May 7, 1997

Mr. Fred Hassan
142 Summit Road
Florham Park, New Jersey  07932

Dear Sir:

This letter confirms the terms for your employment as President and Chief
Executive Officer of Pharmacia & Upjohn, Inc. ("the Company").  I very much
hope that you will become our new President and Chief Executive
Officer.  The principal terms of your employment will be:

1.    You will join the Company as an employee on May 9, 1997.  On
May 10, 1997 you will be appointed President and Chief Executive
Officer for a term beginning on May 10, 1997 and ending on June 1,
2000.  However, subject to paragraph 6 below, you will serve at the
will of the Board.  You will also serve as a member of the Board of
Directors and on the Board's Executive Committee, subject to being
nominated by the Board and approved by the shareholders of the
Company.  As President and Chief Executive Officer, you will report
directly to the Board and will be responsible for the general
management of the affairs of the Company in accordance with
customary practices for chief executive officers of comparable
companies.  While serving as President and Chief Executive Officer
of the Company, for legal and tax purposes, you will be a direct
employee of, and serve as President and Chief Executive Officer of,
Pharmacia & Upjohn Management Company Ltd., a wholly owned U.K.
subsidiary of the Company that provides management services to the
Company under contract ("PUMCO").

      You will devote substantially all of your business time to
your duties and responsibilities with the Company and PUMCO. 
However, you will not be precluded from (i) serving on the board of
directors of other companies (subject to the reasonable approval of
the Board of Directors of the Company) and boards of trade
associations or charitable organizations; (ii) engaging in
charitable activities and community affairs; and (iii) managing
your personal investments and affairs provided that such activities
do not materially interfere with your duties and responsibilities
hereunder.

2.    Your beginning annual base salary will be $1,000,000 and will
be subject to annual review for increases.

3.    You will be included in the Company's Annual Incentive
Compensation Plan at a level determined by the Compensation
Committee of the Board to be appropriate based on your position,
job performance and Company policy.  Your 1997 incentive
compensation target award will be $1,000,000 and will be subject to
adjustment following the end of the year by the performance
criteria established for the Company's other senior executive
officers (the 1997 performance criteria provide that 30% of
targeted incentive compensation will be adjusted based on external
measures (total market return and earnings per share) compared to
a group of comparable global pharmaceutical companies, and the
remaining 70% will be adjusted based on relative growth in the
Company's sales, earnings and cash flow and on individual
performance).  However, you will be guaranteed a minimum cash bonus
of $636,000 for 1997.  The actual amount of your 1997 incentive
compensation (including the guaranteed minimum amount) will be
reduced by the amount of any annual bonus you receive from your
current employer for services rendered during 1997.  Payment of
your incentive compensation will be made in March 1998 unless you
elect to defer payment until after you retire.  Your ongoing annual
incentive compensation target awards will be no less than $1
million, payable if the performance criteria determined by the
Compensation Committee are met.  If the performance criteria are
exceeded or not fully met, you will receive such greater or lesser
amount as the Compensation Committee determines is appropriate.

4.    To provide you with new long-term equity incentive
compensation and to replace the stock options, performance shares
and restricted stock from your current employer that you will lose
as a result of joining Pharmacia & Upjohn, the Company will grant
you, on May 9, 1997, which shall be deemed your "Employment
Commencement Date," stock options and restricted stock according to
the schedule set forth below:

                           NEW LONG-TERM INCENTIVES
                            AND REPLACEMENT AWARDS
(see notes following table)

       TYPE        NATURE OF AWARD     NUMBER OF SHARES     VESTING DATE
------------------------------------------------------------------------------
Stock Options      New Incentive       500,000              1/3 of grant
                                                            on 6/1/98,
                                                            6/1/99 &
                                                            6/1/2000
------------------------------------------------------------------------------
Restricted Stock   Replacement Award   200,000              June 1, 1998
------------------------------------------------------------------------------
Restricted Stock   Replacement Award   40,000               June 1, 1998
------------------------------------------------------------------------------
Restricted Stock   Replacement Award   75,000               January 1, 1998
------------------------------------------------------------------------------

A.    The exercise price of the stock options will be the fair
      market value (as defined in the Company's Stock Option Plan as
      the average of the daily high and low) for Pharmacia & Upjohn
      Common Stock on the New York Stock Exchange on your Employment
      Commencement Date.  All stock options will be non-qualified
      stock options under the U.S. Internal Revenue Code, will be
      subject to the terms of the Plan and will expire not later
      than ten years from the date of grant.

