UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549



                                    FORM 8-K


                Current Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934


                         Date of Report December 9, 1996


                           QUALITY SEMICONDUCTOR, INC.
             (Exact name of registrant as specified in its charter)



       California                   2-23128                     77-0199189
(State or other jurisdiction      (Commission                 (IRS Employer
of incorporation)                 File Number)               Identification No.



                                851 Martin Avenue
                              Santa Clara, CA 95050
          (Address of principal executive offices) (including Zip code)



                                 (408) 450-8000
              (Registrant's telephone number, including area code)



                             Exhibit Index on page 4


<PAGE>



Item 5.  Other Events

         On  November  22,  1996,  Quality  Semiconductor,  Inc.,  a  California
corporation  (the  "Company")  announced  the sale of $5  million  of  unsecured
convertiblepromissory  notes (the "Notes") of Quality  Semiconductor  Australia,
Pty. Limited a subsidiary of the Company. The termsof the Notes are contained in
the  instruments  defining  the rights of the holders of  unsecured  convertible
promissory noes of Quality  Semiconductor  Australia,  Pty.  Limited attached as
exhibits hereto and  incorporated by reference  herein.  Further details of this
transaction are contained in the Company's press release dated November 22, 1996
atttached as an exhibit hereto and incorporated by reference herein.

Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits.

         (c)      Exhibits

     Exhibit 4.1 Form of QSA  Convertible/Redeemable  Note  Issuance  Agreement,
dated November 21, 1996, between Quality Semiconductor  Australia,  Pty.Limited,
Quality Semiconductor, Inc. and Technology Associates (Note No. 1).

     Exhibit 4.2 Form of QSA  Convertible/Redeemable  Note  Issuance  Agreement,
dated November 21, 1996, between Quality Semiconductor  Australia,  Pty.Limited,
Quality  Semiconductor,  Inc. and Win Win Venture Capital  Corporation (Note No.
3).

     Exhibit 4.3 Form of QSA  Convertible/Redeemable  Note  Issuance  Agreement,
dated November 21, 1996, between Quality Semiconductor  Australia,  Pty.Limited,
Quality  Semiconductor,  Inc. and Win Win Venture Capital  Corporation (Note No.
4).

     Exhibit 4.4 Form of QSA  Convertible/Redeemable  Note  Issuance  Agreement,
dated November 21, 1996, between Quality Semiconductor Australia,  Pty. Limited,
Quality  Semiconductor,  Inc. and Win Win Venture Capital  Corporation (Note No.
5).

     Exhibit  4.5  Form of  Unsecured  Convertible  Promissory  Note of  Quality
Semiconductor Australia, Pty. Limited.

     Exhibit 99 Quality  Semiconductor,  Inc.  Press Release dated  November 22,
1996.


<PAGE>



                                   SIGNATURES

Pursuant the  requirements  of the Securities  Exchange Act of 1934, as amended,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                                  QUALITY SEMICONDUCTOR, INC.



Date:  December 9, 1996                     By:      /s/STEPHEN H. VONDERACH
                                                  --------------------------
                                                  Stephen H. Vonderach
                                                  Vice President of Finance and
                                                  Chief Financial Officer
                                                  (Duly Authorized and Principal
Financial and accounting Officer)




                                     <PAGE>



                           QUALITY SEMICONDUCTOR, INC.

                                INDEX TO EXHIBITS

Exhibit Number                  Description           Sequential Page Number

   Exhibit 4.1      Form of QSA Convertible/Redeemable              5
                    Note Issuance Agreement, dated
                    November 21, 1996, between Quality
                    Semiconductor, Inc. and Technology
                    Associates (Note No. 1).

   Exhibit 4.2      Form of QSA Convertible/Redeemable              7
                    Note Issuance Agreement, dated
                    November 21, 1996, between Quality
                    Semiconductor Australia, Pty. Limited,
                    Quality Semiconductor, Inc. and Win
                    Win Venture Capital Corporation
                    (Note No. 3).

   Exhibit 4.3      Form of QSA Convertible/Redeemable              9
                    Note Issuance Agreement, dated
                    November 21, 1996, between Quality
                    Semiconductor Australia, Pty. Limited,
                    Quality Semiconductor, Inc. and Win
                    Win Venture Capital Corporation
                    Note No. 4)

   Exhibit 4.4      Form of QSA Convertible/Redeemable             11
                    Note Issuance Agreement, dated
                    November 21, 1996, between Quality
                    Semiconductor Australia, Pty. Limited,
                    Quality Semiconductor, Inc. and Win
                    Win Venture Capital Corporation
                    Note No. 5).

   Exhibit 4.5      Form of Unsecured Convertible                 13
                    Promissory Note of Quality
                      Semiconductor Australia, Pty. Limited

  Exhibit 99        Press Release dated November 22, 1996         40


<PAGE>



                                                                     EXHIBIT 4.1

               QSA CONVERTIBLE/REDEEMABLE NOTE ISSUANCE AGREEMENT
                       (TECHNOLOGY ASSOCIATES, NOTE NO. 1)

Quality Semiconductor Australia, Pty. Ltd.
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050

Ladies & Gentlemen:

         The undersigned,  Technology Associates Corporation (the "Noteholder"),
hereby confirms its agreement with you as follows:

         1.  This  QSA  Convertible/Redeemable   Note  Issuance  Agreement  (the
"Agreement") is made as of November __, 1996 by and among Quality  Semiconductor
Australia,  Pty.  Ltd., an Australian  corporation  ("QSA"),  and  subsidiary of
Quality  Semiconductor,  Inc., a  California  corporation  ("QSI"),  QSI and the
Noteholder.

     2. QSA has  authorized the issuance of up to  $5,999,977.01  in convertible
debt securities of QSA (the "QSA Notes") substantially in the Form of Exhibit A.

         3. QSA and the Noteholder  agree that the Noteholder  will take and QSA
will issue,  for an  issuance  price of up to  $999,995.03,  the QSA Note No. 1,
substantially in the form attached hereto as Annex I and incorporated  herein by
reference  as if fully set  forth  herein.  Unless  otherwise  requested  by the
Noteholder,  the QSA Note purchased by the Noteholder  will be registered in the
Noteholder's name and address as set forth below.

         4. The QSA Note shall be subject to certain  rights of  conversion  and
redemption  and  exchangeable  for shares of the  Common  Stock of QSI (the "QSI
Stock") or the Series B  Redeemable  Preference  Shares of QSA (the "QSA Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein. QSI has authorized and reserved 146,586 shares of QSI
Stock for issuance  upon  conversion  or  redemption of the QSA Notes and/or QSA
Stock pursuant to the terms of this Agreement.

         5. The QSA Stock shall be subject to certain  rights of conversion  and
redemption  and  exchangeable  for shares of QSI Common  Stock (the "QSI Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein.

         6. The Noteholder  represents  that,  except as set forth below, (a) it
has had no position, office or other material relationship within the past three
years with QSA or its affiliates and (b) neither it nor any group of which it is
a   member    beneficially    owns   any   securities   of   QSA.    Exceptions:
______________________________  (If no exceptions,  write "none." If left blank,
response will be deemed to be "none").

Please confirm that the foregoing  correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

                                           NOTEHOLDER
                                           By:
                                           Title:
                                           Address:
                                           Tax ID No.:


<PAGE>



AGREED AND ACCEPTED:

QUALITY SEMICONDUCTOR AUSTRALIA, PTY. LTD.

By:
Title:


QUALITY SEMICONDUCTOR, INC.

By:
Title:


<PAGE>



                                                                     EXHIBIT 4.2

               QSA CONVERTIBLE/REDEEMABLE NOTE ISSUANCE AGREEMENT
                (WIN WIN VENTURE CAPITAL CORPORATION, NOTE NO. 3)

Quality Semiconductor Australia, Pty. Ltd.
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050

Ladies & Gentlemen:

         The   undersigned,   Win   Win   Venture   Capital   Corporation   (the
"Noteholder"), hereby confirms its agreement with you as follows:

         1.  This  QSA  Convertible/Redeemable   Note  Issuance  Agreement  (the
"Agreement") is made as of November __, 1996 by and among Quality  Semiconductor
Australia,  Pty.  Ltd., an Australian  corporation  ("QSA"),  and  subsidiary of
Quality  Semiconductor,  Inc., a  California  corporation  ("QSI"),  QSI and the
Noteholder.

     2. QSA has  authorized the issuance of up to  $5,999,977.01  in convertible
debt securities of QSA (the "QSA Notes") substantially in the Form of Exhibit A.

         3. QSA and the Noteholder  agree that the Noteholder  will take and QSA
will issue, for an issuance price of up to $999,995.03,  the QSA Note No. 3 (the
"QSA  Note"),  substantially  in  the  form  attached  hereto  as  Annex  I  and
incorporated herein by reference as if fully set forth herein.  Unless otherwise
requested by the  Noteholder,  the QSA Note purchased by the Noteholder  will be
registered in the Noteholder's name and address as set forth below.

         4. The QSA Note shall be subject to certain  rights of  conversion  and
redemption  and  exchangeable  for shares of the  Common  Stock of QSI (the "QSI
Stock") or the Series B  Redeemable  Preference  Shares of QSA (the "QSA Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein. QSI has authorized and reserved 146,586 shares of QSI
Stock for issuance  upon  conversion  or  redemption of the QSA Notes and/or QSA
Stock pursuant to the terms of this Agreement.

         5. The QSA Stock shall be subject to certain  rights of conversion  and
redemption  and  exchangeable  for shares of QSI Common  Stock (the "QSI Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein.

     6. The Noteholder  represents  that,  except as set forth below, (a) it has
had no position,  office or other  material  relationship  within the past three
years with QSA or its affiliates and (b) neither it nor any group of which it is
a member beneficially owns any securities of QSA. Exceptions:  ___________(If no
exceptions, write "none." If left blank, response will be deemed to be "none").

Please confirm that the foregoing  correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

                                               NOTEHOLDER
                                               By:
                                               Title:
                                               Address:
                                               Tax ID No.:


<PAGE>



AGREED AND ACCEPTED:

QUALITY SEMICONDUCTOR AUSTRALIA, PTY. LTD.

By:
Title:


QUALITY SEMICONDUCTOR, INC.

By:
Title:


<PAGE>



                                                                     EXHIBIT 4.3

               QSA CONVERTIBLE/REDEEMABLE NOTE ISSUANCE AGREEMENT
                (WIN WIN VENTURE CAPITAL CORPORATION, NOTE NO. 4)


Quality Semiconductor Australia, Pty. Ltd.
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050

Ladies & Gentlemen:

         The   undersigned,   Win  Win   Venture   Capital   Corporation,   (the
"Noteholder"), hereby confirms its agreement with you as follows:

         1.  This  QSA  Convertible/Redeemable   Note  Issuance  Agreement  (the
"Agreement") is made as of November __, 1996 by and among Quality  Semiconductor
Australia,  Pty.  Ltd., an Australian  corporation  ("QSA"),  and  subsidiary of
Quality  Semiconductor,  Inc., a  California  corporation  ("QSI"),  QSI and the
Noteholder.

     2. QSA has  authorized the issuance of up to  $5,999,977.01  in convertible
debt securities of QSA the "QSA Notes") substantially in the Form of Exhibit A.

         3. QSA and the Noteholder  agree that the Noteholder  will take and QSA
will issue, for an issuance price of up to $999,995.03,  the QSA Note No. 4 (the
"QSA  Note"),  substantially  in  the  form  attached  hereto  as  Annex  I  and
incorporated herein by reference as if fully set forth herein.  Unless otherwise
requested by the  Noteholder,  the QSA Note purchased by the Noteholder  will be
registered in the Noteholder's name and address as set forth below.

         4. QSA and the  Noteholder  agree  that the  Noteholder  shall make the
payment  of the  issuance  price of  $999,995.03  for the QSA Note on or  before
December 15, 1996 and that Noteholder's obligation to make such payment shall be
unconditional,  regardless  of (i) any  provision  herein,  (ii) any  breach  or
violation of any representation,  warranty, covenant or agreement by the Company
or the  Noteholder,  (iii) any  alleged  fraud or other  tort  committed  by the
Company or the  Noteholder,  (iv) the financial  condition of the Company or the
Noteholder,  or (v) general market conditions.  The Noteholder acknowledges that
the Company would be damaged if the  Noteholder  does not pay the full amount of
the issuance  price of the QSA Note on or before  December 15, 1996. QSA and the
Noteholder  further agree that, as a surety for the  Noteholder's  obligation to
make full payment under this  Agreement,  QSA shall hold as  collateral  the QSA
convertible,  unsecured Note No. 3 ("QSA Note No. 3") in the principal amount of
$999,995.03   of  the   Noteholder   issued   pursuant   to  that   certain  QSA
Convertible/Redeemable  Note  Issuance  Agreement  (Note  No.  3) of  even  date
herewith  by and  between QSA and the  Noteholder.  Upon  payment in full of the
issuance  price of the QSA Note by the  Noteholder,  the Company  will issue and
deliver  to the  Noteholder  the QSA Note and QSA Note No. 3. In the event  that
Noteholder  fails to meet its  obligation  to make the  payment of the  issuance
price of $999,995.03  for the QSA Note on or before December 15, 1996, QSA shall
have the right, but not the obligation, to rescind this Agreement and the right,
but not the  obligation,  to cancel QSA Note No. 3 and return the issuance price
of QSA Note No. 3 to the Noteholder.

         5. The QSA Note shall be subject to certain  rights of  conversion  and
redemption  and  exchangeable  for shares of the  Common  Stock of QSI (the "QSI
Stock") or the Series B  Redeemable  Preference  Shares of QSA (the "QSA Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein. QSI has authorized and reserved 146,586 shares of QSI
Stock for issuance  upon  conversion  or  redemption of the QSA Notes and/or QSA
Stock pursuant to the terms of this Agreement.



<PAGE>



         6. The QSA Stock shall be subject to certain  rights of conversion  and
redemption  and  exchangeable  for shares of QSI Common  Stock (the "QSI Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein.

         7. The Noteholder  represents  that,  except as set forth below, (a) it
has had no position, office or other material relationship within the past three
years with QSA or its affiliates and (b) neither it nor any group of which it is
a   member    beneficially    owns   any   securities   of   QSA.    Exceptions:
______________________________  (If no exceptions,  write "none." If left blank,
response will be deemed to be "none").

         Please  confirm that the foregoing  correctly  sets forth the agreement
between us by signing in the space provided below for that purpose.


                                                 NOTEHOLDER
                                                 By:
                                                 Title:
                                                 Address:
                                                 Tax ID No.:

AGREED AND ACCEPTED:

QUALITY SEMICONDUCTOR AUSTRALIA, PTY. LTD.

By:
Title:


QUALITY SEMICONDUCTOR, INC.

By:
Title:



<PAGE>



                                                                     EXHIBIT 4.4

               QSA CONVERTIBLE/REDEEMABLE NOTE ISSUANCE AGREEMENT
                (WIN WIN VENTURE CAPITAL CORPORATION, NOTE NO. 5)


Quality Semiconductor Australia, Pty. Ltd.
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050

Ladies & Gentlemen:

         The   undersigned,   Win  Win   Venture   Capital   Corporation,   (the
"Noteholder"), hereby confirms its agreement with you as follows:

         1.  This  QSA  Convertible/Redeemable   Note  Issuance  Agreement  (the
"Agreement") is made as of November __, 1996 by and among Quality  Semiconductor
Australia,  Pty.  Ltd., an Australian  corporation  ("QSA"),  and  subsidiary of
Quality  Semiconductor,  Inc., a  California  corporation  ("QSI"),  QSI and the
Noteholder.

     2. QSA has  authorized the issuance of up to  $5,999,977.01  in convertible
debt securities of QSA the "QSA Notes") substantially in the Form of Exhibit A.

         3. QSA and the Noteholder agree that the Noteholder, an affiliated fund
of the  Noteholder,  or such other investor as may be approved by QSA, will take
and QSA will issue, for an issuance price of up to  $1,999,996.89,  the QSA Note
No. 5 (the "QSA Note"), substantially in the form attached hereto as Annex I and
incorporated herein by reference as if fully set forth herein.  Unless otherwise
requested by the  Noteholder,  the QSA Note purchased by the Noteholder  will be
registered in the Noteholder's name and address as set forth below.

         4. QSA and the Noteholder agree that the Noteholder, an affiliated fund
of the Noteholder,  or such other investor as may be approved by QSA, shall make
the payment of the issuance price of $1,999,996.89 for the QSA Note on or before
February 15, 1997 and that Noteholder's obligation to make such payment shall be
unconditional,  regardless  of (i) any  provision  herein,  (ii) any  breach  or
violation of any representation,  warranty, covenant or agreement by the Company
or the  Noteholder,  (iii) any  alleged  fraud or other  tort  committed  by the
Company or the  Noteholder,  (iv) the financial  condition of the Company or the
Noteholder,  or (v) general market conditions.  The Noteholder acknowledges that
the Company would be damaged if the  Noteholder  does not pay the full amount of
the issuance  price of the QSA Note on or before  February 15, 1997. QSA and the
Noteholder  further agree that, as a surety for the  Noteholder's  obligation to
make full payment under this  Agreement,  QSA shall hold as collateral:  (a) the
QSA convertible, unsecured Note No. 3 ("QSA Note No. 3") in the principal amount
of  $999,995.03  of  the  Noteholder   issued   pursuant  to  that  certain  QSA
Convertible/Redeemable  Note  Issuance  Agreement  (Note  No.  3) of  even  date
herewith  by and between QSA and the  Noteholder;  and (b) the QSA  Convertible,
Unsecured  Note No. 4 ("QSA Note No. 4") in the principal  amount of $999,995.03
of the  Noteholder  issued  pursuant to that certain QSA  Convertible/Redeemable
Note  Issuance  Agreement  (Note No. 4) of even date herewith by and between QSA
and the  Noteholder.  Upon payment in full of the issuance price of the QSA Note
by the Noteholder,  an affiliated fund of the Noteholder, or such other investor
as may be approved by QSA, the Company will issue and deliver to the  Noteholder
QSA Note No. 3 and QSA Note No. 4 and to the  entity  paying  the full  issuance
price of the QSA Note, the QSA Note. In the event that Noteholder  fails to meet
its  obligation to make the payment of the issuance price of  $1,999,996.89  for
the QSA Note on or before  February 15, 1997, QSA shall have the right,  but not
the obligation, to rescind this Agreement and the right, but not the obligation,
to cancel QSA Note No. 3, and QSA Note No. 4 and return  the  issuance  price of
QSA Note No. 3 and QSA Note No. 4 to the Noteholder.



<PAGE>



         5. The QSA Note shall be subject to certain  rights of  conversion  and
redemption  and  exchangeable  for shares of the  Common  Stock of QSI (the "QSI
Stock") or the Series B  Redeemable  Preference  Shares of QSA (the "QSA Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein. QSI has authorized and reserved 293,173 shares of QSI
Stock for issuance  upon  conversion  or  redemption of the QSA Notes and/or QSA
Stock pursuant to the terms of this Agreement.

         6. The QSA Stock shall be subject to certain  rights of conversion  and
redemption  and  exchangeable  for shares of QSI Common  Stock (the "QSI Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein.

         7. The Noteholder  represents  that,  except as set forth below, (a) it
has had no position, office or other material relationship within the past three
years with QSA or its affiliates and (b) neither it nor any group of which it is
a   member    beneficially    owns   any   securities   of   QSA.    Exceptions:
______________________________  (If no exceptions,  write "none." If left blank,
response will be deemed to be "none").

         Please  confirm that the foregoing  correctly  sets forth the agreement
between us by signing in the space provided below for that purpose.


                                            NOTEHOLDER
                                            By:
                                            Title:
                                            Address:
                                            Tax ID No.:


AGREED AND ACCEPTED:

QUALITY SEMICONDUCTOR AUSTRALIA, PTY. LTD.

By:
Title:


QUALITY SEMICONDUCTOR, INC.

By:
Title:


<PAGE>



                                                                     EXHIBIT 4.5

                   QUALITY SEMICONDUCTOR AUSTRALIA PTY LIMITED
                                 ACN 072 373 730

                               Registered office:
                                    Level 15
                                 321 Kent Street
                                 SYDNEY NSW 2000


                           CONVERTIBLE UNSECURED NOTE
                                November __, 1996


         1.  This  Note is  issued to the  Noteholder  in  consideration  of the
advance to Quality  Semiconductor  Australia Pty. Limited (the "Company") by the
Noteholder of an amount equal to the Principal Amount,  the receipt of which the
Company acknowledges.

     2.  The  Principal  Amount,  together  with  interest,  is  payable  on the
Repayment Date, unless this Note is converted into Shares.

     3. This Note is convertible at the election of the Noteholder into either:

                  (a)      146,586 QSI Shares; or

                  (b)      146,586 QSA Series B Shares,

                  in accordance with the terms and conditions of this Note.

