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                                                     Exhibit 10.20


                               KERAVISION, INC.

                             EMPLOYMENT AGREEMENT
                             --------------------

        This Employment Agreement (the "Agreement") is dated as of January 1,
                                        ---------
1997, by and between Thomas M. Loarie ("Employee") and KeraVision, Inc., a
                                        --------
Delaware corporation (the "Company").
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        1.     TERM OF AGREEMENT. This Agreement shall commence on the date
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hereof and shall have a term of three (3) years (the "Original Term"). This
                                                      -------------
Agreement shall be automatically renewable for one (1) year periods after the
expiration of the Original Term, unless otherwise terminated. This Agreement may
be terminated by either party, with or without cause, at the end of the then
current term with six (6) months advance written notice to the other party.

        2.     DUTIES.
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               (a) POSITION. Employee shall be employed as Chief Executive
Officer and Chairman of the Board of Directors of the Company. In such capacity
he shall report to and be subject to the direction and control of the Company's
Board of Directors.

               (b) OBLIGATIONS TO THE COMPANY. Employee agrees to the best of
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his ability and experience that he will at all times loyally and conscientiously
perform all of the duties and obligations required of and from Employee pursuant
to the express and implicit terms hereof, and to the reasonable satisfaction of
the Company. During the term of Employee's employment relationship with the
Company, Employee further agrees that he will devote all of his business time
and attention to the business of the Company, the Company will be entitled to
all of the benefits and profits arising from or incident to all such work
services and advice, Employee will not render commercial or professional
services of any nature to any person or organization, whether or not for
compensation, without the prior written consent of the Company's Board of
Directors, and Employee will not directly or indirectly engage or participate in
any business that is competitive in any manner with the business of the Company.
Nothing in this Agreement will prevent Employee from accepting speaking or
presentation engagements in exchange for honoraria or from serving on boards of
charitable organizations, or from owning no more than one percent (1%) of the
outstanding equity securities of a corporation whose stock is listed on a
national stock exchange. Employee will comply with and be bound by the Company's
operating policies, procedures and practices from time to time in effect during
the term of Employee's employment.


        3.     AT-WILL EMPLOYMENT. The Company and Employee acknowledge that
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Employee's employment is and shall continue to be at-will, as defined under
applicable law, and that Employee's employment with the Company may be
terminated by either party at any time for any or no reason. If Employee's
employment terminates for any reason, Employee shall not be entitled to any
payments, benefits, damages, award or compensation other than as provided in
this Agreement. The rights and duties created by this Section 3 may not be
modified in any way except by a written agreement executed by the Board of
Directors of the Company and Employee.
<PAGE>

        4.     COMPENSATION. For the duties and services to be performed by
               ------------
Employee hereunder, the Company shall pay Employee, and Employee agrees to
accept, the salary, stock options, bonuses and other benefits described below in
this Section 4.

                (a)  SALARY. Employee shall receive a monthly salary of $20,834
                     ------
which is equivalent to $250,000 on an annualized basis (the "Base Salary").
Employee's Base Salary will be payable in two equal payments per month pursuant
to the Company's normal payroll practices. The Base Salary shall be reviewed
annually by the Company's Board of Directors or its Compensation Committee, and
any increase will be effective as of the date determined appropriate by the
Board of Directors or its Compensation Committee.

                (b)  STOCK OPTIONS AND OTHER INCENTIVE PROGRAMS. In connection
                     ------------------------------------------
with the execution of this Agreement, the Board of Directors shall grant to
Employee an option to purchase 7,827 shares of the Company's Common Stock (the
"Shares") which number of shares is intended to maintain Employee's
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percentage ownership of the Company at the January 1, 1996 level. The option
shall be granted with an exercise price equal to the fair market value on the
date of the grant. The option shares will vest at the rate of 1/16 of the
original number of shares on each three month anniversary of the grant date.
Vesting will depend on Employee's continued employment with the Company. The
option will be an incentive stock option to the maximum extent allowed by the
Internal Revenue Code of 1986, as amended, and will be subject to the terms of
the Company's 1995 Stock Option Plan and the Stock Option Agreement between
Employee and the Company. Subject to the discretion of the Company's Board of
Directors, Employee shall be eligible to receive additional grants of stock
options from time to time in the future, on such terms and subject to such
conditions as the Board of Directors shall determine as of the date of any such
grant.

