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                                                                   EXHIBIT 10.16

                                CREDIT AGREEMENT

      THIS CREDIT AGREEMENT (this "Agreement") is entered into as of October 15,
2004, by and between MICRUS CORPORTION, a Delaware corporation ("Borrower"), and
WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

                                    RECITALS

      Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

      NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:

                                    ARTICLE 1
                                  CREDIT TERMS

      SECTION 1.1. LINE OF CREDIT.

      (a) Line of Credit. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make advances to Borrower from time to time up to and
including September 30, 2005, not to exceed at any time the aggregate principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) ("Line of
Credit"), the proceeds of which shall be used for working capital requirements.
Borrower's obligation to repay advances under the Line of Credit shall be
evidenced by a promissory note dated as of October 15, 2004 ("Line of Credit
Note"), all terms of which are incorporated herein by this reference.

      (b) Limitation on Borrowings. Outstanding borrowings under the Line of
Credit, to a maximum of the principal amount set forth above, shall not at any
time exceed an aggregate of eighty percent (80.0%) of Borrower's eligible
accounts receivable. All of the foregoing shall be determined by Bank upon
receipt and review of all collateral reports required hereunder and such other
documents and collateral information as Bank may from time to time require.
Borrower acknowledges that said borrowing base was established by Bank with the
understanding that, among other items, the aggregate of all returns, rebates,
discounts, credits and allowances for the immediately preceding three (3) months
at all times shall be less than five percent (5%) of Borrower's gross sales for
said period. If such dilution of Borrower's accounts for the immediately
preceding three (3) months at any time exceeds five percent (5%) of Borrower's
gross sales for said period, or if there at any time exists any other matters,
events, conditions or contingencies which Bank reasonably believes may affect
payment of any portion of Borrower's accounts, Bank, in its sole discretion, may
reduce the foregoing advance rate against eligible accounts receivable to a
percentage appropriate to reflect such additional dilution and/or establish
additional reserves against Borrower's eligible accounts receivable.

      As used herein, "eligible accounts receivable" shall consist solely of
trade accounts created in the ordinary course of Borrower's business, upon which
Borrower's right to receive payment is absolute and not contingent upon the
fulfillment of any condition whatsoever, and in which Bank has a perfected
security interest of first priority, and shall not include:

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            (i) any account which is past due more than twice Borrower's
      standard selling terms or 90 days after the invoice date, whichever is
      earlier;

            (ii) that portion of any account for which there exists any right of
      setoff, defense or discount (except regular discounts allowed in the
      ordinary course of business to promote prompt payment) or for which any
      defense or counterclaim has been asserted;

            (iii) any account which represents an obligation of any state or
      municipal government or of the United States government or any political
      subdivision thereof, other than the University of Alabama, University of
      Iowa, University of Illinois, University of Maryland, University of
      Virginia, University Medical Center-Las Vegas, University of CA-Davis,
      University of Colorado, University of Mississippi, University of
      Tennessee, and such other hospitals or medical centers affiliated with
      states or municipalities as may be approved by Bank in writing in its sole
      discretion;

            (iv) any account which represents an obligation of an account debtor
      located in a foreign country, except to the extent any such account, in
      Bank's determination, is supported by a letter of credit or insured under
      a policy of foreign credit insurance, in each case in form, substance and
      issued by a party acceptable to Bank:

            (v) any account which arises from the sale or lease to or
      performance of services for, or represents an obligation of, an employee,
      affiliate, partner, member, parent or subsidiary of Borrower;

            (vi) that portion of any account, which represents interim or
      progress billings or retention rights on the part of the account debtor;

            (vii) any account which represents an obligation of any account
      debtor when twenty percent (20%) or more of Borrower's accounts from such
      account debtor are not eligible pursuant to (i) above;

            (viii) that portion of any account from an account debtor which
      represents the amount by which Borrower's total accounts from said account
      debtor exceeds twenty-five percent (25%) of Borrower's total accounts;

            (ix) any account deemed ineligible by Bank when Bank, in its sole
      discretion, deems the creditworthiness or financial condition of the
      account debtor, or the industry in which the account debtor is engaged, to
      be unsatisfactory.

