<PAGE>
 
                                                                   EXHIBIT 10.26


                             EMPLOYMENT AGREEMENT

                                    between

                    Pacific Investment Management Company, 
                        a Delaware general partnership,

                                      and

                               William H. Gross
<PAGE>
 
                             EMPLOYMENT AGREEMENT
                             --------------------

     This Employment Agreement (the "Agreement") is entered into as of November
16 1994, by and between Pacific Investment Management Company, a Delaware
--
general partnership ("Employer"), and William H. Gross ("Employee").


                                R E C I T A L S
                                ---------------

     WHEREAS, Thomson Advisory Group L.P., a Delaware limited partnership ("TAG
LP"), Thomson Advisory Group Inc., a Delaware corporation ("TAG Inc."),
stockholders of TAG Inc., PIMCO Partners, G.P., a California general partnership
("PIMCO GP"), Pacific Financial Asset Management Company, a California
corporation ("PFAMCO"), certain subsidiaries of PFAMCO and certain individuals
associated with the respective businesses of TAG LP, Pacific Investment
Management Company, a California corporation ("PIMCO Inc."), and PFAMCO are
parties to that certain Amended and Restated Agreement and Plan of Consolidation
for PIMCO Advisors L.P. effective as of July 11, 1994 (the "Consolidation
Agreement"), providing for the consolidation of the investment management and
advisory business of TAG LP with the investment management and advisory
businesses of PFAMCO and PIMCO Inc. in the manner described therein (the
"Consolidation").

     WHEREAS, Employer has acquired its business in connection with and pursuant
to the Consolidation.

     WHEREAS, Employer has proposed to appoint Employee as one of its Managing
Directors and to grant Employee an interest in its Profit Sharing Plan (as
defined in Section 3(b)).

     WHEREAS, Employer and Employee desire to assure that Employee will perform
services for Employer from and after the Consolidation, subject to the
consummation thereof, with such employment to be governed by the terms and
provisions of this Agreement commencing as of the effective date of this
Agreement as specified in Section 9 hereof (the "Effective Date").

                               A G R E E M E N T
                               -----------------

     NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
<PAGE>
 
     1.   Definitions.
          ----------- 

     The following definitions shall be applicable to the terms set forth below
as used in this Agreement:

     "Affiliate" - means, with respect to any person or entity (herein the
      ---------                                                           
"first party"), any other person or entity that directly or indirectly controls,
or is controlled by, or is under common control with, such first party. The term
"control" as used herein (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to (a)
vote 50% or more of the outstanding voting securities of such person or entity,
or (b) otherwise direct the management policies of such person or entity, by
contract or otherwise. An Affiliate of a Partner shall also include any person
or entity that is an officer, director or trustee (or the equivalent) or
constituent partner of such Partner, any person or entity that is an officer,
director or trustee (or the equivalent) or direct or indirect partner of any
constituent partner of any Partner, but shall exclude any public limited partner
of the Supervisory Partner unless such partner beneficially owns 5% or more of
the Supervisory Partner's outstanding units.

     "CPI Adjustment Percentages" - means the percentage (if any) by which the
      --------------------------                                              
level of the Consumer Price Index for All-Urban Consumers as reported in the
Bureau of Labor Statistics of the United States Department of Labor for the
month of November of the year immediately prior to the date on which the
adjustment is to be calculated, has increased over its level for the month of
November 1993. If the Consumer Price Index shall no longer be published, another
index generally recognized as authoritative and finishing the most clearly
similar price information available shall be substituted.

     "Employment Termination Date" shall have the meaning set forth in Section
      ---------------------------
9(b).

     "Employer Managed Funds" - means as of any date of reference, those funds
      ----------------------
or investments with resect to which the Employer or any Employer Subsidiary is
performing any Investment Management Services.

     "Employer Subsidiary" - means, any corporation, partnership, joint venture
      -------------------    
or other business organization in which the Employer owns stock, partnership
interests or other equity securities and which is controlled by the Employer.
For such purposes "controls" means the possession, direct dr indirect, of the
power to (a) vote 50% of more of the outstanding voting securities of such
person or entity, or (b) otherwise direct the management policies of such person
or entity, by contract or otherwise.

