Exhibit 10.57

ARTHROCARE CORPORATION

AMENDED AND RESTATED 2003 INCENTIVE STOCK PLAN

ARTICLE 1

PURPOSE

1.1 General. The purpose of the Amended and Restated ArthroCare Corporation 2003
Incentive Stock Plan (the “Plan”) is to promote the success and enhance the
value of ArthroCare Corporation (the “Company”) by linking the personal
interests of the members of the Board, employees, consultants, officers, and
executives of the Company and any Subsidiary, to those of Company stockholders
and by providing such individuals with an incentive for outstanding performance
to generate superior returns to Company stockholders. The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of members of the Board, employees,
consultants, officers, and executives of the Company upon whose judgment,
interest, and special effort the successful conduct of the Company’s operation
is largely dependent.

ARTICLE 2

DEFINITIONS AND CONSTRUCTION

2.1 Definitions. The following words and phrases shall have the following
meanings:

(a) “Award” means an Option, a Restricted Stock award, a Stock Appreciation
Right award, a Performance Share award, a Dividend Equivalents award, a Stock
Payment award, a Restricted Stock Unit award, or a Performance-Based Award
granted to a Participant pursuant to the Plan.

(b) “Award Agreement” means any written agreement, contract, or other instrument
or document evidencing an Award.

(c) “Board” means the Board of Directors of the Company.

(d) “Change of Control” means and includes each of the following:

(1) the acquisition, directly or indirectly, by any “person” or “group” (as
those terms are defined in Sections 3(a)(9), 13(d) and 14(d) of the Exchange Act
and the rules thereunder) of “beneficial ownership” (as determined pursuant to
Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in
the election of directors (“voting securities”) of the Company that represent
50% or more of the combined voting power of the Company’s then outstanding
voting securities, other than:

(A) an acquisition by a trustee or other fiduciary holding securities under any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any person controlled by the Company or by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any person controlled
by the Company, or

(B) an acquisition of voting securities by the Company or a corporation owned,
directly or indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of the stock of the Company;

 

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Notwithstanding the foregoing, the following event shall not constitute an
“acquisition” by any person or group for purposes of this subsection (e): an
acquisition of the Company’s securities by the Company that causes the Company’s
voting securities beneficially owned by a person or group to represent 50% or
more of the combined voting power of the Company’s then outstanding voting
securities; provided, however, that if a person or group shall become the
beneficial owner of 50% or more of the combined voting power of the Company’s
then outstanding voting securities by reason of share acquisitions by the
Company as described above and shall, after such share acquisitions by the
Company, become the beneficial owner of any additional voting securities of the
Company, then such acquisition shall constitute a Change of Control; or

(2) during any period of two consecutive years, individuals who, at the
beginning of such period, constitute the Board together with any new director(s)
(other than a director designated by a person who shall have entered into an
agreement with the Company to effect a transaction described in clauses (1) or
(3) of this subsection (e)) whose election by the Board or nomination for
election by the Company’s stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the two year period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; or

(3) the consummation by the Company (whether directly involving the Company or
indirectly involving the Company through one or more intermediaries) of (x) a
merger, consolidation, reorganization, or business combination or (y) a sale or
other disposition of all or substantially all of the Company’s assets or (z) the
acquisition of assets or stock of another entity, in each case other than a
transaction:

(A) which results in the Company’s voting securities outstanding immediately
before the transaction continuing to represent (either by remaining outstanding
or by being converted into voting securities of the Company or the person that,
as a result of the transaction, controls, directly or indirectly, the Company or
owns, directly or indirectly, all or substantially all of the Company’s assets
or otherwise succeeds to the business of the Company (the Company or such
person, the “Successor Entity”)) directly or indirectly, at least a majority of
the combined voting power of the Successor Entity’s outstanding voting
securities immediately after the transaction, and

(B) after which no person or group beneficially owns voting securities
representing 50% or more of the combined voting power of the Successor Entity;
provided, however, that no person or group shall be treated for purposes of this
clause (B) as beneficially owning 50% or more of combined voting power of the
Successor Entity solely as a result of the voting power held in the Company
prior to the consummation of the transaction; or

(4) the Company’s stockholders approve a liquidation or dissolution of the
Company.

The Committee shall have full and final authority, which shall be exercised in
its

 

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discretion, to determine conclusively whether a Change of Control of the Company
has occurred pursuant to the above definition, and the date of the occurrence of
such Change of Control and any incidental matters relating thereto.

(e) “Code” means the Internal Revenue Code of 1986, as amended.

(f) “Committee” means the committee of the Board described in Article 12.

(g) “Covered Employee” means an Employee who is, or could be, a “covered
employee” within the meaning of Section 162(m) of the Code.

(h) “Disability” means total and permanent disability as defined in
Section 22(e)(3) of the Code.

(i) “Dividend Equivalents” means a right granted to a Participant pursuant to
Article 8 to receive the equivalent value (in cash or Stock) of dividends paid
on Stock.

(j) “Employee” means any officer or other employee (as defined in accordance
with Section 3401(c) of the Code) of the Company or any Subsidiary.

(k) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(l) “Fair Market Value” shall mean, as of any date, the value of Stock
determined as follows:

(1) If the Stock is listed on any established stock exchange or a national
market system, including without limitation the Nasdaq National Market or The
Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall
be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the date of determination, as reported in The Wall Street Journal or
such other source as the Committee deems reliable;

(2) If the Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, its Fair Market Value shall be the mean of the
closing bid and asked prices for the Stock on the date prior to the date of
determination as reported in The Wall Street Journal or such other source as the
Committee deems reliable; or

(3) In the absence of an established market for the Stock, the Fair Market Value
thereof shall be determined in good faith by the Committee.

(m) “Good Reason” means a Participant’s voluntary resignation following any one
or more of the following that is effected without the Participant’s written
consent: (i) a change in his or her position following the Change of Control
that materially reduces his or her duties or responsibilities, (ii) a reduction
in his or her base salary following a Change of Control, unless the base
salaries of all similarly situated individuals are similarly reduced, or (iii) a
relocation of such Participant’s place of employment of more than fifty
(50) miles following a Change of Control. However, if the term or concept of
“Good Reason” has been defined in an agreement between a Participant and the
Company or any successor or parent or Subsidiary thereof, then “Good Reason”
shall have the definition set forth in such agreement.

 

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(n) “Incentive Stock Option” means an Option that is intended to meet the
requirements of Section 422 of the Code or any successor provision thereto.

(o) “Non-Employee Director” means a member of the Board who qualifies as a
“Non-Employee Director” as defined in Rule 16b-3(b)(3) of the Exchange Act, or
any successor definition adopted by the Board.

(p) “Non-Qualified Stock Option” means an Option that is not intended to be an
Incentive Stock Option.

(q) “Option” means a right granted to a Participant pursuant to Article 5 of the
Plan to purchase a specified number of shares of Stock at a specified price
during specified time periods. An Option may be either an Incentive Stock Option
or a Non-Qualified Stock Option.

(r) “Participant” means a person who, as a member of the Board, consultant to
the Company or any Subsidiary or Employee, has been granted an Award pursuant to
the Plan.

(s) “Performance-Based Award” means an Award granted to selected Covered
Employees pursuant to Articles 6 and 8, but which is subject to the terms and
conditions set forth in Article 9. All Performance-Based Awards are intended to
qualify as Qualified Performance-Based Compensation.

