<PAGE>   1
                                                                 EXHIBIT (10)(i)
December 16, 1997


Mr Timothy G. Rothwell
207 Sandy Ridge, Mt Airy Road
Stockton, NJ 08559
United States of America


Dear Tim:

This letter confirms the terms of our offer for your employment as Executive
Vice President of Pharmacia & Upjohn, Inc. (the "Company") and President,
Pharmaceutical Operations. 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 on January ___, 1998 (your "Employment Commencement
Date") as an employee of the Company, and the Company's Board of Directors will
elect you as Executive Vice President of the Company and President,
Pharmaceutical Operations, at its December meeting, subject to your acceptance
of this Agreement.

The term of this agreement will be from your Employment Commencement Date until
December 31, 2000, 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 $720,000 and will be subject to
annual review for increases.

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 75% of your annual base salary or
$540,000. 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. In addition, you will receive
18,500 shares of restricted Common Stock of the Company to compensate you for
the loss of your long-term incentive shares

<PAGE>   2


                                       2                       December 16, 1997

from your previous  employer.  The restricted  shares will vest over the same
period as the 1997 award at your previous employer. You will also receive on
March 1, 1998 a special cash payment of $325,000 to compensate you for any loss
of bonus from your previous employer.

4. 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 120,000 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 1998, 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 currently is approximately 100,000 shares, but in an
amount not less than 100,000 shares of the Company's Common Stock.

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

5. You will be eligible to receive employee benefits and perquisites in line
with the general plan 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.


<PAGE>   3


                                       3                       December 16, 1997


6. In the event your employment is involuntarily terminated by the Company other
than for Cause (as defined below) 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 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.

7. 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.


<PAGE>   4


                                       4                       December 16, 1997

8. 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. You will begin your employment at the Company's
Management Centre in Windsor, England and the temporary living expenses incurred
by you (and your family if they accompany you) will be reimbursed by the Company
net of any resulting income tax. 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 to
the Company's new headquarters in New Jersey.

9. 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.

10. 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.

11. 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.


<PAGE>   5


                                       5                       December 16, 1997

12. 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.

13. 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 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.

14. 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.

15. 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.

16. 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.


<PAGE>   6


                                       6                       December 16, 1997

17. 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.

18. 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 an Executive Vice President of the Company,
although the Company may at any time change your job description 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.

19. 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.

20. 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.

21. 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.

<PAGE>   7


                                       7                       December 16, 1997

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

23. (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 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.

24. 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.

25. 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.


<PAGE>   8


                                       8                       December 16, 1997

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.

Very truly yours,





FRED HASSAN
Chief Executive Officer



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




--------------------------------------
TIMOTHY G. ROTHWELL


Dated: December  ______, 1997