CREDIT AGREEMENT

EXHIBIT 10.4



PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN

ASTERISK ([*]) ) AND FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL

TREATMENT DATED AUGUST 28, 1998







CREDIT AGREEMENT



THIS CREDIT AGREEMENT (this "Agreement"), is entered into as of

August 12, 1998, by and between ABBOTT LABORATORIES, an Illinois

corporation ("Abbott"), as lender, and MICRO THERAPEUTICS, INC., a

Delaware corporation (the "Company"), as borrower.



W I T N E S S E T H:



WHEREAS, Abbott has purchased from the Company, and the Company has

sold to Abbott, a certain 5% Convertible Subordinated Note, due August

19, 2003, in the principal aggregate amount of Five Million Dollars

($5,000,000) (the "Note") pursuant to the terms and conditions of that

certain Convertible Subordinated Note Agreement, dated as of August 12,

1998, by and between Abbott and the Company (the "Note Agreement"); and



WHEREAS, pursuant to Section 6 of the Note Agreement, the Company and

Abbott agreed to enter into this Credit Agreement, which provides that

Abbott, as lender, shall loan to the Company, as borrower at the

Company's request, an amount not to exceed an aggregate of Five Million

Dollars ($5,000,000).



NOW, THEREFORE, in consideration of the premises and of the mutual

provisions, agreements and covenants contained herein, the Company and

Abbott hereby agree as follows:



1. DEFINITIONS. In addition to any terms defined elsewhere in this

Agreement, the following terms have the meanings indicated for purposes

of this Agreement (such definitions being equally applicable to the

singular and plural forms of the defined term):



"Acceleration" means that the Loan (i)shall not have been paid at the

Maturity Date, or (ii)shall have become due and payable prior to its

stated maturity pursuant to Section 7.2 hereof.



"Disbursement Date" means any date on or prior to July 31, 1999 on

which a disbursement of the Loan is made. Each Disbursement Date shall

be on the date designated in a written notice from the Company to

Abbott; provided, however, that









(a) Abbott shall not be required to make any disbursement if the

conditions hereto and the Note Agreement are not satisfied, and

(b) Abbott shall in no event be required to make any disbursement after

July 31, 1999.



"Maturity" means any date on which the Loan or any portion thereof

becomes due and payable, whether as stated or by virtue of mandatory

prepayment, by acceleration or otherwise.



"Maturity Date" means the fifth year anniversary of the first

Disbursement Date.



"Obligations" means all loans, advances, debts, liabilities,

obligations, covenants and duties owing to Abbott by the Company, of

any kind or nature, present or future, whether or not evidenced by any

note, guaranty or other instrument, arising under this Agreement.



Each accounting term not defined herein and each accounting term partly

defined herein to the extent not defined shall have the meaning given

to it under generally accepted accounting principles.



2. LOAN.



2.1 PROCEDURE FOR LOAN. Subject to all of the terms and

conditions of this Agreement and the Note Agreement, Abbott

agrees to make periodic loans (the "Loan") prior to July 31,

1999 to the Company in the amount of up to Five Million

Dollars ($5,000,000) to be governed by the terms and

conditions of, and repaid in accordance with, this Agreement

and the Note Agreement. The Company shall provide Abbott with

fifteen (15) business days (as defined in the Note Agreement)

written notice of a requested disbursement. Disbursement

amounts shall be in multiples of One Million Dollars

($1,000,000). Subject to the satisfaction of the terms and

conditions set forth in this Agreement and the Note Agreement,

Abbott shall disburse up to Five Million Dollars ($5,000,000)

to the Company at the Company's request. Amounts repaid may

not be reborrowed.



2.2 INTEREST.



(a) INTEREST. The Loan shall bear interest from the

date of disbursement on the unpaid principal amount

thereof until the earlier of an Event of Default or

the date upon which such amount shall become due and

payable (whether upon Maturity, by Acceleration or

otherwise) at a rate per annum equal to five percent

(5%).



