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: September 16, 1997

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



          California                      0-23128               77-0199189
(State or other jurisdiction     (Commission File Number)      (IRS Employer
of incorporation                                             Identification No.)


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



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



<PAGE>



Item 5.       Other Events.

     On August 26, 1997, the Board of Directors of Quality  Semiconductor,  Inc.
(the  "Company")  declared a dividend of one preferred  share  purchase right (a
"Right")  for each  outstanding  share of Common  Stock,  $0.001  par value (the
"Common Shares"),  of the Company. The dividend is payable on September 17, 1997
(the  "Record  Date") to  shareholders  of record as of the close of business on
that date. Each Right entitles the registered holder under certain circumstances
to  purchase  from  the  Company  one  one-thousandth  of a share  of  Series  A
Participating  Preferred Stock, $0.001 par value, of the Company (the "Preferred
Shares"),  subject to adjustment,  at a price of $70.00 per  one-thousandth of a
Preferred Share,  subject to adjustment (the "Purchase Price").  The description
and terms of the Rights are set forth in a  Preferred  Shares  Rights  Agreement
(the  "Rights  Agreement")  dated as of August 29, 1997  between the Company and
BankBoston, N.A., as Rights Agent (the "Rights Agent").

     The following is a general  description only and is subject to the detailed
terms and conditions of the Rights  Agreement.  A copy of the Rights  Agreement,
including the Certificate of Designation, the form of Rights Certificate and the
Summary of Rights to be provided to shareholders of the Company,  is attached as
Exhibit  1  to  this  Registration  Statement  and  is  incorporated  herein  by
reference.

Rights Evidenced by Common Share Certificates

     The Rights will not be  exercisable  until the  Distribution  Date (defined
below).  Accordingly,  Common Share certificates  outstanding on the Record Date
will evidence the Rights related thereto,  and Common Share certificates  issued
after the Record Date will contain a notation incorporating the Rights Agreement
by reference.  Until the Distribution Date (or earlier  redemption,  exchange or
expiration  of the Rights),  the surrender or transfer of any  certificates  for
Common Shares will also  constitute the transfer of the Rights  associated  with
the Common Shares represented by such certificate.

<PAGE>

Distribution Date

     The Rights  will  separate  from the Common  Shares,  certificates  for the
rights  ("Rights  Certificates")  will be  issued  and the  Rights  will  become
exercisable  upon the earlier of: (i) the close of business on the tenth day (or
such later date as may be  determined  by a majority of the Board of  Directors,
excluding directors  affiliated with the Acquiring Person, as defined below (the
"Continuing  Directors")) following a public announcement that a person or group
of  affiliated  or  associated  persons has  acquired,  or obtained the right to
acquire,  beneficial  ownership of 15% or more of the outstanding  Common Shares
(an "Acquiring  Person") or (ii) the close of business on the tenth day (or such
later date as may be  determined  by a  majority  of the  Continuing  Directors)
following the commencement of a tender offer or exchange offer, the consummation
of which would result in the beneficial ownership by a person or group of 15% or
more of the outstanding  Common Shares. The earlier of such dates is referred to
as the "Distribution Date."

Issuance of Rights Certificates, Expiration of Rights

     As soon as practicable  following the  Distribution  Date,  separate Rights
Certificates  will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and such separate Rights Certificates
alone will  evidence  the Rights from and after the  Distribution  Date.  Unless
otherwise  determined by the Board of Directors,  all Common Shares issued prior
to the Distribution Date will be issued with Rights.  Common Shares issued after
the  Distribution  Date may be issued  with Rights if such shares are issued (i)
upon the exercise, conversion or exchange of securities issued after adoption of
the Rights  Agreement or (ii) pursuant to the exercise of stock options or under
any employee benefit plan or arrangement.  Except as otherwise determined by the
Board of Directors,  no other Common Shares issued after the  Distribution  Date
will be issued with  Rights.  In  addition,  no Common  Shares  issued after the
Distribution  Date will be issued with Rights if such  issuance  would result in
(or create a significant  risk) (i) of material  adverse tax consequences to the
Company or the person to whom such  Rights  Certificate  would be issued or (ii)
that such options or plans would not qualify for otherwise available special tax
treatment. The Rights will expire on September 17, 2007 (the "Final Expiration

<PAGE>

Date"),  unless the Final  Expiration  Date is extended or unless the Rights are
earlier  redeemed or  exchanged  by the Company or expire upon  consummation  of
certain mergers, consolidations or sales of assets, as described below.

Initial Exercise of the Rights

     Following the  Distribution  Date,  and until the  occurrence of one of the
subsequent  events  described  below,  holders of the Rights will be entitled to
receive,  upon  exercise  and the payment of $70.00 (the  "Purchase  Price") per
Right, one one-thousandth of a Preferred Share.

Exchange Provision

     At any time after an  Acquiring  Person  has  become  such and prior to the
Acquiring  Person  beneficially  owning  50% or more of the  outstanding  Common
Shares,  the Board of Directors  of the Company may  exchange the Rights  (other
than Rights owned by the  Acquiring  Person or its  affiliates),  in whole or in
part,  at  an  exchange  ratio  of  one  Common  Share  per  Right  (subject  to
adjustment).

Right to Buy Common Shares

        Unless the Rights are earlier  redeemed or exchanged,  in the event that
an Acquiring Person becomes such, other than pursuant to a tender offer which is
made for all of the outstanding  Common Shares and approved by a majority of the
Continuing  Directors  after  determining  that the offer is both  adequate  and
otherwise in the best interests of the Company and its shareholders (a Permitted
Offer),  then proper provision will be made so that each holder of a Right which
has not theretofore been exercised (other than Rights  beneficially owned by the
Acquiring Person,  which will thereafter be void) will thereafter have the right
to receive,  upon  exercise of a Right,  a number of Common Shares having a then
current  value  equal to two times the  Purchase  Price.  In the event  that the
Company does not have a sufficient  number of Common  Shares  available,  or the
Board decides that such action is necessary or  appropriate  and not contrary to
the interests of Rights  holders,  the Company may, among other things,  instead
substitute cash, assets or other securities for the Common Shares into which the
Rights would have otherwise been exercisable.

<PAGE>

Rich to Buy Acquiring Company Stock

     Similarly,  unless the Rights are  earlier  redeemed or  exchanged,  in the
event  that,  after the Shares  Acquisition  Date (as  defined  below),  (i) the
Company  consolidates  with or merges into another  entity,  (ii) another entity
consolidates  with or merges  into the  Company  or (iii) the  Company  sells or
otherwise  transfers 50% or more of its  consolidated  assets or earning  power,
proper  provision  must be made so that  each  holder  of a Right  which has not
theretofore  been  exercised  (other  than  Rights  beneficially  owned  by  the
Acquiring Person,  which will thereafter be void) will thereafter have the right
to receive,  upon exercise,  a number of shares of common stock of the acquiring
company  having a then  current  value  equal to two  times the  Purchase  Price
(unless the transaction  satisfies certain  conditions and is consummated with a
person who  acquired  shares  pursuant to a Permitted  Offer,  in which case the
Rights will expire).

Adjustments to Prevent Dilution

     The  Purchase  Price  payable,  the  number  of  Rights  and the  number of
Preferred  Shares,  Common Shares or other securities or property  issuable upon
exercise  of the Rights are subject to  adjustment  from time to time to prevent
dilution  as set forth in the Rights  Agreement.  With  certain  exceptions,  no
adjustment in the Purchase Price will be required until  cumulative  adjustments
require an adjustment of at least 1% in such Purchase Price.

Rights and Preferences of the Preferred Shares

     Preferred  Shares  purchasable  upon  exercise  of the  Rights  will not be
redeemable.  Each Preferred  Share will be entitled to an aggregate  dividend of
1,000 times the dividend declared per Common Share. In the event of liquidation,
the  holders  of  the  Preferred  Shares  will  be  entitled  to a  preferential
liquidation  payment equal to accrued but unpaid  dividends  plus the greater of
$1,000  per  share  and  1,000  times  the  aggregate  per  share  amount  to be
distributed  to the holders of Common  Shares.  Each  Preferred  Share will have
1,000  votes,  voting  together  with the  holders of Common  Shares,  except as
required by law or the  Certificate of Designation  of Rights,  Preferences  and
Privileges  of  Series A  Participating  Preferred  Stock.  In the  event of any

<PAGE>

merger, consolidation or other transaction in which Common Shares are changed or
exchanged,  each  Preferred  Share will be entitled  to receive  1,000 times the
amount  received  per Common  Share.  These  rights are  protected  by customary
anti-dilution provisions. Because of the nature of the dividend, liquidation and
voting  rights of the  Preferred  Shares,  the  value of the one  one-thousandth
interest in a Preferred  Share  purchasable  upon  exercise of each Right should
approximate the value of one Common Share.

Redemption

     At any time prior to the close of  business on the earlier of (i) the tenth
day following the date (the "Shares  Acquisition  Date") of public  announcement
that an Acquiring Person has become such or such later date as may be determined
by a majority of the Continuing  Directors and publicly announced by the Company
or (ii) the Final  Expiration  Date of the  Rights,  the  Company may redeem the
Rights in  whole,  but not in part,  at a price of $.01 per  Right  ("Redemption
Price").

No Shareholders' Rights Prior to Exercise

     Until a Right is  exercised,  the  holder  thereof,  as such,  will have no
rights as a shareholder  of the Company  (other than any rights  resulting  from
such holder's ownership of Common Shares),  including,  without limitation,  the
right to vote or to receive dividends.

Amendment of Rights Agreement

     The provisions of the Rights  Agreement may be  supplemented  or amended by
the Board of Directors in any manner prior to the Distribution  Date without the
approval of Rights holders.  After the Distribution  Date, the provisions of the
Rights  Agreement  may be  supplemented  or amended by the Board in order to (i)
cure any  ambiguity,  defect or  inconsistency,  (ii) to make changes  which are
deemed  necessary  or advisable  and do not  adversely  affect the  interests of
holders of Rights  (excluding  the  interests of any  Acquiring  Person),  or to
shorten  or  lengthen  any time  period  under the Rights  Agreement;  provided,
however,  that no amendment to lengthen (A) the time period governing redemption
shall be made at such time as the  Rights are not  redeemable,  or (B) any other

<PAGE>

period  shall  be made  unless  for the  purpose  of  protecting,  enhancing  or
clarifying  the rights of,  and/or  benefits to, the holders of Rights.

Certain Anti-takeover Effects

     The Rights  approved by the Board are  designed to protect and maximize the
value of the  outstanding  equity  interests  in the  Company in the event of an
unsolicited  attempt by an acquiror to take over the Company,  in a manner or on
terms not  approved  by the Board of  Directors.  Takeover  attempts  frequently
include coercive  tactics to deprive a corporation's  Board of Directors and its
shareholders   of  any  real   opportunity  to  determine  the  destiny  of  the
corporation.  The Rights have been  declared by the Board in order to deter such
tactics,  including a gradual accumulation of shares in the open market of a 15%
or greater  position to be followed by a merger or a partial or two-tier  tender
offer  that does not treat all  shareholders  equally.  These  tactics  unfairly
pressure shareholders,  squeeze them out of their investment without giving them
any real choice and deprive them of the full value of their shares.

     The Rights are not  intended  to prevent a takeover of the Company and will
not do so. The Rights are not exercisable in the event of a Permitted  Offer, as
described  above.  The Rights may be  redeemed  by the Company at $.01 per Right
within ten days (or such later date as may be  determined  by a majority  of the
Continuing  Directors)  after the  accumulation  of 15% or more of the Company's
outstanding Common Shares by a single acquiror or group. Accordingly, the Rights
should not preclude any merger or business  combination approved by the Board of
Directors.  Issuance  of the Rights  does not in any way  weaken  the  financial
strength of the Company or interfere  with its business  plans.  The issuance of
the Rights has no immediate  dilutive effect,  will not affect reported earnings
per share,  should not be taxable to the Company or to its shareholders and will
not  change the way in which the  Company's  shares are  presently  traded.  The
Company's  Board of  Directors  believes  that the Rights  represent a sound and
reasonable means of addressing the complex issues of corporate policy created by
the current  takeover  environment.  However,  the Rights may have the effect of
rendering  more difficult or  discouraging  an acquisition of the Company deemed
undesirable by the Board of Directors. The Rights may cause substantial dilution

<PAGE>

to a person or group  that  attempts  to  acquire  the  Company on terms or in a
manner not approved by the Company's  Board of Directors,  except pursuant to an
offer conditioned upon the negation, purchase or redemption of the Rights.

Item 7. Financial Statements and Exhibits.

        4.1.    Preferred Shares Rights Agreement,  dated as of August
                29, 1997, between Quality Semiconductor,  Inc. and BankBoston
                N.A., including the Certificate of Designation of Rights,
                Preferences and Privileges of Series A Participating Preferred
                Stock, the form of  Rights  Certificate  and the  Summary  of
                Rights attached thereto as Exhibits A, B and C, respectively.

<PAGE>


                                    SIGNATURE

     Pursuant to the  requirements of Section 12 of the Securities  Exchange Act
of 1934,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

                                              QUALITY SEMICONDUCTOR, INC.


Date:  September 16, 1997                     By:   /s/ John P. Goldsbery
                                                   -------------------------
                                                   John P. Goldsbery
                                                   Vice President - Finance and
                                                   Chief Financial Officer


<PAGE>




                           QUALITY SEMICONDUCTOR, INC.

                           CURRENT REPORT ON FORM 8-K

                                  EXHIBIT INDEX




Exhibit
  No.                                          Exhibit

  4.1         Preferred Shares Rights Agreement, dated as of August 29,
              1997, between Quality Semiconductor, Inc. and BankBoston,
              N.A., including the Certificate of Designation of Rights,
              Preferences  and  Privileges  of  Series A  Participating
              Preferred Stock,  the form of Rights  Certificate and the
              Summary of Rights  attached  thereto as Exhibits A, B and
              C, respectively.



<PAGE>


                           QUALITY SEMICONDUCTOR, INC.

                                       and

                                BANKBOSTON, N.A.

                                  Rights Agent












                        PREFERRED SHARES RIGHTS AGREEMENT


                          Dated as of August 29, 1997


<PAGE>


                                TABLE OF CONTENTS

                                                                            Page

Section 1.  Certain Definitions................................................1
Section 2.  Appointment of Rights Agent........................................5
Section 3.  Issuance of Rights Certificates....................................6
Section 4.  Form of Rights Certificates........................................7
Section 5.  Countersignature and Registration..................................8
Section 6.  Transfer, Split Up, Combination and Exchange of Rights Certificates;
            Mutilanted, Destroyed, Lost or Stolen Rights Certificates..........9
Section 7.  Exercise of Rights; Purchase Price; Expiration Date of Rights......9
Section 8.  Cancellation and Destruction of Rights Certificates...............11
Section 9.  Reservation and Availability of Preferred Shares..................12
Section 10. Preferred Shares Record Date......................................13
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
            Rights............................................................13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares........21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
            Power.............................................................21
Section 14. Fractional Rights and Fractional Shares...........................24
Section 15. Rights of Action..................................................25
Section 16. Agreement of Rights Holders.......................................25
Section 17. Rights Certificate Holder Not Deemed a Shareholder................25
Section 18. Concerning the Rights Agent.......................................26
Section 19. Merger or Consolidation or Change of Name of Rights Agent.........26
Section 20. Duties of Rights Agent............................................27
Section 21. Change of Rights Agent............................................29
Section 22. Issuance of New Rights Certificates...............................30
Section 23. Redemption........................................................30
Section 24. Exchange..........................................................31
Section 25. Notice of Certain Events..........................................33
Section 26. Notices...........................................................33
Section 27. Supplements and Amendments........................................34
Section 28. Successors........................................................34
Section 29. Determinations and Actions by the Board of Directors, etc.........34
Section 30. Benefits of this Agreement........................................35
Section 31. Severability......................................................35
Section 32. Governing Law.....................................................35
Section 33. Counterparts......................................................35
Section 34. Descriptive Headings..............................................35

EXHIBITS

Exhibit A ........Form of Certificate of Determination
Exhibit B.........Form of Rights Certificate
Exhibit C.........Summary of Rights



--------
1     The portion of the legend in brackets shall be inserted only if applicable
      and shall replace the preceding sentence.

<PAGE>

                                RIGHTS AGREEMENT

     Agreement, dated as of August 29, 1997 between Quality Semiconductor, Inc.,
a California  corporation  (the  "Company"),  and BankBoston,  N.A. (the "Rights
Agent").

     On August 26, 1997 (the "Rights Dividend  Declaration  Date"), the Board of
Directors of the Company  authorized  and  declared a dividend of one  Preferred
Share purchase right (a "Right") for each Common Share (as hereinafter  defined)
of the Company outstanding as of the Close of Business (as hereinafter  defined)
on September 17, 1997 (the "Record Date"),  each Right representing the right to
purchase one one-thousandth of a share of Series A Participating Preferred Stock
(as such number may be adjusted  pursuant to the provisions of this  Agreement),
having  the  rights,  preferences  and  privileges  set  forth  in the  form  of
Certificate of Determination  of Rights,  Preferences and Privileges of Series A
Participating  Preferred  Stock attached hereto as Exhibit A, upon the terms and
subject to the conditions herein set forth, and further  authorized and directed
the  issuance  of one Right (as such  number  may be  adjusted  pursuant  to the
provisions  of this  Agreement)  with  respect to each  Common  Share that shall
become  outstanding  between the Record Date and the earlier of the Distribution
Date and the Expiration  Date (as such terms are  hereinafter  defined),  and in
certain circumstances after the Distribution Date.

         NOW,  THEREFORE,  in  consideration  of the  promises  and  the  mutual
agreements herein set forth, the parties hereby agree as follows:

         Section 1.  Certain  Definitions  For purposes of this  Agreement,  the
following terms have the meanings indicated:

     (a)  "Acquiring  Person" shall mean any Person who or which,  together with
all Affiliates and Associates of such Person,  shall be the Beneficial  Owner of
15% or more of the Common  Shares  then  outstanding,  but shall not include the
Company,  any  Subsidiary  of the Company or any  employee  benefit  plan of the
Company or of any Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no
Person shall be deemed to be an Acquiring  Person either (i) as the result of an
acquisition  of Common  Shares by the Company  which,  by reducing the number of
shares  outstanding,  increases the proportionate  number of shares beneficially
owned by such  Person to 15% or more of the Common  Shares of the  Company  then
outstanding;  provided,  however,  that if a Person shall become the  Beneficial
Owner of 15% or more of the Common  Shares of the Company  then  outstanding  by
reason of share  purchases by the Company and shall,  after such share purchases
by the Company,  become the Beneficial Owner of any additional  Common Shares of
the Company, then such Person shall be deemed to be an Acquiring Person; or (ii)
if the Board of Directors of the Company  determines in good faith that a Person
who  would  otherwise  be an  "Acquiring  Person"  as  defined  pursuant  to the
foregoing  provisions of this paragraph (a) has become such  inadvertently,  and
such Person divests as promptly as practicable of a sufficient  number of Common
Shares so that such Person would no longer be an "Acquiring  Person," as defined
pursuant to the foregoing provisions of this paragraph (a).  Notwithstanding the
foregoing (N.A.) or any of their Affiliates or Associates (each an

<PAGE>

"Excepted  Person")  shall not be considered an Acquiring  Person as a result of
being,  at any date, the Beneficial  Owner of that number of Common Shares which
such  Excepted  Person  beneficially  owns as of the date  hereof or which  such
Excepted  Person is  permitted  or required to purchase in  accordance  with the
provisions of any plan,  arrangement,  agreement or transaction  approved by the
Board of  Directors of the Company or any  committee of the Board of  Directors;
provided,  however,  that if any Excepted  Person shall,  after the date hereof,
become the Beneficial  Owner of any Common Shares other than pursuant to a plan,
arrangement,  agreement or transaction approved by the Board of Directors of the
Company or any committee of the Board of Directors, then, if any Excepted Person
would otherwise be an Acquiring Person,  that Excepted Person shall be deemed to
be an  Acquiring  Person and all Common  Shares then  beneficially  owned by the
Excepted  Person  shall be counted  for  purposes  of  determining  whether  the
Excepted  Person is an Acquiring  Person.  Notwithstanding  any provision to the
contrary  in this  Agreement,  no  amendment  shall  be made to this  definition
without the consent of an Excepted  Person if the effect of such amendment would
be to reduce  the  aggregate  percentage  ownership  of the Common  Shares  that
Excepted Person would be permitted to beneficially own at any time without being
deemed an "Acquiring Person" hereunder.

     (b) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such  terms in Rule  12b-2 of the  General  Rules and  Regulations  under the
Securities  Exchange Act of 1934, as amended (the "Exchange  Act"), as in effect
on the date of this Agreement.

     (c) A Person shall be deemed the "Beneficial  Owner" of and shall be deemed
to "beneficially own" any securities:

     (i) which such  Person or any of such  Person's  Affiliates  or  Associates
beneficially owns, directly or indirectly,  for purposes of Section 13(d) of the
Exchange Act and Rule 13d-3  thereunder  (or any  comparable or successor law or
regulation);

     (ii) which such Person or any of such Person's Affiliates or Associates has
(A) the right to acquire (whether such right is exercisable  immediately or only
after  the  passage  of  time)  pursuant  to  any   agreement,   arrangement  or
understanding (other than customary agreements with and between underwriters and
selling  group  members  with  respect  to  a  bona  fide  public   offering  of
securities),  or upon the exercise of conversion rights, exchange rights, rights
(other than the Rights), warrants or options, or otherwise;  provided,  however,
that a Person shall not be deemed pursuant to this Section 1(c)(ii)(A) to be the
Beneficial Owner of, or to beneficially own, (1) securities tendered pursuant to
a tender or  exchange  offer made by or on behalf of such  Person or any of such
Person's  Affiliates or Associates  until such tendered  securities are accepted
for  purchase  or  exchange  or (2)  securities  which a  Person  or any of such
Person's  Affiliates  or  Associates  may be deemed to have the right to acquire
pursuant to any merger or other  acquisition  agreement  between the Company and
such Person (or one or more of its  Affiliates or  Associates) if such agreement
has been  approved by the Board of Directors of the Company prior to there being
an  Acquiring  Person;  or (B) the  right  to vote  pursuant  to any  agreement,
arrangement  or  understanding;  provided,  however,  that a Person shall not be
deemed the Beneficial Owner of, or to beneficially  own, any security under this
Section l(c)(ii)(B) if the agreement,  arrangement or understanding to vote such
security  (1) arises  solely  from a  revocable  proxy or consent  given to such

<PAGE>

Person in response to a public proxy or consent  solicitation  made pursuant to,
and in accordance with, the applicable rules and regulations of the Exchange Act
and (2) is not also then  reportable  on Schedule 13D under the Exchange Act (or
any comparable or successor report); or

     (iii) which are beneficially  owned,  directly or indirectly,  by any other
Person (or any Affiliate or Associate  thereof) with which such Person or any of
such  Person's  Affiliates  or  Associates  has any  agreement,  arrangement  or
understanding  (whether or not in writing) (other than customary agreements with
and between  underwriters  and selling group members with respect to a bona fide
public  offering of securities)  for the purpose of acquiring,  holding,  voting
(except to the extent  contemplated  by the proviso to Section  l(c)(ii)(B))  or
disposing of any securities of the Company;  provided,  however, that in no case
shall an officer or director of the Company be deemed (x) the  Beneficial  Owner
of any  securities  beneficially  owned by another  officer or  director  of the
Company solely by reason of actions undertaken by such persons in their capacity
as  officers  or  directors  of the  Company  or (y)  the  Beneficial  Owner  of
securities  held of record by the trustee of any  employee  benefit  plan of the
Company or any  Subsidiary of the Company for the benefit of any employee of the
Company or any Subsidiary of the Company, other than the officer or director, by
reason of any  influence  that such officer or director may have over the voting
of the securities held in the plan.

     (d)  "Business  Day" shall mean any day other than a Saturday,  Sunday or a
day on which banking institutions in New York are authorized or obligated by law
or executive order to close.

     (e) "Close of  Business"  on any given date shall mean 5:00 P.M.,  New York
time, on such date; provided,  however,  that if such date is not a Business Day
it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.

     (f) "Common  Shares" when used with reference to the Company shall mean the
shares of Common  Stock of the  Company,  $0.001  par value per  share.  "Common
Shares" when used with reference to any Person other than the Company shall mean
the capital stock (or equity  interest)  with the greatest  voting power of such
other  Person or, if such other Person is a Subsidiary  of another  Person,  the
Person or Persons which ultimately control such first-mentioned Person.