     "Equity Board" - means the Equity Board of PIMCO Advisors L.P. as it may
      ------------
from time to time be constituted under the PIMCO Advisors Partnership Agreement.

     "For Cause" - shall have the meaning set forth in Section 5(b) hereof.
      ---------

                                       2
<PAGE>
 
     "Investment Management Services" - means any services which involve (a) the
      ------------------------------                                            
management, for a fee or other remuneration, of an investment account or fund
(or portions thereof or a group of investment accounts or funds), or (b) the
giving of advice, for a fee or other remuneration, with respect to the
investment of specific assets or funds (or any specific group of assets or
funds). Notwithstanding the foregoing, it is intended that Investment Management
Services shall not include the giving of general investment advice that is not
related to an identifiable investment account or fund (or group of investment
accounts or funds) for which the advisor receives no remuneration.

     "Involuntary Termination" - means Employer's termination of Employee's
      -----------------------                                              
employment (but excluding a termination of Employee's employment by Employer For
Cause).

     "Majority Board Vote" shall have the meaning set forth in the Partnership
      -------------------
Agreement.

     "Management Board" means the Management Board of Employer, composed
      ----------------
exclusively of all of the Managing Directors of Employer.

     "Managing Director" means a person who, at the time of reference, is
      -----------------
employed by the Employer in the capacity as, and holds the title of, Managing
Director (including Employee at all times that Employee is employed as a
Managing Director under the terms of this Agreement).

     "Managing Partner" means PIMCO Management, Inc., or any additional or
      ----------------
successor Managing Partner of Employer as of the effective date that such party
shall become a Managing Partner of Employer following approval by a Super-
Majority Board Vote.

     "Operating Board" - means the Operating Board of PIMCO Advisors L.P. as it
      ---------------
may from time to time be constituted under the PIMCO Advisors Partnership
Agreement.

     "Partners" - means, collectively, PIMCO Advisors L.P., PIMCO Management,
      --------
Inc., and any additional or successor Partners as of the effective date that
such party shall become a Partner of the Employer in accordance with the terms
of the Partnership Agreement. The term "Partners" may be used herein to refer
individually to any of such Partners.

    "Partnership Agreement" means that certain Amended and Restated General
     ---------------------
Partnership Agreement of Pacific Investment Management Company dated as of
November __, 1994, as the same may be amended, supplemented or restated from
time to time in accordance with its terms.

     "PIMCO Advisors L.P." - means PIMCO Advisors L.P., a Delaware limited
      ------------------
partnership and the Supervisory. Partner of the Employer.

     "PIMCO Advisors Partnership Agreement" - means that certain Amended and
      ------------------------------------
Restated Agreement of Limited Partnership of PIMCO Advisors L.P. (formerly
Thomson Advisory

                                       3
<PAGE>
 
Group L.P.) effective as of November __, 1994, as the same may be amended,
supplemented or restated from time to time in accordance with its terms.

     "Prohibited Competition Activity" - means any of the following activities:
      -------------------------------                                          

          (a)  Directly or indirectly, for or on behalf of any person, firm,
corporation or other entity other than the Employer or any Employer Subsidiary,
(i) diverting or taking away any Employer Managed Funds, or (ii) soliciting any
person or entity for the purpose of diverting or taking away any such Employer
Managed Funds; and

          (b)  Directly or indirectly, for or on behalf of any person, firm,
corporation or other entity other than the Employer or any Employer Subsidiary,
performing any Prohibited Investment Management Services.

For purposes of this definition of Prohibited Competition Activity, the Employee
shall be deemed to be indirectly engaged in any activity described in clause (a)
or (b) above if such activity is carried out or effected by or through another
party that is acting at the direction of, or in conjunction with, the Employee.

     "Prohibited Investment Management Services" - means any Investment
      -----------------------------------------                        
Management Services which compete with the Investment Management Service
provided by Employer, PIMCO Advisors L.P. or any Affiliates thereof.

