Document:

Unassociated Document

    Exhibit 10.73

     

     

    [Bank of America Letterhead]

    

    

    

    April 1, 2009

    

    

    ArthroCare
Corporation

    7500 Rialto
Boulevard

    Building Two, Suite 100

    Austin, Texas 78735

    
      	
              Attention:

            	
              Mr. Jeffrey
      Templer

            

    

    Mr. Richard Rew, Senior Vice-President
and General Counsel

    

    

    
      	
               
      

            	
              Re:

            	
              Credit Agreement dated as of
      January 13, 2006 (as amended by that certain First Amendment dated as of December
      18, 2007, that certain Second Amendment and Consent dated as of November
      26, 2008, that certain Waiver dated as of January 16, 2009 and as further
      amended, restated, supplemented or otherwise modified prior to the date
      hereof, the “Credit
      Agreement”) by and
      among ArthroCare Corporation, a Delaware corporation, as Borrower (the
      “Borrower”), the banks and other financial
      institutions party thereto from time to time, as Lenders (the
      “Lenders”) and Bank of America, N.A., as
      Administrative Agent, Swing Line Lender and L/C Issuer (the “Administrative
      Agent”). Each
      capitalized term used herein but not defined herein shall be defined in
      accordance with the Credit
Agreement.

            

    

    

    Dear Messrs. Templer and
Rew:

    

    This letter also references those
certain letters to the Borrower from the Administrative Agent dated February 23,
2009 (the “February 23
Letter”) and March 20, 2009
(the “March 20
Letter,” and together with
the February 23 Letter, the “Default
Letters”). As you are
aware, pursuant to the Default Letters the Administrative Agent notified you of
the existence and continuance of several Existing Events of Default (as defined
in the March 20 Letter) under the Credit Agreement. In the Default Letters, the
Administrative Agent further notified you that, by virtue of the Existing Events of Default
and in addition to any pertinent provision of any other Loan Document, the
Administrative Agent and the Lenders were not required to, and did not intend to, honor any
request for any Credit Extension (other than the possible extension/renewal of
an existing Letter of Credit) and that, among other things, the Administrative
Agent was expressly reserving its ability to exercise any further rights,
powers, and/or remedies in its sole discretion.

    

    Consistent with the foregoing, this
letter is to further notify you that pursuant to Section 8.02 of the Credit
Agreement, the Administrative Agent, at the request of the Required Lenders, hereby declares the
commitment of each Lender to make Loans and any obligation of the L/C Issuer to
make L/C Credit Extensions to be terminated, and such commitments and obligation
are hereby terminated effective as of close of business on March 31,
2009.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      Exhibit 10.73

       

    

    ArthroCare
Corporation

    April 1, 2009

    Page 2

    

    While the Administrative Agent and the
Lenders are not presently exercising any other rights, powers, or remedies
available to them with respect to the Existing Events of Default described
above, nothing contained herein shall be deemed to constitute any waiver by the
Administrative Agent or the Lenders of any Existing Events of Default or any
other Events of Default, and the Administrative Agent, on behalf of itself and
the Lender, hereby expressly reserves all rights, powers, and remedies, and
shall be entitled, to pursue at any time and from time to time, without notice,
demand or any other action, any and all rights, powers, and/or remedies provided
under the Credit Agreement and/or the other Loan Documents, at law, in equity or
otherwise, whether or not with respect to any Existing Events of Default or any
other Events of Default, all in the sole and absolute discretion of the
Administrative Agent and the Lenders. Neither this letter nor any other
communication between the Administrative Agent and/or the Lenders, on the one
hand, and the Borrower, on the other hand, shall be construed as a consent,
waiver, forbearance or other modification with respect to any term, condition or
other provision of the Credit Agreement and/or any other Loan Document. Neither
this letter, any other communication between the Administrative Agent and/or the
Lenders, on the one hand, and the Borrower, on the other hand, nor any act or
omission on the part of the Administrative Agent and/or the Lenders constitutes,
or shall be deemed to constitute, a course of conduct or a course of dealing so
as to justify an expectation by the Borrower that the Administrative Agent and
the Lenders will not exercise any rights or remedies available to them with
respect to any Existing Event of Default, any other existing Event of Default or
any subsequent Event of Default or an expectation by the Borrower that the
Administrative Agent and the Lenders will waive any Existing Event of Default,
any other existing Event of Default or any subsequent Event of
Default.