     (g)  "Continuing  Director"  shall  mean  (i) any  member  of the  Board of
Directors of the Company,  while a member of the Board,  who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person, or a representative
of an  Acquiring  Person or of any such  Affiliate or  Associate,  and who was a
member of the Board prior to the date of this Agreement,  or (ii) any Person who
subsequently  becomes a member of the Board, while a member of the Board, who is
not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or
a  representative  of an Acquiring Person or of any such Affiliate or Associate,
if such Person's nomination for election or election to the Board is recommended
or approved by a majority of the Continuing Directors.

     (h) "Distribution Date" shall mean the earlier of (i) the Close of Business
on the  tenth  day (or such  later  date as may be  determined  by  action  of a

<PAGE>

majority of Continuing  Directors  then in office) after the Shares  Acquisition
Date (or, if the tenth day after the Shares  Acquisition  Date occurs before the
Record  Date,  the Close of  Business  on the Record  Date) or (ii) the Close of
Business on the tenth day (or such later date as may be  determined by action of
a majority of Continuing  Directors then in office) after the date that a tender
or exchange  offer by any Person (other than the Company,  any Subsidiary of the
Company,  any employee  benefit plan of the Company or of any  Subsidiary of the
Company,  or any Person or entity  organized,  appointed or  established  by the
Company  for or pursuant  to the terms of any such plan) is first  published  or
sent or given  within the  meaning of Rule  14d-2(a)  of the  General  Rules and
Regulations  under the Exchange Act, if,  assuming the  successful  consummation
thereof,  such Person would be the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding.

     (i) "Equivalent  Shares" shall mean Preferred Shares and any other class or
series of capital  stock of the  Company  which is entitled  to  participate  in
dividends and other distributions, including distributions upon the liquidation,
dissolution  or  winding up of the  Company,  on a  proportional  basis with the
Common Shares.  In  calculating  the number of any class or series of Equivalent
Shares for purposes of Section 11 of this  Agreement,  the number of shares,  or
fractions of a share,  of such class or series of capital stock that is entitled
to the same dividend or  distribution as a whole Common Share shall be deemed to
be one share.

     (j) "Expiration  Date" shall mean the earliest of (i) the Close of Business
on the Final  Expiration Date, (ii) the Redemption Date, (iii) the time at which
the Board of Directors  orders the exchange of the Rights as provided in Section
24 hereof or (iv) the  consummation  of a  transaction  contemplated  by Section
13(d) hereof.

     (k) "Final Expiration Date" shall mean September 17, 2007.

     (1) "Permitted Offer" shall mean a tender offer for all outstanding  Common
Shares made in the manner  prescribed  by Section  14(d) of the Exchange Act and
the rules and regulations promulgated thereunder;  provided,  however, that such
tender  offer  occurs at a time when  Continuing  Directors  are in office and a
majority of the  Continuing  Directors  then in office has  determined  that the
offer is both  adequate and  otherwise in the best  interests of the Company and
its shareholders (taking into account all factors that such Continuing Directors
deem relevant,  including  without  limitation  prices that could  reasonably be
achieved if the Company or its assets were sold on an orderly basis  designed to
realize maximum value).

     (m) "Person" shall mean any individual,  firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.

     (n)  "Preferred  Shares"  shall  mean  shares  of  Series  A  Participating
Preferred Stock of the Company.

     (o)  "Purchase  Price"  shall have the  meaning  set forth in Section  4(a)
hereof.

     (p) "Record  Date" shall have the meaning set forth in the  recitals at the
beginning of this Agreement.

<PAGE>

     (q)  "Redemption  Date" shall mean the time at which the Board of Directors
of the Company orders redemption of the Rights as provided in Section 23 hereof.

     (r)  "Redemption  Price" shall have the meaning set forth in Section  23(a)
hereof.

     (s) "Rights Dividend  Declaration Date" shall have the meaning set forth in
the recitals at the beginning of this Agreement.

     (t) "Section 13 Event" shall mean any event  described in clause (i),  (ii)
or (iii) of Section 13(a) hereof.

     (u)  "Shares  Acquisition  Date"  shall  mean  the  first  date  of  public
announcement  (which,  for purposes of this definition,  shall include,  without
limitation,  a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an  Acquiring  Person that an  Acquiring  Person has become such;
provided  that,  if such person is  determined  not to have become an  Acquiring
Person pursuant to Section  l(a)(ii)  hereof,  then no Shares  Acquisition  Date
shall be deemed to have occurred.

     (v)  "Subsidiary"  of any Person shall mean any corporation or other entity
of which an amount of voting  securities  sufficient  to elect a majority of the
directors  or Persons  having  similar  authority of such  corporation  or other
entity is beneficially  owned,  directly or indirectly,  by such Person,  or any
corporation or other entity otherwise controlled by such Person.

     (w) "Total Exercise Price" shall have the meaning set forth in Section 4(a)
hereof.

     (x) "Trading Day" shall have the meaning set forth in Section 11(d) hereof.

     (y) A  "Triggering  Event" shall be deemed to have occurred upon any Person
(other than the Company,  any  Subsidiary of the Company,  any employee  benefit
plan of the Company or any  Subsidiary  of the  Company,  or any entity  holding
Common Shares for or pursuant to the terms of any such plan),  together with all
Affiliates and Associates of such Person, becoming an Acquiring Person.

     Section 2.  Appointment  of Rights  Agent The Company  hereby  appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall, prior to the Distribution Date, also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof,  and the Rights Agent hereby accepts such  appointment.  The Company may
from time to time  appoint  such  co-Rights  Agents as it may deem  necessary or
desirable,  upon ten (10) days' prior written  notice to the Rights  Agent.  The
Rights  Agent shall have no duty to  supervise,  and shall in no event be liable
for, the acts or omissions of any such co-Rights Agents.

<PAGE>

     Section 3. Issuance of Rights Certificates.

     (a) Until the Distribution  Date, (i) the Rights will be evidenced (subject
to the  provisions  of Sections  3(b) and 3(c) hereof) by the  certificates  for
Common Shares registered in the names of the holders thereof (which certificates
shall  also be deemed  to be Rights  Certificates)  and not by  separate  Rights
Certificates  and  (ii)  the  right  to  receive  Rights  Certificates  will  be
transferable  only in connection  with the transfer of Common Shares.  Until the
earlier of the  Distribution  Date or the  Expiration  Date,  the  surrender for
transfer  of such  certificates  for Common  Shares  shall also  constitute  the
surrender  for  transfer  of  the  Rights  associated  with  the  Common  Shares
represented  thereby.  As soon as practicable  after the Distribution  Date, the
Company  will prepare and execute,  the Rights Agent will  countersign,  and the
Company will send or cause to be sent (and the Rights Agent will,  if requested,
send) by  first-class,  postage-prepaid  mail,  to each record  holder of Common
Shares as of the Close of Business on the  Distribution  Date, at the address of
such  holder  shown on the  records  of the  Company,  a Rights  Certificate  in
substantially the form of Exhibit B hereto (a "Rights Certificate"),  evidencing
one Right for each  Common  Share so held,  subject to  adjustment  as  provided
herein. In the event that an adjustment in the number of Rights per Common Share
has been made  pursuant  to Section  11(a)(i),  Section  11(i) or Section  11(p)
hereof, then at the time of distribution of the Rights Certificates, the Company
shall make the necessary and  appropriate  rounding  adjustments  (in accordance
with Section 14(a) hereof) so that Rights  Certificates  representing only whole
numbers of Rights  are  distributed  and cash is paid in lieu of any  fractional
Rights. As of the Distribution Date, the Rights will be evidenced solely by such
Rights  Certificates  and  may be  transferred  by the  transfer  of the  Rights
Certificates as permitted hereby,  separately and apart from any transfer of one
or more Common Shares, and the holders of such Rights  Certificates as listed in
the records of the Company or any  transfer  agent or  registrar  for the Rights
shall be the record holders thereof.

     (b) On the Record Date or as soon as  practicable  thereafter,  the Company
will send (or cause to be sent) a copy of a Summary  of Rights in  substantially
the  form of  Exhibit  C hereto  (the  "Summary  of  Rights"),  by  first-class,
postage-prepaid  mail, to each record holder of Common Shares as of the Close of
Business on the Record Date,  at the address of such holder shown on the records
of the Company.

     (c) Unless the Board of Directors,  by resolution  adopted at or before the
time of the  issuance  (including  pursuant to the  exercise of rights under the
Company's benefit plans) of any Common Shares, specifies to the contrary, Rights
shall be issued in respect of all Common Shares that are issued after the Record
Date but prior to the earlier of the  Distribution  Date or the Expiration  Date
or,  in  certain  circumstances   provided  in  Section  22  hereof,  after  the
Distribution  Date.  Certificates  representing such Common Shares shall also be
deemed to be certificates for Rights, and shall bear the following legend:

         This  certificate  also  evidences  and entitles  the holder  hereof to
         certain  rights  as set  forth in a Rights  Agreement  between  Quality
         Semiconductor,  Inc. and BankBoston, N.A. as the Rights Agent, dated as
         of August 29,  1997 (the  "Rights  Agreement"),  the terms of which are
         hereby  incorporated herein by reference and a copy of which is on file
         at the  principal  executive  offices of Quality  Semiconductor,  Inc..
         Under certain circumstances, as set forth in the Rights Agreement, such
         Rights will be evidenced by separate certificates and will no longer be
         evidenced by this certificate. Quality Semiconductor, Inc. will mail to

<PAGE>

         the holder of this certificate a copy of the Rights  Agreement  without
         charge  after  receipt of a written  request  therefor.  Under  certain
         circumstances set forth in the Rights  Agreement,  Rights issued to, or
         held by, any Person who is, was or becomes an  Acquiring  Person or any
         Affiliate or Associate thereof (as such terms are defined in the Rights
         Agreement), whether currently held by or on behalf of such Person or by
         any subsequent holder, may become null and void.

With respect to such  certificates  containing the foregoing  legend,  until the
earlier of (i) the  Distribution  Date or (ii) the  Expiration  Date, the Rights
associated  with the Common Shares  represented  by such  certificates  shall be
evidenced by such certificates alone, and the surrender for transfer of any such
certificate shall also constitute the transfer of the Rights associated with the
Common Shares  represented  thereby.  In the event that the Company purchases or
acquires any Common  Shares after the Record Date but prior to the  Distribution
Date, any Rights associated with such Common Shares shall be deemed canceled and
retired  so that the  Company  shall not be  entitled  to  exercise  any  Rights
associated with the Common Shares which are no longer outstanding.

     Section 4. Form of Rights Certificates.

     (a) The Rights  Certificates  (and the forms of election to purchase Common
Shares  and of  assignment  to be  printed  on the  reverse  thereof)  shall  be
substantially  in the form of  Exhibit  B  hereto  and may  have  such  marks of
identification  or  designation  and such  legends,  summaries  or  endorsements
printed thereon as the Company may deem  appropriate and as are not inconsistent
with the provisions of this Agreement,  or as may be required to comply with any
applicable law or with any rule or regulation made pursuant  thereto or with any
rule or  regulation  of any stock  exchange on which the Rights may from time to
time be listed, or to conform to usage.  Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates,  whenever distributed,  shall be
dated as of the Record  Date (or in the case of Rights  issued  with  respect to
Common  Shares  issued by the Company  after the Record Date,  as of the date of
issuance  of such  Common  Shares)  and on their face shall  entitle the holders
thereof to purchase such number of one-thousandths of a Preferred Share as shall
be set forth therein at the price set forth therein (such exercise price per one
one-thousandth  of a  Preferred  Share  being  hereinafter  referred  to as  the
"Purchase  Price"  and the  aggregate  exercise  price of all  Preferred  Shares
issuable upon exercise of one Right being hereinafter  referred to as the "Total
Exercise  Price"),  but the number and type of securities  purchasable  upon the
exercise of each Right and the Purchase  Price shall be subject to adjustment as
provided herein.

     (b) Any Rights  Certificate  issued  pursuant to Section 3(a) or Section 22
hereof that represents Rights  beneficially owned by: (i) an Acquiring Person or
any  Associate  or Affiliate of an  Acquiring  Person,  (ii) a transferee  of an
Acquiring  Person  (or of  any  such  Associate  or  Affiliate)  who  becomes  a
transferee  after the Acquiring  Person becomes such or (iii) a transferee of an
Acquiring  Person  (or of  any  such  Associate  or  Affiliate)  who  becomes  a
transferee prior to or concurrently  with the Acquiring Person becoming such and
receives  such  Rights  pursuant  to either (A) a transfer  (whether  or not for
consideration)  from the Acquiring Person to holders of equity interests in such
Acquiring  Person  or to any  Person  with whom such  Acquiring  Person  has any
continuing  agreement,  arrangement or  understanding  regarding the transferred
Rights or (B) a  transfer  which  the  Board of  Directors  of the  Company  has

<PAGE>

determined  is part of a  plan,  arrangement  or  understanding  which  has as a
primary  purpose or effect  avoidance  of Section  7(e)  hereof,  and any Rights
Certificate  issued  pursuant to Section 6 or Section 11 hereof  upon  transfer,
exchange,  replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:

         The  Rights   represented  by  this  Rights  Certificate  are  or  were
         beneficially owned by a Person who was or became an Acquiring Person or
         an Affiliate  or  Associate  of an Acquiring  Person (as such terms are
         defined in the Rights Agreement).  Accordingly, this Rights Certificate
         and the  Rights  represented  hereby  may  become  null and void in the
         circumstances specified in Section 7(e) of the Rights Agreement.

     Section 5. Countersignature and Registration.

     (a) The Rights  Certificates  shall be executed on behalf of the Company by
its Chairman of the Board,  its Chief  Executive  Officer,  its President or any
Vice President,  either manually or by facsimile signature, and by the Secretary
or an  Assistant  Secretary  of the  Company,  either  manually or by  facsimile
signature,  and shall have  affixed  thereto  the  Company's  seal (if any) or a
facsimile thereof.  The Rights  Certificates shall be manually  countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case any  officer  of the  Company  who  shall  have  signed  any of the  Rights
Certificates   shall   cease  to  be  such   officer  of  the   Company   before
countersignature  by the Rights  Agent and issuance and delivery by the Company,
such Rights Certificates nevertheless,  may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the  Company;  and any  Rights  Certificate  may be  signed  on behalf of the
Company by any person who, at the actual  date of the  execution  of such Rights
Certificate,  shall be a proper  officer  of the  Company  to sign  such  Rights
Certificate,  although at the date of the execution of this Rights Agreement any
such person was not such an officer.

     (b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its office designated for such purposes,  books for registration and
transfer of the Rights Certificates issued hereunder.  Such books shall show the
names and addresses of the respective  holders of the Rights  Certificates,  the
number of Rights  evidenced on its face by each of the Rights  Certificates  and
the date of each of the Rights Certificates.

     Section  6.  Transfer,   Split  Up,  Combination  and  Exchange  of  Rights
Certificates;   Mutilated,   DestroyedSection  6.Stolen  RTransfer,   Split  Up,
Combination and Exchange of Rights Certificates;  Mutilated,  Destroyed, Lost or
Stolen Rights Certificates.

     (a) Subject to the  provisions of Sections  7(e), 14 and 24 hereof,  at any
time after the Close of Business on the  Distribution  Date,  and at or prior to
the Close of Business on the Expiration  Date, any Rights  Certificate or Rights
Certificates  may be  transferred,  split up,  combined or exchanged for another
Rights  Certificate or Rights  Certificates,  entitling the registered holder to
purchase a like number of  one-thousandths of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets, as the case may be) as

<PAGE>

the Rights  Certificate or Rights  Certificates  surrendered  then entitled such
holder to  purchase.  Any  registered  holder  desiring to  transfer,  split up,
combine or exchange any Rights  Certificate  or Rights  Certificates  shall make
such request in writing  delivered to the Rights Agent,  and shall surrender the
Rights Certificate or Rights Certificates to be transferred,  split up, combined
or  exchanged  at the office of the Rights Agent  designated  for such  purpose.
Neither the Rights  Agent nor the Company  shall be obligated to take any action
whatsoever  with  respect  to  the  transfer  of  any  such  surrendered  Rights
Certificate  until the  registered  holder shall have  completed  and signed the
certificate  contained  in the form of  assignment  on the reverse  side of such
Rights  Certificate  and shall have  provided  such  additional  evidence of the
identity of the Beneficial Owner (or former  Beneficial  Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Sections 7(e), 14 and 24 hereof, countersign and deliver
to the person entitled thereto a Rights Certificate or Rights  Certificates,  as
the case may be, as so  requested.  The  Company  may  require  payment of a sum
sufficient  to cover  any tax or  governmental  charge  that may be  imposed  in
connection  with any  transfer,  split up,  combination  or  exchange  of Rights
Certificates.

     (b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss,  theft,  destruction or mutilation of a Rights
Certificate,  and,  in case of  loss,  theft or  destruction,  of  indemnity  or
security  reasonably  satisfactory  to  them,  and,  at the  Company's  request,
reimbursement  to the Company and the Rights  Agent of all  reasonable  expenses
incidental  thereto,  and upon surrender to the Rights Agent and cancellation of
the Rights  Certificate  if  mutilated,  the Company will make and deliver a new
Rights  Certificate  of like  tenor to the  Rights  Agent  for  delivery  to the
registered holder in lieu of the Rights Certificate so lost,  stolen,  destroyed
or mutilated.

     Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.

     (a) Subject to Section 7(e), 23(b) and 24(b) hereof,  the registered holder
of any Rights  Certificate may exercise the Rights evidenced  thereby (except as
otherwise  provided  herein)  in  whole  or  in  part  at  any  time  after  the
Distribution  Date upon  surrender of the Rights  Certificate,  with the form of
election to purchase on the reverse side thereof  duly  executed,  to the Rights
Agent at the office of the Rights Agent  designated  for such purpose,  together
with payment of the Purchase Price for each  one-thousandth of a Preferred Share
as to which the Rights are exercised, at or prior to the Expiration Date.

     (b) The  Purchase  Price  for  each  one-thousandth  of a  Preferred  Share
issuable pursuant to the exercise of a Right shall initially be $70.00, shall be
subject to adjustment from time to time as provided in Sections 11 and 13 hereof
and shall be  payable  in  lawful  money of the  United  States  of  America  in
accordance with paragraph (c) below.

     (c) Upon receipt of a Rights Certificate  representing  exercisable Rights,
with the form of election to purchase duly  executed,  accompanied by payment of
the Purchase Price for the number of  one-thousandths  of a Preferred  Share (or
other securities or property,  as the case may be) to be purchased and an amount
equal to any  applicable  transfer tax required to be paid by the holder of such
Rights  Certificate in accordance with Section 9 hereof in cash, or by certified
check or cashier's  check payable to the order of the Company,  the Rights Agent
shall,  subject to Section 20(k) hereof,  thereupon promptly (i) (A) requisition

<PAGE>

from any  transfer  agent of the  Preferred  Shares (or make  available,  if the
Rights Agent is the transfer  agent for the Preferred  Shares) a certificate  or
certificates  for the  number  of  one-thousandths  of a  Preferred  Share to be
purchased and the Company  hereby  irrevocably  authorizes its transfer agent to
comply  with all such  requests  or (B) if the  Company  shall  have  elected to
deposit the total number of  one-thousandths  of a Preferred Share issuable upon
exercise of the Rights hereunder with a depository  agent,  requisition from the
depository   agent  of   depository   receipts   representing   such  number  of
one-thousandths  of a  Preferred  Share as are to be  purchased  (in which  case
certificates  for the Preferred  Shares  represented  by such receipts  shall be
deposited  by the  transfer  agent with the  depository  agent) and the  Company
hereby  directs  the  depository  agent to comply with such  request,  (ii) when
appropriate,  requisition from the Company the amount of cash to be paid in lieu
of issuance of  fractional  shares in accordance  with Section 14 hereof,  (iii)
after receipt of such certificates or depository receipts,  cause the same to be
delivered  to or  upon  the  order  of the  registered  holder  of  such  Rights
Certificate,  registered  in such  name or  names as may be  designated  by such
holder and (iv) when appropriate, after receipt thereof, deliver such cash to or
upon the order of the registered holder of such Rights Certificate.  The payment
of the  Purchase  Price  (as such  amount  may be  reduced  (including  to zero)
pursuant to Section  11(a)(iv)  hereof) may be made in cash or by certified bank
check or bank draft  payable to the order of the Company.  In the event that the
Company is obligated to issue other  securities of the Company,  pay cash and/or
distribute  other  property  pursuant to Section 11(a) hereof,  the Company will
make all arrangements necessary so that such other securities, cash and/or other
property  are  available  for  distribution  by the  Rights  Agent,  if and when
appropriate.

     (d) In case the registered holder of any Rights  Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate  evidencing
Rights  equivalent to the Rights  remaining  unexercised  shall be issued by the
Rights Agent to the  registered  holder of such Rights  Certificate or to his or
her duly authorized assigns, subject to the provisions of Section 14 hereof.

     (e)  Notwithstanding  anything in this Agreement to the contrary,  from and
after the first  occurrence  of a  Triggering  Event or a Section 13 Event,  any
Rights  beneficially  owned  by (i)  an  Acquiring  Person  or an  Associate  or
Affiliate of an Acquiring  Person,  (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person  becomes such (a "Post  Transferee"),  (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer  (whether or not for  consideration)  from the
Acquiring  Person to holders of equity  interests in such Acquiring Person or to
any  Person  with  whom  the  Acquiring  Person  has any  continuing  agreement,
arrangement or understanding  regarding the transferred Rights or (B) a transfer
which the Board of  Directors of the Company has  determined  is part of a plan,
arrangement  or  understanding  which has as a  primary  purpose  or effect  the
avoidance  of this Section 7(e) (a "Prior  Transferee")  or (iv) any  subsequent
transferee  receiving  transferred  Rights  from a Post  Transferee  or a  Prior
Transferee,  either  directly or through one or more  intermediate  transferees,
shall  become null and void  without  any  further  action and no holder of such
Rights shall have any rights  whatsoever  with  respect to such Rights,  whether
under any provision of this  Agreement or  otherwise.  The Company shall use all
reasonable  efforts  to ensure  that the  provisions  of this  Section  7(e) and

<PAGE>

Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or to any other Person as a result of its failure to make
any determinations  with respect to an Acquiring Person or any of such Acquiring
Person's Affiliates, Associates or transferees hereunder.

     (f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company  shall be  obligated  to undertake  any action with
respect to a registered holder upon the occurrence of any purported  exercise as
set  forth in this  Section  7 unless  such  registered  holder  shall  have (i)
completed  and signed  the  certificate  contained  in the form of  election  to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional  evidence of the identity of the
Beneficial  Owner (or  former  Beneficial  Owner) or  Affiliates  or  Associates
thereof as the Company shall reasonably request.

     Section 8.  Cancellation and Destruction of Rights  Certificates All Rights
Certificates  surrendered  for the  purpose  of  exercise,  transfer,  split up,
combination  or exchange  shall,  if surrendered to the Company or to any of its
agents,  be delivered to the Rights Agent for  cancellation or in canceled form,
or, if surrendered  to the Rights Agent,  shall be canceled by it, and no Rights
Certificates  shall be issued in lieu thereof  except as expressly  permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement,  and the Rights Agent shall so cancel and
retire,  any Rights  Certificate  purchased or acquired by the Company otherwise
than upon the  exercise  thereof.  The Rights  Agent shall  deliver all canceled
Rights  Certificates  to the Company,  or shall,  at the written  request of the
Company,  destroy  such  canceled  Rights  Certificates,  and in such case shall
deliver a certificate of destruction thereof to the Company.

     Section 9. Reservation and Availability of Preferred Shares.

     (a) The Company  covenants  and agrees that it will use its best efforts to
cause  to be  reserved  and  kept  available  out of and  to the  extent  of its
authorized  and  unissued  shares of  preferred  stock not  reserved for another
purpose  (and,  following  the  occurrence  of a  Triggering  Event,  out of its
authorized and unissued  shares of Common Shares and/or other  securities),  the
number of Preferred  Shares (and,  following the  occurrence  of the  Triggering
Event,  Common Shares and/or other securities) that will be sufficient to permit
the exercise in full of all outstanding Rights.

     (b) If the Company shall  hereafter  list any of its Preferred  Shares on a
national  securities  exchange,  then  so  long as the  Preferred  Shares  (and,
following  the  occurrence  of a Triggering  Event,  Common  Shares and/or other
securities)  issuable and deliverable  upon exercise of the Rights may be listed
on a national  securities  exchange,  the Company  shall use its best efforts to
cause,  from and after such time as the Rights become  exercisable  (but only to
the extent that it is reasonably likely that the Rights will be exercised),  all
shares  reserved for such  issuance to be listed on such  exchange upon official
notice of issuance upon such exercise.