                              TERMS AND CONDITIONS

         1.       DEFINITIONS

                  In this Note:

                  `Business  Day' means a day on which trading banks (as defined
                  in the  Banking  Act 1959  (C'th))  are open for  business  in
                  Sydney, New South Wales;

     `Company'  means  Quality  Semiconductor  Australia Pty Limited ACN 072 373
730;

                  `Conversion Date' means, where notice is given:

     (a) under clause 3.1(a), 5 days after the date of that notice;

                  (b)      under clause 7, the Repayment Date,

                  provided  that  where a day is not a  Business  Day,  the next
Business Day after that date is the Conversion Date:



<PAGE>



                  `Interest  Payment Date' means 30 June and 31 December of each
                  calendar year, or if that date is not a Business Day, the next
                  Business  Day with the first  Interest  Payment  Date being 31
                  December 1996;

                  `ITTA' means the Income Tax Assessment Act 1936 (C'th).

     `Note' means this convertible unsecured note issued by the Company;

                  `Principal Amount' means U.S. $999,995.03;

     `Public  Authority'  means any  government  or  minister  or  governmental,
semi-governmental or judicial entity, department, instrumentality or authority;

                  `QSA Series B Shares' means  redeemable  preference  shares in
                  the issued share  capital of the Company,  with the rights set
                  out in Schedule 1;

     `QSI Shares' means shares of common stock of Quality Semiconductor, Inc., a
California, U.S.A. corporation ("QSI");

                  "Shares' means:

                  (a)      QSI Shares; or

                  (b)      QSA Series B Shares;

                  `Tax Change' means:

     (a) any amendment, modification or replacement of the ITAA;

                  (b)      the   announcement   of   any   proposed   amendment,
                           modification  or  replacement  of  the  ITAA  by  the
                           Minister of State of the  Commonwealth  of Australia,
                           the  Commonwealth  Government or the  Commissioner of
                           Taxation of the Australian  Taxation Office or by any
                           other responsible public Authority;

     (c)  any  ruling  or  decision   of  a  tribunal  or  court  of   competent
jurisdiction;

                  (d)      any announcement or ruling by any of the Commissioner
                           of Taxation or the Australian  Taxation Office of, or
                           any  assessment  from the  Commissioner  of  Taxation
                           disclosing,  any  change  in  the  interpretation  or
                           administration by the Commissioner of Taxation of the
                           ITAA or any legislation replacing the ITAA;

         2.       GENERAL TERMS OF ISSUE

         2.1      This Note:

                  (a)      was issued for the Principal Amount;



<PAGE>



     (b) is convertible in the manner and at the times provided by clause 3 and,
subject  to clause 7 into the number of Shares  determined  in  accordance  with
clause 4.6; and

     (c) was paid in full on application by the Noteholder; and

                  (d)      is not transferable.

         2.2      Interest on this Note:

     (a) is payable on the  Principal  Amount of this Note at the rate of 8% per
annum on each Interest Payment Date;

                  (b)      ceases to accrue:

     (i) in the case of conversion of this Note into Shares,  on the  Conversion
Date; and

                           (ii)     in any other case, on the Repayment Date.

         2.3 The Company will pay to the  Noteholder  on conversion of this Note
interest accrued on this Note during the period commencing on the date after the
last Interest  Repayment Date and ending on the Conversion Date or the Repayment
Date, as applicable.

         3.       GENERAL RIGHTS OF CONVERSION

         3.1      This Note is convertible into Shares:

                  (a)      at any time  before  redemption  or  repayment  under
                           clause 7 by the  Noteholder  giving to the  Company a
                           written notice, in the form set out in Schedule 2 (or
                           in such  other  form as the  Company  may  require or
                           accept) requiring the Company to convert; or

     (b) in the circumstances and in the manner provided in clause 7.8.

         3.2      A notice given by the Noteholder under clause 3.1:

     (a) is irrevocable unless the Company otherwise determines;

                  (b) must specify  whether the Noteholder  requires the Company
to convert the Note into QSA Series B Shares or QSI Shares.

     3.3 On conversion of this Note, the Company will apply the Principal Amount
in either:

     (a)  paying up the QSA  Series B Shares to be issued to the  Noteholder  on
conversion; or



<PAGE>



     (b)  subscribing  for  fully  paid  QSI  Shares  to be  distributed  to the
Noteholder on conversion.

     in full discharge of the Company's liability for the Principal Amount.

         4.       ALLOTMENT OF SHARES

         4.1 The  Company  must  allot the  Shares to which  the  Noteholder  is
entitled within 20 Business Days of the receipt of a notice under clause 3.1.

     4.2 Any allotment of Shares will have effect on the Conversion Date.

         4.3 The Company must,  not later than 20 Business Days after  allotment
forward,  free of charge,  to the holder of the Note converted (or to such other
person as the holder may in writing request) a share  certificate for the number
of Shares allotted on conversion of this Note.

         4.4 QSI Shares allotted on conversion of this Note will rank equally in
all respects with shares of common stock of QSI existing on the Conversion Date.

     4.5 QSA Series B Shares  allotted on  conversion of this Note will have the
rights attaching to QSA Series B Shares.

         4.6      This Note will convert into either:

                  (a)      146,586 QSI Shares; or

                  (b)      146,586 QSA Series B Shares.

         5.       NON-PARTICIPATION IN ISSUES AND LIMITED VOTING RIGHTS

     5.1  Except  as set out in  this  Note,  this  Note  carries  no  right  to
participate in any offering of securities by the Company.

     5.2 Except as required by the  Corporations  Law, the  Noteholder  will not
have any right to vote at general meetings of the Company.

         6.       NON-RESIDENT NOTEHOLDER

                  Where  this Note is held by or on behalf of a person  resident
                  outside  Australia,  then,  despite  anything to the  contrary
                  contained  in or  implied  by  this  Note,  it is a  condition
                  precedent to any right of the Noteholder:

                  (a)      to receive payment of the Principal Amount;

                  (b)      to receive payment of any interest on this Note; or

                  (c)      to obtain Shares on conversion of this Note.



<PAGE>



                  that all  necessary  Authorisations  (if  any)  and any  other
                  statutory  requirements  which  may then be in  existence  are
                  obtained  at  the  cost  of,  unless  the  Company  determines
                  otherwise, the Noteholder

         7.       MATURITY AND REPAYMENT

         7.1 The date of maturity  (`Repayment  Date') of this Note is the first
date on which an order is made or an  effective  resolution  is  passed  for the
winding up of the Company in accordance  with the  Corporations  Law and on that
Repayment Date, the Company will be obliged to repay this Note.

         7.2 Subject to clause 7.1,  there is no fixed  repayment  date for this
Note  and the  Company  may  only  repay it in  accordance  with  the  following
provisions of this clause 7.

     7.3 The  Company may redeem this Note at any time on giving same day notice
to the Noteholder concerned.

         7.4 If the Company exercises a right to redeem under this clause 7, the
Company must repay the Principal  Amount and all interest  accrued but unpaid on
the Note to the date of payment.

         7.5      If:

     (a) the Company is satisfied  that the interest or any part of the interest
paid or payable on this Note is not or may not be  allowed  as a  deduction  for
Australian income tax purposes; or

     (b) (i) a Tax Change occurs or is officially announced; or

     (ii) a bill to effect a Tax Change is  presented to the  Parliament  of the
Commonwealth of Australia.

                           and  the  Company  is  of  the  opinion  that  it  is
                           reasonably  probable that any such change has or will
                           have the result that the  interest or any part of the
                           interest  paid or  payable on this Note is or may not
                           be allowed as a deduction for  Australian  income tax
                           purposes.

     the  Company  may in its  discretion  (on  giving  same day  notice  to the
Noteholder) redeem this Note.

         7.6 If the Company  exercises a right to redeem  under  clause 7.3, the
Company must (unless the Noteholder has by the redemption date already converted
the Note) pay to the  Noteholder the Principal  Amount and all interest  accrued
but unpaid to the  redemption  date on the Note or make  repayment in accordance
with clause 7.10.



<PAGE>



         7.7 At the time that the Company  intends to redeem the Note under this
clause 7, the Company must give written notice to this effect to the Noteholder.

         7.8 The Noteholder may, then, within 5 days from the date of receipt of
that notice, by notice in writing to the Company, require the Company to convert
this Note into QSI Shares in  accordance  with clause  2.1(b) with effect on the
same day as the receipt of written notice by the Company.

         7.9 If a  Noteholder  does not require the Company to convert this Note
in accordance with clause 7.8, the Company may repay this Note under this clause
7.

         7.10 The repayment of the Principal  Amount and any interest under this
clause 7 may be  satisfied,  at the  election  of the  Company,  by the issue of
146,586 QSI  Shares,  which have been  allotted  to the Company by QSI.  The QSI
Shares will be issued in accordance with and subject to the terms and conditions
of Sections 4 through 8 of the Terms and Conditions for Exchange of the QSA Note
and QSA Stock attached hereto as Schedule 3.

         8.       CANCELLATION OF NOTE

                  On  repayment,  redemption  or  conversion of this Note by the
                  Company,  this Note will  immediately be cancelled and may not
                  be reissued.

         9.       STATUS AND SUBORDINATION

         9.1      This Note constitutes an unsecured obligation of the Company.

         9.2 The rights of the Noteholder  against the Company,  in the event of
the  winding  up of the  Company,  are  subordinated  in right of payment to the
claims of Ordinary Creditors.

         9.3 The obligations of the Company in respect of this Note will rank at
least equally with the obligations of the Company to its Subordinated Creditors.

         9.4 So long as this Note  remains  outstanding,  the  Company  will not
create or permit to be outstanding any subordinated  obligations  ranking in the
liquidation  of the Company in priority in right of payment to the rights of the
Noteholder under or in respect of this Note.

         9.5      In this clause 9:

     (a)  `Ordinary  Creditors'  means all  present or future  creditors  of the
Company whose claims:

     (i) are admitted in the winding up of the Company;

     (ii) are not, or are not by their terms  expressed to be,  subordinated  to
the claims of all other unsubordinated creditors of the Company; and



<PAGE>



                  (b)      `Subordinated  Creditors'  means persons whose claims
                           against the Company are  subordinated in the event of
                           a winding up of the Company in any manner (or even by
                           statute)   to  the  claims  of  any   unsecured   and
                           unsubordinated creditor of the Company.

         10.      FAILURE TO PAY PRINCIPAL, INTEREST OR BOTH

                  If:

     (a) the Company makes default for a period of 30 days in the payment of any
interest required by this Note to be paid;

     (b) the Company  fails to issue a required  number of Shares within 30 days
of the Conversion Date; or

     (c) the Company fails to repay the  Principal  Amount within 30 days of the
date required for payment under this Note,

                  the Principal  Amount,  at the option of the Noteholder and on
                  the   Noteholder   giving   written  notice  to  the  Company,
                  immediately  becomes due and payable  together with all unpaid
                  interest on this Note to the date of payment.

         11.      INDEMNITY TO THE COMPANY

         11.1     Whenever in consequence of:

     (a)  the  non-payment  of  any  income  tax or  other  tax  payable  by the
Noteholder;

     (b) the non-payment of any stamp or other duty by the Noteholder;

     (c) any other act or thing in relation to this Note or the Noteholder,

                  any law  imposes or purports  to impose any  liability  of any
                  nature  whatever  on the  Company to make any  payments to any
                  Public   Authority,   the  Company  is,  in  respect  of  that
                  liability,  indemnified  by the Noteholder and any moneys paid
                  by the Company in respect of that  liability  may be recovered
                  by action from the Noteholder as a debt due to the Company.

     11.2 The Company  will have a lien in respect of those  moneys on this Note
and on the principal and interest payable in respect of this Note.

     11.3 Nothing in this clause 11 will prejudice or affect any right or remedy
which any such law may confer or purport to confer on the Company.

         12.      PAYMENT TO NOTEHOLDER

         12.1 Any interest,  principal or other moneys  payable on or in respect
of this Note may be paid by cheque marked `not  negotiable' and sent through the
post.

<PAGE>



                  12.2 Every  cheque  referred to in this clause 12 will be sent
at the risk of the person beneficially  entitled to the money represented by the
cheque and payment will be deemed to have been made when the cheque is posted.

         13.      NOTICES

         13.1 A notice  given to the  Noteholder  must be in writing  and may be
given to the Noteholder by being delivered to the Noteholder or a representative
appointed by the Noteholder to receive  notice on behalf of the Noteholder  (the
"Noteholder's  Representative")  or posted by prepaid envelope  addressed to the
Noteholder  or the  Noteholder's  Representative  at the  address  given  by the
Noteholder to the Company.

     13.2  Where a notice is sent by post,  it will be deemed to have been given
on the Business Day on which it was posted.

         13.3 A post office receipt for the envelope containing a notice will be
taken as conclusive evidence of the date on which the notice was posted.

     13.4 In this clause 13 `Notice'  includes any  communication to be given by
the Company under this Note.

         14.      AMENDMENT

                  Any  amendment to this Note must be in writing  signed by both
the Company and the Noteholder.

         15.      GOVERNING LAW

                  This Note is  governed  by the laws of New South Wales and the
                  parties submit to the non-exclusive jurisdiction of the Courts
                  of New South Wales.



<PAGE>





THE COMMON SEAL of                                      ))))))
QUALITY SEMICONDUCTOR
AUSTRALIA PTY LIMITED
is affixed in accordance with its articles of association in
the presence of


 ..................................         .....................................
Secretary                                  Director
 ...................................        .....................................
Name of secretary (print)                  Name of director (print)

Executed by  ___________________  on behalf of Technology Associates Corporation
for the purpose of signifying its acceptance of this Note.
THE COMMON SEAL of

TECHNOLOGY ASSOCIATES                   )
CORPORATION is affixed                  )
in accordance with its                  )
articles of association in              )
the presence of                         )
 ...................................         ....................................
Secretary                                   Director
 ...................................         ....................................
Name of secretary (print)                   Name of director (print)


<PAGE>




THE COMMON SEAL of                      )
QUALITY SEMICONDUCTOR                   )
AUSTRALIA PTY LIMITED                   )
is affixed in accordance                )
with its articles of                    )
association in                          )
the presence of                         )


 ..................................         .....................................
Secretary                                  Director
 ..................................         .....................................
Name of secretary (print)                  Name of director (print)

Executed  by   ___________________   on  behalf  of  Fidelity   Venture  Capital
Corporation for the purpose of signifying its acceptance of this Note.

THE COMMON SEAL of                      )
TECHNOLOGY ASSOCIATES                   )
CORPORATION is affixed                  )
in accordance with its                  )
articles of association in              )
the presence of                         )
 ....................................       .....................................
Secretary                                  Director
 .....................................      .....................................
Name of secretary (print)                  Name of director (print)


<PAGE>



                                   SCHEDULE 1
                     RIGHTS ATTACHING TO QSA SERIES B SHARES


     1. The QSA  Series B Shares  will be  redeemable  preference  shares in the
issued share capital of the Company.

         2. The QSA Series B Shares will be under the  control of the  directors
who may allot or  otherwise  dispose of the QSA Series B Shares (at a premium or
otherwise) to any persons  (whether or not a member of Company) on any terms and
conditions that the directors think fit.

         3. Each QSA Series B Share  irrespective of its date of issue will rank
equally  with all other QSA  Series B Shares and any  allotment  of QSA Series B
Shares  will not be  regarded  as a  variation  of the  rights  attached  to any
existing QSA Series B Shares.

         4.       Each QSA Series B Share will have a par value of A$0.01.

     5. The QSA Series B Shares will confer on the holder, and be issued subject
to:

                  (a)      the  rights  to  such   dividends  (if  any)  as  the
                           directors  or Company in general  meeting may declare
                           with  respect to the QSA Series B Shares,  but do not
                           have  the  right  to  payment  of a  fixed  or  other
                           dividend;

                  (b)      the right in the event of:

                           (i)      the winding up of the Company; or

     (ii) a reduction in the share capital of the Company,

                           in  priority  to all other  classes  of shares in the
                           capital of the Company except the QSA Series A Shares
                           to the payment of the Redemption Amount applicable at
                           the  time a  resolution  to  wind up the  Company  or
                           reduce the share  capital is passed or a Court  Order
                           to wind up the Company is made (as applicable);

                           but without:

                           (iii)    any  additional  right  to  payment  of  any
                                    capital  paid up or  credited  as paid up on
                                    the QSA Series B Shares or any premium  paid
                                    in respect of the QSA Series B Shares.

     (iv) any  further  rights to  participate  in the  assets or profits of the
Company;

                  (c)      the right to receive  notice of all general  meetings
                           (including  all reports,  balance sheets and accounts
                           issued  with any  notice)  and to attend all  general
                           meetings of the Company; but with no right to vote at
                           any  general,   special  or  other  meetings  of  the
                           Company, or in any other manner.

<PAGE>



                  6.       Subject to section 192 of the Corporation Law:

                  (a)      at any  time  after  issuance  of the  QSA  Series  B
                           Shares,  the  holder of the QSA  Series B Shares  may
                           give to the  Company  a written  notice  (`Redemption
                           Notice')  requiring  the  Company  to redeem  the QSA
                           Series B Shares not less than 30 clear days after the
                           date of the  Redemption  Notice,  in which  event the
                           Company   must   redeem   the  QSA  Series  B  Shares
                           immediately on expiry of such 30 clear days;

                  (b)      at any  time  after  issuance  of the  QSA  Series  B
                           Shares,  the  Company  may  redeem  the QSA  Series B
                           Shares, by resolution of a majority of the directors.

     7. On redemption of the QSA Series B Shares under clause 6 becoming due:

     (a) the Company must pay the  Redemption  Amount  applicable at the time of
redemption to the holder of the QSA Series B Shares;

     (b) the holder of the QSA Series B Shares must  surrender for  cancellation
to the Company the Certificate for the QSA Series B Shares,

                  in which even the QSA Series B Shares will be fully redeemed.

         8. Except to the extent otherwise  permitted by the  Corporations  Law,
the QSA Series B Shares may not be  redeemed  except out of profits  which would
otherwise be available for dividend,  or out of the proceeds of a fresh issue of
shares made for the purpose of the redemption, and unless they are fully paid.

         9. The  payment  of the  Redemption  Amount  may be  satisfied,  at the
election of the  Company,  by the  exchange of shares of common stock of Quality
Semiconductor,  Inc., for shares of QSA Series B Shares being redeemed  pursuant
to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock attached
as Schedule 3 to Annex I.

     10.  `Redemption  Amount' means the product of the closing price of a share
in the common stock of Quality Semiconductor,  Inc. on the date of redemption of
a QSA  Series B Share and the  number of shares in the  common  stock of Quality
Semiconductor, Inc. received after redemption of the QSA Series B Shares.

         11. The QSA Series B Shares may not be transferred  for a period of one
year;  thereafter,  any  proposed  transfer of the QSA Series B Shares  shall be
subject to redemption into QSI Shares.



<PAGE>



                                   SCHEDULE 2
                            NOTICE OF CONVERSION NOTE


TO:      Quality Semiconductor Australia Pty Limited
         ACN 072 373 730
         c/o Quality Semiconductor, Inc.
         851 Martin Avenue
         Santa Clara, CA  95050


          Notice is given of the  exercise  of my/our  right to convert the Note
attached to this notice into:

     146,586   fully   paid   ordinary   shares  of  common   stock  of  Quality
Semiconductor, Inc.; or

                  146,586  fully paid Series B redeemable  preference  shares in
                  the issued share  capital of Quality  Semiconductor  Australia
                  Pty Limited.

         [Delete which ever is inapplicable.]

If this notice is signed by an attorney,  the attorney  declares  that he or she
has no notice of  revocation  of the poser of  attorney  of which this notice is
signed.

[Companies must sign under seal or by attorney.]


<PAGE>



                                   SCHEDULE 3
         TERMS AND CONDITIONS FOR EXCHANGE OF THE QSA NOTE AND QSA STOCK


         1. Authorization of QSI Stock. Quality Semiconductor,  Inc. ("QSI") has
authorized  the issuance of up to 732,932 shares of the Common Stock of QSI (the
"QSI Stock") in exchange for the QSA Notes or up to 732,932 shares of the Series
B  Redeemable  Preference  Shares of QSA (the "QSA  Stock")  pursuant to the QSA
Convertible/Redeemable Note Issuance Agreement (the "Note Issuance Agreement").

         2.  Exchange  of Shares for the QSA Note.  Each  Holder of the QSA Note
shall have certain rights to convert the QSA Note into QSI Stock,  and QSA shall
have certain rights to redeem the QSA Note for QSI Stock, as provided for by the
terms  of  such  Holder's  QSA  Note.  The QSI  Stock  issued  pursuant  to such
conversion or redemption  shall be issued in accordance with, and subject to the
terms and conditions of Sections 4 through 8 of this document.

         3. Exchange of Shares;  Conversion and Redemption  Rights.  The Holders
shall  have the right to convert  shares of QSA Stock into  shares of QSI Stock,
and QSA shall  have the right to  redeem  shares of QSA Stock for  shares of QSI
Stock in accordance with this Section 3.

     3.1  Conversion.  The  holders  of  shares  of the  QSA  Stock  shall  have
conversion rights as follows (the "Conversion Rights"): ----------

                  (a) Right to Convert. Subject to Section 3.1(b), each share of
                  the QSA  Stock  shall be  convertible,  at the  option  of the
                  holder thereof, at any time after the date of issuance of such
                  share,  at the  office of QSI or any  transfer  agent for such
                  stock, into such number of fully paid and nonassessable shares
                  of QSI Stock as is determined by dividing the number of shares
                  of QSA Stock  presented  for  exchange by the  Exchange  Ratio
                  applicable to each share of QSA Stock,  determined as provided
                  in Section 3.3 below, in effect on the date the certificate is
                  surrendered  for  conversion.  The initial  Exchange Ratio per
                  share of QSA Stock shall be ten. Such initial  Exchange  Ratio
                  shall be subject to adjustment as set forth in Section 3.3.