(t) “Performance Criteria” means the criteria that the Committee selects for
purposes of establishing the Performance Goal or Performance Goals for a
Participant for a Performance Period. The Performance Criteria that will be used
to establish Performance Goals are limited to the following: net earnings
(either before or after interest, taxes, depreciation and amortization), net
losses, sales or revenue, operating earnings, operating cash flow, return on net
assets, return on stockholders’ equity, return on assets, return on capital,
stockholder returns, gross or net profit margin, earnings per share, price per
share of Stock, and market share, any of which may be measured either in
absolute terms or as compared to any incremental increase or as compared to
results of a peer group. The Committee shall, within the time prescribed by
Section 162(m) of the Code, define in an objective fashion the manner of
calculating the Performance Criteria it selects to use for such Performance
Period for such Participant.

(u) “Performance Goals” means, for a Performance Period, the goals established
in writing by the Committee for the Performance Period based upon the
Performance Criteria. Depending on the Performance Criteria used to establish
such Performance Goals, the Performance Goals may be expressed in terms of
overall Company performance or the performance of a division, business unit, or
an individual. The Committee, in its discretion, may, within the time prescribed
by Section 162(m) of the Code, adjust or modify the calculation of Performance
Goals for such Performance Period in order to prevent the dilution or
enlargement of the rights of Participants (i) in the event of, or in
anticipation of, any unusual or extraordinary corporate item, transaction,
event, or development, or (ii) in recognition of, or in anticipation of, any
other unusual or nonrecurring events affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation of, changes in
applicable laws, regulations, accounting principles, or business conditions.

 

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(v) “Performance Period” means the one or more periods of time, which may be of
varying and overlapping durations, as the Committee may select, over which the
attainment of one or more Performance Goals will be measured for the purpose of
determining a Participant’s right to, and the payment of, a Performance-Based
Award.

(w) “Performance Share” means a right granted to a Participant pursuant to
Article 8, to receive cash, Stock, or other Awards, the payment of which is
contingent upon achieving certain performance goals established by the
Committee.

(x) “Plan” means this ArthroCare Corporation Amended and Restated 2003 Incentive
Stock Plan, as it may be amended from time to time.

(y) “Public Trading Date” means the first date upon which Stock is listed (or
approved for listing) upon notice of issuance on any securities exchange or
designated (or approved for designation) upon notice of issuance as a national
market security on an interdealer quotation system.

(z) “Qualified Performance-Based Compensation” means any compensation that is
intended to qualify as “qualified performance-based compensation” as described
in Section 162(m)(4)(C) of the Code.

(aa) “Restricted Stock” means Stock awarded to a Participant pursuant to Article
6 that is subject to certain restrictions and to risk of forfeiture.

(bb) “Restricted Stock Unit” means a right to receive a specified number of
shares of Stock during specified time periods pursuant to Article 8.

(cc) “Stock” means the common stock of the Company and such other securities of
the Company that may be substituted for Stock pursuant to Article 11.

(dd) “Stock Appreciation Right” or “SAR” means a right granted pursuant to
Article 7 to receive a payment equal to the excess of the Fair Market Value of a
specified number of shares of Stock on the date the SAR is exercised over the
Fair Market Value on the date the SAR was granted as set forth in the applicable
Award Agreement.

(ee) “Stock Payment” means (a) a payment in the form of shares of Stock, or
(b) an option or other right to purchase shares of Stock, as part of any bonus,
deferred compensation or other arrangement, made in lieu of all or any portion
of the compensation, granted pursuant to Article 8.

(ff) “Subsidiary” means any corporation or other entity of which a majority of
the outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company.

 

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ARTICLE 3

SHARES SUBJECT TO THE PLAN

3.1 Number of Shares.

(a) Subject to Article 11, the aggregate number of shares of Stock which may be
issued or transferred pursuant to Awards under the Plan shall be 2,500,000
shares. The payment of Dividend Equivalents in conjunction with any outstanding
Awards shall not be counted against the shares available for issuance under the
Plan.

(b) To the extent that an Award terminates, expires, or lapses for any reason,
any shares of Stock subject to the Award shall again be available for the grant
of an Award pursuant to the Plan. Additionally, any shares of Stock tendered or
withheld to satisfy the grant or exercise price or tax withholding obligation
pursuant to any Award shall again be available for the grant of an Award
pursuant to the Plan. To the extent permitted by applicable law or any exchange
rule, shares of Stock issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of combination by the
Company or any Subsidiary shall not be counted against shares of Stock available
for grant pursuant to this Plan.

(c) Notwithstanding the provisions of this Section 3.1 no shares of Stock may
again be optioned, granted or awarded if such action would cause an Incentive
Stock Option to fail to qualify as an Incentive Stock Option under Code
Section 422.

3.2 Stock Distributed. Any Stock distributed pursuant to an Award may consist,
in whole or in part, of authorized and unissued Stock, treasury Stock or Stock
purchased on the open market.

3.3 Limitation on Number of Shares Subject to Awards. Notwithstanding any
provision in the Plan to the contrary, and subject to Article 11, the maximum
number of shares of Stock with respect to one or more Awards that may be granted
to any one Participant during a calendar year shall be 650,000.

ARTICLE 4

ELIGIBILITY AND PARTICIPATION

4.1 Eligibility.

(a) General. Persons eligible to participate in this Plan include Employees,
consultants to the Company or any Subsidiary and all members of the Board, as
determined by the Committee.

(b) Foreign Participants. In order to assure the viability of Awards granted to
Participants employed in foreign countries, the Committee may provide for such
special terms as it may consider necessary or appropriate to accommodate
differences in local law, tax policy, or custom. Moreover, the Committee may
approve such supplements to, or amendments, restatements, or alternative
versions of, the Plan as it may consider necessary or appropriate for such
purposes without thereby affecting the terms of the Plan as in effect for any
other purpose; provided, however, that no such supplements, amendments,
restatements, or alternative versions shall increase the share limitations
contained in Sections 3.1 and 3.3 of the Plan.

 

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4.2 Actual Participation. Subject to the provisions of the Plan, the Committee
may, from time to time, select from among all eligible individuals, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award. No individual shall have any right to be granted an Award pursuant to
this Plan.

ARTICLE 5

STOCK OPTIONS

5.1 General. The Committee is authorized to grant Options to Participants on the
following terms and conditions:

(a) Exercise Price. The exercise price per share of Stock subject to an Option
shall be determined by the Committee and set forth in the Award Agreement;
provided that the exercise price for any Option shall not be less than par value
of a share of Stock on the date of grant.

(b) Time And Conditions Of Exercise. The Committee shall determine the time or
times at which an Option may be exercised in whole or in part, provided that the
term of any Option granted under the Plan shall not exceed ten years, and
provided further, that in the case of a Non-Qualified Stock Option, such Option
shall be exercisable for one year after the date of the Participant’s death. The
Committee shall also determine the performance or other conditions, if any, that
must be satisfied before all or part of an Option may be exercised.

(c) Payment. The Committee shall determine the methods by which the exercise
price of an Option may be paid, the form of payment, including, without
limitation, cash, promissory note bearing interest at no less than such rate as
shall then preclude the imputation of interest under the Code, shares of Stock
held for longer than six months having a Fair Market Value on the date of
delivery equal to the aggregate exercise price of the Option or exercised
portion thereof, or other property acceptable to the Committee (including
through the delivery of a notice that the Participant has placed a market sell
order with a broker with respect to shares of Stock then issuable upon exercise
of the Option, and that the broker has been directed to pay a sufficient portion
of the net proceeds of the sale to the Company in satisfaction of the Option
exercise price, provided that payment of such proceeds is then made to the
Company upon settlement of such sale), and the methods by which shares of Stock
shall be delivered or deemed to be delivered to Participants. Notwithstanding
any other provision of the Plan to the contrary, no Participant who is a member
of the Board or an “executive officer” of the Company within the meaning of
Section 13(k) of the Exchange Act shall be permitted to pay the exercise price
of an Option in any method which would violate Section 13(k).

