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                                                                   EXHIBIT 10.28


                            CEO CONTINUITY AGREEMENT

        This CEO Continuity Agreement (the "Agreement") is made and entered into
effective as of _____________, 1998, by and between Michael A. Baker (the
"Employee") and ArthroCare Corporation, a Delaware corporation (the "Company").

                                 R E C I T A L S

        A. It is expected that the Company from time to time will consider the
possibility of a Change of Control (as defined below). The Board of Directors of
the Company recognizes that such consideration can be a distraction to the
Employee and can cause the Employee to consider alternative employment
opportunities. The Board of Directors has determined that it is in the best
interests of the Company and its shareholders to assure that the Company will
have the continued dedication and objectivity of the Employee, notwithstanding
the possibility, threat or occurrence of a Change of Control.

        B. The Board of Directors believes that it is in the best interests of
the Company and its shareholders to provide the Employee with an incentive to
continue his/her employment and to motivate the Employee to maximize the value
of the Company upon a Change of Control for the benefit of its shareholders.

        C. The Board of Directors believes that it is imperative to provide the
Employee with certain benefits upon a Change of Control and, under certain
circumstances, upon termination of the Employee's employment, which benefits are
intended to provide the Employee with financial security and sufficient
incentive and encouragement to remain with the Company notwithstanding the
possibility of a Change of Control or a termination of employment.

        D. Certain capitalized terms used in the Agreement are defined in
Section 7 below.

        In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:

1. Duties and Scope of Employment. The Company shall continue to employ the
Employee in the position of President and Chief Executive Officer, as such
position was defined in terms of responsibilities and compensation as of the
effective date of this Agreement; provided, however, that the Board of Directors
shall have the right, subject to the other provisions of this Agreement, at any
time prior to the occurrence of a Change of Control, to revise such
responsibilities and compensation as the Board of Directors in its discretion
may deem necessary or appropriate. The Employee shall comply with and be bound
by the Company's operating policies, procedures and practices from time to time
in effect during his/her employment. During the term of the Employee's
employment with the Company, the Employee shall devote his/her full time, skill
and attention to his/her duties and responsibilities, and shall perform them
faithfully, diligently and competently, and the

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Employee shall use his/her best efforts to further the business of the Company
and its affiliated entities.

2. Base Compensation. The Company shall pay the Employee as compensation for
his/her services a base salary, along with such performance bonus amounts as the
Board of Directors shall authorize, in its discretion, from time to time. Such
salary shall be paid periodically in accordance with normal Company payroll
policies. The Employee's compensation (including bonus amounts) specified in
this Section 2, together with any increases in such compensation that the Board
of Directors may grant from time to time, is referred to in this Agreement as
the Employee's "Base Compensation."

3. Employee Benefits. The Employee shall be eligible to participate in the
employee benefit plans and compensation programs maintained by the Company and
applicable to other key employees of the Company, including (without limitation)
retirement plans, savings or profit-sharing plans, stock option, incentive or
other bonus plans, life, disability, health, accident and other insurance
programs, paid vacations, and similar plans or programs, subject in each case to
the generally applicable terms and conditions of the applicable plan or program
in question and to the determination of any committee administering such plan or
program.

4. At-Will Employment. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, subject, however, to such
terms as stated in the offer of employment letter dated June 20, 1997, or as may
otherwise be available in accordance with the Company's established employee
plans and policies at the time of termination. The terms of this Agreement shall
terminate upon the earlier of (i) termination of the Employee's position as an
executive officer of the Company; (ii) the date that all obligations of the
parties hereunder have been satisfied or (iii) the date 24 months after a Change
of Control (the "Expiration Date"). A termination of the terms of this Agreement
pursuant to the preceding sentence shall be effective for all purposes, except
that such termination shall not affect the payment or provision of compensation
or benefits on account of a termination of employment occurring prior to the
termination of the terms of this Agreement.

5. Option Acceleration Upon a Change of Control. Upon a Change of Control, the
vesting and exercisability of each option granted to the Employee by the Company
(the "Options") shall be automatically accelerated as to 50% of the unvested
shares subject thereto at the time of the Change of Control; provided, however,
that if it is determined by the Company's independent public accountants that
such acceleration would preclude accounting for the Change of Control as a
pooling of interests for financial accounting purposes, and it is a condition to
the closing of the Change of Control that the transaction be accounted for as a
pooling of interests, then the vesting and exercisability of the Options shall
not accelerate pursuant to this Section 5.


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6. Option Acceleration Upon a Hostile Takeover. Upon a Hostile Takeover, the
vesting and exercisability of the Options shall be automatically accelerated as
to 100% of the shares subject thereto.

