<PAGE>   1
                                                                  EXHIBIT 10.4  


                            TARGET THERAPEUTICS, INC.

                       1991 EMPLOYEE STOCK PURCHASE PLAN
                              As Amended May, 1996

         The following constitute the provisions of the 1991 Employee Stock
Purchase Plan of Target Therapeutics, Inc.

         1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.

         2. Definitions.

              (a) "Board" shall mean the Board of Directors of the Company.

              (b) "Code" shall mean the Internal Revenue Code of 1986, as
                  amended.

              (c) "Common Stock" shall mean the Common Stock of the Company.

              (d) "Company" shall mean Target Therapeutics, Inc., a Delaware
                  corporation.

              (e) "Compensation" shall mean all base straight time gross
earnings, including payments for overtime, shift premium, incentive
compensation, incentive payments, commissions and other compensation and
excluding bonuses; provided, however, that Compensation for officers, directors
and other persons subject to Section 16 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") shall include only base straight time gross
earnings exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses, commissions and other compensation.

              (f) "Designated Subsidiaries" shall mean the Subsidiaries which
have been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.

              (g) "Employee" shall mean any individual who is an employee of the
Company for purposes of tax withholding under the Code whose customary
employment with the Company or any Designated Subsidiary is at least twenty (20)
hours per week and more than five (5) months in any calendar year. For purposes
of the Plan, the employment relationship shall be treated as continuing intact
while the individual is on sick leave or other leave of absence approved by the
Company. Where the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the 91st day of such leave.
<PAGE>   2
              (h) "Enrollment Date" shall mean the first day of each Offering
Period.

              (i) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:

                   (1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sale
price for the Common Stock (or the mean of the closing bid and asked prices, if
no sales were reported), as quoted on such exchange (or the exchange with the
greatest volume of trading in Common Stock) or system on the date of such
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable, or;

                   (2) If the Common Stock is quoted on the NASDAQ system (but
not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or,

                   (3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.

              (j) "Offering Period" shall mean a period of approximately twelve
(12) months, commencing on the first Trading Day in May and November coinciding
with the beginning of the second full pay period in such month and terminating
on the last Trading Day of the first full pay period in the following May and
November, respectively, during which an option granted pursuant to the Plan may
be exercised.

              (k) "Plan" shall mean this Employee Stock Purchase Plan.

              (l) "Purchase Date" shall mean the last day of each Purchase
Period.

              (m) "Purchase Period" shall mean a period of approximately six
months within an Offering Period.

              (n) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Purchase Date, whichever is lower.

              (o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.

                                       -2-
<PAGE>   3
              (p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.

              (q) "Trading Day" shall mean a day on which national stock
exchanges and the National Association of Securities Dealers Automated Quotation
(NASDAQ) System are open for trading.

         3. Eligibility.

              (a) Any Employee (as defined in Section 2(g)), who shall be
employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.

              (b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent his or her rights to purchase stock under
all employee stock purchase plans of the Company and its subsidiaries to accrue
at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock
(determined at the fair market value of the shares at the time such option is
granted) for each calendar year in which such option is outstanding at any time.

         4. Offering Periods and Purchase Periods.

              (a) Offering Periods. The Plan shall be implemented by a series of
consecutive Offering Periods of approximately twelve (12) months duration, with
new Offering Periods commencing on the first Trading Day in May and November
coinciding with the beginning of the second full pay period in each such month,
or on such other date as the Board shall determine, and continuing thereafter
until terminated in accordance with Section 20 hereof. The Board shall have the
power to change the duration of Offering Periods (including the commencement
dates thereof) with respect to future offerings without stockholder approval if
such change is announced at least fifteen (15) days prior to the scheduled
beginning of the first Offering Period to be affected thereafter. Eligible
Employees may not participate in more than one Offering Period at a time.

              (b) Purchase Periods. Each Offering Period shall consist of two
(2) consecutive purchase periods of approximately six (6) months duration. The
last day of each Purchase Period shall be the "Purchase Date" for such Purchase
Period. A Purchase Period commencing on the First Trading Day coinciding with
the beginning of the second full pay period in May shall end on the last Trading
Day coinciding with the end of the first full pay period in the next November. A
Purchase Period commencing on the First Trading Day coinciding with the
beginning of the second full pay period in November shall end on the last
Trading Day coinciding with the end of the first full pay period in the next
May. The Board of Directors of the Company shall have the power to change the
duration and/or frequency of Purchase Periods with respect to

                                       -3-
<PAGE>   4
future purchases without shareholder approval if such change is announced at
least fifteen (15) days prior to the scheduled beginning of the first Offering
Period to be effected thereafter.

         5. Participation.

              (a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office at
least five (5) business days prior to the applicable Enrollment Date, unless a
later time for filing the subscription agreement is set by the Board for all
eligible Employees with respect to a given Offering Period. The subscription
agreement shall set forth the percentage of the participant's Compensation
(which shall be not less than 1% and not more than 12%) to be deducted pursuant
to the Plan. Eligible Employees may not participate in more than one Offering
Period at a time.

              (b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll
paid on or prior to the last Purchase Period of the Offering Period to which
such authorization is applicable, unless sooner terminated by the participant as
provided in Section 10 hereof.

         6. Payroll Deductions.

              (a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during an Offering Period in an amount not exceeding twelve percent (12%) of the
Compensation which he or she receives on each pay day during an Offering Period,
and the aggregate of such payroll deductions during an Offering Period shall not
exceed twelve percent (12%) of the participant's Compensation during said
Offering Period.