B.    Stock options and restricted stock not vesting until the
      indicated dates will nevertheless vest immediately upon your
      death or disability, a Change in Control of the Company (as
      defined in the Company's Stock Option Plan), your involuntary
      termination of employment other than for Cause (as defined
      below) or your termination of employment for Good Reason (as
      defined below) provided you do not enter into Competition (as
      defined below) with the Company within two years after your
      employment is terminated.

C.    The stock options set forth in the table above represent your
      annual stock option grant for 1997.  Beginning in 1998, you
      will be granted stock options pursuant to the Company's Stock
      Option Plan at the same time as other senior executives of the
      Company and at a level determined by the Compensation
      Committee of the Board to be appropriate based on your
      position, job performance, competitive practices and Company
      policy.  If your performance is found to be satisfactory, it
      is expected that the target for your stock option grants would
      be at least 250,000 options in 1998 and 250,000 options in
      1999.

D.    The 40,000 restricted shares of Pharmacia & Upjohn Common
      Stock issued to replace certain restricted stock and
      performance shares from your current employer that may not be
      paid due to termination of your current employment, will be
      reduced by the value of any such restricted stock or
      performance shares you subsequently receive from your current
      employer.  

E.    The 75,000 restricted shares of Pharmacia & Upjohn Common
      Stock issued to replace 133,200 options awarded in 1996 by
      your current employer and 12,500 shares of restricted stock
      from your current employer that may not vest or may not be
      paid due to termination of your current employment, will be
      reduced by the value of any such options which subsequently
      vest or any such restricted stock you subsequently receive
      from your current employer.

5.    You will be eligible to receive employee benefits and
perquisites at least as favorable as those provided to any other
similarly situated senior executives of the Company, including,
without limitation, if offered to such other senior executives,
pension, profit sharing, savings, deferred compensation and other
retirement plans or programs, medical, dental, hospitalization,
short-term and long-term disability, life insurance, accidental
death, travel accident, vacation and any other benefit programs or
plans that may be sponsored by the Company, including any plans
that supplement the above-listed plans, whether funded or unfunded. 


You shall be entitled to post-retirement welfare benefits, if any,
as are made available by the Company to its senior level
executives, provided that for this purpose your period of
employment shall be deemed to be the period necessary to obtain the
maximum level of such benefits.

To the extent that there is a period of employment required as a
condition for full benefit coverage under any employee benefit
plan, you shall be deemed to have met such requirement, and to the
extent that you and/or your dependents will not be eligible to
participate fully in any medical plan because of any exclusion for
preexisting conditions, the Company will either, at its option,
waive any such exclusion for pre-existing conditions or reimburse
you for the cost of paying for the COBRA continuation coverage
available under your prior employer's medical plans.