(d) Evidence Of Grant. All Options shall be evidenced by a written Award
Agreement between the Company and the Participant. The Award Agreement shall
include such additional provisions as may be specified by the Committee.

5.2 Incentive Stock Options. Incentive Stock Options shall be granted only to
Employees and the terms of any Incentive Stock Options granted pursuant to the
Plan must comply with the following additional provisions of this Section 5.2:

 

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(a) Exercise Price. The exercise price per share of Stock shall be set by the
Committee, provided that the exercise price for any Incentive Stock Option shall
not be less than 100% of the Fair Market Value on the date of grant.

(b) Expiration Of Option. An Incentive Stock Option may not be exercised to any
extent by anyone after the first to occur of the following events:

(1) Ten years from the date it is granted, unless an earlier time is set in the
Award Agreement.

(2) One year after the date of the Participant’s termination of employment or
service on account of Disability or death, unless in the case of death a shorter
or longer period is designated in the Award Agreement. Upon the Participant’s
Disability or death, any Incentive Stock Options exercisable at the
Participant’s Disability or death may be exercised by the Participant’s legal
representative or representatives, by the person or persons entitled to do so
pursuant to the Participant’s last will and testament, or, if the Participant
fails to make testamentary disposition of such Incentive Stock Option or dies
intestate, by the person or persons entitled to receive the Incentive Stock
Option pursuant to the applicable laws of descent and distribution.

(c) Individual Dollar Limitation. The aggregate Fair Market Value (determined as
of the time the Option is granted) of all shares of Stock with respect to which
Incentive Stock Options are first exercisable by a Participant in any calendar
year may not exceed $100,000.00 or such other limitation as imposed by
Section 422(d) of the Code, or any successor provision. To the extent that
Incentive Stock Options are first exercisable by a Participant in excess of such
limitation, the excess shall be considered Non-Qualified Stock Options.

(d) Ten Percent Owners. An Incentive Stock Option shall be granted to any
individual who, at the date of grant, owns stock possessing more than ten
percent of the total combined voting power of all classes of Stock of the
Company only if such Option is granted at a price that is not less than 110% of
Fair Market Value on the date of grant and the Option is exercisable for no more
than five years from the date of grant.

(e) Transfer Restriction. The Participant shall give the Company prompt notice
of any disposition of shares of Stock acquired by exercise of an Incentive Stock
Option within (1) two years from the date of grant of such Incentive Stock
Option or (2) one year after the transfer of such shares of Stock to the
Participant.

(f) Expiration Of Incentive Stock Options. No Award of an Incentive Stock Option
may be made pursuant to this Plan after the Expiration Date (as defined in
Section 13.2).

(g) Right To Exercise. During a Participant’s lifetime, an Incentive Stock
Option may be exercised only by the Participant.

 

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ARTICLE 6

RESTRICTED STOCK AWARDS

6.1 Grant of Restricted Stock. The Committee is authorized to make Awards of
Restricted Stock to any Participant selected by the Committee in such amounts
and subject to such terms and conditions as determined by the Committee. All
Awards of Restricted Stock shall be evidenced by a written Restricted Stock
Award Agreement.

6.2 Issuance and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times,
pursuant to such circumstances, in such installments, or otherwise, as the
Committee determines at the time of the grant of the Award or thereafter.

6.3 Forfeiture. Except as otherwise determined by the Committee at the time of
the grant of the Award or thereafter, upon termination of employment or service
during the applicable restriction period, Restricted Stock that is at that time
subject to restrictions shall be forfeited; provided, however, that the
Committee may provide in any Restricted Stock Award Agreement that restrictions
or forfeiture conditions relating to Restricted Stock will be waived in whole or
in part in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part restrictions or
forfeiture conditions relating to Restricted Stock.

6.4 Certificates For Restricted Stock. Restricted Stock granted pursuant to the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company may, at its discretion, retain physical possession of the
certificate until such time as all applicable restrictions lapse.

ARTICLE 7

STOCK APPRECIATION RIGHTS

7.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be
granted to any Participant selected by the Committee. A Stock Appreciation Right
may be granted (a) in connection and simultaneously with the grant of an Option,
(b) with respect to a previously granted Option, or (c) independent of an
Option. A Stock Appreciation Right shall be subject to such terms and conditions
not inconsistent with the Plan as the Committee shall impose and shall be
evidenced by an Award Agreement.

7.2 Coupled Stock Appreciation Rights.

(a) A Coupled Stock Appreciation Right (“CSAR”) shall be related to a particular
Option and shall be exercisable only when and to the extent the related Option
is exercisable.

 

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(b) A CSAR may be granted to a Participant for no more than the number of shares
subject to the simultaneously or previously granted Option to which it is
coupled.

(c) A CSAR shall entitle the Participant (or other person entitled to exercise
the Option pursuant to the Plan) to surrender to the Company unexercised a
portion of the Option to which the CSAR relates (to the extent then exercisable
pursuant to its terms) and to receive from the Company in exchange therefor an
amount determined by multiplying the difference obtained by subtracting the
Option exercise price from the Fair Market Value of a share of Stock on the date
of exercise of the CSAR by the number of shares of Stock with respect to which
the CSAR shall have been exercised, subject to any limitations the Committee may
impose.

7.3 Independent Stock Appreciation Rights.

(a) An Independent Stock Appreciation Right (“ISAR”) shall be unrelated to any
Option and shall have a term set by the Committee. An ISAR shall be exercisable
in such installments as the Committee may determine. An ISAR shall cover such
number of shares of Stock as the Committee may determine. The exercise price per
share of Stock subject to each ISAR shall be set by the Committee; provided,
however, that, the Committee in its sole and absolute discretion may provide
that the ISAR may be exercised subsequent to a termination of employment or
service, as applicable, or following a Change of Control of the Company, or
because of the Participant’s retirement, death or disability, or otherwise.

(b) An ISAR shall entitle the Participant (or other person entitled to exercise
the ISAR pursuant to the Plan) to exercise all or a specified portion of the
ISAR (to the extent then exercisable pursuant to its terms) and to receive from
the Company an amount determined by multiplying the difference obtained by
subtracting the exercise price per share of the ISAR from the Fair Market Value
of a share of Stock on the date of exercise of the ISAR by the number of shares
of Stock with respect to which the ISAR shall have been exercised, subject to
any limitations the Committee may impose.

7.4 Payment and Limitations on Exercise.

(a) Payment of the amounts determined under Section 7.2(c) and 7.3(b) above
shall be in cash, in Stock (based on its Fair Market Value as of the date the
Stock Appreciation Right is exercised) or a combination of both, as determined
by the Committee.

(b) To the extent any payment under Section 7.2(c) or 7.3(b) is effected in
Stock it shall be made subject to satisfaction of all provisions of Article 5
above pertaining to Options.

 

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ARTICLE 8

OTHER TYPES OF AWARDS

8.1 Performance Share Awards. Any Participant selected by the Committee may be
granted one or more Performance Share awards which may be denominated in a
number of shares of Stock or in a dollar value of shares of Stock and which may
be linked to any one or more of the Performance Criteria or other specific
performance criteria determined appropriate by the Committee, in each case on a
specified date or dates or over any period or periods determined by the
Committee. In making such determinations, the Committee shall consider (among
such other factors as it deems relevant in light of the specific type of award)
the contributions, responsibilities and other compensation of the particular
Participant.

8.2 Dividend Equivalents.

(a) Any Participant selected by the Committee may be granted Dividend
Equivalents based on the dividends declared on the shares of Stock that are
subject to any Award, to be credited as of dividend payment dates, during the
period between the date the Award is granted and the date the Award is
exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Stock by such
formula and at such time and subject to such limitations as may be determined by
the Committee.

(b) Dividend Equivalents granted with respect to Options or SARs that are
intended to be Qualified Performance-Based Compensation shall be payable, with
respect to pre-exercise periods, regardless of whether such Option or SAR is
subsequently exercised.

8.3 Stock Payments. Any Participant selected by the Committee may receive Stock
Payments in the manner determined from time to time by the Committee. The number
of shares shall be determined by the Committee and may be based upon the
Performance Criteria or other specific performance criteria determined
appropriate by the Committee, determined on the date such Stock Payment is made
or on any date thereafter.

8.4 Restricted Stock Units. Any Participant selected by the Committee may be
granted an award of Restricted Stock Units in the manner determined from time to
time by the Committee. The number of Restricted Stock Units shall be determined
by the Committee and may be linked to the Performance Criteria or other specific
performance criteria determined to be appropriate by the Committee, in each case
on a specified date or dates or over any period or periods determined by the
Committee. Stock underlying a Restricted Stock Unit award will not be issued
until the Restricted Stock Unit award has vested, pursuant to a vesting schedule
or performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Participant awarded Restricted Stock Units shall have no rights as
a Company stockholder with respect to such Restricted Stock Units until such
time as the Restricted Stock Units have vested and the Stock underlying the
Restricted Stock Units has been issued.

8.5 Term. The term of any Award of Performance Shares, Dividend Equivalents,
Stock Payments or Restricted Stock Units shall be set by the Committee in its
discretion.

 

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8.6 Exercise or Purchase Price. The Committee may establish the exercise or
purchase price of any Award of Performance Shares, Restricted Stock Units or
Stock Payments; provided, however, that such price shall not be less than the
par value of a share of Stock, unless otherwise permitted by applicable state
law.

8.7 Exercise Upon Termination of Employment or Service. An Award of Performance
Shares, Dividend Equivalents, Restricted Stock Units and Stock Payments shall
only be exercisable or payable while the Participant is an Employee, consultant
to the Company or a member of the Board, as applicable; provided, however, that
the Committee in its sole and absolute discretion may provide that an Award of
Performance Shares, Dividend Equivalents, Stock Payments or Restricted Stock
Units may be exercised or paid subsequent to a termination of employment or
service, as applicable, or following a Change of Control of the Company, or
because of the Participant’s retirement, death or disability, or otherwise;
provided, however, that any such provision with respect to Performance Shares
shall be subject to the requirements of Section 162(m) of the Code that apply to
Qualified Performance-Based Compensation.

8.8 Form of Payment. Payments with respect to any Awards granted under this
Article 8 shall be made in cash, in Stock or a combination of both, as
determined by the Committee.

8.9 Award Agreement. All Awards under this Article 8 shall be subject to such
additional terms and conditions as determined by the Committee and shall be
evidenced by a written Award Agreement.

ARTICLE 9

PERFORMANCE-BASED AWARDS

9.1 Purpose. The purpose of this Article 9 is to provide the Committee the
ability to qualify Awards other than Options and SARs and that are granted
pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If the
Committee, in its discretion, decides to grant a Performance-Based Award to a
Covered Employee, the provisions of this Article 9 shall control over any
contrary provision contained in Articles 6 or 8; provided, however, that the
Committee may in its discretion grant Awards to Covered Employees that are based
on Performance Criteria or Performance Goals but that do not satisfy the
requirements of this Article 9.

9.2 Applicability. This Article 9 shall apply only to those Covered Employees
selected by the Committee to receive Performance-Based Awards. The designation
of a Covered Employee as a Participant for a Performance Period shall not in any
manner entitle the Participant to receive an Award for the period. Moreover,
designation of a Covered Employee as a Participant for a particular Performance
Period shall not require designation of such Covered Employee as a Participant
in any subsequent Performance Period and designation of one Covered Employee as
a Participant shall not require designation of any other Covered Employees as a
Participant in such period or in any other period.

9.3 Procedures With Respect to Performance-Based Awards. To the extent necessary
to comply with the Qualified Performance-Based Compensation requirements of
Section

 

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162(m)(4)(C) of the Code, with respect to any Award granted under Articles 6 and
8 which may be granted to one or more Covered Employees, no later than ninety
(90) days following the commencement of any fiscal year in question or any other
designated fiscal period or period of service (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee shall, in
writing, (i) designate one or more Covered Employees, (ii) select the
Performance Criteria applicable to the Performance Period, (iii) establish the
Performance Goals, and amounts of such Awards, as applicable, which may be
earned for such Performance Period, and (iv) specify the relationship between
Performance Criteria and the Performance Goals and the amounts of such Awards,
as applicable, to be earned by each Covered Employee for such Performance
Period. Following the completion of each Performance Period, the Committee shall
certify in writing whether the applicable Performance Goals have been achieved
for such Performance Period. In determining the amount earned by a Covered
Employee, the Committee shall have the right to reduce or eliminate (but not to
increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the Performance Period.

9.4 Payment of Performance-Based Awards. Unless otherwise provided in the
applicable Award Agreement, a Participant must be employed by the Company or a
Subsidiary on the day a Performance-Based Award for such Performance Period is
paid to the Participant. Furthermore, a Participant shall be eligible to receive
payment pursuant to a Performance-Based Award for a Performance Period only if
the Performance Goals for such period are achieved. In determining the amount
earned under a Performance-Based Award, the Committee may reduce or eliminate
the amount of the Performance-Based Award earned for the Performance Period, if
in its sole and absolute discretion, such reduction or elimination is
appropriate.

9.5 Additional Limitations. Notwithstanding any other provision of the Plan, any
Award which is granted to a Covered Employee and is intended to constitute
Qualified Performance-Based Compensation shall be subject to any additional
limitations set forth in Section 162(m) of the Code (including any amendment to
Section 162(m) of the Code) or any regulations or rulings issued thereunder that
are requirements for qualification as qualified performance-based compensation
as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed
amended to the extent necessary to conform to such requirements.

ARTICLE 10

PROVISIONS APPLICABLE TO AWARDS

10.1 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in
the discretion of the Committee, be granted either alone, in addition to, or in
tandem with, any other Award granted pursuant to the Plan. Awards granted in
addition to or in tandem with other Awards may be granted either at the same
time as or at a different time from the grant of such other Awards.

10.2 Award Agreement. Awards under the Plan shall be evidenced by Award
Agreements that set forth the terms, conditions and limitations for each Award
which may include the term of an Award, the provisions applicable in the event
the Participant’s employment or service terminates, and the Company’s authority
to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an
Award.

 

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10.3 Limits on Transfer. No right or interest of a Participant in any Award may
be pledged, encumbered, or hypothecated to or in favor of any party other than
the Company or a Subsidiary, or shall be subject to any lien, obligation, or
liability of such Participant to any other party other than the Company or a
Subsidiary. Except as otherwise provided by the Committee, no Award shall be
assigned, transferred, or otherwise disposed of by a Participant other than by
will or the laws of descent and distribution. The Committee by express provision
in the Award or an amendment thereto may permit an Award (other than an
Incentive Stock Option) to be transferred to, exercised by and paid to certain
persons or entities related to the Participant, including but not limited to
members of the Participant’s family, charitable institutions, or trusts or other
entities whose beneficiaries or beneficial owners are members of the
Participant’s family and/or charitable institutions, or to such other persons or
entities as may be expressly approved by the Committee, pursuant to such
conditions and procedures as the Committee may establish. Any permitted transfer
may be subject to the condition that the Committee receive evidence satisfactory
to it that the transfer is being made for estate and/or tax planning purposes
(or to a “blind trust” in connection with the Participant’s termination of
employment or service with the Company or a Subsidiary to assume a position with
a governmental, charitable, educational or similar non-profit institution) and
on a basis consistent with the Company’s lawful issue of securities.

