GENERAL SEMICONDUCTOR, INC.
                              ANNUAL INCENTIVE PLAN

     1.     Purpose

     The  purpose of the Annual  Incentive  Plan is to  enhance  the  ability of
General  Semiconductor,  Inc.  to  attract,  motivate,  reward  and  retain  key
employees,  to strengthen  their commitment to the success of the Company and to
align their  interests  with those of the  Company's  stockholders  by providing
additional  compensation to designated key employees of the Company based on the
achievement of performance  objectives.  To this end, the Annual  Incentive Plan
provides  a means of  annually  rewarding  participants  primarily  based on the
performance of the Company and its Business Units and  secondarily  based on the
achievement of personal performance objectives.


     2.     Eligibility

     Participation  in the Plan for a  Performance  Period  shall be  limited to
those  Employees  who,  because of their  significant  impact on the current and
future success of the Company, the CEO selects, in accordance with Section 4, to
participate  in the  Plan  for  that  Performance  Period.  Notwithstanding  the
foregoing, Officers shall participate in the Plan in every Performance Period.

     To be  eligible to  participate  in the Plan in any  Performance  Period an
Employee  shall  have  had at least  three  months  active  tenure  during  such
Performance  Period and be actively employed by the Company on the Award payment
date (except as provided in Sections 6 and 7).

     Employees shall participate in only one annual cash or sales incentive plan
for any specific period in time. For example,  an individual may not participate
in both the Plan and the  Company's  sales  incentive  plan at the same time. An
individual may participate in this Plan and another Plan sequentially during any
Performance   Period  because  of  promotion  or  reassignment,   provided  that
participation  in each such plan is pro-rated to reflect (to the nearest  weekly
increment) the period during which he or she participated in each plan.

     3.    Administration

     The administration of the Plan shall be consistent with the purpose and the
terms of the Plan. The Plan shall be  administered by the Committee with respect
to Officers and by the CEO with respect to all other Participants. The Committee
and the CEO, as the case may be,  shall have full  authority  to  establish  the
rules and  regulations  relating to the Plan,  to  interpret  the Plan and those
rules and  regulations,  to select  Participants  in the Plan, to determine each
Participant's  Target  Award  Percentage,  to approve all Awards,  to decide the
facts in any case  arising  under the Plan and to make all other  determinations
and  to  take  all  other  actions  necessary  or  appropriate  for  the  proper
administration of the Plan, including the delegation of such authority or power,
where  appropriate;  provided,  however,  that  only the  Committee  shall  have
authority  to amend  or  terminate  the  Plan.  The  Committee's  and the  CEO's
administration   of  the  Plan,   including  all  such  rules  and  regulations,
interpretations,  selections, determinations, approvals, decisions, delegations,
amendments,  terminations  and other actions,  shall be final and binding on the
Company,  their  respective  stockholders  and  all  employees  of the  Company,
including the Participants and their respective beneficiaries.

     4.     Determination of Awards

     Prior to, or as soon as practicable  following,  the  commencement  of each
Performance  Period,  the CEO with respect to all Employees  other than Officers
shall determine the Employees who shall be Participants  during that Performance
Period  and  determine  each  Participant's  Target  Award  Percentage  and  the
Committee shall determine each Officer's  Target Award  Percentage.  The Company
shall  prepare  schedules,  which  will be  treated as part of the Plan for that
Performance  Period,  setting forth (a) the Participants during that Performance
Period,  (b) each  Participant's  Target Award  Percentage for that  Performance
Period,  and  (c)  the  Operational   Targets  (and  the  allocation  among  the
Operational  Targets) for that  Performance  Period (which shall be  established
within 90 days after the commencement of such Performance  Period).  The Company
shall  notify each  Participant  of his or her Target Award  Percentage  and the
applicable  Operational  Targets for the Performance Period. The Committee shall
establish the Target Award  Percentage and the Operational  Targets for Officers
within 90 days after the commencement of the relevant Performance Period.