     (c) The  Company  shall  use  its  best  efforts  to (i)  file,  as soon as
practicable  following  the  earliest  date  after  the  first  occurrence  of a

<PAGE>

Triggering Event in which the  consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section  11(a)(iv)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a  registration  statement  under the  Securities  Act of 1933,  as
amended (the "Securities Act"), with respect to the securities  purchasable upon
exercise  of the Rights on an  appropriate  form,  (ii) cause such  registration
statement to become effective as soon as practicable after such filing and (iii)
cause such registration  statement to remain effective (with a prospectus at all
times meeting the  requirements  of the Securities Act) until the earlier of (A)
the date as of which the Rights are no longer  exercisable  for such  securities
and (B) the date of  expiration  of the  Rights.  The  Company  may  temporarily
suspend, for a period not to exceed ninety (90) days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability of the
Rights in order to prepare and file such registration statement and permit it to
become  effective.  Upon any such  suspension,  the Company shall issue a public
announcement  stating,  and notify the Rights Agent, that the  exercisability of
the Rights has been temporarily suspended,  as well as a public announcement and
notification  to the Rights Agent at such time as the suspension is no longer in
effect.  The Company will also take such action as may be appropriate  under, or
to ensure  compliance  with,  the  securities  or "blue sky" laws of the various
states in connection with the exercisability of the Rights.  Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any  jurisdiction,  unless the requisite  qualification in such  jurisdiction
shall have been  obtained,  or an exemption  therefrom  shall be available,  and
until a registration statement has been declared effective.

     (d) The Company  covenants  and agrees that it will take all such action as
may be necessary to ensure that all Preferred  Shares delivered upon exercise of
Rights shall,  at the time of delivery of the  certificates  for such  Preferred
Shares  (subject  to  payment  of the  Purchase  Price),  be  duly  and  validly
authorized and issued and fully paid and nonassessable shares.

     (e) The Company further  covenants and agrees that it will pay when due and
payable any and all federal and state  transfer  taxes and charges  which may be
payable  in  respect  of  the  original  issuance  or  delivery  of  the  Rights
Certificates or of any Preferred Shares upon the exercise of Rights. The Company
shall not, however,  be required to pay any transfer tax which may be payable in
respect of any  transfer or delivery of Rights  Certificates  to a person  other
than, or the issuance or delivery of certificates or depository receipts for the
Preferred  Shares in a name  other than that of,  the  registered  holder of the
Rights Certificate  evidencing Rights surrendered for exercise or to issue or to
deliver any  certificates or depository  receipts for Preferred  Shares upon the
exercise  of any  Rights  until any such tax shall  have been paid (any such tax
being payable by the holder of such Rights Certificate at the time of surrender)
or until it has been established to the Company's  satisfaction that no such tax
is due.

     Section  10.  Preferred  Shares  Record  Date Each person in whose name any
certificate for a number of  one-thousandths of a Preferred Share is issued upon
the  exercise  of Rights  shall for all  purposes  be deemed to have  become the
holder  of  record  of  Preferred  Shares  represented   thereby  on,  and  such
certificate  shall  be  dated,  the  date  upon  which  the  Rights  Certificate
evidencing  such Rights was duly  surrendered  and payment of the Purchase Price
multiplied by the number of one-thousandths of a Preferred Share with respect to
which the Rights have been  exercised (and any  applicable  transfer  taxes) was
made;  provided,  however,  that if the date of such  surrender and payment is a
date upon which the Preferred  Shares  transfer books of the Company are closed,

<PAGE>

such person shall be deemed to have become the record  holder of such shares on,
and such certificate  shall be dated, the next succeeding  Business Day on which
the  Preferred  Shares  transfer  books of the  Company  are open.  Prior to the
exercise of the Rights  evidenced  thereby,  the holder of a Rights  Certificate
shall not be  entitled to any rights of a holder of  Preferred  Shares for which
the Rights shall be exercisable,  including,  without  limitation,  the right to
vote, to receive dividends or other  distributions or to exercise any preemptive
rights,  and shall not be entitled to receive any notice of any  proceedings  of
the Company, except as provided herein.

     Section 11.  Adjustment  of Purchase  Price,  Number of Shares or Number of
Rights The  Purchase  Price,  the  number  and kind of shares or other  property
covered  by each  Right and the  number of Rights  outstanding  are  subject  to
adjustment from time to time as provided in this Section 11.

     (a) (i) In the event the  Company  shall at any time after the date of this
Agreement (A) declare a dividend on the Common Shares  payable in Common Shares,
(B) subdivide the outstanding  Common Shares, (C) combine the outstanding Common
Shares (by reverse  stock split or  otherwise)  into a smaller  number of Common
Shares,  or (D) issue any shares of its capital stock in a  reclassification  of
the Common Shares  (including  any such  reclassification  in connection  with a
consolidation  or merger in which the  Company is the  continuing  or  surviving
corporation),  then,  in each such event,  except as otherwise  provided in this
Section 11(a) and Section 7(e) hereof: (1) each of the Rights outstanding at the
time  of the  record  date  for  such  dividend  or the  effective  date of such
subdivision,  combination or reclassification shall be proportionately  adjusted
to  that  number  of  Rights  (calculated  to  the  nearest  one  ten-thousandth
(1/10,000) of a Right) equal to a fraction (the "Exchange Ratio"), the numerator
of which shall be the total number of Common  Shares or shares of capital  stock
issued in such  reclassification  of the Common Shares  outstanding  immediately
following such dividend,  subdivision,  combination or reclassification  and the
denominator  of which  shall be the total  number of Common  Shares  outstanding
immediately  prior to such time, and the number of Rights that shall  thereafter
be issued with respect to each Common Share or share of such other capital stock
that shall become outstanding thereafter prior to the Distribution Date shall be
equal to the total number of outstanding Rights immediately after such event (as
adjusted pursuant to this clause (1)) divided by the total number of outstanding
Common Shares or shares of such other capital stock immediately after such event
(subject to further  adjustment  pursuant to the provisions of this  Agreement);
(2) the  Purchase  Price  in  effect  at the  time of the  record  date for such
dividend  or  of  the  effective  date  of  such  subdivision,   combination  or
reclassification  shall be adjusted so that the Purchase Price  thereafter shall
equal the result  obtained by dividing the Purchase Price in effect  immediately
prior to such time by the Exchange Ratio;  provided,  however,  that in no event
shall the  consideration  to be paid upon the exercise of one Right be less than
the aggregate  par value of the shares of capital stock of the Company  issuable
upon  exercise of such Right;  and (3) the number of Common  Shares or shares of
such other capital  stock  issuable upon the exercise of each Right shall remain
unchanged immediately after such event, but, in the event of a reclassification,
the kind of shares  issuable upon the exercise of each Right  immediately  after
such  reclassification  shall be adjusted to be the kind of shares of such other
capital stock issued in such reclassification,  rather than Common Shares. If an
event occurs which would require an adjustment  under both this Section 11(a)(i)
and Section  11(a)(ii)  hereof,  the  adjustment  provided  for in this  Section

<PAGE>

11(a)(i)  shall be in  addition  to, and shall be made prior to, any  adjustment
required pursuant to Section 11(a)(ii) hereof.

     (ii)  Subject to Section 24 of this  Agreement,  in the event a  Triggering
Event shall have occurred, then promptly following such Triggering Event, proper
provision  shall be made so that each  holder of a Right,  except as provided in
Section 7(e) hereof,  shall thereafter have the right to receive for each Right,
upon exercise thereof in accordance with the terms of this Agreement and payment
of the then-current Total Exercise Price, in lieu of a number of one-thousandths
of a Preferred Share, such number of Common Shares of the Company as shall equal
the result obtained by multiplying the  then-current  Purchase Price by the then
number of one-thousandths of a Preferred Share for which a Right was exercisable
(or  would  have  been  exercisable  if  the  Distribution  Date  had  occurred)
immediately  prior to the first  occurrence of a Triggering  Event, and dividing
that product by 50% of the current per share market price  (determined  pursuant
to Section  11(d)  hereof) for Common  Shares on the date of  occurrence  of the
Triggering  Event (such  number of shares being  hereinafter  referred to as the
"Adjustment Shares").

     (iii) The right to buy Common  Shares of the  Company  pursuant  to Section
11(a)(ii) hereof shall not arise as a result of any Person becoming an Acquiring
Person through an acquisition of Common Shares pursuant to a Permitted Offer.

     (iv) In lieu of issuing Common Shares in accordance with Section  11(a)(ii)
hereof,  the Company may, if the Board of Directors  determines that such action
is  necessary  or  appropriate  and not  contrary to the  interest of holders of
Rights (and, in the event that the number of Common Shares which are  authorized
by the Company's  Articles of Incorporation  but not outstanding or reserved for
issuance for purposes  other than upon exercise of the Rights are not sufficient
to permit the  exercise in full of the Rights,  or if any  necessary  regulatory
approval  for such  issuance has not been  obtained by the Company,  the Company
shall):  (A) determine the excess of (1) the value of the Common Shares issuable
upon the exercise of a Right (the "Current  Value") over (2) the Purchase  Price
(such excess,  the  "Spread") and (B) with respect to each Right,  make adequate
provision to substitute for such Common Shares, upon exercise of the Rights, (1)
cash, (2) a reduction in the Purchase Price, (3) other equity  securities of the
Company (including,  without limitation, shares or units of shares of any series
of  preferred  stock which the Board of  Directors  of the Company has deemed to
have  the same  value as  Common  Shares  (such  shares  or units of  shares  of
preferred  stock are herein called "common stock  equivalents")),  except to the
extent that the Company has not obtained any necessary shareholder or regulatory
approval for such issuance,  (4) debt  securities of the Company,  except to the
extent that the Company has not obtained any necessary shareholder or regulatory
approval  for such  issuance,  (5) other  assets or (6) any  combination  of the
foregoing,  having an  aggregate  value equal to the Current  Value,  where such
aggregate  value has been  determined  by the Board of  Directors of the Company
based  upon the  advice  of a  nationally  recognized  investment  banking  firm
selected by the Board of  Directors of the Company;  provided,  however,  if the
Company  shall not have made  adequate  provision to deliver  value  pursuant to
clause (B) above within  thirty (30) days  following  the later of (x) the first
occurrence of a Triggering  Event and (y) the date on which the Company's  right
of redemption  pursuant to Section 23(a) expires (the later of (x) and (y) being

<PAGE>

referred to herein as the "Section  11(a)(ii)  Trigger Date"),  then the Company
shall be obligated to deliver,  upon the  surrender  for exercise of a Right and
without  requiring  payment of the Purchase Price,  Common Shares (to the extent
available), except to the extent that the Company has not obtained any necessary
shareholder or regulatory  approval for such  issuance,  and then, if necessary,
cash,  which shares and/or cash have an aggregate value equal to the Spread.  If
the Board of Directors of the Company  shall  determine in good faith that it is
likely that sufficient additional Common Shares could be authorized for issuance
upon  exercise in full of the Rights or that any necessary  regulatory  approval
for such issuance  will be obtained,  the thirty (30) day period set forth above
may be  extended  to the extent  necessary,  but not more than  ninety (90) days
after the Section  11(a)(ii)  Trigger  Date,  in order that the Company may seek
shareholder  approval for the  authorization  of such additional  shares or take
action to obtain such regulatory  approval (such period,  as it may be extended,
the "Substitution  Period"). To the extent that the Company determines that some
action  need be taken  pursuant to the first  and/or  second  sentences  of this
Section  11(a)(iv),  the  Company  (x) shall  provide,  subject to Section  7(e)
hereof, that such action shall apply uniformly to all outstanding Rights and (y)
may  suspend  the  exercisability  of the  Rights  until the  expiration  of the
Substitution  Period in order to seek any authorization of additional shares, to
take any action to obtain any required  regulatory approval and/or to decide the
appropriate  form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement  stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect.  For purposes of this Section  11(a)(iv),
the value of the Common  Shares  shall be the current per share market price (as
determined pursuant to Section 11(d) hereof) of the Common Shares on the Section
11(a)(ii)  Trigger Date and the value of any "common stock  equivalent" shall be
deemed to have the same value as the Common Shares on such date. (b) In case the
Company shall, at any time after the date of this  Agreement,  fix a record date
for the issuance of rights,  options or warrants to all holders of Common Shares
or of any class or series of  Equivalent  Shares  entitling  such holders (for a
period expiring within  forty-five (45) calendar days after such record date) to
subscribe  for or purchase  Common  Shares or  Equivalent  Shares or  securities
convertible  into Common  Shares or  Equivalent  Shares at a price per share (or
having a  conversion  price per share,  if a security  convertible  into  Common
Shares or  Equivalent  Shares) less than the then current per share market price
of the Common Shares or Equivalent  Shares (as defined in Section 11(d)) on such
record date,  then, in each such case,  the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately  prior to such  record date by a fraction,  the  numerator  of which
shall be the number of Common Shares and Equivalent  Shares (if any) outstanding
on such record date, plus the number of Common Shares or Equivalent  Shares,  as
the case may be,  which the  aggregate  offering  price of the  total  number of
Common Shares or Equivalent Shares, as the case may be, so to be offered (and/or
the aggregate  initial  conversion price of the convertible  securities so to be
offered)  would purchase at such current  market price,  and the  denominator of
which  shall be the  number of Common  Shares  and  Equivalent  Shares  (if any)
outstanding on such record date, plus the number of additional  Common Shares or
Equivalent  Shares,  as the case  may be,  to be  offered  for  subscription  or
purchase  (or  into  which  the  convertible  securities  so to be  offered  are
initially  convertible).  In  case  such  subscription  price  may be  paid in a

<PAGE>

consideration part or all of which shall be in a form other than cash, the value
of such  consideration  shall be as  determined  in good  faith by the  Board of
Directors of the Company,  whose determination shall be described in a statement
filed  with the Rights  Agent and shall be  binding on the Rights  Agent and the
holders of the Rights.  Common Shares and Equivalent Shares owned by or held for
the account of the Company  shall not be deemed  outstanding  for the purpose of
any such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights, options or warrants are
not so issued,  the Purchase  Price shall be adjusted to be the  Purchase  Price
which would then be in effect if such record date had not been fixed.

     (c) In  case  the  Company  shall,  at any  time  after  the  date  of this
Agreement,  fix a record date for the making of a distribution to all holders of
the Common Shares or of any class or series of Equivalent  Shares (including any
such distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular  quarterly cash dividend,  if any, or a dividend
payable in Common Shares) or subscription rights, options or warrants (excluding
those referred to in Section 11(b)), then, in each such case, the Purchase Price
to be in effect after such record date shall be  determined by  multiplying  the
Purchase  Price in effect  immediately  prior to such record date by a fraction,
the numerator of which shall be the current market price (as determined pursuant
to Section 11(d) hereof) of a Common Share or an Equivalent Share on such record
date,  less the fair  market  value per  Common  Share or  Equivalent  Share (as
determined  in good  faith  by the  Board of  Directors  of the  Company,  whose
determination  shall be described in a statement filed with the Rights Agent) of
the  portion  of  the  cash,  assets  or  evidences  of  indebtedness  so  to be
distributed or of such  subscription  rights or warrants  applicable to a Common
Share or  Equivalent  Share,  as the case may be, and the  denominator  of which
shall be such current  market  price (as  determined  pursuant to Section  11(d)
hereof)  of a  Common  Share  or  Equivalent  Share on such  record  date.  Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such  distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.

     (d) For the purpose of any computation  hereunder,  other than computations
made pursuant to Section 11(a)(iv) hereof,  the "current per share market price"
of any security (a "Security" for the purpose of this Section 11(d)) on any date
shall be deemed to be the average of the daily closing  prices per share of such
Security  for  the  thirty  (30)  consecutive  Trading  Days  (as  such  term is
hereinafter  defined)  immediately  prior  to such  date,  and for  purposes  of
computations made pursuant to Section  11(a)(iv) hereof,  the "current per share
market  price" of any  Security on any date shall be deemed to be the average of
the daily closing prices per share of such Security for the ten (10) consecutive
Trading Days  immediately  prior to such date;  provided,  however,  that in the
event that the  current per share  market  price of the  Security is  determined
during a period following the announcement by the issuer of such Security of (i)
a dividend or distribution  on such Security  payable in shares of such Security
or securities convertible into such shares or (ii) any subdivision,  combination
or  reclassification  of such  Security,  and  prior  to the  expiration  of the
requisite  thirty  (30)  Trading Day or ten (10)  Trading Day period,  after the
ex-dividend date for such dividend or distribution,  or the record date for such
subdivision,  combination or reclassification,  then, and in each such case, the

<PAGE>

current per share  market price shall be  appropriately  adjusted to reflect the
current market price per share  equivalent of such  Security.  The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes  place on such day,  the  average  of the  closing  bid and asked  prices,
regular  way,  in  either  case  as  reported  in  the  principal   consolidated
transaction  reporting  system with respect to securities  listed or admitted to
trading  on the New York Stock  Exchange  or, if the  Security  is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated  transaction  reporting system with respect to securities listed on
the principal  national  securities  exchange on which the Security is listed or
admitted to trading or, if the  Security is not listed or admitted to trading on
any  national  securities  exchange,  the last sale  price or, if such last sale
price is not  reported,  the average of the high bid and low asked prices in the
over-the-counter  market, as reported by the National  Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in
use,  or,  if on  any  such  date  the  Security  is  not  quoted  by  any  such
organization,  the average of the closing bid and asked prices as furnished by a
professional  market maker making a market in the Security selected by the Board
of  Directors  of the  Company.  If on any such date no market maker is making a
market  in the  Common  Shares,  the fair  value of such  shares on such date as
determined in good faith by the Board of Directors of the Company shall be used.
The  term  "Trading  Day"  shall  mean a day on  which  the  principal  national
securities  exchange  on which the  Security is listed or admitted to trading is
open for the  transaction  of  business  or, if the  Security  is not  listed or
admitted to trading on any national securities  exchange, a Business Day. If the
Common Shares are not publicly  held or so listed or traded,  "current per share
market price" shall mean the fair value per share as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a  statement  filed  with the  Rights  Agent  and  shall be  conclusive  for all
purposes.

     (e) Anything herein to the contrary  notwithstanding,  no adjustment in the
Purchase  Price  shall be  required  unless  such  adjustment  would  require an
increase or decrease of at least 1% in the Purchase  Price;  provided,  however,
that any  adjustments  which by reason of this Section 11(e) are not required to
be made  shall be carried  forward  and taken  into  account  in any  subsequent
adjustment.  All calculations under this Section 11 shall be made to the nearest
cent or to the nearest  ten-thousandth  of a Common  Share or other share or one
hundred-thousandth of a Preferred Share, as the case may be. Notwithstanding the
first sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the  earlier of (i) three (3) years from the date of
the transaction which requires such adjustment or (ii) the Expiration Date.

     (f) If as a result of an adjustment made pursuant to Section 11(a) or 13(a)
hereof,  the holder of any Right  thereafter  exercised shall become entitled to
receive any shares of capital stock other than Preferred Shares,  thereafter the
number of such other  shares so  receivable  upon  exercise  of any Right and if
required,  the Purchase Price thereof,  shall be subject to adjustment from time
to time in a manner  and on terms as nearly  equivalent  as  practicable  to the
provisions with respect to the Common Shares  contained in Sections 11(a),  (b),
(c), (e), (h), (i), (j), (k), (1) and (m), and the  provisions of Sections 7, 9,
10, 13 and 14 with respect to the Preferred  Shares shall apply on like terms to
any such other shares.

     (g)  All  Rights  originally  issued  by  the  Company  subsequent  to  any
adjustment  made to the Purchase  Price  hereunder  shall  evidence the right to

<PAGE>

purchase,  at the adjusted  Purchase Price, the number of  one-thousandths  of a
Preferred  Share  purchasable  from time to time  hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.

     (h) Unless the Company  shall have  exercised  its  election as provided in
Section  11(i),  upon each  adjustment of the Purchase  Price as a result of the
calculations made in Section 11(b), each Right outstanding  immediately prior to
the making of such adjustment shall  thereafter  evidence the right to purchase,
at the adjusted Purchase Price,  that number of Preferred Shares  (calculated to
the nearest one  hundred-thousandth  of a share) obtained by (i) multiplying (x)
the number of  Preferred  Shares  covered by a Right  immediately  prior to this
adjustment,  by (y) the  Purchase  Price  in  effect  immediately  prior to such
adjustment of the Purchase  Price,  and (ii) dividing the product so obtained by
the Purchase Price in effect  immediately  after such adjustment of the Purchase
Price.

     (i) The  Company  may elect on or after the date of any  adjustment  of the
Purchase Price as a result of the  calculations  made in Section 11(b) to adjust
the  number of  Rights,  in  substitution  for any  adjustment  in the number of
Preferred Shares  purchasable  upon the exercise of a Right.  Each of the Rights
outstanding  after such  adjustment of the number of Rights shall be exercisable
for the number of  one-thousandths  of a  Preferred  Share for which a Right was
exercisable  immediately  prior to such  adjustment.  Each  Right held of record
prior to such  adjustment  of the number of Rights  shall  become that number of
Rights  (calculated  to the nearest  ten-thousandth)  obtained  by dividing  the
Purchase Price in effect  immediately  prior to adjustment of the Purchase Price
by the Purchase  Price in effect  immediately  after  adjustment of the Purchase
Price.  The Company shall make a public  announcement  of its election to adjust
the number of Rights,  indicating  the record date for the  adjustment,  and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter,  but,
if the Rights  Certificates  have been  issued,  shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have been
issued,  upon each  adjustment of the number of Rights  pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing,  subject to Section 14 hereof,  the additional  Rights to which such
holders shall be entitled as a result of such  adjustment,  or, at the option of
the  Company,  shall  cause to be  distributed  to such  holders  of  record  in
substitution  and replacement for the Rights  Certificates  held by such holders
prior to the date of adjustment,  and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall  be  entitled  after  such  adjustment.   Rights  Certificates  so  to  be
distributed  shall be issued,  executed and countersigned in the manner provided
for herein (and may bear,  at the option of the Company,  the adjusted  Purchase
Price) and shall be  registered  in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.

     (j)  Irrespective  of any adjustment or change in the Purchase Price or the
number of Preferred Shares issuable upon the exercise of the Rights,  the Rights
Certificates  theretofore  and  thereafter  issued may  continue  to express the
Purchase  Price per one  one-thousandth  of a Preferred  Share and the number of
one-thousandths  of a Preferred Share which were expressed in the initial Rights
Certificates issued hereunder.

<PAGE>

     (k) Before  taking any action that would cause an  adjustment  reducing the
Purchase  Price  below  the par or  stated  value,  if  any,  of the  number  of
one-thousandths  of a Preferred Share issuable upon exercise of the Rights,  the
Company  shall  take any  corporate  action  which  may,  in the  opinion of its
counsel, be necessary in order that the Company may validly and legally issue as
fully  paid  and  nonassessable  shares  such  number  of  one-thousandths  of a
Preferred Share at such adjusted Purchase Price.

     (1) In any case in which this Section 11 shall  require that an  adjustment
in the  Purchase  Price be made  effective  as of a record  date for a specified
event,  the Company may elect to defer  until the  occurrence  of such event the
issuing  to the holder of any Right  exercised  after  such  record  date of the
number of  one-thousandths  of a  Preferred  Share and  other  capital  stock or
securities  of the Company,  if any,  issuable upon such exercise over and above
the number of  one-thousandths  of a Preferred  Share and other capital stock or
securities of the Company,  if any,  issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment;  provided,  however, that
the  Company  shall  deliver  to such  holder a due  bill or  other  appropriate
instrument  evidencing  such holder's  right to receive such  additional  shares
(fractional  or  otherwise)  upon the  occurrence  of the event  requiring  such
adjustment.

     (m) Anything in this Section 11 to the contrary  notwithstanding,  prior to
the Distribution  Date, the Company shall be entitled to make such reductions in
the Purchase Price, in addition to those adjustments  expressly required by this
Section 11, as and to the extent that it in its sole discretion  shall determine
to be  advisable  in order  that any (i)  consolidation  or  subdivision  of the
Preferred or Common  Shares,  (ii) issuance  wholly for cash of any Preferred or
Common Shares at less than the current market price,  (iii) issuance  wholly for
cash of  Preferred  or Common  Shares  or  securities  which by their  terms are
convertible  into or  exchangeable  for Preferred or Common  Shares,  (iv) stock
dividends  or (v)  issuance of rights,  options or warrants  referred to in this
Section 11,  hereafter made by the Company to holders of its Preferred or Common
Shares shall not be taxable to such shareholders.