    

    Without limiting the generality of the
foregoing, nothing contained herein is intended to or shall be deemed to
constitute any binding commitment or other agreement on behalf of the
Administrative Agent or the Lenders to enter into any amendment to the Credit
Agreement or any forbearance or other type of agreement with respect to the
Existing Events of Default or any other Events of Default, including, without
limitation, to extend any funding or loan commitment pursuant to any such
amendment or other type of agreement. As conspicuously set forth in the Credit
Agreement, only terms in writing executed by the Administrative Agent and the
requisite Lenders (and not other terms or oral promises) are enforceable against
the Administrative Agent or the Lenders.

    

    

    
      	 
      	
              Very truly
      yours,

            	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              BANK OF AMERICA, N.A., as
      Administrative

              Agent on behalf of the
      Lenders

            	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ David Maiorella

            	 
      
	 
      	 
      	
              Name:

            	
              David Maiorella

            	 
      
	 
      	 
      	
              Title:

            	
              Senior Vice
      President

            	 
      
	 
      	 
      	
              Phone:

            	
              (###)
    ###-####Unassociated Document

    
      Exhibit
10.74

       

    

    ARTHROCARE
CORPORATION

     

    EMPLOYMENT
AGREEMENT

     

    This
Employment Agreement (the “Agreement”) is
effective as of March 30, 2009 (the “Effective Date”), by
and between David Fitzgerald (“Executive”) and
ArthroCare Corporation, a Delaware corporation (the “Company”).  Certain
capitalized terms used in the Agreement are defined in Section 7
below.

     

    RECITALS

     

    WHEREAS, the Board of
Directors of the Company believes that it is in the best interests of the
Company and its stockholders to provide Executive with an incentive to continue
his employment with the Company and to motivate Executive to maximize the value
of the Company in the event of a Change of Control for the benefit of its
stockholders; and

     

    WHEREAS, the Company and
Executive wish to set forth the terms and conditions related to Executive’s
employment in this Agreement.

     

    AGREEMENT

     

    NOW, THEREFORE, in
consideration of the mutual promises and agreements contained herein, the
parties hereby agree as follows:

     

    1. Term
of Agreement.  The Agreement shall
commence on the Effective Date and shall expire on February 18, 2010 (such
period, including any extensions pursuant to this Section 1, the “Term”).  This Agreement shall be
automatically renewable for one-year periods after the expiration of the initial
period, unless otherwise terminated pursuant to Section 5.  This
Agreement may be terminated by either party, with or without cause, at the end
of the then-current Term with six months’ advance written notice to the other
party.

     

    2. Duties.

     

    (a) Position.  Executive shall be employed as Acting
President and Chief Executive Officer of the Company.  In such
capacity he shall have overall responsibility for the management of the Company
and report to and be subject to the direction and control of the Company’s Board
of Directors.  So long as Executive remains the Acting Chief Executive
Officer of the Company, and subject to the fiduciary duties of the Board of
Directors as directors of the Company, Executive will be nominated to, and if
elected by the stockholders of the Company, be a member of, the Company’s Board
of Directors.

     

    (b) Obligations
to the Company.  During his employment with the Company,
Executive agrees to the best of his ability and experience that he will loyally
and conscientiously perform all of the duties and obligations required of and
from Executive pursuant to the express and implicit terms hereof, and to the
reasonable satisfaction of the Company.  During Executive’s employment
with the Company, Executive further agrees that he will devote all of his
business time and attention to the business of the Company, Executive will not
render commercial or professional services of any nature to any person or
organization, whether or not for compensation, without the prior written consent
of the Company’s Board of Directors, and Executive will not directly or
indirectly engage or participate in any business that is competitive in any
manner with the business of the Company; provided, however, that Executive will
be allowed to continue to serve as a member of the board of directors
(or board of advisors)
of the companies listed on
Exhibit
A attached
hereto.  Nothing
in this Agreement will prevent Executive from accepting speaking or presentation
engagements in exchange for honoraria or from serving on boards of charitable
organizations, or from owning no more than 1% of the outstanding equity
securities of a corporation whose stock is listed on a national stock
exchange.  Executive will comply with and be bound by the Company’s
operating policies, procedures and practices from time to time in effect during
Executive’s employment with the Company.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3. At-Will
Employment.  The
Company and Executive acknowledge that Executive’s employment is and shall
continue to be at-will, as defined under applicable law, and that Executive’s
employment with the Company may be terminated by either party at any time for
any or no reason.  If Executive’s employment terminates for any
reason, Executive shall not be entitled to any payments, benefits, damages,
award or compensation other than as provided in this Agreement.  The
rights and duties created by this Section 3 may not be modified in any way
except by a written agreement executed by the Board of Directors of the Company
and Executive.