(b) ACCRUAL AND COMPUTATION OF INTEREST. Interest

shall accrue daily and shall be computed on the basis

of a year of 360 days for the actual number of days









2.3 MAXIMUM INTEREST RATE. Nothing in this Agreement shall

require the Company to pay interest at a rate exceeding the

maximum amount permitted by applicable law to be charged by



2.4 REPAYMENT.



(a) INTEREST PAYMENTS. On the last day of each

quarter payable in arrears on January 31, April 30,

July 31 and October 31, commencing with the quarter

of the first Disbursement Date until the Maturity

Date, and on the Maturity Date, the Company shall pay

Abbott all interest then accrued.



(b) LOAN PAYMENT. The Company shall repay the entire

outstanding principal amount of the Loan in full on

the Maturity Date.



(c) OPTIONAL PREPAYMENT. The Company may at any time

prepay the entire outstanding principal amount of the

Loan or any portion thereof without penalty.



2.5 POST-MATURITY INTEREST. After the earlier of an Event of

Default or Maturity (whether by Acceleration or otherwise) of

the Loan, the Loan shall bear interest, payable on demand, at

a rate per annum equal to ten percent (10%), subject to

Section 2.3 hereof.



2.6 CREDIT FACILITY NOTE. The Loan made by Abbott pursuant

hereto shall be evidenced by a credit facility note (the

"Credit Facility Note") of the Company in the form of Annex A

hereto, payable to the order of Abbott on the Maturity Date in

the principal amount of up to Five Million Dollars

($5,000,000) in accordance with Section 2.1 hereof. The

Company hereby authorizes Abbott to indicate upon a schedule

attached to the Credit Facility Note all disbursements made by

Abbott pursuant to this Agreement and all payments of

principal and interest thereon. Absent manifest error, such

notations shall be presumptive as to the aggregate unpaid

principal amount of the Loan, and interest due thereon, but

the failure by Abbott to make such notations or the inaccuracy

or incompleteness of any such notations shall not affect the

obligations of the Company hereunder or under the Credit

Facility Note.



2.7 PAYMENTS BY THE COMPANY. All payments (including

prepayments) to be made by the Company shall be made without

set-off or counterclaim and shall be made to Abbott by wire

transfer in United States dollars and in immediately available

funds to the following Abbott account: [*] for credit to

Abbott Laboratories Account [*] (or to such other account as

may be designated by written notice to the Company), no later

than 12:00 noon, Pacific time, of the business day on which

payment is due. Any payment









which is received in Abbott's account later than 12:00 noon,

Pacific time, shall be deemed to have been received on the

immediately succeeding business day. Whenever any payment

hereunder shall be stated to be due on a day other than a

business day, such payment shall be made on the next

succeeding business day, and such extension of time shall in

such case be included in the computation of interest.



3. CONVERSION OF CREDIT FACILITY NOTE.



3.1 CONVERSION PRIVILEGE AND CONVERSION PRICE.



(a) Subject to and upon compliance with the

provisions of this Section 3, at the option of the

Company at any time and at the Company's sole

discretion without regard to the price of the Common

Stock (except as set forth in Section 3.1(b)) and the

Conversion Price (as defined herein), the Credit

Facility Note or any portion of the principal amount

thereof which is One Million Dollars ($1,000,000) or

an integral multiple of One Million Dollars

($1,000,000) (a "$1,000,000 Integral Multiple") may

be converted at the principal amount thereof, or of

such portion thereof, into fully paid and

nonassessable shares of Common Stock at the

Conversion Price, in effect at the time of

conversion. Such conversion right shall expire at the

close of business on the Maturity Date. The price at

which shares of Common Stock shall be delivered upon

conversion (the "Conversion Price") shall be

initially [*] of Common Stock, unless the Conversion

Price shall be adjusted in certain instances as

provided in this Section 3.



(b) The Company shall not have the option to convert

the Credit Facility Note into shares of Common Stock

(i) to the extent that such shares of Common Stock,

together with the shares of Common Stock then

beneficially owned by Abbott, would exceed 19% of the

then outstanding shares of Common Stock of the

Company (giving effect to such issuance upon

conversion to Abbott) or (ii) if the Fair Market

Value of the Common Stock as of the date that written

notice of conversion is provided to Abbott shall be

less than [*] .



