SENIOR
      VP
      CONTINUITY AGREEMENT

    


     This
      Senior VP
      Continuity Agreement (the “Agreement”)
      is
      made and entered into effective as of ____________,
      by and
      between ______________ (the “Employee”)
      and
      ArthroCare Corporation, a Delaware corporation (the “Company”).
      

    


    RECITALS

    


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

    
      
         

      

      
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    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
time
      off,
      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.
      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; or
      (ii)
      the
      date that all obligations of the parties hereunder have been satisfied. 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.
       Equity
      Acceleration Upon a Change of Control.
      Upon a
      Change of Control, Employee shall immediately become 50% vested with respect
      to
      any outstanding unvested options to purchase the Company’s capital stock or
      outstanding stock appreciation rights (SARs) that Employee then holds and/or
      any
      restrictions with respect to 50% of the unvested restricted shares and
      restricted stock units (RSUs) of the Company’s capital stock that Employee then
      holds shall immediately lapse at the time of the Change of Control.

     

    6.
       Equity
      Acceleration Upon a Hostile Takeover.
      Upon a
      Hostile Takeover, Employee shall immediately become 100% vested with respect
      to
      any outstanding options to purchase the Company’s capital stock or outstanding
      SARs that Employee then holds and/or any restrictions with respect to restricted
      shares and RSUs of the Company’s capital stock that Employee then holds shall
      immediately lapse.

     

    7.
       Compensation
      Upon Termination
      of
      Employment.
      

     

    (a) Termination
      Without Cause Apart from a Change of Control. If
      the
      Employee's employment is
      terminated by
      the
      Company without
      Cause at
      any
      time either
      prior to the occurrence of a Change of Control or after the twenty
      -four
      (24) month
      period following the effective date of a
      Change
      of Control,
      then the
      Employee
      shall be entitled to
      receive
      severance benefits as follows:

     

    
      
         

      

      
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    (i) Accrued
      Compensation.
      The
      Company shall pay to the Employee his or her full earned but unpaid base salary,
      when due, through the date of termination at the rate in effect immediately
      prior to the date of termination, plus all other amounts to which the Employee
      is entitled under any compensation plan or practice of the Company at the time
      such payments are due, including accrued paid time off. The Employee will not
      accrue paid time off following the date of termination.

     

    (ii)
       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 base salary (not including any
      bonus) in effect immediately prior to the Employee’s termination. 

     

    (iii)
       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 (1) 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 (2) the date six (6) months following
      the
      Employee’s termination, the Company’s obligations to reimburse the Employee
      under this subsection (iii) shall cease. 

     

    (iv) Equity
      Grants.
      Effective as of the date of termination, the Employee’s outstanding options and
      SARs will cease to continue vesting and all of the unvested options and SARs
      will be canceled. The Employee’s outstanding options and SARs which are vested
      at the time of termination will remain exercisable in accordance with the terms
      of the stock option agreements or stock appreciation rights agreements, as
      applicable, pursuant to which they were granted for the periods set forth
      therein. Effective as of the date of termination, any restrictions with respect
      to restricted shares and RSUs of the Company’s capital stock that Employee then
      holds shall cease lapsing and all of the unvested shares shall be subject to
      forfeiture and/or repurchase pursuant to the terms of the restricted stock
      agreements or restricted stock unit agreements, as applicable, pursuant to
      which
      they were granted.

     

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

     

    (i) Accrued Compensation.
      The
      Company shall pay to the Employee his or her full earned but unpaid base salary,
      when due, through the date of termination at the rate in effect immediately
      prior to the Involuntary Termination, plus all other amounts to which the
      Employee is entitled under any compensation plan or practice of the Company
      at
      the time such

      
        
           

        

        
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payments
      are due, including accrued paid time off. The Employee will not accrue paid
      time
      off following the date of termination.

     

    (ii) 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.

     

    (iii)  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 (1)
      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 (2)
      the
      date twenty-four (24) months following the Employee's termination, the Company's
      obligations to reimburse the Employee under this subsection (iii)
      shall
      cease; provided,
      finally,
      that if
      the Company's obligations under this subsection (iii)
      cease
      pursuant to clause (1),
      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
      (iii)
      multiplied by six (6). 

     

    (iv)
       Outplacement
      Services.
      During
      the twenty-four (24) 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.

     

    (v)
       Equity
      Acceleration.
      At the
      time of the Involuntary Termination, Employee shall immediately become 100%
      vested with respect to any outstanding options to purchase the Company’s capital
      stock or outstanding SARs that Employee then holds and/or any restrictions
      with
      respect to restricted shares and RSUs of the Company’s capital stock that
      Employee then holds shall immediately lapse.

     

    (c)
       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.

     

    (d)
       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


    
      
         

      

      
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    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.

     

    (e) Release.
      Payment
      of any amount to the
      Employee pursuant
      to this Section 7 and
      the
Employee’s
      acceptance
      of
such
      amounts shall
      be
subject
      to the execution
      of
a
      general
      waiver and release of all claims in the form attached hereto as Exhibit
      A.