10.4 Beneficiaries. Notwithstanding Section 10.3, a Participant may, in the
manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant’s death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights pursuant to the Plan is
subject to all terms and conditions of the Plan and any Award Agreement
applicable to the Participant, except to the extent the Plan and Award Agreement
otherwise provide, and to any additional restrictions deemed necessary or
appropriate by the Committee. If the Participant is married and resides in a
community property state, a designation of a person other than the Participant’s
spouse as his beneficiary with respect to more than 50% of the Participant’s
interest in the Award shall not be effective without the prior written consent
of the Participant’s spouse. If no beneficiary has been designated or survives
the Participant, payment shall be made to the person entitled thereto pursuant
to the Participant’s will or the laws of descent and distribution. Subject to
the foregoing, a beneficiary designation may be changed or revoked by a
Participant at any time provided the change or revocation is filed with the
Committee.

10.5 Stock Certificates. Notwithstanding anything herein to the contrary, the
Company shall not be required to issue or deliver any certificates evidencing
shares of Stock pursuant to the exercise of any Award, unless and until the
Board has determined, with advice of counsel, that the issuance and delivery of
such certificates is in compliance with all applicable laws, regulations of
governmental authorities and, if applicable, the requirements of any exchange on
which the shares of Stock are listed or traded. All Stock certificates delivered
pursuant to the Plan are subject to any stop-transfer orders and other
restrictions as the Committee deems necessary or advisable to comply with
federal, state, or foreign jurisdiction, securities or other laws, rules and
regulations and the rules of any national securities exchange or automated
quotation system on which the Stock is listed, quoted, or traded. The Committee
may place legends on any Stock certificate to reference restrictions applicable
to the Stock. In addition to the terms and conditions provided herein, the Board
may require that a Participant make such reasonable covenants, agreements, and
representations as the Board, in its discretion, deems

 

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advisable in order to comply with any such laws, regulations, or requirements.
The Committee shall have the right to require any Participant to comply with any
timing or other restrictions with respect to the settlement or exercise of any
Award, including a window-period limitation, as may be imposed in the discretion
of the Committee.

ARTICLE 11

CHANGES IN CAPITAL STRUCTURE

11.1 Adjustments. In the event of any stock dividend, stock split, combination
or exchange of shares, merger, consolidation, spin-off, recapitalization or
other distribution (other than normal cash dividends) of Company assets to
stockholders, or any other change affecting the shares of Stock or the share
price of the Stock, the Committee shall make such proportionate adjustments, if
any, as the Committee in its discretion may deem appropriate to reflect such
change with respect to (i) the aggregate number and type of shares that may be
issued under the Plan (including, but not limited to, adjustments of the
limitations in Sections 3.1 and 3.3); (ii) the terms and conditions of any
outstanding Awards (including, without limitation, any applicable performance
targets or criteria with respect thereto); and (iii) the grant or exercise price
per share for any outstanding Awards under the Plan. Any adjustment affecting an
Award intended as Qualified Performance-Based Compensation shall be made
consistent with the requirements of Section 162(m) of the Code.

11.2 Effect of a Change of Control. If a Change of Control occurs and a
Participant’s Awards are not assumed by the surviving or successor entity or its
parent or Subsidiary and such successor does not substitute substantially
similar awards for those outstanding under the Plan, such Awards shall become
fully exercisable and/or payable as applicable, and all forfeiture restrictions
on such Awards shall lapse. Upon, or in anticipation of, a Change of Control,
the Committee may cause any and all Awards outstanding hereunder to terminate at
a specific time in the future and shall give each Participant the right to
exercise such Awards during a period of time as the Committee, in its sole and
absolute discretion, shall determine. The Committee shall have sole discretion
to determine whether an Award has been assumed by the surviving or successor
entity or its parent or Subsidiary or whether such successor has substituted
substantially similar awards for those outstanding under the Plan in connection
with a Change of Control.

11.3 Outstanding Awards – Certain Mergers. Subject to any required action by the
stockholders of the Company, in the event that the Company shall be the
surviving corporation in any merger or consolidation (except a merger or
consolidation as a result of which the holders of shares of Stock receive
securities of another corporation), each Award outstanding on the date of such
merger or consolidation shall pertain to and apply to the securities that a
holder of the number of shares of Stock subject to such Award would have
received in such merger or consolidation.

11.4 Outstanding Awards – Other Changes. In the event of any other change in the
capitalization of the Company or corporate change other than those specifically
referred to in this Article 11, the Committee may, in its absolute discretion,
make such adjustments in the number and class of shares subject to Awards
outstanding on the date on which such change occurs and in the per share grant
or exercise price of each Award as the Committee may consider appropriate to
prevent dilution or enlargement of rights.

 

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11.5 No Other Rights. Except as expressly provided in the Plan, no Participant
shall have any rights by reason of any subdivision or consolidation of shares of
stock of any class, the payment of any dividend, any increase or decrease in the
number of shares of stock of any class or any dissolution, liquidation, merger,
or consolidation of the Company or any other corporation. Except as expressly
provided in the Plan or pursuant to action of the Committee under the Plan, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number of shares of Stock
subject to an Award or the grant or exercise price of any Award.

ARTICLE 12

ADMINISTRATION

12.1 Committee. Unless and until the Board delegates administration to a
Committee as set forth below, the Plan shall be administered by the Board. The
Board may delegate administration of the Plan to a Committee or Committees of
one or more members of the Board, and the term “Committee” shall apply to any
person or persons to whom such authority has been delegated. If administration
is delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. Notwithstanding the foregoing,
however, from and after the Public Trading Date, a Committee of the Board shall
administer the Plan and the Committee shall consist solely of two or more
members of the Board each of whom is both an “outside director,” within the
meaning of Section 162(m) of the Code, and a Non-Employee Director. Within the
scope of such authority, the Board or the Committee may (i) delegate to a
committee of one or more members of the Board who are not “outside directors,”
within the meaning of Section 162(m) of the Code the authority to grant awards
under the Plan to eligible persons who are either (1) not then “covered
employees,” within the meaning of Section 162(m) of the Code and are not
expected to be “covered employees” at the time of recognition of income
resulting from such award or (2) not persons with respect to whom the Company
wishes to comply with Section 162(m) of the Code and/or (ii) delegate to a
committee of one or more members of the Board who are not Non-Employee
Directors, the authority to grant awards under the Plan to eligible persons who
are not then subject to Section 16 of the Exchange Act. The Board may abolish
the Committee at any time and/or revest in the Board the administration of the
Plan. Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may only be filled by the Board.

12.2 Action by the Committee. A majority of the Committee shall constitute a
quorum. The acts of a majority of the members present at any meeting at which a
quorum is present, and acts approved in writing by a majority of the Committee
in lieu of a meeting, shall be deemed the acts of the Committee. Each member of
the Committee is entitled to, in good faith, rely or act upon any report or
other information furnished to that member by any officer or

 

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other employee of the Company or any Subsidiary, the Company’s independent
certified public accountants, or any executive compensation consultant or other
professional retained by the Company to assist in the administration of the
Plan.

