May 12, 1999
 
 
Dear Christine:
 
This letter is to serve as confirmation of the employment agreement
between you and ArthroCare Corporation (the "Company").  You currently
hold the position of Vice President, Finance and Chief Financial
Officer.  In this position, you are 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 was January 9,
1998, and you report directly to me.
 
The terms of your offer are as follows:
 
1.      Compensation:  Your annual salary is $135,000.00.  The Company pays
you $5,192.23 bi-weekly in accordance with the Company's standard
payroll policies.  Your salary began as of the effective date of
employment at a rate agreed upon at that time.  The first and last
payment by the Company to you will be adjusted, as necessary, to
reflect a commencement or termination date other than the first or
the last working day of any period.  You are also eligible for an
annual bonus of approximately 30% of your then-current salary which
is based upon the successful completion of agreed upon goals and
objectives and the Company's financial performance.
 
2.      Benefits:  You are entitled, during the term of your employment, to
the Company's standard vacation and benefits covering employees, as
such may be in effect from time to time.
 
3.  Stock Options: The Company granted you an initial option to purchase
75,000 shares of the Company's Common Stock pursuant to the Company's
1993 Stock Plan (the "Plan"), a copy of which was provided to you.
The options vest over four years with 1/4 of the shares subject to
the options vesting one year from the effective date of your
employment and 1/48 of the shares vesting at the end of each full
month thereafter until all shares are vested, subject to all
provisions of the Plan and your continued employment with the
Company.  Subsequent stock option grants have been, and will be, made
pursuant to this same Plan with vesting schedules pursuant to
standard Company practice at the time of grant.
 
 
 
 
 
Christine Hanni
May 12, 1999
Page 2 of 2
 
4.      At-Will Employment:  You should be aware that 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
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.
 
5.      The terms of this letter supersede any remaining current terms of any
previous employment arrangements with the Company.
 
Christine, we look forward to your continued employment with 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.
 
Sincerely yours,
 
ArthroCare Corporation
 
 
 
 
 
Michael A. Baker
President and Chief Executive Officer
 
MAB/gt
 
Accepted:
 
 
__________________________________              ______________________________
Christine Hanni                                 Date