     

    4. Compensation.  For the duties and services
to be performed by Executive hereunder, the Company shall pay Executive, and
Executive agrees to accept, the Base Salary, Equity Awards, Annual Bonus and
other benefits described below in this Section 4.  Upon the
termination of Executive’s employment with the Company for any reason, Executive
will receive payment(s) for all accrued but unpaid Base Salary (and any portion of the Annual Bonus
that has been awarded by the Board of Directors or compensation committee
thereof or earned pursuant to the terms of the applicable bonus plan or program
with respect to the applicable year and was unpaid on the termination date,
except in the event of a Termination for Cause), and all accrued but unused vacation as
of the date of Executive’s termination, and Executive’s benefits will be
continued under the Company’s then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of termination and
in accordance with applicable law.

     

    (a) Salary.  Executive shall receive an
annual salary of $480,000 (the “Base
Salary”).  Executive’s Base Salary
will be payable biweekly pursuant to the Company’s normal payroll
practices, and shall be
retroactive to February 18, 2009.  The Base Salary shall be
reviewed annually by the Company’s Board of Directors or its Compensation
Committee, and adjusted as necessary following such review, and any increase
will be effective as of the date determined appropriate by the Board of
Directors or its Compensation Committee and will thereafter be deemed a part of
Base Salary for purposes of Sections 6(a) and 6(b) of this
Agreement.

     

    (b) Annual
Bonus.  In
addition to the Base Salary, for each fiscal year ending during the Term,
Executive shall have the opportunity to earn an annual performance bonus (the
“Annual
Bonus”) that will include
cash (in an amount up to 75% of Executive’s Base Salary) and Equity Awards
(having, with respect to stock options and stock appreciation rights, a
Black-Scholes value and, with respect to restricted stock and restricted stock
units, underlying shares with a fair market value on the date of grant of up to
25% of Executive’s Base Salary).  The exact amount and composition of
the Annual Bonus will be determined by the Board of Directors in consultation
with Executive, based upon mutually agreed performance objectives, both personal
and corporate.

     

    
      
        
        

      

      
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    (c) Equity
Awards and Acceleration of Vesting Upon Change of Control.  Subject to the discretion
of the Company’s Board of Directors (or its Compensation Committee), Executive
shall be eligible to receive additional Equity Awards, from time to time in the
future, on such terms and subject to such conditions as the Board of Directors
(or its Compensation Committee) shall determine as of the date of any such
grant.  To the extent permitted by Section 422(d) of the Internal
Revenue Code of 1986, as amended (the “Code”), any stock options shall be incentive
stock options.  Upon a Change of Control (as defined in Section 7
below), the vesting and exercisability of all of Executive’s outstanding Equity
Awards shall be automatically accelerated and any transfer or forfeiture
restrictions on such Equity Awards automatically lapse as to 100% of the shares
subject thereto.  The foregoing provision is hereby deemed to be a
part of each Equity Award and to supersede any contrary provision in any
agreement relating thereto.

     

    (d) Additional
Benefits.  Executive shall be eligible
to participate in the Company’s employee benefit plans of general application,
including without limitation, those plans covering medical, disability, and life
insurance in accordance with the rules established for individual participation
in any such plan and under applicable law.  Executive shall be
eligible for vacation and sick leave in accordance with the policies in effect
during the Term of this Agreement, and will receive such other benefits as the
Company generally provides to its other employees of comparable position and
experience.  In addition, the Company shall (i) provide Executive with
an annual physical examination, at the Company’s expense, with Executive’s
agreement that the doctor performing such examination shall provide a copy of
the examination report to the Compensation Committee of the Board of Directors,
and (ii) reimburse Executive for attorneys’ fees
and expenses incurred by Executive in connection with the negotiation and
execution of this Agreement, up to a maximum of $5,000.