     "Restricted Period" - means the period Beginning on the Employment
      -----------------
Termination Date and ending on: (i) in the case of a Voluntary Termination, the
latest to occur of (W) the then Scheduled Termination Date or (X) the date which
is six months after the Employment Termination Date or (Y) the date which is
nine months after the date of the notice of Voluntary Termination given pursuant
to Section 5(b) or (Z) if no notice of Voluntary Termination is given before the
Employment Termination Date, the date which is nine months after the Employment
Termination Date; (ii) in the case of a termination For Cause, the later of (X)
the date which is six months after the Employment Termination Date or (Y) the
then Schedule Termination Date; and (iii) in the case of a termination on the
then Scheduled Termination Date by reason of its non-extension pursuant to
Section 9(c) hereof, the date which is six months after the Employment
Termination Date.

     "Scheduled-Termination Date" - shall have the meaning set forth in Section
      --------------------------
9(c).

     "Super-Majority Board Vote" - shall have the meaning set forth in the
      -------------------------                                           
Partnership Agreement.

     "Supervisory Partner" - means PIMCO Advisors L.P. or any additional or
      -------------------
successor Supervisory. Partner as of the effective date that such party shall
become a Supervisory Partner of the Employer in accordance with the provisions
of the Partnership Agreement.

                                       4
<PAGE>
 
     "Voluntary Termination" - means a termination of employment by reason of
      ---------------------                                                  
Employee's voluntary resignation or any other voluntary termination of
employment by Employee.

     2.   Employment of Employee.
          ---------------------- 

     Subject to the terms and provisions of this Agreement, Employer agrees to
employ Employee as a Managing Director of Employer and Employee agrees to be
employed in such capacity, with such employment to commence effective as of the
Effective Date. Employee agrees to serve Employer faithfully and to the best of
his ability in such capacities, or in such other capacity as Employee and
Employer shall agree upon from time to time. Employee shall devote such time and
attention to the business of Employer during the term of this Agreement as
Employer in its discretion shall deem appropriate and commensurate with
Employee's duties and responsibilities with Employer and which is reasonable and
proper under general rules of business conduct. Employee shall not, during the
term of this Agreement, directly or indirectly render any services of a
business, commercial or professional nature to any other person or organization,
whether for compensation or otherwise, to an extent that such services interfere
with or detract from the quality of Employee's performance of his duties and
obligations on behalf of Employer. Notwithstanding the foregoing, Employee shall
not be deemed to be rendering service contrary to the provisions of the
preceding sentence unless and until (a) Employer gives written notice to
Employee of Employer's belief that Employee is rendering service to an extent
prohibited by the provisions of the preceding sentence (such notice shall
specify the reasons for such belief), and (b) Employee fails, within 30 days
after the effective date of such notice (determined as provided in Section 8
hereof), to cease rendering such services as are prohibited by the provisions of
the preceding sentence.

     3.   Compensation.
          ------------

          (a)  As compensation for Employee's performance of his services under
this Agreement, Employer shall pay Employee an annual base cash salary of not
less than $187,300 with such minimum amount increased on January 1st of each
calendar year following the Effective Date during the term of this Agreement by
the CPI Adjustment Percentage. Such compensation shall be prorated for a partial
year based on the period worked for Employer during such year, and shall be
payable in accordance with Employer's customary employee payroll practice,
including but not limited to all customary withholding practices.

          (b)  As additional compensation for Employee's performance of
services under this Agreement, Employee shall be entitled to participate in the
1994 Pacific Investment Management Company Non-Qualified Profit Sharing Plan
(and any succor plan adopted by Employer during Employee's term of employment
hereunder) (the "Profit Sharing Plans"), a copy of which is attached hereto as
Exhibit A, subject to all of the terms and provisions of the Profit Sharing Plan
document as the same may be amended from time to time as provided therein.
Employee's initial percentage under the Profit Sharing Plan shall be determined
by the Compensation Committee (as such term is defined in the Partnership
Agreement). As

                                       5
<PAGE>
 
provided in the Profit Sharing Plan and the Partnership Agreement, Employee's
interest in the Profit Sharing Plan may be increased or decreased from time to
time and Employee's interest in the Profit Sharing Plan may be affected by
actions such as the awarding of interests to new or current employees including
Managing Directors, or the loss of interests of other participants. Employee's
rights under the Profit Sharing Plan shall be governed by the Profit Sharing
Plan document as the same may be amended from time to time as provided therein
and herein, and nothing herein shall be construed to confer any additional
rights on Employee under such Plan. Except as expressly provided above with
respect to Employee's initial interest in the Profit Sharing Plan, Employee
shall have no right under this Agreement or under the Profit Sharing Plan to any
percentage interest in the Profit Sharing Plan.