12.3 Authority of Committee. Subject to any specific designation in the Plan,
the Committee has the exclusive power, authority and discretion to:

(a) Designate Participants to receive Awards;

(b) Determine the type or types of Awards to be granted to each Participant;

(c) Determine the number of Awards to be granted and the number of shares of
Stock to which an Award will relate;

(d) Determine the terms and conditions of any Award granted pursuant to the
Plan, including, but not limited to, the exercise price, grant price, or
purchase price, any reload provision, any restrictions or limitations on the
Award, any schedule for lapse of forfeiture restrictions or restrictions on the
exercisability of an Award, and accelerations or waivers thereof, any provisions
related to non-competition and recapture of gain on an Award, based in each case
on such considerations as the Committee in its sole discretion determines;
provided, however, that the Committee shall not have the authority to accelerate
the vesting or waive the forfeiture of any Performance-Based Awards;

(e) Determine whether, to what extent, and pursuant to what circumstances an
Award may be settled in, or the exercise price of an Award may be paid in, cash,
Stock, other Awards, or other property, or an Award may be canceled, forfeited,
or surrendered;

(f) Prescribe the form of each Award Agreement, which need not be identical for
each Participant;

(g) Decide all other matters that must be determined in connection with an
Award;

(h) Establish, adopt, or revise any rules and regulations as it may deem
necessary or advisable to administer the Plan;

(i) Interpret the terms of, and any matter arising pursuant to, the Plan or any
Award Agreement; and

(j) Make all other decisions and determinations that may be required pursuant to
the Plan or as the Committee deems necessary or advisable to administer the
Plan.

12.4 Decisions Binding. The Committee’s interpretation of the Plan, any Awards
granted pursuant to the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.

 

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ARTICLE 13

EFFECTIVE AND EXPIRATION DATE

13.1 Effective Date. The Plan is effective as of the date of its initial
adoption by the Board (the “Effective Date”); provided that the Plan has been
approved by the Company’s stockholders prior to such date.

13.2 Expiration Date. The Plan will expire on, and no Award may be granted
pursuant to the Plan after, the earlier of the tenth anniversary of (i) the date
this Plan is approved by the Board or (ii) the date this Plan is approved by the
Company’s stockholders or (the “Expiration Date”). Any Awards that are
outstanding on the Expiration Date shall remain in force according to the terms
of the Plan and the applicable Award Agreement. Each Award Agreement shall
provide that it will expire on the tenth anniversary of the date of grant of the
Award to which it relates.

ARTICLE 14

AMENDMENT, MODIFICATION, AND TERMINATION

14.1 Amendment, Modification, and Termination. With the approval of the Board,
at any time and from time to time, the Committee may terminate, amend or modify
the Plan; provided, however, that, to the extent necessary and desirable to
comply with any applicable law, regulation, or stock exchange rule, the Company
shall obtain stockholder approval of any Plan amendment in such a manner and to
such a degree as required. Notwithstanding any provision in this Plan to the
contrary, no Award may be amended to reduce the price per share of the Stock
subject to such Award below the exercise or purchase price, as applicable, as of
the date the Award is granted without stockholder approval.

14.2 Awards Previously Granted. No termination, amendment, or modification of
the Plan shall adversely affect in any material way any Award previously granted
pursuant to the Plan without the prior written consent of the Participant.

ARTICLE 15

GENERAL PROVISIONS

15.1 No Rights to Awards. No Participant, employee, or other person shall have
any claim to be granted any Award pursuant to the Plan, and neither the Company
nor the Committee is obligated to treat Participants, employees, and other
persons uniformly.

15.2 No Stockholders Rights. No Award gives the Participant any of the rights of
a stockholder of the Company unless and until shares of Stock are in fact issued
to such person in connection with such Award.

15.3 Withholding. The Company or any Subsidiary shall have the authority and the
right to deduct or withhold, or require a Participant to remit to the Company,
an amount sufficient to satisfy federal, state, local and foreign taxes
(including the Participant’s FICA obligation) required by law to be withheld
with respect to any taxable event concerning a Participant arising as a result
of this Plan. The Committee may in its discretion and in satisfaction of the
foregoing requirement allow a Participant to elect to have the Company withhold
shares of Stock otherwise issuable under an Award (or allow the return of shares
of Stock) having a Fair Market Value equal to the sums required to be withheld.
Notwithstanding any other provision of the Plan, the number of shares of Stock
which may be withheld with

 

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respect to the issuance, vesting, exercise or payment of any Award (or which may
be repurchased from the Participant of such Award within six months after such
shares of Stock were acquired by the Participant from the Company) in order to
satisfy the Participant’s federal, state, local and foreign income and payroll
tax liabilities with respect to the issuance, vesting, exercise or payment of
the Award shall be limited to the number of shares which have a Fair Market
Value on the date of withholding or repurchase equal to the aggregate amount of
such liabilities based on the minimum statutory withholding rates for federal,
state, local and foreign income tax and payroll tax purposes that are applicable
to such supplemental taxable income.

15.4 No Right to Employment or Services. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate any Participant’s employment or services at any
time, nor confer upon any Participant any right to continue in the employ or
service of the Company or any Subsidiary.

15.5 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan
for incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Award
Agreement shall give the Participant any rights that are greater than those of a
general creditor of the Company or any Subsidiary.

15.6 Indemnification. To the extent allowable pursuant to applicable law, each
member of the Committee or of the Board shall be indemnified and held harmless
by the Company from any loss, cost, liability, or expense that may be imposed
upon or reasonably incurred by such member in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action or failure to act
pursuant to the Plan and against and from any and all amounts paid by him or her
in satisfaction of judgment in such action, suit, or proceeding against him or
her, provided he or she gives the Company an opportunity, at its own expense, to
handle and defend the same before he or she undertakes to handle and defend it
on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may have to indemnify
them or hold them harmless.

15.7 Relationship to Other Benefits. No payment pursuant to the Plan shall be
taken into account in determining any benefits pursuant to any pension,
retirement, savings, profit sharing, group insurance, welfare or other benefit
plan of the Company or any Subsidiary except to the extent otherwise expressly
provided in writing in such other plan or an agreement thereunder.

15.8 Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries.

15.9 Titles and Headings. The titles and headings of the Sections in the Plan
are for convenience of reference only and, in the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.

 

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15.10 Fractional Shares. No fractional shares of Stock shall be issued and the
Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up or down as appropriate.

15.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan, the Plan, and any Award granted or awarded to any
Participant who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

15.12 Government And Other Regulations. The obligation of the Company to make
payment of awards in Stock or otherwise shall be subject to all applicable laws,
rules, and regulations, and to such approvals by government agencies as may be
required. The Company shall be under no obligation to register pursuant to the
Securities Act of 1933, as amended, any of the shares of Stock paid pursuant to
the Plan. If the shares paid pursuant to the Plan may in certain circumstances
be exempt from registration pursuant to the Securities Act of 1933, as amended,
the Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.

15.13 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of Delaware.

 

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ARTHROCARE CORPORATION

AMENDED AND RESTATED 2003 INCENTIVE STOCK PLAN

APPENDIX

FOR AUSTRIA

1. Application. This Appendix shall apply in relation to Awards granted to
Participants residing and providing services in Austria.

2. Definitions. Definitions as set out in Article 2 of the Plan are applicable
to this Appendix.

3. Eligible Employees. The Committee´s discretion with respect to Articles 11
and 12 of the Plan shall be exercised in such a way as to comply with Austrian
law, in particular with the labour law principle of equal treatment
(arbeitsrechtlicher Gleichbehandlungsgrundsatz) and with the prohibition of
discrimination (Diskriminierungsverbot).

4. Ex-gratia benefit. The grant of an Award is an ex-gratia benefit (freiwillige
Leistung). It is granted without any obligation; and even repeated granting will
not create such obligation.