     A  Participant  earns an Award for a  Performance  Period  based on (i) the
Company's and his or her Business Unit's achievement of the Operational Targets,
and (ii) in the case of Participants  other than the CEO, his or her achievement
of  personal  performance  goals.  The  portion  of Awards  based on  Company or
Business Unit  Performance  will only be earned if the Company or Business Unit,
as  applicable,  achieves  at least  the  minimum  percentage  specified  by the
Committee  or the CEO,  as  applicable,  of the  Operational  Target set for the
Performance  Period. The Awards for any Performance Period may also be increased
above the Target Award  Percentage for  achievement in excess of the Operational
Targets for that  Performance  Period,  as specified by the Committee or CEO, as
applicable,  for that Performance  Period. The Awards of each Participant (other
than the CEO) may be adjusted  upward or downward by twenty percent (20%) by the
Committee  or the CEO, as  applicable,  based upon the CEO's or the  Committee's
determination  of a  Participant's  Personal  Performance  Percentage  for  that
Performance  Period;  provided,  however,  that such  adjustments  shall neither
increase nor decrease the total amount paid on the basis of the  achievement  of
the Operational Targets for that Performance Period. The Committee is authorized
to reduce  the  amount of the award  payable to the CEO by not more than 20% for
any Performance Period based upon its assessment of personal performance but not
to increase the Award above that yielded by the Operational  Target Award earned
for the CEO.

    5.     Changes to the Target

     The Committee,  with respect to Officers,  and the CEO, with respect to all
other  Participants,  may at any time prior to the final determination of Awards
change the Target  Award  Percentage  of any  Participant  or assign a different
Target  Award  Percentage  to  a  Participant  to  reflect  any  change  in  the
Participant's  responsibility  level  or  position  during  the  course  of  the
Performance Period.

     The Committee,  with respect to Officers,  and the CEO, with respect to all
other  Participants,  may at any time prior to the final determination of Awards
change the Operational Targets to reflect a change in corporate  capitalization,
such as a stock split or stock dividend, or a corporate  transaction,  such as a
merger,  consolidation,   separation,  reorganization  or  partial  or  complete
liquidation;  or to equitably reflect changed business  circumstances during the
Performance  Period;  the occurrence of any  extraordinary  event; any change in
applicable accounting rules or principles; any change in the Company's method of
accounting;  any  change  in  applicable  law;  any  change  due to any  merger,
consolidation,   acquisition,   reorganization,   stock  split,  stock  dividend
combination of shares or other changes in the Company's  corporate  structure or
shares; or any other change of a similar nature.

     6.     Payment of Awards

     The  Committee  shall  certify and announce the Awards that will be paid by
the  Company  to each  Officer  as  soon  as  practicable  following  the  final
determination of the Company's  financial  results for the relevant  Performance
Period.  Subject to the provisions of Section 7, payment of the Awards certified
by the  Committee  shall  normally be made, in a single lump sum cash payment as
soon as practicable  following the close of such  Performance  Period but in any
event within 120 days after the close of the Performance  Period. In the case of
all other Participants,  as soon as practicable after the close of a Performance
Period, the CEO shall review the Business Units' financial  performance  against
the  Operational  Targets  for  that  Performance  Period  and,  subject  to the
provisions  of Section 7, each  Award to the  extent  earned  shall be paid in a
single  lump sum cash  payment  as soon as  practicable  after  the close of the
Performance  Period,  but no  later  than 120 days  following  the  close of the
Performance Period.

     If  a  Change  in  Control  occurs,  the  Company  shall,  within  60  days
thereafter,  pay to each Participant in the Plan immediately prior to the Change
in Control  (regardless of whether the  Participant  remains  employed after the
Change in Control) an Award which is calculated  assuming  that all  performance
percentages are 100 percent, and such Award shall be prorated to the date of the
Change in Control based on the  Participant's  Base Salary earned to the date of
the Change in Control.

     7.     Limitations on Rights to Payment of Awards

     No  Participant  shall have any right to receive  payment of an Award under
the Plan for a Performance  Period unless the Participant  remains in the employ
of the Company  through the Award payment  date,  except as provided in the last
paragraph of Section 6. However,  if the Participant has active service with the
Company  for at  least  three  months  during  any  Performance  Period  and the
Participant's   employment  with  the  Company  terminates  due  to  the  death,
Disability  or  Retirement  (or, in the event of the  Participant's  death,  the
Participant's  estate,  beneficiary or beneficiaries as determined under Section
8), the Participant  shall remain eligible to receive a prorated  portion of any
earned  Award,  based on the number of weeks that the  Participant  was actively
employed and performed services during such Performance Period.

