JAZZ SEMICONDUCTOR, INC.

RECAPITALIZATION AGREEMENT

THIS RECAPITALIZATION AGREEMENT (the "Agreement") is entered into as of July 30, 2002 by and among JAZZ SEMICONDUCTOR, INC., a Delaware corporation (the "Company"), Carlyle Partners III, L. P., a Delaware limited partnership, CP III Coin vestment, L. P., a Delaware limited partnership, Carlyle High Yield Partners, L. P. a Delaware limited partnership (each a "Carlyle Entity" and, collectively, the "Carlyle Entities") and Conexant Systems, Inc., a Delaware corporation ("Conexant" and, together with the Carlyle Entities, the "Stockholders").

RECITALS

WHEREAS, as of the date hereof, Carlyle owns of record and beneficially 5,500,000 shares of the Class A Common Stock, $0.001 par value, of the Company (the "Class A Common Stock"), and Conexant owns of record and beneficially 4,500,000 shares of the Class B Common Stock, $0.001 par value, of the Company (the "Class B Common Stock" and, together with the Class A Common Stock, the "Common Stock"); and

WHEREAS, the Company and each Stockholder believe it is in the best interest of the Company and each Stockholder to effect a recapitalization of the Company (the "Recapitalization") pursuant to which the Carlyle Entities' shares of Class A Common Stock are to be exchanged for shares of the Series A Preferred Stock,$0.001 par value, of the Company (the "Series A Preferred Stock"), and Conexant's shares of Class B Common Stock are to be exchanged for shares of the Series B Preferred Stock,$0.001 par value, of the Company (the "Series B Preferred Stock," and, together with the Series A Preferred Stock, the "Designated Preferred Stock").

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, and intending to be legally bound thereby, the parties hereto agree as follows: