AMENDMENTS

Upon fulfillment of the conditions set forth in Article 3 hereof, the Loan Agreement shall be amended as follows:

2.1 The following definitions are added to Article I of the Loan Agreement in appropriate alphabetical order:

“ Banking Services ” shall mean all treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services and international treasury management services), commercial credit cards and stored value cards, provided to the Borrower or any of its Subsidiaries by any Lender or any Lender’s Affiliates.

“ Banking Services Obligations ” shall mean any and all obligations of the Borrower or any of its Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.

“ Collateral ” shall mean all assets of the Borrower and each of its Subsidiaries in which a Lien is required to be granted to secure the Secured Obligations. As provided in the Collateral Documents, the Collateral shall not include the Qualified Receivables Transaction Assets.

“ Collateral Agent ” means JPMCB in its capacity as collateral agent under the Collateral Documents.

“ Collateral Documents ” means, collectively, the Intercreditor Agreement, the Security Agreements, and all other agreements or documents granting or perfecting a Lien in favor of the Collateral Agent for the benefit of the Secured Parties under the Intercreditor Agreement or otherwise providing support for the Secured Obligations at any time, as any of the foregoing may be amended or modified from time to time.

“ Equity Interests ” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

“ Foreign Subsidiary ” means each Subsidiary organized under the laws of a jurisdiction outside of the United States.

“ Guarantor ” means, with respect to the Obligations and Rate Management Obligations owing by the Borrower, each present and future Domestic Subsidiary and their respective successors and assigns; provided that (i) no Inactive Subsidiary shall be required to be a Guarantor, but shall be required to have 100% of their Equity Interests pledged to the Collateral Agent under the Collateral Documents, (ii) upon the closing of any Qualified Receivables Transaction, (A) any Guarantor which will be a Securitization Entity in connection with any Qualified Receivables Transaction shall be released from its obligations as a Guarantor and any lien on its assets under any Collateral Document shall be released, and (B) no newly formed Subsidiary which will be Securitization Entity in connection with any Qualified Receivables Transaction shall be required to be a Guarantor so long as no assets are transferred to such newly formed Subsidiary until simultaneously with the closing of any Qualified Receivables Transaction; provided , that , each Securitization Entity will be required to have 100% of their Equity Interests pledged to the Collateral Agent under the Intercreditor Agreement, and (iii) neither The Kelly Services, Inc. Foundation, a non-profit Michigan corporation nor The Kelly Relief Fund, a Michigan non-profit corporation, shall be required to be a Guarantor.

“ Guaranty ” means the guarantee contained in Article IX, including any amendment, modification, renewal or replacement of such guaranty agreement, and any separate guaranty, in form and substance satisfactory to the Agent delivered by any Guarantor, as it may be amended or modified from time to time.

“ Inactive Subsidiary ” means a Subsidiary which has no assets and conducts no business. Schedule 1.1(c) is a list of all Inactive Subsidiaries as of the Second Amendment Effective Date.

“ Intercreditor Agreement ” shall mean the Collateral Agency and Intercreditor Agreement among the Secured Parties of the Borrower and JPMCB, as Collateral Agent, dated as of the date hereof, as amended or modified from time to time, provided that such Intercreditor Agreement, and any amendments or modifications thereto, shall be in form and substance acceptable to the Required Lenders and the Agent.

“ Qualified Receivables Transaction ” means any asset securitization transaction (i) by a Securitization Entity, (ii) which is a sale or other transfer of an interest in Qualified Receivables Transaction Assets to such Securitization Entity, which Securitization Entity will in turn sell certain of those Qualified Receivables Transaction Assets to a special purpose entity or a commercial paper issuance vehicle or conduit on terms and in a manner acceptable to the Agent, (iii) which is otherwise permitted by the terms of this Agreement and any other agreement binding on the Borrower or any of its Subsidiaries, (iv) under which 100% of the Equity Interests of such Securitization Entity have been pledged on a first priority basis to the Collateral Agent under the Collateral Documents, and (v) which asset securitization transaction is otherwise in form and substance reasonably acceptable to the Agent.