"Fair Market Value" of the Common Stock as of any date of determination

means the arithmetic mean of the reported last sale price of the Common

Stock regular way on each of the 20 trading days preceding such date of

determination or, if no such sale takes place on any of such days, the

average of the reported closing bid and asked prices regular way, in

each case on the principal national securities exchange on which the

security is listed or admitted to trading, or, if the security is not

listed or admitted to trading on any national securities exchange, the

closing sales prices, or, if there are no closing sales prices on any

such days, the average of the closing bid and asked prices, in the

Nasdaq Stock Market or other over-the-counter market as









reported by the National Association of Securities Dealers Automated

Quotation System, or, if not so reported, the fair market value of the

security as estimated by a nationally recognized investment banking

firm selected by Abbott and acceptable to the Company in the exercise

of its reasonable discretion, which estimate shall be prepared at the

expense of the Company.



3.2 EXERCISE OF CONVERSION PRIVILEGE. Upon receipt of written

notice of conversion (pursuant to Section 8.1 hereof) in the

form provided on the Credit Facility Note, Abbott shall

immediately surrender the Credit Facility Note or any

$1,000,000 Integral Multiple thereof duly endorsed or assigned

to the Company or in blank, at any office or agency of the

Company maintained for that purpose. No payment or adjustment

shall be made upon any conversion on account of any interest

accrued on the Credit Facility Note surrendered for conversion

or on account of any dividends on the Common Stock issued upon



The Credit Facility Note shall be deemed to have been converted

immediately prior to the close of business on the day of mailing of the

written notice of conversion (pursuant to Section 8.1 hereof) by the

Company, and at such time the rights of Abbott shall cease, and the

Person or Persons entitled to receive the Common Stock issuable upon

conversion shall be treated for all purposes as the record holder or

holders of such Common Stock at such time. As promptly as practicable

on or after the conversion date, the Company shall issue and shall

deliver at such office or agency a certificate or certificates for the

number of duly authorized, validly issued, fully paid and nonassessable

shares of Common Stock issuable upon conversion, together with payment

in lieu of any fraction of a share, as provided in Section 3.3 hereof.



In the case of any Credit Facility Note which is converted in part

only, upon such conversion, the Company shall execute and deliver to

Abbott, at the expense of the Company, a new Credit Facility Note or

Credit Facility Notes of authorized denominations in the aggregate

principal amount equal to the unconverted portion of the principal

amount of the Credit Facility Note.



3.3 FRACTIONS OF SHARES. No fractional shares of Common Stock

shall be issued upon conversion of the Credit Facility Note or

$1,000,000 Integral Multiple thereof. Instead of any

fractional share of Common Stock which would otherwise be

issuable upon the conversion of the Credit Facility Note or

the $1,000,000 Integral Multiple thereof, the Company shall

pay a cash adjustment in respect of such fraction of a share

of Common Stock in an amount equal to the remaining amount

which is not converted by reason of this Section 3.3.



3.4 ADJUSTMENT OF CONVERSION PRICE.









(a) In case the Company shall pay or make a dividend

or other distribution on any class of capital stock

of the Company in Common Stock, the Conversion Price

in effect at the opening of business on the day

following the date fixed for the determination of

stockholders entitled to receive such dividend or

other distribution shall be reduced by multiplying

such Conversion Price by a fraction the numerator of

which shall be the number of shares of Common Stock

outstanding at the close of business on the date

fixed for such determination and the denominator

shall be the sum of such number of shares and the

total number of shares constituting such dividend or

other distribution, such reduction to become

effective immediately after the opening of business

on the day following the date fixed for such

determination. For the purposes of this Section

3.4(a), the number of shares of Common Stock at any

time outstanding shall not include shares held in the

treasury of the Company but shall include shares

issuable in respect of scrip certificates issued in

lieu of fractions of shares of Common Stock. The

Company will not pay any dividend or make any

distribution on shares of Common Stock held in the

treasury of the Company.