     4.   Benefit Arrangements.
          --------------------

          (a)  Employee shall be entitled to participate in all health, welfare,
insurance, pension and other similar employee benefit plans and programs of
Employer (including, without limitation, the Employer's "Perquisite Plan")
or the Supervisory. Partner which are open to participation by employees holding
employment positions comparable to Employee's position; provided, however, that
such participation by Employee shall in all cases be subject to the terms and
provisions of each such employee plan or program and also to applicable federal,
state or other governmental laws and regulations; provided further such benefits
shall be on terms no less favorable than under Employee's prior employment
agreement with PIMCO Inc. in effect as of the date hereof.

          (b)  Employer shall promptly reimburse Employee for all reasonable
business expenses incurred by Employee during the term of this Agreement in
accordance with practices as in effect from time to time.

          (c)  During the term of this Agreement, Employee shall receive paid
vacations in accordance with Employer's practices as in effect from time to
time.

          (d)  Compliance with the foregoing subsections shall in no way create
or be deemed to create any obligation, express or implied, on the part of
Employer or any affiliate of Employer with respect to the continuation of any
benefit or other plan or arrangement maintained at or prior to the date hereof
or the creation and maintenance of any particular benefit or other plan or
arrangement at any time after the date hereof.

     5.   Termination of Employment Prior to the Scheduled Termination Date.
          -----------------------------------------------------------------

     The parties hereby expressly agree that Employee's employment by Employer
may terminate or be terminated by either party at any time prior to the
Scheduled Termination Date as provided below; provided, however, that any such
termination of Employee's employment by Employer shall be in accordance with the
terms of Article VI of the Partnership Agreement in effect as of the date such
Partnership Agreement was first executed. Except as otherwise expressly set
forth herein, Employee shall not be entitled to any severance pay, relocation
benefits or other severance benefits upon termination of his employment with
Employer, and

                                       6
<PAGE>
 
upon such termination for any reason, shall no longer be a Managing Director.
Upon any termination prior to the Scheduled Termination Date the rights of the
parties shall be as follows:

          (a)  Death and Permanent Incapacity. Upon the death of Employee or the
               ------------------------------                                   
permanent incapacity of Employee continuing for a period of more than 180 days,
Employee's employment by Employer hereunder shall terminate. Upon any such
termination, Employer shall pay Employee (or his estate) his base salary
pursuant to Section 3(a) hereof and shall provide Employee (or his estate or
beneficiaries) with all the benefits contemplated by Section 4(a) hereof for a
period of one year from the date of termination of Employee's employment
pursuant to this Section 5(a). In addition, upon any such termination, Employer
shall pay Employee or his estate, (i) any base salary pursuant to Section 3(a)
hereof which is earned but unpaid as of the date of termination, (ii) any
compensation owed to Employee pursuant to the Profit Sharing Plan pursuant to
Section 3(b) hereof as provided therein and (iii) any reimbursement amounts owed
to Employee and any other amounts owed to Employee under any benefit plan
(including amounts under any disability plan) in respect of service through the
date of termination. As used herein, the term permanent incapacity means the
inability of Employee, by reason of injury, illness or other similar cause to
perform a major part of his duties and responsibilities in connection with the
conduct of the business and affairs of Employer and its Affiliates.