     

    (e) Reimbursement
of Expenses.  Executive shall be
authorized to incur reasonable expenses on behalf and for the benefit of the
Company, and shall be reimbursed by the Company for such expenses, provided that
such expenses are substantiated in accordance with Company
policies.

     

    5. Termination
of Agreement.  This Agreement may be
terminated during its Term upon the occurrence of any of the following
events:

     

    (i) The Company’s termination of Executive
for Cause (as defined in Section 7 below) (“Termination
for Cause”);

     

    (ii) The Company’s termination of Executive
without Cause (as defined in Section 7 below), which determination may be made
by the Company at any time at the Company’s sole discretion, for any or no
reason (“Termination
Without Cause”);

     

    
      
        
        

      

      
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    (iii) The effective date of a written notice
sent to the Company from Executive stating that Executive is electing to
terminate his employment with the Company (“Voluntary
Termination”);
or

     

    (iv) Executive’s death or Disability (as
defined in Section 7 below).

     

    6. Severance
Benefits.  Executive shall be entitled to receive
severance benefits upon termination of employment only as set forth in this
Section 6:

     

    (a) Termination
Following a Change of Control.

     

    (i) Involuntary
Termination.  If
Executive’s employment with the Company is terminated at any time within 24
months after a Change of Control as a result of an Involuntary Termination,
then, subject to Executive
executing and not revoking a general mutual release of claims in a form
acceptable to the Company (which Executive must execute and deliver to the Company
within fifty (50) days following the date of termination and shall not have been revoked by
Executive within any period permitted under applicable law),
Executive shall be entitled
to receive the following severance and other benefits, provided that such termination of
employment with the Company constitutes a Separation from Service:

     

    (A) Severance
Pay.  During the
Continuation Period, the Company shall pay Executive as severance an amount
equal to the sum of (i) Executive’s Base Salary (on a monthly basis) multiplied
by the length of the Continuation Period, plus (ii) an amount equal to the cash
portion of Executive’s target Annual Bonus for the fiscal year in which the
termination occurs (with it deemed that all performance goals have been met at
100% of budget or plan) multiplied by (x) the number of months in the
Continuation Period divided by (y) 12.  Such severance payments will
be made periodically in the same amounts and at the same intervals as the
payments of Base Salary were made immediately prior to termination of
employment; provided,
however, that any such payments that would otherwise have been made before the
first normal payroll payment date falling on or after the First Payment Date
shall be made on the First
Payment Date.  In addition, during the Continuation Period, the
Company shall continue to
make available to Executive and Executive’s spouse and dependents any group
health plans, life insurance plans and other benefit plans and programs of the
Company which were available to such individuals on the date of such termination
of employment (the “Benefit
Programs”), to the extent
permitted by law and subject to the terms and conditions of the relevant plan or
program.  For purposes of this Section 6(a)(i)(A), Benefit Programs
will not include future participation in any discretionary bonus or equity
incentive pool, other than amounts as contemplated in this subsection
A.

     

    (B) Medical
Benefits.  During
the Continuation Period, the Company shall pay Executive an amount equal to
$1,500 per month, which shall be intended to reimburse Executive’s premium
payments, if any, for group health coverage elected by Executive pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”).

     

    (ii) Voluntary
Termination; Termination For Cause.  If Executive’s employment
with the Company is terminated at any time within 24 months after a Change of
Control as a result of a Voluntary Termination or a Termination for Cause, then
Executive shall not be entitled to receive payment of any severance
benefits.  Executive will receive payment(s) for all accrued but
unpaid Base Salary (and any
portion of the Annual Bonus that has been awarded by the Board of Directors or
compensation committee thereof or earned pursuant to the terms of the applicable
bonus plan or program with respect to the applicable year and was unpaid on the
termination date, except in the event of a Termination for Cause), and all accrued but unused vacation as
of the date of Executive’s termination of employment, and Executive’s benefits
will be continued under the Company’s then existing benefit plans and policies
in accordance with such plans and policies in effect on the date of termination
and in accordance with applicable law.

     

    
      
        
        

      

      
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    (b) Termination
Apart from a Change of Control.