(b) In case the Company shall issue rights, options

or warrants to all holders of its Common Stock (not

being available on an equivalent basis to Abbott upon

conversion) entitling them to subscribe for or

purchase shares of Common Stock at a price per share

less than the current market price per share of the

Common Stock (determined as provided in Section

3.4(h) hereof) on the date fixed for the

determination of stockholders entitled to receive

such rights, options or warrants (other than pursuant

to a dividend reinvestment plan), the Conversion

Price in effect at the opening of business on the day

following the date fixed for such determination shall

be reduced to a price (calculated to the nearest

cent) determined by multiplying such Conversion Price

by a fraction the numerator of which shall be the

number of shares of Common Stock outstanding at the

close of business on the date fixed for such

determination plus the number of shares of Common

Stock which the aggregate consideration received by

the Company for the total number of additional shares

of Common Stock so offered for subscription or

purchase would purchase at such Conversion Price in

effect immediately prior to the date fixed for such

determination and the denominator of which shall be

the number of shares of Common Stock outstanding at

the close of business on the date fixed for such

determination plus the number of shares of Common

Stock so offered for subscription or purchase, such

reduction to become effective immediately after the

opening of business on the day following the date

fixed for such determination. For purposes of

calculating the Conversion Price in this Section

3.4(b), the number of shares of Common Stock









immediately prior to the date fixed for such

determination of rights, options or warrants shall be

calculated as if all shares had been fully converted

into shares of Common Stock. Also, for the purposes

of this Section 3.4(b), the number of shares of

Common Stock at any time outstanding shall not

include shares held in the treasury of the Company

but shall include shares issuable in respect of scrip

certificates issued in lieu of fractions of shares of

Common Stock. The Company will not issue any rights,

options or warrants in respect of shares of Common

Stock held in the treasury of the Company.



(c) In case outstanding shares of Common Stock shall

be subdivided into a greater number of shares of

Common Stock, the Conversion Price in effect at the

opening of business on the day following the day upon

which such subdivision becomes effective shall be

proportionately reduced, and, conversely, in case

outstanding shares of Common Stock shall each be

combined into a smaller number of shares of Common

Stock, the Conversion Price in effect at the opening

of business on the day following the day upon which

such combination becomes effective shall be

proportionately increased, such reduction or

increase, as the case may be, to become effective

immediately after the opening of business on the day

following the day upon which such subdivision or

combination becomes effective.



(d) In case the Company shall, by dividend or

otherwise, distribute to all holders of its Common

Stock evidences of its indebtedness or assets

(including securities, but excluding any rights,

options or warrants referred to in Section 3.4(b)

hereof, any dividend or distribution paid exclusively

in cash and any dividend or distribution referred to

in Section 3.4), the Conversion Price shall be

adjusted so that the same shall equal the price

determined by multiplying the Conversion Price in

effect immediately prior to the close of business on

the date fixed for the determination of stockholders

entitled to receive such distribution by a fraction

the numerator of which shall be the current market

price per share (determined as provided in Section

3.4(h)) of the Common Stock on the date fixed for

such determination less the then fair market value

(as determined by an independent majority of the

Board of Directors, whose determination shall be

conclusive and described in a board resolution) of

the portion of the assets or evidences of

indebtedness so distributed applicable to one share

of Common Stock and the denominator shall be such

current market price per share of the Common Stock,

such adjustment to become effective immediately prior

to the opening of business on the day following the

date fixed for the determination of stockholders

entitled to receive such









distribution. In any case in which this Section

3.4(d) is applicable, Section 3.4(b) hereof shall not

be applicable.



(e) In case the Company shall, by dividend or

otherwise, distribute to all holders of its Common

Stock cash (excluding any cash that is distributed

upon a merger or consolidation to which Section 3.10

hereof applies or as part of a distribution referred

to in paragraph (d) of this Section 3.4) in an

aggregate amount that, combined together with (i) the

aggregate amount of any other distributions to all

holders of its Commo ...