6.    In the event your employment is involuntarily terminated by
the Company other than for Cause or you terminate your employment
for Good Reason, in either case prior to June 1, 2000, provided
that you do not enter into Competition with the Company, then, as
liquidated damages and in lieu of any other damages or compensation
under this agreement, (i) you shall be entitled to receive a lump
sum severance payment, payable within 60 days after termination,
equal to the total amount of base salary and annual target
incentive compensation you would have received had you continued
your employment until June 1, 2000 (calculated using your base
salary and target bonus in effect on your date of termination) but
in no event less than an amount equal to two years' base salary and
annual target incentive compensation so calculated; (ii) you shall
have your period of employment service used to calculate retirement
and other employee benefits extended as if you had worked until
November 12, 2000, and the compensation used to calculate your
retirement benefits will be determined as if you had continued to
receive your then current annual base salary and annual target
incentive compensation until November 12, 2000; (iii) you will be
entitled to exercise during the five years following your
termination, in accordance with their terms, any remaining stock
options that had been granted prior to your termination (all of
which will become vested under such circumstances); (iv) you shall
earn the restricted shares you receive pursuant to paragraph 4
above if not yet vested; (v) you shall be entitled to payment of
your expenses in connection with the relocation of your family from
the United Kingdom to the United States on the same basis as your
expenses were paid with respect to your relocation from the United
States to the United Kingdom in connection with the commencement of
your employment; (vi) you and your dependents shall continue to
participate (with the same level of coverage) for the period in
respect to which you receive salary and bonus payments under
subparagraph (i) above, in all medical, accident, disability and
life insurance on the same terms as in effect immediately prior to
your termination, provided, however, such benefits will cease on
the date of your receiving equivalent benefits from a new employer,
and, at your option, you may have such benefits determined as if
you had terminated employment from the Company's principal U.S.
operating subsidiary; (vii) you shall be entitled to outplacement
services, at the expense of the Company, from a provider selected
by you, subject to a maximum expense of $100,000, and (viii) you
shall receive any other amounts earned, accrued or owing to you
under the plans and programs of the Company.  In the event you
should die prior to June 1, 2000 while still employed by Pharmacia
& Upjohn, your spouse or other beneficiary shall receive a lump sum
payment equal to two years' base salary offset by any death
benefits payable under the Company's life insurance plans under
which you are covered.  In the event you enter into Competition
with the Company within two years after your employment is
terminated, and you have received severance payments under
subparagraph (i) above, additional retirement or other employee
benefits under subparagraph (ii) above, or (iii) restricted stock
under subparagraph (iv) above, you agree to promptly repay the
amount of such severance payments, additional retirement and other
employee benefits and restricted stock to the Company, and any
remaining stock options will be canceled.

7.    In the event that, within one year following a Change in
Control of the Company (as currently defined in the Company's Stock
Option Plan without regard to any future amendment) occurring prior
to June 1, 2000, your employment with the Company is involuntarily
terminated other than for Cause or you terminate your employment
for Good Reason, the Company will assure you that the stock options
granted under paragraph 4 above and any other stock options granted
to you before the Change in Control (even if previously exercised
or if not yet exercisable) will have a before-tax value of at least
$15 million on the date of the Change in Control.  If they do not
have that value, then the Company will pay you, within sixty days
after the date of your involuntary termination or the date you
terminate your employment for Good Reason, a lump sum cash payment
in an amount (which amount will be grossed up for any resulting IRS
Code Section 4999 excise taxes) equal to the difference between $15
million and the  market spread on the date of the Change in Control
of the 500,000 stock options granted under paragraph 4 and any
other stock options granted to you before the Change in Control
(even if previously exercised or if not yet exercisable).

8.    In the event, prior to June 1, 2000, you voluntarily terminate
your employment (other than for Good Reason or due to permanent
disability) or you are discharged by the Company for Cause, you
will forfeit your right to receive any salary, incentive
compensation, severance pay or restricted stock that has not been
fully earned at the time your employment terminates, provided,
however, you will be entitled to receive any benefits or amounts
accrued but not yet paid as of the date of termination, and you
will be able to exercise any remaining vested stock options only
during the three months following termination of your employment.

9.    You will receive the Company's customary relocation benefits,
including, unless you sell your home yourself, an amount equal to
the average appraised value of your home as determined by at least
two independent real estate appraisers (you would then deed your
home to the Company). The Company will also reimburse you, grossed-
up for any resulting taxes, for reasonable house-hunting, personal
transportation, moving expenses, temporary living expenses and
other related costs associated with your move to Pharmacia &
Upjohn's management center in Windsor, England.  The Company will
also pay you $25,000, grossed-up for any resulting taxes, for
incidental expenses incurred in establishing a residence in
England.