      (c) Letter of Credit Subfeature. As a subfeature under the Line of Credit,
Bank agrees from time to time during the term thereof to issue or cause an
affiliate to issue standby letters of credit for the account of Borrower to
finance working capital and/or commercial letters of credit for the account of
Borrower to finance Borrower's inventory purchases (each, a "Letter of Credit"
and collectively, "Letters of Credit"); provided however, that the aggregate
undrawn amount of all outstanding Letters of Credit shall not at any time exceed
One Million Dollars ($1,000,000.00), The form and substance of each Letter of
Credit shall be subject to approval by Bank, in its sole discretion. Each Letter
of Credit shall be issued for a term not to exceed three hundred sixty-five
(365) days, as designated by Borrower; provided however, that no Letter of
Credit shall have an expiration date more than ninety (90) days beyond the
maturity date of the Line of Credit. The undrawn amount of all Letters of Credit
shall be reserved under the Line of Credit and shall not be available for
borrowings thereunder. Each Letter of Credit

<PAGE>

shall be subject to the additional terms and conditions of the Letter of Credit
agreements, applications and any related documents required by Bank in
connection with the issuance thereof. Each drawing paid under a Letter of Credit
shall be deemed an advance under the Line of Credit and shall be repaid by
Borrower in accordance with the terms and conditions of this Agreement
applicable to such advances; provided however, that if advances under the Line
of Credit are not available, for any reason, at the time any drawing is paid,
then Borrower shall immediately pay to Bank the full amount drawn, together with
interest thereon from the date such drawing is paid to the date such amount is
fully repaid by Borrower, at the rate of interest applicable to advances under
the Line of Credit. In such event Borrower agrees that Bank, in its sole
discretion, may debit any account maintained by Borrower with Bank for the
amount of any such drawing.

      (d) Borrowing and Repayment Borrower may from time to time during the term
of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.

      SECTION 1.2. INTEREST/FEES.

      (a) Interest. The outstanding principal balance of each credit subject
hereto shall bear interest at the rate of interest set forth in each promissory
note or other instrument or document executed in connection therewith.

      (b) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument or document required
hereby.

      (c) Letter of Credit Fees. Borrower shall pay to Bank (i) fees upon the
issuance of each Letter of Credit equal to one percent (1.00%) per annum
(computed on the basis of a 360-day year, actual days elapsed) of the face
amount thereof, and (ii) fees upon the payment or negotiation of each drawing
under any Letter of Credit and fees upon the occurrence of any other activity
with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank's standard fees and charges then in effect for such
activity.

      SECTION 1.3. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all interest and fees due under each credit subject hereto by charging
Borrower's deposit account number 4121-041941 with Bank, or any other deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such deposit account to pay all such sums
when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.

      SECTION 1.4. COLLATERAL.

      As security for all indebtedness of Borrower to Bank subject hereto,
Borrower hereby grants to Bank security interests of first priority (except as
otherwise agreed by Bank in writing) in the Collateral, as defined in the
Security Agreement dated as of the date hereof, executed by Debtor.

<PAGE>

      All of the foregoing shall be evidenced by and subject to the terms of
such security agreements, financing statements and other documents as Bank shall
reasonably require, all in form and substance satisfactory to Bank. Borrower
shall reimburse Bank immediately for all costs and expenses incurred by Bank in
connection with any of the foregoing security, including without limitation,
filing and allocated costs of collateral audits (except that Borrower shall be
responsible for only 1/2 of the allocated costs of the initial audit, with
Borrower's share not to exceed $2,000.00).

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

      Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.

      SECTION 2.1 LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of Delaware, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could reasonably be expected to have a material adverse effect on Borrower.

      SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each
promissory note, contract, instrument and other document required hereby or at
any time hereafter delivered to Bank in connection herewith (collectively, the
"Loan Documents") have been duly authorized, and upon their execution and
delivery in accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Borrower or the party which executes
the same, enforceable in accordance with their respective terms.

      SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation applicable to Borrower, or contravene any provision of the
Articles of Incorporation or By-Laws of Borrower, or result in any breach of or
default under any material contract, obligation, indenture or other instrument
to which Borrower is a party or by which Borrower is bound.

      SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could reasonably be expected to have a material
adverse effect on the financial condition or operations of Borrower other than
those disclosed by Borrower to Bank in writing prior to the date hereof.

      SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statements
of Borrower for the fiscal year ended March 31, 2004, a true copy of which has
been delivered by Borrower to Bank prior to the date hereof, (a) is complete and
correct and presents fairly the financial condition of Borrower, (b) discloses
all liabilities of Borrower that are required to be reflected or reserved
against under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statements there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered

<PAGE>

any of its assets or properties except in favor of Bank or as otherwise
permitted by Bank in writing.

      SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

      SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower is a party or by which Borrower may be bound
that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.

      SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises, licenses and rights to
all trademarks, trade names, patents and fictitious names, if any, required to
enable it to conduct the business in which it is now engaged in compliance with
applicable law, except to the extent that non-compliance with the foregoing
could not reasonably be expected to have a material adverse effect on Borrower.

      SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.

      SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.

      SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.

<PAGE>

                                   ARTICLE III
                                   CONDITIONS

      SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:

      (a) Approval of Bank Counsel. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank's counsel.

      (b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:

      (i)   This Agreement and each promissory note or other instrument or
            document required hereby.

      (ii)  Security Agreement.

      (iii) UCC-1.

      (iv)  Corporate Borrowing Resolution.

      (v)   Incumbency Certificate.

      (vi)  Such other documents as Bank may require under any other Section of
            this Agreement.

      (c) Financial Condition. There shall have been no material adverse change,
as determined by Bank, in the financial condition or business of Borrower, nor
any material decline, as determined by Bank, in the market value of any
collateral required hereunder or a substantial or material portion of the assets
of Borrower.

      (d) Insurance. Borrower shall have delivered to Bank evidence of insurance
coverage on all Borrower's property, in form, substance, amounts, covering risks
and issued by companies satisfactory to Bank, and where required by Bank, with
loss payable endorsements in favor of Bank.

            SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation
of Bank to make each extension of credit requested by Borrower hereunder shall
be subject to the fulfillment to Bank's satisfaction of each of the following
conditions:

      (a) Compliance. The representations and warranties contained herein and in
each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.

      (b) Documentation. Bank shall have received all additional documents which
may be required in connection with such extension of credit.
<PAGE>

                                   ARTICLE IV
                              AFFIRMATIVE COVENANTS

      Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

      SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein, and immediately upon demand by Bank,
the amount by which the outstanding principal balance of the Line of Credit
(inclusive of the amount available to be drawn under outstanding Letters of
Credit) exceeds the limitations set forth in Section 1.1 (b) above.

      SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.

      SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following,
in form and detail satisfactory to Bank:

      (a) not later than 90 days after and as of the end of each fiscal year, an
audited financial statement of Borrower, prepared by independent certified
public accountants acceptable to Bank, to include balance sheet, income
statement, statement of cash flows, and footnotes, if any, and within 30 days
after filing, but in no event later than each November 15, copies of Borrower's
filed federal income tax returns for such year;

      (b) not later than 45 days after and as of the end of each fiscal quarter,
a financial statement of Borrower, prepared by Borrower, to include balance
sheet, income statement and statement of cash flows;

      (c) not later than 15 days after and as of the end of each month, a
borrowing base certificate, an aged listing of accounts receivable and accounts
payable, reconciliation of accounts, and a deferred revenue schedule, and not
later than 15 days after and as of each fiscal quarter end, a list of the names
and addresses of all Borrower's account debtors;

      (d) contemporaneously with each annual and quarterly financial statement
of Borrower required hereby, a certificate of the president or chief financial
officer of Borrower that said financial statements are accurate and that there
exists no Event of Default nor any condition, act or event which with the giving
of notice or the passage of time or both would constitute an Event of Default;

      (e) from time to time such other information as Bank may reasonably
request.

      SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or

<PAGE>

its business, except to the extent that non-compliance with the foregoing could
not reasonably be expected to have a material adverse effect on Borrower.

      SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.

      SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.

      SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.

      SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower with a claim in excess of
$500,000.00.

      SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial condition
as follows using generally accepted accounting principles consistently applied
and used consistently with prior practices (except to the extent modified by the
definitions herein):

      (a) Tangible Net Worth not at any time less than $15,000,000.00, with
"Tangible Net Worth" defined as the aggregate of total stockholders' equity plus
subordinated debt less any intangible assets.

      (b) Total Liabilities divided by Tangible Net Worth not at any time
greater than 0.70 to 1.0, with "Total Liabilities" defined as the aggregate of
current liabilities and non-current liabilities less subordinated debt, and with
"Tangible Net Worth" as defined above.

      (c) Quick Ratio not at any time less than 2.00 to 1.0, with "Quick Ratio"
defined as the aggregate of unrestricted cash, unrestricted marketable
securities and receivables convertible into cash divided by total current
liabilities.

      SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five (5)
days after the occurrence of each such event or matter) give written notice to
Bank in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property in
excess of an aggregate of $500,000.00.

<PAGE>

                                    ARTICLE V
                               NEGATIVE COVENANTS

      Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:

      SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.

      SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Bank, (b) trade debt
incurred in the ordinary course of its business, (c) purchase money indebtedness
(including capitalized leases) not to exceed $350,000.00 outstanding at any
time, and (d) any other liabilities of Borrower existing as of, and disclosed to
Bank prior to, the date hereof.

      SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity unless Borrower is the surviving entity, the
aggregate consideration paid or to be paid by Borrower (other than in Borrower's
stock) in connection with any such merger does not exceed, in any fiscal year,
the Permitted Amount, and following such merger, Borrower is in compliance with
all terms and covenants of this Agreement; make any substantial change in the
nature of Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of or equity interests in any other entity
unless such other entity is in substantially the same line(s) of business as
Borrower and the aggregate consideration paid or to be paid by Borrower (other
than in Borrower's stock) for any such acquisition does not exceed, in any
fiscal year, the Permitted Amount; nor sell, lease, transfer or otherwise
dispose of all or a substantial or material portion of Borrower's assets except
in the ordinary course of its business. The term "Permitted Amount" means, in
each fiscal year with respect to all mergers and acquisition permitted
hereunder, an aggregate amount equal to 10% of Borrower's Tangible Net Worth as
of the end of the immediately preceding fiscal year, provided, however, that
with respect to the fiscal year in which Borrower's initial public offering
("IPO") occurs, the "Permitted A mount" shall be 10% of Borrower's Tangible Net
Worth as of the end of the fiscal quarter in which the IPO occurs. Each merger
or acquisition permitted hereunder shall be "friendly" (i.e. approved by the
Board of Directors of the other entity).

      SECTION 5.4. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank.

      SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to
or investments (other than as permitted under Section 5.3) in any person or
entity, except any of the foregoing existing as of, and disclosed to Bank prior
to, the date hereof and advances to employees and consultants in the ordinary
course of business.

<PAGE>

      SECTION 5.6. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower's stock now or hereafter outstanding, other
than repurchases of stock from current or former employees and consultants in
the ordinary course of business.

      SECTION 5.7. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist
a security interest in or lien (collectively, "Lien") upon all or any portion of
Borrower's assets now owned or hereafter acquired, except:

      (a)   Liens existing on the closing date and shown on the Schedule hereto;

      (b)   Purchase money liens (i) on equipment acquired or held by Borrower
            incurred for financing the acquisition of such equipment, or (ii)
            existing on equipment when acquired by Borrower, if the lien is
            confined to such property and the proceeds thereof;

      (c)   Liens for taxes, fees, assessments or other government charges or
            levies, either not delinquent or being contested in good faith and
            for which Borrower maintains adequate reserves, if they have no
            priority over any of Bank's security interests;

      (d)   Non-exclusive licenses or sublicenses granted in the ordinary course
            of business, and, with respect to any licenses where Borrower is the
            licensee, any interest or title of a licensor under any such license
            or sublicense;

      (e)   Leases or subleases entered into in the ordinary course of
            Borrower's business, including in connection with Borrower's leased
            premises or leased property; and

      (f)   Liens incurred in the extension, renewal or refinancing of the
            indebtedness secured by liens described in (a) through (c), but any
            extension, renewal or replacement lien must be limited to the
            property encumbered by the existing lien and the principal amount of
            the indebtedness secured thereby may not be increased.

                                   ARTICLE VI
                                EVENTS OF DEFAULT

      SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:

      (a) Borrower shall fail to pay any principal when due, or, within three
(3) business days after the applicable due date, any interest, fees or other
amounts payable under any of the Loan Documents.

      (b) Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.

<PAGE>

      (c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of twenty (20) days from the date Borrower first knew (or
using reasonable due diligence, should have first known) of such default.

      (d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower, any guarantor
hereunder or any general partner or joint venturer in any Borrower which is a
partnership or joint venture (with each such guarantor, general partner and/or
joint venturer referred to herein as a "Third Party Obligor") has incurred any
debt or other liability to any person or entity, including Bank, and, if the
debt or liability is owed to a party other than Bank, the amount thereof exceeds
$100,000.00 and such debt or liability is then due and payable or subject to
acceleration by the holder thereof by reason of such default.

      (e) The filing of a notice of judgment lien against Borrower or any Third
Party Obligor; or the recording of any abstract of judgment against Borrower or
any Third Party Obligor in any county in which Borrower or such Third Party
Obligor has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or any Third Party Obligor; or the entry of a judgment
against Borrower or any Third Party Obligor; and with respect to any of the
foregoing, the amount involved exceeds $50,000.00 and the item or proceeding in
question is not vacated, bonded against or dismissed with 10 days after its
occurrence.

