**EXHIBIT 10.31****SECOND AMENDMENT****to****EMPLOYMENT AGREEMENT (“AGREEMENT”)****between****TRIAD GUARANTY INSURANCE CORPORATION (“COMPANY”)****and****KEN N. LARD (“EMPLOYEE”)****dated****AUGUST 3, 2005**     **WHEREAS,**Company and Employee are currently parties to the Agreement; and     **WHEREAS,**the parties desire to address changes in the treatment of bonus or incentivecompensation under the Agreement in view of the significant change in the duties of Employee; and     **WHEREAS,**the parties desire to memorialize their understandings with respect to these changesby amending the Agreement.     **NOW, THEREFORE,**in consideration of the mutual covenants and obligations hereinafter setforth, the parties hereto agree as follows:     1. Section 7(c)(ii) of the Amendment to the Employment Agreement dated January 1, 1997is deleted in its entirety and the following is substituted therefore:     “(ii) Notwithstanding anything contained herein to the contrary, the Companyalso may terminate this Agreement and Employee’s employment hereunder for any reasonwhatsoever, upon no less than sixty (60) days prior written notice to Employee. Inthe event that the Company terminates this Agreement pursuant to the provisions ofthis Section 7(c)(ii), Employee shall be entitled to receive his salary up to thedate of termination set forth in the notice of termination and a severance paymentequal to 200% of the total annual salary paid to Employee by the Company and/or TGIduring the two (2) calendar years prior to the year of termination (the “SeverancePayment”). At the option of the Company, the Severance Payment shall be payableeither in a lump sum cash payment or in twenty-four (24) monthly installmentscommencing on the first day of the month following termination of this Agreement.If for any reason any court
-1-

 
determines that any of the restrictions contained in Section 8 hereof are notenforceable, the Company shall have no obligation to pay the Severance Payment orany remaining installment thereof to Employee.     2. Section 10(a) of the Agreement is deleted in its entirety and the following issubstituted therefor:     “(a) Change in Control Severance Compensation. Within two yearsfollowing a Change in Control (as defined below), in the event of (i) a material andadverse change in the status or position of Employee as an executive officer of theCompany including, without limitation, a material diminution in duties orresponsibilities, except in connection with the incapacity of Employee, (ii) thetransfer or relocation by the Company of the office of Employee which would requireEmployee to be based more than fifty (50) miles distant from the location of hisoffice immediately prior to such transfer or relocation, or (iii) the discontinuanceof any bonus or incentive compensation plan for which the Company or TGI hasdetermined Employee to be eligible and which represents a material portion of theEmployee’s annual compensation, Employee shall be entitled to terminate thisAgreement and his employment hereunder and receive from the Company a payment equalto 200% of the total annual salary paid to Employee by the Company and/or TGI duringthe two (2) calendar years prior to the year of termination (the “Change of ControlCompensation”). At the option of the Company, the Change in Control Compensationshall be payable either in a lump sum cash payment or in twenty-four (24) monthlyinstallments commencing on the first day of the month following termination of thisAgreement. If for any reason any court determines that any of the restrictionscontained in Section 8 hereof are not enforceable, the Company shall have noobligation to pay the Change in Control Compensation or any remaining installmentthereof to Employee.”     3. Except as expressly provided in this Amendment or as necessary to effectuate itsterms, the terms of the Agreement remain unchanged.     **IN WITNESS WHEREOF,**the Company has caused this Amendment to be executed by its dulyauthorized officer and Employee has signed this Amendment to be effective immediately uponexecution by each of the parties.   **COMPANY:** **EMPLOYEE:****TRIAD GUARANTY INSURANCE**       **CORPORATION**   By: /s/ Ron D. Kessinger      /s/ Ken N. LardName(Printed): Ron D. Kessinger        KenN. LardTitle:Senior Executive Vice-President & COO  Date: August 4, 2005Date:August 4, 2005  
-2-