     

    (i) Involuntary
Termination.  If
Executive’s employment with the Company terminates as a result of an Involuntary
Termination at any time prior to the occurrence of a Change of Control or after
the 24-month period following the effective date of a Change of Control, then,
subject to Executive executing and not revoking a general release of claims
against the Company in a form acceptable to the Company (which Executive must execute and deliver to the Company
within fifty (50) days following the date of termination and shall not have been revoked by
Executive within any period permitted under applicable law),
Executive will be entitled to receive the following severance and other
benefits, provided that
such termination of employment with the Company constitutes a Separation from
Service:

     

    (A) Severance
Pay.  The Company
shall pay to Executive in one lump-sum payment on the First Payment Date, an
amount equal to (i) Executive’s Base Salary (on a monthly basis) multiplied by
the length of the Continuation Period, plus (ii) an amount equal to the cash
portion of Executive’s target Annual Bonus for the fiscal year in which the
termination occurs (with it deemed that all performance goals have been met at
100% of budget or plan) multiplied by (x) the number of months in the
Continuation Period divided by (y) 12.  In addition, during the
Continuation Period, the Company shall continue to make available to Executive
and Executive’s spouse and dependents the Benefit Programs, to the extent
permitted by law and subject to the terms and conditions of the relevant plan or
program.  For purposes of this Section 6(b)(i)(A), Benefit Programs
will not include future participation in any discretionary bonus or equity
incentive pool, other than continuation of amounts as contemplated in this
subsection A. 

     

    (B) Medical
Benefits.  During
the Continuation Period, the Company shall pay Executive an amount equal to
$1,500 per month, which shall be intended to reimburse Executive’s premium
payments, if any, for group health coverage elected by the Executive pursuant to
the COBRA.

     

    (ii) Voluntary
Termination; Termination for Cause.  If Executive’s employment
with the Company is terminated at any time prior to a Change of Control or after
the 24 month period following the effective date of a Change of Control as a
result of a Voluntary Termination (other than an Involuntary Termination, in
which case Section 6(b)(i) will apply) or a Termination for Cause, then
Executive shall not be entitled to receive payment of any severance or other
benefits described in this Section 6.  Executive will receive
payment(s) for all accrued but unpaid Base Salary (and any portion of the Annual Bonus
that has been awarded by the Board of Directors or compensation committee
thereof or earned pursuant to the terms of the applicable bonus plan or program
with respect to the applicable year and was unpaid on the termination date,
except in the event of a Termination for Cause), and all accrued but unused vacation as
of the date of Executive’s termination of employment, and Executive’s benefits
will be continued under the Company’s then existing benefit plans and policies
in accordance with such plans and policies in effect on the date of termination
and in accordance with applicable law.

     

    
      
        
        

      

      
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    (c) Termination
Resulting from Death or Disability.  If Executive’s employment
is terminated as a result of Executive’s death or Disability, Executive shall
not be entitled to any other severance or other benefits described above in this
Section 6.  Executive, or, as the case may be, Executive’s estate
or designated beneficiary(ies) will receive payment(s) for all accrued but
unpaid Base Salary (and any
portion of the Annual Bonus that has been awarded by the Board of Directors or
compensation committee thereof or earned pursuant to the terms of the applicable
bonus plan or program with respect to the applicable year and was unpaid on the
termination date), and all
accrued but unused vacation as of the date of Executive’s termination of
employment, and Executive’s benefits will be continued under the Company’s then
existing benefit plans and policies in accordance with such plans and policies
in effect on the date of termination and in accordance with applicable
law.

     

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

     

    (a) “Cause” for Executive’s termination will exist
at any time after 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) Executive’s gross negligence or willful
misconduct in performance of his duties hereunder where such gross negligence or
unique misconduct has resulted or is likely to result in substantial and
material damage to the Company or any of its subsidiaries;

     

    (ii) Executive’s repeated and unjustified
absence from the Company;

     

    (iii) Executive’s material and willful
violation of any federal or state law;

     

    (iv) The commission of any act of fraud by
Executive with respect to the Company;

     

    (v) Executive’s conviction of a felony or a
crime involving moral turpitude causing material harm to the standing and
reputation of the Company; or

     

    (vi) Executive’s incurable material breach of
any element of the Company’s Confidential Information and Invention Assignment
Agreement, including without limitation, Executive’s theft or other
misappropriation of the Company’s proprietary information.