    


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

     

    (a)
       Cause.
      “Cause”
shall
      mean the
      happening of one or more of the following events, in each case as determined
      in
      good faith by the Company’s Board of Directors, (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,
      (iv)
      the
      Employee’s failure to satisfactorily perform the Employee's obligations under
      Section 1 of this Agreement, which failure adversely affects the business of
      the
      Company or its affiliates, as determined by a majority of the members of the
      Company’s Board of Directors, and
      (v)
      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
      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

    
      
         

      

      
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    (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 (i)
      in
      the case of a termination pursuant to Section 7(a) above, the period of time
      commencing with termination of the Employee's employment by the Company without
      Cause during the term of this Agreement and ending with the expiration of six
      (6) months following the date of the Employee's termination, or (ii) in the
      case
      of a termination pursuant to Section 7(b) above, 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 twenty-four (24) 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.

     

    (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


    
      
         

      

      
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    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 12
      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.

    


    9.  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 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.

    


    10. Nonsolicitation
      Covenant.
      The
      Employee hereby agrees that he or she shall not, during the term of Employee’s
      employment with the Company and until the later of (i) one year

      
        
           

        

        
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    following
      termination of Employee’s employment with the Company or (ii) the date upon
      which the Employee ceases receiving payments pursuant to Section 7 above,
      without the prior written consent of the Company’s Board of Directors, do any of
      the following:

     

    (a) solicit
      or influence or attempt to influence any client, customer or other person either
      directly or indirectly, to direct any purchase of the Company's products and/or
      services to any person, firm, corporation, institution or other entity in
      competition with the business of the Company; and

     

    (b) solicit
      or influence or attempt to influence any person employed by the Company to
      terminate or otherwise cease his or her employment with the Company or become
      an
      employee of any competitor of the Company.

     

    The
      Employee’s obligations under this Section 10 shall survive termination of the
      Employee’s employment with the Company and the termination of this
      Agreement.

     

    11. Non-Disparagement.
      The
      Employee agrees to refrain from any disparagement, criticism, defamation,
      slander, or tortious interference with the contracts and relationships of the
      Company or its employees, directors or principal stockholders. The Employee’s
      obligations under this Section 11 shall survive termination of the Employee’s
      employment with the Company and the termination of this Agreement.

     

    12.  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.

    


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


    
      
         

      

      
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    Secretary.

     

    (b)
       Notice
      of Termination.
      Any
      termination of
      Employee’s employment 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.
      

    


    14.  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, rescission
      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.

     

    15.  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.
      This
      Agreement sets forth the entire agreement of the parties hereto in respect
      of
      the subject matter contained herein and supersedes all prior
      agreements,
      promises, covenants, arrangements, communications,
      representations or warranties, whether
      oral or written,
      by any
      officer, employee or
      representative
      of any party hereto, and any prior agreement of the parties hereto in respect
      of
      the subject matter contained herein, including, without limitation, any prior
      severance or change in control agreements is
      hereby
      terminated and


    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    


    cancelled.
      Any of the Employee’s rights hereunder shall be in addition
      to any
      rights the Employee may otherwise have under benefit plans or agreements of
      the
      Company (other
      than
      severance plans or agreements or the Prior Agreement) to which the Employee
      is a
      party
      or
      in which the Employee is a participant, including, but
      not
limited
      to, any Company sponsored employee benefit plans and equity incentive plans.
      The
      provisions of
      this
      Agreement shall
      not
      in any way abrogate the Employee’s rights under such other plans and
      agreements.

     

    (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.
      

    


    (i) Unless
      otherwise provided herein, in the event that there shall be a dispute
      (a
      “Dispute”) among the parties
      arising
      out of
      or
      relating
      to
      this
      Agreement, or the breach
      thereof,
the
      parties agree that such dispute shall
      be
resolved
      by
final
      and binding
      arbitration  before
      a
      single arbitrator
      in Santa
      Clara County, California,
      administered by
      the
      American Arbitration Association (the
      “AAA”), in
      accordance
      with AAA’s Employment ADR Rules. 
      The arbitrator’s
      decision shall be final and binding upon the parties, and may be entered and
      enforced in any court of competent jurisdiction by either of the parties. The
      arbitrator shall have the power to grant temporary, preliminary and permanent
      relief, including without limitation, injunctive relief and specific
      performance. 

     

    (ii) The
      Company will pay the direct costs and expenses of the arbitration. The Employee
      and the Company are responsible for their respective attorneys’ fees incurred in
      connection with enforcing this Agreement; however, the Employee and the Company
      agree that, except as may be prohibited by law, the arbitrator may, in his
      or
      her discretion, award reasonable attorneys’ fees to the
      prevailing party. 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. 


    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    (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.