“ Qualified Receivables Transaction Assets ” means all Receivables and Related Rights that are sold, purportedly sold, contributed, transferred, conveyed or assigned by the Borrower or any Subsidiary of the Borrower to the Securitization Entity (regardless of whether such transfer is characterized as a sale, a secured loan or contribution). For the purposes hereof (i) “Receivables” means accounts or notes receivable and (ii) “Related Rights” means (a) the rights but not the obligations of, the Borrower or such Subsidiary under all related security with respect to such Receivables, (b) all monies due or to become due to the Borrower or such Subsidiary with respect to such Receivables, (c) all books and records related to such Receivables, (d) all collections and other proceeds and products of any of such Receivables, (e) and all right title and interest (but not obligations) in and to the lockbox accounts, into which collections or other proceeds with respect to such Receivables may deposited, and any related investment property acquired with any such collections or other proceeds.

“ Revolving Credit Agreement ” means the Credit Agreement dated as of September 28, 2009 among the Borrower, any foreign subsidiary borrowers party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as agent for such lenders, as amended, modified or restated from time to time in accordance with the terms hereof.

“ Revolving Credit Debt ” means the indebtedness and other liabilities owing pursuant to any Revolving Credit Loan Documents at any time.

“ Revolving Credit Lenders ” means the holders of the Revolving Credit Debt.

“ Revolving Credit Loan Documents ” means the Revolving Credit Agreement and all agreements and documents executed in connection therewith at any time and as amended, modified or restated from time to time in accordance with the terms hereof.

“ Second Amendment ” means the Second Amendment to this Agreement dated as of the Second Amendment Effective Date.

“ Second Amendment Effective Date ” means September 28, 2009.

“ Secured Obligations ” means, collectively, all (i) Obligations, (ii) the Revolving Credit Debt, (iii) the Yen Loan Debt, (iv) Banking Services Obligations, and (v) other indebtedness and obligations defined as “Secured Obligations” in the Intercreditor Agreement.

“ Secured Parties ” means the Collateral Agent, the Agent, the Lenders, the Revolving Credit Lenders, the Yen Loan Lender and the other holders of the Secured Obligations.

“ Securitization Entity ” means a wholly-owned Subsidiary of the Borrower that engages in no activities other than Qualified Receivables Transactions and any necessary related activities and owns no assets other than as required for Qualified Receivables Transactions and no portion of the Indebtedness (contingent or otherwise) of which is guaranteed by the Borrower or any Subsidiary of the Borrower or is recourse to or obligates the Borrower or any Subsidiary of the Borrower in any way, other than pursuant to customary representations, warranties, covenants, indemnities, performance guaranties and other obligations entered into in connection with a Qualified Receivables Transaction.

“ Security Agreements ” means each security agreement, pledge agreement, pledge and security agreement and similar agreement and any other agreement from the Borrower or any Guarantor granting a Lien on any of its personal property (including without limitation any Equity Interests owned by the Borrower or such Guarantor), each in form and substance acceptable to the Agent and as amended or modified from time to time, entered into by the Borrower or any Guarantor at any time for the benefit of the Collateral Agent and the Secured Parties pursuant to this Agreement or the Intercreditor Agreement.

“ Yen Loan Agreement ” means the Credit Facility Letter dated November 7, 2007 between the Borrower and the Yen Loan Lender, as amended, modified or restated from time to time in accordance with the terms hereof.

“ Yen Loan ” means the term loan made under the Yen Agreement in the original principal amount of 5,451,052,623 Japanese Yen.

“ Yen Loan Debt ” means the indebtedness and other liabilities owing pursuant to any Yen Loan Documents at any time.

“ Yen Loan Documents ” means the Yen Loan Agreement and all agreements and documents executed in connection therewith at any time and as amended, modified or restated from time to time in accordance with the terms hereof.

“Yen Loan Lender” means The Bank of Tokyo-Mitsubishi UFJ, Ltd.

2.2 The following definitions in Article I of the Loan Agreement are restated as follows:

“ Defaulting Lender ” means any Lender, as determined by the Agent, that has (a) failed to fund any portion of its Loans within three Business Days of the date required to be funded by it hereunder, (b) notified the Borrower, the Agent or any Lender in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or under other agreements in which it commits to extend credit, (c) failed, within three Business Days after request by the Agent, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Loans, (d) otherwise failed to pay over to the Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, unless the subject of a good faith dispute, or (e) (i) become or is insolvent or has a parent company that has become or is insolvent or (ii) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment.