                  (b)  Mechanics of  Conversion.  Before any holder of QSA Stock
                  shall be  entitled  to  convert  the same  into  shares of QSI
                  Stock,  he shall  surrender the  certificate  or  certificates
                  therefor,  duly  endorsed,  at  the  office  of  QSA or of any
                  transfer  agent  for the QSA  Stock,  and shall  give  written
                  notice  to QSA  at  its  principal  corporate  office,  of the
                  election to convert the same and shall state  therein the name
                  or names in which the certificate or  certificates  for shares
                  of  QSI  Stock  are  to be  issued.  QSA  shall,  as  soon  as
                  practicable  thereafter,  issue and  deliver at such office to
                  such  holder of QSA Stock , or to the  nominee or  nominees of
                  such holder,  a certificate or certificates  for the number of
                  shares of QSI Stock to which such holder  shall be entitled as
                  aforesaid.  Such conversion  shall be deemed to have been made
                  immediately prior to the close of business on the date of such
                  surrender of the shares of QSA Stock to be converted,  and the
                  person or persons  entitled to receive the shares of QSI Stock
                  issuable upon such conversion

<PAGE>



                  shall be treated  for all  purposes  as the  record  holder or
holders of such shares of QSI Stock as of such date.

     3.2 Redemption.  QSA shall have  redemption  rights with respect to the QSA
Stock as follows: (the "Redemption Rights"): -----------

                  (a) Right to Redeem.  Subject to Section 3.2(b), each share of
                  the QSA Stock  shall be  redeemable,  at the option of QSA, at
                  any time  after the date of  issuance  of such  share,  at the
                  office of QSA or any transfer agent for such stock,  into such
                  number of fully paid and nonassessable  shares of QSI Stock as
                  is  determined  by dividing  the number of shares of QSA Stock
                  presented  for exchange by the Exchange  Ratio  applicable  to
                  each share of QSA Stock, determined as provided in Section 3.3
                  below,  in effect on the date the  certificate  is surrendered
                  for  redemption.  The initial  Exchange Ratio per share of QSA
                  Stock  shall be ten.  Such  initial  Exchange  Ratio  shall be
                  subject to adjustment as set forth in Section 3.3.

                  (b) Mechanics of Redemption.  QSA shall provide written notice
                  of  redemption  to those holders of QSA Stock whose shares are
                  being redeemed. Within five (5) business days after receipt of
                  notification of redemption by QSA, a holder of QSA Stock whose
                  shares are being redeemed shall  surrender the  certificate or
                  certificates therefor,  duly endorsed, at the office of QSA or
                  of any  transfer  agent  for the QSA  Stock,  and  shall  give
                  written  notice  to  QSA  at its  principal  corporate  office
                  stating  therein the name or names in which the certificate or
                  certificates  for  shares of QSI Stock are to be  issued.  QSA
                  shall, as soon as practicable thereafter, issue and deliver at
                  such  office to such  holder of QSA Stock or to the nominee or
                  nominees of such holder, a certificate or certificates for the
                  number of shares of QSI Stock to which  such  holder  shall be
                  entitled as aforesaid. Such redemption shall be deemed to have
                  been made  immediately  prior to the close of  business on the
                  date  of such  surrender  of the  shares  of QSA  Stock  to be
                  redeemed,  and the person or persons  entitled  to receive the
                  shares of QSI Stock  issuable  upon such  redemption  shall be
                  treated for all  purposes  as the record  holder or holders of
                  such shares of QSI Stock as of such date.


Splits and Combinations. The Exchange Ratio of the QSA
Stock shall be subject to adjustment from time to time as follows:

                  (a) In the event  QSI  should at any time or from time to time
                  after the Closing  Date of the Note  Issuance  Agreement  (the
                  "Closing  Date") fix a record date for the  effectuation  of a
                  split or subdivision of the outstanding shares of QSI Stock or
                  the  determination of holders of QSI Stock entitled to receive
                  a dividend or other distribution  payable in additional shares
                  of QSI Stock or other securities or rights  convertible  into,
                  or  entitling  the  holder  thereof  to  receive  directly  or
                  indirectly,  additional  shares of QSI Stock then,  as of such
                  record  date,  the  Exchange  Ratio of the QSA Stock  shall be
                  appropriately  decreased  so that the  number of shares of QSI
                  Stock  issuable on conversion of each share of QSA Stock shall
                  be increased in  proportion  to such increase of the aggregate
                  of shares of QSI Stock outstanding.

<PAGE>



                  (b) If the  number of shares of QSI Stock  outstanding  at any
                  time after the Closing Date is decreased by a  combination  of
                  the  outstanding  shares of QSI  Stock,  then,  following  the
                  record date of such  combination,  the Exchange  Ratio for the
                  QSA Stock shall be appropriately  increased so that the number
                  of shares of QSI Stock  issuable  on exchange of each share of
                  such series shall be decreased in  proportion to such decrease
                  in outstanding shares.

         3.5 Recapitalizations.  If at any time or from time to time there shall
be a  recapitalization  of the QSI  Stock,  provision  shall be made so that the
holders of the QSA Stock shall  thereafter  be entitled to receive upon exchange
of the QSA Stock the number of shares of stock or other  securities  or property
of QSI or otherwise,  to which a holder of QSI Stock  deliverable  upon exchange
would have been entitled on such recapitalization.

         3.6      No Fractional Shares and Certificate as to Adjustments.

                  (a) No fractional  shares shall be issued upon the exchange of
                  any  share or  shares  of the QSA  Stock , and the  number  of
                  shares  of QSI  Stock to be  issued  shall be  rounded  to the
                  nearest  whole  share.  Whether or not  fractional  shares are
                  issuable upon such conversion shall be determined on the basis
                  of the total  number  of shares of QSA Stock the  holder is at
                  the time exchanging into QSI Stock and the number of shares of
                  QSI Stock issuable upon such aggregate conversion.

                  (b) Upon the occurrence of each  adjustment or readjustment of
                  the Exchange  Ratio of QSA Stock pursuant to this Section 3.3,
                  QSI, at its expense, shall promptly compute such adjustment or
                  readjustment  in accordance  with the terms hereof and prepare
                  and furnish to each holder of QSA Stock a certificate  setting
                  forth such  adjustment or  readjustment  and showing in detail
                  the facts upon which such adjustment or readjustment is based.
                  QSI shall,  upon the written request at any time of any holder
                  of QSA Stock,  furnish or cause to be furnished to such holder
                  a like  certificate  setting  forth  (A) such  adjustment  and
                  readjustment,  (B) the Exchange Ratio for the QSA Stock at the
                  time in effect,  and (C) the number of shares of QSI Stock and
                  the amount,  if any, of other property which at the time would
                  be received upon the exchange of a share of the QSA Stock.

3.7  Reservation of QSI Stock Issuable Upon  Conversion.  QSI shall at all times
reserve and keep  available  out of its  authorized  but unissued  shares of QSI
Stock,  solely for the purpose of effecting the  conversion of the shares of the
QSA Stock , such number of its shares of QSI Stock as shall from time to time be
sufficient to effect the conversion of all outstanding  shares of QSA Stock; and
if at any time the number of authorized  but unissued  shares of QSI Stock shall
not be sufficient to effect the conversion of all then outstanding shares of QSA
Stock, in addition to such other remedies as shall be available to the holder of
such QSA Stock,  QSI will take such  corporate  action as may, in the opinion of
its counsel,  be necessary to increase its authorized but unissued shares of QSI
Stock  to such  number  of  shares  as shall be  sufficient  for such  purposes,
including, without limitation,  engaging in best efforts to obtain the requisite
shareholder   approval  of  any   necessary   amendment   to  the   Articles  of
Incorporation.



<PAGE>



         3.8 Notices. Any notice required by the provisions of this Section 3 to
be given to the  holders  of  shares  of QSA  Stock  shall  be  deemed  given if
deposited in the United  States mail,  postage  prepaid,  and  addressed to each
holder of record at his address appearing on the books of QSI.

         4.       Representations and Warranties of QSI

         For purposes of Sections 4 through 8 of this Note  Issuance  Agreement,
the term  "Holder"  refers to a person who has exchanged a QSA Note or shares of
QSA Stock for shares of QSI Stock whether  through  conversion or by redemption.
QSI represents and warrants to the Holders as of the Closing Date as follows:

         4.1  Organization;  Standing;  Qualification  to Do Business.  QSI is a
corporation  duly organized and validly  existing  under,  and by virtue of, the
laws  of  the  State  of  California  and  is in  good  standing  as a  domestic
corporation  under the laws of said state.  QSI is duly qualified to do business
as a foreign  corporation and is in good standing in each  jurisdiction in which
the  ownership  or  leasing of its  properties  or the  conduct of its  business
requires such  qualification,  except where the failure to be so qualified or be
in good standing is not reasonably  likely to have a material  adverse effect on
QSI.

         4.2 Corporate  Power;  Authorization.  QSI has all requisite  legal and
corporate  power and has taken all  requisite  corporate  action to execute  and
deliver the Note Issuance Agreement,  to authorize the issuance of the QSI Stock
in  exchange  for the QSA Note or QSA Stock and to carry out and  perform all of
its obligations under the Note Issuance  Agreement.  The Note Issuance Agreement
constitutes  the legal,  valid and binding  obligation  of QSI,  enforceable  in
accordance  with  its  terms,  except  (a)  as  rights  to  indemnification  and
contribution hereunder may be limited by applicable law, equitable principles or
public   policy,   (b)  as  limited  by   applicable   bankruptcy,   insolvency,
reorganization  or similar laws  relating to or  affecting  the  enforcement  of
creditors'  rights  generally  and  (c)  as  limited  by  equitable   principles
generally.  The execution and delivery of the Note Issuance  Agreement does not,
and the  performance of the Note Issuance  Agreement and the compliance with the
provisions  hereof and the issuance of the QSI Stock by QSI will not  materially
conflict  with,  or  result in a  material  breach or  violation  of the  terms,
conditions or provisions of, or constitute a material  default under,  or result
in the creation or imposition of any material lien pursuant to the terms of, the
Amended and Restated  Articles of Incorporation or Bylaws of QSI or any statute,
law, rule or regulation or any state or federal order, judgment or decree or any
indenture,  mortgage,  lease or other material  agreement or instrument to which
QSI or any of its properties is subject.

                  4.3  Issuance  and  Delivery of the QSI Stock.  The QSI Stock,
when issued in compliance  with the  provisions of the Note Issuance  Agreement,
will be validly issued, fully paid and nonassessable.  The issuance and delivery
of the QSI Stock is not subject to preemptive or any other similar rights of the
shareholders of QSI or any liens or encumbrances.

         5.       Representations, Warranties and Covenants of the Holders

         Each Holder hereby severally represents and warrants, and covenants and
agrees with, to QSI, as of the Closing Date, as follows;



<PAGE>



         5.1  Authorization.  Holder has all  requisite  legal and  corporate or
other power and capacity and has taken all  requisite  corporate or other action
to execute and deliver the Note Issuance Agreement, to carry out and perform all
of its  obligations  under  the  Note  Issuance  Agreement.  The  Note  Issuance
Agreement  constitutes  the legal,  valid and binding  obligation of the Holder,
enforceable   in   accordance   with  its   terms,   except  (a)  as  rights  to
indemnification  and  contribution  hereunder may be limited by applicable  law,
equitable principles or public policy, (b) as limited by applicable  bankruptcy,
insolvency,  reorganization  or  similar  laws  relating  to  or  affecting  the
enforcement  of  creditors'  rights  generally  and (c) as limited by  equitable
principles generally.

         5.2  Investment  Experience.  Holder  is an  "accredited  investor"  as
defined  in Rule  501(a)  under  the  Securities  Act.  Holder is aware of QSI's
business affairs and financial  condition and has had access to and has acquired
sufficient information about QSI to reach an informed and knowledgeable decision
to acquire the QSI Stock.  Holder has such business and financial  experience as
is required to give it the capacity to protect its own  interests in  connection
with the exchange of the QSA Stock for QSI Stock.  Holder is not a "broker" or a
"dealer"  as defined in the  Exchange  Act and is not an  "affiliate"  of QSI as
defined in the Securities Act.

         5.3  Investment  Intent.  To the extent that Holder  acquires QSI Stock
pursuant to this Note Issuance Agreement, Holder is acquiring such QSI Stock for
its own account as  principal,  for  investment  purposes  only,  and not with a
present view to, or for, resale,  distribution or fractionalization  thereof, in
whole or in part,  within the meaning of the Securities Act. Holder  understands
that its  acquisition  of the QSI Stock under the terms and  provisions  of this
Note Issuance  Agreement has not been  registered  under the  Securities  Act or
registered or qualified  under any state  securities law in reliance on specific
exemptions therefrom,  which exemptions may depend upon, among other things, the
bona fide nature of Holder's investment intent as expressed herein.  Holder has,
in connection with its decision to be subject to acquire the number of QSI Stock
set forth in the Note Issuance Agreement,  relied solely upon the Memorandum and
the  representations  and warranties of QSI contained  herein.  Holder will not,
directly or indirectly,  offer, sell,  pledge,  transfer or otherwise dispose of
(or solicit any offers to buy,  purchase or  otherwise  acquire or take a pledge
of) any of the QSI Stock except in compliance  with the  Securities  Act and the
rules and regulations promulgated thereunder.

         5.4 Restrictions on Transferability of QSI Stock.  Holder agrees not to
sell or otherwise  transfer the QSI Stock that it acquires pursuant to this Note
Issuance  Agreement  for a period of one year  following the closing date of the
QSA Common Stock Purchase  Agreement (the "Closing Date") of even date herewith.
Holder acknowledges and agrees that all share certificates issued to it pursuant
to this Note Issuance  Agreement  will be imprinted  with legend that  indicates
that transfer of the QSI Stock is subject to  restrictions  as specified by this
Section 5.4 of this Note Issuance Agreement.

         5.5 Registration or Exemption Requirements. Holder further acknowledges
and  understands  that the QSI Stock may not be resold or otherwise  transferred
except  in a  transaction  registered  under  the  Securities  Act or  unless an
exemption  from such  registration  is available.  Holder  understands  that the
certificates  evidencing  the QSI Stock  will be  imprinted  with a legend  that
prohibits  the  transfer  of the  QSI  Stock  unless  (a)  such  transaction  is
registered  or such  registration  is not  required,  and (b) if the transfer is
pursuant  to an  exemption  from  registration  other  than  Rule 144  under the
Securities Act, and if QSI shall so request in writing, an opinion

<PAGE>



         reasonably  satisfactory to QSI of counsel  reasonably  satisfactory to
QSI is obtained to the effect that the transaction is so exempt.

         5.6 Restriction on Sales, Short Sales and Hedging Transactions.  Holder
will not, prior to the effectiveness of the Registration Statement,  sell, offer
to sell,  solicit offers to buy,  dispose of, loan,  pledge,  or grant any right
with respect to (collectively, a "Disposition"),  the QSI Stock, nor will Holder
engage  in any  hedging  or  other  transaction  which is  designed  to or could
reasonably be expected to lead to or result in a Disposition of QSI Stock by the
Holder  or any  other  person  or  entity.  Such  prohibited  hedging  or  other
transactions would include without limitation effecting any short sale or having
in effect any short  position  (whether  or not such sale or position is against
the box and  regardless of when such position was entered into) or any purchase,
sale or grant of any right (including without limitation any put or call option)
with  respect to the QSI Stock or with  respect to any  security  (other  than a
broad-based  market  basket or index) that  includes,  relates to or derives any
significant part of its value from the QSI Stock.

         5.7 No Legal, Tax or Investment Advice. Holder understands that nothing
in the Memorandum,  the Note Issuance Agreement or any other materials presented
to Holder in connection  with the issuance of the QSI Stock  constitutes  legal,
tax or investment  advice.  Holder has consulted such legal,  tax and investment
advisors as it, in its sole  discretion,  has deemed necessary or appropriate in
connection with its likely exchange or exchange of the QSI Stock.

         5.8 Further  Representation by Foreign Holders. If such Holder is not a
U.S.  Person,  such Holder hereby  represents that it has satisfied itself as to
the full  observance  of the laws of its  jurisdiction  in  connection  with any
invitation  to  subscribe  for the QSI  Stock or any use of this  Note  Issuance
Agreement,  including (a) the legal  requirements  with its jurisdiction for the
acquisition of the QSI Stock, (b) any foreign exchange  restrictions  applicable
to such  purchase,  (c) any  governmental  or other consents that may need to be
obtained,  and (d) the income tax and other  consequences,  if any,  that may be
relevant to the purchase, exchange for, holding, redemption, sale or transfer of
the QSI  Stock.  Such  Holder's  acquisition  of, and its  continued  beneficial
ownership of the QSI Stock, will not violate any applicable  securities or other
laws of its jurisdiction.



<PAGE>



         5.9      Regulation S. 3.6 Regulation S

                  (a) The Holder is not a "U.S.  Person" as that term is defined
in Regulation S promulgated  under the  Securities  Act and is not acquiring the
QSI Stock for the account or benefit of a U.S. Person.  Under Regulation S, with
certain exceptions,  "U.S. person" means: (i) any natural person resident in the
U.S.;  (ii) any partnership or corporation  organized or incorporated  under the
laws of the U.S.;  (iii) any estate of which any executor or  administrator is a
U.S.  person;  (iv) any trust of which any  trustee  is a U.S.  person;  (v) any
agency  or  branch  of a  foreign  entity  located  in the  U.S.;  (vi)  any non
discretionary account or similar account (other than an estate or trust) held by
a dealer or other fiduciary for the benefit or account of a U.S.  person;  (vii)
any  discretionary  account or similar  account  (other than an estate or trust)
held  by a  dealer  or  other  fiduciary  organized,  incorporated,  or  (if  an
individual)  resident in the U.S.; and (viii) any partnership or corporation if:
(A) organized or incorporated  under the laws of any foreign  jurisdiction;  and
(B)  formed  by a U.S.  person  principally  for the  purpose  of  investing  in
securities not registered  under the Securities  Act,  unless it is organized or
incorporated and owned by accredited  investors (as defined in Rule 501(a) under
the Securities Act) who are not natural persons, estates or trusts.

                  (b) Without in any way limiting the  representations set forth
above,  the  Holder  further  agrees not to make any  disposition  of all or any
portion of the QSI Stock unless and until:

     (i) Such  disposition is in accordance with Regulation S promulgated  under
the Securities Act, or

     (ii) There is then in effect a Registration  Statement under the Securities
Act  of  1933,  as  amended  (the  "Securities   Act")  covering  such  proposed
disposition and such  disposition is made in accordance  with such  Registration
Statement, or

     (iii) (y) The  Holder  shall have  notified  the  Company  of the  proposed
disposition  and shall have  furnished the Company with a detailed  statement of
the circumstances  surrounding the proposed  disposition,  and (z) if reasonably
requested by the Company,  the Holder shall have  furnished  the Company with an
opinion  of  counsel,   reasonably   satisfactory  to  the  Company,  that  such
disposition will not require registration under the Securities Act. It is agreed
that the Company  will not require  opinions  of counsel for  transactions  made
pursuant  to  Rule  904  of   Regulation   S  or  Rule  144  except  in  unusual
circumstances.

         6.       Affirmative Covenants

         QSI and the Holder hereby covenant as follows:

         6.1 Financial Information.  QSI will mail the following reports to each
Holder until such Holder  transfers,  assigns or sells the QSI Stock acquired by
such Holder pursuant to the Note Issuance Agreement:



<PAGE>



     (a) Within 100 days after the end of each fiscal year, a copy of its Annual
Report on Form 10-K.

                  (b)  Within 55 days  after the end of the  first,  second  and
                  third quarterly accounting periods of each fiscal year of QSI,
                  a copy of its Quarterly Report on Form 10-Q.

         6.2      Registration Requirements.

                  (a) After the  first  anniversary  of the  Closing  Date,  the
                  Holder  may  make a  written  request  to QSI  that QSI file a
                  registration  statement  on Form S-3 to  register  resales  of
                  outstanding  shares of the Holder's QSI Stock. Upon receipt of
                  such request,  if QSI meets the eligibility  requirements  for
                  use of Form S-3,  QSI shall  prepare  and file a  registration
                  statement (the  "Registration  Statement")  with the SEC under
                  the  Securities  Act to  register  the resale of the QSI Stock
                  (the "Registrable  Securities") and shall use its best efforts
                  to secure the effectiveness of such registration  statement as
                  soon as reasonably practicable thereafter.

                  (b) QSI shall pay all Registration Expenses (as defined below)
                  in  connection  with  any   registration,   qualification   or
                  compliance  hereunder,  and each Holder  shall pay all Selling
                  Expenses (as defined  below) and other  expenses  that are not
                  Registration  Expenses relating to the Registrable  Securities
                  resold by such Holder.  "Registration Expenses" shall mean all
                  expenses,  except for  Selling  Expenses,  incurred  by QSI in
                  complying with the registration  provisions  herein described,
                  including, without limitation, all registration, qualification
                  and filing fees,  printing  expenses,  escrow  fees,  fees and
                  disbursements  of counsel for QSI,  blue sky fees and expenses
                  and the expense of any special audits  incident to or required
                  by any such  registration.  "Selling  Expenses" shall mean all
                  selling  commissions,  underwriting  fees and  stock  transfer
                  taxes  applicable to the  Registrable  Securities and all fees
                  and disbursements of counsel for any Holder.