7. Termination Following a Change of Control. If the Employee's employment with
the Company terminates at any time within twenty four (24) months after a change
of control, then Employee shall be entitled to receive severance benefits as
follows:

        (a) Involuntary Termination. If the Employee's employment with the
Company terminates in an Involuntary Termination, then the Employee shall be
entitled to receive severance benefits as follows:

                  (i) Severance Pay. During the Compensation Continuation
Period, the Company shall pay the Employee continuing payments of severance pay
in accordance with its normal payroll practices at a rate equal to the
Employee's Current Compensation. Such severance payments shall be paid monthly.
In addition, during the Compensation Continuation Period, the Company shall
continue to make available to the Employee and the Employee's spouse and
dependents any group health plans, life insurance plans and other benefit plans
and programs of the Company on the date of such termination of employment, to
the extent permitted by law and subject to the terms and conditions of the
relevant plan or program.

                  (ii) Medical Benefits. The Company shall reimburse the
Employee for the amount of his or her premium payment for group health coverage,
if any, elected by the Employee pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"); provided, however, that (A)
such reimbursement shall not exceed $650.00 per month, and (B) the Employee
shall be solely responsible for all matters relating to his or her continuation
of coverage pursuant to COBRA, including (without limitation) his or her
election of such coverage and his or her timely payment of premiums; provided,
further, that upon the earlier to occur of (C) the time that the Employee no
longer constitutes a Qualified Beneficiary (as such term is defined in Section
4980B(g)(1) of the Internal Revenue Code of 1986, as amended) and (D) the date
thirty-six (36) months following the Employee's termination, the Company's
obligations to reimburse the Employee under this subsection (ii) shall cease;
provided, finally, that if the Company's obligations under this subsection (ii)
cease pursuant to clause (C), the Company shall make a lump sum payment to the
Employee equal to the product of the last monthly reimbursement paid to the
Employee pursuant to this subsection (ii) multiplied by eighteen (18).

                  (iii) Outplacement Services. During the thirty-six (36) months
following termination of the Employee's employment, the Employee shall be
entitled to executive-level outplacement services at the Company's expense, not
to exceed $15,000. Such services shall be provided by a firm selected by the
Employee from a list compiled by the Company.


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                  (iv) Option Acceleration. The vesting and exercisability of
each option shall be automatically accelerated as to 100% of the unvested shares
subject thereto at the time of the Involuntary Termination; provided, however,
that it is determined by the Company's independent accountants that such
acceleration would preclude accounting for the Change of Control as a pooling of
interests for financial accounting purposes, and it is a condition to the
closing of the Change of Control that the transaction be accounted for as a
pooling of interests, then the vesting and exercisability of the Options should
not accelerate pursuant to this Section 7(a)(iv).

        (b) Voluntary Resignation; Termination For Cause. If the Employee
voluntarily resigns from the Company (other than in an Involuntary Termination),
or if the Company terminates the Employee's employment for Cause, then the
Employee shall not be entitled to receive severance or other benefits under this
Section 7, but shall be eligible for those benefits (if any) as may then be
established under any other Section of this Agreement or the Company's
then-existing severance and benefits plans and policies at the time of such
termination.

        (c) Disability; Death. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment terminates due to the death of the Employee, either in connection
with or apart from a Change of Control, then the Employee shall not be entitled
to receive severance or other benefits under this Section 7, but shall be
eligible for those benefits (if any) as may then be established under any other
Section of this Agreement or the Company's then-existing severance and benefits
plans and policies at the time of such Disability or death.

8. Termination Apart from a Change of Control. If the Employee's employment with
the Company terminates at any time either prior to the occurrence of a Change of
Control or after the twenty-four month period following the effective date of a
Change of Control, then the Employee shall not be entitled to receive severance
or other benefits under this Agreement, but shall be eligible for those benefits
(if any) as may be established under the Company's then-existing severance and
benefits plans and policies at the time of such termination, or as may be
provided in the offer of employment letter dated June 20, 1997.

9. Definition of Terms. The following terms referred to in this Agreement shall
have the following meanings:

        (a) Cause. "Cause" shall mean (i) any act of personal dishonesty taken
by the Employee in connection with his/her responsibilities as an employee and
intended to result in substantial personal enrichment of the Employee, (ii) the
Employee's commission of a felony or an act of fraud against the Company or its
affiliates, (iii) a willful act by the Employee that constitutes gross
misconduct and that is injurious to the Company, and (iv) continued violations
by the Employee of the Employee's obligations under Section 1 of this Agreement,
which are demonstrably willful and deliberate on the Employee's part after there
has been delivered to the Employee a written demand for performance from the
Company that describes the basis for the Company's belief that the Employee has
not substantially performed his/her duties along


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with an opportunity for the Employee to meet such demands, which the Employee
fails to accomplish within a reasonable period of time.