5. Changes in Capital Structure. The Committee´s discretion with respect to any
adjustments pursuant to Article 11 will be exercised taking into fair
consideration the circumstances why such adjustment is deemed appropriate.

6. Committee´s Decisions. The decisions of the Committee in connection with any
interpretation of the Plan or in any dispute relating to an Award or other
matters relating to the Plan shall be final and conclusive and binding on the
relevant parties. It may only be revised by competent courts.

7. Governing Law. The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware but mandatory provisions of Austrian law may
be applied.

 

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ARTHROCARE CORPORATION

AMENDED AND RESTATED 2003 INCENTIVE STOCK PLAN

APPENDIX

FOR COSTA RICA

1. Application. This Appendix shall apply in relation to Awards granted to
Participants residing and providing services in Costa Rica.

2. Definitions. Definitions as set out in Article 2 of the Plan are applicable
to this Appendix.

3. Taxes/Withholding. Each Participant shall be liable for any employer’s Costa
Rican taxes or contributions to any government agency, excluding social security
obligations, in respect of the grant, exercise, release or assignment of any
Award or the acquisition, sale or other disposition of any Stock issued upon
exercise of an Award and the Company may require, as a condition of exercise,
that any liability it or any Parent or Subsidiary has to account for Costa Rican
income or salary taxes or contributions to any governmental agency, excluding
social security obligations, or any other federal, state or local tax
withholding obligation relating to the exercise or acquisition of Stock under an
Award granted pursuant to this Plan be satisfied by any of the following means
(in addition to the Company’s or any Parent’s or Subsidiary’s right to withhold
from any compensation paid or payable to the Participant an amount sufficient to
satisfy such taxes and any withholding obligations) or by a combination of such
means: (i) the Participant’s tender of a cash payment in an amount sufficient to
satisfy such taxes and any withholding obligations; (ii) the Participant’s
authorization of the Company or any Parent or Subsidiary to withhold shares of
Stock from the shares of Stock otherwise issuable to the Participant as a result
of the exercise or acquisition of Stock under the Award having a Fair Market
Value equal to an amount sufficient to satisfy such taxes and any withholding
obligations; provided, however, that no shares of Stock will be withheld with a
value exceeding the minimum amount of tax required to be withheld by law; or
(iii) the Participant’s delivery of owned and unencumbered shares of Stock
having a Fair Market Value equal to an amount sufficient to satisfy such taxes
and any withholding obligations.

4. Governing Law. The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware but mandatory provisions of Costa Rican law
may be applied.

 

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ARTHROCARE CORPORATION

AMENDED AND RESTATED 2003 INCENTIVE STOCK PLAN

APPENDIX

FOR FRANCE

1. Application. This Appendix shall apply in relation to Awards granted to
Participants residing and providing services in France.

2. Definitions. Definitions as set out in Article 2 of the Plan are applicable
to this Appendix.

3. Eligible Employees. Options may only be granted to Employees who, on the date
of grant of such options, do not own Stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary. Options may not be granted to consultants or Directors.
Restricted Stock may not be issued to Employees residing and providing services
in France.

4. Date of Grant. The date of grant for purposes of Options granted to Employees
residing and providing services in France means the date on which the Committee
makes the determination granting the Options to an Employee and determines the
number of Options granted and the per share exercise price for the Stock to be
issued pursuant to exercise of the Option.

5. Time of Granting of Options.

(a) If the Stock is listed on any established stock exchange or a national
market system, Options cannot be granted (i) during the ten (10) trading
sessions preceding and following the date on which the consolidated accounts or
annual accounts of the Company are published and (ii) during a period
(x) starting from the date on which the corporate bodies of the Company become
aware of any information which, if published, could significantly affect the
Company’s market price and (y) ending at the close of the tenth (10th) trading
session following the publication of the information.

(b) If the Stock is listed on any established stock exchange or a national
market system, no Option may be granted less than twenty trading sessions after
a coupon giving a right to a dividend or to a capital increase has been detached
from the shares of Common Stock.

6. Definition of Fair Market Value. The Fair Market Value of a share of Stock
shall be determined according to the provisions of the Plan, subject to the
following limitations:

(a) If the Stock is listed on any established stock exchange or a national
market system, including, without limitation, the Nasdaq National Market or The
Nasdaq SmallCap Market of The Nasdaq Stock Market, or (b) if the Common Stock is
regularly quoted by a recognized securities dealer but selling prices are not
reported, the Fair Market Value shall

 

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in no case be less than eighty per cent (80%) of the average of the closing
sales price for a Share as quoted on said stock exchange market during the
twenty market trading days prior to the day of the Committee’s decision to grant
the Options; or

(b) In the absence of an established market for the Stock, the Fair Market Value
thereof shall be determined in good faith by the Committee in connection with
the price held at the time of the last operation affecting the share capital of
the Company, unless otherwise decided by the Committee by a well-founded
decision, and in consideration of the applicable laws and regulations applicable
at this date.

7. Limitations on Exercise and Transfer.

(a) No Option may be exercised prior to the expiration of a minimum period of
one year following the date of grant. In addition, the shares of Stock acquired
as a result of the exercise of all or part of the Option cannot be transferred
by the Participant before the expiration of a three-year period which shall
start running as from the expiration of the above mentioned period of one year.

(b) The Stock acquired as a result of the exercise of an Option may however be
immediately transferred upon the occurrence of one of the events referred to
under Article 91-bis of appendix II to the French General Tax Code, i.e., the
dismissal, retirement, invalidity or death of the Participant. In case of
dismissal or retirement, the exception to the non-transferability deadline of
the Stock shall be subject to the condition that the Option shall have been
exercised at least three (3) months before the dismissal or the retirement.

8. Adjustments to Exercise Price. Any adjustment made to the exercise price of
an Option and/or the number of Options shall not provide more advantages to the
Participant than those which would result from any adjustments that would be
made in accordance with the provisions of Article L 225-181 of the French
business code (Code de Commerce).

9. Consideration. The consideration to be paid for the Stock to be issued upon
exercise of an Option may consist of (a) cash, (b) check, or (c) such other
consideration and method of payment for the issuance of Stock to the extent
permitted by applicable laws.

10. Nontransferability. Options may not be transferred in any manner. Options
may nevertheless be transferred to the heirs of a Participant and exercised by
them within a period of six (6) months following the death of such Participant.

11. Ex-gratia benefit. The grant of an Award is an ex-gratia benefit. It is
granted without any obligation; and even repeated granting will not create such
obligation.

12. Governing Law. The Plan shall be governed by and construed in accordance
with the laws of the State of Delaware but mandatory provisions of French law
may be applied.

 

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ARTHROCARE CORPORATION

AMENDED AND RESTATED 2003 INCENTIVE STOCK PLAN

APPENDIX

FOR GERMANY

1. Application. This Appendix shall apply in relation to Awards granted to
Participants residing and providing services in Germany.

2. Definitions. Definitions as set out in Article 2 of the Plan are applicable
to this Appendix.

3. Eligible Employees. The Committee’s discretion with respect to Articles 11
and 12 of the Plan will be exercised in a way complying with German law, in
particular with the labour law principle of equal treatment (arbeitsrechtlicher
Gleichbehandlungsgrundsatz) and with the prohibition of discrimination
(Diskriminierungsverbot).

4. Ex-gratia benefit. The grant of an Award is an ex-gratia benefit (freiwillige
Leistung). It is granted without any obligation; and even repeated granting will
not create such obligation.

5. Changes in Capital Structure. The Commitee’s discretion with respect to any
adjustments pursuant to Article 11 will be exercised taking into fair
consideration the circumstances why such adjustment is deemed appropriate.