     8.     Designation of Beneficiary

     A  Participant  may designate a beneficiary  or  beneficiaries  who, in the
event of the  Participant's  death prior to full payment of any Award hereunder,
shall receive payment of any Award due under the Plan. Such designation shall be
made by the Participant on a form  prescribed by the Committee.  The Participant
may, at any time, change or revoke such designation.  A beneficiary designation,
or revocation of a prior beneficiary  designation,  will be effective only if it
is made in writing on a form provided by the Company,  signed by the Participant
and received by the Company's  Human  Resources  Department.  If the Participant
does not designate a beneficiary or the beneficiary  dies prior to receiving any
payment  of an  Award,  Awards  payable  under  the  Plan  shall  be paid to the
Participant's estate.

     9.       Amendment and Termination

     (a) The Committee may at any time, or from time to time, amend, in whole or
in part,  the Plan.  However,  no  amendment  or  termination  of the Plan shall
adversely affect any Participant's right to or interest in an Award earned prior
to the date of such amendment, unless the Participant agrees in writing thereto.

     (b) The Committee  may  terminate  the Plan, in whole or in part;  however,
each  Participant  shall receive an amount equal to the amount of the Award that
would  have been paid for the  Performance  Period,  prorated  for the number of
weeks in the Performance Period prior to the date of termination of the Plan.

     10.      Miscellaneous Provisions

     (a) This Plan is not a contract  between the Company and the  Employees  or
the  Participants.  Neither the establishment of this Plan, nor any action taken
hereunder,  shall be  construed as giving any  Employee or any  Participant  any
right to be  retained  in the  employ of the  Company.  The  Company is under no
obligation to continue the Plan.

     (b) A  Participant's  right and interest under the Plan may not be assigned
or transferred, except as provided in Section 8, and any attempted assignment or
transfer  shall be null and void and shall  extinguish,  in the  Company's  sole
discretion,  the Company's  obligation under the Plan to pay Awards with respect
to the Participant.

     (c) The Plan  shall be  unfunded.  The  Company  shall not be  required  to
establish  any special or separate  fund,  or to make any other  segregation  of
assets, to assure payment of Awards.

     (d) The Company shall have the right to deduct from Awards paid,  any taxes
or other amounts required by law to be withheld.

     (e)  Nothing  contained  in the Plan shall limit or affect in any manner or
degree the normal and usual powers of management,  exercised by the Officers and
the Board of  Directors  or  committees  thereof,  to change  the  duties or the
character  of  employment  of any  employee  of the  Company  or to  remove  the
individual  from the  employment of the Company at any time, all of which rights
and powers are expressly reserved.

     (f) The Plan and the  rights of all  persons  claiming  hereunder  shall be
construed and  determined in accordance  with the laws of the State of New York,
without giving effect to conflict of law principles thereof.

     11.    Definitions

     (a) "Award"  shall mean the incentive  award earned by a Participant  under
the Plan for any Performance Period.

     (b)"Base Salary" shall mean the Participant's  annual base salary, paid in
the  performance  period.  Annual base salary does not include  Awards under the
Plan, long-term incentive awards, imputed income from such programs as executive
life insurance or nonrecurring  earnings such as moving expenses and is based on
salary before  reductions for such items as contributions  under Sections 401(k)
or 125 of the Internal Revenue Code of 1986, as amended,  and  Company-sponsored
deferred compensation arrangements.

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

     (d) "Business  Unit" shall mean either the Company,  a strategic  function,
regional group or other unit of classification, as specified by the Committee or
CEO, as applicable.

     (e) "CEO" shall mean the Chief Executive Officer of the Company.