      (f) Borrower or any Third Party Obligor shall become insolvent, or shall
suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any Third Party Obligor shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time ("Bankruptcy Code"), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower or any Third Party
Obligor, or Borrower or any Third Party Obligor shall file an answer admitting
the jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any Third Party Obligor shall be adjudicated a
bankrupt, or an order for relief shall be entered against Borrower or any Third
Party Obligor by any court of competent jurisdiction under the Bankruptcy Code
or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors.

      (g) There shall exist or occur any event or condition which Bank in good
faith believes impairs, or is substantially likely to impair, the prospect of
payment by Borrower of its monetary obligations under any of the Loan Documents.

      (h) The death or incapacity of any individual Borrower or Third Party
Obligor. The dissolution or liquidation of any Borrower or Third Party Obligor
which is a corporation, partnership, joint venture or other type of entity; or
Borrower or any such Third Party Obligor, or any of its directors, stockholders
or members, shall take action seeking to effect the dissolution or liquidation
of such Borrower or Third Party Obligor.

<PAGE>

      (i) Any change in ownership of the common stock of Borrower whereby any
person or entity, or group of affiliated persons or entities, acquires 40% or
more of Borrower's common stock.

      SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)
all indebtedness of Borrower under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Bank's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by each Borrower;
(b) the obligation, if any, of Bank to extend any further credit under any of
the Loan Documents shall immediately cease and terminate; and (c) Bank shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including without limitation the right to resort to any or
all security for any credit subject hereto and to exercise any or all of the
rights of a beneficiary or secured party pursuant to applicable law. All rights,
powers and remedies of Bank may be exercised at any time by Bank and from time
to time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.

                                   ARTICLE VII
                                  MISCELLANEOUS

      SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.

      SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

    BORROWER: MICRUS CORPORATION
              610 Palomar Avenue
              Sunnyvale, CA 94085
              Attn: Robert Stern

    BANK:     WELLS FARGO BANK, NATIONAL ASSOCIATION
              Peninsula RCBO 400
              Hamilton Ave., Palo
              Alto, CA 94301

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.

      SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and
<PAGE>
expenses, including reasonable attorneys' fees (to include outside counsel fees
and all allocated costs of Bank's in-house counsel), expended or incurred by
Bank in connection with (a) the negotiation and preparation of this Agreement
and the other Loan Documents and the preparation of any amendments and waivers
hereto and thereto, (b) the enforcement of Bank's rights and/or the collection
of any amounts which become due to Bank under any of the Loan Documents, and (c)
the prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.

      SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or its business, or any
collateral required hereunder.

      SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.

      SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

      SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.

      SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.

      SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.

      SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
<PAGE>

      SECTION 7.11. ARBITRATION.

      (a) Arbitration. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way (i) the loan and related Loan Documents which are the subject of
this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.

      (b) Governing Rules. Any arbitration proceeding will (i) proceed in a
location in California selected by the American Arbitration Association ("AAA");
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. Section 91 or
any similar applicable state law.

      (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

      (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the
state or federal judiciary of California, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of California and may grant any
remedy or relief that a

<PAGE>

court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award. The arbitrator
shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
California Rules of Civil Procedure or other applicable law. Judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the controversy or
claim to arbitration if any other party contests such action for judicial
relief.

      (e) Discovery. In any arbitration proceeding discovery will be permitted
in accordance with the Rules. All discovery shall be expressly limited to
matters directly relevant to the dispute being arbitrated and must be completed
no later than 20 days before the hearing date and within 180 days of the filing
of the dispute with the AAA. Any requests for an extension of the discovery
periods, or any discovery disputes, will be subject to final determination by
the arbitrator upon a showing that the request for discovery is essential for
the party's presentation and that no alternative means for obtaining information
is available.

      (f) Class Proceedings and Consolidations. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.

      (g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all
costs and expenses of the arbitration proceeding.

      (h) Real Property Collateral: Judicial Reference. Notwithstanding anything
herein to the contrary, no dispute shall be submitted to arbitration if the
dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.

      (i) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.

MICRUS CORPORATION                        WELLS FARGO BANK,
                                             NATIONAL ASSOCIATION

By: /s/ Robert A. Stern                   By: /s/ Jillian Richardson
    -------------------                       ----------------------
                                              Jillian Richardson
Title: Chief Financial Officer                Vice President