     (n) The Company  covenants  and agrees that it shall not, at any time after
the Distribution Date, effect or permit to occur any Triggering Event or Section
13 Event,  if (i) at the time or  immediately  after  such  Triggering  Event or
Section  13  Event  there  are any  rights,  warrants  or other  instruments  or
securities  outstanding  or  agreements  in  effect  which  would  substantially
diminish or  otherwise  eliminate  the  benefits  intended to be afforded by the
Rights or (ii) prior to,  simultaneously  with or immediately after such Section
13 Event, the shareholders of the Person who constitutes,  or would  constitute,
the "Principal Party" for purposes of Section 13(b) hereof shall have received a
distribution of Rights  previously owned by such Person or any of its Affiliates
and Associates.

     (o) The Company covenants and agrees that, after the Distribution  Date, it
will not,  except as permitted by Sections 23, 24 or 27 hereof,  take (or permit
to be taken)  any  action if at the time such  action is taken it is  reasonably
foreseeable that such action will diminish  substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.

     (p)  Anything in this  Agreement to the  contrary  notwithstanding,  in the
event the Company shall at any time after the date of this Agreement (A) declare

<PAGE>

a dividend on the Preferred  Shares payable in Preferred  Shares,  (B) subdivide
the outstanding  Preferred Shares, (C) combine the outstanding  Preferred Shares
(by reverse stock split or otherwise) into a smaller number of Preferred Shares,
or (D)  issue any  shares  of its  capital  stock in a  reclassification  of the
Preferred  Shares  (including  any such  reclassification  in connection  with a
consolidation  or merger in which the  Company is the  continuing  or  surviving
corporation),  then,  in each such event,  except as otherwise  provided in this
Section 11 and Section 7(e) hereof:  (1) each of the Rights  outstanding  at the
time  of the  record  date  for  such  dividend  or the  effective  date of such
subdivision,  combination or reclassification shall be proportionately  adjusted
to  that  number  of  Rights  (calculated  to  the  nearest  one  ten-thousandth
(1/10,000)  of a Right)  equal to a  fraction  (the  "Exchange  Fraction"),  the
numerator of which shall be the total  number of  Preferred  Shares or shares of
capital  stock  issued  in  such   reclassification   of  the  Preferred  Shares
outstanding  immediately  following such time and the denominator of which shall
be the total number of Preferred Shares  outstanding  immediately  prior to such
time,  and the number of Rights that shall  thereafter be issued with respect to
each  Common  Share or share of other  capital  stock  that shall be issued in a
reclassification  of the Common Shares prior to the  Distribution  Date shall be
equal to the total number of outstanding Rights immediately after such event (as
adjusted pursuant to this clause (1)) divided by the total number of outstanding
Common Shares or shares of such other capital stock immediately after such event
(subject to further  adjustment  pursuant to the provisions of this  Agreement);
(2) the  Purchase  Price  in  effect  at the  time of the  record  date for such
dividend  or  of  the  effective  date  of  such  subdivision,   combination  or
reclassification  shall be adjusted so that the Purchase Price  thereafter shall
equal the result  obtained by dividing the Purchase Price in effect  immediately
prior to such time by the Exchange Fraction; provided, however, that in no event
shall the  consideration  to be paid upon the exercise of one Right be less than
the aggregate  par value of the shares of capital stock of the Company  issuable
upon  exercise  of such  Right;  and  (3) the  number  of  one-thousandths  of a
Preferred  Share or share of such other capital stock issuable upon the exercise
of each Right shall remain unchanged  immediately  after such event, but, in the
event of a  reclassification,  the kind of shares  issuable upon the exercise of
each Right immediately after such  reclassification  shall be adjusted to be the
kind of shares of such  other  capital  stock  issued in such  reclassification,
rather than Preferred Shares.

     Section  12.  Certificate  of Adjusted  Purchase  Price or Number of Shares
Whenever an  adjustment  is made as  provided in Sections 11 and 13 hereof,  the
Company shall promptly (a) prepare a certificate  setting forth such  adjustment
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Preferred Shares a copy of
such certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Section 26 hereof.  Notwithstanding the foregoing
sentence,  the  failure of the Company to make such  certification  or give such
notice shall not affect the validity of such  adjustment  or the force or effect
of the  requirement  for  such  adjustment.  The  Rights  Agent  shall  be fully
protected in relying on any such  certificate  and on any  adjustment  contained
therein and shall not be deemed to have knowledge of such adjustment  unless and
until it shall have received such certificate.

     Section 13. Consolidation,  Merger or Sale or Transfer of Assets or Earning
Power.

     (a) In the event that,  following the Shares Acquisition Date,  directly or
indirectly:

<PAGE>

     (i) the Company shall  consolidate  with, or merge with and into, any other
Person (other than a Subsidiary  of the Company in a  transaction  the principal
purpose of which is to change the state of incorporation of the Company or which
complies with Section 11(o) hereof);

     (ii) any Person  (other than a Subsidiary  of the Company in a  transaction
that complies with Section 11(o) hereof) shall consolidate with the Company,  or
merge with and into the  Company  and the  Company  shall be the  continuing  or
surviving corporation of such consolidation or merger; or

     (iii) the Company  shall sell or otherwise  transfer (or one or more of its
Subsidiaries  shall sell or otherwise  transfer),  in one or more  transactions,
assets or earning power  aggregating  50% or more of the assets or earning power
of the Company and its  Subsidiaries  (taken as a whole) to any other  Person or
Persons (other than the Company or one or more of its wholly owned  Subsidiaries
in one or more transactions, each of which complies with Section 11(o) hereof),

     then, and in each such case, proper provision shall be made so that

     (A) each holder of a Right  (except as  otherwise  provided  herein)  shall
thereafter  have the right to receive,  upon the exercise  thereof in accordance
with the terms of this Agreement,  such number of validly authorized and issued,
fully  paid  and  nonassessable   Common  Shares  of  the  Principal  Party  (as
hereinafter defined), free of any liens,  encumbrances,  rights of first refusal
or other  adverse  claims,  as shall be  equal  to the  result  obtained  by (1)
multiplying the then current Purchase Price by the number of  one-thousandths of
a Preferred  Share for which a Right was  exercisable  immediately  prior to the
first  occurrence of a Section 13 Event (or, if a Triggering  Event has occurred
prior to the first  occurrence of a Section 13 Event,  multiplying the number of
such  one-thousandths  of a  Preferred  Share for which a Right was  exercisable
immediately  prior to the first occurrence of a Triggering Event by the Purchase
Price in effect  immediately  prior to such first  occurrence)  and (2) dividing
that product (which, following the first occurrence of a Section 13 Event, shall
be referred to as the "Total Exercise Price" for each Right and for all purposes
of this  Agreement)  by 50% of the current per share  market  price  (determined
pursuant to Section 11(d) hereof) of the Common Shares of such  Principal  Party
on the date of consummation of such Section 13 Event;

     (B) such Principal Party shall  thereafter be liable for, and shall assume,
by virtue  of such  Section  13 Event,  all the  obligations  and  duties of the
Company pursuant to this Agreement;

     (C) the  term  "Company"  shall  thereafter  be  deemed  to  refer  to such
Principal Party, it being  specifically  intended that the provisions of Section
11  hereof  shall  apply  only to  such  Principal  Party  following  the  first
occurrence of a Section 13 Event;

     (D) such Principal Party shall take such steps (including,  but not limited
to, the  reservation of a sufficient  number of its Common Shares) in connection
with the consummation of any such transaction as may be necessary to assure that
the provisions  hereof shall  thereafter be applicable,  as nearly as reasonably
may be,  in  relation  to its  Common  Shares  thereafter  deliverable  upon the
exercise of the Rights.

<PAGE>

     (b) "Principal Party" shall mean, in the case of any transaction  described
in clause (i), (ii) or (iii) of Section  13(a),  the Person or Acquiring  Person
referred  to  therein  (or  such  Person's  or  Acquiring  Person's   successor,
including,  if  applicable,  the Company,  if it is the surviving  corporation),
provided,  however,  that in any such  case,  (i) if such  Person is a direct or
indirect  Subsidiary of another  Person,  "Principal  Party" shall refer to such
other  Person  and  (ii)  in case  such  Person  is a  Subsidiary,  directly  or
indirectly,  of more than one Person, "Principal Party" shall refer to whichever
of such Persons is the issuer of the Common Shares having the greatest aggregate
value,  and provided,  further,  that for purposes of transactions  described in
clause (iii) hereof,  "Principal Party" shall refer to that Person receiving the
greatest  portion of the assets or earning  power  transferred  pursuant to such
transaction or transactions.

     (c) If, for any reason, the Rights cannot be exercised for Common Shares of
such Principal  Party as provided in Section  13(a),  then each holder of Rights
shall have the right to exchange its Rights for cash from such  Principal  Party
in an amount  equal to the number of Common  Shares that it would  otherwise  be
entitled  to  purchase  times 50% of the  current  per share  market  price,  as
determined  pursuant to Section  11(d)  hereof,  of such  Common  Shares of such
Principal Party. If, for any reason, the foregoing formulation cannot be applied
to determine  the cash amount into which the Rights are  exchangeable,  then the
Board of Directors,  based upon the advice of one or more nationally  recognized
investment  banking firms, and based upon the total value of the Company,  shall
determine  such amount  reasonably and with good faith to the holders of Rights.
Any such determination shall be final and binding on the Rights Agent.

     (d) Notwithstanding anything in this Agreement to the contrary,  Section 13
shall not be applicable  to a  transaction  described in clauses (i) and (ii) of
Section 13(a) if: (i) such  transaction is consummated  with a Person or Persons
who acquired  Common  Shares  pursuant to a Permitted  Offer (or a  wholly-owned
Subsidiary  of any such Person or  Persons);  (ii) the price per share of Common
Shares  offered  in such  transaction  is not less  than the  price per share of
Common Shares paid to all holders of Common  Shares whose shares were  purchased
pursuant to such  Permitted  Offer;  and (iii) the form of  consideration  being
offered to the remaining  holders of Common Shares pursuant to such  transaction
is the same form as the form of  consideration  paid pursuant to such  Permitted
Offer.  Upon  consummation of any such transaction  contemplated by this Section
13(d), all Rights hereunder shall expire.

     (e) The  Company  shall not  consummate  any  Section  13 Event  unless the
Principal Party shall have a sufficient  number of authorized Common Shares that
have not been issued or reserved  for issuance to permit the exercise in full of
the Rights in  accordance  with this  Section 13 and unless  prior  thereto  the
Company and such issuer shall have  executed and delivered to the Rights Agent a
supplemental   agreement  confirming  that  such  Principal  Party  shall,  upon
consummation of such Section 13 Event,  assume this Agreement in accordance with
Sections  13(a) and (b) hereof,  that all rights of first  refusal or preemptive
rights in respect of the issuance of Common Shares of such Principal  Party upon
exercise  of  outstanding  Rights  have been  waived,  that there are no rights,
warrants,   instruments   or  securities   outstanding   or  any  agreements  or
arrangements  which, as a result of the consummation of such transaction,  would

<PAGE>

eliminate or substantially  diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such Principal
Party under this Agreement,  and further  providing that, as soon as practicable
after the date of such Section 13 Event, such Principal Party will:

     (i) prepare and file a registration statement under the Securities Act with
respect to the Rights and the securities purchasable upon exercise of the Rights
on an  appropriate  form,  use its  best  efforts  to  cause  such  registration
statement to become  effective as soon as practicable  after such filing and use
its best efforts to cause such registration  statement to remain effective (with
a prospectus at all times meeting the  requirements of the Securities Act) until
the Expiration Date, and similarly comply with applicable state securities laws;

     (ii) use its best  efforts to list (or  continue the listing of) the Rights
and the  securities  purchasable  upon  exercise  of the  Rights  on a  national
securities  exchange or to meet the  eligibility  requirements  for quotation on
NASDAQ; and

     (iii) deliver to holders of the Rights historical  financial statements for
such  Principal  Party which comply in all respects  with the  requirements  for
registration on Form 10 (or any successor form) under the Exchange Act.

     In the event that at any time after the  occurrence  of a Triggering  Event
some or all of the  Rights  shall  not  have  been  exercised  at the  time of a
transaction  described in this Section 13, the Rights which have not theretofore
been  exercised  shall  thereafter  be  exercisable  in the manner  described in
Section  13(a)  (without  taking into account any prior  adjustment  required by
Section 11(a)(ii)).

     (f) The provisions of this Section 13 shall  similarly  apply to successive
mergers or consolidations or sales or other transfers.

     Section 14. Fractional Rights and Fractional Shares.

     (a) The Company  shall not be required to issue  fractions  of Rights or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional  Rights,  there shall be paid to the registered holders of the Rights
Certificates  with regard to which such  fractional  Rights  would  otherwise be
issuable,  an amount in cash equal to the same  fraction of the  current  market
value of a whole  Right.  For the purposes of this  Section  14(a),  the current
market  value of a whole Right shall be the closing  price of the Rights for the
Trading Day immediately  prior to the date on which such fractional Rights would
have been otherwise  issuable,  as determined pursuant to the second sentence of
Section 11(d) hereof.

     (b) The  Company  shall not be  required to issue  fractions  of  Preferred
Shares (other than fractions that are integral  multiples of one  one-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute  certificates
which  evidence  fractional  Preferred  Shares  (other than  fractions  that are
integral  multiples  of one  one-thousandth  of a Preferred  Share).  In lieu of
fractional   Preferred   Shares  that  are  not   integral   multiples   of  one
one-thousandth  of a Preferred  Share,  the Company shall pay to the  registered
holders of Rights  Certificates  at the time such Rights are exercised as herein

<PAGE>

provided  an amount in cash equal to the same  fraction  of the  current  market
value of a Common Share.  For purposes of this Section 14(b), the current market
value of a  Common  Share  shall be the  closing  price  of a Common  Share  (as
determined  pursuant  to the second  sentence of Section  11(d)  hereof) for the
Trading Day immediately prior to the date of such exercise.

     (c) The holder of a Right by the acceptance of the Right  expressly  waives
his or her right to receive any fractional  Rights or any fractional shares upon
exercise of a Right.

     Section  15.  Rights of Action  All  rights  of action in  respect  of this
Agreement,  excepting  the  rights of action  given to the  Rights  Agent  under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares);  and any registered holder of any Rights  Certificate (or, prior
to the  Distribution  Date,  of the Common  Shares),  without the consent of the
Rights Agent or of the holder of any other Rights  Certificate (or, prior to the
Distribution Date, of the Common Shares),  may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or  proceeding  against the Company to enforce,  or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights  Certificate in
the manner provided in such Rights  Certificate  and in this Agreement.  Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically  acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this  Agreement and will be entitled to specific
performance of the obligations  under,  and injunctive  relief against actual or
threatened  violations  of,  the  obligations  of any  Person  subject  to  this
Agreement.

     Section  16.  Agreement  of Rights  Holders  Every  holder  of a Right,  by
accepting  the same,  consents  and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

     (a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Shares;

     (b) after the Distribution  Date, the Rights  Certificates are transferable
only on the registry  books of the Rights Agent if  surrendered at the principal
office or  offices  of the  Rights  Agent  designated  for such  purposes,  duly
endorsed  or  accompanied  by a  proper  instrument  of  transfer  and  with the
appropriate forms and certificates fully executed; and

     (c) subject to Sections  6(a) and 7(f)  hereof,  the Company and the Rights
Agent may deem and treat the person in whose name the  Rights  Certificate  (or,
prior to the  Distribution  Date, the associated  Common Shares  certificate) is
registered  as the absolute  owner thereof and of the Rights  evidenced  thereby
(notwithstanding   any   notations   of  ownership  or  writing  on  the  Rights
Certificates or the associated  Common Shares  certificate  made by anyone other
than the Company or the Rights Agent) for all purposes  whatsoever,  and neither
the  Company  nor the  Rights  Agent  shall be  affected  by any  notice  to the
contrary.

     Section 17. Rights  Certificate  Holder Not Deemed a Shareholder No holder,
as such, of any Rights  Certificate shall be entitled to vote, receive dividends

<PAGE>

or be deemed for any  purpose  the holder of the  Preferred  Shares or any other
securities  of the Company  which may at any time be issuable on the exercise of
the Rights  represented  thereby,  nor shall anything contained herein or in any
Rights  Certificate  be  construed  to  confer  upon the  holder  of any  Rights
Certificate,  as such,  any of the rights of a shareholder of the Company or any
right to vote for the  election of  directors  or upon any matter  submitted  to
shareholders  at any  meeting  thereof,  or to give or  withhold  consent to any
corporate  action,  or to receive notice of meetings or other actions  affecting
shareholders  (except as provided in Section 25 hereof), or to receive dividends
or subscription  rights,  or otherwise,  until the Right or Rights  evidenced by
such  Rights  Certificate  shall  have been  exercised  in  accordance  with the
provisions hereof.

     Section 18. Concerning the Rights Agent.

     (a) The Company agrees to pay to the Rights Agent  reasonable  compensation
for all services  rendered by it hereunder  and, from time to time, on demand of
the  Rights  Agent,   its  reasonable   expenses  and  counsel  fees  and  other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company also agrees to
indemnify  the Rights  Agent for,  and to hold it  harmless  against,  any loss,
liability or expense,  incurred without gross  negligence,  bad faith or willful
misconduct on the part of the Rights Agent,  for anything done or omitted by the
Rights  Agent in  connection  with the  acceptance  and  administration  of this
Agreement,  including  the costs and expenses of defending  against any claim of
liability in the premises.

     (b) The Rights Agent shall be protected  and shall incur no liability  for,
or in respect of any action taken, suffered or omitted by it in connection with,
its  administration of this Agreement in reliance upon any Rights Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the  Company,   instrument  of  assignment  or  transfer,   power  of  attorney,
endorsement,   affidavit,  letter,  notice,  direction,   consent,  certificate,
statement  or other  paper or  document  believed  by it to be genuine and to be
signed, executed and, where necessary,  verified or acknowledged,  by the proper
Person or  Persons,  or  otherwise  upon the  advice of  counsel as set forth in
Section 20 hereof.

     Section 19. Merger or Consolidation or Change of Name of Rights Agent.

     (a) Any  corporation  into which the Rights Agent or any  successor  Rights
Agent may be merged or with  which it may be  consolidated,  or any  corporation
resulting  from any merger or  consolidation  to which the  Rights  Agent or any
successor  Rights Agent shall be a party, or any  corporation  succeeding to the
corporate  trust  business of the Rights Agent or any  successor  Rights  Agent,
shall be the  successor  to the Rights  Agent under this  Agreement  without the
execution  or filing of any paper or any  further  act on the part of any of the
parties hereto;  provided,  however, that such corporation would be eligible for
appointment  as a  successor  Rights  Agent under the  provisions  of Section 21
hereof.  In case at the time such  successor  Rights Agent shall  succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned  but not delivered,  any such successor Rights Agent may adopt the
countersignature  of the  predecessor  Rights  Agent  and  deliver  such  Rights
Certificates  so  countersigned;  and in  case at that  time  any of the  Rights
Certificates shall not have been  countersigned,  any successor Rights Agent may
countersign  such  Rights  Certificates  either  in the name of the  predecessor

<PAGE>

Rights Agent or in the name of the successor Rights Agent; and in all such cases
such  Rights  Certificates  shall  have the full  force  provided  in the Rights
Certificates and in this Agreement.

     (b) In case at any time the name of the Rights  Agent  shall be changed and
at such time any of the Rights  Certificates  shall have been  countersigned but
not delivered,  the Rights Agent may adopt the countersignature  under its prior
name and deliver Rights Certificates so countersigned;  and in case at that time
any of the Rights  Certificates  shall not have been  countersigned,  the Rights
Agent may countersign  such Rights  Certificates  either in its prior name or in
its changed name; and in all such cases such Rights  Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.

     Section 20. Duties of Rights Agent The Rights Agent  undertakes  the duties
and  obligations  imposed  by  this  Agreement  upon  the  following  terms  and
conditions,  by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:

     (a) The  Rights  Agent may  consult  with legal  counsel  (who may be legal
counsel for the  Company),  and the opinion or advice of such  counsel  shall be
full and complete  authorization  and  protection  to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance  with such opinion
or advice.

     (b)  Whenever in the  performance  of its duties under this  Agreement  the
Rights  Agent  shall  deem it  necessary  or  desirable  that any fact or matter
(including,  without  limitation,  the identity of any Acquiring  Person and the
determination  of "current per share market  price") be proved or established by
the Company  prior to taking or  suffering  any action  hereunder,  such fact or
matter  (unless  other  evidence  in  respect  thereof  be  herein  specifically
prescribed)  may be  deemed  to be  conclusively  proved  and  established  by a
certificate  signed by any one of the Chairman of the Board, the Chief Executive
Officer,  the President,  any Vice President,  the Chief Financial Officer,  the
Secretary or any Assistant  Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full  authorization to the Rights Agent for
any action  taken or suffered in good faith by it under the  provisions  of this
Agreement in reliance upon such certificate.

     (c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own gross negligence, bad faith or willful misconduct.

     (d) The  Rights  Agent  shall not be liable  for or by reason of any of the
statements  of fact or recitals  contained  in this  Agreement  or in the Rights
Certificates (except its countersignature  thereof) or be required to verify the
same, but all such  statements and recitals are and shall be deemed to have been
made by the Company only.

     (e) The Rights  Agent shall not be under any  responsibility  in respect of
the validity of this Agreement or the execution and delivery  hereof (except the
due  execution  hereof by the Rights  Agent) or in respect  of the  validity  or
execution of any Rights Certificate (except its countersignature  thereof);  nor
shall it be  responsible  for any  breach  by the  Company  of any  covenant  or
condition contained in this Agreement or in any Rights Certificate; nor shall it

<PAGE>

be  responsible  for any  change  in the  exercisability  of the  Rights  or any
adjustment in the terms of the Rights  (including  the manner,  method or amount
thereof)  provided for in Sections 3, 11, 13, 23 or 24, or the  ascertaining  of
the existence of facts that would require any such change or adjustment  (except
with respect to the exercise of Rights  evidenced by Rights  Certificates  after
receipt by the Rights Agent of a  certificate  furnished  pursuant to Section 12
describing  such change or  adjustment);  nor shall it by any act  hereunder  be
deemed  to make  any  representation  or  warranty  as to the  authorization  or
reservation of any Preferred  Shares to be issued  pursuant to this Agreement or
any Rights  Certificate or as to whether any Preferred Shares will, when issued,
be validly authorized and issued, fully paid and nonassessable.

     (f) The  Company  agrees that it will  perform,  execute,  acknowledge  and
deliver or cause to be performed, executed,  acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying  out or  performing  by the Rights Agent of
the provisions of this Agreement.

     (g)  The  Rights  Agent  is  hereby   authorized  and  directed  to  accept
instructions  with respect to the  performance of its duties  hereunder from any
one of the Chairman of the Board,  the Chief Executive  Officer,  the President,
any Vice President,  the Chief Financial Officer, the Secretary or any Assistant
Secretary  of the  Company,  and  to  apply  to  such  officers  for  advice  or
instructions in connection  with its duties,  and it shall not be liable for any
action taken or suffered by it in good faith in accordance with  instructions of
any  such  officer  or  for  any  delay  in  acting  while   waiting  for  those
instructions.  Any application by the Rights Agent for written instructions from
the  Company  may, at the option of the Rights  Agent,  set forth in writing any
action  proposed  to be taken or omitted by the Rights  Agent  under this Rights
Agreement  and the date on and/or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any action
taken by, or  omission  of,  the  Rights  Agent in  accordance  with a  proposal
included  in any  such  application  on or  after  the  date  specified  in such
application  (which date shall not be less than five (5) Business Days after the
date any officer of the Company actually receives such  application,  unless any
such officer shall have  consented in writing to an earlier date) unless,  prior
to taking any such action (or the  effective  date in the case of an  omission),
the Rights Agent shall have received  written  instructions  in response to such
application specifying the action to be taken or omitted.

     (h) The Rights Agent and any shareholder,  director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other  securities
of the Company or become pecuniarily  interested in any transaction in which the
Company  may be  interested,  or  contract  with or lend money to the Company or
otherwise  act as fully and freely as though it were not Rights Agent under this
Agreement.  Nothing  herein  shall  preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.

     (i) The Rights  Agent may execute and  exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its  attorneys  or  agents,  and the Rights  Agent  shall not be  answerable  or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the  Company  resulting  from any such  act,  default,
neglect or misconduct,  provided  reasonable care was exercised in the selection
and continued employment thereof.

<PAGE>

     (j) No provision of this Agreement shall require the Rights Agent to expend
or risk  its own  funds  or  otherwise  incur  any  financial  liability  in the
performance  of any of its duties  hereunder or in the exercise of its rights if
there shall be reasonable  grounds for believing that repayment of such funds or
adequate  indemnification  against  such  risk or  liability  is not  reasonably
assured to it.