    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    


    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)

     

    ___________________________________

    (Print)

    


     Date:
      ______________________________

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

     

    EXHIBIT
      A

    


    EMPLOYEE
      AGREEMENT AND RELEASE

    


    Pursuant
      to a Senior VP Continuity Agreement (the “Continuity Agreement”) dated
      _________________, with ArthroCare Corporation (the “Company”), I have been
      offered the opportunity to receive certain severance benefits from the Company
      described in Section 7 of the Continuity Agreement to which I otherwise would
      not be entitled by executing this Employee Agreement and Release (this
“Agreement”).

     

    I
      hereby
      confirm my obligations under the Company’s proprietary information and
      inventions agreement. 

    


    In
      granting the release herein, I acknowledge that I understand that I am waiving
      the benefit of any provision of law in any jurisdiction to the following effect:
      “A general release does not extend to claims which the creditor does not know
      or
      suspect to exist in his favor at the time of executing the release, which if
      known by him must have materially affected her settlement with the debtor.”
(California Civil Code Section 1542). I hereby expressly waive and relinquish
      all rights and benefits under that section and any law or legal principle of
      similar effect in any jurisdiction with respect to the release of unknown and
      unsuspected claims granted in this Agreement.

    


    Except
      as
      otherwise set forth in this Agreement, I hereby release, acquit and forever
      discharge the Company, its parents and subsidiaries, and its and their
      respective officers, directors, agents, servants, employees, shareholders,
      successors, assigns and affiliates, of and from any and all claims, liabilities,
      demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
      and obligations of every kind and nature, in law, equity, or otherwise, known
      and unknown, suspected and unsuspected, disclosed and undisclosed (other than
      any claim for indemnification I may have as a result of any third party action
      against me based on my employment with the Company), arising out of or in any
      way related to agreements, events, acts or conduct at any time prior to the
      date
      I execute this Agreement, including but not limited to: all such claims and
      demands directly or indirectly arising out of or in any way connected with
      my
      employment with the Company or the termination of that employment, including
      but
      not limited to, claims of intentional and negligent infliction of emotional
      distress, any and all tort claims for personal injury, claims or demands related
      to salary, bonuses, commissions, stock, stock options, or any other ownership
      interests in the Company, paid time off, fringe benefits, expense
      reimbursements, severance pay, or any other form of compensation; claims
      pursuant to any federal, state or local law or cause of action including, but
      not limited to, the federal Civil Rights Act of 1964, as amended; the Federal
      Equal Pay Act, as amended; the federal Age Discrimination in Employment Act
      of
      1967, as amended (“ADEA”); the Older Workers Benefit Protection Act of 1990; the
      federal Employee Retirement Income Security Act of 1974, as amended; the federal
      Americans with Disabilities Act of 1990; all claims under the Fair Labor
      Standards Act; all claims under the National Labor Relations Act; all claims
      under the Family and Medical Leave Act; all claims under 42 U.S.C. 1981; the
      California Fair Employment and Housing Act, as amended, and the California
      Labor
      Code; tort law; contract law; wrongful discharge; harassment; discrimination;
      fraud; defamation; emotional distress; and breach of the implied covenant of
      good faith and fair dealing; all claims under any principle of common
      law;


    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    


    all
      claims concerning any right to reinstatement; and/or any other local, state,
      or
      federal law governing discrimination in employment and/or the payment of wages
      and benefits; provided, however, that nothing in this paragraph shall be
      construed in any way to release the Company from its obligation to indemnify
      me
      pursuant to the Company's indemnification agreement.

    


    I
      acknowledge that I am knowingly and voluntarily waiving and releasing any rights
      I may have under ADEA. I also acknowledge that the consideration given for
      the
      waiver and release in the preceding paragraph hereof is in addition to anything
      of value to which I was already entitled. I further acknowledge that I have
      been
      advised by this writing, as required by the ADEA, that: (A) my waiver and
      release do not apply to any rights or claims that may arise on or after the
      date
      I execute this Agreement; (B) I have the right to consult with an attorney
      prior
      to executing this Agreement; (C) I have twenty-one (21) days to consider this
      Agreement (although I may choose to voluntarily execute this Agreement earlier);
      (D) I have seven (7) days following the execution of this Agreement by the
      parties to revoke the Agreement; and (E) this Agreement shall not be effective
      until the date upon which the revocation period has expired, which shall be
      the
      eighth day after this Agreement is executed by me, provided that the Company
      has
      also executed this Agreement by that date.

    


    BY
      SIGNING BELOW, I ACKNOWLEDGE THAT I HAVE READ THIS AGREEMENT, UNDERSTAND ITS
      TERMS AND EFFECT, AND AGREE TO IT VOLUNTARILY.

    


     

    Date:    

    [EMPLOYEE]
      

    


    


    


    Acknowledged
      and Agreed:

    


    ARTHROCARE
      CORPORATION

    


    


    By:

    Name:

    Title:

    
      
         

      

        -14-