          (b)  Voluntary Termination and Termination For Cause. In the event of
               -----------------------------------------------                 
(i) a termination of Employee's employment by reason of a Voluntary Termination
or (ii) in the event of Employee's termination by Employer For Cause, then (A)
all obligations of Employer under any Section of this Agreement shall terminate
as of the date of such termination, (B) all obligations of Employer and its
Affiliates under the Profit Sharing Plan shall terminate as provided therein,
and (C) Employee's obligations under Section 6(a) and Section 6(c) hereof shall
continue unaffected by the termination of Employee's employment in accordance
with the terms thereof and, as a material consideration for its agreements
hereunder and other arrangements in connection with the Consolidation, Employer
shall have the right to enforce such obligations to the full extent set forth
therein. Employee agrees to give Employer at least six months prior written
notice of any Voluntary Termination hereunder.

     As used herein, the term "For Causes" shall mean any of the following:

               (i)    Employee has engaged in actions which both constitute a
          Termination Offense, and are of a nature which if publicly known would
          materially and adversely affect Employer's business; and the term
          "Termination Offense" shall mean any felony criminal offense which
          involves a violation of federal or state securities laws or
          regulations, embezzlement, fraud, wrongful taking or misappropriation
          of property, theft, or any other crime involving dishonesty;

                                       7
<PAGE>
 
               (ii)   Employee has persistently and willfully neglected his
          duties as provided herein after Employer has given Employee written
          notice specifying such conduct by Employee and giving Employee a
          reasonable period of time (not less than 45 days), to conform his
          conduct to such duties; or

               (iii)  Employee has engaged in Prohibited Competition Activity.

     Any determination as to whether Employee has been terminated For Cause for
purposes of this Agreement shall be made without reference to the determination
required to be made under the Partnership Agreement and the related definition
of "For Cause" in that Agreement.

     (c)   Involuntary Termination and Default by Employer. In the event of the
           -----------------------------------------------                     
Involuntary Termination of Employee's employment by Employer, then (i) Employer
shall continue to pay Employee his base salary as was in effect as of the
Employment Termination Date subject to the CPI adjustment for the longer of one
year from the Employment Termination Date or through the then Scheduled
Termination Date and during such period shall continue in effect Employee's
benefits in accordance with Section 4(a), (ii) Employee shall be entitled to
participate in the Profit Sharing Plan to the extent and only to the extent
provided therein and (iii) all obligations of Employee under this Agreement
other than Section 6(a) hereof shall terminate; provided, however, that in the
event that Employee engages in any of the activities described in Section 6(c)
hereof following any such termination, then Employer's obligations under clause
(i) above shall terminate. After any material default by Employer in the
performance of any of its obligations hereunder, Employee shall have the right
to terminate his employment hereunder for a period of three months thereafter,
and such a termination shall be deemed an Involuntary Termination by Employer.
Notwithstanding the foregoing, Employer shall not be deemed to have committed a
material default hereunder unless and until (x) Employee gives written notice to
Employer of Employee's belief that Employer has committed such a default, and
(y) Employer fails, within 30 days after the effective date of such notice
(determined as provided in Section 8 hereof), to cure such default. Payment of
the amount specified in this Section 5(c) is agreed by the parties hereto to be
in full satisfaction and compromise of any claims arising out of any termination
of Employee's employment pursuant to this Section 5(c).

     6.   Confidential Information: Prohibited Activities.
          -----------------------------------------------

          (a)  Employee hereby represents that as of the date of this Agreement
he is not performing any consulting or other duties for, and is not a party to
any similar agreement with, any business or venture competing with the Employer
or any of its Affiliates. By execution of this Agreement, Employee hereby
covenants that during the term of his employment with Employer he will not
engage in any Prohibited Competition Activity. Without limitation of any other
provision of this Agreement, the restrictions set forth in this Section 6(a)
shall in no event be applicable to or restrict Employee following termination of
his employment for any reason.