                  (c) In the case of the  registration  effected by QSI pursuant
                  to  these  registration  provisions,  QSI  will  use its  best
                  efforts  to: (i) keep such  registration  effective  until the
                  earlier of (A) the first  anniversary of the effective date of
                  the  registration,  (B)  such  date as all of the  Registrable
                  Securities  have  been  resold  or (C) such time as all of the
                  Registrable  Securities held by the Holders can be sold within
                  a  given  three-month   period  without  compliance  with  the
                  registration  requirements  of the  Securities Act pursuant to
                  Rule 144 promulgated thereunder ("Rule 144"); (ii) prepare and
                  file  with  the SEC such  amendments  and  supplements  to the
                  Registration  Statement and the prospectus  used in connection
                  with the Registration  Statement as may be necessary to comply
                  with the  provisions of the Securities Act with respect to the
                  disposition  of all  securities  covered  by the  Registration
                  Statement; (iii) furnish such number of prospectuses and other
                  documents  incident  thereto,  including  any  amendment of or
                  supplement  to the  prospectus,  as a Holder from time to time
                  may reasonably request;  (iv) cause the QSI Stock to be listed
                  on each  securities  exchange  and  quoted  on each  quotation
                  service  on which  similar  securities  issued by QSI are then
                  listed or quoted;  (v) provide a transfer  agent and registrar
                  for all securities registered pursuant to the

<PAGE>



                  Registration  Statement  and  a  CUSIP  number  for  all  such
                  securities; (vi) otherwise use its best efforts to comply with
                  all  applicable  rules and  regulations  of the SEC; and (vii)
                  file the documents  required of QSI and otherwise use its best
                  efforts to maintain  requisite  blue sky  clearance in (X) all
                  jurisdictions  in  which  any  shares  of the  QSI  Stock  are
                  originally issued pursuant to this Note Issuance Agreement and
                  (Y)  all  other  states  specified  in  writing  by a  Holder,
                  provided,  however,  that,  as to clause (Y), QSI shall not be
                  required  to qualify to do  business  or consent to service of
                  process  in any state in which it is not now so  qualified  or
                  has not so consented.

                  (d) QSI shall furnish to each Holder upon request a reasonable
                  number of copies of a  supplement  to or an  amendment  of the
                  prospectus used in connection with the Registration  Statement
                  as may be necessary in order to facilitate  the public sale or
                  other disposition of all or any of the Registrable  Securities
                  held by the Holder.

                  (e)  With a view  to  making  available  to  the  Holders  the
                  benefits of Rule 144 and any other rule or  regulation  of the
                  SEC that may at any time  permit a Holder to sell  Registrable
                  Securities to the public without registration or pursuant to a
                  registration  statement on Form S-3, QSI  covenants and agrees
                  to  use  its  best  efforts  to:  (i)  make  and  keep  public
                  information  available,  as those  terms  are  understood  and
                  defined  in Rule  144,  until  the  earlier  of (A) the  first
                  anniversary  of the date hereof or (B) such date as all of the
                  Registrable  Securities shall have been resold; (ii) file with
                  the SEC in a timely  manner all  reports  and other  documents
                  required of QSI under the Securities Act and Exchange Act; and
                  (iii)  furnish  to any  Holder  upon  request,  as long as the
                  Holder  owns  any  Registrable   Securities,   (A)  a  written
                  statement  by QSI  that it has  complied  with  the  reporting
                  requirements of the Securities Act and the Exchange Act, (B) a
                  copy of the most recent annual or quarterly report of QSI, and
                  (C) such other  information as may be reasonably  requested in
                  order to avail any Holder of any rule or regulation of the SEC
                  that  permits the selling of any such  Registrable  Securities
                  without   registration   or  pursuant  to  such   registration
                  statement on Form S-3.

                  (f) If any  Holder  shall  propose  to  sell  any  Registrable
                  Securities  pursuant to the Registration  Statement,  it shall
                  notify  QSI of its  intent  to do so at  least  five  (5) full
                  business days prior to such sale.  Such notice shall be deemed
                  to constitute a  representation  that any written  information
                  previously   supplied  by  such  Holder   (including   without
                  limitation the information  referred to in Section 6.4 hereof)
                  is accurate as of the date of such notice.  At any time within
                  such five (5)  business-day  period,  QSI may refuse to permit
                  the Holder to resell any  Registrable  Securities  pursuant to
                  the Registration Statement for an initial period not to exceed
                  thirty (30) days; provided, however, that in order to exercise
                  this right,  QSI must deliver a certificate  in writing to the
                  Holder to the  effect  that a delay in such sale is  necessary
                  because a sale pursuant to such Registration  Statement in its
                  then-current  form would not be in the best  interests  of QSI
                  and its shareholders. In such an event, QSI shall use its best
                  efforts to amend the  Registration  Statement if necessary and
                  to take all other  actions  necessary to allow such sale,  and
                  shall notify

<PAGE>



                  the Holder promptly after it has determined that such sale has
                  become permissible.  Notwithstanding the foregoing,  QSI shall
                  not  be  entitled  to  exercise  its  right  to  withdraw  the
                  registration  statement  more  than  three  (3)  times  in any
                  calendar year or for more than two consecutive thirty (30) day
                  periods in any calendar year. Each Holder hereby covenants and
                  agrees  that it  will  not  sell  any  Registrable  Securities
                  pursuant to the Registration  Statement during the periods the
                  Registration  Statement  is  withdrawn  as set  forth  in this
                  Section 6.2(f).

         6.3      Indemnification and Contribution.

                  (a) QSI agrees to indemnify and hold harmless each Holder from
                  and against any losses,  claims,  damages or  liabilities  (or
                  actions  or  proceedings  in  respect  thereof)  to which such
                  Holder  may  become  subject  (under  the  Securities  Act  or
                  otherwise)  insofar  as  such  losses,   claims,   damages  or
                  liabilities  (or actions or  proceedings  in respect  thereof)
                  arise out of, or are based  upon,  any untrue  statement  of a
                  material  fact or  omission  to state a  material  fact in the
                  Registration Statement on the effective date thereof, or arise
                  out of any failure by QSI to fulfill any undertaking  included
                  in the  Registration  Statement,  and QSI will,  as  incurred,
                  reimburse   such  Holder  for  any  legal  or  other  expenses
                  reasonably  incurred in investigating,  defending or preparing
                  to defend  any such  action,  proceeding  or claim;  provided,
                  however,  that QSI shall not be liable in any such case to the
                  extent that such loss,  claim,  damage or liability arises out
                  of, or is based upon (i) an untrue  statement  or  omission in
                  such Registration Statement in reliance upon and in conformity
                  with written  information  furnished to QSI by or on behalf of
                  such  Holder  specifically  for  use  in  preparation  of  the
                  Registration  Statement,  (ii) the  failure of such  Holder to
                  comply with the covenants and agreements contained in Sections
                  6.2(f),  7.3 or 7.4 hereof,  or (iii) an untrue  statement  or
                  omission in any prospectus that is corrected in any subsequent
                  prospectus,  or  supplement  or  amendment  thereto,  that was
                  delivered to the Holder prior to the  pertinent  sale or sales
                  by the Holder.

                  (b)  Each  Holder,   severally  and  not  jointly,  agrees  to
                  indemnify  and hold  harmless QSI from and against any losses,
                  claims,  damages or liabilities  (or actions or proceedings in
                  respect  thereof) to which QSI may become  subject  (under the
                  Securities Act or otherwise)  insofar as such losses,  claims,
                  damages or  liabilities  (or actions or proceedings in respect
                  thereof)  arise  out  of,  or are  based  upon  (i) an  untrue
                  statement  of a material  fact or omission to state a material
                  fact in the  Registration  Statement  in reliance  upon and in
                  conformity with written information  furnished to QSI by or on
                  behalf of such Holder  specifically  for use in preparation of
                  the Registration Statement;  provided, however, that no Holder
                  shall be liable in any such case for any untrue  statement  or
                  omission in any prospectus which statement has been corrected,
                  in  writing,  by such Holder and  delivered  to QSI before the
                  sale from which such loss  occurred,  (ii) the failure of such
                  Holder to comply with the covenants and  agreements  contained
                  in  Sections  6.2(f),  7.3 or 7.4  hereof,  or (iii) an untrue
                  statement or omission in any  prospectus  that is corrected in
                  any subsequent prospectus, or supplement or amendment thereto,
                  that was delivered to the Holder prior to the  pertinent  sale
                  or sales by the Holder, and each

<PAGE>



                  Holder,   severally  and  not  jointly,   will,  as  incurred,
                  reimburse  QSI for any  legal  or  other  expenses  reasonably
                  incurred in  investigating,  defending  or preparing to defend
                  any such action, proceeding or claim.

                  (c)  Promptly  after  receipt by any  indemnified  person of a
                  notice of a claim or the beginning of any action in respect of
                  which indemnity is to be sought against an indemnifying person
                  pursuant to this Section 6.3,  such  indemnified  person shall
                  notify the indemnifying  person in writing of such claim or of
                  the   commencement  of  such  action,   and,  subject  to  the
                  provisions  hereinafter  stated, in case any such action shall
                  be brought against an indemnified  person and the indemnifying
                  person  shall have been  notified  thereof,  the  indemnifying
                  person shall be entitled to participate  therein,  and, to the
                  extent that it shall wish, to assume the defense thereof, with
                  counsel  reasonably  satisfactory to the  indemnified  person.
                  After notice from the indemnifying  person to such indemnified
                  person of the  indemnifying  person's  election  to assume the
                  defense thereof,  the indemnifying  person shall not be liable
                  to such indemnified person for any legal expenses subsequently
                  incurred by such  indemnified  person in  connection  with the
                  defense thereof;  provided,  however,  that if there exists or
                  shall  exist  a  conflict  of  interest  that  would  make  it
                  inappropriate  in the reasonable  judgment of the  indemnified
                  person for the same counsel to represent both the  indemnified
                  person  and  such  indemnifying  person  or any  affiliate  or
                  associate thereof, the indemnified person shall be entitled to
                  retain  its own  counsel at the  expense of such  indemnifying
                  person.

                  (d) If the indemnification provided for in this Section 6.3 is
                  unavailable to or insufficient to hold harmless an indemnified
                  party  under  subsection  (a) or (b) above in  respect  of any
                  losses,   claims,   damages  or  liabilities  (or  actions  or
                  proceedings in respect thereof) referred to therein, then each
                  indemnifying  party  shall  contribute  to the amount  paid or
                  payable by such  indemnified  party as result of such  losses,
                  claims, damages or liabilities (or actions in respect thereof)
                  in such  proportion as is  appropriate to reflect the relative
                  fault of QSI on the one hand and the  Holders  on the other in
                  connection  with the statements or omissions which resulted in
                  such  losses,claims,  damages or  liabilities  (or  actions in
                  respect  thereof),  as well as any  other  relevant  equitable
                  considerations.  The  relative  fault shall be  determined  by
                  reference  to,  among  other  things,  whether  the  untrue or
                  alleged untrue statement of a material fact or the omission or
                  alleged   omission  to  state  a  material   fact  relates  to
                  information supplied by QSI on the one hand or a Holder on the
                  other and the parties' relative intent,  knowledge,  access to
                  information   and  opportunity  to  correct  or  prevent  such
                  statement or omission. QSI and the Holders agree that it would
                  not be just and  equitable  if  contribution  pursuant to this
                  subsection (d) were determined by pro rata allocation (even if
                  the Holders were treated as one entity for such purpose) or by
                  any  other  method  of  allocation  which  does not take  into
                  account the equitable considerations referred to above in this
                  subsection  (d). The amount paid or payable by an  indemnified
                  party  as  a  result  of  the  losses,   claims,   damages  or
                  liabilities (or actions in respect thereof)  referred to above
                  in this subsection (d) shall be deemed to include any legal or
                  other expenses  reasonably  incurred by such indemnified party
                  in connection with investigating or defending

<PAGE>



                  any such action or claim.  Notwithstanding  the  provisions of
                  this subsection (d), no Holder shall be required to contribute
                  any amount in excess of the  amount by which the gross  amount
                  received by the Holder from the sale of the QSI Stock to which
                  such loss relates exceeds the amount of any damages which such
                  Holder has  otherwise  been  required to pay by reason of such
                  untrue or alleged  untrue  statement  or  omission  or alleged
                  omission.  No person  guilty of  fraudulent  misrepresentation
                  (within the meaning of Section 1 l(f) of the  Securities  Act)
                  shall be entitled to contribution  from any person who was not
                  guilty  of such  fraudulent  misrepresentation.  The  Holders'
                  obligations  in this  subsection (d) to contribute are several
                  in  proportion  to their sales of QSI Stock to which such loss
                  relates and not joint.

                  (e) The  obligations of QSI and the Holders under this Section
                  6.3 shall be in  addition to any  liability  which QSI and the
                  respective  Holders may otherwise have and shall extend,  upon
                  the same terms and  conditions,  to each  person,  if any, who
                  controls  QSI  or  any  Holder   within  the  meaning  of  the
                  Securities Act and the Exchange Act.



     7. Restrictions on Transferability of QSI Stock; Compliance with Securities
Act

         7.1  Restrictions  on  Transferability.  The  QSI  Stock  shall  not be
transferable  in the  absence of  registration  under the  Securities  Act or an
exemption  therefrom or in the absence of  compliance  with any term of the Note
Issuance Agreement.  The QSI Stock shall not be transferable for a period of one
year  following  the Closing  Date.  QSI shall be entitled to give stop transfer
instructions  to its  transfer  agent with  respect to the QSI Stock in order to
enforce the foregoing restrictions.

     7.2 Restrictive Legend.  Each certificate  representing the QSI Stock shall
bear  substantially  the following  legends (in addition to any legends required
under applicable state securities laws):

         THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE BEEN ACQUIRED FOR
         INVESTMENT  PURPOSES  ONLY  AND  HAVE NOT  BEEN  REGISTERED  UNDER  THE
         SECURITIES  ACT OF 1933.  THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED
         IN THE  ABSENCE OF SUCH  REGISTRATION  OR AN  EXEMPTION  THEREFROM,  OR
         COMPLIANCE WITH REGULATION S.

         ADDITIONALLY,  THE  TRANSFER  OF THE  SECURITIES  REPRESENTED  BY  THIS
         CERTIFICATE  IS  SUBJECT TO CERTAIN  RESTRICTIONS  SPECIFIED  IN A NOTE
         ISSUANCE  AGREEMENT DATED NOVEMBER __, 1996 BETWEEN THE COMPANY AND THE
         ORIGINAL  PURCHASER,  AND NO TRANSFER OF  SECURITIES  SHALL BE VALID OR
         EFFECTIVE  ABSENT  COMPLIANCE  WITH SUCH  RESTRICTIONS.  ALL SUBSEQUENT
         HOLDERS OF THIS  CERTIFICATE WILL HAVE AGREED TO BE BOUND BY CERTAIN OF
         THE TERMS OF THE NOTE ISSUANCE  AGREEMENT,  INCLUDING SECTIONS 7.1, 7.3
         AND 7.4 OF SCHEDULE 3 TO ANNEX I OF THE  AGREEMENT.  A COPY OF THE NOTE
         ISSUANCE AGREEMENT MAY BE OBTAINED AT NO COST BY

<PAGE>



         WRITTEN  REQUEST MADE BY THE REGISTERED  HOLDER OF THIS  CERTIFICATE TO
THE SECRETARY OF THE COMPANY.

         7.3 Transfer of QSI Stock. Each Holder hereby covenants with QSI not to
make any sale of the QSI Stock  except:  (a) a sale of QSI  Stock in  accordance
with the  Registration  Statement,  in which case the Holder covenants to comply
with the requirement of delivering a current prospectus, (b) a sale of QSI Stock
in accordance  with Rule 144, in which case the Holder  covenants to comply with
Rule 144; or (c) subject to such conditions as QSI in its sole discretion  shall
impose, in accordance with another exemption from the registration  requirements
of the  Securities  Act. Each Holder further  acknowledges  and agrees that such
shares  of QSI  Stock  are not  transferable  on the  books  of QSI  unless  the
certificate  submitted  to QSI's  transfer  agent  evidencing  such QSI Stock is
accompanied by such additional  certification,  documentation  or information as
QSI in its  sole  discretion  shall  require  in order to  effect  such  sale in
accordance with the Registration  Statement or Rule 144, or such other exemption
from the  registration  requirements  of the Securities  Act. No transfer of QSI
Stock will be effected to any  "affiliate"  of QSI as defined in the  Securities
Act except  pursuant to  subsection  (a) or (b) hereof.  The legend set forth in
Section 7.2 will be removed from a certificate  representing QSI Stock following
and in connection  with any sale of QSI Stock  pursuant to subsection (a) or (b)
hereof but not in connection  with any sale of QSI Stock  pursuant to subsection
(c) hereof.

     7.4 Holder Information.  Each Holder covenants that it will promptly notify
QSI of any changes in the  information set forth in the  Registration  Statement
regarding such Holder or such Holder's "Plan of Distribution."

         8.       Miscellaneous

         8.1  Waivers and  Amendments.  With the  exception  of Sections 6 and 7
hereof,  the terms of this  Schedule 3 may be waived or amended with the written
consent of QSI and each Holder.  With  respect to Sections 6 and 7 hereof,  with
the  written  consent of QSI and the record  holders of more than 50% of the (X)
QSI Stock then  outstanding and held by Holders together with (Y) QSA Stock then
outstanding and held by the Holders,  the terms of this Schedule 3 may be waived
or amended and any such  amendment  or waiver  shall be binding upon QSI and all
holders of QSI Stock and QSA Stock.



<PAGE>



                              For more information contact:          EXHIBIT 99
                              Stephen H. Vonderach
                             Chief Financial Officer
                           Quality Semiconductor, Inc.
                                 (408) 450-8000

                              Morgan-Walke Associates, Inc.
                              Doug Sherk, Suzanne Craig,
                              Lisa Laukkanen
                              (415) 296-7383
                              Emily Dupree, Elissa Grabowski
                              (212) 850-5698
FOR IMMEDIATE RELEASE

                QUALITY SEMICONDUCTOR ANNOUNCES PRIVATE FINANCING

     SANTA CLARA,  CA --  (November  22,  1996) -- Quality  Semiconductor,  Inc.
(Nasdaq:QUAL)  today announced the closing of a private  placement of unsecured,
convertible  promissory notes in the principal amount of $5 million,  of Quality
Semiconductor  Australia,  Pty. Limited, a subsidiary of Quality  Semiconductor,
Inc. The notes may be converted,  at the option of the investors of the Company,
for up to 732,931 shares of the Common Stock of Quality Semiconductor,  Inc. The
notes are also  non-transferable  and are convertible into 732,931 shares of the
non-voting Series B Preference shares of Quality Semiconductor  Australia,  Pty.
Limited.  The lead  investors  are  affiliated  with  Fidelity  Venture  Capital
Corporation and Technology Associates Corporation, both of Taiwan. The investors
have initially  funded $2 million dollars of the total financing and have agreed
to complete  the balance of the funding no later than  February  28,  1997.  The
Company  intends  to use the  proceeds  for  payment  of the  debt  incurred  in
connection  with the  acquisition  of a wafer  fabrication  facility  by Quality
Semiconductor  Australia,  Pty., general corporate purposes and working capital.
"This important  financing  provides us with additional  resources to expand our
capabilities  and to meet the demand for our  products,"  commented  Paul Gupta,
president and chief executive  officer.  Quality  Semiconductor,  Inc.  designs,
develops  and  markets   high-performance   logic  as  well  as  networking  and
logic-intensive  specialty memory  semiconductor  products.  The Company targets
systems  manufacturers  principally  in the  networking,  personal  computer and
workstation  markets.  The  Company's  logic  products  include the 3.3-volt and
5-volt QSFCT  families of high-speed,  low-noise  interface  logic devices,  the
QuickSwitch  family of  high-speed,  low-resistance  bus  switches,  a family of
low-skew clock management  products,  a family of analog switch devices, and new
JTAG products designed to allow board-level testing of complex products. Quality
Semiconductor,     Inc.'s     networking     products     include     an     ATM
multiplexer/demultiplexer,  and two  Fast  Ethernet  transceivers  that  provide
on-chip  solutions  for  glue-less  interface.  Quality  Semiconductor,   Inc.'s
specialty memory products include some of the fastest FIFO (first-in, first-out)
devices currently available.

     Except for  historical  information,  the matters  discussed  in this press
release  are   forward-looking   statements   that  are  subject  to  risks  and
uncertainties  that could cause actual results to differ  materially  from those
projected,  including  the  ability of the  Company to enforce  the  contractual
commitment of the investors to fund the notes, as well as the factors identified
in the Company's 10-K for the year ended September 24, 1995 and in the Company's
10-Qs for the quarters  ended  December  31,  1995,  March 31, 1996 and June 30,
1996,   respectively.   The  Company   assumes  no   obligation  to  update  the
forward-looking statements included in this press release.

