2006 Executive Officer Bonus Plan



 Exhibit 10.54 
 2006 Executive Officer Bonus Plan 
 Objective: 
  

	 	-	Align the interests of employees and shareholders in the future growth and success of ArthroCare Corporation (the “Company”) by rewarding employee performance.


 Bonus Pool: 
  

	 	-	Up to 100% of the Total Bonus Potential of all Eligible Participants during the period of January 1, 2006 through December 31, 2006 (the “Bonus Period”). The
Total Bonus Potential for an Eligible Participant will be the Eligible Participant’s Bonus Potential. For example, the Total yearly Bonus Potential for an Eligible Participant (other than the Company’s CEO) with a base salary of $200,000
shall be $120,000. Twenty five percent (25%) of the Eligible Participant’s Bonus Potential will be paid at midyear if the Company is expected to achieve its fiscal year goals. The Total Bonus Potential of an Eligible Participant, other than the
Chief Executive Officer, may be increased or decreased at the sole discretion of the Chief Executive Officer of the Company. The Total Bonus Potential of the Chief Executive Officer may be increased or decreased at the sole discretion of the
Company’s Board of Directors. 

 Eligible Participants: 
  

	 	-	All executive officers of the Company from the period of January 1, 2006 through the payment date of a bonus (the “Bonus Payment Date”) who began employment with the
Company on or before December 31, 2006 and are not ineligible due to performance issues, as approved by the Compensation Committee of the Company’s Board of Directors. Pro rata eligibility for executive officers who start after
January 1, 2006 and remain employed by the Company through the Bonus Payment Date. Executive officers who go on leave of absence will have their bonus prorated for time worked through the Bonus Payment Date. 

 Bonus Potential: 
  

	 	-	60% of base salary for fiscal year end December 31, 2006 for Vice Presidents who are officers of the company 

  

	 	-	70% of base salary for fiscal year end December 31, 2006 for Chief Executive Officer 

 Bonus Factors: 
  

	 	-	In the event the Company achieves at least 90% (the “Minimum Achievement Level”) of the Total Net Revenue Goal, and Earnings before Income Tax Depreciation Amortization
and non-cash equity Compensation (EBIT-DAC) Goal, a bonus will be earned by each Eligible Participant. The Total Net Revenue Goal, and EBIT-DAC Goal shall be as set forth in the Company’s operating budget for the period of January 1, 2006
through December 31, 2006, as approved by the Company’s Board of Directors. 









	 	-	Each of the Total Net Revenue Goal, and EBIT-DAC Goal shall be ascribed a percentage weight totaling 100% in the aggregate, as follows: 

 Total Net Revenue Goal – 70% 
 EBITDAC
Goal – 30% 
  

	 	-	The Minimum Achievement Level is determined by adding the weighted average of the Total Net Revenue Goal (i.e., Total Net Revenue Goal Achieved (as defined below) multiplied by
70%), plus the weighted average of the EBIT-DAC Goal (same formula). If the sum of these percentages is equal to or greater than 90%, a bonus is payable. 

  

	 	-	If the Bonus Achievement Level is between 90% and 100%, then Eligible Participants are eligible for a prorated bonus equal to a 1 to 3 ratio of the bonus achieved. For example, if
the Bonus Achievement Level is 90%, then Eligible Participants are eligible for 70% of their Total Bonus Potential. 

 Bonus Multiplier:

  

	 	-	If the Bonus Achievement Level is in excess of 100%, then Eligible Participants are eligible for 100% of their Total Bonus Potential, plus a percentage of their Total Bonus
Potential equal to three times the portion in excess of 100%. For example, if the Bonus Achievement Level is 110%, then Eligible Participants are eligible for 100% of their Total Bonus Potential, plus 30% of the Total Bonus Potential.


 Defined Terms: 
 Total
Net Revenue shall mean the amount of ArthroCare total net revenue from the period of January 1, 2006 through December 31, 2006. 
 EBITDAC shall mean Earnings before Income Tax, Depreciation, Amortization and non-cash equity Compensation. 
 Total Net
Revenue Goal Achieved shall mean the percentage determined by dividing total net revenue by the Total Net Revenue Goal. 
 EBITDAC Goal
Achieved shall mean the percentage determined by dividing the EBITDAC by the EBITDAC Goal. 
 Bonus Achievement Level shall mean
the actual level of bonus achieved. 
 Any bonuses payable under this 2006 Bonus Plan are subject to the approval of the Company’s Board of Directors.
The Company has the right to make changes in plan participation, the bonus pool or any other aspect of this plan at any time and without prior notice.