                                       8
<PAGE>
 
          (b)   Employee agrees and acknowledges that any and all presently
existing investment advisory business of Employer and its Affiliates and all
business developed by Employer and its Affiliates or any other employee of
Employer and its Affiliates, including without Limitation all investment
advisory contracts, fees, commissions, compensation records, client lists,
agreements, and any other incident of any business developed by Employer or
earned or carried on by Employer and all trade names, service marks and logos
under which Employer and its Affiliates do business, including without
limitation the "Pacific Investment Management Company" trade names and service
marks and any combinations or variations thereof and all related logos, are and
shall be the exclusive property of Employer or such Affiliate, as applicable,
for its or their sole use, and (where applicable) shall be payable directly to
Employer or such Affiliate. Employee acknowledges that, in the course of
performing services hereunder and otherwise, including for Employer's
predecessor, Employee has had and will from time to time have access to
confidential records, data, client and contract lists, trade secrets, formulae,
computer programs and software, manuals and documentation, algorithms, and
similar and other confidential information owned or used in the course of
business by Employer or its Affiliates. Employee agrees always to keep secret
and not ever (during the term of this Agreement or thereafter) publish, divulge,
furnish, use or make accessible to anyone (otherwise than in the regular
business of Employer or any Affiliate thereof or otherwise at the Employer's
request and with the consent of the Management Board (which consent shall
require a Super-Majority Board Vote)) any knowledge or information of a
confidential or proprietary nature with respect to any trade secrets,
proprietary plans, clients, client requirements, service providers, business
operations or techniques of Employer or any of its Affiliates. Upon termination
of Employee, 5 services to Employer for any reason, all data, memoranda, client
lists, notes, programs and other papers, items and tangible media, and
reproductions thereof relating to the foregoing matters in Employee's possession
or control, shall be returned to Employer and remain in its possession (except
where the return of such items shall be unreasonable or impractical in relation
to the importance or confidentiality of such items).

          (c)   In further reflection of Employer's important interests in its
proprietary information and trade and employee relationships as contemplated by
Section 6(b), Employee agrees that, following the Employment Termination Date,
unless Employee's termination of employment occurred by reason of death or
permanent incapacity as provided in Section 5(a) or Involuntary Termination as
provided in Section 5(c), Employee will not, during the Restricted Period,
without the consent of the Management Board (which consent shall require a
Super-Majority Board Vote) and the consent of the Supervisory. Partner, directly
or indirectly, whether as owner, part-owner, shareholder, partner, director,
officer, trustee, employee, agent or consultant, or in any other capacity, on
behalf of himself or any firm, corporation or other business organization other
than Employer or any Affiliate of Employer:

               (A)  provide investment advisory, investment management or any
          other services to any person or entity that is a client of Employer
          (for this purpose, a "client of Employers" is any person or entity
          for whom Employer is performing Investment Management Services at the
          Employment Termination

                                       9
<PAGE>
 
          Date or for whom Employer performed Investment Management Services at
          any time during the six months immediately preceding the Employment
          Termination Date and any person or entity with whom Employer was
          actively attempting to develop an investment advisory relationship
          during such period); provided, however, that this paragraph (1) shall
          not prohibit Employee from providing investment advisory or investment
          management or other services to any person or entity that is not a
          client of Employer, and (2) shall not prohibit Employee from working
          as part of an enterprise having clients of Employer as its clients as
          long as Employee can demonstrate by clear and convincing evidence that
          he has no direct or indirect involvement with the management of such
          clients' accounts or the provision of advice or other services with
          respect thereto and that he has refrained from contacting such clients
          directly or indirectly;

               (B)  divert or take away any Employer Managed Funds or solicit
          any person or entity for the purpose of diverting or taking away any
          such Employer Managed Funds; or

               (C)  solicit or induce any professional employee or former
          professional employee of Employer to terminate his relationship
          therewith, hire any such professional employee, or work in any
          enterprise involving investment advisory services with any
          professional employee or former professional employee of Employer who
          was employed by Employer at any time during the six months immediately
          preceding the Employment Termination Date.

     Notwithstanding the provisions of this Section 6(c), Employee may make
passive investments in a competitive enterprise the shares of which are publicly
traded provided his holding therein, together with any holdings of his
Affiliates, do not exceed 1% of the outstanding shares or comparable interests
in such entity.

          (d)  Employer shall not have the right to enforce the provisions of
Section 6(c) following any termination of employment prior to the Scheduled
Termination Date by reason of death or permanent incapacity as provided in
Section 5(a) or Involuntary Termination as provided in Section 5(c), its sole
right being to terminate further payments as described in such Sections in the
event Employee elects to engage in any activity described in such Sections while
otherwise entitled to receive such payments.