6. Taxes/Withholding. Capital gains realized upon exercise of an Award are
deemed to be a benefit in kind subject to income tax. Such gain is subject to
the progressive income tax rate (19.9% to 48.5%) plus a solidarity surcharge of
5.5% thereon. The capital gain realized upon exercise of an option is determined
by the difference between the fair market value of the shares at the time the
options are exercised and the purchase price. The fair market value is defined
on the basis of the prices quoted on the respective stock exchange or, if the
shares are not listed, according to the so-called “Stuttgart appraisal formula”
for unlisted shares of corporations.

The Company shall deduct wage tax from the gross salary of the Participant.
Additionally, the usual social security contributions, up to the relevant
maximum amount, have to be paid on the difference between the exercise price and
the market value at the time the Award is exercised. If the regular salary of
the Participant is not sufficient for the Company to deduct wage tax and pay
such tax to the competent tax office, the Company shall request the Participant
to pay the tax to the tax office directly. The Company shall inform the tax
office of such request.

Capital gains from the sale of Stock are only subject to taxation, (i) if the
sale takes place within one year from the purchase or (ii) if the Participant
(or the predecessor in the case of a transfer of Stock without consideration),
at any time during the five years preceding the sale, directly or indirectly
held or holds a participation of 1% or more. Capital gains deriving from a
disposal of Stock are tax exempt for Participants if the total gains from
private disposal

 

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transactions (private Veräußerungsgeschäfte) in the respective calendar year
amounts to less than € 512 p.a. and per person. To the extent that capital gains
upon sale of Stock are subject to German income tax, 50% of such capital gains
are subject to the progressive income tax rate plus a solidarity surcharge of
5.5% thereon.

In principle, 50% of the gross dividends received by Participants will be
subject to income tax at the progressive tax rate plus solidarity surcharge.
Investment income received by the Participant, including dividends and interest,
after deduction of half the income-related expenses in economic connection with
the dividends or the standard amount for income-related expenses of € 51 (€ 102
for married couples filing jointly), are tax-free up to the maximum amount of
tax-free savings allowances of € 1,550 (or € 3,100 for married couples filing
jointly).

7. Insider Dealings. Germany has adopted the EC-Directive on Insider Dealings.
Insiders are, among others, persons who by virtue of their position as members
of managing or supervisory boards of the issuing company or its subsidiaries or
by their profession or work, have knowledge of not publicly known facts which
may influence the market value of the securities issued. Insiders are subject to
certain restrictions in selling or purchasing such securities or otherwise
making use of their insider knowledge. Anyone in breach of those provisions will
be liable to imprisonment or fine.

8. Committee’s Decisions. The decisions of the Committee in connection with any
interpretation of the Plan or in any dispute relating to an Award or other
matters relating to the Plan shall be final and conclusive and binding on the
relevant parties. It may only be revised by competent courts.

9. Governing Law. The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware but mandatory provisions of German law may be
applied.

 

26

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ARTHROCARE CORPORATION

AMENDED AND RESTATED 2003 INCENTIVE STOCK PLAN

APPENDIX

FOR ITALY

1. Application. This Appendix shall apply in relation to Awards granted to
Participants residing and providing services in Italy.

2. Definitions. Definitions as set out in Article 2 of the Plan are applicable
to this Appendix.

3. Committee Discretion. The Committee´s discretion with respect to the Plan
will be exercised in a way complying with the requirements under Italian law
that awards under the Plan be offered on a non-discriminatory basis.

4. Ex-gratia benefit. The grant of an Award is an ex-gratia benefit. It is
granted without any obligation; and even repeated granting will not create such
obligation.

5. Privacy. The processing of an Participant’s personal data shall be handled in
such a manner as to comply with the Italian Data Protection Act.

6. Governing Law. The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware but mandatory provisions of Italian law may be
applied.

 

27

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ARTHROCARE CORPORATION

AMENDED AND RESTATED 2003 INCENTIVE STOCK PLAN

APPENDIX

FOR SWEDEN

1. Application. This Appendix shall apply in relation to Awards granted to
Participants residing and providing services in Sweden.

2. Definitions. Definitions as set out in Article 2 of the Plan are applicable
to this Appendix.

3. Taxes/Withholding. In the Committee’s discretion, each Participant may be
liable for any social charges payable by the Participant’s employer in respect
of the exercise of an Award and, as a condition of exercise of the Award, any
liability that the Company or any Parent or Subsidiary has to account for
Swedish social charges or any other federal, state or local tax withholding
obligation relating to the exercise or acquisition of Stock pursuant to the
Award shall be satisfied by Participant through one or a combination of the
following means, in the discretion of the Committee:

(i) the withholding by the Company or any Parent or Subsidiary from any
compensation paid or payable to the Participant an amount sufficient to satisfy
such social charges and any withholding obligations;

(ii) the Participant’s tender of a cash payment in an amount sufficient to
satisfy such social charges and any withholding obligations;

(iii) the Participant’s authorization of the Company or any Parent or Subsidiary
to withhold shares of Stock from the shares of Stock otherwise issuable to the
Participant as a result of the exercise or acquisition of Stock under the award
having a Fair Market Value equal to an amount sufficient to satisfy such social
charges and any withholding obligations; provided, however, that no shares of
Stock will be withheld with a value exceeding the minimum amount of tax required
to be withheld by law; or

(iv) the Participant’s delivery of owned and unencumbered shares of Stock having
a Fair Market Value equal to an amount sufficient to satisfy such social charges
and any withholding obligations.

Each Participant shall sign a set-off consent regarding the foregoing
withholding provisions.

4. Privacy. The processing of a Participant’s personal data shall be handled in
such a manner as to comply with the Swedish Data Act.

5. Governing Law. The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware but mandatory provisions of Swedish law may be
applied.

 

28

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ARTHROCARE CORPORATION

AMENDED AND RESTATED 2003 INCENTIVE STOCK PLAN

APPENDIX

FOR UNITED KINGDOM

1. Application. This Appendix shall apply in relation to Awards granted to
Participants residing and providing services in the United Kingdom.

2. Definitions. Definitions as set out in Article 2 of the Plan are applicable
to this Appendix.

3. Taxes/Withholding. In the Committee’s discretion, each Participant may be
liable for any employer’s United Kingdom National Insurance Contribution in
respect of the grant, exercise, release or assignment of any Award or the
acquisition, sale or other disposition of any Stock issued upon exercise of an
Award and the Company may require, as a condition of grant, exercise or
settlement of an Award, that any liability it or any Parent or Subsidiary has to
account for United Kingdom income tax under the Pay As You Earn system and
employer or employee National Insurance Contributions or any other federal,
state or local tax withholding obligation relating to the exercise or
acquisition of Stock under an Award granted pursuant to this Plan be satisfied
by any of the following means (in addition to the Company’s or any Parent’s or
Subsidiary’s right to withhold from any compensation paid or payable to the
Participant an amount sufficient to satisfy such withholding obligations) or by
a combination of such means: (i) the Participant’s tender of a cash payment in
an amount sufficient to satisfy such withholding obligations; (ii) the
Participant’s authorization of the Company or any Parent or Subsidiary to
withhold shares of Stock from the shares of Stock otherwise issuable to the
Participant as a result of the exercise or acquisition of Stock under the Award
having a Fair Market Value equal to an amount sufficient to satisfy such
withholding obligations; provided, however, that no shares of Stock will be
withheld with a value exceeding the minimum amount of tax required to be
withheld by law; or (iii) the Participant’s delivery of owned and unencumbered
shares of Stock having a Fair Market Value equal to an amount sufficient to
satisfy such withholding obligations.

4. Governing Law. The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware but mandatory provisions of United Kingdom law
may be applied.

 

29