                (c)  BONUSES. Employee shall be eligible to receive an annual
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cash bonus of up to fifty percent (50%) of the Base Salary. Such bonus shall be
based on achievement of approved corporate and individual performance objectives
established by Employee and agreed to by the Board or its Compensation
Committee. Thereafter, Employee shall be eligible for such incentive
compensation or bonus as shall be determined by the Board of Directors or its
Compensation Committee.

                (d)  ADDITIONAL BENEFITS. Employee shall be eligible to
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participate in the Company's employee benefit plans of general application,
including without limitation, those plans covering medical, disability and life
insurance in accordance with the rules established for individual participation
in any such plan and under applicable law. Employee shall be eligible for
vacation and sick leave in accordance with the policies in effect during the
term of this Agreement and will receive such other benefits as the Company
generally provides to its other employees of comparable position and experience.
In addition, the Company shall provide the following benefits to Employee at the
Company's expense:

                (i)    an annual physical examination, with Employee's agreement
that the doctor performing such examination shall provide a copy of the
examination report to the Compensation Committee of the Board of Directors;
<PAGE>

                (ii)   a split-dollar life insurance policy with a face value of
$1,000,000;

                (iii)  a disability insurance benefit that provides a salary
continuation benefit to Employee of $3,460 per month, which benefit shall be in
addition to the standard disability benefit of up to $6,000 per month in salary
continuation already provided by the Company;

                (iv)   a business-related perquisites allowance of $15,000 per
year which is intended to cover expenses such as financial consultation and
advice, income tax preparation and a car allowance; and

                (v)  the reimbursement of attorneys' fees and expenses incurred
by Employee in connection with the negotiation and execution of this Agreement,
up to a maximum of $5,000.

                (e)  REIMBURSEMENT OF EXPENSES. Employee shall be authorized to
                     -------------------------
incur on behalf and for the benefit of, and shall be reimbursed by, the Company
for reasonable expenses, provided that such expenses are substantiated in
accordance with Company policies.

        5.     TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS.
               ------------------------------------------------

                (a)  TERMINATION OF EMPLOYMENT. This Agreement may be terminated
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during its Original Term (or any extension thereof) upon the occurrence of any
of the following events:

                     (i)   The Company's determination in good faith that it is
terminating Employee for Cause (as defined in Section 6 below) ("Termination for
                                                                 ---------------
Cause");
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                     (ii)  The Company's determination that it is terminating
Employee without Cause, which determination may be made by the Company at any
time at the Company's sole discretion, for any or no reason ("Termination
                                                              -----------
Without Cause"); or
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                     (iii) The effective date of a written notice sent to the
Company from Employee stating that Employee is electing to terminate his
employment with the Company ("Voluntary Termination").
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                (b)  SEVERANCE BENEFITS. Employee shall be entitled to receive
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severance benefits upon termination of employment only as set forth in this
Section 5(b):

                     (i)   VOLUNTARY TERMINATION. If Employee's employment
                           ---------------------
terminates by Voluntary Termination, then Employee shall not be entitled to
receive payment of any severance benefits. Employee will receive payment(s) for
all salary and unpaid vacation accrued as of the date of Employee's termination
of employment and Employee's benefits will be continued under the Company's then
existing benefit plans and policies in accordance with such plans and policies
in effect on the date of termination and in accordance with applicable law.