     7.   Additional Covenants Regarding Management of Employer.
          -----------------------------------------------------

     Employer and Employee understand and agree that it is important to the
employment relationship of the Managing Directors with Employer that the
Managing Directors as a group have certain rights under the Partnership
Agreement and the Profit Sharing Plan. Accordingly, Employer and Employee
agree that none of the following actions will be taken by Employer (or the
partners thereof) unless such action shall first have been approved as provided
below:

                                      10
<PAGE>
 
          (a)  The amendment or modification of the provisions of Article VII of
the Partnership Agreement (relating to the management of Employer) or any
successor provisions thereto must first be approved by a Majority Board Vote
provided that to the extent that any such change amends a provision which
requires a Super-Majority Board Vote, such an amendment may only be adopted by
with the approval of a Super-Majority Board Vote); or

          (b)  The amendment, modification or termination of the Profit Sharing
Plan must first be approved by a Super-Majority Board Vote.

     8.   Notices.
          ------- 

     All notices, requests or other communications hereinafter collectively
referred to as "Notices") required or permitted to be given hereunder or which
are given with respect to this Agreement shall be in writing (including
telecopy) and, unless otherwise expressly provided herein, shall be delivered
(a) by hand during normal business hours, (b) by Federal Express, United Parcel
Service or other reputable overnight commercial delivery. Service (collectively
"overnight couriers"), (c) by registered or certified mail (return receipt
requested) or (d) by telecopy, addressed as follows:

To Employer at:               Pacific Investment Management Company
                              840 Newport Center Drive
                              Newport Beach, CA 92660
 
To Employee at:               The current residential mailing address and
                              residential telecopy number for Employee as
                              reflected in Employer's employee records

     Any such notice shall be effective for purposes of determining compliance
with the time requirements herein (unless otherwise specifically provided
herein) (a) at the time of personal delivery, if delivered by hand, (b) at the
time accepted for overnight delivery by the overnight courier, if delivered by
overnight courier, (c) at the time of deposit in the United States mail, postage
fully prepaid, if delivered by registered or certified mail, or (d) at the time
of confirmation of receipt, if delivered by telecopy. Either party may change
its address for purposes of Notices hereunder pursuant to a Notice, given as
provided herein, advising the other party of such change.

     9.   Effective Date/Term of Agreement.
          --------------------------------

          (a)  Employee and Employer agree that the employment relationship
between Employee and Employer shall be governed in all respects by the terms and
provisions of this Agreement effective as of the date of the closing of the
transactions contemplated by the Consolidation Agreement ("Effective Date"). If
for any reason such closing shall not occur, this Agreement and all of its terms
and conditions shall be null and void and of no effect whatsoever.

                                      11
<PAGE>
 
          (b)  The term of Employee's employment under this Agreement shall end
on the earlier of the following dates (the "Employment Termination Date"):

               (i)  The Scheduled Termination Date; or

               (ii) The effective date of Employee's termination of employment
          with Employer as provided in Section 5 hereof, if earlier.

          (c)  As used in this Agreement, the initial "Scheduled Termination
Date" initially shall be December 31, 1997; provided, however, that such initial
Scheduled Termination Date automatically shall be changed on such initial
Scheduled Termination Date or any subsequent Scheduled Termination Date to a
date which is exactly two years after the Scheduled Termination Date then in
effect (and after such a change, such date shall thereafter be the then
"Scheduled Termination Date") unless either Employer or Employee gives notice
(the "Notice of Non-Extension") to the other party that the Scheduled
Termination Date shall not be so postponed; and provided further, that the
Scheduled Termination Date automatically shall be postponed pursuant to the
preceding clause for successive two-year periods until a Notice of Non-Extension
is given by at least one of the parties. Any Notice of Non-Extension must be
given in writing at least six months prior to the Scheduled Termination Date to
which the Notice of Non-Extension applies. Upon any such non-renewal by either
party, Employee shall be subject to Section 6 to the extent provided therein.

          (d)  Notwithstanding that Employee's employment by Employer under this
Agreement shall terminate on the Employment Termination Date, such termination
shall not have the effect of terminating those obligations of any party which,
pursuant to the terms of this Agreement, are contemplated as remaining in effect
to a date, or throughout a period which ends, after the Employment Termination
Date.