     

    
      
        
        

      

      
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    (b) “Change of
Control” shall mean the
occurrence of any of the following events, provided that such event constitutes
a change in the ownership or effective control of the Company or a change in the
ownership of a substantial portion of the assets of the Company, as described in
Treasury Regulation Section 1.409A-3(i)(5):

     

    (i) 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 50% or more
of the total voting power represented by the Company’s then outstanding voting
securities;

     

    (ii) 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;

     

    (iii) 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) or (ii) or in connection with
an actual or threatened proxy contest relating to the election of directors of
the Company; or

     

    (iv) 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 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.

     

    (c) “Continuation
Period” shall mean a
period, commencing on the date of an Involuntary Termination, of a duration
equal to two (2) months for each full month of Executive’s employment as Acting
President and Chief Executive Officer of the Company, up to a maximum of (i) 24
months, for purposes of an Involuntary Termination which occurs within 24 months
after a Change of Control, or (ii) 18 months, for purposes of an Involuntary
Termination which occurs prior to a Change of Control or more than 24 months
following a Change of Control.

     

    (d) “Disability” shall mean that Executive has been
unable to perform his duties under this Agreement as a 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 Executive or
Executive’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 Executive’s employment.  In the event that
Executive resumes the performance of substantially all of his duties hereunder
before the termination of his employment becomes effective, the notice of intent
to terminate shall automatically be deemed to have been
revoked.

     

    
      
        
        

      

      
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    (e) “Equity
Award” shall mean a grant
of stock options, stock appreciation rights, restricted stock or restricted
stock units.

     

    (f) “First
Payment Date” shall mean
the sixtieth (60th) day following the date of the Executive’s Separation from
Service.

     

    (g) “Involuntary
Termination” shall include
any Termination Without Cause and Executive’s Voluntary Termination, upon 30
days prior written notice to the Company within 90 days
following:

     

    (i) The assignment of any duties, or the
removal from or reduction or limitation of duties or responsibilities, which in
any case is a significant change in Executive’s position, title, organization
level, duties, responsibilities, compensation and status with the Company,
without Executive’s express written consent;

     

    (ii) A substantial reduction of the
facilities and perquisites provided to Executive (including office space or
relocation more than 30 miles from the Company’s then present
location);

     

    (iii) A reduction in Executive’s Base Salary
(other than in connection with a general decrease in base salaries for officers
of the Company);

     

    (iv) A material reduction in the kind or
level of Executive’s benefits (including percentage bonus opportunity) with the
result that the overall benefits package is significantly
reduced;

     

    (v) any purported termination of the
Executive 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

     

    (vi) The failure of the Company to obtain the
assumption of this Agreement by any successors; 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 in this
Agreement.

     

    In
connection with a Change of Control, if Executive and any successor company or
its parent are unable to negotiate a new agreement governing the terms of
Executive’s service with such successor company or its parent prior to the
closing of such transaction, then Executive may elect to terminate his
employment effective upon the Change of Control (without compliance with the 30
day prior written notice provision set forth above or any other advance notice
period described herein), and such termination shall constitute an Involuntary
Termination for purposes of this Agreement.

     

    (h) “Separation
from Service” shall mean a
termination of the Executive’s employment with the Company which
constitutes a separation from service within the meaning of Section 409A of the
Code and the regulations promulgated thereunder, including Treasury Regulation
Section 1.409A-1(h).

     

    
      
        
        

      

      
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    8. Golden
Parachute Excise Tax.

     

    (a) Effect
of Excise Tax.  In the event that it shall
be determined that any payment or other benefit by the Company to or for the
benefit of Executive under this Agreement, whether paid or payable (the
“Payments”), would be subject to the excise tax
imposed by Section 4999 of the Code (the “Excise
Tax”), then such Payments
shall be payable either (i) in full, or (ii) as to such lesser amount which
would result in no portion of such Payments being subject to the Excise Tax,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the Excise Tax, results in the receipt by
Executive, on an after-tax basis, of the greatest amount of Payments,
notwithstanding that all or some portion of such Payments may be subject to the
Excise Tax.  To the extent that any reduction of Payments is required
pursuant to this Section 8(a), the specific Payments that shall be reduced and
the order of such reduction shall be determined by the Company in its sole
discretion.

