June 20, 1997

Michael Baker
14364 Via Baroda
Rancho Santa Fe, CA  92067

Dear Mike:

On behalf of ArthroCare Corporation (the "Company") and the Board of 
Directors, I am pleased to invite you to join the Company as our next 
President and Chief Executive Officer, and Member of the Board of Directors 
 .  In this position, you will be expected to devote your full business 
time, attention, and energies to the performance of your duties with the 
Company.  The effective date of your employment will be as soon as 
reasonably possible, and you will be reporting directly to the Board of 
Directors.

The terms of this offer of employment are as follows:

1.      Compensation:  Your annual salary for FY97 will be $250,000.00.  
The Company will pay you $9,615.38 bi-weekly in accordance with the 
Company's standard payroll policies.  Your salary will begin as of 
the effective date of employment.  The first and last payment by the 
Company to you will be adjusted, if necessary, to reflect a 
commencement or termination date other than the first or last working 
day of a pay period.  

Fifty (50) percent of your 1997 actual compensation will be paid to 
you as a bonus on January 1, 1998.

        Your base salary will be revised on January 1, 1998.  You will 
present a FY98 plan for the Company to the Board.  Your target 
bonus will be fifty (50) percent of your 1998 salary and it will be 
paid to you in January 1999, subject to meeting the Company's 
objectives for 1998, which will be set by you and the Board of 
Directors.

2.      Benefits:  You will be entitled, during the term of your employment, 
to the Company's standard benefits covering employees, as such may be 
in effect from time to time.  You will also be entitled to four (4) 
weeks of paid vacation per year.





Michael Baker
June 20, 1997
Page 2 of 4

3.      Stock Options:  Subject to action at the Company's next Board of 
Directors Compensation Committee meeting and compliance with 
applicable state and federal securities laws, the Company will grant 
you an option to purchase 300,000 shares of the Company's Common 
Stock pursuant to the Company's 1993 Stock Plan (the "Plan"), a copy 
of which will be provided to you.  The exercise price of the option 
will be the closing price of the Company's Common Stock on June 20, 
1997.   The option will vest over four years with 1/48 of the shares 
vesting at the end of each full month until all shares are vested, 
subject to all provisions of the Plan and your continued employment 
with the Company.  In the event that the Company is sold, the vesting 
of stock will accelerate and you will become fully vested (subject to 
the Golden Parachute provision which limits salary to three (3) times 
base).

4.      Prior Bonus:  We understand that Medtronic may try to reclaim the 
bonus, tax payments, expenses or other claims paid to you, in that 
event, we will reimburse you for that amount. 

5.      Relocation Expenses:  You shall be paid a lump sum payment of $95,000 
to cover the reasonable and customary out-of-pocket expenses 
associated with (i) the sale of your current residence, including 
real estate commission and reasonable and customary closing expenses 
paid by you; (ii) relocation of family and household goods, including 
travel; (iii) temporary living expenses in the Bay Area; and (iv) 
federal and state taxes related to relocation.  Expenses in excess of 
$95,000 will be your responsibility.  In addition, the Company will 
pay for the expenses incurred in housing hunting trips, and trips to 
visit your family during the time you are here and your family is in 
San Diego.

6.      Relocation Loan:  In the event you purchase a home in the Bay Area, 
the Company will agree to lend you $500,000 (the "Relocation Loan") 
provided that you obtain a first mortgage that permits a second 
mortgage to be placed against the residence at the close of escrow.  
Such Relocation Loan will be advanced to you in two parts: the first 
will be the amount advanced to you to repay Medtronic when they 
demand it. The balance of the $500,000 loan will be advanced to you 
at the close of escrow and the entire $500,000 will be secured by a 
second mortgage interest in the purchased home and will bear interest 
at the minimum applicable federal rate; provided, however, in the 
event that if the Relocation Loan can be structured as an "employee-
relocation loan" (as that term is defined under Treasury 
Regulations), the loan will be interest free.


Michael Baker
June 20, 1997
Page 3 of 4

7.      Loan Repayment:  The Relocation Loan (including any accrued interest) 
will be due and payable upon the first to occur of:

a) following a sale or transfer of the property or any interest 
therein;

b) if you choose to leave the employment of ArthroCare, the loan 
becomes immediately payable; if ArthroCare terminates your 
employment, then the loan will be due and payable in twelve months 
thereafter;

c) pursuant to Section 3 above in the event the Company is sold, then 
the loan will be due and payable in twelve months thereafter.

8.      At-Will Employment:  You should be aware that under California law 
your employment with the Company is for no specified period and 
constitutes "at-will" employment.  As a result, you are free to 
terminate your employment at any time, for any reason or for no 
reason.  Similarly, the Company is free to terminate your employment 
at any time,  for any reason or for no reason.  In the event of 
termination of your employment, you will not be entitled to any 
payments, benefits, damages, awards, or compensation other than as 
may otherwise be available in accordance with the Company's 
established employee plans and policies at the time of termination 
(subject to the provisions of paragraph 9 below).

9.      Severance Agreement:  While the Company is free to terminate your 
employment at any time, for any reason or no reason, in the event of 
termination of your employment by the Company without Justifiable 
Cause (as defined below), you will be entitled to your monthly base 
salary paid each month for twelve (12) months.  During those 12 
months, you will receive no bonuses and vesting of stock would cease.  
You would continue to receive health and other employee benefits that 
the Company provides.  These payments and benefits will terminate 
when you take your new employment within the twelve month period.  
However, we will make up the difference should your salary at the new 
position be less than that at ArthroCare, again, limited to the 
overall twelve month period.  In the event you terminate your 
employment with the Company or the Company terminates your employment 
for any Justifiable Cause, you will not be entitled to any payments, 
benefits, damages, awards or compensation other than as may be 
available in accordance with the Company's established employee plans 
and policies at the time of termination.


Michael Baker
June 20, 1997
Page 4 of 4

9.      Severance Agreement, continued:  The term "Justifiable Cause" shall 
include the occurrence of any of the following events:  (i) the 
conviction of, plea of nolo contendere in, felony or a crime 
involving moral turpitude, (ii) the commission of an intentional act 
of personal dishonesty or breach of fiduciary duty involving personal 
profit in connection with the Company, (iii) the commission of an 
act, or failure to act, which the Board of Directors of the Company 
shall reasonably have found to have involved gross misconduct or 
gross negligence in the conduct of your duties and (iv) alcoholism, 
drug dependency or habitual absenteeism which interferes with the 
performance of duties.

10.     Immigration Laws:  For purposes of federal immigration laws, you will 
be required to provide to the Company documentary evidence of your 
identity and eligibility for employment in the United States.  Such 
documentation must be provided within 3 business days of the 
effective date of your employment, or your employment relationship 
with the Company will be terminated.

11.     Proprietary Information Agreement:  As a condition of accepting this 
offer of employment, you will be required to complete, sign and 
return the Company's standard form of Proprietary Information 
Agreement.

Mike, we look forward to you joining the Company.  If the foregoing terms 
are agreeable, please indicate your acceptance by signing the enclosed copy 
of this letter in the space provided below and returning it to me.  This 
offer will terminate if not extended or accepted on or before June 30, 
1997.

Sincerely yours,

ArthroCare Corporation



/s/ HIRA THAPLIYAL
Hira V. Thapliyal
President and CEO

ACCEPTED:

/s/ MICHAEL A. BAKER                           6/22/97
Michael Baker                                   Date