     (k) If, with respect to any Rights  Certificate  surrendered  to the Rights
Agent  for  exercise  or  transfer,  the  certificate  attached  to the  form of
assignment  or form of election to purchase,  as the case may be, has either not
been  completed  or  indicates  an  affirmative  response  to  clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

     Section 21. Change of Rights Agent The Rights Agent or any successor Rights
Agent may resign and be  discharged  from its duties under this  Agreement  upon
thirty (30) days' notice in writing  mailed to the Company and to each  transfer
agent of the  Preferred  Shares and the Common Shares by registered or certified
mail, and to the holders of the Rights  Certificates  by  first-class  mail. The
Company may remove the Rights  Agent or any  successor  Rights Agent upon thirty
(30) days' notice in writing,  mailed to the Rights  Agent or  successor  Rights
Agent,  as the case may be, and to each transfer  agent of the Preferred  Shares
and the Common Shares by registered or certified mail, and to the holders of the
Rights  Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a  successor  to the  Rights  Agent.  If the  Company  shall  fail to make  such
appointment  within a period of thirty  (30) days  after  giving  notice of such
removal  or  after  it has been  notified  in  writing  of such  resignation  or
incapacity by the resigning or incapacitated  Rights Agent or by the holder of a
Rights  Certificate  (who  shall,  with such  notice,  submit  his or her Rights
Certificate  for inspection by the Company),  then the registered  holder of any
Rights  Certificate  may apply to any court of  competent  jurisdiction  for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court,  shall be either (a) a corporation  organized
and doing  business  under the laws of the United  States or of any state of the
United States, in good standing, which is authorized under such laws to exercise
corporate trust or shareholder  services powers and is subject to supervision or
examination  by  federal  or state  authority  and  which has at the time of its
appointment  as Rights  Agent a  combined  capital  and  surplus of at least $50
million  or (b) an  affiliate  of such a  corporation.  After  appointment,  the
successor Rights Agent shall be vested with the same powers,  rights, duties and
responsibilities  as if it had been  originally  named as Rights  Agent  without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose.  Not later than the  effective  date of any such  appointment,  the
Company shall file notice thereof in writing with the  predecessor  Rights Agent
and each transfer agent of the Preferred Shares and the Common Shares,  and mail
a  notice  thereof  in  writing  to  the   registered   holders  of  the  Rights
Certificates.  Failure  to give any  notice  provided  for in this  Section  21,
however, or any defect therein, shall not affect the legality or validity of the
resignation  or removal of the Rights Agent or the  appointment of the successor
Rights Agent, as the case may be.

<PAGE>

     Section 22. Issuance of New Rights Certificates  Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary,  the Company may,
at its option,  issue new Rights Certificates  evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property  purchasable  under the Rights  Certificates made in accordance with
the provisions of this Agreement.  In addition,  in connection with the issuance
or sale of  Common  Shares  following  the  Distribution  Date and  prior to the
redemption or expiration of the Rights,  the Company (a) shall,  with respect to
Common  Shares so issued or sold  pursuant to the  exercise of stock  options or
under any employee  plan or  arrangement  or upon the  exercise,  conversion  or
exchange  of  securities  hereinafter  issued by the Company and (b) may, in any
other case, if deemed  necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the appropriate number of Rights
in connection with such issuance or sale;  provided,  however,  that (i) no such
Rights  Certificate  shall be issued and this sentence shall be null and void ab
initio if, and to the extent that, such issuance or this sentence would create a
significant  risk of or result  in  material  adverse  tax  consequences  to the
Company or the Person to whom such Rights  Certificate  would be issued or would
create a significant  risk of or result in such  options' or employee  plans' or
arrangements'  failing to qualify for otherwise  available special tax treatment
and (ii) no such Rights  Certificate shall be issued if, and to the extent that,
appropriate  adjustment  shall  otherwise have been made in lieu of the issuance
thereof.

     Section 23. Redemption.

     (a) The Company  may,  at its option and with the  approval of the Board of
Directors,  at any time prior to the Close of Business on the earlier of (i) the
tenth day  following  the Shares  Acquisition  Date or such later date as may be
determined  by action of a majority of Continuing  Directors  then in office and
publicly  announced by the Company or (ii) the Final Expiration Date, redeem all
but not less than all the then outstanding Rights at a redemption price of $0.01
per Right,  appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
herein  referred  to as the  "Redemption  Price")  and the  Company  may, at its
option,  pay the Redemption  Price either in Common Shares (based on the current
per share market price thereof (as determined  pursuant to Section 11(d) hereof)
at the time of redemption) or cash. Such redemption of the Rights by the Company
may be made  effective at such time,  on such basis and with such  conditions as
the Board of Directors in its sole discretion may establish;  provided, however,
if the Board of Directors of the Company authorizes  redemption of the Rights on
or after the time a Person  becomes  an  Acquiring  Person,  then  there must be
Continuing  Directors  then in office and such  authorization  shall require the
concurrence of a majority of such Continuing Directors.

     (b)  Immediately  upon the action of the Board of  Directors of the Company
ordering the  redemption of the Rights,  evidence of which shall have been filed
with the Rights  Agent,  and without any further  action and without any notice,
the right to exercise the Rights will terminate and the only right thereafter of
the holders of Rights  shall be to receive  the  Redemption  Price.  The Company
shall  promptly give public notice of any such  redemption;  provided,  however,
that the failure to give, or any defect in, any such notice shall not affect the
validity of such redemption.  Within ten (10) days after the action of the Board
of  Directors  ordering the  redemption  of the Rights,  the Company  shall give
notice  of such  redemption  to the  Rights  Agent and the  holders  of the then

<PAGE>

outstanding  Rights by  mailing  such  notice to all such  holders at their last
addresses as they appear upon the  registry  books of the Rights Agent or, prior
to the  Distribution  Date, on the registry  books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption  will state the method by which the payment of the  Redemption  Price
will be made.  Neither the Company nor any of its  Affiliates or Associates  may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and
other  than in  connection  with the  purchase  of  Common  Shares  prior to the
Distribution Date.

     Section 24. Exchange.

     (a)  Subject to  applicable  laws,  rules and  regulations,  and subject to
subsection  (c) below,  the Company may, at its option,  by majority vote of the
Board of Directors and a majority vote of the Continuing Directors,  at any time
after the  occurrence  of a Triggering  Event,  exchange all or part of the then
outstanding  and  exercisable  Rights (which shall not include  Rights that have
become void pursuant to the provisions of Section 7(e) hereof) for Common Shares
at an exchange  ratio of one Common Share per Right,  appropriately  adjusted to
reflect any stock split, stock dividend or similar  transaction  occurring after
the date hereof (such exchange ratio being hereinafter referred to as the "Ratio
of Exchange").  Notwithstanding the foregoing,  the Board of Directors shall not
be  empowered to effect such  exchange at any time after any Person  (other than
the Company,  any  Subsidiary of the Company,  any employee  benefit plan of the
Company or any such  Subsidiary,  or any  entity  holding  Common  Shares for or
pursuant  to the  terms of any such  plan),  together  with all  Affiliates  and
Associates of such Person,  becomes the  Beneficial  Owner of 50% or more of the
Common Shares then outstanding.

     (b)  Immediately  upon the action of the Board of  Directors  ordering  the
exchange of any Rights pursuant to subsection (a) of this Section 24 and without
any further  action and without  any notice,  the right to exercise  such Rights
shall  terminate and the only right  thereafter of a holder of such Rights shall
be to receive  that number of Common  Shares  equal to the number of such Rights
held by such holder multiplied by the Ratio of Exchange.  The Company shall give
public notice of any such exchange; provided, however, that the failure to give,
or any defect in, such notice  shall not affect the  validity of such  exchange.
The  Company  shall mail a notice of any such  exchange to all of the holders of
such Rights at their last  addresses as they appear upon the  registry  books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged.  Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.

     (c) In the event that there shall not be  sufficient  Common  Shares issued
but not  outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with Section 24(a),  the Company shall either take
such  action as may be  necessary  to  authorize  additional  Common  Shares for

<PAGE>

issuance  upon  exchange  of the  Rights or  alternatively,  at the  option of a
majority of the Board of  Directors,  with respect to each Right (i) pay cash in
an amount  equal to the  Current  Value  (as  hereinafter  defined),  in lieu of
issuing  Common  Shares  in  exchange  therefor,  or (ii)  issue  debt or equity
securities or a combination thereof,  having a value equal to the Current Value,
in lieu of issuing  Common  Shares in exchange  for each such  Right,  where the
value  of  such  securities  shall  be  determined  by a  nationally  recognized
investment banking firm selected by majority vote of the Board of Directors,  or
(iii)  deliver any  combination  of cash,  property,  Common Shares and/or other
securities having a value equal to the Current Value in exchange for each Right.
For  purposes  of this  Section  24(c) only,  the  Current  Value shall mean the
product of the  current  per share  market  price of Common  Shares  (determined
pursuant to Section 11(d) on the date of the  occurrence of the event  described
above in  subparagraph  (a)) multiplied by the number of Common Shares for which
the Right  otherwise  would be  exchangeable  if there  were  sufficient  shares
available.  To the extent that the Company  determines  that some action need be
taken pursuant to clauses (i), (ii) or (iii) of this Section 24(c), the Board of
Directors may temporarily  suspend the exercisability of the Rights for a period
of up to sixty  (60) days  following  the date on which the event  described  in
Section  24(a)  shall  have  occurred,  in order to seek  any  authorization  of
additional  Common Shares and/or to decide the appropriate  form of distribution
to be made pursuant to the above  provision and to determine the value  thereof.
In  the  event  of any  such  suspension,  the  Company  shall  issue  a  public
announcement  stating that the exercisability of the Rights has been temporarily
suspended.

     (d) The Company  shall not be required to issue  fractions of Common Shares
or to distribute  certificates which evidence  fractional Common Shares. In lieu
of such fractional Common Shares,  there shall be paid to the registered holders
of the Rights  Certificates  with regard to which such fractional  Common Shares
would otherwise be issuable, an amount in cash equal to the same fraction of the
current per share market value of a whole Common Share (as  determined  pursuant
to the second sentence of Section 11(d) hereof).

     (e) The  Company  may,  at its  option,  by  majority  vote of the Board of
Directors,  at any time  before  any  Person  has  become an  Acquiring  Person,
exchange all or part of the then outstanding  Rights for rights of substantially
equivalent  value, as determined  reasonably and with good faith by the Board of
Directors, based upon the advice of one or more nationally recognized investment
banking firms.

     (f)  Immediately  upon the action of the Board of  Directors  ordering  the
exchange of any Rights pursuant to subsection (e) of this Section 24 and without
any further  action and without  any notice,  the right to exercise  such Rights
shall  terminate and the only right  thereafter of a holder of such Rights shall
be to receive that number of rights in exchange  therefor as has been determined
by the Board of Directors in accordance with  subsection (e) above.  The Company
shall give  public  notice of any such  exchange;  provided,  however,  that the
failure to give,  or any defect in, such notice shall not affect the validity of
such  exchange.  The Company  shall mail a notice of any such exchange to all of
the  holders of such  Rights at their last  addresses  as they  appear  upon the
registry books of the transfer  agent for the Common Shares of the Company.  Any
notice  which is mailed in the manner  herein  provided  shall be deemed  given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the Rights will be effected.

<PAGE>

     Section 25. Notice of Certain Events.

     (a) In case the  Company  shall  propose  to  effect or permit to occur any
Triggering Event having the effects  described in Section  11(a)(ii) hereof or a
Section 13 Event, the Company shall give notice thereof to each holder of Rights
in  accordance  with  Section  26 hereof  at least  twenty  (20)  days  prior to
occurrence of such Triggering Event or Section 13 Event.

     (b) In case any Triggering Event or Section 13 Event shall occur,  then, in
any such case, the Company shall as soon as practicable  thereafter give to each
holder of a Rights  Certificate,  in accordance with Section 26 hereof, a notice
of the  occurrence  of  such  event,  which  shall  specify  the  event  and the
consequences  of the event to holders of Rights under Sections  11(a)(ii) and 13
hereof.

     Section 26. Notices  Notices or demands  authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights  Certificate to
or on the Company  shall be  sufficiently  given or made if sent by  first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:

                           Quality Semiconductor, Inc.
                           851 Martin Avenue
                           Santa Clara, CA  95050
                           Attention:  President

Subject to the provisions of Section 21 hereof,  any notice or demand authorized
by this  Agreement  to be given or made by the  Company  or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail,  postage prepaid,  addressed (until another address
is filed in writing with the Company) as follows:

                           BankBoston, N.A.
                           c/o Boston Equiserve, L.P.
                           435 Tasso Street
                           Palo Alto, CA
                           Attention:  Account Manager

Notices  or  demands  authorized  by this  Agreement  to be given or made by the
Company or the Rights  Agent to the  holder of any Rights  Certificate  shall be
sufficiently  given  or  made  if sent by  first-class  mail,  postage  prepaid,
addressed  to such holder at the address of such holder as shown on the registry
books of the Company.

     Section 27.  Supplements and Amendments Prior to the Distribution Date, the
Company  may  supplement  or amend this  Agreement  in any  respect  without the
approval of any holders of Rights and the Rights Agent shall,  if the Company so
directs,  execute such supplement or amendment.  From and after the Distribution
Date, the Company and the Rights Agent may from time to time supplement or amend
this  Agreement  without  the  approval of any holders of Rights in order to (i)
cure any ambiguity,  (ii) correct or supplement any provision  contained  herein

<PAGE>

which may be defective or inconsistent with any other provisions  herein,  (iii)
shorten or lengthen any time period hereunder (which  lengthening or shortening,
following  the first  occurrence of an event set forth in the proviso to Section
23(a)  hereof,  shall be effective  only if there are  Continuing  Directors and
shall require the  concurrence  of a majority of such  Continuing  Directors) or
(iv) to change or  supplement  the  provisions  hereunder in any manner that the
Company may deem necessary or desirable and that shall not adversely  affect the
interests  of the  holders  of  Rights  (other  than an  Acquiring  Person or an
Affiliate or Associate of an Acquiring Person); provided, this Agreement may not
be  supplemented  or  amended  to  lengthen,  pursuant  to clause  (iii) of this
sentence,  (A) a time period relating to when the Rights may be redeemed at such
time as the Rights are not then  redeemable  or (B) any other time period unless
such  lengthening is for the purpose of protecting,  enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a
certificate  from an  appropriate  officer of the  Company  that states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such  supplement  or amendment.  Prior to the
Distribution  Date,  the  interests  of the  holders  of Rights  shall be deemed
coincident with the interests of the holders of Common Shares.

     Section 28.  Successors  All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.

     Section 29.  Determinations and Actions by the Board of Directors,  etc For
all purposes of this  Agreement,  any calculation of the number of Common Shares
outstanding at any particular  time,  including for purposes of determining  the
particular  percentage of such outstanding  Common Shares of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i)  of the General Rules and Regulations under the Exchange Act. The
Board of Directors of the Company (and, where specifically  provided for herein,
the  Continuing  Directors)  shall have the  exclusive  power and  authority  to
administer  this  Agreement  and to exercise all rights and powers  specifically
granted to the Board,  or the  Company  (or,  where  specifically  provided  for
herein,  the Continuing  Directors),  or as may be necessary or advisable in the
administration of this Agreement,  including,  without limitation, the right and
power to (i)  interpret  the  provisions  of this  Agreement  and (ii)  make all
determinations  deemed  necessary or advisable  for the  administration  of this
Agreement  (including a  determination  to redeem or not redeem the Rights or to
amend  the  Agreement).  All such  actions,  calculations,  interpretations  and
determinations  (including, for purposes of clause (y) below, all omissions with
respect  to the  foregoing)  which  are  done or made by the  Board  (or,  where
specifically  provided for herein,  by the Continuing  Directors) in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights Certificates and all other parties and (y) not subject the
Board or the Continuing Directors to any liability to the holders of the Rights.

     Section 30.  Benefits of this Agreement  Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered  holders of the Rights  Certificates  (and, prior to the Distribution
Date,  the Common  Shares) any legal or equitable  right,  remedy or claim under

<PAGE>

this Agreement;  but this Agreement shall be for the sole and exclusive  benefit
of the  Company,  the  Rights  Agent and the  registered  holders  of the Rights
Certificates (and, prior to the Distribution Date, the Common Shares).

     Section 31. Severability If any term, provision, covenant or restriction of
this Agreement is held by a court of competent  jurisdiction  or other authority
to be invalid,  void or unenforceable,  the remainder of the terms,  provisions,
covenants  and  restrictions  of this  Agreement  shall remain in full force and
effect  and shall in no way be  affected,  impaired  or  invalidated;  provided,
however, that notwithstanding anything in this Agreement to the contrary, if any
such term, provision, covenant or restriction is held by such court or authority
to be invalid,  void or unenforceable  and the Board of Directors of the Company
determines in its good faith  judgment  that severing the invalid  language from
this Agreement would  adversely  affect the purpose or effect of this Agreement,
the right of redemption  set forth in Section 23 hereof shall be reinstated  and
shall not expire until the Close of Business on the tenth day following the date
of such determination by the Board of Directors.

     Section 32.  Governing  Law This  Agreement  and each Right and each Rights
Certificate  issued  hereunder  shall be deemed to be a contract  made under the
laws of the State of  California  and for all purposes  shall be governed by and
construed in accordance  with the laws of such State  applicable to contracts to
be made and performed entirely within such State.

     Section 33.  Counterparts  This  Agreement may be executed in any number of
counterparts and each of such  counterparts  shall for all purposes be deemed to
be an original,  and all such counterparts shall together constitute but one and
the same instrument.

     Section  34.  Descriptive  Headings  Descriptive  headings  of the  several
Sections of this  Agreement  are  inserted  for  convenience  only and shall not
control or affect the meaning or construction of any of the provisions hereof.



<PAGE>



     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed as of the day and year first above written.

                                         QUALITY SEMICONDUCTOR, INC.

                                         By:     /s/ John P. Goldsberry /s/

                                         Name:   John P. Goldsberry

                                         Title:  Vice President - Finance and
                                                 Chief Financial Officer


                                         BANKBOSTON, N.A.

                                         By:     /s/ Geoffrey D. Anderson /s/

                                         Name:   Geoffrey D. Anderson

                                         Title:  Director, Client Services


<PAGE>


                                    EXHIBIT A

     CERTIFICATE  OF  DETERMINATION  OF RIGHTS,  PREFERENCES  AND  PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK OF QUALITY SEMICONDUCTOR, INC.

The undersigned, R. Paul Gupta and John Goldsberry, do hereby certify:

     1. That they are the duly elected  President and Chief Executive Office and
Secretary,   respectively,   of  Quality   Semiconductor,   Inc.,  a  California
corporation (the "Corporation").

     2. That pursuant to the authority  conferred upon the Board of Directors by
the  Articles  of  Incorporation  of the said  Corporation,  the  said  Board of
Directors on August 26, 1997 adopted the following resolutions creating a series
of shares of Preferred  Stock  designated  as Series A  Participating  Preferred
Stock:

     "RESOLVED,  that pursuant to the authority vested in the Board of Directors
of the Corporation by the Articles of Incorporation, the Board of Directors does
hereby provide for the issue of a series of Preferred  Stock,  $0.001 par value,
of the Corporation,  to be designated "Series A Participating  Preferred Stock,"
initially  consisting  of  _____________  shares  and to  the  extent  that  the
designations,  powers, preferences and relative and other special rights and the
qualifications,  limitations  and  restrictions  of the  Series A  Participating
Preferred  Stock are not stated and expressed in the Articles of  Incorporation,
does  hereby  fix and  herein  state  and  express  such  designations,  powers,
preferences  and  relative  and other  special  rights  and the  qualifications,
limitations and  restrictions  thereof,  as follows (all terms used herein which
are  defined  in the  Articles  of  Incorporation  shall be  deemed  to have the
meanings provided therein):

     Section 1.  Designation  and  Amount.  The shares of such  series  shall be
designated  as "Series A  Participating  Preferred  Stock," par value $0.001 per
share, and the number of shares constituting such series shall be _____________.

     Section 2. Dividends and Distributions.

     (A) Subject to the prior and superior right of the holders of any shares of
any series of Preferred Stock ranking prior and superior to the shares of Series
A Participating Preferred Stock with respect to dividends, the holders of shares
of Series A Participating  Preferred Stock shall be entitled to receive when, as
and if declared by the Board of Directors out of funds legally available for the
purpose,  quarterly  dividends  payable in cash on the last day of March,  June,
September and December in each year (each such date being  referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment  Date  after the first  issuance  of a share or  fraction  of a share of
Series A Participating  Preferred  Stock, in an amount per share (rounded to the
nearest cent) equal to, subject to the provision for adjustment  hereinafter set
forth,  1,000 times the  aggregate per share amount of all cash  dividends,  and

<PAGE>

1,000 times the  aggregate  per share  amount  (payable in kind) of all non-cash
dividends  or other  distributions  other than a  dividend  payable in shares of
Common  Stock or a  subdivision  of the  outstanding  shares of Common Stock (by
reclassification or otherwise),  declared on the Common Stock of the Corporation
(the "Common Stock") since the immediately  preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly  Dividend  Payment Date, since the
first  issuance of any share or  fraction  of a share of Series A  Participating
Preferred Stock. In the event the Corporation  shall at any time after ________,
1997 (the  "Rights  Declaration  Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding  Common Stock,
or (iii) combine the  outstanding  Common Stock into a smaller number of shares,
then in each  such  case the  amount  to which  holders  of  shares  of Series A
Participating  Preferred  Stock were  entitled  immediately  prior to such event
under the preceding  sentence shall be adjusted by multiplying  such amount by a
fraction,  the  numerator  of which is the  number of  shares  of  Common  Stock
outstanding  immediately  after such event and the  denominator  of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

     (B) The Corporation  shall declare a dividend or distribution on the Series
A Participating  Preferred Stock as provided in paragraph (A) above  immediately
after it declares a dividend or  distribution  on the Common Stock (other than a
dividend payable in shares of Common Stock).

     (C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Participating  Preferred Stock from the Quarterly  Dividend  Payment
Date next  preceding the date of issue of such shares of Series A  Participating
Preferred Stock,  unless the date of issue of such shares is prior to the record
date for the first Quarterly  Dividend  Payment Date, in which case dividends on
such  shares  shall begin to accrue  from the date of issue of such  shares,  or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the  record  date  for the  determination  of  holders  of  shares  of  Series A
Participating  Preferred  Stock  entitled  to receive a quarterly  dividend  and
before such  Quarterly  Dividend  Payment  Date,  in either of which events such
dividends shall begin to accrue and be cumulative  from such Quarterly  Dividend
Payment Date.  Accrued but unpaid  dividends shall not bear interest.  Dividends
paid on the shares of Series A  Participating  Preferred Stock in an amount less
than the total amount of such  dividends at the time accrued and payable on such
shares  shall be  allocated  pro rata on a  share-by-share  basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Participating Preferred Stock
entitled to receive  payment of a dividend  or  distribution  declared  thereon,
which  record date shall be no more than 30 days prior to the date fixed for the
payment thereof.

     Section 3. Voting Rights.  The holders of shareIs of Series A Participating
Preferred Stock shall have the following voting rights:

     (A) Subject to the provision for  adjustment  hereinafter  set forth,  each
share of Series A Participating Preferred Stock shall entitle the holder thereof
to 1,000 votes on all matters  submitted  to a vote of the  shareholders  of the
Corporation.  In the event the  Corporation  shall at any time  after the Rights
Declaration  Date (i) declare any dividend on Common Stock  payable in shares of
Common Stock, (ii) subdivide the outstanding  Common Stock, or (iii) combine the

<PAGE>

outstanding Common Stock into a smaller number of shares, then in each such case
the  number  of  votes  per  share  to  which  holders  of  shares  of  Series A
Participating  Preferred  Stock were  entitled  immediately  prior to such event
shall be adjusted by  multiplying  such number by a fraction,  the  numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the  denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

     (B) Except as otherwise provided herein or by law, the holders of shares of
Series A Participating Preferred Stock and the holders of shares of Common Stock
shall  vote  together  as  one  class  on all  matters  submitted  to a vote  of
shareholders of the corporation.

     (C) Except as required by law, holders of Series A Participating  Preferred
Stock  shall  have no  special  voting  rights  and their  consent  shall not be
required  (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.

     Section 4. Certain Restrictions.

     (A)  The   Corporation   shall  not  declare  any  dividend  on,  make  any
distribution  on, or redeem or purchase or otherwise  acquire for  consideration
any shares of Common Stock after the first  issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith it
shall  declare a  dividend  on the  Series A  Participating  Preferred  Stock as
required by Section 2 hereof.