                                       ###


<PAGE>
[{"type": "8-K", "sequence": "1", "description": "8-K", "secsgml_size_bytes": 104116}]
{"company-data": {"conformed-name": "QUALITY SEMICONDUCTOR INC", "cik": "0000869886", "assigned-sic": "3674", "irs-number": "770199189", "state-of-incorporation": "CA", "fiscal-year-end": "0930"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-23128", "film-number": "96678828"}, "business-address": {"street1": "851 MARTIN AVE", "city": "SANTA CLARA", "state": "CA", "zip": "95050", "phone": "4084508004"}, "mail-address": {"street1": "851 MARTIN AVE", "city": "SANTA CLARA", "state": "CA", "zip": "95050"}}
UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 8-K

                Current Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                         Date of Report December 9, 1996

                           QUALITY SEMICONDUCTOR, INC.
             (Exact name of registrant as specified in its charter)

       California                   2-23128                     77-0199189
(State or other jurisdiction      (Commission                 (IRS Employer
of incorporation)                 File Number)               Identification No.

                                851 Martin Avenue
                              Santa Clara, CA 95050
          (Address of principal executive offices) (including Zip code)

                                 (408) 450-8000
              (Registrant's telephone number, including area code)

                             Exhibit Index on page 4
Item 5.  Other Events

         On  November  22,  1996,  Quality  Semiconductor,  Inc.,  a  California
corporation  (the  "Company")  announced  the sale of $5  million  of  unsecured
convertiblepromissory  notes (the "Notes") of Quality  Semiconductor  Australia,
Pty. Limited a subsidiary of the Company. The termsof the Notes are contained in
the  instruments  defining  the rights of the holders of  unsecured  convertible
promissory noes of Quality  Semiconductor  Australia,  Pty.  Limited attached as
exhibits hereto and  incorporated by reference  herein.  Further details of this
transaction are contained in the Company's press release dated November 22, 1996
atttached as an exhibit hereto and incorporated by reference herein.

Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits.

         (c)      Exhibits

     Exhibit 4.1 Form of QSA  Convertible/Redeemable  Note  Issuance  Agreement,
dated November 21, 1996, between Quality Semiconductor  Australia,  Pty.Limited,
Quality Semiconductor, Inc. and Technology Associates (Note No. 1).

     Exhibit 4.2 Form of QSA  Convertible/Redeemable  Note  Issuance  Agreement,
dated November 21, 1996, between Quality Semiconductor  Australia,  Pty.Limited,
Quality  Semiconductor,  Inc. and Win Win Venture Capital  Corporation (Note No.
3).

     Exhibit 4.3 Form of QSA  Convertible/Redeemable  Note  Issuance  Agreement,
dated November 21, 1996, between Quality Semiconductor  Australia,  Pty.Limited,
Quality  Semiconductor,  Inc. and Win Win Venture Capital  Corporation (Note No.
4).

     Exhibit 4.4 Form of QSA  Convertible/Redeemable  Note  Issuance  Agreement,
dated November 21, 1996, between Quality Semiconductor Australia,  Pty. Limited,
Quality  Semiconductor,  Inc. and Win Win Venture Capital  Corporation (Note No.
5).

     Exhibit  4.5  Form of  Unsecured  Convertible  Promissory  Note of  Quality
Semiconductor Australia, Pty. Limited.

     Exhibit 99 Quality  Semiconductor,  Inc.  Press Release dated  November 22,
1996.
SIGNATURES

Pursuant the  requirements  of the Securities  Exchange Act of 1934, as amended,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                  QUALITY SEMICONDUCTOR, INC.

Date:  December 9, 1996                     By:      /s/STEPHEN H. VONDERACH
                                                  --------------------------
                                                  Stephen H. Vonderach
                                                  Vice President of Finance and
                                                  Chief Financial Officer
                                                  (Duly Authorized and Principal
Financial and accounting Officer)
QUALITY SEMICONDUCTOR, INC.

                                INDEX TO EXHIBITS

Exhibit Number                  Description           Sequential Page Number

   Exhibit 4.1      Form of QSA Convertible/Redeemable              5
                    Note Issuance Agreement, dated
                    November 21, 1996, between Quality
                    Semiconductor, Inc. and Technology
                    Associates (Note No. 1).

   Exhibit 4.2      Form of QSA Convertible/Redeemable              7
                    Note Issuance Agreement, dated
                    November 21, 1996, between Quality
                    Semiconductor Australia, Pty. Limited,
                    Quality Semiconductor, Inc. and Win
                    Win Venture Capital Corporation
                    (Note No. 3).

   Exhibit 4.3      Form of QSA Convertible/Redeemable              9
                    Note Issuance Agreement, dated
                    November 21, 1996, between Quality
                    Semiconductor Australia, Pty. Limited,
                    Quality Semiconductor, Inc. and Win
                    Win Venture Capital Corporation
                    Note No. 4)

   Exhibit 4.4      Form of QSA Convertible/Redeemable             11
                    Note Issuance Agreement, dated
                    November 21, 1996, between Quality
                    Semiconductor Australia, Pty. Limited,
                    Quality Semiconductor, Inc. and Win
                    Win Venture Capital Corporation
                    Note No. 5).

   Exhibit 4.5      Form of Unsecured Convertible                 13
                    Promissory Note of Quality
                      Semiconductor Australia, Pty. Limited

  Exhibit 99        Press Release dated November 22, 1996         40
EXHIBIT 4.1

               QSA CONVERTIBLE/REDEEMABLE NOTE ISSUANCE AGREEMENT
                       (TECHNOLOGY ASSOCIATES, NOTE NO. 1)

Quality Semiconductor Australia, Pty. Ltd.
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050

Ladies & Gentlemen:

         The undersigned,  Technology Associates Corporation (the "Noteholder"),
hereby confirms its agreement with you as follows:

         1.  This  QSA  Convertible/Redeemable   Note  Issuance  Agreement  (the
"Agreement") is made as of November __, 1996 by and among Quality  Semiconductor
Australia,  Pty.  Ltd., an Australian  corporation  ("QSA"),  and  subsidiary of
Quality  Semiconductor,  Inc., a  California  corporation  ("QSI"),  QSI and the
Noteholder.

     2. QSA has  authorized the issuance of up to  $5,999,977.01  in convertible
debt securities of QSA (the "QSA Notes") substantially in the Form of Exhibit A.

         3. QSA and the Noteholder  agree that the Noteholder  will take and QSA
will issue,  for an  issuance  price of up to  $999,995.03,  the QSA Note No. 1,
substantially in the form attached hereto as Annex I and incorporated  herein by
reference  as if fully set  forth  herein.  Unless  otherwise  requested  by the
Noteholder,  the QSA Note purchased by the Noteholder  will be registered in the
Noteholder's name and address as set forth below.

         4. The QSA Note shall be subject to certain  rights of  conversion  and
redemption  and  exchangeable  for shares of the  Common  Stock of QSI (the "QSI
Stock") or the Series B  Redeemable  Preference  Shares of QSA (the "QSA Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein. QSI has authorized and reserved 146,586 shares of QSI
Stock for issuance  upon  conversion  or  redemption of the QSA Notes and/or QSA
Stock pursuant to the terms of this Agreement.

         5. The QSA Stock shall be subject to certain  rights of conversion  and
redemption  and  exchangeable  for shares of QSI Common  Stock (the "QSI Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein.

         6. The Noteholder  represents  that,  except as set forth below, (a) it
has had no position, office or other material relationship within the past three
years with QSA or its affiliates and (b) neither it nor any group of which it is
a   member    beneficially    owns   any   securities   of   QSA.    Exceptions:
______________________________  (If no exceptions,  write "none." If left blank,
response will be deemed to be "none").

Please confirm that the foregoing  correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

                                           NOTEHOLDER
                                           By:
                                           Title:
                                           Address:
                                           Tax ID No.:
AGREED AND ACCEPTED:

QUALITY SEMICONDUCTOR AUSTRALIA, PTY. LTD.

By:
Title:

QUALITY SEMICONDUCTOR, INC.

By:
Title:
EXHIBIT 4.2

               QSA CONVERTIBLE/REDEEMABLE NOTE ISSUANCE AGREEMENT
                (WIN WIN VENTURE CAPITAL CORPORATION, NOTE NO. 3)

Quality Semiconductor Australia, Pty. Ltd.
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050

Ladies & Gentlemen:

         The   undersigned,   Win   Win   Venture   Capital   Corporation   (the
"Noteholder"), hereby confirms its agreement with you as follows:

         1.  This  QSA  Convertible/Redeemable   Note  Issuance  Agreement  (the
"Agreement") is made as of November __, 1996 by and among Quality  Semiconductor
Australia,  Pty.  Ltd., an Australian  corporation  ("QSA"),  and  subsidiary of
Quality  Semiconductor,  Inc., a  California  corporation  ("QSI"),  QSI and the
Noteholder.

     2. QSA has  authorized the issuance of up to  $5,999,977.01  in convertible
debt securities of QSA (the "QSA Notes") substantially in the Form of Exhibit A.

         3. QSA and the Noteholder  agree that the Noteholder  will take and QSA
will issue, for an issuance price of up to $999,995.03,  the QSA Note No. 3 (the
"QSA  Note"),  substantially  in  the  form  attached  hereto  as  Annex  I  and
incorporated herein by reference as if fully set forth herein.  Unless otherwise
requested by the  Noteholder,  the QSA Note purchased by the Noteholder  will be
registered in the Noteholder's name and address as set forth below.

         4. The QSA Note shall be subject to certain  rights of  conversion  and
redemption  and  exchangeable  for shares of the  Common  Stock of QSI (the "QSI
Stock") or the Series B  Redeemable  Preference  Shares of QSA (the "QSA Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein. QSI has authorized and reserved 146,586 shares of QSI
Stock for issuance  upon  conversion  or  redemption of the QSA Notes and/or QSA
Stock pursuant to the terms of this Agreement.

         5. The QSA Stock shall be subject to certain  rights of conversion  and
redemption  and  exchangeable  for shares of QSI Common  Stock (the "QSI Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein.

     6. The Noteholder  represents  that,  except as set forth below, (a) it has
had no position,  office or other  material  relationship  within the past three
years with QSA or its affiliates and (b) neither it nor any group of which it is
a member beneficially owns any securities of QSA. Exceptions:  ___________(If no
exceptions, write "none." If left blank, response will be deemed to be "none").

Please confirm that the foregoing  correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

                                               NOTEHOLDER
                                               By:
                                               Title:
                                               Address:
                                               Tax ID No.:
AGREED AND ACCEPTED:

QUALITY SEMICONDUCTOR AUSTRALIA, PTY. LTD.

By:
Title:

QUALITY SEMICONDUCTOR, INC.

By:
Title:
EXHIBIT 4.3

               QSA CONVERTIBLE/REDEEMABLE NOTE ISSUANCE AGREEMENT
                (WIN WIN VENTURE CAPITAL CORPORATION, NOTE NO. 4)

Quality Semiconductor Australia, Pty. Ltd.
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050

Ladies & Gentlemen:

         The   undersigned,   Win  Win   Venture   Capital   Corporation,   (the
"Noteholder"), hereby confirms its agreement with you as follows:

         1.  This  QSA  Convertible/Redeemable   Note  Issuance  Agreement  (the
"Agreement") is made as of November __, 1996 by and among Quality  Semiconductor
Australia,  Pty.  Ltd., an Australian  corporation  ("QSA"),  and  subsidiary of
Quality  Semiconductor,  Inc., a  California  corporation  ("QSI"),  QSI and the
Noteholder.

     2. QSA has  authorized the issuance of up to  $5,999,977.01  in convertible
debt securities of QSA the "QSA Notes") substantially in the Form of Exhibit A.

         3. QSA and the Noteholder  agree that the Noteholder  will take and QSA
will issue, for an issuance price of up to $999,995.03,  the QSA Note No. 4 (the
"QSA  Note"),  substantially  in  the  form  attached  hereto  as  Annex  I  and
incorporated herein by reference as if fully set forth herein.  Unless otherwise
requested by the  Noteholder,  the QSA Note purchased by the Noteholder  will be
registered in the Noteholder's name and address as set forth below.

         4. QSA and the  Noteholder  agree  that the  Noteholder  shall make the
payment  of the  issuance  price of  $999,995.03  for the QSA Note on or  before
December 15, 1996 and that Noteholder's obligation to make such payment shall be
unconditional,  regardless  of (i) any  provision  herein,  (ii) any  breach  or
violation of any representation,  warranty, covenant or agreement by the Company
or the  Noteholder,  (iii) any  alleged  fraud or other  tort  committed  by the
Company or the  Noteholder,  (iv) the financial  condition of the Company or the
Noteholder,  or (v) general market conditions.  The Noteholder acknowledges that
the Company would be damaged if the  Noteholder  does not pay the full amount of
the issuance  price of the QSA Note on or before  December 15, 1996. QSA and the
Noteholder  further agree that, as a surety for the  Noteholder's  obligation to
make full payment under this  Agreement,  QSA shall hold as  collateral  the QSA
convertible,  unsecured Note No. 3 ("QSA Note No. 3") in the principal amount of
$999,995.03   of  the   Noteholder   issued   pursuant   to  that   certain  QSA
Convertible/Redeemable  Note  Issuance  Agreement  (Note  No.  3) of  even  date
herewith  by and  between QSA and the  Noteholder.  Upon  payment in full of the
issuance  price of the QSA Note by the  Noteholder,  the Company  will issue and
deliver  to the  Noteholder  the QSA Note and QSA Note No. 3. In the event  that
Noteholder  fails to meet its  obligation  to make the  payment of the  issuance
price of $999,995.03  for the QSA Note on or before December 15, 1996, QSA shall
have the right, but not the obligation, to rescind this Agreement and the right,
but not the  obligation,  to cancel QSA Note No. 3 and return the issuance price
of QSA Note No. 3 to the Noteholder.

         5. The QSA Note shall be subject to certain  rights of  conversion  and
redemption  and  exchangeable  for shares of the  Common  Stock of QSI (the "QSI
Stock") or the Series B  Redeemable  Preference  Shares of QSA (the "QSA Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein. QSI has authorized and reserved 146,586 shares of QSI
Stock for issuance  upon  conversion  or  redemption of the QSA Notes and/or QSA
Stock pursuant to the terms of this Agreement.
6. The QSA Stock shall be subject to certain  rights of conversion  and
redemption  and  exchangeable  for shares of QSI Common  Stock (the "QSI Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein.

         7. The Noteholder  represents  that,  except as set forth below, (a) it
has had no position, office or other material relationship within the past three
years with QSA or its affiliates and (b) neither it nor any group of which it is
a   member    beneficially    owns   any   securities   of   QSA.    Exceptions:
______________________________  (If no exceptions,  write "none." If left blank,
response will be deemed to be "none").

         Please  confirm that the foregoing  correctly  sets forth the agreement
between us by signing in the space provided below for that purpose.

                                                 NOTEHOLDER
                                                 By:
                                                 Title:
                                                 Address:
                                                 Tax ID No.:

AGREED AND ACCEPTED:

QUALITY SEMICONDUCTOR AUSTRALIA, PTY. LTD.

By:
Title:

QUALITY SEMICONDUCTOR, INC.

By:
Title:
EXHIBIT 4.4

               QSA CONVERTIBLE/REDEEMABLE NOTE ISSUANCE AGREEMENT
                (WIN WIN VENTURE CAPITAL CORPORATION, NOTE NO. 5)

Quality Semiconductor Australia, Pty. Ltd.
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050

Ladies & Gentlemen:

         The   undersigned,   Win  Win   Venture   Capital   Corporation,   (the
"Noteholder"), hereby confirms its agreement with you as follows:

         1.  This  QSA  Convertible/Redeemable   Note  Issuance  Agreement  (the
"Agreement") is made as of November __, 1996 by and among Quality  Semiconductor
Australia,  Pty.  Ltd., an Australian  corporation  ("QSA"),  and  subsidiary of
Quality  Semiconductor,  Inc., a  California  corporation  ("QSI"),  QSI and the
Noteholder.

     2. QSA has  authorized the issuance of up to  $5,999,977.01  in convertible
debt securities of QSA the "QSA Notes") substantially in the Form of Exhibit A.

         3. QSA and the Noteholder agree that the Noteholder, an affiliated fund
of the  Noteholder,  or such other investor as may be approved by QSA, will take
and QSA will issue, for an issuance price of up to  $1,999,996.89,  the QSA Note
No. 5 (the "QSA Note"), substantially in the form attached hereto as Annex I and
incorporated herein by reference as if fully set forth herein.  Unless otherwise
requested by the  Noteholder,  the QSA Note purchased by the Noteholder  will be
registered in the Noteholder's name and address as set forth below.

         4. QSA and the Noteholder agree that the Noteholder, an affiliated fund
of the Noteholder,  or such other investor as may be approved by QSA, shall make
the payment of the issuance price of $1,999,996.89 for the QSA Note on or before
February 15, 1997 and that Noteholder's obligation to make such payment shall be
unconditional,  regardless  of (i) any  provision  herein,  (ii) any  breach  or
violation of any representation,  warranty, covenant or agreement by the Company
or the  Noteholder,  (iii) any  alleged  fraud or other  tort  committed  by the
Company or the  Noteholder,  (iv) the financial  condition of the Company or the
Noteholder,  or (v) general market conditions.  The Noteholder acknowledges that
the Company would be damaged if the  Noteholder  does not pay the full amount of
the issuance  price of the QSA Note on or before  February 15, 1997. QSA and the
Noteholder  further agree that, as a surety for the  Noteholder's  obligation to
make full payment under this  Agreement,  QSA shall hold as collateral:  (a) the
QSA convertible, unsecured Note No. 3 ("QSA Note No. 3") in the principal amount
of  $999,995.03  of  the  Noteholder   issued   pursuant  to  that  certain  QSA
Convertible/Redeemable  Note  Issuance  Agreement  (Note  No.  3) of  even  date
herewith  by and between QSA and the  Noteholder;  and (b) the QSA  Convertible,
Unsecured  Note No. 4 ("QSA Note No. 4") in the principal  amount of $999,995.03
of the  Noteholder  issued  pursuant to that certain QSA  Convertible/Redeemable
Note  Issuance  Agreement  (Note No. 4) of even date herewith by and between QSA
and the  Noteholder.  Upon payment in full of the issuance price of the QSA Note
by the Noteholder,  an affiliated fund of the Noteholder, or such other investor
as may be approved by QSA, the Company will issue and deliver to the  Noteholder
QSA Note No. 3 and QSA Note No. 4 and to the  entity  paying  the full  issuance
price of the QSA Note, the QSA Note. In the event that Noteholder  fails to meet
its  obligation to make the payment of the issuance price of  $1,999,996.89  for
the QSA Note on or before  February 15, 1997, QSA shall have the right,  but not
the obligation, to rescind this Agreement and the right, but not the obligation,
to cancel QSA Note No. 3, and QSA Note No. 4 and return  the  issuance  price of
QSA Note No. 3 and QSA Note No. 4 to the Noteholder.
5. The QSA Note shall be subject to certain  rights of  conversion  and
redemption  and  exchangeable  for shares of the  Common  Stock of QSI (the "QSI
Stock") or the Series B  Redeemable  Preference  Shares of QSA (the "QSA Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein. QSI has authorized and reserved 293,173 shares of QSI
Stock for issuance  upon  conversion  or  redemption of the QSA Notes and/or QSA
Stock pursuant to the terms of this Agreement.

         6. The QSA Stock shall be subject to certain  rights of conversion  and
redemption  and  exchangeable  for shares of QSI Common  Stock (the "QSI Stock")
pursuant to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein.

         7. The Noteholder  represents  that,  except as set forth below, (a) it
has had no position, office or other material relationship within the past three
years with QSA or its affiliates and (b) neither it nor any group of which it is
a   member    beneficially    owns   any   securities   of   QSA.    Exceptions:
______________________________  (If no exceptions,  write "none." If left blank,
response will be deemed to be "none").

         Please  confirm that the foregoing  correctly  sets forth the agreement
between us by signing in the space provided below for that purpose.

                                            NOTEHOLDER
                                            By:
                                            Title:
                                            Address:
                                            Tax ID No.:

AGREED AND ACCEPTED:

QUALITY SEMICONDUCTOR AUSTRALIA, PTY. LTD.

By:
Title:

QUALITY SEMICONDUCTOR, INC.

By:
Title:
EXHIBIT 4.5

                   QUALITY SEMICONDUCTOR AUSTRALIA PTY LIMITED
                                 ACN 072 373 730

                               Registered office:
                                    Level 15
                                 321 Kent Street
                                 SYDNEY NSW 2000

                           CONVERTIBLE UNSECURED NOTE
                                November __, 1996

         1.  This  Note is  issued to the  Noteholder  in  consideration  of the
advance to Quality  Semiconductor  Australia Pty. Limited (the "Company") by the
Noteholder of an amount equal to the Principal Amount,  the receipt of which the
Company acknowledges.

     2.  The  Principal  Amount,  together  with  interest,  is  payable  on the
Repayment Date, unless this Note is converted into Shares.

     3. This Note is convertible at the election of the Noteholder into either:

                  (a)      146,586 QSI Shares; or

                  (b)      146,586 QSA Series B Shares,

                  in accordance with the terms and conditions of this Note.