              (b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and will be withheld in whole
percentages only. A participant may not make any additional payments into such
account.

              (c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during an Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.

              (d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to 0% at such time during any
Offering Period which is scheduled to end during the current calendar year (the
"Current Offering Period") that the aggregate of all payroll deductions

                                       -4-
<PAGE>   5
which were previously used to purchase stock under the Plan in a prior Offering
Period which ended during that calendar year plus all payroll deductions
accumulated with respect to the Current Offering Period equal $21,250. Payroll
deductions shall recommence at the rate provided in such participant's
subscription agreement at the beginning of the first Offering Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10 hereof.

              (e) At the time the option is exercised, in whole or in part, or
at the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.

         7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Purchase Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Purchase Date and retained in the Participant's account as of the
Purchase Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than a
number of Shares determined by dividing $25,000 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 13 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof, and
shall expire on the last day of the Offering Period.

         8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares will
be exercised automatically on each Purchase Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after a
Purchase Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.

         9. Delivery. As promptly as practicable after each Purchase Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.

                                       -5-
<PAGE>   6
         10. Voluntary Withdrawal; Termination of Employment.

              (a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account will be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made during the Offering Period.
If a participant withdraws from an Offering Period, payroll deductions will not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.

              (b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), for any reason, including by virtue of him or her having
failed to remain an Employee of the Company for at least twenty (20) hours per
week during an Offering Period in which the Employee is a participant, he or she
will be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option will be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option will be automatically
terminated.

              (c) A participant's withdrawal from an Offering Period will not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering Periods
which commence after the termination of the Offering Period from which the
participant withdraws.

         11. Automatic Withdrawal. If the fair market value of the shares on the
first Purchase Date of an Offering Period is less than the fair market value of
the shares on the Enrollment Date for such Offering Period, then every
participant shall automatically (i) be withdrawn from such Offering Period at
the close of such Purchase Date and after the acquisition of shares for such
Purchase Period, and (ii) be enrolled in the Offering Period commencing on the
first business day subsequent to such Purchase Period.

         12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.

         13. Stock.

              (a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be 300,000 shares,
subject to adjustment upon changes in capitalization of the Company as provided
in Section 19 hereof. If on a given Purchase Date the number of shares with
respect to which options are to be exercised exceeds the number of shares then
available under the Plan, the Company shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.

                                       -6-
<PAGE>   7
              (b) The participant will have no interest or voting right in
shares covered by his option until such option has been exercised.

              (c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.

         14. Administration.

              (a) Administrative Body. The Plan shall be administered by the
Board or a committee of members of the Board appointed by the Board. The Board
or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties. Members of the
Board who are eligible Employees are permitted to participate in the Plan,
provided that:

                   (1) Members of the Board who are eligible to participate in
the Plan may not vote on any matter affecting the administration of the Plan or
the grant of any option pursuant to the Plan.

                   (2) If a Committee is established to administer the Plan, no
member of the Board who is eligible to participate in the Plan may be a member
of the Committee.

              (b) Rule 16b-3 Limitations. Notwithstanding the provisions of
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Exchange Act, or any successor provision ("Rule 16b-3") provides
specific requirements for the administrators of plans of this type, the Plan
shall be only administered by such a body and in such a manner as shall comply
with the applicable requirements of Rule 16b-3. Unless permitted by Rule 16b-3,
no discretion concerning decisions regarding the Plan shall be afforded to any
committee or person that is not "disinterested" as that term is used in Rule
16b-3.

         15. Designation of Beneficiary.

              (a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to a Purchase
Date on which the option is exercised but prior to delivery to such participant
of such shares and cash. In addition, a participant may file a written
designation of a beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death prior to
exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.

              (b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of

                                       -7-
<PAGE>   8
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

         16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.

         17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.

         18. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees at least annually, which statements will set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.

         19. Adjustments Upon Changes in Capitalization.

              (a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration". Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.

              (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.

              (c) Merger or Asset Sale. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to

                                       -8-
<PAGE>   9
shorten the Offering Period then in progress by setting a new Purchase Date (the
"New Purchase Date") or to cancel each outstanding right to purchase and refund
all sums collected from participants during the Offering Period then in
progress. If the Board shortens the Offering Period then in progress in lieu of
assumption or substitution in the event of a merger or sale of assets, the Board
shall notify each participant in writing, at least ten (10) business days prior
to the New Purchase Date, that the Purchase Date for his option has been changed
to the New Purchase Date and that his option will be exercised automatically on
the New Purchase Date, unless prior to such date he has withdrawn from the
Offering Period as provided in Section 10 hereof. For purposes of this
paragraph, an option granted under the Plan shall be deemed to be assumed if,
following the sale of assets or merger, the option confers the right to
purchase, for each share of option stock subject to the option immediately prior
to the sale of assets or merger, the consideration (whether stock, cash or other
securities or property) received in the sale of assets or merger by holders of
Common Stock for each share of Common Stock held on the effective date of the
transaction (and if such holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
shares of Common Stock); provided, however, that if such consideration received
in the sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per share consid eration received by holders of Common Stock and
the sale of assets or merger.

         The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.

         20. Amendment or Termination.

              (a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 19 hereof,
no such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Purchase Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 19
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.

              (b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts

                                       -9-
<PAGE>   10
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.

         21. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.

         22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

         As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

         23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.

         24. Additional Restrictions of Rule 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.

                                      -10-