     (B)  Whenever  quarterly  dividends  or other  dividends  or  distributions
payable on the Series A  Participating  Preferred Stock as provided in Section 2
are in  arrears,  thereafter  and until all  accrued  and unpaid  dividends  and
distributions,  whether  or not  declared,  on shares of Series A  Participating
Preferred Stock  outstanding shall have been paid in full, the Corporation shall
not (i) declare or pay dividends on, make any other  distributions on, or redeem
or purchase or otherwise  acquire for  consideration any shares of stock ranking
junior (either as to dividends or upon  liquidation,  dissolution or winding up)
to the Series A Participating Preferred Stock; (ii) declare or pay dividends on,
make any other  distributions on any shares of stock ranking on a parity (either
as to dividends or upon  liquidation,  dissolution  or winding up) with Series A
Participating  Preferred  Stock,  except  dividends paid ratably on the Series A
Participating  Preferred  Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled; (iii) redeem or purchase or otherwise acquire
for  consideration  shares  of any  stock  ranking  on a  parity  (either  as to
dividends  or upon  liquidation,  dissolution  or winding  up) with the Series A
Participating  Preferred  Stock,  provided that the  Corporation may at any time
redeem,  purchase  or  otherwise  acquire  shares  of any such  parity  stock in
exchange for shares of any stock of the Corporation ranking junior (either as to
dividends  or upon  dissolution,  liquidation  or  winding  up) to the  Series A
Participating   Preferred  Stock;   (iv)  purchase  or  otherwise   acquire  for
consideration  any  shares of Series A  Participating  Preferred  Stock,  or any
shares of stock  ranking on a parity with the Series A  Participating  Preferred
Stock,  except  in  accordance  with a  purchase  offer  made in  writing  or by
publication  (as  determined  by the Board of  Directors) to all holders of such
shares upon such terms as the Board of  Directors,  after  consideration  of the
respective  annual  dividend rates and other relative  rights and preferences of

<PAGE>

the respective series and classes,  shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.

     (C) The  Corporation  shall not permit any subsidiary of the Corporation to
purchase  or  otherwise  acquire  for  consideration  any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

     Section  5.  Reacquired  Shares.  Any  shares  of  Series  A  Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their  cancellation  become  authorized  but unissued
shares  of  Preferred  Stock  and may be  reissued  as part of a new  series  of
Preferred  Stock to be  created by  resolution  or  resolutions  of the Board of
Directors,  subject to the  conditions  and  restrictions  on issuance set forth
herein.

     Section 6. Liquidation, Dissolution or Winding Up.

     (A) Upon any liquidation  (voluntary or otherwise),  dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Participating Preferred Stock unless, prior thereto,
the  holders  of shares of Series A  Participating  Preferred  Stock  shall have
received  an amount  equal to accrued  and unpaid  dividends  and  distributions
thereon,  whether or not declared,  to the date of such payment,  plus an amount
equal to the  greater of (1) $1,000  per share,  provided  that in the event the
Corporation  does not have sufficient  assets,  after payment of its liabilities
and  distribution  to holders of Preferred  Stock  ranking prior to the Series A
Participating Preferred Stock, available to permit payment in full of the $1,000
per share  amount,  the amount  required to be paid under this  Section 6 (A)(1)
shall,  subject  to  Section  6(B)  hereof,  equal  the  value of the  amount of
available  assets  divided  by the  number  of  outstanding  shares  of Series A
Participating  Preferred  Stock or (2) subject to the  provisions for adjustment
hereinafter  set  forth,  1,000  times  the  aggregate  per  share  amount to be
distributed  to the  holders  of Common  Stock (the  greater of (1) or (2),  the
"Series  A  Liquidation  Preference").  In the event  the  Corporation  shall at
anytime  after the Rights  Declaration  Date (i) declare any  dividend on Common
Stock payable in shares of Common Stock,  (ii) subdivide the outstanding  Common
Stock,  or (iii) combine the  outstanding  Common Stock into a smaller number of
shares, then in each such case the amount to which holders of shares of Series A
Participating  Preferred  Stock were  entitled  immediately  prior to such event
under clause (2) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction  the  numerator  of which is the number of shares of Common
Stock that were outstanding  immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding  immediately
prior to such event.

     (B) In the event,  however,  that there are not sufficient assets available
to  permit  payment  in full of the  Series  A  Liquidation  Preference  and the
liquidation  preferences of all other series of Preferred  Stock,  if any, which
rank on a parity  with the Series A  Participating  Preferred  Stock,  then such
remaining  assets  shall be  distributed  ratably to the  holders of such parity
shares in proportion to their respective liquidation preferences.

<PAGE>

     Section 7. Consolidation,  Merger, etc. In case the Corporation shall enter
into any  consolidation,  merger,  combination or other transaction in which the
shares  of  Common  Stock are  exchanged  for or  changed  into  other  stock or
securities,  cash and/or any other property, then in any such case the shares of
Series A  Participating  Preferred  Stock  shall at the same  time be  similarly
exchanged  or changed  in an amount  per share  (subject  to the  provision  for
adjustment  hereinafter set forth) equal to 1,000 times the aggregate  amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be,  into  which or for which  each  share of  Common  Stock is  changed  or
exchanged.  In the  event the  Corporation  shall at any time  after the  Rights
Declaration  Date (i) declare any dividend on Common Stock  payable in shares of
Common Stock, (ii) subdivide the outstanding  Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the  preceding  sentence with respect to the exchange or
change of shares of Series A Participating  Preferred Stock shall be adjusted by
multiplying  such amount by a fraction  the  numerator of which is the number of
shares  of  Common  Stock  outstanding  immediately  after  such  event  and the
denominator  of  which is the  number  of  shares  of  Common  Stock  that  were
outstanding immediately prior to such event.

     Section 8. No Redemption.  The shares of Series A  Participating  Preferred
Stock shall not be redeemable.

     Section 9. Ranking.  The Series A Participating  Preferred Stock shall rank
junior  to all  other  series  of the  Corporation's  Preferred  Stock as to the
payment of dividends  and the  distribution  of assets,  unless the terms of any
such series shall provide otherwise.

     Section 10.  Amendment.  The Articles of  Incorporation  of the Corporation
shall not be further  amended  in any manner  which  would  materially  alter or
change the powers,  preference or special  rights of the Series A  Participating
Preferred Stock so as to affect them adversely  without the affirmative  vote of
the  holders  of a  majority  or more of the  outstanding  shares  of  Series  A
Participating Preferred Stock, voting separately as a class.

     Section 11. Fractional Shares. Series A Participating Preferred Stock maybe
issued in fractions of a share which shall entitle the holder,  in proportion to
such holder's  fractional shares, to exercise voting rights,  receive dividends,
participate  in  distributions  and to have the  benefit of all other  rights of
holders of Series A Participating Preferred Stock.

     RESOLVED  FURTHER,  that  the  President  or any  Vice  President  and  the
Secretary or any  Assistant  Secretary of this  Corporation  be, and they hereby
are,  authorized and directed to prepare and file a Certificate of Determination
of  Rights,   Preferences  and  Privileges  in  accordance  with  the  foregoing
resolution and the provisions of California law and to take such actions as they
may deem  necessary  or  appropriate  to carry out the  intent of the  foregoing
resolution."

     3.  That  the  authorized  number  of  shares  of  Preferred  Stock  of the
Corporation is 1,000,000, and that no such Preferred Stock has been issued.

     We further  declare  under penalty of perjury that the matters set forth in
the  foregoing  Certificate  of  Determination  are true and  correct of our own
knowledge.

<PAGE>

         Executed at Santa Clara, California on __________, 1997.




                                        R. Paul Gupta, President and
                                        Chief Executive Officer


                                        John Goldsberry, Secretary


<PAGE>



                                    EXHIBIT B

                           Form of Rights Certificate


Certificate No. ____                                                _____ Rights


        NOT EXERCISABLE AFTER SEPTEMBER 17, 2007 OR EARLIER IF TERMINATED BY THE
COMPANY OR IF THE COMPANY EXCHANGES THE RIGHTS PURSUANT TO THE RIGHTS AGREEMENT.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER
RIGHT  ON  THE  TERMS  SET  FORTH  IN  THE  RIGHTS   AGREEMENT.   UNDER  CERTAIN
CIRCUMSTANCES,  RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE
OR  ASSOCIATE  OF AN  ACQUIRING  PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT)  AND ANY  SUBSEQUENT  HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
[THE RIGHTS  REPRESENTED  BY THIS RIGHTS  CERTIFICATE  ARE OR WERE  BENEFICIALLY
OWNED BY A PERSON  WHO WAS OR BECAME AN  ACQUIRING  PERSON  OR AN  AFFILIATE  OR
ASSOCIATE  OF AN  ACQUIRING  PERSON  (AS SUCH  TERMS ARE  DEFINED  IN THE RIGHTS
AGREEMENT).  ACCORDINGLY,  THIS RIGHTS  CERTIFICATE  AND THE RIGHTS  REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE  CIRCUMSTANCES  SPECIFIED IN SECTION 7(e)
OF SUCH RIGHTS AGREEMENT.1]   

                               Rights Certificate


     This certifies that  _____________________,  or registered  assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of August 29, 1997 (the "Rights Agreement"),  between Quality
Semiconductor,  Inc., a California Corporation (the "Company"),  and BankBoston,
N.A.  (the "Rights  Agent"),  to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights  Agreement)and prior to
5:00 P.M.,  New York time,  on  September  17,  2007 at the office of the Rights
Agent  designated for such purpose,  or at the office of its successor as Rights
Agent,  one  one-thousandth  of a fully  paid  non-assessable  share of Series A
Participating  Preferred  Stock,  par value  $0.001 per share,  (the  "Preferred
Shares"),  of the Company, at a purchase price of $70.00 per one-thousandth of a
Preferred Share (the "Purchase Price"),  upon presentation and surrender of this
Rights Certificate with the Form of Election to Purchase and related Certificate
duly executed.  The number of Rights  evidenced by this Rights  Certificate (and
the number of  one-thousandths  of a Preferred Share which may be purchased upon
exercise  hereof)  and the  Purchase  Price set forth  above are the  number and
Purchase  Price as of  September  17,  1997,  based on the  Preferred  Shares as
constituted  at such date.  As provided in the Rights  Agreement,  the  Purchase
Price and the number and kind of Preferred  Shares or other securities which may
be  purchased  upon  the  exercise  of  the  Rights  evidenced  by  this  Rights
Certificate  are subject to  modification  and adjustment  upon the happening of
certain events.

---------------------------
1    The portion of the legend in brackets shall be inserted only if applicable 
and shall replace the preceeding sentence.   

<PAGE>

         This Rights Certificate is subject to all of the terms,  provisions and
conditions of the Rights Agreement,  which terms,  provisions and conditions are
hereby  incorporated  herein by  reference  and made a part  hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights  Agent,  the Company and the  holders of the Rights  Certificates,  which
limitations of rights include the temporary  suspension of the exercisability of
such Rights under the specific  circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned office of the Rights Agent.

         Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Rights Certificate (i) may be redeemed by the Company, at its option, at
a redemption price of $0.01 per Right or (ii) may be exchanged by the Company in
whole or in part for Common  Shares,  substantially  equivalent  rights or other
consideration as determined by the Company.

         This Rights  Certificate,  with or without  other Rights  Certificates,
upon  surrender at the office of the Rights Agent  designated  for such purpose,
may be exchanged for another Rights  Certificate or Rights  Certificates of like
tenor  and date  evidencing  Rights  entitling  the  holder to  purchase  a like
aggregate amount of securities as the Rights evidenced by the Rights Certificate
or Rights Certificates  surrendered shall have entitled such holder to purchase.
If this Rights  Certificate  shall be  exercised  in part,  the holder  shall be
entitled to receive upon surrender  hereof another Rights  Certificate or Rights
Certificates for the number of whole Rights not exercised.

         No fractional  portion of less than one  one-thousandth  of a Preferred
Share will be issued upon the exercise of any Right or Rights  evidenced  hereby
but in lieu  thereof a cash  payment  will be made,  as  provided  in the Rights
Agreement.

         No holder of this  Rights  Certificate,  as such,  shall be entitled to
vote or  receive  dividends  or be  deemed  for any  purpose  the  holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof,  nor shall anything  contained in the Rights
Agreement or herein be construed to confer upon the holder hereof,  as such, any
of the  rights  of a  shareholder  of the  Company  or any right to vote for the
election  of  directors  or upon any matter  submitted  to  shareholders  at any
meeting thereof,  or to give or withhold consent to any corporate  action, or to
receive notice of meetings or other actions  affecting  shareholders  (except as
provided  in the Rights  Agreement),  or to receive  dividends  or  subscription
rights,  or  otherwise,  until  the  Right or Rights  evidenced  by this  Rights
Certificate shall have been exercised as provided in the Rights Agreement.

         This  Rights  Certificate  shall  not be  valid or  obligatory  for any
purpose until it shall have been countersigned by the Rights Agent.

<PAGE>

         WITNESS the facsimile  signature of the proper  officers of the Company
and its corporate seal. Dated as of _____________, 1997.


ATTEST:                                QUALITY SEMICONDUCTOR, INC.


____________________________           By:________________________
Secretary                                  President


Countersigned:

___________________________
as Rights Agent


By:________________________
     Authorized Signature


<PAGE>



                  Form of Reverse Side of Rights Certificate

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer the Rights Certificate)

      FOR VALUE RECEIVED ________________________ hereby sells,
assigns and transfers unto _________________________________________________
                            (Please print name and address of transferee)

this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably cons titute and appoint ___________________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.  Dated: ____________, ____.


                                           ____________________________________
                                           Signature

Signature Guaranteed:

         The  signature(s)   should  be  guaranteed  by  an  eligible  guarantor
institution(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions
with membership in an approved signature  guarantee  medallion program) pursuant
to S.E.C. Rule 17Ad-15.

<PAGE>




                                   CERTIFICATE



         The  undersigned  hereby  certifies by checking the  appropriate  boxes
that:

         (1) this Rights Certificate [ ] is [ ] is not being sold,  assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, or an
Affiliate  or  Associate  of any such  Person (as such terms are  defined in the
Rights Agreement);

         (2) after due inquiry and to the best knowledge of the undersigned,  it
[ ]did [ ] did not acquire the Rights evidenced by this Rights  Certificate from
any  Person  who is,  was or  subsequently  became  an  Acquiring  Person  or an
Affiliate or Associate of any such Person.

Dated:____________, ____

                                      _________________________________________
 
                                      Signature


Signature Guaranteed:

         The  signature(s)   should  be  guaranteed  by  an  eligible  guarantor
institution(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions
with membership in an approved signature  guarantee  medallion program) pursuant
to S.E.C. Rule 17Ad-15.



<PAGE>




             Form of Reverse Side of Rights Certificate -- continued


                          FORM OF ELECTION TO PURCHASE

                      (To be executed if holder desires to
                        exercise the Rights Certificate)


To:____________________

         The      undersigned       hereby       irrevocably      elects      to
exercise_________________________  Rights represented by this Rights Certificate
to purchase the number of one-thousandths of a Preferred Share issuable upon the
exercise  of such  Rights and  requests  that  certificates  for such  number of
one-thousandths of a Preferred Share issued in the name of:

Please insert social security or
other identifying number


------------------------------------------------------------------------------
(Please print name and add address) ____________________________________________
----------------------------------

If such number of Rights  shall not be all the Rights  evidenced  by this Rights
Certificate,  a new Rights  Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

Please insert social security or
other identifying number
------------------------------------------------------------------------------
(Please print name and address) _______________________________________________
------------------------------


Dated:____________, _____
                                          _____________________________________
                                          Signature

Signature Guaranteed:

         The  signature(s)   should  be  guaranteed  by  an  eligible  guarantor
institution(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions
with membership in an approved signature  guarantee  medallion program) pursuant
to S.E.C. Rule 17Ad-15.



<PAGE>




                                   CERTIFICATE



         The  undersigned  hereby  certifies by checking the  appropriate  boxes
that:

         (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an  Affiliate  or Associate of any such Person (as such terms are defined in the
Rights Agreement);

         (2) after due inquiry and to the best knowledge of the undersigned,  it
[ ]did [ ] did not acquire the Rights evidenced by this Rights  Certificate from
any  Person  who is,  was or  subsequently  became  an  Acquiring  Person  or an
Affiliate or Associate of any such Person.

Dated:____________, _____


                                                              Signature

Signature Guaranteed:

         The  signature(s)   should  be  guaranteed  by  an  eligible  guarantor
institution(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions
with membership in an approved signature  guarantee  medallion program) pursuant
to S.E.C. Rule 17Ad-15.



<PAGE>




             Form of Reverse Side of Rights Certificate -- continued


                                     NOTICE


         The  signature in the foregoing  Forms of Assignment  and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.




<PAGE>


                                    EXHIBIT C

                           QUALITY SEMICONDUCTOR, INC.
                             SHAREHOLDER RIGHTS PLAN

                                Summary of Rights

Distribution and Transfer of Rights;
Rights Certificate:

     The Board of Directors  has declared a dividend of one Right for each share
of  Quality  Semiconductor,   Inc.  Common  Stock  outstanding.   Prior  to  the
Distribution  Date referred to below,  the Rights will be evidenced by and trade
with the certificates for the Common Stock. After the Distribution Date, Quality
Semiconductor,  Inc.  (the  "Company")  will  mail  Rights  certificates  to the
Company's  shareholders and the Rights will become  transferable  apart from the
Common Stock.

Distribution Date:

     Rights will separate from the Common Stock and become exercisable following
the tenth day (the "Distribution Date") (or such later date as may be determined
by a majority of the Directors not affiliated with the acquiring person or group
(the "Continuing  Directors")) after a person or group (a) announces acquisition
of  beneficial  ownership  of 15% or more of the  Company's  Common  Stock  (the
"Shares Acquisition Date") if such acquisition was not approved by the Company's
Board of Directors or a committee thereof) or (b) announces a tender or exchange
offer,  the consummation of which would result in ownership by a person or group
of 15% or more of the Company's Common Stock.

Preferred Stock Purchasable
Upon Exercise of Rights:

     After  the  Distribution  Date,  each  Right  will  entitle  the  holder to
purchase,  for $70.00, one one-thousandth of a share of the Company's  Preferred
Stock with economic  terms similar to that of one share of the Company's  Common
Stock.

<PAGE>

Flip-In:

     If an acquiror (an "Acquiring Person") obtains beneficial  ownership of 15%
or more of the  Company's  Common Stock  (other than  pursuant to a tender offer
deemed  fair  by the  Board  of  Directors  (a  "Permitted  Offer")  and if such
acquisition  was not approved by the Company's Board of Directors or a committee
thereof)),  then each Right (other than Rights  owned by an Acquiring  Person or
its  affiliates)  will entitle the holder thereof to purchase,  for the exercise
price,  a number of shares of the  Company's  Common Stock having a then current
market value of twice the exercise price.

Flip-Over:

     If, after the Shares  Acquisition  Date  (defined  above),  (a) the Company
merges into another entity,  (b) an acquiring  entity merges into the Company or
(c) the Company  sells more than 50% of the Company's  assets or earning  power,
then  each  Right  (other  than  Rights  owned  by an  Acquiring  Person  or its
affiliates) will entitle the holder thereof to purchase, for the exercise price,
a number of shares of Common  Stock of the person  engaging  in the  transaction
having a then  current  market  value of twice the  exercise  price  (unless the
transaction  satisfies  certain  conditions and is consummated with a person who
acquired  shares  pursuant to a Permitted  Offer,  in which case the Rights will
expire).

Exchange Provision:

     At any time after an event  triggering the flip-in or flip-over  rights and
prior  to the  acquisition  by the  Acquiring  Person  of  50%  or  more  of the
outstanding Common Stock, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by the Acquiring Person or its  affiliates),  in
whole or in part, at an exchange ratio of one Common Share per Right (subject to
adjustment).

Redemption of the Rights:

     Rights will be  redeemable  at Company's  option for $0.01 per Right at any
time on or prior to the tenth day (or such later date as may be  determined by a
majority of the Continuing Directors) after the Shares Acquisition Date.

<PAGE>

Expiration of the Rights:

     The Rights expire on the earliest of (a)  September 17, 2007,  (b) exchange
or redemption of the Rights as described  above, or (c) consummation of a merger
or  consolidation  or sale of assets  resulting in  expiration  of the Rights as
described above.

Amendment of Terms of Rights:

     The terms of the Rights Agreement may be amended in any respect without the
consent of the Rights holders on or prior to the Distribution Date;  thereafter,
the terms of the Rights  and the Rights  Agreement  may be amended  without  the
consent  of the  Rights  holders  in order to cure  any  ambiguities  or to make
changes which do not adversely  affect the  interests of Rights  holders  (other
than the Acquiring Person).

Voting Rights:

     Rights will not have any voting rights.

Anti-Dilution Provisions:

     Rights will have the benefit of certain customary anti-dilution provisions.

Taxes:

     The  Rights  distribution  should  not be taxable  for  federal  income tax
purposes.  However,  following an event which renders the Rights  exercisable or
upon redemption of the Rights, shareholders may recognize taxable income.

     The foregoing is a summary of certain  principal  terms of the  Shareholder
Rights Plan only and is  qualified  in its entirety by reference to the detailed
terms of the Rights  Agreement dated as of August 29, 1997,  between the Company
and the Rights Agent.
[{"type": "8-K", "sequence": "1", "description": "FORM 8-K", "secsgml_size_bytes": 186312}]
{"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": "97681165"}, "business-address": {"street1": "851 MARTIN AVE", "city": "SANTA CLARA", "state": "CA", "zip": "95050", "phone": "4087278885"}, "mail-address": {"street1": "851 MARTIN AVE", "city": "SANTA CLARA", "state": "CA", "zip": "95050"}}
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: September 16, 1997

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

          California                      0-23128               77-0199189
(State or other jurisdiction     (Commission File Number)      (IRS Employer
of incorporation                                             Identification No.)

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

                               (408) 450-8000
            (Registrant's telephone number, including area code)
Item 5.       Other Events.

     On August 26, 1997, the Board of Directors of Quality  Semiconductor,  Inc.
(the  "Company")  declared a dividend of one preferred  share  purchase right (a
"Right")  for each  outstanding  share of Common  Stock,  $0.001  par value (the
"Common Shares"),  of the Company. The dividend is payable on September 17, 1997
(the  "Record  Date") to  shareholders  of record as of the close of business on
that date. Each Right entitles the registered holder under certain circumstances
to  purchase  from  the  Company  one  one-thousandth  of a share  of  Series  A
Participating  Preferred Stock, $0.001 par value, of the Company (the "Preferred
Shares"),  subject to adjustment,  at a price of $70.00 per  one-thousandth of a
Preferred Share,  subject to adjustment (the "Purchase Price").  The description
and terms of the Rights are set forth in a  Preferred  Shares  Rights  Agreement
(the  "Rights  Agreement")  dated as of August 29, 1997  between the Company and
BankBoston, N.A., as Rights Agent (the "Rights Agent").

     The following is a general  description only and is subject to the detailed
terms and conditions of the Rights  Agreement.  A copy of the Rights  Agreement,
including the Certificate of Designation, the form of Rights Certificate and the
Summary of Rights to be provided to shareholders of the Company,  is attached as
Exhibit  1  to  this  Registration  Statement  and  is  incorporated  herein  by
reference.

Rights Evidenced by Common Share Certificates

     The Rights will not be  exercisable  until the  Distribution  Date (defined
below).  Accordingly,  Common Share certificates  outstanding on the Record Date
will evidence the Rights related thereto,  and Common Share certificates  issued
after the Record Date will contain a notation incorporating the Rights Agreement
by reference.  Until the Distribution Date (or earlier  redemption,  exchange or
expiration  of the Rights),  the surrender or transfer of any  certificates  for
Common Shares will also  constitute the transfer of the Rights  associated  with
the Common Shares represented by such certificate.
Distribution Date

     The Rights  will  separate  from the Common  Shares,  certificates  for the
rights  ("Rights  Certificates")  will be  issued  and the  Rights  will  become
exercisable  upon the earlier of: (i) the close of business on the tenth day (or
such later date as may be  determined  by a majority of the Board of  Directors,
excluding directors  affiliated with the Acquiring Person, as defined below (the
"Continuing  Directors")) following a public announcement that a person or group
of  affiliated  or  associated  persons has  acquired,  or obtained the right to
acquire,  beneficial  ownership of 15% or more of the outstanding  Common Shares
(an "Acquiring  Person") or (ii) the close of business on the tenth day (or such
later date as may be  determined  by a  majority  of the  Continuing  Directors)
following the commencement of a tender offer or exchange offer, the consummation
of which would result in the beneficial ownership by a person or group of 15% or
more of the outstanding  Common Shares. The earlier of such dates is referred to
as the "Distribution Date."

