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                                                                 EXHIBIT (10)(H)




February 17, 1998



Mr. P. L. Matson
502 East North Avenue
Lake Bluff, IL 60044
U.S.A.



Dear Paul:

This letter confirms the terms of our offer for your employment as Senior Vice
President for Human Resources of Pharmacia & Upjohn, Inc. (the "Company")
reporting to the President and Chief Executive Officer of the Company. I very
much hope that you will find this opportunity attractive and rewarding and will
accept our offer. The principal terms of your employment will be:

1.       You will join the Company as soon as possible (your "Employment
Commencement Date") as Senior Vice President for Human Resources of the Company.

The term of this agreement will be from your Employment Commencement Date until
February 28, 2001, and will be automatically renewed for an indefinite period
thereafter (the "Term"), unless and until at least sixty (60) days' prior
written notice of termination is given by either party stating the date of
termination.

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

2.       Your beginning annual base salary will be $250,000 and will be subject
to annual review for increases.
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                                       2                       February 17, 1998





3.       You will be included in the Company's Annual Incentive 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 1998 incentive
compensation target award will be set at 50% of your annual base salary or
$125,000. Your incentive compensation award will be subject to adjustment
following the end of the year by the performance criteria established by the
Compensation Committee of the Board of Directors, but in no event will your 1998
incentive compensation award be less than $65,000.

4.       To reimburse you for any housing assistance payment received from your
current employer that you may be required to pay back to your current employer
as a result of joining the Company, you will receive a cash bonus in the amount
of $50,000, payable when it can be determined whether or not you will be
required to repay any such housing assistance payment. If your current employer
waives or forgives repayment of the remaining housing assistance payment, you
will not receive the foregoing $50,000 cash bonus.

5.       To provide you with new long-term equity incentive compensation and to
replace the equity awards from your current employer that you will lose as a
result of joining the Company, the Board of Directors of the Company will grant
you, as of your Employment Commencement Date, a stock option for 50,000 shares
of the Company's Common Stock, vesting ratably over a three-year period on each
of the first three annual anniversaries of your Employment Commencement Date.

The exercise price of the stock options will be the fair market value (defined
in the Company's Long-Term Incentive 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 "Incentive Stock
Options" to the maximum extent permitted, and the remainder will be
non-qualified stock options, under the U.S. Internal Revenue Code, will be
subject to the terms of said Plan and will expire no later than ten years from
the date of grant.

Beginning in 1999, you will be granted stock options pursuant to the Company's
Long-Term Incentive 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, which will be in an amount not less than 50,000 shares of
the Company's Common Stock.

In addition, you will receive a grant of 5,000 shares of the Common Stock
restricted as to sale or transfer until earned. These restricted shares will be
earned ratably over a 3-year period on each of the first three annual
anniversaries of your Employment Commencement Date.
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                                       3                       February 17, 1998






Stock options and restricted shares not yet vested or earned will nevertheless
vest or be earned immediately upon a Change in Control of the Company (as
defined in the Company's Long-Term Incentive Plan).

6.       You will be eligible to receive employee benefits and perquisites in
line with the general plans applicable to our Global Officers including, without
limitation, if offered to such other senior executives, pension, profit sharing,
savings, deferred compensation, 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.

To the extent that there is a period of employment service required as a
condition for full benefit coverage under any employee benefit program or 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/dental plan because of any exclusion for preexisting conditions, the
Company will waive any such exclusion for pre-existing conditions.

7.       In the event your employment is involuntarily terminated by the Company
other than for Cause (as defined below), which the Company reserves the right to
do at any time during or after the Term of this agreement, or you terminate your
employment for Good Reason (as defined below), during the Term of this
agreement, provided that you do not enter into Competition (as defined below)
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
twice the combined amount of your annual base salary and annual target incentive
compensation as in effect on your date of termination; (ii) you shall have your
period of employment service used to calculate retirement and other employee
benefits, including eligibility for post-retirement medical/dental coverage,
extended for two additional years following your employment termination date 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 for two additional years following your
employment termination date, which retirement benefits will be paid in a lump
sum within 30 days after termination subject to appropriate actuarial reductions
consistent with those applied under the plan to reflect your age when you
terminate employment; (iii) you will receive a pro-rata annual incentive
compensation award in March of the year following your termination equal to the
amount you would have received if you had worked for the full year as adjusted
for the performance criteria specified for your award multiplied by a fraction
where the numerator is the number of months (rounded to the next highest number
for a partial month) of the year elapsed
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                                       4                       February 17, 1998








prior to your termination and the denominator is 12; (iv) you and your
dependents shall continue to participate (with the same level of coverage) for
two additional years following your employment termination date, in all
medical/dental, accident, disability and life insurance plans on the same terms
as in effect immediately prior to your termination, provided, however, that such
benefits will cease on the date of your receiving equivalent benefits from a new
employer; (v) you shall be entitled to outplacement services from a provider
selected by you, at the expense of the Company, subject to a maximum expense of
$25,000; and (vi) you shall receive any other amounts earned, accrued or owing
to you under the plans and programs of the Company.