                     (ii)  INVOLUNTARY TERMINATION. If Employee's employment is
                           -----------------------
terminated as a result of an Involuntary Termination other than for Cause (as
defined below) and other than by reason of Employee's Voluntary Termination,
Employee will be entitled to receive payment of severance benefits equal to
Employee's regular monthly salary for the lesser of (i)
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eighteen (18) months or (ii) until Employee commences employment with another
Company at a comparable base salary, (the "Severance Period"). Such payments
                                           -----------------
shall be made ratably over the Severance Period according to the Company's
standard payroll schedule. Employee will also be entitled to receive payment on
the date of termination of any bonus that has accrued as of such date of the
year of termination. Health insurance benefits with the same coverage provided
to Employee prior to the termination (e.g. medical, dental, optical, mental
health) and in all other respects significantly comparable to those in place
immediately prior to the termination will be provided at the Company's cost over
the Severance Period pursuant to the coverage continuation provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). Employee shall
be responsible for the timely and effect election of his COBRA continuation
benefits. In addition, Employee will be entitled to receive at the Company's
expense, out placement services with a total value not to exceed $20,000.

                     (iii) TERMINATION FOR CAUSE. If Employee's employment is
                           ---------------------
terminated for Cause, then Employee shall not be entitled to receive payment of
any severance benefits. Employee will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Employee's termination of employment
and Employee's benefits will be continued under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination and in accordance with applicable law.

        6.   DEFINITION OF INVOLUNTARY TERMINATION.  For purposes of this
             -------------------------------------
Agreement, "Involuntary Termination" shall include any termination by the
Company other than for Cause and Employee's voluntary termination, upon thirty
(30) days prior written notice to the Company, following:  (i) the assignment of
any duties, or the removal from on reduction or limitation of duties or
responsibilities which in any case is a significant change in position, title,
organization level, duties, responsibilities, compensation and status with the
Company; (ii) a substantial reduction of the facilities and perquisites provided
to Employee (including office space and location); (iii) a reduction in
Employee's Base Salary (other than in connection with a general decrease in base
salaries for officers of the Company); (iv) a material reduction in the kind or
level of employee benefits with the result that the overall benefits package is
significantly reduced; or (v) the failure of the Company to obtain the
assumption of this Agreement by any successors.

        7.     DEFINITION OF CAUSE.  For purposes of this Agreement, "Cause" for
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Employee's termination will exist at any time after the happening of one or more
of the following events, in each case as determined in good faith by the
Company's Board of Directors:

                (a)  Employee's gross negligence or willful misconduct in
performance of his duties hereunder where such gross negligence or unique
misconduct has resulted or is likely to result in substantial and material
damage to the Company or any of its subsidiaries;

                (b)  Employee's repeated or unjustified absence from the
Company;

                (c)  Employee's material and willful violation of any federal or
state law;
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                (d)  The commission of any act of fraud by Employee with respect
to the Company;

                (e)  Employee's conviction of a felony or a crime involving
moral turpitude causing material harm to the standing and reputation of the
Company; or


                (f)  Employee's incurable material breach of any element of the
Company's Confidential Information and Invention Assignment Agreement, including
without limitation, Employee's theft or other misappropriation of the Company's
proprietary information.

        8.     CONFIDENTIALITY AGREEMENT.  Employee has signed a Confidential
               -------------------------
Information and Invention Assignment Agreement (the "Confidentiality Agreement")
                                                     -------------------------
in the form attached hereto as Exhibit A.  Employee hereby represents and
                               ---------
warrants to the Company that he has complied with all obligations under the
Confidentiality Agreement and agrees to continue to abide by the terms of the
Confidentiality Agreement and further agrees that the provisions of the
Confidentiality Agreement shall survive any termination of this Agreement or of
Employee's employment relationship with the Company.

        9.     NONCOMPETITION COVENANT. Employee hereby agrees that he shall
               -----------------------
not, during the term of his employment pursuant to this Agreement and the
Severance Period, if applicable, without the prior written consent of the
Company's Board of Directors, carry on any business or activity (whether
directly or indirectly, as a partner, shareholder, principal, agent, director,
affiliate, employee or consultant) which is competitive with the business
conducted by the Company (as conducted now or during the term of Employee's
employment), nor engage in any other activities that conflict with Employee's
obligations to the Company.