        (b) Change of Control. "Change of Control" shall mean the occurrence of
any of the following events:

                  (i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifteen percent (15%) or
more of the total voting power represented by the Company's then outstanding
voting securities;

                  (ii) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation;

                  (iii) The approval by the shareholders of the Company of a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets;
or

                  (iv) A change in the composition of the Board, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (A) are directors of the Company as
of the date hereof, or (B) are elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of those directors whose
election or nomination was not in connection with any transaction described in
subsections (i), (ii) or (iii) or in connection with an actual or threatened
proxy contest relating to the election of directors of the Company.

        (c) Compensation Continuation Period. "Compensation Continuation Period"
shall mean the period of time commencing with termination of the Employee's
employment in an Involuntary Termination during the term of this Agreement and
ending with the expiration of thirty-six (36) months following the date of the
Employee's termination.

        (d) Current Compensation. "Current Compensation" shall mean an amount
equal to the greater of (i) Employee's Base Compensation earned in the fiscal
year preceding the fiscal year of Employee's termination; or (ii) Employee's
Base Compensation for the fiscal year of Employee's termination, including 100%
of any bonus which the Employee could have earned during such fiscal year,
assuming the achievement of all relevant Employee and Company goals, milestones
and performance criteria.


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        (e) Disability. "Disability" shall mean that the Employee has been
unable to perform his duties under this Agreement as the result of his
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the Employee
or the Employee's legal representative (such Agreement as to acceptability not
to be unreasonably withheld). Termination resulting from Disability may only be
effected after at least 30 days' written notice by the Company of its intention
to terminate the Employee's employment. In the event that the Employee resumes
the performance of substantially all of his/her duties hereunder before the
termination of his employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked.

        (f) Hostile Takeover. "Hostile Takeover" shall mean any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended) becoming the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company's then outstanding voting securities, without the approval of the
Company's Board of Directors;

        (g) Involuntary Termination. "Involuntary Termination" shall mean (i)
without the Employee's express written consent, the assignment to the Employee
of any duties or the significant reduction of the Employee's duties, either of
which is inconsistent with the Employee's position with the Company and his/her
responsibilities in effect immediately prior to such assignment, or the removal
of the Employee from such position and responsibilities; (ii) without the
Employee's express written consent, a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Employee immediately prior to such reduction; (iii) a
reduction by the Company in the Base Compensation of the Employee as in effect
immediately prior to such reduction; (iv) a material reduction by the Company in
the kind or level of employee benefits to which the Employee is entitled
immediately prior to such reduction, with the result that the Employee's overall
benefits package is significantly reduced; (v) the relocation of the Employee to
a facility or a location more than 30 miles from the Employee's then present
location, without the Employee's express written consent; (vi) any purported
termination of the Employee by the Company that is not effected for Disability
or for Cause, or any purported termination for which the grounds relied upon are
not valid; or (vii) the failure of the Company to obtain the assumption of this
Agreement by any successors contemplated in Section 9 below; provided, however,
that no Involuntary Termination shall be deemed to have occurred if any such
successor substitutes an agreement for this Agreement providing comparable
severance benefits to those provided for in this Agreement.

10. Golden Parachute Excise Tax.

        (a) Reimbursement. In the event that it shall be determined that any
payment or other benefit by the Company to or for the benefit of the Employee
under this Agreement, whether paid or payable, but determined without regard to
any additional payments required under this Section (the "Payments"), would be
subject to the excise tax imposed by


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Section 4999 of the Internal Revenue Code (the "Excise Tax"), then the Employee
shall be entitled to receive an additional payment from the Company (the "First
Reimbursement Payment") equal to one hundred percent (100%) of any Excise Tax
actually paid or payable by the Employee in connection with the Payments, plus
an additional payment from the Company in such amount that after payment of all
taxes (including, without limitation, any interest and penalties on such taxes
and the Excise Tax) on the Reimbursement Payment, the Employee retains an amount
equal to the Reimbursement Payment.

        (b) Determination. Unless the Company and the Employee otherwise agree
in writing, any determination required under this Section shall be made in
writing by the Company's primary independent public accounting firm (the
"Accountants"), whose determination shall be conclusive and binding upon the
Employee and the Company for all purposes. For purposes of making the
calculations required by this Section, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code. The Company and the Employee shall furnish to the
Accountants such information and documents as the Accountants may reasonably
request in order to make their determination under this Section. The Company
shall bear all costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section.