     

    (b) Determination.  Unless the Company and
Executive otherwise agree in writing, any determination required under this
Section shall be made in writing by the nationally recognized firm of certified
public accountants (the “Accounting
Firm”) used by the Company
prior to the Change of Control (or, if such Accounting Firm declines to serve,
the Accounting Firm shall be a nationally recognized firm of certified public
accountants selected by the Company), whose determination shall be conclusive
and binding upon Executive 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
Executive 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.

     

    9. Confidentiality
Agreement.  Executive has signed the
Company’s standard form of Employment, Proprietary Information and Invention
Assignment Agreement that covers protection of the Company’s proprietary
information and assignment of inventions (the “Confidentiality
Agreement”).  Executive hereby
represents and warrants to the Company that he has complied with all obligations
under the Confidentiality Agreement and agrees to continue to abide by the terms
of the Confidentiality Agreement and further agrees that the provisions of the
Confidentiality Agreement shall survive any termination of this Agreement or of
Executive’s employment relationship with the Company.

     

    10. Nonsolicitation
Covenant.  Executive hereby agrees
that he shall not, during the Term of this Agreement and for 12 months
thereafter, do any of the following without the prior written consent of the
Company’s Board of Directors:

     

    (a) Solicit
Business.  Solicit or influence or
attempt to influence any client, customer or other person either directly or
indirectly, to direct his or its 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

     

    
      
        
        

      

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

     

    11. Conflicts.  Executive represents that his
performance of all the terms of this Agreement will not breach any other
agreement to which Executive is a party.  Executive has not, and will
not during the Term of this Agreement, enter into any oral or written agreement
in conflict with any of the provisions of this Agreement.  Executive
further represents that he is entering into or has entered into an employment
relationship with the Company of his own free will.

     

    12. Successors.  Any successor to the
Company (whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise), or to all or substantially all of the
Company’s business and/or assets, shall assume the obligations of the Company
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 Section 12 or which
becomes bound by the terms of this Agreement by operation of law.  The
terms of this Agreement and all of Executive’s rights hereunder shall inure to
the benefit of, and be enforceable by, Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.

     

    13. Indemnification
Agreement.  The
Company and the Executive have entered into an Indemnification Agreement
substantially in the form filed as Exhibit 10.1 to the Company’s Registration
Statement on Form S-1 filed with the Securities and Exchange Commission
(Registration No. 33-80453).

     

    14. Section
409A of the Code.

     

    (a) Notwithstanding any provision to the
contrary in the Agreement, if Executive is deemed by the Company at the time of
his Separation from Service to be a “specified employee” for purposes of Section
409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion
of the termination benefits to which Executive is entitled under this Agreement is
required in order to avoid a prohibited distribution under Section
409A(a)(2)(B)(i) of the Code, such portion of the Executive’s termination benefits shall not be
provided to the Executive
prior to the earlier of
(i) the expiration of the six-month period
measured from the date of the Executive’s Separation from Service with the Company
or (ii) the date of the Executive’s death.  Upon the first
business day following the expiration of the applicable Code Section
409A(a)(2)(B)(i) deferral period, all payments deferred pursuant to this Section
14(a) shall be paid in a lump sum to the
Executive, and any remaining payments due under
the Agreement shall be paid as otherwise provided herein, with all such payments
to be subject to all required tax withholding.  For purposes of
Section 409A of the Code (including, without limitation, for purposes of
Treasury Regulation Section 1.409A-2(b)(2)(iii)), the Executive’s right to receive any installment payments payable pursuant to
this Agreement (the “Installment
Payments”) shall be treated
as a right to receive a series of separate payments and, accordingly, each
Installment Payment shall at all times be considered a separate and distinct
payment.

     

    
      
        
        

      

      
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    (b) In addition, any reimbursements payable to the
Executive pursuant to this Agreement shall be paid to the Executive no later
than December 31 of the year following the year in which the cost was
incurred.  The amount of expenses reimbursed in one year shall not
affect the amount eligible for reimbursement in any subsequent year, and the
Executive’s right to reimbursement under this Agreement will not be subject to liquidation or
exchange for another benefit.

     

    15. Miscellaneous
Provisions.

     

    (a) No
Duty to Mitigate.  Executive shall not be
required to mitigate the amount of any payment 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 be reduced by any
earnings that Executive may receive from any other source.

