ARTHROCARE CORPORATION
NONSTATUTORY OPTION PLAN

1. Purposes of the Plan

- to attract and retain the best available personnel for positions of
substantial responsibility,
- to provide additional incentive to Employees and Consultants, and
- to promote the success of the Company's business.

Options granted under the Plan may be Nonstatutory Stock Options.  Incentive
Stock Options may not be granted under the Plan.  Stock Purchase Rights may also
be granted under the Plan.  Options and Stock Purchase Rights may not be granted
under the Plan to Officers and Directors.

1. Definitions
2. "Administrator" means the Board or any Committee
administering the Plan, in accordance with Section 4 of the Plan.
3. "Applicable Laws" means the legal requirements relating to
the administration of stock option plans under state corporate and securities
laws and the Code.
4. "Board" means the Board of Directors of the Company.
5. "Code" means the Internal Revenue Code of 1986, as
amended.
6. "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
7. "Common Stock" means the Common Stock of the Company.
8. "Company" means ArthroCare Corporation, a Delaware
corporation.
9. "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services and who is
compensated for such services, provided that the term "Consultant"
shall not include Employees, Directors or Officers.
10. "Continuous Status as an Employee or Consultant" means that
the employment or consulting relationship with the Company or any Parent or
Subsidiary is not interrupted or terminated.  Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any
leave of absence approved by the Company, including sick leave, military leave,
or any other personal leave or (ii) transfers between locations of the Company
or between the Company, its Parent, its Subsidiaries or its successor.
11. "Director" means a member of the Board.
12. "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
13. "Employee" means any person employed by the Company or any
Parent or Subsidiary of the Company; provided, however, that the term Employee
shall not include Officers or Directors.
14. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
15. "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
16. if the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, the Fair Market Value of a Share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
17. If the Common Stock is quoted on the NASDAQ System (but not on the National
Market System thereof) or is regularly quoted by a recognized securities dealer
but selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the Common
Stock on the last market trading day prior to the day of determination, as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable;
18. In the absence of an established market for the Common Stock, the Fair
Market Value shall be determined in good faith by the Administrator.
19. "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
20. "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
21. "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option or Stock Purchase Right grant.  The
Notice of Grant is part of the Option Agreement.
22. "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
23. "Option" means a stock option granted pursuant to the
Plan.
24. "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant.  The Option Agreement is subject to the terms and conditions of
the Plan.
25. "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.
26. "Optioned Stock" means the Common Stock subject to an
Option or Stock Purchase Right.
27. "Optionee" means an Employee or Consultant who holds an
outstanding Option or Stock Purchase right.
28. "Parent" means a "parent corporation," whether
now or hereafter existing, as defined in Section 424(e) of the Code.
29. "Plan" means this Nonstatutory Option Plan.
30. "Restricted Stock" means share of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 below.
31. Stock Subject to the Plan
32. Administration of the Plan
33. The Plan shall be administered by (A) the Board or (B) a committee
designated by the Board, which committee shall be constituted to satisfy
Applicable Laws.  Once appointed, such Committee shall serve in its designated
capacity until otherwise directed by the Board.  The Board may increase the size
of the Committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by Applicable Laws.
34. Powers of the Administrator
35. to determine the Fair Market Value of the Common Stock, in accordance with
Section 2(n) of the Plan;
36. to select the Consultants and Employees to whom Options and Stock Purchase
Rights may be granted hereunder;
37. to determine whether and to what extent Options and Stock Purchase Rights or
any combination thereof, are granted hereunder;
38. to determine the number of shares of Common Stock to be covered by each
Option and Stock Purchase Right granted hereunder;
39. to approve forms of agreement for use under the Plan;
40. to determine the terms and conditions, not inconsistent with the terms of
the Plan, of any award granted hereunder.  Such terms and conditions include,
but are not limited to, the exercise price, the time or times when Options or
Stock Purchase Rights may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions and any
restriction or limitation regarding any Option or Stock Purchase Right or the
shares of Common Stock relating thereto, based in each case on such factors as
the Administrator, in its sole discretion, shall determine;
41. to reduce the exercise price of any Option or Stock Purchase Right to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option or Stock Purchase Right shall have declined since the
date the Option or Stock Purchase Right was granted;
42. to construe and interpret the terms of the Plan and awards granted pursuant
to the Plan;
43. to prescribe, amend and rescind rules and regulations relating to the plan;
44. to modify and amend each Option or Stock Purchase Right (subject to Section
15(c) of the Plan);
45. to authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Option or Stock Purchase Right previously
granted  by the Administrator;
46. to institute an Option Exchange Program;
47. to determine the terms and restrictions applicable to Options and Stock
Purchase Rights and any Restricted Stock;
48. to allow Optionees to satisfy withholding tax obligations by electing to
have the Company withhold from the Shares to be issued upon exercise of an
Option or Stock Purchase Right that number of Shares having a Fair Market Value
equal to the minimum amount required to be withheld based on the statutory
withholding rates for federal and state tax purposes that apply to supplemental
taxable income.  The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined.  All elections by Optionees to have Shares withheld for this purpose
shall be made in such form and under such conditions as the Administrator may
deem necessary or advisable; and
49. to make all other determinations deemed necessary or advisable for
administering the Plan.
50. Effect of Administrator's Decision
51. Eligibility
52. Limitations
53. Term of Plan
54. Term of Option
55. Option Exercise Price and Consideration
56. Exercise Price
57. Waiting Period and Exercise Dates
58. Form of Consideration
59. cash;
60. check;
61. delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall require
to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the exercise price;
62. a reduction in the amount of any Company liability to the Optionee,
including any liability attributable to the Optionee's participation in any
Company-sponsored deferred compensation program or arrangement;
63. any combination of the foregoing methods of payment; of
64. such other consideration and method of payment for the issuance of Shares to
the extent permitted by Applicable Laws.
65. Exercise of Option
66. Procedure for Exercise: Rights as a Shareholder
67. Termination of Employment or Consulting Relationship
68. Disability of Optionee
69. Death of Optionee
70. Rule 16b-3
71. Stock Purchase Rights
72. Rights to Purchase
73. Repurchase Option
74. Rule 16b-3
75. Other Provisions
76. Rights as a Shareholder
77. Non-Transferability of Options and Stock Purchase Rights
78. Adjustments Upon Chances in Capitalization, Dissolution, Merger, Asset
Sale or Chance of Control
79. Chances in Capitalization
80. Dissolution or Liquidation
81. Merger or Asset Sale
82. Date of Grant
83. Amendment and Termination of the Plan.
84. Amendment and Termination
85. Effect of Amendment or Termination
86. Conditions Upon Issuance of Shares
87. Legal Compliance
88. Investment Representations
89. Liability of Company
90. Inability to Obtain Authority
91. Grants Exceeding Allotted Shares
92. Reservation of Shares

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