10.   (a)  If your employment with the Company is terminated on
account of disability or is involuntarily terminated by the Company
other than for Cause or you terminate your employment for Good
Reason, the Company will pay you the greater of (i) the amount of
(A) qualified and non-qualified retirement income you would have
been entitled to receive under the retirement benefit formula now
in effect with your current employer if you had remained employed
by your current employer until the later of (x) your attainment of
age 55 or (y) your employment with the Company terminates and if
your current employer had paid you the same compensation as you
received from the Company, less (B) the amount of any qualified or
non-qualified retirement income you are actually entitled to
receive from your current employer; or (ii) the amount of
retirement income you are entitled to receive under the Company's
Global Officer Pension Plan (or any other retirement plan hereafter
provided by the Company for its senior executive officers) using
your actual years of service and compensation with the Company, as
described in paragraph (c) below.
      (b)  If you voluntarily terminate your employment with the
Company other than for Good Reason or if the Company terminates
your employment for Cause, the Company will pay you the greater of
(i) the amount of (A) qualified and non-qualified retirement income
you would have been entitled to receive under the retirement
benefit formula now in effect with your current employer if you had
remained employed by your current employer until your employment
with the Company terminates and if your current employer
compensation had increased at a 5% compounded rate annually, less
(B) the amount of any qualified or non-qualified retirement income
you are actually entitled to receive from your current employer; or
(ii) the amount of retirement income you are entitled to receive
under the Company's Global Officer Pension Plan (or any other
retirement plan hereafter provided by the Company for its senior
executive officers) using your actual years of service and
compensation with the Company, as described in paragraph (c) below.
      (c)  The Company's Global Officer Pension Plan, which is not
qualified under the U.S. Internal Revenue Code, supplements the
officer's other sources of retirement income to provide the officer
with the actuarial value of an annual life annuity of 65% of the
officer's final three-year average annual salary and cash bonus
compensation prior to retirement from the Company, provided the
officer retires at age 65 with at least ten years of service under
the Plan.  Appropriate adjustments will be made if the officer has
less than ten years of service under the Plan or retires before age
65.  The benefits payable under the Company's Global Officer
Pension Plan will be offset for any social security or other
governmental retirement income and any retirement income from any
prior employers that you may be entitled to receive.
      (d)   If you die while employed by the Company or thereafter
under circumstances in which a spousal survivor's benefit would
have been payable under the retirement plans of your current
employer had you continued employment with your current employer
and/or you elect the pre-retirement 60% spousal survivor benefit
under the Company's Global Officer Pension Plan or a spousal
survivor's benefit becomes payable under any other retirement plans
of the Company under which you are covered, then the benefit
payable by the Company to your surviving spouse shall be the
greater of (i) the amount which would have been payable as a
spousal survivor's benefit under the retirement plans of your
current employer had you continued employment with your current
employer or (ii) the amount payable as a spousal survivor's benefit
under the Global Officer Pension Plan or any other retirement plans
of the Company, with each such amount being calculated in
accordance with the assumptions described in and offsets
corresponding to those provided for in subparagraph (a), above,
subparagraph (b), above, and/or subparagraph (e), below, whichever
is applicable to the circumstances of the termination of your
employment with the Company.
      (e)   For the purpose of the foregoing calculations,
alternative forms of benefits will be made actuarially equivalent
using the actuarial assumptions then applied to all senior
executive officers under the Company's Global Officer Pension Plan
(or any successor plan).

11.   You are authorized to incur reasonable expenses in carrying
out your duties and responsibilities with the Company and PUMCO,
and the Company shall promptly reimburse you for all business
expenses in accordance with Company policy.  The Company shall pay
your reasonable expenses for legal counsel and financial advice in
connection with the negotiation and documentation of your
employment arrangements with the Company.  You will be provided
with an automobile and chauffeur in the U.K. for business purposes. 
You will receive annual assistance from an independent accounting
firm selected by the Company, at Company expense, in preparing your
income tax returns.  Your children will be entitled to attend
private school in the U.K. through high school at Company expense. 