“ Designated Financial Officer ” means, with respect to the Borrower, its chief financial officer, treasurer or controller.

“ Indebtedness ” of a Person means, without duplication, such Person’s (a) obligations for borrowed money, (b) obligations representing the deferred purchase price of Property or services (other than accounts payable and/or accrued expenses arising in the ordinary course of such Person’s business payable in accordance with customary practices), (c) obligations, whether or not assumed, secured by Liens on property now or hereafter owned or acquired by such Person, (d) obligations which are evidenced by notes, acceptances, or other instruments (other than Financial Contracts), (e) Capitalized Lease Obligations, (f) all reimbursement and similar obligations under outstanding letters of credit, bankers acceptances, surety bonds or similar instruments in respect of drafts or other claims which may be presented or have been presented and have not yet been paid, (g) the aggregate outstanding amount of all Off Balance Sheet Liabilities, based on the aggregate outstanding amounts sold, signed, discounted or otherwise transferred or financed, whether or not shown as a liability on a consolidated balance sheet of the Borrower and its Subsidiaries, including without limitation, all Receivables Transaction Attributed Indebtedness, and (h) all Contingent Liabilities of such Person with respect to or relating to Indebtedness of others the same as those described in clauses (a) through (g) of this definition. For purposes of this definition, there shall be excluded from “Indebtedness” all standby letters of credit, bank guaranties, surety bonds and similar instruments which are issued in connection with workers compensation obligations or other statutory or governmental obligations up to an aggregate amount of $100,000,000. All such other instruments shall be included in the calculation of “Indebtedness”. For the avoidance of doubt, Operating Leases are not Indebtedness.

“ JPMCB ” means JPMorgan Chase Bank, N.A., a national banking association (including its branches and affiliates).

“ Lien ” means any lien (statutory or other), mortgage, pledge, hypothecation, fixed or floating charge, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement); provided that the filing of financing statements solely with respect to, or other lien or claim solely on, any interest in Qualified Receivables Transaction Assets shall not be considered a Lien.

“ Loan Documents ” means this Agreement, the Guaranties, the Collateral Documents and the other agreements, certificates and other documents contemplated hereby or executed or delivered pursuant hereto by the Borrower or any Guarantor at any time on or after the date of execution of this Agreement with or in favor of the Agent or any Lender.

“ Obligations ” means the unpaid principal of and interest on the Loans, all Rate Management Obligations to any Lender and all other obligations and liabilities of the Borrower under this Agreement and the other Loan Documents (including, without limitation, interest accruing at the then applicable rate provided in this Agreement or any other applicable Loan Document after the maturity of the Loans and interest accruing at the then applicable rate provided in this Agreement or any other applicable Loan Document after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, the other Loan Documents or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all reasonable fees and disbursements of counsel to the Agent or to the Lenders that are required to be paid by the Borrower pursuant to the terms of this Agreement or any other Loan Document). Obligations of the Guarantors shall include collectively the Obligations of all of the Borrower and the obligations of all of the Guarantors under the Guaranty as provided in this Agreement.

2.3 The definition of “ Rate Hedging Agreement ” in Article I of the Loan Agreement is replaced with the definition of “ Rate Management Transaction ” set forth below and any and all references in the Loan Agreement to the defined term “ Rate Hedging Agreement ” are replaced with a reference to the defined term “ Rate Management Transaction ”:

“ Rate Management Transaction ” means any transaction (including an agreement with respect thereto) now existing or hereafter entered by the Borrower or any of its Subsidiaries which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures, in each case entered into to hedge a bona fide risk and not for purposes of speculation.

2.4 The definition of “ Rate Hedging Obligations ” in Article I of the Loan Agreement is replaced with the definition of “ Rate Management Obligations ” set forth below and any and all references in the Loan Agreement to the defined term “ Rate Hedging Obligations ” are replaced with a reference to the defined term “ Rate Management Obligations ”:

“ Rate Management Obligations ” means any and all obligations of the Borrower or any of its Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions.