Issuance of Rights Certificates, Expiration of Rights

     As soon as practicable  following the  Distribution  Date,  separate Rights
Certificates  will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and such separate Rights Certificates
alone will  evidence  the Rights from and after the  Distribution  Date.  Unless
otherwise  determined by the Board of Directors,  all Common Shares issued prior
to the Distribution Date will be issued with Rights.  Common Shares issued after
the  Distribution  Date may be issued  with Rights if such shares are issued (i)
upon the exercise, conversion or exchange of securities issued after adoption of
the Rights  Agreement or (ii) pursuant to the exercise of stock options or under
any employee benefit plan or arrangement.  Except as otherwise determined by the
Board of Directors,  no other Common Shares issued after the  Distribution  Date
will be issued with  Rights.  In  addition,  no Common  Shares  issued after the
Distribution  Date will be issued with Rights if such  issuance  would result in
(or create a significant  risk) (i) of material  adverse tax consequences to the
Company or the person to whom such  Rights  Certificate  would be issued or (ii)
that such options or plans would not qualify for otherwise available special tax
treatment. The Rights will expire on September 17, 2007 (the "Final Expiration
Date"),  unless the Final  Expiration  Date is extended or unless the Rights are
earlier  redeemed or  exchanged  by the Company or expire upon  consummation  of
certain mergers, consolidations or sales of assets, as described below.

Initial Exercise of the Rights

     Following the  Distribution  Date,  and until the  occurrence of one of the
subsequent  events  described  below,  holders of the Rights will be entitled to
receive,  upon  exercise  and the payment of $70.00 (the  "Purchase  Price") per
Right, one one-thousandth of a Preferred Share.

Exchange Provision

     At any time after an  Acquiring  Person  has  become  such and prior to the
Acquiring  Person  beneficially  owning  50% or more of the  outstanding  Common
Shares,  the Board of Directors  of the Company may  exchange the Rights  (other
than Rights owned by the  Acquiring  Person or its  affiliates),  in whole or in
part,  at  an  exchange  ratio  of  one  Common  Share  per  Right  (subject  to
adjustment).

Right to Buy Common Shares

        Unless the Rights are earlier  redeemed or exchanged,  in the event that
an Acquiring Person becomes such, other than pursuant to a tender offer which is
made for all of the outstanding  Common Shares and approved by a majority of the
Continuing  Directors  after  determining  that the offer is both  adequate  and
otherwise in the best interests of the Company and its shareholders (a Permitted
Offer),  then proper provision will be made so that each holder of a Right which
has not theretofore been exercised (other than Rights  beneficially owned by the
Acquiring Person,  which will thereafter be void) will thereafter have the right
to receive,  upon  exercise of a Right,  a number of Common Shares having a then
current  value  equal to two times the  Purchase  Price.  In the event  that the
Company does not have a sufficient  number of Common  Shares  available,  or the
Board decides that such action is necessary or  appropriate  and not contrary to
the interests of Rights  holders,  the Company may, among other things,  instead
substitute cash, assets or other securities for the Common Shares into which the
Rights would have otherwise been exercisable.
Rich to Buy Acquiring Company Stock

     Similarly,  unless the Rights are  earlier  redeemed or  exchanged,  in the
event  that,  after the Shares  Acquisition  Date (as  defined  below),  (i) the
Company  consolidates  with or merges into another  entity,  (ii) another entity
consolidates  with or merges  into the  Company  or (iii) the  Company  sells or
otherwise  transfers 50% or more of its  consolidated  assets or earning  power,
proper  provision  must be made so that  each  holder  of a Right  which has not
theretofore  been  exercised  (other  than  Rights  beneficially  owned  by  the
Acquiring Person,  which will thereafter be void) will thereafter have the right
to receive,  upon exercise,  a number of shares of common stock of the acquiring
company  having a then  current  value  equal to two  times the  Purchase  Price
(unless the transaction  satisfies certain  conditions and is consummated with a
person who  acquired  shares  pursuant to a Permitted  Offer,  in which case the
Rights will expire).

Adjustments to Prevent Dilution

     The  Purchase  Price  payable,  the  number  of  Rights  and the  number of
Preferred  Shares,  Common Shares or other securities or property  issuable upon
exercise  of the Rights are subject to  adjustment  from time to time to prevent
dilution  as set forth in the Rights  Agreement.  With  certain  exceptions,  no
adjustment in the Purchase Price will be required until  cumulative  adjustments
require an adjustment of at least 1% in such Purchase Price.

Rights and Preferences of the Preferred Shares

     Preferred  Shares  purchasable  upon  exercise  of the  Rights  will not be
redeemable.  Each Preferred  Share will be entitled to an aggregate  dividend of
1,000 times the dividend declared per Common Share. In the event of liquidation,
the  holders  of  the  Preferred  Shares  will  be  entitled  to a  preferential
liquidation  payment equal to accrued but unpaid  dividends  plus the greater of
$1,000  per  share  and  1,000  times  the  aggregate  per  share  amount  to be
distributed  to the holders of Common  Shares.  Each  Preferred  Share will have
1,000  votes,  voting  together  with the  holders of Common  Shares,  except as
required by law or the  Certificate of Designation  of Rights,  Preferences  and
Privileges  of  Series A  Participating  Preferred  Stock.  In the  event of any
merger, consolidation or other transaction in which Common Shares are changed or
exchanged,  each  Preferred  Share will be entitled  to receive  1,000 times the
amount  received  per Common  Share.  These  rights are  protected  by customary
anti-dilution provisions. Because of the nature of the dividend, liquidation and
voting  rights of the  Preferred  Shares,  the  value of the one  one-thousandth
interest in a Preferred  Share  purchasable  upon  exercise of each Right should
approximate the value of one Common Share.

Redemption

     At any time prior to the close of  business on the earlier of (i) the tenth
day following the date (the "Shares  Acquisition  Date") of public  announcement
that an Acquiring Person has become such or such later date as may be determined
by a majority of the Continuing  Directors and publicly announced by the Company
or (ii) the Final  Expiration  Date of the  Rights,  the  Company may redeem the
Rights in  whole,  but not in part,  at a price of $.01 per  Right  ("Redemption
Price").

No Shareholders' Rights Prior to Exercise

     Until a Right is  exercised,  the  holder  thereof,  as such,  will have no
rights as a shareholder  of the Company  (other than any rights  resulting  from
such holder's ownership of Common Shares),  including,  without limitation,  the
right to vote or to receive dividends.

Amendment of Rights Agreement

     The provisions of the Rights  Agreement may be  supplemented  or amended by
the Board of Directors in any manner prior to the Distribution  Date without the
approval of Rights holders.  After the Distribution  Date, the provisions of the
Rights  Agreement  may be  supplemented  or amended by the Board in order to (i)
cure any  ambiguity,  defect or  inconsistency,  (ii) to make changes  which are
deemed  necessary  or advisable  and do not  adversely  affect the  interests of
holders of Rights  (excluding  the  interests of any  Acquiring  Person),  or to
shorten  or  lengthen  any time  period  under the Rights  Agreement;  provided,
however,  that no amendment to lengthen (A) the time period governing redemption
shall be made at such time as the  Rights are not  redeemable,  or (B) any other
period  shall  be made  unless  for the  purpose  of  protecting,  enhancing  or
clarifying  the rights of,  and/or  benefits to, the holders of Rights.

Certain Anti-takeover Effects

     The Rights  approved by the Board are  designed to protect and maximize the
value of the  outstanding  equity  interests  in the  Company in the event of an
unsolicited  attempt by an acquiror to take over the Company,  in a manner or on
terms not  approved  by the Board of  Directors.  Takeover  attempts  frequently
include coercive  tactics to deprive a corporation's  Board of Directors and its
shareholders   of  any  real   opportunity  to  determine  the  destiny  of  the
corporation.  The Rights have been  declared by the Board in order to deter such
tactics,  including a gradual accumulation of shares in the open market of a 15%
or greater  position to be followed by a merger or a partial or two-tier  tender
offer  that does not treat all  shareholders  equally.  These  tactics  unfairly
pressure shareholders,  squeeze them out of their investment without giving them
any real choice and deprive them of the full value of their shares.

     The Rights are not  intended  to prevent a takeover of the Company and will
not do so. The Rights are not exercisable in the event of a Permitted  Offer, as
described  above.  The Rights may be  redeemed  by the Company at $.01 per Right
within ten days (or such later date as may be  determined  by a majority  of the
Continuing  Directors)  after the  accumulation  of 15% or more of the Company's
outstanding Common Shares by a single acquiror or group. Accordingly, the Rights
should not preclude any merger or business  combination approved by the Board of
Directors.  Issuance  of the Rights  does not in any way  weaken  the  financial
strength of the Company or interfere  with its business  plans.  The issuance of
the Rights has no immediate  dilutive effect,  will not affect reported earnings
per share,  should not be taxable to the Company or to its shareholders and will
not  change the way in which the  Company's  shares are  presently  traded.  The
Company's  Board of  Directors  believes  that the Rights  represent a sound and
reasonable means of addressing the complex issues of corporate policy created by
the current  takeover  environment.  However,  the Rights may have the effect of
rendering  more difficult or  discouraging  an acquisition of the Company deemed
undesirable by the Board of Directors. The Rights may cause substantial dilution
to a person or group  that  attempts  to  acquire  the  Company on terms or in a
manner not approved by the Company's  Board of Directors,  except pursuant to an
offer conditioned upon the negation, purchase or redemption of the Rights.

Item 7. Financial Statements and Exhibits.

        4.1.    Preferred Shares Rights Agreement,  dated as of August
                29, 1997, between Quality Semiconductor,  Inc. and BankBoston
                N.A., including the Certificate of Designation of Rights,
                Preferences and Privileges of Series A Participating Preferred
                Stock, the form of  Rights  Certificate  and the  Summary  of
                Rights attached thereto as Exhibits A, B and C, respectively.
SIGNATURE

     Pursuant to the  requirements of Section 12 of the Securities  Exchange Act
of 1934,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

                                              QUALITY SEMICONDUCTOR, INC.

Date:  September 16, 1997                     By:   /s/ John P. Goldsbery
                                                   -------------------------
                                                   John P. Goldsbery
                                                   Vice President - Finance and
                                                   Chief Financial Officer
QUALITY SEMICONDUCTOR, INC.

                           CURRENT REPORT ON FORM 8-K

                                  EXHIBIT INDEX

Exhibit
  No.                                          Exhibit

  4.1         Preferred Shares Rights Agreement, dated as of August 29,
              1997, between Quality Semiconductor, Inc. and BankBoston,
              N.A., including the Certificate of Designation of Rights,
              Preferences  and  Privileges  of  Series A  Participating
              Preferred Stock,  the form of Rights  Certificate and the
              Summary of Rights  attached  thereto as Exhibits A, B and
              C, respectively.
QUALITY SEMICONDUCTOR, INC.

                                       and

                                BANKBOSTON, N.A.

                                  Rights Agent

                        PREFERRED SHARES RIGHTS AGREEMENT

                          Dated as of August 29, 1997
TABLE OF CONTENTS

                                                                            Page

Section 1.  Certain Definitions................................................1
Section 2.  Appointment of Rights Agent........................................5
Section 3.  Issuance of Rights Certificates....................................6
Section 4.  Form of Rights Certificates........................................7
Section 5.  Countersignature and Registration..................................8
Section 6.  Transfer, Split Up, Combination and Exchange of Rights Certificates;
            Mutilanted, Destroyed, Lost or Stolen Rights Certificates..........9
Section 7.  Exercise of Rights; Purchase Price; Expiration Date of Rights......9
Section 8.  Cancellation and Destruction of Rights Certificates...............11
Section 9.  Reservation and Availability of Preferred Shares..................12
Section 10. Preferred Shares Record Date......................................13
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
            Rights............................................................13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares........21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
            Power.............................................................21
Section 14. Fractional Rights and Fractional Shares...........................24
Section 15. Rights of Action..................................................25
Section 16. Agreement of Rights Holders.......................................25
Section 17. Rights Certificate Holder Not Deemed a Shareholder................25
Section 18. Concerning the Rights Agent.......................................26
Section 19. Merger or Consolidation or Change of Name of Rights Agent.........26
Section 20. Duties of Rights Agent............................................27
Section 21. Change of Rights Agent............................................29
Section 22. Issuance of New Rights Certificates...............................30
Section 23. Redemption........................................................30
Section 24. Exchange..........................................................31
Section 25. Notice of Certain Events..........................................33
Section 26. Notices...........................................................33
Section 27. Supplements and Amendments........................................34
Section 28. Successors........................................................34
Section 29. Determinations and Actions by the Board of Directors, etc.........34
Section 30. Benefits of this Agreement........................................35
Section 31. Severability......................................................35
Section 32. Governing Law.....................................................35
Section 33. Counterparts......................................................35
Section 34. Descriptive Headings..............................................35

EXHIBITS

Exhibit A ........Form of Certificate of Determination
Exhibit B.........Form of Rights Certificate
Exhibit C.........Summary of Rights

--------
1     The portion of the legend in brackets shall be inserted only if applicable
      and shall replace the preceding sentence.
RIGHTS AGREEMENT

     Agreement, dated as of August 29, 1997 between Quality Semiconductor, Inc.,
a California  corporation  (the  "Company"),  and BankBoston,  N.A. (the "Rights
Agent").

     On August 26, 1997 (the "Rights Dividend  Declaration  Date"), the Board of
Directors of the Company  authorized  and  declared a dividend of one  Preferred
Share purchase right (a "Right") for each Common Share (as hereinafter  defined)
of the Company outstanding as of the Close of Business (as hereinafter  defined)
on September 17, 1997 (the "Record Date"),  each Right representing the right to
purchase one one-thousandth of a share of Series A Participating Preferred Stock
(as such number may be adjusted  pursuant to the provisions of this  Agreement),
having  the  rights,  preferences  and  privileges  set  forth  in the  form  of
Certificate of Determination  of Rights,  Preferences and Privileges of Series A
Participating  Preferred  Stock attached hereto as Exhibit A, upon the terms and
subject to the conditions herein set forth, and further  authorized and directed
the  issuance  of one Right (as such  number  may be  adjusted  pursuant  to the
provisions  of this  Agreement)  with  respect to each  Common  Share that shall
become  outstanding  between the Record Date and the earlier of the Distribution
Date and the Expiration  Date (as such terms are  hereinafter  defined),  and in
certain circumstances after the Distribution Date.

         NOW,  THEREFORE,  in  consideration  of the  promises  and  the  mutual
agreements herein set forth, the parties hereby agree as follows:

         Section 1.  Certain  Definitions  For purposes of this  Agreement,  the
following terms have the meanings indicated:

     (a)  "Acquiring  Person" shall mean any Person who or which,  together with
all Affiliates and Associates of such Person,  shall be the Beneficial  Owner of
15% or more of the Common  Shares  then  outstanding,  but shall not include the
Company,  any  Subsidiary  of the Company or any  employee  benefit  plan of the
Company or of any Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no
Person shall be deemed to be an Acquiring  Person either (i) as the result of an
acquisition  of Common  Shares by the Company  which,  by reducing the number of
shares  outstanding,  increases the proportionate  number of shares beneficially
owned by such  Person to 15% or more of the Common  Shares of the  Company  then
outstanding;  provided,  however,  that if a Person shall become the  Beneficial
Owner of 15% or more of the Common  Shares of the Company  then  outstanding  by
reason of share  purchases by the Company and shall,  after such share purchases
by the Company,  become the Beneficial Owner of any additional  Common Shares of
the Company, then such Person shall be deemed to be an Acquiring Person; or (ii)
if the Board of Directors of the Company  determines in good faith that a Person
who  would  otherwise  be an  "Acquiring  Person"  as  defined  pursuant  to the
foregoing  provisions of this paragraph (a) has become such  inadvertently,  and
such Person divests as promptly as practicable of a sufficient  number of Common
Shares so that such Person would no longer be an "Acquiring  Person," as defined
pursuant to the foregoing provisions of this paragraph (a).  Notwithstanding the
foregoing (N.A.) or any of their Affiliates or Associates (each an
"Excepted  Person")  shall not be considered an Acquiring  Person as a result of
being,  at any date, the Beneficial  Owner of that number of Common Shares which
such  Excepted  Person  beneficially  owns as of the date  hereof or which  such
Excepted  Person is  permitted  or required to purchase in  accordance  with the
provisions of any plan,  arrangement,  agreement or transaction  approved by the
Board of  Directors of the Company or any  committee of the Board of  Directors;
provided,  however,  that if any Excepted  Person shall,  after the date hereof,
become the Beneficial  Owner of any Common Shares other than pursuant to a plan,
arrangement,  agreement or transaction approved by the Board of Directors of the
Company or any committee of the Board of Directors, then, if any Excepted Person
would otherwise be an Acquiring Person,  that Excepted Person shall be deemed to
be an  Acquiring  Person and all Common  Shares then  beneficially  owned by the
Excepted  Person  shall be counted  for  purposes  of  determining  whether  the
Excepted  Person is an Acquiring  Person.  Notwithstanding  any provision to the
contrary  in this  Agreement,  no  amendment  shall  be made to this  definition
without the consent of an Excepted  Person if the effect of such amendment would
be to reduce  the  aggregate  percentage  ownership  of the Common  Shares  that
Excepted Person would be permitted to beneficially own at any time without being
deemed an "Acquiring Person" hereunder.

     (b) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such  terms in Rule  12b-2 of the  General  Rules and  Regulations  under the
Securities  Exchange Act of 1934, as amended (the "Exchange  Act"), as in effect
on the date of this Agreement.

     (c) A Person shall be deemed the "Beneficial  Owner" of and shall be deemed
to "beneficially own" any securities:

     (i) which such  Person or any of such  Person's  Affiliates  or  Associates
beneficially owns, directly or indirectly,  for purposes of Section 13(d) of the
Exchange Act and Rule 13d-3  thereunder  (or any  comparable or successor law or
regulation);

     (ii) which such Person or any of such Person's Affiliates or Associates has
(A) the right to acquire (whether such right is exercisable  immediately or only
after  the  passage  of  time)  pursuant  to  any   agreement,   arrangement  or
understanding (other than customary agreements with and between underwriters and
selling  group  members  with  respect  to  a  bona  fide  public   offering  of
securities),  or upon the exercise of conversion rights, exchange rights, rights
(other than the Rights), warrants or options, or otherwise;  provided,  however,
that a Person shall not be deemed pursuant to this Section 1(c)(ii)(A) to be the
Beneficial Owner of, or to beneficially own, (1) securities tendered pursuant to
a tender or  exchange  offer made by or on behalf of such  Person or any of such
Person's  Affiliates or Associates  until such tendered  securities are accepted
for  purchase  or  exchange  or (2)  securities  which a  Person  or any of such
Person's  Affiliates  or  Associates  may be deemed to have the right to acquire
pursuant to any merger or other  acquisition  agreement  between the Company and
such Person (or one or more of its  Affiliates or  Associates) if such agreement
has been  approved by the Board of Directors of the Company prior to there being
an  Acquiring  Person;  or (B) the  right  to vote  pursuant  to any  agreement,
arrangement  or  understanding;  provided,  however,  that a Person shall not be
deemed the Beneficial Owner of, or to beneficially  own, any security under this
Section l(c)(ii)(B) if the agreement,  arrangement or understanding to vote such
security  (1) arises  solely  from a  revocable  proxy or consent  given to such
Person in response to a public proxy or consent  solicitation  made pursuant to,
and in accordance with, the applicable rules and regulations of the Exchange Act
and (2) is not also then  reportable  on Schedule 13D under the Exchange Act (or
any comparable or successor report); or

     (iii) which are beneficially  owned,  directly or indirectly,  by any other
Person (or any Affiliate or Associate  thereof) with which such Person or any of
such  Person's  Affiliates  or  Associates  has any  agreement,  arrangement  or
understanding  (whether or not in writing) (other than customary agreements with
and between  underwriters  and selling group members with respect to a bona fide
public  offering of securities)  for the purpose of acquiring,  holding,  voting
(except to the extent  contemplated  by the proviso to Section  l(c)(ii)(B))  or
disposing of any securities of the Company;  provided,  however, that in no case
shall an officer or director of the Company be deemed (x) the  Beneficial  Owner
of any  securities  beneficially  owned by another  officer or  director  of the
Company solely by reason of actions undertaken by such persons in their capacity
as  officers  or  directors  of the  Company  or (y)  the  Beneficial  Owner  of
securities  held of record by the trustee of any  employee  benefit  plan of the
Company or any  Subsidiary of the Company for the benefit of any employee of the
Company or any Subsidiary of the Company, other than the officer or director, by
reason of any  influence  that such officer or director may have over the voting
of the securities held in the plan.

     (d)  "Business  Day" shall mean any day other than a Saturday,  Sunday or a
day on which banking institutions in New York are authorized or obligated by law
or executive order to close.

     (e) "Close of  Business"  on any given date shall mean 5:00 P.M.,  New York
time, on such date; provided,  however,  that if such date is not a Business Day
it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.

     (f) "Common  Shares" when used with reference to the Company shall mean the
shares of Common  Stock of the  Company,  $0.001  par value per  share.  "Common
Shares" when used with reference to any Person other than the Company shall mean
the capital stock (or equity  interest)  with the greatest  voting power of such
other  Person or, if such other Person is a Subsidiary  of another  Person,  the
Person or Persons which ultimately control such first-mentioned Person.

     (g)  "Continuing  Director"  shall  mean  (i) any  member  of the  Board of
Directors of the Company,  while a member of the Board,  who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person, or a representative
of an  Acquiring  Person or of any such  Affiliate or  Associate,  and who was a
member of the Board prior to the date of this Agreement,  or (ii) any Person who
subsequently  becomes a member of the Board, while a member of the Board, who is
not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or
a  representative  of an Acquiring Person or of any such Affiliate or Associate,
if such Person's nomination for election or election to the Board is recommended
or approved by a majority of the Continuing Directors.

     (h) "Distribution Date" shall mean the earlier of (i) the Close of Business
on the  tenth  day (or such  later  date as may be  determined  by  action  of a
majority of Continuing  Directors  then in office) after the Shares  Acquisition
Date (or, if the tenth day after the Shares  Acquisition  Date occurs before the
Record  Date,  the Close of  Business  on the Record  Date) or (ii) the Close of
Business on the tenth day (or such later date as may be  determined by action of
a majority of Continuing  Directors then in office) after the date that a tender
or exchange  offer by any Person (other than the Company,  any Subsidiary of the
Company,  any employee  benefit plan of the Company or of any  Subsidiary of the
Company,  or any Person or entity  organized,  appointed or  established  by the
Company  for or pursuant  to the terms of any such plan) is first  published  or
sent or given  within the  meaning of Rule  14d-2(a)  of the  General  Rules and
Regulations  under the Exchange Act, if,  assuming the  successful  consummation
thereof,  such Person would be the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding.

     (i) "Equivalent  Shares" shall mean Preferred Shares and any other class or
series of capital  stock of the  Company  which is entitled  to  participate  in
dividends and other distributions, including distributions upon the liquidation,
dissolution  or  winding up of the  Company,  on a  proportional  basis with the
Common Shares.  In  calculating  the number of any class or series of Equivalent
Shares for purposes of Section 11 of this  Agreement,  the number of shares,  or
fractions of a share,  of such class or series of capital stock that is entitled
to the same dividend or  distribution as a whole Common Share shall be deemed to
be one share.

     (j) "Expiration  Date" shall mean the earliest of (i) the Close of Business
on the Final  Expiration Date, (ii) the Redemption Date, (iii) the time at which
the Board of Directors  orders the exchange of the Rights as provided in Section
24 hereof or (iv) the  consummation  of a  transaction  contemplated  by Section
13(d) hereof.

     (k) "Final Expiration Date" shall mean September 17, 2007.

     (1) "Permitted Offer" shall mean a tender offer for all outstanding  Common
Shares made in the manner  prescribed  by Section  14(d) of the Exchange Act and
the rules and regulations promulgated thereunder;  provided,  however, that such
tender  offer  occurs at a time when  Continuing  Directors  are in office and a
majority of the  Continuing  Directors  then in office has  determined  that the
offer is both  adequate and  otherwise in the best  interests of the Company and
its shareholders (taking into account all factors that such Continuing Directors
deem relevant,  including  without  limitation  prices that could  reasonably be
achieved if the Company or its assets were sold on an orderly basis  designed to
realize maximum value).

     (m) "Person" shall mean any individual,  firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.

