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                                                                  Exhibit 10.26

proteon                                             Proteon Inc.
-------                                             Nine Technology Drive
                                                    Wesborough, MA 01581-1799
                                                    508 / 898-2800

January 4, 1996


Mr. Robert J. Connaughton, Jr.
102 Den Quarry Road
Lynn, MA 01904

Dear Bob:

It is my pleasure to offer you the position of General Counsel reporting to me.

The terms of our agreement will be as follows:

-    BASE SALARY: Your initial base salary for this position will be $4,230.77
     bi-weekly ($110,000 annualized) which will be reviewed annually on the
     anniversary date of hire. After completion of your first six (6) months of
     employment you will receive a prorated performance evaluation. As well,
     your title and level of responsibility will be re-evaluated within the
     first twelve (12) months of employment.

-    BONUS: You will be eligible for Proteon's Management Incentive Program
     annual bonus of 25% of base salary. Payment of this bonus is based upon
     Proteon's Executive Compensation Plan and goals mutually agreed to.

-    STOCK: A recommendation will be made to the Compensation Committee that you
     receive an option to purchase 15,000 shares of stock which vest over a
     4 year period.

-    SEVERANCE BENEFIT: A severance benefit of six (6) months salary then
     current (base) continuation benefit for you should your position be
     involuntarily or constructively eliminated for any reason other than cause
     within the first 24 months of employment will be granted. As well, a
     severance benefit of eight (8) months salary then current (base)
     continuation benefit for you should your position be involuntarily or
     constructively eliminated for any reason other than cause commencing after
     24 months of employment, as defined in Proteon's Policies and Procedures
     Manual, will be granted. Should you become employed at any time during
     payment of the severance period, such severance payments shall terminate
     except to the extent that base salary in your new employment is less than
     the installment portion amount. In such event Proteon shall only be
     obligated to pay the amount equal to the difference for the balance of the
     severance period.

-    PROTEON GROUP HEALTH PLAN: You will be eligible to participate in Proteon's
     comprehensive benefits package (see enclosed benefits summary).




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Page -2-
Offer letter - R. Connaughton, Jr.
January 4, 1996

This offer is contingent upon providing proper identification and employment
eligibility documents according to Immigration and Naturalization Service
Regulation. Please complete Section I of the enclosed Employment Verification
Form (I-9) and present it with original documents as outlined in Section II, on
your first day of employment.

Bob, I look forward to your decision to accept our offer and join Proteon as
General Counsel. Please indicate your acceptance of this offer by signing below
and returning it by January 8, 1996. Also enclosed are two copies of Proteon's
Proprietary Information Agreement. Proteon requires all individuals joining the
company to sign this standard agreement. Please return one copy of the signed
agreement along with the signed offer letter.

If you have any questions regarding this offer or Proteon in general, please
give me a call.

Sincerely,


/s/ Michele Scholl for Joe DiGiantommaso

Joseph A. DiGiantommaso
Vice President and C.F.O.


Accepted by:  /s/ Robert J. Connaughton, Jr.       Start date:  1/29/96
             -------------------------------------           -------------------
               Robert J. Connaughton, Jr.



proteon
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