12.   During the period of your employment and thereafter, you will
maintain the confidentiality of all confidential or proprietary
information relating to the business of the Company or any of its
subsidiaries or affiliates provided, however, you may disclose such
information as (i) may be required or appropriate in carrying out
your duties at the Company or PUMCO or (ii) may be required for you
to disclose by applicable law, governmental regulations or judicial
or regulatory process.

13.   To the fullest extent permitted by applicable law, all
intellectual property (including patents, trademarks, and
copyrights) which are made, developed or acquired by you in the
course of your employment with the Company will be and remain the
absolute property of the Company.

14.   Without the written consent of the Board of Directors of the
Company, you agree that during the period of your employment with
the Company and for a period of two years following the termination
of your employment, you will not enter into Competition with the
Company.  "Competition" as used in this agreement means that you
commence employment with, or provide substantial consulting
services to, any pharmaceutical company (except companies where
sales from pharmaceutical products constitute less than 20% of
total sales).  Anything herein to the contrary notwithstanding,
your service solely as a member of the board of directors of a
company whose annual sales, for its last fiscal year prior to your
becoming a member of its board of directors, are less than $100
million shall not be deemed to be Competition for purposes of this
agreement.  For purposes of the preceding sentence, if a company is
a subsidiary of another company, the sales of both companies shall
be taken into account.

15.   To the fullest extent permitted by applicable law, the Company
will, during and after termination of your employment, indemnify
you (including providing advancement of expenses) for any
judgments, fines, amounts paid in settlement and reasonable
expenses, including attorneys' fees, incurred by you in connection
with the defense of any lawsuit or other claim to which you are
made, or threatened to be made, a party by reason of being or
having been an officer, director or employee of the Company or any
of its subsidiaries or affiliates.  In addition, you will be
covered under any directors and officers' liability insurance
policy for your acts (or non-acts) as an officer or director of the
Company or any of its subsidiaries or affiliates to the extent the
Company provides such coverage for its senior executive officers.

16.   Any disputes arising under or in connection with this
agreement shall, unless other arrangements are agreed upon in
writing by you and the Company, be resolved by binding arbitration
to be held in London, England, in accordance with the rules and
procedures of the London Court of International Arbitration. 
Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction.  Costs of the arbitration
or litigation, including (but not by way of limitation) reasonable
attorneys' fees of both parties, shall be borne by the party which
does not prevail in the proceedings.  In the event that each party
prevails as to certain aspects of the proceedings, the
arbitrator(s) shall determine an appropriate allocation of costs
between the parties.

17.   In the event of termination of your employment, you will
immediately, unless otherwise requested by the Company's Board of
Directors, resign from all directorships, trusteeships, other
offices and employment held at that time with the Company or any of
its subsidiaries or affiliates.

18.   For purposes of this agreement, "Cause" means (i) a material
breach by you of your duties and responsibilities (other than as a
result of incapacity due to physical or mental illness) which is
demonstrably willful and deliberate on your part, which is
committed in bad faith or without reasonable belief that such
breach is in the best interests of the Company, and which is not
remedied in a reasonable period of time after receipt of written
notice from the Company specifying such breach; or (ii) your
conviction of a felony which is materially and demonstrably
injurious to the Company as determined in the sole discretion of
the Board of Directors of the Company.  

19.   For purposes of this agreement, "Good Reason" means that,
without your consent, (i) your rate of annual base salary or the
target amount of your annual cash incentive bonus are reduced in a
manner that is not applied proportionately to all other senior
executive officers of the Company, (ii) the Company fails to retain
you as President and Chief Executive Officer of the Company,
(iii) the Company fails to nominate you (or renominate you) for
election to the Board of Directors of each of the Company and of
PUMCO, (iv) there is a material diminution in your duties, or the
assignment to you of duties which are materially inconsistent with
your duties or materially impair your ability to function, as the
President and Chief Executive Officer of the Company or of PUMCO or
(v) there is a change in your reporting so that you no longer
report directly to the Board of the Company or of PUMCO; provided,
however, that in the event PUMCO ceases to provide senior
management services to the Company under contract, any changes
related solely to PUMCO shall not be deemed Good Reason.