        10.    NONSOLICITATION COVENANT. Employee hereby agrees that he shall
               ------------------------
not, during the term of his employment pursuant to this Agreement and for twelve
(12) months after the end of the Severance Period, if applicable, do any of the
following without the prior written consent of the Company's Board of Directors:

                (a)  SOLICIT BUSINESS. Solicit or influence or attempt to
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influence any client, customer or other person either directly or indirectly, to
direct his or its purchase of the Company's products and/or services to any
person, firm, corporation, institution or other entity in competition with the
business of the Company; and

                (b)  SOLICIT PERSONNEL. Solicit or influence or attempt to
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influence any person employed by the Company to terminate or otherwise cease his
employment with the Company or become an employee of any competitor of the
Company. This Section 10(b) is to be read in conjunction with Section [ __ ] of
the Confidential Information and Invention Assignment Agreement executed by
Employee.

        11.    CONFLICTS. Employee represents that his performance of all the
               ---------
terms of this Agreement will not breach any other agreement to which Employee is
a party. Employee has not, and will not during the term of this Agreement, enter
into any oral or written agreement in conflict with any of the provisions of
this Agreement. Employee further represents that he is
<PAGE>

entering into or has entered into an employment relationship with the Company of
his own free will.

        12.    SUCCESSORS. Any successor to the Company (whether direct or
               ----------
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
<PAGE>

        13.     MISCELLANEOUS PROVISIONS.

                (a)  NO DUTY TO MITIGATE. Employee shall not be required to
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mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor, except as otherwise
provided in this Agreement, shall any such payment be reduced by any earnings
that Employee may receive from any other source.

                (b)  AMENDMENTS AND WAIVERS. Any term of this Agreement may be
                     ----------------------
amended or waived only with the written consent of the parties.

                (c)  SOLE AGREEMENT. This Agreement, including any Exhibits
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hereto, constitutes the sole agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof.

                (d)  NOTICES. Any notice required or permitted by this Agreement
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shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or forty-eight (48) hours after being deposited in the U.S.
mail as certified or registered mail with postage prepaid, if such notice is
addressed to the party to be notified at such party's address as set forth below
or as subsequently modified by written notice.

                (e)  CHOICE OF LAW. The validity, interpretation, construction
                     -------------
and performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.

                (f)  SEVERABILITY. If one or more provisions of this Agreement
                     ------------
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(i) such provision shall be excluded from this Agreement, (ii) the balance of
the Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.


                (g)  COUNTERPARTS. This Agreement may be executed in
                     ------------
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.

                (h)  ARBITRATION. Any dispute or claim arising out of or in
                     -----------
connection with this Agreement shall be finally settled by binding arbitration
in San Jose, California in accordance with the rules of the American Arbitration
Association by one arbitrator appointed in accordance with said rules. The
arbitrator shall apply California law, without reference to rules of conflicts
of law or rules of statutory arbitration, to the resolution of any dispute.
Judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Notwithstanding the foregoing, the parties may
apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this paragraph,
without breach of this arbitration provision. This Section 13(h) shall not apply
to the Confidentiality Agreement.

                (i)  ADVICE OF COUNSEL. EACH PARTY TO THIS AGREEMENT
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ACKNOWLEDGES THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE
OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND
UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT
SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR
PREPARATION HEREOF.

                           [Signature Page Follows]
<PAGE>

The parties have executed this Agreement the date first written above.

                                        KERAVISION, INC.


                                        By:   /s/ John Gilbert
                                              ----------------


                                        Title:   Vice Chairman

                                         Address:  48630 Milmont Drive
                                                   Fremont, CA  94538



                                        THOMAS M. LOARIE


                                        Signature:  /s/ Thomas M. Loarie
                                                    --------------------

                                        Address:   2485 Holly Oak Drive
                                                   Danville, CA  94506


<PAGE>

                                   EXHIBIT A
                                   ---------

                         CONFIDENTIAL INFORMATION AND
                        INVENTION ASSIGNMENT AGREEMENT