     (f) "Change in Control" shall mean the occurrence of any of the following:

     (1) An  acquisition  (other than  directly  from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person" (as the term
Person  is used for  purposes  of  Section  13(d)  or  14(d)  of the 1934  Act),
immediately  after  which such  Person has  "Beneficial  Ownership"  (within the
meaning  of Rule  13d-3  promulgated  under the  Exchange  Act) of  thirty-three
percent  (33%) or more of the then  outstanding  Shares or the  combined  voting
power of the Company's then outstanding Voting Securities; provided, however, in
determining  whether a Change in Control has  occurred  pursuant to this Section
11(f)(1),  Shares or Voting  Securities  which are  acquired  in a  "Non-Control
Acquisition" (as hereinafter  defined) shall not constitute an acquisition which
would  cause a Change in  Control.  A  "Non-Control  Acquisition"  shall mean an
acquisition by (i) an employee  benefit plan (or a trust forming a part thereof)
maintained by (A) the Company or (B) any  corporation or other Person of which a
majority of its voting power or its voting equity  securities or equity interest
is  owned,  directly  or  indirectly,  by the  Company  (for  purposes  of  this
definition,  a "Related  Entity"),  (ii) the Company or any Related  Entity,  or
(iii) any Person in connection with a "Non-Control  Transaction" (as hereinafter
defined);

     (2) The  individuals  who, as of October 19, 1999, are members of the Board
(the "Incumbent  Board"),  cease,  for any  reason,  to  constitute  at least a
majority of the members of the Board;  provided,  however, that if the election,
or nomination  for election by the  Company's  common  stockholders,  of any new
director was approved by a vote of at least  two-thirds  (2/3) of the  Incumbent
Board,  such new director  shall,  for purposes of this Plan, be considered as a
member of the Incumbent Board;  provided  further,  however,  that no individual
shall be considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened  "Election Contest"
(as described in Rule 14a-11 promulgated under the Exchange Act) or other actual
or  threatened  solicitation  of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy  Contest")  including by reason of any  agreement
intended to avoid or settle any Election Contest or Proxy Contest; or

(3)          The consummation of:

     (A) A merger,  consolidation or reorganization  with or into the Company or
in which securities of the Company are issued, unless such merger, consolidation
or  reorganization is a "Non-Control  Transaction." A "Non-Control  Transaction"
shall mean a merger, consolidation or reorganization with or into the Company or
in which securities of the Company are issued where:

     (i) the  stockholders  of the  Company,  immediately  before  such  merger,
consolidation  or  reorganization,   own  directly  or  indirectly   immediately
following such merger,  consolidation or reorganization,  at least a majority of
the  combined  voting  power  of  the  outstanding   voting  securities  of  the
corporation  resulting from such merger or consolidation or reorganization  (the
"Surviving  Corporation"),   in  substantially  the  same  proportion  as  their
ownership of the Voting Securities immediately before such merger, consolidation
or reorganization.

     (ii) the individuals,  who were members of the Incumbent Board  immediately
prior to the extension of the agreement providing for such merger, consolidation
or reorganization, constitute at least a majority of the members of the board of
directors of the Surviving Corporation,  or a corporation  beneficially directly
or  indirectly  owning a majority  of the  Voting  Securities  of the  Surviving
Corporation, and

     (iii) no Person other than (1) the Company, (2) any Related Entity, (3) any
employee  benefit plan (or any trust forming a part thereof)  that,  immediately
prior to such merger,  consolidation  or  reorganization,  was maintained by the
Company or any Related Entity, or (4) any Person who,  immediately prior to such
merger, consolidation or reorganization had Beneficial Ownership of thirty-three
percent (33%) or more of the then outstanding  Voting Securities or Shares,  has
Beneficial  Ownership  of  thirty-three  percent  (33%) or more of the  combined
voting power of the Surviving  Corporation's  then outstanding voting securities
or its common stock.

(B)         A complete liquidation or dissolution of the Company; or

     (C) The sale or other disposition of all or substantially all of the assets
of the Company to any Person  (other than a transfer to a Related  Entity or the
distribution  to the Company's  stockholders of the stock of a Related Entity or
any other assets).