20.   The obligation of the Company to make any payments provided
for hereunder and otherwise to perform their obligations hereunder
shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have
against you or others.  In no event shall you be obligated to seek
other employment or take other action by way of mitigation of the
amounts payable to you under any of the provisions of this
agreement, and such amounts shall not be reduced (except as
otherwise specifically provided herein) whether or not you obtain
other employment.

21.   In the event of any change in the outstanding shares of the
Company's Common Stock (including any increase or decrease in such
shares) by reason of any stock dividend or split, recapitalization,
merger, consolidation, spinoff, combination or exchange of shares
or other similar corporate change, or any distributions to common
stockholders other than regular cash dividends, the Compensation
Committee of the Board may make such substitution or adjustment, if
any, as it deems to be equitable, as to the number or kind of
shares of Common Stock provided for in this agreement.

22.   As with all prospective employees, a recent medical
examination evidencing general good health must be completed prior
to employment.  Your physician should send the results of such
examination to the Company's Chief Medical Officer at the
management center in Windsor, England.

23.   This agreement will be governed by and construed in accordance
with the laws of the State of Delaware, U.S.A.

24.   (a)  No rights or obligations of the Company under this
agreement may be assigned or transferred by the Company except that
such rights or obligations may be assigned or transferred pursuant
to a merger or consolidation in which the Company is not the
continuing entity, or pursuant to the sale or transfer of all or
substantially all of the assets of the Company, provided that the
assignee or transferee is the successor to all or substantially all
of the assets of the Company.
      (b)  This agreement shall not be terminated by any merger,
consolidation, or transfer of assets referred to above.  In the
event of any such merger, consolidation or transfer of assets, the
provisions of this agreement shall be binding upon the surviving or
resulting corporation or the person or entity to which such assets
are transferred.
      (c)  The Company agrees that concurrently with any merger,
consolidation or transfer of assets referred to above, it will
cause any successor or transferee unconditionally to assume, either
contractually or as a matter of law, the liabilities, obligations,
and duties of the Company hereunder.            (d)  This agreement shall
inure to the benefit of, and be enforceable by or against, you or
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, designees and legatees.  None of
your rights or obligations under this agreement may be assigned or
transferred by you other than your rights to compensation and
benefits, which may be transferred only by will or operation of
law.  If you should die while any amounts or benefits have been
accrued by you but not yet paid as of the date of your death and
which would be payable to you hereunder had you continued to live,
all such amounts and benefits unless otherwise provided herein
shall be paid or provided  in accordance with the terms of this
agreement to such person or persons appointed in writing by you to
receive such amounts or, if no such person is so appointed, to your
estate.

25.   No provisions of this agreement may be waived, modified or
discharged unless such waiver, modification or discharge is agreed
to in writing signed by both you and an authorized officer of the
Company.  No waiver by any party hereto at any time of any breach
by any other party hereto of, or compliance with, any condition or
provision of this agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.  No
agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made
by any party which are not set forth expressly in this agreement.

26.   This agreement may be executed by the parties in two or more
counterparts, each of which shall be deemed to be an original, but
all such counterparts shall constitute one and the same instrument,
and all signatures need not appear on any one counterpart.  A faxed
signature of a party which is a reproduction of a genuine signature
of that party shall be conclusive evidence of execution of this
agreement by that party.

27.   This agreement sets forth the entire agreement of the parties
hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party
hereto in respect of the subject matter contained herein.

I am always available at your convenience to discuss any matters
you may wish.  

Very truly yours,


William E. LaMothe
Chairman, Search Committee


I accept the terms set forth in this letter and will serve in the
capacity stated: 


______________________________________

Date: May 9, 1997