                              TERMS AND CONDITIONS

         1.       DEFINITIONS

                  In this Note:

                  `Business  Day' means a day on which trading banks (as defined
                  in the  Banking  Act 1959  (C'th))  are open for  business  in
                  Sydney, New South Wales;

     `Company'  means  Quality  Semiconductor  Australia Pty Limited ACN 072 373
730;

                  `Conversion Date' means, where notice is given:

     (a) under clause 3.1(a), 5 days after the date of that notice;

                  (b)      under clause 7, the Repayment Date,

                  provided  that  where a day is not a  Business  Day,  the next
Business Day after that date is the Conversion Date:
`Interest  Payment Date' means 30 June and 31 December of each
                  calendar year, or if that date is not a Business Day, the next
                  Business  Day with the first  Interest  Payment  Date being 31
                  December 1996;

                  `ITTA' means the Income Tax Assessment Act 1936 (C'th).

     `Note' means this convertible unsecured note issued by the Company;

                  `Principal Amount' means U.S. $999,995.03;

     `Public  Authority'  means any  government  or  minister  or  governmental,
semi-governmental or judicial entity, department, instrumentality or authority;

                  `QSA Series B Shares' means  redeemable  preference  shares in
                  the issued share  capital of the Company,  with the rights set
                  out in Schedule 1;

     `QSI Shares' means shares of common stock of Quality Semiconductor, Inc., a
California, U.S.A. corporation ("QSI");

                  "Shares' means:

                  (a)      QSI Shares; or

                  (b)      QSA Series B Shares;

                  `Tax Change' means:

     (a) any amendment, modification or replacement of the ITAA;

                  (b)      the   announcement   of   any   proposed   amendment,
                           modification  or  replacement  of  the  ITAA  by  the
                           Minister of State of the  Commonwealth  of Australia,
                           the  Commonwealth  Government or the  Commissioner of
                           Taxation of the Australian  Taxation Office or by any
                           other responsible public Authority;

     (c)  any  ruling  or  decision   of  a  tribunal  or  court  of   competent
jurisdiction;

                  (d)      any announcement or ruling by any of the Commissioner
                           of Taxation or the Australian  Taxation Office of, or
                           any  assessment  from the  Commissioner  of  Taxation
                           disclosing,  any  change  in  the  interpretation  or
                           administration by the Commissioner of Taxation of the
                           ITAA or any legislation replacing the ITAA;

         2.       GENERAL TERMS OF ISSUE

         2.1      This Note:

                  (a)      was issued for the Principal Amount;
(b) is convertible in the manner and at the times provided by clause 3 and,
subject  to clause 7 into the number of Shares  determined  in  accordance  with
clause 4.6; and

     (c) was paid in full on application by the Noteholder; and

                  (d)      is not transferable.

         2.2      Interest on this Note:

     (a) is payable on the  Principal  Amount of this Note at the rate of 8% per
annum on each Interest Payment Date;

                  (b)      ceases to accrue:

     (i) in the case of conversion of this Note into Shares,  on the  Conversion
Date; and

                           (ii)     in any other case, on the Repayment Date.

         2.3 The Company will pay to the  Noteholder  on conversion of this Note
interest accrued on this Note during the period commencing on the date after the
last Interest  Repayment Date and ending on the Conversion Date or the Repayment
Date, as applicable.

         3.       GENERAL RIGHTS OF CONVERSION

         3.1      This Note is convertible into Shares:

                  (a)      at any time  before  redemption  or  repayment  under
                           clause 7 by the  Noteholder  giving to the  Company a
                           written notice, in the form set out in Schedule 2 (or
                           in such  other  form as the  Company  may  require or
                           accept) requiring the Company to convert; or

     (b) in the circumstances and in the manner provided in clause 7.8.

         3.2      A notice given by the Noteholder under clause 3.1:

     (a) is irrevocable unless the Company otherwise determines;

                  (b) must specify  whether the Noteholder  requires the Company
to convert the Note into QSA Series B Shares or QSI Shares.

     3.3 On conversion of this Note, the Company will apply the Principal Amount
in either:

     (a)  paying up the QSA  Series B Shares to be issued to the  Noteholder  on
conversion; or
(b)  subscribing  for  fully  paid  QSI  Shares  to be  distributed  to the
Noteholder on conversion.

     in full discharge of the Company's liability for the Principal Amount.

         4.       ALLOTMENT OF SHARES

         4.1 The  Company  must  allot the  Shares to which  the  Noteholder  is
entitled within 20 Business Days of the receipt of a notice under clause 3.1.

     4.2 Any allotment of Shares will have effect on the Conversion Date.

         4.3 The Company must,  not later than 20 Business Days after  allotment
forward,  free of charge,  to the holder of the Note converted (or to such other
person as the holder may in writing request) a share  certificate for the number
of Shares allotted on conversion of this Note.

         4.4 QSI Shares allotted on conversion of this Note will rank equally in
all respects with shares of common stock of QSI existing on the Conversion Date.

     4.5 QSA Series B Shares  allotted on  conversion of this Note will have the
rights attaching to QSA Series B Shares.

         4.6      This Note will convert into either:

                  (a)      146,586 QSI Shares; or

                  (b)      146,586 QSA Series B Shares.

         5.       NON-PARTICIPATION IN ISSUES AND LIMITED VOTING RIGHTS

     5.1  Except  as set out in  this  Note,  this  Note  carries  no  right  to
participate in any offering of securities by the Company.

     5.2 Except as required by the  Corporations  Law, the  Noteholder  will not
have any right to vote at general meetings of the Company.

         6.       NON-RESIDENT NOTEHOLDER

                  Where  this Note is held by or on behalf of a person  resident
                  outside  Australia,  then,  despite  anything to the  contrary
                  contained  in or  implied  by  this  Note,  it is a  condition
                  precedent to any right of the Noteholder:

                  (a)      to receive payment of the Principal Amount;

                  (b)      to receive payment of any interest on this Note; or

                  (c)      to obtain Shares on conversion of this Note.
that all  necessary  Authorisations  (if  any)  and any  other
                  statutory  requirements  which  may then be in  existence  are
                  obtained  at  the  cost  of,  unless  the  Company  determines
                  otherwise, the Noteholder

         7.       MATURITY AND REPAYMENT

         7.1 The date of maturity  (`Repayment  Date') of this Note is the first
date on which an order is made or an  effective  resolution  is  passed  for the
winding up of the Company in accordance  with the  Corporations  Law and on that
Repayment Date, the Company will be obliged to repay this Note.

         7.2 Subject to clause 7.1,  there is no fixed  repayment  date for this
Note  and the  Company  may  only  repay it in  accordance  with  the  following
provisions of this clause 7.

     7.3 The  Company may redeem this Note at any time on giving same day notice
to the Noteholder concerned.

         7.4 If the Company exercises a right to redeem under this clause 7, the
Company must repay the Principal  Amount and all interest  accrued but unpaid on
the Note to the date of payment.

         7.5      If:

     (a) the Company is satisfied  that the interest or any part of the interest
paid or payable on this Note is not or may not be  allowed  as a  deduction  for
Australian income tax purposes; or

     (b) (i) a Tax Change occurs or is officially announced; or

     (ii) a bill to effect a Tax Change is  presented to the  Parliament  of the
Commonwealth of Australia.

                           and  the  Company  is  of  the  opinion  that  it  is
                           reasonably  probable that any such change has or will
                           have the result that the  interest or any part of the
                           interest  paid or  payable on this Note is or may not
                           be allowed as a deduction for  Australian  income tax
                           purposes.

     the  Company  may in its  discretion  (on  giving  same day  notice  to the
Noteholder) redeem this Note.

         7.6 If the Company  exercises a right to redeem  under  clause 7.3, the
Company must (unless the Noteholder has by the redemption date already converted
the Note) pay to the  Noteholder the Principal  Amount and all interest  accrued
but unpaid to the  redemption  date on the Note or make  repayment in accordance
with clause 7.10.
7.7 At the time that the Company  intends to redeem the Note under this
clause 7, the Company must give written notice to this effect to the Noteholder.

         7.8 The Noteholder may, then, within 5 days from the date of receipt of
that notice, by notice in writing to the Company, require the Company to convert
this Note into QSI Shares in  accordance  with clause  2.1(b) with effect on the
same day as the receipt of written notice by the Company.

         7.9 If a  Noteholder  does not require the Company to convert this Note
in accordance with clause 7.8, the Company may repay this Note under this clause
7.

         7.10 The repayment of the Principal  Amount and any interest under this
clause 7 may be  satisfied,  at the  election  of the  Company,  by the issue of
146,586 QSI  Shares,  which have been  allotted  to the Company by QSI.  The QSI
Shares will be issued in accordance with and subject to the terms and conditions
of Sections 4 through 8 of the Terms and Conditions for Exchange of the QSA Note
and QSA Stock attached hereto as Schedule 3.

         8.       CANCELLATION OF NOTE

                  On  repayment,  redemption  or  conversion of this Note by the
                  Company,  this Note will  immediately be cancelled and may not
                  be reissued.

         9.       STATUS AND SUBORDINATION

         9.1      This Note constitutes an unsecured obligation of the Company.

         9.2 The rights of the Noteholder  against the Company,  in the event of
the  winding  up of the  Company,  are  subordinated  in right of payment to the
claims of Ordinary Creditors.

         9.3 The obligations of the Company in respect of this Note will rank at
least equally with the obligations of the Company to its Subordinated Creditors.

         9.4 So long as this Note  remains  outstanding,  the  Company  will not
create or permit to be outstanding any subordinated  obligations  ranking in the
liquidation  of the Company in priority in right of payment to the rights of the
Noteholder under or in respect of this Note.

         9.5      In this clause 9:

     (a)  `Ordinary  Creditors'  means all  present or future  creditors  of the
Company whose claims:

     (i) are admitted in the winding up of the Company;

     (ii) are not, or are not by their terms  expressed to be,  subordinated  to
the claims of all other unsubordinated creditors of the Company; and
(b)      `Subordinated  Creditors'  means persons whose claims
                           against the Company are  subordinated in the event of
                           a winding up of the Company in any manner (or even by
                           statute)   to  the  claims  of  any   unsecured   and
                           unsubordinated creditor of the Company.

         10.      FAILURE TO PAY PRINCIPAL, INTEREST OR BOTH

                  If:

     (a) the Company makes default for a period of 30 days in the payment of any
interest required by this Note to be paid;

     (b) the Company  fails to issue a required  number of Shares within 30 days
of the Conversion Date; or

     (c) the Company fails to repay the  Principal  Amount within 30 days of the
date required for payment under this Note,

                  the Principal  Amount,  at the option of the Noteholder and on
                  the   Noteholder   giving   written  notice  to  the  Company,
                  immediately  becomes due and payable  together with all unpaid
                  interest on this Note to the date of payment.

         11.      INDEMNITY TO THE COMPANY

         11.1     Whenever in consequence of:

     (a)  the  non-payment  of  any  income  tax or  other  tax  payable  by the
Noteholder;

     (b) the non-payment of any stamp or other duty by the Noteholder;

     (c) any other act or thing in relation to this Note or the Noteholder,

                  any law  imposes or purports  to impose any  liability  of any
                  nature  whatever  on the  Company to make any  payments to any
                  Public   Authority,   the  Company  is,  in  respect  of  that
                  liability,  indemnified  by the Noteholder and any moneys paid
                  by the Company in respect of that  liability  may be recovered
                  by action from the Noteholder as a debt due to the Company.

     11.2 The Company  will have a lien in respect of those  moneys on this Note
and on the principal and interest payable in respect of this Note.

     11.3 Nothing in this clause 11 will prejudice or affect any right or remedy
which any such law may confer or purport to confer on the Company.

         12.      PAYMENT TO NOTEHOLDER

         12.1 Any interest,  principal or other moneys  payable on or in respect
of this Note may be paid by cheque marked `not  negotiable' and sent through the
post.
12.2 Every  cheque  referred to in this clause 12 will be sent
at the risk of the person beneficially  entitled to the money represented by the
cheque and payment will be deemed to have been made when the cheque is posted.

         13.      NOTICES

         13.1 A notice  given to the  Noteholder  must be in writing  and may be
given to the Noteholder by being delivered to the Noteholder or a representative
appointed by the Noteholder to receive  notice on behalf of the Noteholder  (the
"Noteholder's  Representative")  or posted by prepaid envelope  addressed to the
Noteholder  or the  Noteholder's  Representative  at the  address  given  by the
Noteholder to the Company.

     13.2  Where a notice is sent by post,  it will be deemed to have been given
on the Business Day on which it was posted.

         13.3 A post office receipt for the envelope containing a notice will be
taken as conclusive evidence of the date on which the notice was posted.

     13.4 In this clause 13 `Notice'  includes any  communication to be given by
the Company under this Note.

         14.      AMENDMENT

                  Any  amendment to this Note must be in writing  signed by both
the Company and the Noteholder.

         15.      GOVERNING LAW

                  This Note is  governed  by the laws of New South Wales and the
                  parties submit to the non-exclusive jurisdiction of the Courts
                  of New South Wales.
THE COMMON SEAL of                                      ))))))
QUALITY SEMICONDUCTOR
AUSTRALIA PTY LIMITED
is affixed in accordance with its articles of association in
the presence of

 ..................................         .....................................
Secretary                                  Director
 ...................................        .....................................
Name of secretary (print)                  Name of director (print)

Executed by  ___________________  on behalf of Technology Associates Corporation
for the purpose of signifying its acceptance of this Note.
THE COMMON SEAL of

TECHNOLOGY ASSOCIATES                   )
CORPORATION is affixed                  )
in accordance with its                  )
articles of association in              )
the presence of                         )
 ...................................         ....................................
Secretary                                   Director
 ...................................         ....................................
Name of secretary (print)                   Name of director (print)
THE COMMON SEAL of                      )
QUALITY SEMICONDUCTOR                   )
AUSTRALIA PTY LIMITED                   )
is affixed in accordance                )
with its articles of                    )
association in                          )
the presence of                         )

 ..................................         .....................................
Secretary                                  Director
 ..................................         .....................................
Name of secretary (print)                  Name of director (print)

Executed  by   ___________________   on  behalf  of  Fidelity   Venture  Capital
Corporation for the purpose of signifying its acceptance of this Note.

THE COMMON SEAL of                      )
TECHNOLOGY ASSOCIATES                   )
CORPORATION is affixed                  )
in accordance with its                  )
articles of association in              )
the presence of                         )
 ....................................       .....................................
Secretary                                  Director
 .....................................      .....................................
Name of secretary (print)                  Name of director (print)
SCHEDULE 1
                     RIGHTS ATTACHING TO QSA SERIES B SHARES

     1. The QSA  Series B Shares  will be  redeemable  preference  shares in the
issued share capital of the Company.

         2. The QSA Series B Shares will be under the  control of the  directors
who may allot or  otherwise  dispose of the QSA Series B Shares (at a premium or
otherwise) to any persons  (whether or not a member of Company) on any terms and
conditions that the directors think fit.

         3. Each QSA Series B Share  irrespective of its date of issue will rank
equally  with all other QSA  Series B Shares and any  allotment  of QSA Series B
Shares  will not be  regarded  as a  variation  of the  rights  attached  to any
existing QSA Series B Shares.

         4.       Each QSA Series B Share will have a par value of A$0.01.

     5. The QSA Series B Shares will confer on the holder, and be issued subject
to:

                  (a)      the  rights  to  such   dividends  (if  any)  as  the
                           directors  or Company in general  meeting may declare
                           with  respect to the QSA Series B Shares,  but do not
                           have  the  right  to  payment  of a  fixed  or  other
                           dividend;

                  (b)      the right in the event of:

                           (i)      the winding up of the Company; or

     (ii) a reduction in the share capital of the Company,

                           in  priority  to all other  classes  of shares in the
                           capital of the Company except the QSA Series A Shares
                           to the payment of the Redemption Amount applicable at
                           the  time a  resolution  to  wind up the  Company  or
                           reduce the share  capital is passed or a Court  Order
                           to wind up the Company is made (as applicable);

                           but without:

                           (iii)    any  additional  right  to  payment  of  any
                                    capital  paid up or  credited  as paid up on
                                    the QSA Series B Shares or any premium  paid
                                    in respect of the QSA Series B Shares.

     (iv) any  further  rights to  participate  in the  assets or profits of the
Company;

                  (c)      the right to receive  notice of all general  meetings
                           (including  all reports,  balance sheets and accounts
                           issued  with any  notice)  and to attend all  general
                           meetings of the Company; but with no right to vote at
                           any  general,   special  or  other  meetings  of  the
                           Company, or in any other manner.
6.       Subject to section 192 of the Corporation Law:

                  (a)      at any  time  after  issuance  of the  QSA  Series  B
                           Shares,  the  holder of the QSA  Series B Shares  may
                           give to the  Company  a written  notice  (`Redemption
                           Notice')  requiring  the  Company  to redeem  the QSA
                           Series B Shares not less than 30 clear days after the
                           date of the  Redemption  Notice,  in which  event the
                           Company   must   redeem   the  QSA  Series  B  Shares
                           immediately on expiry of such 30 clear days;

                  (b)      at any  time  after  issuance  of the  QSA  Series  B
                           Shares,  the  Company  may  redeem  the QSA  Series B
                           Shares, by resolution of a majority of the directors.

     7. On redemption of the QSA Series B Shares under clause 6 becoming due:

     (a) the Company must pay the  Redemption  Amount  applicable at the time of
redemption to the holder of the QSA Series B Shares;

     (b) the holder of the QSA Series B Shares must  surrender for  cancellation
to the Company the Certificate for the QSA Series B Shares,

                  in which even the QSA Series B Shares will be fully redeemed.

         8. Except to the extent otherwise  permitted by the  Corporations  Law,
the QSA Series B Shares may not be  redeemed  except out of profits  which would
otherwise be available for dividend,  or out of the proceeds of a fresh issue of
shares made for the purpose of the redemption, and unless they are fully paid.

         9. The  payment  of the  Redemption  Amount  may be  satisfied,  at the
election of the  Company,  by the  exchange of shares of common stock of Quality
Semiconductor,  Inc., for shares of QSA Series B Shares being redeemed  pursuant
to the Terms and  Conditions for Exchange of the QSA Note and QSA Stock attached
as Schedule 3 to Annex I.

     10.  `Redemption  Amount' means the product of the closing price of a share
in the common stock of Quality Semiconductor,  Inc. on the date of redemption of
a QSA  Series B Share and the  number of shares in the  common  stock of Quality
Semiconductor, Inc. received after redemption of the QSA Series B Shares.

         11. The QSA Series B Shares may not be transferred  for a period of one
year;  thereafter,  any  proposed  transfer of the QSA Series B Shares  shall be
subject to redemption into QSI Shares.
SCHEDULE 2
                            NOTICE OF CONVERSION NOTE

TO:      Quality Semiconductor Australia Pty Limited
         ACN 072 373 730
         c/o Quality Semiconductor, Inc.
         851 Martin Avenue
         Santa Clara, CA  95050

          Notice is given of the  exercise  of my/our  right to convert the Note
attached to this notice into:

     146,586   fully   paid   ordinary   shares  of  common   stock  of  Quality
Semiconductor, Inc.; or

                  146,586  fully paid Series B redeemable  preference  shares in
                  the issued share  capital of Quality  Semiconductor  Australia
                  Pty Limited.

         [Delete which ever is inapplicable.]

If this notice is signed by an attorney,  the attorney  declares  that he or she
has no notice of  revocation  of the poser of  attorney  of which this notice is
signed.

[Companies must sign under seal or by attorney.]
SCHEDULE 3
         TERMS AND CONDITIONS FOR EXCHANGE OF THE QSA NOTE AND QSA STOCK

         1. Authorization of QSI Stock. Quality Semiconductor,  Inc. ("QSI") has
authorized  the issuance of up to 732,932 shares of the Common Stock of QSI (the
"QSI Stock") in exchange for the QSA Notes or up to 732,932 shares of the Series
B  Redeemable  Preference  Shares of QSA (the "QSA  Stock")  pursuant to the QSA
Convertible/Redeemable Note Issuance Agreement (the "Note Issuance Agreement").

         2.  Exchange  of Shares for the QSA Note.  Each  Holder of the QSA Note
shall have certain rights to convert the QSA Note into QSI Stock,  and QSA shall
have certain rights to redeem the QSA Note for QSI Stock, as provided for by the
terms  of  such  Holder's  QSA  Note.  The QSI  Stock  issued  pursuant  to such
conversion or redemption  shall be issued in accordance with, and subject to the
terms and conditions of Sections 4 through 8 of this document.

         3. Exchange of Shares;  Conversion and Redemption  Rights.  The Holders
shall  have the right to convert  shares of QSA Stock into  shares of QSI Stock,
and QSA shall  have the right to  redeem  shares of QSA Stock for  shares of QSI
Stock in accordance with this Section 3.

