EMPLOYMENT AGREEMENT

Exhibit 10.20

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT dated as of June 26, 2009 by and between ABK INVESTMENT ADVISORS, INC. , a Delaware corporation (the “Company” ), and ROBERT S. SMITH (the “Executive” ).

WHEREAS, the Company has agreed to acquire substantially all of the assets (the “Acquisition” ) of NSM Capital Management LLC and Structured Credit Solutions LLC (collectively the “Selling Companies”) pursuant to that certain Purchase Agreement dated as of the date hereof by and among, among other persons, the Selling Companies, the Executive and the Company (the “Purchase Agreement”); and

WHEREAS, the Company and the Executive wish to enter into this Agreement to provide for the Executive’s service with the Company on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows (capitalized terms used herein without definition shall have the meanings ascribed to such terms in Section 5 below):

1. Employment and Duties.

(a) Term of the Agreement . This Agreement shall become effective only upon the Initial Closing (as defined in the Purchase Agreement) and will apply for a nonrenewable term beginning on the Initial Closing Date and ending on the sixth anniversary thereof (the “Term” ). The Executive’s employment may continue beyond the end of the Term, but nothing herein shall require the Executive to continue his employment with the Company after the end of the Term. In addition, nothing in this Agreement shall alter the Executive’s status as an “at will” employee of the Company, subject to the Executive’s rights and obligations under this Agreement. This Agreement shall automatically terminate and be of no further force or effect upon any termination of the Purchase Agreement.

(b) General .

(i) Title/Reporting . The Executive will serve as Chief Executive Officer of the Company during the Term, subject to the supervision and direction of the Board of Directors of the Company (the “Board” ), and reporting to David Wallis, its Chairman, or his successor as chief executive officer of Ambac, and shall not be required to report to any other individual.

(ii) Work Location . During the current term of the Lease by and between The Mill Owners Company LLC and NSM Capital Management LLC, dated April 3, 2008, the principal office of the Executive shall be in Greenwich, CT and thereafter may be in any location approved by the Board within 50 miles thereof, unless the Executive otherwise consents in writing.

(iii) Scope of Business/Authority . The Executive and Tim Stevens (or such other individual as may be designated from time to time by the Board) shall be the senior-most

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executives of the Company and shall share day to day operational authority of the Organic Business and the Synergistic Business, subject to the supervision and direction of the Board consistent with the terms of this Agreement. The Executive shall have authority over the hiring or termination of any personnel within the Organic Business. During the Term, the Company shall be subject to the budget review and oversight of the Chief Executive Officer of Ambac or the Chairman of the Board.

(c) Full-Time Employment . The Executive shall devote his full-time working hours and best efforts to his duties hereunder. Executive may devote reasonable periods of time to serve as a director of other organizations if approved by the Ambac Board, to perform charitable and other community activities, and to manage his personal investments; provided, however, that such activities do not materially interfere with the performance of his duties hereunder and are not in conflict or competitive with, or adverse to, the interests of the Company, as reasonably determined by the Board and comply with any code of conduct applicable to the employees of the Company or its Affiliates in the opinion of Ambac’s Chief Compliance Officer.

2. Compensation and Other Benefits.

Subject to the provisions of this Agreement, the Company shall pay and provide the following compensation and other benefits to the Executive during the Term as compensation for services rendered hereunder:

(a) Salary . Effective as of the Initial Closing Date, the Executive’s annual salary (the “ Salary ”) shall be two hundred fifty thousand dollars ($250,000). The Salary is payable in accordance with the Company’s payroll practices as established by the Company from time to time. The Board shall periodically review and may increase, but not decrease, the Executive’s Salary.

(b) Special Equity Grant . Management will recommend to the Compensation Committee (the “ Committee ”) of the Board of Directors (the “ Ambac Board ”) of Ambac Financial Group, Inc. (“ Ambac ”) that the Committee approve a special grant to the Executive of phantom stock units (“ PSUs ”) under Ambac’s 1997 Equity Plan, as amended (the “ Equity Plan ”). The number of PSUs included in such award will be determined by dividing (i) Thirty-Five Thousand dollars ($35,000) by (ii) the Fair Market Value of a share of Ambac’s common stock on the date the Committee approves such award. All PSUs included in such award will vest on the third anniversary of the date of the grant. The PSUs included in the Executive’s award shall be settled pursuant to the terms of the Equity Plan and award agreement by delivery of the corresponding cash, which in no event shall exceed three (3) times the Fair Market Value of a share of Ambac’s common stock on the date the Committee approved such award multiplied by the number of PSUs granted. If the Ambac Board does not approve this PSU award, the Executive shall receive $35,000 plus annual interest (computed on the basis of a 360-day year of twelve 30-day months) accruing from the Initial Closing Date at the Interest Rate in cash on the third anniversary of the Initial Closing Date if the Executive is still employed by the Company at such time or the Executive’s employment hereunder is terminated by the Company without Cause or by the Executive’s resignation for Good Reason.

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(c) Organic Business Earn-Out . For each twelve month period commencing on the first day of the calendar month following the Initial Closing Date (each a “Measurement Period”), the Executive will receive the applicable percentage of Organic Net Income set forth in Table I below for such Measurement Period (each an “Organic Payout”); provided that, unless the Executive shall have given notice to the Company within forty-five (45) days prior to the end of the sixth Measurement Period, the Executive also shall receive a one-time lump sum payment in an amount equal to the product of (i) four (4) times (ii) fifteen percent (15%) of the average of the annual Organic Net Income for the fifth and sixth Measurement Periods in lieu of the amounts provided for in the seventh through fifteenth Measurement Periods, inclusive, at the same time as he is paid the Organic Payout for the Sixth Measurement Period (the “Final Organic Payout”) .

(d) Synergistic Business Earn-Out . For each Measurement Period the Executive will receive the applicable percentage of Synergistic Net Income set forth in Table II below for such Measurement Period in the form provided in the next sentence (each, a “Synergistic Payout”) . One-third (1/3) of each Synergistic Payout will be paid in cash and two-thirds (2/3) of each Synergistic Payout (each a “PSU Payout”) will be paid by delivery of a grant, effective on the date of payment (the “Synergistic Payout Date”) of a number of PSUs determined by dividing (i) two thirds (2/3) of the Synergistic Payout by (ii) the Fair Market Value of a share of Ambac’s common stock on the date the Committee approves such award. PSUs included in such award will be granted at the first meeting of the Ambac Board subsequent to the determination of such amount and shall vest on the third anniversary of the Synergistic Payout Date. The PSUs included in a Synergistic Payout shall be settled pursuant to the terms of the Equity Plan and award agreement by delivery of the corresponding cash, which, shall not exceed three (3) times the Fair Market Value of a share of Ambac’s common stock on the date the Committee approved such award multiplied by the number of PSUs granted. If the shares of Ambac stock are trading below $0.50 per share on the date the Committee would have approved such award, the PSU Payout shall be made in cash plus interest (computed on the basis of a 360-day year of twelve 30-day months) accruing from the Synergistic Payout Date at the Interest Rate on the third anniversary of the Synergistic Payout Date if the Executive is still employed by the Company at such time or the Executive’s employment hereunder is terminated by the Company without Cause or by the Executive’s resignation for Good Reason.

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(e) Time of Payment . The undisputed amount of the Organic Payout, the Final Organic Payout and the Synergistic Payout (other than the PSU Payouts payable in cash) shall be paid within ten (10) business days of Ambac’s filing of a form 10Q or 10K with the Securities and Exchange Commission for the applicable period. Such amounts shall be net of Revenue Accruals. Any Revenue Accruals shall be paid within ten (10) business days of Ambac’s filing of a form 10Q or 10K with the Securities and Exchange Commission for the period in which the account receivable related to such Revenue Accrual is collected. Any disputed amount shall be paid within ten (10) business days of final determination of such amount. Subject to Sections 2(l) and 4, the Organic Payout, the Final Organic Payout and the Synergistic Payout (other than the PSU Payout) in respect of any concluded Measurement Period shall be paid without regard to whether or not Executive is employed by the Company on the payment date.

(f) Reporting Requirements . The Company shall (i) designate each engagement, contract or statement of work as ABK Business, Organic Business or Synergistic Business within fourteen (14) business days of the executed contract, statement of work or start of such engagement as appropriate and (ii) provide the Executive with a quarterly report of the Organic Net Income and the Synergistic Net Income within thirty (30) days following the closing of the books of Ambac for such quarter and such designation decision and report shall be conclusive and binding unless the Executive notifies the Company of any objections or disputes within thirty (30) days of receipt of such designation decision and/or report.

(g) Dispute Resolution . If the Executive disputes the Company’s designation of any engagement, contract or statement of work as ABK Business, Organic Business or Synergistic Business or the quarterly report of the Organic Net Income and the Synergistic Net Income and the dispute can not be resolved through good faith efforts by the Company and the Executive within sixty (60) days, then the dispute shall be resolved by an independent third party selected by the mutual consent of the Company and the Executive; provided that in the event that the Company and the Executive are unable to mutually agree on an independent third party, the Company and the Executive shall each select an independent third party and the two independent third parties shall mutually agree upon a third independent third party. A majority of the independent third parties shall determine such designation and/or amount of Organic Net Income and Synergistic Net Income and such determination shall be set forth in a written report mutually addressed to the Company and the Executive and shall be final, conclusive and binding upon the parties.

(h) Operation of the Company . The Executive agrees and acknowledges that Ambac and the Company may make, from time to time, such business decisions as each deems appropriate in the conduct of its business and the business of its Affiliates, including the acquisition or operation of any business (including the business in which the Company is

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currently engaged) or other actions that may have an impact on the Organic Business and the Synergistic Business and the Executive will not have any right to claim any lost earn-out, compensation or other damages as a result of such decisions unless such decisions are made against the written objections of the Executive and directly and materially impede the Executive’s ability to grow the Organic Business as currently contemplated by the parties.

(i) Expenses . The Company shall reimburse the Executive for reasonable travel and other business-related expenses incurred by him in performance of the business of the Company.

(j) 401(k), Welfare and Fringe Benefits . The Executive shall participate in each 401(k), welfare, life insurance, health, disability and other fringe benefit plan or program maintained by the Company for its executive officers in accordance with the terms thereof.

(k) Termination Due to Death or Disability . In the event of the Executive’s Disability, the Company shall be entitled to terminate his employment. Notwithstanding anything contained in this Agreement to the contrary, if the Executive’s employment terminates before the end of the Term due to death or Disability, any Salary earned by the Executive up to the date of such termination, plus a pro rata portion (based on the number of days elapsed prior to such termination) of his cash earn-out under Section 2(c) or 2(d) for the year in which such termination occurs, shall be paid to the Executive or his estate, as the case may be, within thirty (30) days of his terminat