11. Successors.

        (a) Company's 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 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. For all purposes under this Agreement, the term "Company" shall
include any successor to the Company's business and assets that executes and
delivers the assumption agreement described in this subsection (a) or which
becomes bound by the terms of this Agreement by operation of law.

        (b) Employee's Successors. The terms of this Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, devisees and legatees.

12. Notice.

        (a) General. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered personally, or by facsimile, or three business days after deposit in
the U.S. mail by registered or certified mail, return receipt requested and
postage prepaid. In the case of the Employee, mailed notices shall be addressed
to him/her at the home address which he/she most recently communicated to the
Company in writing. In the case of the Company, mailed notices shall be


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addressed to its corporate headquarters, and all notices shall be directed to
the attention of its Secretary.

        (b) Notice of Termination. Any termination by the Company for Cause or
by the Employee as a result of an Involuntary Termination shall be communicated
by a notice of termination to the other party hereto given in accordance with
this Section. Such notice shall indicate the specific termination provision in
this Agreement relied upon, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision so
indicated, and shall specify the termination date (which shall be not more than
15 days after the giving of such notice). The failure by the Employee to include
in the notice any fact or circumstance which contributes to a showing of
Involuntary Termination shall not waive any right of the Employee hereunder or
preclude the Employee from asserting such fact or circumstance in enforcing
his/her rights hereunder.

13. Confidentiality. The Parties hereto each agree to use their best efforts to
maintain in confidence the underlying facts leading up to this Agreement, the
existence of this Agreement, the contents and terms of this Agreement, and the
consideration for this Agreement. Each Party hereto agrees not to disclose or
use and to take every reasonable precaution to prevent disclosure or use of any
such information to or by third parties, and each agrees that there will be no
publicity, directly or indirectly, concerning any such information. The parties
hereto agree that breach of this Section shall constitute a material breach of
this Agreement that shall entitle the non-breaching party to all available legal
and equitable remedies including, but not limited to, recision of this
Agreement. The parties hereto further agree that all benefits to the Employee
under this Agreement shall be conditioned on his/her compliance with his/her
obligations under this Section.

14. Miscellaneous Provisions.

        (a) No Duty to Mitigate. The Employee shall not be required to mitigate
the amount of any payment or benefit 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 or benefit be reduced by the
Employee obtaining new employment or by any earnings that the Employee may
receive from any other source.

        (b) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of compliance
with, any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.

        (c) Whole Agreement. No agreements, representations or understandings
(whether oral or written and whether express or implied) between the parties
with regard to severance or other benefits in connection with a Change of
Control that are not expressly set forth or referred to in this Agreement have
been made or entered into by either party.


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        (d) Choice of Law. The validity and interpretation of this Agreement
shall be governed by the laws of the State of California without reference to
rules of conflicts of law. Employee hereby consents to the personal jurisdiction
of the state and federal courts located in California for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.

        (e) Severability. If any portion of this Agreement is held by an
arbitrator or a court of competent jurisdiction to conflict with any federal,
state or local law, or to be otherwise invalid or unenforceable, such portion of
this Agreement shall be of no force or effect and the remaining provisions of
this Agreement shall otherwise remain in full force and effect and be construed
as if such portion had not been included in this Agreement.

        (f) Arbitration. Employee agrees that any dispute or controversy arising
out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach, or termination
thereof, shall be settled by binding arbitration to be held in Santa Clara
County, California in accordance with the rules of the American Arbitration
Association then in effect. The prevailing party shall be entitled to recover
its attorneys' fees. Judgment may be entered on the arbitrator's award in any
court having jurisdiction. Punitive damages shall not be awarded.

        (g) No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this subsection (g) shall be void.

        (h) Employment Taxes. All payments made pursuant to this Agreement will
be subject to withholding of applicable income and employment taxes.

        (i) Assignment by Company. The Company may assign its rights under this
Agreement to an affiliate, and an affiliate may assign its rights under this
Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case of
any such assignment, the term "Company" when used in a Section of this Agreement
shall mean the corporation that actually employs the Employee.

        (j) 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.


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        IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.

                                     COMPANY:

                                     ARTHROCARE CORPORATION

                                     By:
                                           -------------------------------------
                                     Title:
                                           -------------------------------------


                                     EMPLOYEE:

                                     -------------------------------------------
                                     (Signature)

                                     Michael A. Baker
                                     -------------------------------------------
                                     (Print Name)

                                     Date:
                                           -------------------------------------


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