     3.1  Conversion.  The  holders  of  shares  of the  QSA  Stock  shall  have
conversion rights as follows (the "Conversion Rights"): ----------

                  (a) Right to Convert. Subject to Section 3.1(b), each share of
                  the QSA  Stock  shall be  convertible,  at the  option  of the
                  holder thereof, at any time after the date of issuance of such
                  share,  at the  office of QSI or any  transfer  agent for such
                  stock, into such number of fully paid and nonassessable shares
                  of QSI Stock as is determined by dividing the number of shares
                  of QSA Stock  presented  for  exchange by the  Exchange  Ratio
                  applicable to each share of QSA Stock,  determined as provided
                  in Section 3.3 below, in effect on the date the certificate is
                  surrendered  for  conversion.  The initial  Exchange Ratio per
                  share of QSA Stock shall be ten. Such initial  Exchange  Ratio
                  shall be subject to adjustment as set forth in Section 3.3.

                  (b)  Mechanics of  Conversion.  Before any holder of QSA Stock
                  shall be  entitled  to  convert  the same  into  shares of QSI
                  Stock,  he shall  surrender the  certificate  or  certificates
                  therefor,  duly  endorsed,  at  the  office  of  QSA or of any
                  transfer  agent  for the QSA  Stock,  and shall  give  written
                  notice  to QSA  at  its  principal  corporate  office,  of the
                  election to convert the same and shall state  therein the name
                  or names in which the certificate or  certificates  for shares
                  of  QSI  Stock  are  to be  issued.  QSA  shall,  as  soon  as
                  practicable  thereafter,  issue and  deliver at such office to
                  such  holder of QSA Stock , or to the  nominee or  nominees of
                  such holder,  a certificate or certificates  for the number of
                  shares of QSI Stock to which such holder  shall be entitled as
                  aforesaid.  Such conversion  shall be deemed to have been made
                  immediately prior to the close of business on the date of such
                  surrender of the shares of QSA Stock to be converted,  and the
                  person or persons  entitled to receive the shares of QSI Stock
                  issuable upon such conversion
shall be treated  for all  purposes  as the  record  holder or
holders of such shares of QSI Stock as of such date.

     3.2 Redemption.  QSA shall have  redemption  rights with respect to the QSA
Stock as follows: (the "Redemption Rights"): -----------

                  (a) Right to Redeem.  Subject to Section 3.2(b), each share of
                  the QSA Stock  shall be  redeemable,  at the option of QSA, at
                  any time  after the date of  issuance  of such  share,  at the
                  office of QSA or any transfer agent for such stock,  into such
                  number of fully paid and nonassessable  shares of QSI Stock as
                  is  determined  by dividing  the number of shares of QSA Stock
                  presented  for exchange by the Exchange  Ratio  applicable  to
                  each share of QSA Stock, determined as provided in Section 3.3
                  below,  in effect on the date the  certificate  is surrendered
                  for  redemption.  The initial  Exchange Ratio per share of QSA
                  Stock  shall be ten.  Such  initial  Exchange  Ratio  shall be
                  subject to adjustment as set forth in Section 3.3.

                  (b) Mechanics of Redemption.  QSA shall provide written notice
                  of  redemption  to those holders of QSA Stock whose shares are
                  being redeemed. Within five (5) business days after receipt of
                  notification of redemption by QSA, a holder of QSA Stock whose
                  shares are being redeemed shall  surrender the  certificate or
                  certificates therefor,  duly endorsed, at the office of QSA or
                  of any  transfer  agent  for the QSA  Stock,  and  shall  give
                  written  notice  to  QSA  at its  principal  corporate  office
                  stating  therein the name or names in which the certificate or
                  certificates  for  shares of QSI Stock are to be  issued.  QSA
                  shall, as soon as practicable thereafter, issue and deliver at
                  such  office to such  holder of QSA Stock or to the nominee or
                  nominees of such holder, a certificate or certificates for the
                  number of shares of QSI Stock to which  such  holder  shall be
                  entitled as aforesaid. Such redemption shall be deemed to have
                  been made  immediately  prior to the close of  business on the
                  date  of such  surrender  of the  shares  of QSA  Stock  to be
                  redeemed,  and the person or persons  entitled  to receive the
                  shares of QSI Stock  issuable  upon such  redemption  shall be
                  treated for all  purposes  as the record  holder or holders of
                  such shares of QSI Stock as of such date.

Splits and Combinations. The Exchange Ratio of the QSA
Stock shall be subject to adjustment from time to time as follows:

                  (a) In the event  QSI  should at any time or from time to time
                  after the Closing  Date of the Note  Issuance  Agreement  (the
                  "Closing  Date") fix a record date for the  effectuation  of a
                  split or subdivision of the outstanding shares of QSI Stock or
                  the  determination of holders of QSI Stock entitled to receive
                  a dividend or other distribution  payable in additional shares
                  of QSI Stock or other securities or rights  convertible  into,
                  or  entitling  the  holder  thereof  to  receive  directly  or
                  indirectly,  additional  shares of QSI Stock then,  as of such
                  record  date,  the  Exchange  Ratio of the QSA Stock  shall be
                  appropriately  decreased  so that the  number of shares of QSI
                  Stock  issuable on conversion of each share of QSA Stock shall
                  be increased in  proportion  to such increase of the aggregate
                  of shares of QSI Stock outstanding.
(b) If the  number of shares of QSI Stock  outstanding  at any
                  time after the Closing Date is decreased by a  combination  of
                  the  outstanding  shares of QSI  Stock,  then,  following  the
                  record date of such  combination,  the Exchange  Ratio for the
                  QSA Stock shall be appropriately  increased so that the number
                  of shares of QSI Stock  issuable  on exchange of each share of
                  such series shall be decreased in  proportion to such decrease
                  in outstanding shares.

         3.5 Recapitalizations.  If at any time or from time to time there shall
be a  recapitalization  of the QSI  Stock,  provision  shall be made so that the
holders of the QSA Stock shall  thereafter  be entitled to receive upon exchange
of the QSA Stock the number of shares of stock or other  securities  or property
of QSI or otherwise,  to which a holder of QSI Stock  deliverable  upon exchange
would have been entitled on such recapitalization.

         3.6      No Fractional Shares and Certificate as to Adjustments.

                  (a) No fractional  shares shall be issued upon the exchange of
                  any  share or  shares  of the QSA  Stock , and the  number  of
                  shares  of QSI  Stock to be  issued  shall be  rounded  to the
                  nearest  whole  share.  Whether or not  fractional  shares are
                  issuable upon such conversion shall be determined on the basis
                  of the total  number  of shares of QSA Stock the  holder is at
                  the time exchanging into QSI Stock and the number of shares of
                  QSI Stock issuable upon such aggregate conversion.

                  (b) Upon the occurrence of each  adjustment or readjustment of
                  the Exchange  Ratio of QSA Stock pursuant to this Section 3.3,
                  QSI, at its expense, shall promptly compute such adjustment or
                  readjustment  in accordance  with the terms hereof and prepare
                  and furnish to each holder of QSA Stock a certificate  setting
                  forth such  adjustment or  readjustment  and showing in detail
                  the facts upon which such adjustment or readjustment is based.
                  QSI shall,  upon the written request at any time of any holder
                  of QSA Stock,  furnish or cause to be furnished to such holder
                  a like  certificate  setting  forth  (A) such  adjustment  and
                  readjustment,  (B) the Exchange Ratio for the QSA Stock at the
                  time in effect,  and (C) the number of shares of QSI Stock and
                  the amount,  if any, of other property which at the time would
                  be received upon the exchange of a share of the QSA Stock.

3.7  Reservation of QSI Stock Issuable Upon  Conversion.  QSI shall at all times
reserve and keep  available  out of its  authorized  but unissued  shares of QSI
Stock,  solely for the purpose of effecting the  conversion of the shares of the
QSA Stock , such number of its shares of QSI Stock as shall from time to time be
sufficient to effect the conversion of all outstanding  shares of QSA Stock; and
if at any time the number of authorized  but unissued  shares of QSI Stock shall
not be sufficient to effect the conversion of all then outstanding shares of QSA
Stock, in addition to such other remedies as shall be available to the holder of
such QSA Stock,  QSI will take such  corporate  action as may, in the opinion of
its counsel,  be necessary to increase its authorized but unissued shares of QSI
Stock  to such  number  of  shares  as shall be  sufficient  for such  purposes,
including, without limitation,  engaging in best efforts to obtain the requisite
shareholder   approval  of  any   necessary   amendment   to  the   Articles  of
Incorporation.
3.8 Notices. Any notice required by the provisions of this Section 3 to
be given to the  holders  of  shares  of QSA  Stock  shall  be  deemed  given if
deposited in the United  States mail,  postage  prepaid,  and  addressed to each
holder of record at his address appearing on the books of QSI.

         4.       Representations and Warranties of QSI

         For purposes of Sections 4 through 8 of this Note  Issuance  Agreement,
the term  "Holder"  refers to a person who has exchanged a QSA Note or shares of
QSA Stock for shares of QSI Stock whether  through  conversion or by redemption.
QSI represents and warrants to the Holders as of the Closing Date as follows:

         4.1  Organization;  Standing;  Qualification  to Do Business.  QSI is a
corporation  duly organized and validly  existing  under,  and by virtue of, the
laws  of  the  State  of  California  and  is in  good  standing  as a  domestic
corporation  under the laws of said state.  QSI is duly qualified to do business
as a foreign  corporation and is in good standing in each  jurisdiction in which
the  ownership  or  leasing of its  properties  or the  conduct of its  business
requires such  qualification,  except where the failure to be so qualified or be
in good standing is not reasonably  likely to have a material  adverse effect on
QSI.

         4.2 Corporate  Power;  Authorization.  QSI has all requisite  legal and
corporate  power and has taken all  requisite  corporate  action to execute  and
deliver the Note Issuance Agreement,  to authorize the issuance of the QSI Stock
in  exchange  for the QSA Note or QSA Stock and to carry out and  perform all of
its obligations under the Note Issuance  Agreement.  The Note Issuance Agreement
constitutes  the legal,  valid and binding  obligation  of QSI,  enforceable  in
accordance  with  its  terms,  except  (a)  as  rights  to  indemnification  and
contribution hereunder may be limited by applicable law, equitable principles or
public   policy,   (b)  as  limited  by   applicable   bankruptcy,   insolvency,
reorganization  or similar laws  relating to or  affecting  the  enforcement  of
creditors'  rights  generally  and  (c)  as  limited  by  equitable   principles
generally.  The execution and delivery of the Note Issuance  Agreement does not,
and the  performance of the Note Issuance  Agreement and the compliance with the
provisions  hereof and the issuance of the QSI Stock by QSI will not  materially
conflict  with,  or  result in a  material  breach or  violation  of the  terms,
conditions or provisions of, or constitute a material  default under,  or result
in the creation or imposition of any material lien pursuant to the terms of, the
Amended and Restated  Articles of Incorporation or Bylaws of QSI or any statute,
law, rule or regulation or any state or federal order, judgment or decree or any
indenture,  mortgage,  lease or other material  agreement or instrument to which
QSI or any of its properties is subject.

                  4.3  Issuance  and  Delivery of the QSI Stock.  The QSI Stock,
when issued in compliance  with the  provisions of the Note Issuance  Agreement,
will be validly issued, fully paid and nonassessable.  The issuance and delivery
of the QSI Stock is not subject to preemptive or any other similar rights of the
shareholders of QSI or any liens or encumbrances.

         5.       Representations, Warranties and Covenants of the Holders

         Each Holder hereby severally represents and warrants, and covenants and
agrees with, to QSI, as of the Closing Date, as follows;
5.1  Authorization.  Holder has all  requisite  legal and  corporate or
other power and capacity and has taken all  requisite  corporate or other action
to execute and deliver the Note Issuance Agreement, to carry out and perform all
of its  obligations  under  the  Note  Issuance  Agreement.  The  Note  Issuance
Agreement  constitutes  the legal,  valid and binding  obligation of the Holder,
enforceable   in   accordance   with  its   terms,   except  (a)  as  rights  to
indemnification  and  contribution  hereunder may be limited by applicable  law,
equitable principles or public policy, (b) as limited by applicable  bankruptcy,
insolvency,  reorganization  or  similar  laws  relating  to  or  affecting  the
enforcement  of  creditors'  rights  generally  and (c) as limited by  equitable
principles generally.

         5.2  Investment  Experience.  Holder  is an  "accredited  investor"  as
defined  in Rule  501(a)  under  the  Securities  Act.  Holder is aware of QSI's
business affairs and financial  condition and has had access to and has acquired
sufficient information about QSI to reach an informed and knowledgeable decision
to acquire the QSI Stock.  Holder has such business and financial  experience as
is required to give it the capacity to protect its own  interests in  connection
with the exchange of the QSA Stock for QSI Stock.  Holder is not a "broker" or a
"dealer"  as defined in the  Exchange  Act and is not an  "affiliate"  of QSI as
defined in the Securities Act.

         5.3  Investment  Intent.  To the extent that Holder  acquires QSI Stock
pursuant to this Note Issuance Agreement, Holder is acquiring such QSI Stock for
its own account as  principal,  for  investment  purposes  only,  and not with a
present view to, or for, resale,  distribution or fractionalization  thereof, in
whole or in part,  within the meaning of the Securities Act. Holder  understands
that its  acquisition  of the QSI Stock under the terms and  provisions  of this
Note Issuance  Agreement has not been  registered  under the  Securities  Act or
registered or qualified  under any state  securities law in reliance on specific
exemptions therefrom,  which exemptions may depend upon, among other things, the
bona fide nature of Holder's investment intent as expressed herein.  Holder has,
in connection with its decision to be subject to acquire the number of QSI Stock
set forth in the Note Issuance Agreement,  relied solely upon the Memorandum and
the  representations  and warranties of QSI contained  herein.  Holder will not,
directly or indirectly,  offer, sell,  pledge,  transfer or otherwise dispose of
(or solicit any offers to buy,  purchase or  otherwise  acquire or take a pledge
of) any of the QSI Stock except in compliance  with the  Securities  Act and the
rules and regulations promulgated thereunder.

         5.4 Restrictions on Transferability of QSI Stock.  Holder agrees not to
sell or otherwise  transfer the QSI Stock that it acquires pursuant to this Note
Issuance  Agreement  for a period of one year  following the closing date of the
QSA Common Stock Purchase  Agreement (the "Closing Date") of even date herewith.
Holder acknowledges and agrees that all share certificates issued to it pursuant
to this Note Issuance  Agreement  will be imprinted  with legend that  indicates
that transfer of the QSI Stock is subject to  restrictions  as specified by this
Section 5.4 of this Note Issuance Agreement.

         5.5 Registration or Exemption Requirements. Holder further acknowledges
and  understands  that the QSI Stock may not be resold or otherwise  transferred
except  in a  transaction  registered  under  the  Securities  Act or  unless an
exemption  from such  registration  is available.  Holder  understands  that the
certificates  evidencing  the QSI Stock  will be  imprinted  with a legend  that
prohibits  the  transfer  of the  QSI  Stock  unless  (a)  such  transaction  is
registered  or such  registration  is not  required,  and (b) if the transfer is
pursuant  to an  exemption  from  registration  other  than  Rule 144  under the
Securities Act, and if QSI shall so request in writing, an opinion
reasonably  satisfactory to QSI of counsel  reasonably  satisfactory to
QSI is obtained to the effect that the transaction is so exempt.

         5.6 Restriction on Sales, Short Sales and Hedging Transactions.  Holder
will not, prior to the effectiveness of the Registration Statement,  sell, offer
to sell,  solicit offers to buy,  dispose of, loan,  pledge,  or grant any right
with respect to (collectively, a "Disposition"),  the QSI Stock, nor will Holder
engage  in any  hedging  or  other  transaction  which is  designed  to or could
reasonably be expected to lead to or result in a Disposition of QSI Stock by the
Holder  or any  other  person  or  entity.  Such  prohibited  hedging  or  other
transactions would include without limitation effecting any short sale or having
in effect any short  position  (whether  or not such sale or position is against
the box and  regardless of when such position was entered into) or any purchase,
sale or grant of any right (including without limitation any put or call option)
with  respect to the QSI Stock or with  respect to any  security  (other  than a
broad-based  market  basket or index) that  includes,  relates to or derives any
significant part of its value from the QSI Stock.

         5.7 No Legal, Tax or Investment Advice. Holder understands that nothing
in the Memorandum,  the Note Issuance Agreement or any other materials presented
to Holder in connection  with the issuance of the QSI Stock  constitutes  legal,
tax or investment  advice.  Holder has consulted such legal,  tax and investment
advisors as it, in its sole  discretion,  has deemed necessary or appropriate in
connection with its likely exchange or exchange of the QSI Stock.

         5.8 Further  Representation by Foreign Holders. If such Holder is not a
U.S.  Person,  such Holder hereby  represents that it has satisfied itself as to
the full  observance  of the laws of its  jurisdiction  in  connection  with any
invitation  to  subscribe  for the QSI  Stock or any use of this  Note  Issuance
Agreement,  including (a) the legal  requirements  with its jurisdiction for the
acquisition of the QSI Stock, (b) any foreign exchange  restrictions  applicable
to such  purchase,  (c) any  governmental  or other consents that may need to be
obtained,  and (d) the income tax and other  consequences,  if any,  that may be
relevant to the purchase, exchange for, holding, redemption, sale or transfer of
the QSI  Stock.  Such  Holder's  acquisition  of, and its  continued  beneficial
ownership of the QSI Stock, will not violate any applicable  securities or other
laws of its jurisdiction.
5.9      Regulation S. 3.6 Regulation S

                  (a) The Holder is not a "U.S.  Person" as that term is defined
in Regulation S promulgated  under the  Securities  Act and is not acquiring the
QSI Stock for the account or benefit of a U.S. Person.  Under Regulation S, with
certain exceptions,  "U.S. person" means: (i) any natural person resident in the
U.S.;  (ii) any partnership or corporation  organized or incorporated  under the
laws of the U.S.;  (iii) any estate of which any executor or  administrator is a
U.S.  person;  (iv) any trust of which any  trustee  is a U.S.  person;  (v) any
agency  or  branch  of a  foreign  entity  located  in the  U.S.;  (vi)  any non
discretionary account or similar account (other than an estate or trust) held by
a dealer or other fiduciary for the benefit or account of a U.S.  person;  (vii)
any  discretionary  account or similar  account  (other than an estate or trust)
held  by a  dealer  or  other  fiduciary  organized,  incorporated,  or  (if  an
individual)  resident in the U.S.; and (viii) any partnership or corporation if:
(A) organized or incorporated  under the laws of any foreign  jurisdiction;  and
(B)  formed  by a U.S.  person  principally  for the  purpose  of  investing  in
securities not registered  under the Securities  Act,  unless it is organized or
incorporated and owned by accredited  investors (as defined in Rule 501(a) under
the Securities Act) who are not natural persons, estates or trusts.

                  (b) Without in any way limiting the  representations set forth
above,  the  Holder  further  agrees not to make any  disposition  of all or any
portion of the QSI Stock unless and until:

     (i) Such  disposition is in accordance with Regulation S promulgated  under
the Securities Act, or

     (ii) There is then in effect a Registration  Statement under the Securities
Act  of  1933,  as  amended  (the  "Securities   Act")  covering  such  proposed
disposition and such  disposition is made in accordance  with such  Registration
Statement, or

     (iii) (y) The  Holder  shall have  notified  the  Company  of the  proposed
disposition  and shall have  furnished the Company with a detailed  statement of
the circumstances  surrounding the proposed  disposition,  and (z) if reasonably
requested by the Company,  the Holder shall have  furnished  the Company with an
opinion  of  counsel,   reasonably   satisfactory  to  the  Company,  that  such
disposition will not require registration under the Securities Act. It is agreed
that the Company  will not require  opinions  of counsel for  transactions  made
pursuant  to  Rule  904  of   Regulation   S  or  Rule  144  except  in  unusual
circumstances.

         6.       Affirmative Covenants

         QSI and the Holder hereby covenant as follows:

         6.1 Financial Information.  QSI will mail the following reports to each
Holder until such Holder  transfers,  assigns or sells the QSI Stock acquired by
such Holder pursuant to the Note Issuance Agreement:
(a) Within 100 days after the end of each fiscal year, a copy of its Annual
Report on Form 10-K.

                  (b)  Within 55 days  after the end of the  first,  second  and
                  third quarterly accounting periods of each fiscal year of QSI,
                  a copy of its Quarterly Report on Form 10-Q.

         6.2      Registration Requirements.

                  (a) After the  first  anniversary  of the  Closing  Date,  the
                  Holder  may  make a  written  request  to QSI  that QSI file a
                  registration  statement  on Form S-3 to  register  resales  of
                  outstanding  shares of the Holder's QSI Stock. Upon receipt of
                  such request,  if QSI meets the eligibility  requirements  for
                  use of Form S-3,  QSI shall  prepare  and file a  registration
                  statement (the  "Registration  Statement")  with the SEC under
                  the  Securities  Act to  register  the resale of the QSI Stock
                  (the "Registrable  Securities") and shall use its best efforts
                  to secure the effectiveness of such registration  statement as
                  soon as reasonably practicable thereafter.