2.5 Section 2.14 is restated as follows:

2.14 Defaulting Lenders . Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

(i) Outstanding Credit Exposure of such Defaulting Lender shall not be included in determining whether all Lenders or the Required Lenders have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 8.2), provided that any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender which affects such Defaulting Lender differently than other affected Lenders shall require the consent of such Defaulting Lender; and

(ii) any amount payable to such Defaulting Lender hereunder (whether on account of principal, interest, fees or otherwise and including any amount that would otherwise be payable to such Defaulting Lender pursuant to Section 2.14 but excluding Section 3.7) shall, in lieu of being distributed to such Defaulting Lender, be retained by the Agent in a segregated account and, subject to any applicable requirements of law, be applied at such time or times as may be determined by the Agent (i) first, to the payment of any amounts owing by such Defaulting Lender to the Agent hereunder, (ii) second, pro rata, to the payment of any amounts owing to the Borrower or the Lenders as a result of any judgment of a court of competent jurisdiction obtained by the Borrower or any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement and (iii) third, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if such payment is (x) a prepayment of the principal amount of any Loans and (y) made at a time when the conditions set forth in Section 4.2 are satisfied, such payment shall be applied solely to prepay the Loans of all non-Defaulting Lenders pro rata prior to being applied to the prepayment of any Loans owed to, any Defaulting Lender.

2.6 A new Section 2.15 is added at the end of Article II to read as follows:

2.15 Collateral Security; Further Assurances . To secure the payment when due of the Secured Obligations (subject to the Intercreditor Agreement), the Borrower shall execute and deliver, or cause to be executed and delivered, to the Collateral Agent, Collateral Documents granting or providing for the following:

(i) Security Agreements granting a first priority, enforceable Lien and security interest, subject to the Liens permitted by this Agreement and subject to the sharing provisions to be contained in the Intercreditor Agreement, on all present and future accounts, chattel paper, commercial tort claims, deposit accounts, documents, farm products, fixtures, chattel paper, equipment, general intangibles, goods, instruments, inventory, investment property, letter-of-credit rights (as those terms are defined in the Michigan Uniform Commercial Code) and all other personal property of the Borrower and of each Guarantor, subject to any exclusions described in the Intercreditor Agreement or approved by the Required Lenders and it being understood and agreed that such first priority, enforceable Lien and security interest shall not include any Lien or security interest in the Qualified Receivables Transaction Assets. Notwithstanding the foregoing, with respect to Liens granted by the Borrower or any Guarantor on the Equity Interests in any Foreign Subsidiary such Lien shall not exceed 65% (or such greater percentage that, due to a change in an applicable law after the date hereof, (1) could not reasonably be expected to cause the undistributed earnings of such Foreign Subsidiary as determined for U.S. federal income tax purposes to be treated as a deemed dividend to such Foreign Subsidiary’s U.S. parent and (2) could not reasonably be expected to cause any material adverse tax consequences) of the issued and outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding Equity Interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) in each Foreign Subsidiary directly owned by the Borrower or any Guarantor. Notwithstanding the foregoing, if the Agent reasonably determines in good faith that the Borrower will not incur a material tax liability as result of such greater pledge, the Borrower shall, upon the request of the Agent, have the balance of its Equity Interests pledged to the Collateral Agent to secure, subject to the Intercreditor Agreement, the Secured Obligations.

(ii) On or before the Effective Date, the Borrower shall cause all Collateral Documents as reasonably requested by the Agent, in each case duly executed on behalf of the Borrower and the Guarantors, as the case may be, granting to the Secured Parties and the Collateral Agent the Collateral and support specified in Section 2.15 hereof, together with: (v) such resolutions, certificates and opinions of counsel as reasonably requested by the Agent; (w) the recordation, filing and other action (including payment of any applicable taxes or fees) in such jurisdictions as the Lenders or the Agent may deem necessary or appropriate with respect to the Collateral Documents, including the filing of financing statements and other filings which the Lenders or the Agent may deem necessary or appropriate to create, preserve or perfect the liens, security interests and other rights intended to be granted to t