**Exhibit 10.4**

 

**Silicon Storage Technology, Inc.**

**Employee Profit Sharing Plan**

 

TheEmployee Profit Sharing Plan (the “Plan”) of Silicon Storage Technology, Inc.(the “Company”) was adopted by the Board of Directors in 1995. Certain aspectsof the Plan were revised by the Compensation Committee of the Board ofDirectors on January 23, 2006. The Plan as revised is as follows:

 

Anyprofit sharing bonus will be based on financial performance for the periodsJanuary 1 through June 30 and July 1 through December 31. Adjusted OperatingProfit will be calculated as Operating Profit plus any expenses booked asresult of the application of SFAS 123(R) less any amounts calculated for theProfit Sharing Pool. The Adjusted Operating Margin is calculated by dividingthe Adjusted Operating Profit by Net Revenue for the same six month period. TheProfit Sharing Pool will be determined by multiplying the Profit Sharing Ratioby the Adjusted Operating Profit. The Profit Sharing Pool will be calculatedbased on the following table:

 
| **Adjusted Operating Margin** | ** ** | **Profit Sharing Ratio** | ** ** |
|-----------------------------------------|------------|------------------------------------|------------|
|                                    |       |                               |       |
| Below 5%                                |       | 0                                  | %          |
| 5% to 6%                                |       | 5                                  | %          |
| 6% to 7%                                |       | 6                                  | %          |
| 7% to 8%                                |       | 7                                  | %          |
| 8% to 9%                                |       | 8                                  | %          |
| 9% to 10%                               |       | 9                                  | %          |
| Above 10%                               |       | 10                                 | %          |

 

Managementmay recommend to the Board of Director or the Compensation Committee that theProfit Sharing Pool may be reduced based upon the Company’s profitability, theCompany’s sales returns performance, individual MBO performance or otherfactors deemed relevant by management. Management shall recommend to the Boardof Directors or the Compensation Committee the distribution of the ProfitSharing Pool to Company employees which distribution may be based upon salary,performance, longevity or other factors considered relevant by management. Employeescovered by other compensation plans may be excluded from the Plan at management’srecommendation to the Board of Directors or Compensation Committee.

 

Any payments under theProfit Sharing Plan shall be approved by and made on such schedule and at suchtimes as may be approved by the Board of Directors or the CompensationCommittee each in their discretion.

 

Participation in the Planshall not alter in any way the at-will nature of the employment of an employee,and such employment may be terminated at any time for any reason, with orwithout cause and with or without prior notice.

 

The Board of Directors orthe Compensation Committee may amend, suspend, modify the terms of, orterminate the Plan at any time.

 

ThePlan shall be governed by and construed in accordance with the laws of theState of California.

 

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