                  (b) QSI shall pay all Registration Expenses (as defined below)
                  in  connection  with  any   registration,   qualification   or
                  compliance  hereunder,  and each Holder  shall pay all Selling
                  Expenses (as defined  below) and other  expenses  that are not
                  Registration  Expenses relating to the Registrable  Securities
                  resold by such Holder.  "Registration Expenses" shall mean all
                  expenses,  except for  Selling  Expenses,  incurred  by QSI in
                  complying with the registration  provisions  herein described,
                  including, without limitation, all registration, qualification
                  and filing fees,  printing  expenses,  escrow  fees,  fees and
                  disbursements  of counsel for QSI,  blue sky fees and expenses
                  and the expense of any special audits  incident to or required
                  by any such  registration.  "Selling  Expenses" shall mean all
                  selling  commissions,  underwriting  fees and  stock  transfer
                  taxes  applicable to the  Registrable  Securities and all fees
                  and disbursements of counsel for any Holder.

                  (c) In the case of the  registration  effected by QSI pursuant
                  to  these  registration  provisions,  QSI  will  use its  best
                  efforts  to: (i) keep such  registration  effective  until the
                  earlier of (A) the first  anniversary of the effective date of
                  the  registration,  (B)  such  date as all of the  Registrable
                  Securities  have  been  resold  or (C) such time as all of the
                  Registrable  Securities held by the Holders can be sold within
                  a  given  three-month   period  without  compliance  with  the
                  registration  requirements  of the  Securities Act pursuant to
                  Rule 144 promulgated thereunder ("Rule 144"); (ii) prepare and
                  file  with  the SEC such  amendments  and  supplements  to the
                  Registration  Statement and the prospectus  used in connection
                  with the Registration  Statement as may be necessary to comply
                  with the  provisions of the Securities Act with respect to the
                  disposition  of all  securities  covered  by the  Registration
                  Statement; (iii) furnish such number of prospectuses and other
                  documents  incident  thereto,  including  any  amendment of or
                  supplement  to the  prospectus,  as a Holder from time to time
                  may reasonably request;  (iv) cause the QSI Stock to be listed
                  on each  securities  exchange  and  quoted  on each  quotation
                  service  on which  similar  securities  issued by QSI are then
                  listed or quoted;  (v) provide a transfer  agent and registrar
                  for all securities registered pursuant to the
Registration  Statement  and  a  CUSIP  number  for  all  such
                  securities; (vi) otherwise use its best efforts to comply with
                  all  applicable  rules and  regulations  of the SEC; and (vii)
                  file the documents  required of QSI and otherwise use its best
                  efforts to maintain  requisite  blue sky  clearance in (X) all
                  jurisdictions  in  which  any  shares  of the  QSI  Stock  are
                  originally issued pursuant to this Note Issuance Agreement and
                  (Y)  all  other  states  specified  in  writing  by a  Holder,
                  provided,  however,  that,  as to clause (Y), QSI shall not be
                  required  to qualify to do  business  or consent to service of
                  process  in any state in which it is not now so  qualified  or
                  has not so consented.

                  (d) QSI shall furnish to each Holder upon request a reasonable
                  number of copies of a  supplement  to or an  amendment  of the
                  prospectus used in connection with the Registration  Statement
                  as may be necessary in order to facilitate  the public sale or
                  other disposition of all or any of the Registrable  Securities
                  held by the Holder.

                  (e)  With a view  to  making  available  to  the  Holders  the
                  benefits of Rule 144 and any other rule or  regulation  of the
                  SEC that may at any time  permit a Holder to sell  Registrable
                  Securities to the public without registration or pursuant to a
                  registration  statement on Form S-3, QSI  covenants and agrees
                  to  use  its  best  efforts  to:  (i)  make  and  keep  public
                  information  available,  as those  terms  are  understood  and
                  defined  in Rule  144,  until  the  earlier  of (A) the  first
                  anniversary  of the date hereof or (B) such date as all of the
                  Registrable  Securities shall have been resold; (ii) file with
                  the SEC in a timely  manner all  reports  and other  documents
                  required of QSI under the Securities Act and Exchange Act; and
                  (iii)  furnish  to any  Holder  upon  request,  as long as the
                  Holder  owns  any  Registrable   Securities,   (A)  a  written
                  statement  by QSI  that it has  complied  with  the  reporting
                  requirements of the Securities Act and the Exchange Act, (B) a
                  copy of the most recent annual or quarterly report of QSI, and
                  (C) such other  information as may be reasonably  requested in
                  order to avail any Holder of any rule or regulation of the SEC
                  that  permits the selling of any such  Registrable  Securities
                  without   registration   or  pursuant  to  such   registration
                  statement on Form S-3.

                  (f) If any  Holder  shall  propose  to  sell  any  Registrable
                  Securities  pursuant to the Registration  Statement,  it shall
                  notify  QSI of its  intent  to do so at  least  five  (5) full
                  business days prior to such sale.  Such notice shall be deemed
                  to constitute a  representation  that any written  information
                  previously   supplied  by  such  Holder   (including   without
                  limitation the information  referred to in Section 6.4 hereof)
                  is accurate as of the date of such notice.  At any time within
                  such five (5)  business-day  period,  QSI may refuse to permit
                  the Holder to resell any  Registrable  Securities  pursuant to
                  the Registration Statement for an initial period not to exceed
                  thirty (30) days; provided, however, that in order to exercise
                  this right,  QSI must deliver a certificate  in writing to the
                  Holder to the  effect  that a delay in such sale is  necessary
                  because a sale pursuant to such Registration  Statement in its
                  then-current  form would not be in the best  interests  of QSI
                  and its shareholders. In such an event, QSI shall use its best
                  efforts to amend the  Registration  Statement if necessary and
                  to take all other  actions  necessary to allow such sale,  and
                  shall notify
the Holder promptly after it has determined that such sale has
                  become permissible.  Notwithstanding the foregoing,  QSI shall
                  not  be  entitled  to  exercise  its  right  to  withdraw  the
                  registration  statement  more  than  three  (3)  times  in any
                  calendar year or for more than two consecutive thirty (30) day
                  periods in any calendar year. Each Holder hereby covenants and
                  agrees  that it  will  not  sell  any  Registrable  Securities
                  pursuant to the Registration  Statement during the periods the
                  Registration  Statement  is  withdrawn  as set  forth  in this
                  Section 6.2(f).

         6.3      Indemnification and Contribution.

                  (a) QSI agrees to indemnify and hold harmless each Holder from
                  and against any losses,  claims,  damages or  liabilities  (or
                  actions  or  proceedings  in  respect  thereof)  to which such
                  Holder  may  become  subject  (under  the  Securities  Act  or
                  otherwise)  insofar  as  such  losses,   claims,   damages  or
                  liabilities  (or actions or  proceedings  in respect  thereof)
                  arise out of, or are based  upon,  any untrue  statement  of a
                  material  fact or  omission  to state a  material  fact in the
                  Registration Statement on the effective date thereof, or arise
                  out of any failure by QSI to fulfill any undertaking  included
                  in the  Registration  Statement,  and QSI will,  as  incurred,
                  reimburse   such  Holder  for  any  legal  or  other  expenses
                  reasonably  incurred in investigating,  defending or preparing
                  to defend  any such  action,  proceeding  or claim;  provided,
                  however,  that QSI shall not be liable in any such case to the
                  extent that such loss,  claim,  damage or liability arises out
                  of, or is based upon (i) an untrue  statement  or  omission in
                  such Registration Statement in reliance upon and in conformity
                  with written  information  furnished to QSI by or on behalf of
                  such  Holder  specifically  for  use  in  preparation  of  the
                  Registration  Statement,  (ii) the  failure of such  Holder to
                  comply with the covenants and agreements contained in Sections
                  6.2(f),  7.3 or 7.4 hereof,  or (iii) an untrue  statement  or
                  omission in any prospectus that is corrected in any subsequent
                  prospectus,  or  supplement  or  amendment  thereto,  that was
                  delivered to the Holder prior to the  pertinent  sale or sales
                  by the Holder.

                  (b)  Each  Holder,   severally  and  not  jointly,  agrees  to
                  indemnify  and hold  harmless QSI from and against any losses,
                  claims,  damages or liabilities  (or actions or proceedings in
                  respect  thereof) to which QSI may become  subject  (under the
                  Securities Act or otherwise)  insofar as such losses,  claims,
                  damages or  liabilities  (or actions or proceedings in respect
                  thereof)  arise  out  of,  or are  based  upon  (i) an  untrue
                  statement  of a material  fact or omission to state a material
                  fact in the  Registration  Statement  in reliance  upon and in
                  conformity with written information  furnished to QSI by or on
                  behalf of such Holder  specifically  for use in preparation of
                  the Registration Statement;  provided, however, that no Holder
                  shall be liable in any such case for any untrue  statement  or
                  omission in any prospectus which statement has been corrected,
                  in  writing,  by such Holder and  delivered  to QSI before the
                  sale from which such loss  occurred,  (ii) the failure of such
                  Holder to comply with the covenants and  agreements  contained
                  in  Sections  6.2(f),  7.3 or 7.4  hereof,  or (iii) an untrue
                  statement or omission in any  prospectus  that is corrected in
                  any subsequent prospectus, or supplement or amendment thereto,
                  that was delivered to the Holder prior to the  pertinent  sale
                  or sales by the Holder, and each
Holder,   severally  and  not  jointly,   will,  as  incurred,
                  reimburse  QSI for any  legal  or  other  expenses  reasonably
                  incurred in  investigating,  defending  or preparing to defend
                  any such action, proceeding or claim.

                  (c)  Promptly  after  receipt by any  indemnified  person of a
                  notice of a claim or the beginning of any action in respect of
                  which indemnity is to be sought against an indemnifying person
                  pursuant to this Section 6.3,  such  indemnified  person shall
                  notify the indemnifying  person in writing of such claim or of
                  the   commencement  of  such  action,   and,  subject  to  the
                  provisions  hereinafter  stated, in case any such action shall
                  be brought against an indemnified  person and the indemnifying
                  person  shall have been  notified  thereof,  the  indemnifying
                  person shall be entitled to participate  therein,  and, to the
                  extent that it shall wish, to assume the defense thereof, with
                  counsel  reasonably  satisfactory to the  indemnified  person.
                  After notice from the indemnifying  person to such indemnified
                  person of the  indemnifying  person's  election  to assume the
                  defense thereof,  the indemnifying  person shall not be liable
                  to such indemnified person for any legal expenses subsequently
                  incurred by such  indemnified  person in  connection  with the
                  defense thereof;  provided,  however,  that if there exists or
                  shall  exist  a  conflict  of  interest  that  would  make  it
                  inappropriate  in the reasonable  judgment of the  indemnified
                  person for the same counsel to represent both the  indemnified
                  person  and  such  indemnifying  person  or any  affiliate  or
                  associate thereof, the indemnified person shall be entitled to
                  retain  its own  counsel at the  expense of such  indemnifying
                  person.

                  (d) If the indemnification provided for in this Section 6.3 is
                  unavailable to or insufficient to hold harmless an indemnified
                  party  under  subsection  (a) or (b) above in  respect  of any
                  losses,   claims,   damages  or  liabilities  (or  actions  or
                  proceedings in respect thereof) referred to therein, then each
                  indemnifying  party  shall  contribute  to the amount  paid or
                  payable by such  indemnified  party as result of such  losses,
                  claims, damages or liabilities (or actions in respect thereof)
                  in such  proportion as is  appropriate to reflect the relative
                  fault of QSI on the one hand and the  Holders  on the other in
                  connection  with the statements or omissions which resulted in
                  such  losses,claims,  damages or  liabilities  (or  actions in
                  respect  thereof),  as well as any  other  relevant  equitable
                  considerations.  The  relative  fault shall be  determined  by
                  reference  to,  among  other  things,  whether  the  untrue or
                  alleged untrue statement of a material fact or the omission or
                  alleged   omission  to  state  a  material   fact  relates  to
                  information supplied by QSI on the one hand or a Holder on the
                  other and the parties' relative intent,  knowledge,  access to
                  information   and  opportunity  to  correct  or  prevent  such
                  statement or omission. QSI and the Holders agree that it would
                  not be just and  equitable  if  contribution  pursuant to this
                  subsection (d) were determined by pro rata allocation (even if
                  the Holders were treated as one entity for such purpose) or by
                  any  other  method  of  allocation  which  does not take  into
                  account the equitable considerations referred to above in this
                  subsection  (d). The amount paid or payable by an  indemnified
                  party  as  a  result  of  the  losses,   claims,   damages  or
                  liabilities (or actions in respect thereof)  referred to above
                  in this subsection (d) shall be deemed to include any legal or
                  other expenses  reasonably  incurred by such indemnified party
                  in connection with investigating or defending
any such action or claim.  Notwithstanding  the  provisions of
                  this subsection (d), no Holder shall be required to contribute
                  any amount in excess of the  amount by which the gross  amount
                  received by the Holder from the sale of the QSI Stock to which
                  such loss relates exceeds the amount of any damages which such
                  Holder has  otherwise  been  required to pay by reason of such
                  untrue or alleged  untrue  statement  or  omission  or alleged
                  omission.  No person  guilty of  fraudulent  misrepresentation
                  (within the meaning of Section 1 l(f) of the  Securities  Act)
                  shall be entitled to contribution  from any person who was not
                  guilty  of such  fraudulent  misrepresentation.  The  Holders'
                  obligations  in this  subsection (d) to contribute are several
                  in  proportion  to their sales of QSI Stock to which such loss
                  relates and not joint.

                  (e) The  obligations of QSI and the Holders under this Section
                  6.3 shall be in  addition to any  liability  which QSI and the
                  respective  Holders may otherwise have and shall extend,  upon
                  the same terms and  conditions,  to each  person,  if any, who
                  controls  QSI  or  any  Holder   within  the  meaning  of  the
                  Securities Act and the Exchange Act.

     7. Restrictions on Transferability of QSI Stock; Compliance with Securities
Act

         7.1  Restrictions  on  Transferability.  The  QSI  Stock  shall  not be
transferable  in the  absence of  registration  under the  Securities  Act or an
exemption  therefrom or in the absence of  compliance  with any term of the Note
Issuance Agreement.  The QSI Stock shall not be transferable for a period of one
year  following  the Closing  Date.  QSI shall be entitled to give stop transfer
instructions  to its  transfer  agent with  respect to the QSI Stock in order to
enforce the foregoing restrictions.

     7.2 Restrictive Legend.  Each certificate  representing the QSI Stock shall
bear  substantially  the following  legends (in addition to any legends required
under applicable state securities laws):

         THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE BEEN ACQUIRED FOR
         INVESTMENT  PURPOSES  ONLY  AND  HAVE NOT  BEEN  REGISTERED  UNDER  THE
         SECURITIES  ACT OF 1933.  THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED
         IN THE  ABSENCE OF SUCH  REGISTRATION  OR AN  EXEMPTION  THEREFROM,  OR
         COMPLIANCE WITH REGULATION S.

         ADDITIONALLY,  THE  TRANSFER  OF THE  SECURITIES  REPRESENTED  BY  THIS
         CERTIFICATE  IS  SUBJECT TO CERTAIN  RESTRICTIONS  SPECIFIED  IN A NOTE
         ISSUANCE  AGREEMENT DATED NOVEMBER __, 1996 BETWEEN THE COMPANY AND THE
         ORIGINAL  PURCHASER,  AND NO TRANSFER OF  SECURITIES  SHALL BE VALID OR
         EFFECTIVE  ABSENT  COMPLIANCE  WITH SUCH  RESTRICTIONS.  ALL SUBSEQUENT
         HOLDERS OF THIS  CERTIFICATE WILL HAVE AGREED TO BE BOUND BY CERTAIN OF
         THE TERMS OF THE NOTE ISSUANCE  AGREEMENT,  INCLUDING SECTIONS 7.1, 7.3
         AND 7.4 OF SCHEDULE 3 TO ANNEX I OF THE  AGREEMENT.  A COPY OF THE NOTE
         ISSUANCE AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN  REQUEST MADE BY THE REGISTERED  HOLDER OF THIS  CERTIFICATE TO
THE SECRETARY OF THE COMPANY.

         7.3 Transfer of QSI Stock. Each Holder hereby covenants with QSI not to
make any sale of the QSI Stock  except:  (a) a sale of QSI  Stock in  accordance
with the  Registration  Statement,  in which case the Holder covenants to comply
with the requirement of delivering a current prospectus, (b) a sale of QSI Stock
in accordance  with Rule 144, in which case the Holder  covenants to comply with
Rule 144; or (c) subject to such conditions as QSI in its sole discretion  shall
impose, in accordance with another exemption from the registration  requirements
of the  Securities  Act. Each Holder further  acknowledges  and agrees that such
shares  of QSI  Stock  are not  transferable  on the  books  of QSI  unless  the
certificate  submitted  to QSI's  transfer  agent  evidencing  such QSI Stock is
accompanied by such additional  certification,  documentation  or information as
QSI in its  sole  discretion  shall  require  in order to  effect  such  sale in
accordance with the Registration  Statement or Rule 144, or such other exemption
from the  registration  requirements  of the Securities  Act. No transfer of QSI
Stock will be effected to any  "affiliate"  of QSI as defined in the  Securities
Act except  pursuant to  subsection  (a) or (b) hereof.  The legend set forth in
Section 7.2 will be removed from a certificate  representing QSI Stock following
and in connection  with any sale of QSI Stock  pursuant to subsection (a) or (b)
hereof but not in connection  with any sale of QSI Stock  pursuant to subsection
(c) hereof.

     7.4 Holder Information.  Each Holder covenants that it will promptly notify
QSI of any changes in the  information set forth in the  Registration  Statement
regarding such Holder or such Holder's "Plan of Distribution."

         8.       Miscellaneous

         8.1  Waivers and  Amendments.  With the  exception  of Sections 6 and 7
hereof,  the terms of this  Schedule 3 may be waived or amended with the written
consent of QSI and each Holder.  With  respect to Sections 6 and 7 hereof,  with
the  written  consent of QSI and the record  holders of more than 50% of the (X)
QSI Stock then  outstanding and held by Holders together with (Y) QSA Stock then
outstanding and held by the Holders,  the terms of this Schedule 3 may be waived
or amended and any such  amendment  or waiver  shall be binding upon QSI and all
holders of QSI Stock and QSA Stock.
For more information contact:          EXHIBIT 99
                              Stephen H. Vonderach
                             Chief Financial Officer
                           Quality Semiconductor, Inc.
                                 (408) 450-8000

                              Morgan-Walke Associates, Inc.
                              Doug Sherk, Suzanne Craig,
                              Lisa Laukkanen
                              (415) 296-7383
                              Emily Dupree, Elissa Grabowski
                              (212) 850-5698
FOR IMMEDIATE RELEASE

                QUALITY SEMICONDUCTOR ANNOUNCES PRIVATE FINANCING

     SANTA CLARA,  CA --  (November  22,  1996) -- Quality  Semiconductor,  Inc.
(Nasdaq:QUAL)  today announced the closing of a private  placement of unsecured,
convertible  promissory notes in the principal amount of $5 million,  of Quality
Semiconductor  Australia,  Pty. Limited, a subsidiary of Quality  Semiconductor,
Inc. The notes may be converted,  at the option of the investors of the Company,
for up to 732,931 shares of the Common Stock of Quality Semiconductor,  Inc. The
notes are also  non-transferable  and are convertible into 732,931 shares of the
non-voting Series B Preference shares of Quality Semiconductor  Australia,  Pty.
Limited.  The lead  investors  are  affiliated  with  Fidelity  Venture  Capital
Corporation and Technology Associates Corporation, both of Taiwan. The investors
have initially  funded $2 million dollars of the total financing and have agreed
to complete  the balance of the funding no later than  February  28,  1997.  The
Company  intends  to use the  proceeds  for  payment  of the  debt  incurred  in
connection  with the  acquisition  of a wafer  fabrication  facility  by Quality
Semiconductor  Australia,  Pty., general corporate purposes and working capital.
"This important  financing  provides us with additional  resources to expand our
capabilities  and to meet the demand for our  products,"  commented  Paul Gupta,
president and chief executive  officer.  Quality  Semiconductor,  Inc.  designs,
develops  and  markets   high-performance   logic  as  well  as  networking  and
logic-intensive  specialty memory  semiconductor  products.  The Company targets
systems  manufacturers  principally  in the  networking,  personal  computer and
workstation  markets.  The  Company's  logic  products  include the 3.3-volt and
5-volt QSFCT  families of high-speed,  low-noise  interface  logic devices,  the
QuickSwitch  family of  high-speed,  low-resistance  bus  switches,  a family of
low-skew clock management  products,  a family of analog switch devices, and new
JTAG products designed to allow board-level testing of complex products. Quality
Semiconductor,     Inc.'s     networking     products     include     an     ATM
multiplexer/demultiplexer,  and two  Fast  Ethernet  transceivers  that  provide
on-chip  solutions  for  glue-less  interface.  Quality  Semiconductor,   Inc.'s
specialty memory products include some of the fastest FIFO (first-in, first-out)
devices currently available.

     Except for  historical  information,  the matters  discussed  in this press
release  are   forward-looking   statements   that  are  subject  to  risks  and
uncertainties  that could cause actual results to differ  materially  from those
projected,  including  the  ability of the  Company to enforce  the  contractual
commitment of the investors to fund the notes, as well as the factors identified
in the Company's 10-K for the year ended September 24, 1995 and in the Company's
10-Qs for the quarters  ended  December  31,  1995,  March 31, 1996 and June 30,
1996,   respectively.   The  Company   assumes  no   obligation  to  update  the
forward-looking statements included in this press release.

                                       ###