     10.  Governing Law.
          ------------- 

     This Agreement shall be governed by, interpreted under, and construed and
enforced in accordance with the laws of the State of California applicable to
Agreements made and to be performed only within the State of California without
regard to its rules concerning conflict of laws.

     11.  Entire Agreement.
          ----------------

     The terms of this Agreement are intended by the parties as a final
expression of their agreement with respect to such terms as are included in this
Agreement and may not be contradicted by evidence of any prior or
contemporaneous agreement. This Agreement supersedes all prior understandings
and agreements between the parties relating to the subject matter hereof.

                                      12
<PAGE>
 
     12.  Modifications and Amendments.
          ----------------------------

     This Agreement may not be modified, amended, changed or supplemented, nor
may any obligations hereunder be waived, except by written instrument signed by
both parties and approved by Super-Majority Board Vote. Notwithstanding the
foregoing, Employer shall be entitled, without any approval or acceptance by
Employee, to exercise the discretionary powers and authority granted under:
Section 3 hereof with respect to Employee's compensation, provided that such
compensation shall not be less than the amount stated therein; and Section 5
hereof with respect to the termination of Employee's employment with Employer;
and provided further, that, subject to the provisions of Section 7 hereof,
Employer shall be entitled, with Super-Majority Board Vote, without any approval
or acceptance by Employee, to amend, supplement, restate, modify or terminate
the Profit Sharing Plan.

     13.  Successors and Assigns.
          ---------------------- 

     This Agreement and the provisions hereof shall be binding upon each of the
parties, their successors, and assigns.

     14.   Assignment.
           ----------

     This Agreement and the rights, duties and obligations hereunder may not be
assigned (which term shall mean only the actual assignment of this Agreement) by
either party without the prior written consent of the other party.

     15.  Third Party Rights.
          ------------------

     The parties do not intend to confer any benefit hereunder on any person,
firm or corporation other than the parties hereto and, in the case of Employee's
death, Employee's estate, heirs or beneficiaries; provided, however, that with
respect to Sections 5, 6 and 7 hereof, PIMCO Advisors L.P. is an intended third-
party beneficiary.

     16.   Non-Waiver of Rights.
           -------------------- 

     The failure or delay of either eased in the exercise of any right given to
such party hereunder shall not constitute a waiver of rights unless the time 
specified herein for exercise of such rights has expired, nor shall any single
or partial exercise of any right preclude other or further exercise thereof or
of any other right.

     17.  Specified Performance: Severability.
          -----------------------------------

     It is specifically understood and agreed that any breach of the provisions
of this Agreement will result in irreparable injury, that the remedy at law
alone will be an inadequate remedy for such breach and that, in addition to any
other remedy they may have, the parties hereto shall be entitled to enforce the
specific performance of this Agreement by and to seek both temporary and
permanent injunctive relief without the necessity of proving actual

                                      13
<PAGE>
 
damages. In case any of the provisions contained in this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect, any such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had been limited or modified (consistent with
its general intent) to the extent necessary to make it valid, legal and
enforceable, or if it shall not be possible to so limit or modify such invalid,
illegal or unenforceable provision or part of a provision, this Agreement shall
be construed as if such invalid, illegal or unenforceable provision or part of a
provision had never been contained in this Agreement.

     18.  Pronouns and Plurals.
          -------------------- 

     Whenever the context may require, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.

     19.  Counterparts.
          ------------

     This Agreement may be executed in two counterparts, each of which shall be
deemed an original, but both of which together shall constitute one and the same
agreement.

                                      14
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as provided hereinabove.

                                        "EMPLOYER"

                                        PACIFIC INVESTMENT MANAGEMENT 
                                        COMPANY, 
                                        a Delaware general partnership


                                        By: /s/ William S. Thompson
                                           ------------------------
                                        Name:  William S. Thompson
                                             ---------------------
                                        Title: CEO
                                              --------------------


                                        "EMPLOYEE"

                                        /s/ William H. Gross
                                        --------------------------
                                        William H. Gross

                                      15