     Notwithstanding  the foregoing,  a Change in Control shall not be deemed to
occur  solely  because any Person (the  "Subject  Person")  acquired  Beneficial
Ownership of more than the permitted  amount of the then  outstanding  Shares or
Voting  Securities as a result of the acquisition of Shares or Voting Securities
by the Company which, by reducing the number of Shares or Voting Securities then
outstanding,  increases the proportional  number of shares Beneficially Owned by
the Subject  Persons,  provided that if a Change in Control would occur (but for
the  operation  of this  sentence) as a result of the  acquisition  of Shares or
Voting  Securities  by the  Company,  and after  such share  acquisition  by the
Company,  the Subject  Person  becomes the  Beneficial  Owner of any  additional
Shares or Voting  Securities  Beneficially  Owned by the Subject Person,  then a
Change in Control shall occur.

     (g) "Committee" shall mean the Compensation Committee of the Board.

     (h) "Company" shall mean General Semiconductor, Inc., and its Subsidiaries.

     (i)  "Disability"  shall  mean  permanent  disability,  as  defined  in the
Company's long-term disability plan.

     (j) "Effective Date" shall mean January 1, 2000.

     (l) "Employee" shall mean any person (including an officer) employed by the
Company or any of its Subsidiaries on a full-time salaried basis.

     (m) "1934 Act" shall mean the Securities Exchange Act of 1934, as amended.

     (n) "Officer"  shall mean the CEO and an officer of the Company  elected by
the Board.

     (o)  "Operational  Targets,"  for any  Performance  Period,  shall mean the
financial  performance of the Company, as specified by the Committee or the CEO,
as applicable,  as the stock price, earnings per share, net earnings,  operating
income,  return on assets, net capital employed,  shareholder return,  return on
equity,  growth in assets,  unit  volume,  sales,  market  share,  or  strategic
business criteria  consisting of one or more Company objectives based on meeting
specified revenue goals, market penetration goals, geographic business expansion
goals, cost targets,  customer satisfaction goals, product development goals, or
goals relating to acquisitions or divestitures.  In setting  Operational Targets
pursuant  to  Section  4,  the  Committee  or  the  CEO  shall  use  objectively
determinable  Operational Targets based on the foregoing criteria. To the extent
applicable,  any such Operational  Target shall be determined in accordance with
generally  accepted  accounting  principles  and reported  upon by the Company's
independent accountants. The Operational Targets established by the Committee or
the CEO may be (but need not be) different each Performance Period and different
Operational Targets may be applicable to different Participants.

     (p)  "Participant,"  for any Performance  Period,  shall mean an Officer or
Employee  selected to  participate  in the Plan for such  Performance  Period in
accordance with Section 2.

     (q)  "Performance  Period" shall mean the fiscal year of the Company or any
other  period  designated  by the  Committee  with  respect to which an Award is
earned.

     (s) "Personal  Performance  Percentage," with respect to Participants other
than the CEO for any Performance  Period,  shall mean the percentage between 80%
and 120%,  based on the achievement of the  Participant's  personal  performance
goals, as determined in accordance with Section 4.

     (t) "Plan" shall mean this General  Semiconductor,  Inc.  Annual  Incentive
Plan, as from time to time amended and in effect.

     (u) "Retirement"  shall  mean  retirement  at or  after  age  65 or  early
retirement with the prior written approval of the Company.

     (v) "Shares" shall mean the common stock,  par value $.01 per share, of the
Company.

     (w)  "Subsidiary"  shall mean a corporation as defined in Section 424(f) of
the Internal Revenue Code of 1986, as amended, with the Company being treated as
the employer corporation for purposes of this definition.

     (x) "Target  Award  Percentage"  for any  Participant  with  respect to any
Performance  Period,  shall mean the percentage of the Participant's Base Salary
that the Participant would earn as an Award for that Performance  Period if each
of the Operational Target Awards Earned and the Personal Performance  Percentage
(if applicable) for that Performance  Period is 100%, and shall be determined by
the Committee  with respect to Officers and by the CEO with respect to all other
Participants, based on the Participant's responsibility level or the position or
positions held during the Performance  Period;  provided,  however,  that if any
Participant  other  than an  Officer  held more  than one  position  during  the
Performance  Period,  then  the CEO  may  designate  a  different  Target  Award
Percentage  with  respect to each  position  and the Award will be  pro-rated to
reflect ( to the nearest  semi-monthly  increment)  the period during which such
Participant had each Target Award Percentage.


Adopted:  ________________, 1999