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, or additional retirement or other employee benefits
under subparagraph (ii) above, you agree to promptly repay the amount of such
severance payments and additional retirement or other employee benefits to the
Company.

8.       In the event that, during the Term of this agreement, you voluntarily
terminate your employment (other than for Good Reason) or you are discharged by
the Company for Cause, you will forfeit your right to receive any salary,
incentive compensation or severance pay 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 your
termination.

9.       You acknowledge that the Company may at any time relocate your place of
employment to such location as may at that time constitute the Company's
principal executive offices. While you may need to initially be present at the
Company's Management Centre in Windsor, England (your temporary living expenses
in England incurred by you will be reimbursed by the Company net of any
resulting income tax), you will primarily be based at the Company's new
headquarters in New Jersey. You will receive the company's customary relocation
benefits for your move from your current home in the United States to the
Company's new headquarters in New Jersey. You shall be reimbursed for any loss
incurred on the sale of your principal U.S. residence (measured by the
difference between the net sales price you receive after deducting brokerage
fees and closing costs and the original purchase price you paid plus the
reasonable cost of improvements made to your residence) up to a maximum amount
of $100,000. In lieu of selling your home yourself, the Company will purchase
your home for an amount equal to the average appraised value of your home as
determined by at least two independent real estate appraisers mutually
satisfactory to you and the Company, which amount will be deemed your net sales
price for the purpose of determining the amount of any loss to be reimbursed by
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 from
your
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                                       5                       February 17, 1998




current residence to the Company's new headquarters in New Jersey, which
you may incur at any time prior to August 31, 1999.

10.      You will be immediately eligible to participate in, and shall be
immediately vested under, 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 highest three-year
average annual salary and cash bonus compensation within the ten years prior to
retirement from the Company, provided the officer retires at age 65 with at
least ten years of service under the Plan. Appropriate actuarial adjustments
consistent with those applied under the Plan will be made if you have less than
ten years of service under the Plan or retire 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.

11.      You are authorized to incur reasonable expenses in carrying out your
duties and responsibilities with the Company, and the Company shall promptly
reimburse you for all business expenses in accordance with Company policy.

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 (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, and you shall assist
the Company in perfecting and defending its rights to such intellectual
property.

14.      In consideration of the offer of employment and the compensation and
benefits provided hereunder, without the written consent of the Chief Executive
Officer 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 engage in substantially the same work
as you had been engaged in while employed by the Company with another
pharmaceutical company (except companies where sales from pharmaceutical
products constitute less than 20% of total sales) as either an employee or
consultant. Anything herein to the contrary
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                                       6                       February 17, 1998






notwithstanding, your service solely as a member of the Board of Directors of a
company whose annual sales 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 or investigation to
which you are made, or threatened to be made, a party or witness 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 to by you and the Company, be resolved by
binding arbitration to be held in New York, New York in accordance with the
rules and procedures of the American Arbitration Association, and judgment upon
any award rendered by the arbitrator(s) may be entered in any court having
jurisdiction. Costs of the arbitration, including (but not by way of limitation)
reasonable attorney's fees of both parties, shall be borne by the party which
does not prevail in the proceedings, but in no event shall a party be liable to
pay for such costs in excess of $25,000. 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.
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                                       7                       February 17, 1998







19.      For purposes of this agreement, "Good Reason" means that, without your
consent, (i) your rate of annual base salary or the cash 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 a Senior Vice President of the Company, although
the Company may at any time change your job description or reporting
relationship without constituting "Good Reason;" (iii) there is a material
diminution of your primary job function, or the assignment to you of duties
which are materially inconsistent with your primary job function, or which
materially impair your ability to perform your primary job function with the
Company; (iv) the Company delivers to you a written notice of intended
termination of this agreement pursuant to Section 1 above at a time when the
Company would not have Cause to terminate your employment; or (v) there is a
material breach of this agreement by the Company which is not remedied in a
reasonable period of time after receipt of written notice from you specifying
such breach.

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, spin-off,
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.

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

24.      (a) No rights or obligations of the Company under this agreement may be
assigned or transferred
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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 of the Company 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, all of the obligations 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, distributes, 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 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.
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27.      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.

Very truly yours,




FRED HASSAN
Chief Executive Officer


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




--------------------------------------
PAUL L. MATSON






Dated: February ____, 1998