     

    (b) Amendments
and Waivers.  Any
term of this Agreement may be amended or waived only with the written consent of
the parties.  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) Entire
Agreement.  This
Agreement, along with the Confidentiality Agreement and the Indemnification
Agreement referred to herein, constitutes the entire agreement of the parties
and supersedes all oral negotiations and prior writings with respect to the
subject matter hereof.

     

    (d) Notices.  Any notice required or
permitted by this Agreement shall be in writing and shall be deemed sufficient
upon receipt, when delivered personally, by facsimile or by a nationally
recognized delivery service (such as Federal Express or UPS), or forty-eight
(48) hours after being deposited in the U.S. mail as certified or registered
mail with postage prepaid, if such notice is addressed to the party to be
notified at such party’s current mailing address as reflected in the Company’s
records or as subsequently modified by written notice.  Any
termination by the Company for Cause or by Executive as a result of an
Involuntary Termination shall be communicated by a notice of termination to the
other party 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 Executive to include in the notice any fact
or circumstance which contributes to a showing of Involuntary Termination shall
not waive any right of Executive hereunder or preclude Executive from asserting
such fact or circumstance in enforcing his rights hereunder.

     

    
      
        
        

      

      
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    (e) Choice
of Law.  The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of Texas, without giving effect to the
principles of conflict of laws.  Executive hereby consents to the
personal jurisdiction of the state and federal courts located in Texas for any action or proceeding arising
from or relating to this Agreement or relating to any arbitration in which the
parties are participants.

     

    (f) Severability.  If one or more provisions
of this Agreement are held to be unenforceable under applicable law, the parties
agree to renegotiate such provision in good faith.  In the event that
the parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (i) such provision shall be excluded from this
Agreement, (ii) the balance of the Agreement shall be interpreted as if
such provision were so excluded and (iii) the balance of the Agreement
shall be enforceable in accordance with its terms.

     

    (g) 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.

     

    (h) Arbitration.   Any dispute or claim arising out of or in
connection with this Agreement shall be finally settled by binding arbitration
in Austin, Texas in accordance with the rules of the
American Arbitration Association by one arbitrator appointed in accordance with said
rules.  The arbitrator shall apply Texas law, without reference to rules of
conflicts of law or rules of statutory arbitration, to the resolution of any
dispute.  Judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.  Notwithstanding the
foregoing, the parties may apply to any court of competent jurisdiction for
preliminary or interim equitable relief, or to compel arbitration in accordance
with this paragraph, without breach of this arbitration
provision.  This Section 15(h) shall not apply to the Confidentiality
Agreement.

     

    (i) 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 (i) shall be
void.

     

    (j) Employment
Taxes.  All
payments made pursuant to this Agreement will be subject to withholding of
applicable income and employment taxes.

     

    (k) 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 Executive.

     

    (l) ADVICE
OF COUNSEL.  EXECUTIVE ACKNOWLEDGES THAT,
IN EXECUTING THIS AGREEMENT, HE HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL
COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS
AGREEMENT.  THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY
REASON OF THE DRAFTING OR PREPARATION HEREOF.

     

    [Signature
Page Follows]

     

    
      
        
        

      

      
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    The
parties have executed this Agreement as of the date first written
above.

     

    
      
        
          
            
              
                
                  
                    
                      	 	ARTHROCARE
      CORPORATION	 
	 	 	 	 
	
                               
      

                            	
                              By:
      

                            	/s/
      James Foster	 
	 	 	James
      Foster	 
	 	 	 	 
	 	Title:	Chair, Compensation
      Committee	 
	 	 	 	 
	 	Address:   
        	
                              7500 Rialto Boulevard

                              
                                Building
      Two, Suite 100

                                Austin,
      TX  78735

                              

                            	 

                    

                  

                

              

            

          

        

      

    

     

     

    
      
        
          
            
              	 	DAVID
    FITZGERALD	 
	 	 	 	 
	
                       

                    	
                      Signature: 
      

                    	/s/
      David Fitzgerald	 
	 	 	 	 
	 	Address:	
                      P.O.
      Box 1286

                      Dripping Springs, Texas 78620

                    	 

            

          

        

      

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
A

    

    

    Executive shall be allowed to continue
to serve as a member of the board of directors (or board of advisors) of the
following companies:

    

    Board of
Advisors of Sandvik MedTech

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