     (n)  "Preferred  Shares"  shall  mean  shares  of  Series  A  Participating
Preferred Stock of the Company.

     (o)  "Purchase  Price"  shall have the  meaning  set forth in Section  4(a)
hereof.

     (p) "Record  Date" shall have the meaning set forth in the  recitals at the
beginning of this Agreement.
(q)  "Redemption  Date" shall mean the time at which the Board of Directors
of the Company orders redemption of the Rights as provided in Section 23 hereof.

     (r)  "Redemption  Price" shall have the meaning set forth in Section  23(a)
hereof.

     (s) "Rights Dividend  Declaration Date" shall have the meaning set forth in
the recitals at the beginning of this Agreement.

     (t) "Section 13 Event" shall mean any event  described in clause (i),  (ii)
or (iii) of Section 13(a) hereof.

     (u)  "Shares  Acquisition  Date"  shall  mean  the  first  date  of  public
announcement  (which,  for purposes of this definition,  shall include,  without
limitation,  a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an  Acquiring  Person that an  Acquiring  Person has become such;
provided  that,  if such person is  determined  not to have become an  Acquiring
Person pursuant to Section  l(a)(ii)  hereof,  then no Shares  Acquisition  Date
shall be deemed to have occurred.

     (v)  "Subsidiary"  of any Person shall mean any corporation or other entity
of which an amount of voting  securities  sufficient  to elect a majority of the
directors  or Persons  having  similar  authority of such  corporation  or other
entity is beneficially  owned,  directly or indirectly,  by such Person,  or any
corporation or other entity otherwise controlled by such Person.

     (w) "Total Exercise Price" shall have the meaning set forth in Section 4(a)
hereof.

     (x) "Trading Day" shall have the meaning set forth in Section 11(d) hereof.

     (y) A  "Triggering  Event" shall be deemed to have occurred upon any Person
(other than the Company,  any  Subsidiary of the Company,  any employee  benefit
plan of the Company or any  Subsidiary  of the  Company,  or any entity  holding
Common Shares for or pursuant to the terms of any such plan),  together with all
Affiliates and Associates of such Person, becoming an Acquiring Person.

     Section 2.  Appointment  of Rights  Agent The Company  hereby  appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall, prior to the Distribution Date, also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof,  and the Rights Agent hereby accepts such  appointment.  The Company may
from time to time  appoint  such  co-Rights  Agents as it may deem  necessary or
desirable,  upon ten (10) days' prior written  notice to the Rights  Agent.  The
Rights  Agent shall have no duty to  supervise,  and shall in no event be liable
for, the acts or omissions of any such co-Rights Agents.
Section 3. Issuance of Rights Certificates.

     (a) Until the Distribution  Date, (i) the Rights will be evidenced (subject
to the  provisions  of Sections  3(b) and 3(c) hereof) by the  certificates  for
Common Shares registered in the names of the holders thereof (which certificates
shall  also be deemed  to be Rights  Certificates)  and not by  separate  Rights
Certificates  and  (ii)  the  right  to  receive  Rights  Certificates  will  be
transferable  only in connection  with the transfer of Common Shares.  Until the
earlier of the  Distribution  Date or the  Expiration  Date,  the  surrender for
transfer  of such  certificates  for Common  Shares  shall also  constitute  the
surrender  for  transfer  of  the  Rights  associated  with  the  Common  Shares
represented  thereby.  As soon as practicable  after the Distribution  Date, the
Company  will prepare and execute,  the Rights Agent will  countersign,  and the
Company will send or cause to be sent (and the Rights Agent will,  if requested,
send) by  first-class,  postage-prepaid  mail,  to each record  holder of Common
Shares as of the Close of Business on the  Distribution  Date, at the address of
such  holder  shown on the  records  of the  Company,  a Rights  Certificate  in
substantially the form of Exhibit B hereto (a "Rights Certificate"),  evidencing
one Right for each  Common  Share so held,  subject to  adjustment  as  provided
herein. In the event that an adjustment in the number of Rights per Common Share
has been made  pursuant  to Section  11(a)(i),  Section  11(i) or Section  11(p)
hereof, then at the time of distribution of the Rights Certificates, the Company
shall make the necessary and  appropriate  rounding  adjustments  (in accordance
with Section 14(a) hereof) so that Rights  Certificates  representing only whole
numbers of Rights  are  distributed  and cash is paid in lieu of any  fractional
Rights. As of the Distribution Date, the Rights will be evidenced solely by such
Rights  Certificates  and  may be  transferred  by the  transfer  of the  Rights
Certificates as permitted hereby,  separately and apart from any transfer of one
or more Common Shares, and the holders of such Rights  Certificates as listed in
the records of the Company or any  transfer  agent or  registrar  for the Rights
shall be the record holders thereof.

     (b) On the Record Date or as soon as  practicable  thereafter,  the Company
will send (or cause to be sent) a copy of a Summary  of Rights in  substantially
the  form of  Exhibit  C hereto  (the  "Summary  of  Rights"),  by  first-class,
postage-prepaid  mail, to each record holder of Common Shares as of the Close of
Business on the Record Date,  at the address of such holder shown on the records
of the Company.

     (c) Unless the Board of Directors,  by resolution  adopted at or before the
time of the  issuance  (including  pursuant to the  exercise of rights under the
Company's benefit plans) of any Common Shares, specifies to the contrary, Rights
shall be issued in respect of all Common Shares that are issued after the Record
Date but prior to the earlier of the  Distribution  Date or the Expiration  Date
or,  in  certain  circumstances   provided  in  Section  22  hereof,  after  the
Distribution  Date.  Certificates  representing such Common Shares shall also be
deemed to be certificates for Rights, and shall bear the following legend:

         This  certificate  also  evidences  and entitles  the holder  hereof to
         certain  rights  as set  forth in a Rights  Agreement  between  Quality
         Semiconductor,  Inc. and BankBoston, N.A. as the Rights Agent, dated as
         of August 29,  1997 (the  "Rights  Agreement"),  the terms of which are
         hereby  incorporated herein by reference and a copy of which is on file
         at the  principal  executive  offices of Quality  Semiconductor,  Inc..
         Under certain circumstances, as set forth in the Rights Agreement, such
         Rights will be evidenced by separate certificates and will no longer be
         evidenced by this certificate. Quality Semiconductor, Inc. will mail to
the holder of this certificate a copy of the Rights  Agreement  without
         charge  after  receipt of a written  request  therefor.  Under  certain
         circumstances set forth in the Rights  Agreement,  Rights issued to, or
         held by, any Person who is, was or becomes an  Acquiring  Person or any
         Affiliate or Associate thereof (as such terms are defined in the Rights
         Agreement), whether currently held by or on behalf of such Person or by
         any subsequent holder, may become null and void.

With respect to such  certificates  containing the foregoing  legend,  until the
earlier of (i) the  Distribution  Date or (ii) the  Expiration  Date, the Rights
associated  with the Common Shares  represented  by such  certificates  shall be
evidenced by such certificates alone, and the surrender for transfer of any such
certificate shall also constitute the transfer of the Rights associated with the
Common Shares  represented  thereby.  In the event that the Company purchases or
acquires any Common  Shares after the Record Date but prior to the  Distribution
Date, any Rights associated with such Common Shares shall be deemed canceled and
retired  so that the  Company  shall not be  entitled  to  exercise  any  Rights
associated with the Common Shares which are no longer outstanding.

     Section 4. Form of Rights Certificates.

     (a) The Rights  Certificates  (and the forms of election to purchase Common
Shares  and of  assignment  to be  printed  on the  reverse  thereof)  shall  be
substantially  in the form of  Exhibit  B  hereto  and may  have  such  marks of
identification  or  designation  and such  legends,  summaries  or  endorsements
printed thereon as the Company may deem  appropriate and as are not inconsistent
with the provisions of this Agreement,  or as may be required to comply with any
applicable law or with any rule or regulation made pursuant  thereto or with any
rule or  regulation  of any stock  exchange on which the Rights may from time to
time be listed, or to conform to usage.  Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates,  whenever distributed,  shall be
dated as of the Record  Date (or in the case of Rights  issued  with  respect to
Common  Shares  issued by the Company  after the Record Date,  as of the date of
issuance  of such  Common  Shares)  and on their face shall  entitle the holders
thereof to purchase such number of one-thousandths of a Preferred Share as shall
be set forth therein at the price set forth therein (such exercise price per one
one-thousandth  of a  Preferred  Share  being  hereinafter  referred  to as  the
"Purchase  Price"  and the  aggregate  exercise  price of all  Preferred  Shares
issuable upon exercise of one Right being hereinafter  referred to as the "Total
Exercise  Price"),  but the number and type of securities  purchasable  upon the
exercise of each Right and the Purchase  Price shall be subject to adjustment as
provided herein.

     (b) Any Rights  Certificate  issued  pursuant to Section 3(a) or Section 22
hereof that represents Rights  beneficially owned by: (i) an Acquiring Person or
any  Associate  or Affiliate of an  Acquiring  Person,  (ii) a transferee  of an
Acquiring  Person  (or of  any  such  Associate  or  Affiliate)  who  becomes  a
transferee  after the Acquiring  Person becomes such or (iii) a transferee of an
Acquiring  Person  (or of  any  such  Associate  or  Affiliate)  who  becomes  a
transferee prior to or concurrently  with the Acquiring Person becoming such and
receives  such  Rights  pursuant  to either (A) a transfer  (whether  or not for
consideration)  from the Acquiring Person to holders of equity interests in such
Acquiring  Person  or to any  Person  with whom such  Acquiring  Person  has any
continuing  agreement,  arrangement or  understanding  regarding the transferred
Rights or (B) a  transfer  which  the  Board of  Directors  of the  Company  has
determined  is part of a  plan,  arrangement  or  understanding  which  has as a
primary  purpose or effect  avoidance  of Section  7(e)  hereof,  and any Rights
Certificate  issued  pursuant to Section 6 or Section 11 hereof  upon  transfer,
exchange,  replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:

         The  Rights   represented  by  this  Rights  Certificate  are  or  were
         beneficially owned by a Person who was or became an Acquiring Person or
         an Affiliate  or  Associate  of an Acquiring  Person (as such terms are
         defined in the Rights Agreement).  Accordingly, this Rights Certificate
         and the  Rights  represented  hereby  may  become  null and void in the
         circumstances specified in Section 7(e) of the Rights Agreement.

     Section 5. Countersignature and Registration.

     (a) The Rights  Certificates  shall be executed on behalf of the Company by
its Chairman of the Board,  its Chief  Executive  Officer,  its President or any
Vice President,  either manually or by facsimile signature, and by the Secretary
or an  Assistant  Secretary  of the  Company,  either  manually or by  facsimile
signature,  and shall have  affixed  thereto  the  Company's  seal (if any) or a
facsimile thereof.  The Rights  Certificates shall be manually  countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case any  officer  of the  Company  who  shall  have  signed  any of the  Rights
Certificates   shall   cease  to  be  such   officer  of  the   Company   before
countersignature  by the Rights  Agent and issuance and delivery by the Company,
such Rights Certificates nevertheless,  may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the  Company;  and any  Rights  Certificate  may be  signed  on behalf of the
Company by any person who, at the actual  date of the  execution  of such Rights
Certificate,  shall be a proper  officer  of the  Company  to sign  such  Rights
Certificate,  although at the date of the execution of this Rights Agreement any
such person was not such an officer.

     (b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its office designated for such purposes,  books for registration and
transfer of the Rights Certificates issued hereunder.  Such books shall show the
names and addresses of the respective  holders of the Rights  Certificates,  the
number of Rights  evidenced on its face by each of the Rights  Certificates  and
the date of each of the Rights Certificates.

     Section  6.  Transfer,   Split  Up,  Combination  and  Exchange  of  Rights
Certificates;   Mutilated,   DestroyedSection  6.Stolen  RTransfer,   Split  Up,
Combination and Exchange of Rights Certificates;  Mutilated,  Destroyed, Lost or
Stolen Rights Certificates.

     (a) Subject to the  provisions of Sections  7(e), 14 and 24 hereof,  at any
time after the Close of Business on the  Distribution  Date,  and at or prior to
the Close of Business on the Expiration  Date, any Rights  Certificate or Rights
Certificates  may be  transferred,  split up,  combined or exchanged for another
Rights  Certificate or Rights  Certificates,  entitling the registered holder to
purchase a like number of  one-thousandths of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets, as the case may be) as
the Rights  Certificate or Rights  Certificates  surrendered  then entitled such
holder to  purchase.  Any  registered  holder  desiring to  transfer,  split up,
combine or exchange any Rights  Certificate  or Rights  Certificates  shall make
such request in writing  delivered to the Rights Agent,  and shall surrender the
Rights Certificate or Rights Certificates to be transferred,  split up, combined
or  exchanged  at the office of the Rights Agent  designated  for such  purpose.
Neither the Rights  Agent nor the Company  shall be obligated to take any action
whatsoever  with  respect  to  the  transfer  of  any  such  surrendered  Rights
Certificate  until the  registered  holder shall have  completed  and signed the
certificate  contained  in the form of  assignment  on the reverse  side of such
Rights  Certificate  and shall have  provided  such  additional  evidence of the
identity of the Beneficial Owner (or former  Beneficial  Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Sections 7(e), 14 and 24 hereof, countersign and deliver
to the person entitled thereto a Rights Certificate or Rights  Certificates,  as
the case may be, as so  requested.  The  Company  may  require  payment of a sum
sufficient  to cover  any tax or  governmental  charge  that may be  imposed  in
connection  with any  transfer,  split up,  combination  or  exchange  of Rights
Certificates.

     (b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss,  theft,  destruction or mutilation of a Rights
Certificate,  and,  in case of  loss,  theft or  destruction,  of  indemnity  or
security  reasonably  satisfactory  to  them,  and,  at the  Company's  request,
reimbursement  to the Company and the Rights  Agent of all  reasonable  expenses
incidental  thereto,  and upon surrender to the Rights Agent and cancellation of
the Rights  Certificate  if  mutilated,  the Company will make and deliver a new
Rights  Certificate  of like  tenor to the  Rights  Agent  for  delivery  to the
registered holder in lieu of the Rights Certificate so lost,  stolen,  destroyed
or mutilated.

     Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.

     (a) Subject to Section 7(e), 23(b) and 24(b) hereof,  the registered holder
of any Rights  Certificate may exercise the Rights evidenced  thereby (except as
otherwise  provided  herein)  in  whole  or  in  part  at  any  time  after  the
Distribution  Date upon  surrender of the Rights  Certificate,  with the form of
election to purchase on the reverse side thereof  duly  executed,  to the Rights
Agent at the office of the Rights Agent  designated  for such purpose,  together
with payment of the Purchase Price for each  one-thousandth of a Preferred Share
as to which the Rights are exercised, at or prior to the Expiration Date.

     (b) The  Purchase  Price  for  each  one-thousandth  of a  Preferred  Share
issuable pursuant to the exercise of a Right shall initially be $70.00, shall be
subject to adjustment from time to time as provided in Sections 11 and 13 hereof
and shall be  payable  in  lawful  money of the  United  States  of  America  in
accordance with paragraph (c) below.

     (c) Upon receipt of a Rights Certificate  representing  exercisable Rights,
with the form of election to purchase duly  executed,  accompanied by payment of
the Purchase Price for the number of  one-thousandths  of a Preferred  Share (or
other securities or property,  as the case may be) to be purchased and an amount
equal to any  applicable  transfer tax required to be paid by the holder of such
Rights  Certificate in accordance with Section 9 hereof in cash, or by certified
check or cashier's  check payable to the order of the Company,  the Rights Agent
shall,  subject to Section 20(k) hereof,  thereupon promptly (i) (A) requisition
from any  transfer  agent of the  Preferred  Shares (or make  available,  if the
Rights Agent is the transfer  agent for the Preferred  Shares) a certificate  or
certificates  for the  number  of  one-thousandths  of a  Preferred  Share to be
purchased and the Company  hereby  irrevocably  authorizes its transfer agent to
comply  with all such  requests  or (B) if the  Company  shall  have  elected to
deposit the total number of  one-thousandths  of a Preferred Share issuable upon
exercise of the Rights hereunder with a depository  agent,  requisition from the
depository   agent  of   depository   receipts   representing   such  number  of
one-thousandths  of a  Preferred  Share as are to be  purchased  (in which  case
certificates  for the Preferred  Shares  represented  by such receipts  shall be
deposited  by the  transfer  agent with the  depository  agent) and the  Company
hereby  directs  the  depository  agent to comply with such  request,  (ii) when
appropriate,  requisition from the Company the amount of cash to be paid in lieu
of issuance of  fractional  shares in accordance  with Section 14 hereof,  (iii)
after receipt of such certificates or depository receipts,  cause the same to be
delivered  to or  upon  the  order  of the  registered  holder  of  such  Rights
Certificate,  registered  in such  name or  names as may be  designated  by such
holder and (iv) when appropriate, after receipt thereof, deliver such cash to or
upon the order of the registered holder of such Rights Certificate.  The payment
of the  Purchase  Price  (as such  amount  may be  reduced  (including  to zero)
pursuant to Section  11(a)(iv)  hereof) may be made in cash or by certified bank
check or bank draft  payable to the order of the Company.  In the event that the
Company is obligated to issue other  securities of the Company,  pay cash and/or
distribute  other  property  pursuant to Section 11(a) hereof,  the Company will
make all arrangements necessary so that such other securities, cash and/or other
property  are  available  for  distribution  by the  Rights  Agent,  if and when
appropriate.

     (d) In case the registered holder of any Rights  Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate  evidencing
Rights  equivalent to the Rights  remaining  unexercised  shall be issued by the
Rights Agent to the  registered  holder of such Rights  Certificate or to his or
her duly authorized assigns, subject to the provisions of Section 14 hereof.

     (e)  Notwithstanding  anything in this Agreement to the contrary,  from and
after the first  occurrence  of a  Triggering  Event or a Section 13 Event,  any
Rights  beneficially  owned  by (i)  an  Acquiring  Person  or an  Associate  or
Affiliate of an Acquiring  Person,  (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person  becomes such (a "Post  Transferee"),  (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer  (whether or not for  consideration)  from the
Acquiring  Person to holders of equity  interests in such Acquiring Person or to
any  Person  with  whom  the  Acquiring  Person  has any  continuing  agreement,
arrangement or understanding  regarding the transferred Rights or (B) a transfer
which the Board of  Directors of the Company has  determined  is part of a plan,
arrangement  or  understanding  which has as a  primary  purpose  or effect  the
avoidance  of this Section 7(e) (a "Prior  Transferee")  or (iv) any  subsequent
transferee  receiving  transferred  Rights  from a Post  Transferee  or a  Prior
Transferee,  either  directly or through one or more  intermediate  transferees,
shall  become null and void  without  any  further  action and no holder of such
Rights shall have any rights  whatsoever  with  respect to such Rights,  whether
under any provision of this  Agreement or  otherwise.  The Company shall use all
reasonable  efforts  to ensure  that the  provisions  of this  Section  7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or to any other Person as a result of its failure to make
any determinations  with respect to an Acquiring Person or any of such Acquiring
Person's Affiliates, Associates or transferees hereunder.

     (f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company  shall be  obligated  to undertake  any action with
respect to a registered holder upon the occurrence of any purported  exercise as
set  forth in this  Section  7 unless  such  registered  holder  shall  have (i)
completed  and signed  the  certificate  contained  in the form of  election  to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional  evidence of the identity of the
Beneficial  Owner (or  former  Beneficial  Owner) or  Affiliates  or  Associates
thereof as the Company shall reasonably request.

     Section 8.  Cancellation and Destruction of Rights  Certificates All Rights
Certificates  surrendered  for the  purpose  of  exercise,  transfer,  split up,
combination  or exchange  shall,  if surrendered to the Company or to any of its
agents,  be delivered to the Rights Agent for  cancellation or in canceled form,
or, if surrendered  to the Rights Agent,  shall be canceled by it, and no Rights
Certificates  shall be issued in lieu thereof  except as expressly  permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement,  and the Rights Agent shall so cancel and
retire,  any Rights  Certificate  purchased or acquired by the Company otherwise
than upon the  exercise  thereof.  The Rights  Agent shall  deliver all canceled
Rights  Certificates  to the Company,  or shall,  at the written  request of the
Company,  destroy  such  canceled  Rights  Certificates,  and in such case shall
deliver a certificate of destruction thereof to the Company.

     Section 9. Reservation and Availability of Preferred Shares.

     (a) The Company  covenants  and agrees that it will use its best efforts to
cause  to be  reserved  and  kept  available  out of and  to the  extent  of its
authorized  and  unissued  shares of  preferred  stock not  reserved for another
purpose  (and,  following  the  occurrence  of a  Triggering  Event,  out of its
authorized and unissued  shares of Common Shares and/or other  securities),  the
number of Preferred  Shares (and,  following the  occurrence  of the  Triggering
Event,  Common Shares and/or other securities) that will be sufficient to permit
the exercise in full of all outstanding Rights.

     (b) If the Company shall  hereafter  list any of its Preferred  Shares on a
national  securities  exchange,  then  so  long as the  Preferred  Shares  (and,
following  the  occurrence  of a Triggering  Event,  Common  Shares and/or other
securities)  issuable and deliverable  upon exercise of the Rights may be listed
on a national  securities  exchange,  the Company  shall use its best efforts to
cause,  from and after such time as the Rights become  exercisable  (but only to
the extent that it is reasonably likely that the Rights will be exercised),  all
shares  reserved for such  issuance to be listed on such  exchange upon official
notice of issuance upon such exercise.

     (c) The  Company  shall  use  its  best  efforts  to (i)  file,  as soon as
practicable  following  the  earliest  date  after  the  first  occurrence  of a
Triggering Event in which the  consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section  11(a)(iv)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a  registration  statement  under the  Securities  Act of 1933,  as
amended (the "Securities Act"), with respect to the securities  purchasable upon
exercise  of the Rights on an  appropriate  form,  (ii) cause such  registration
statement to become effective as soon as practicable after such filing and (iii)
cause such registration  statement to remain effective (with a prospectus at all
times meeting the  requirements  of the Securities Act) until the earlier of (A)
the date as of which the Rights are no longer  exercisable  for such  securities
and (B) the date of  expiration  of the  Rights.  The  Company  may  temporarily
suspend, for a period not to exceed ninety (90) days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability of the
Rights in order to prepare and file such registration statement and permit it to
become  effective.  Upon any such  suspension,  the Company shall issue a public
announcement  stating,  and notify the Rights Agent, that the  exercisability of
the Rights has been temporarily suspended,  as well as a public announcement and
notification  to the Rights Agent at such time as the suspension is no longer in
effect.  The Company will also take such action as may be appropriate  under, or
to ensure  compliance  with,  the  securities  or "blue sky" laws of the various
states in connection with the exercisability of the Rights.  Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any  jurisdiction,  unless the requisite  qualification in such  jurisdiction
shall have been  obtained,  or an exemption  therefrom  shall be available,  and
until a registration statement has been declared effective.

     (d) The Company  covenants  and agrees that it will take all such action as
may be necessary to ensure that all Preferred  Shares delivered upon exercise of
Rights shall,  at the time of delivery of the  certificates  for such  Preferred
Shares  (subject  to  payment  of the  Purchase  Price),  be  duly  and  validly
authorized and issued and fully paid and nonassessable shares.

     (e) The Company further  covenants and agrees that it will pay when due and
payable any and all federal and state  transfer  taxes and charges  which may be
payable  in  respect  of  the  original  issuance  or  delivery  of  the  Rights
Certificates or of any Preferred Shares upon the exercise of Rights. The Company
shall not, however,  be required to pay any transfer tax which may be payable in
respect of any  transfer or delivery of Rights  Certificates  to a person  other
than, or the issuance or delivery of certificates or depository receipts for the
Preferred  Shares in a name  other than that of,  the  registered  holder of the
Rights Certificate  evidencing Rights surrendered for exercise or to issue or to
deliver any  certificates or depository  receipts for Preferred  Shares upon the
exercise  of any  Rights  until any such tax shall  have been paid (any such tax
being payable by the holder of such Rights Certificate at the time of surrender)
or until it has been established to the Company's  satisfaction that no such tax
is due.

     Section  10.  Preferred  Shares  Record  Date Each person in whose name any
certificate for a number of  one-thousandths of a Preferred Share is issued upon
the  exercise  of Rights  shall for all  purposes  be deemed to have  become the
holder  of  record  of  Preferred  Shares  represented   thereby  on,  and  such
certificate  shall  be  dated,  the  date  upon  which  the  Rights  Certificate
evidencing  such Rights was duly  surrendered  and payment of the Purchase Price
multiplied by the number of one-thousandths of a Preferred Share with respect to
which the Rights have been  exercised (and any  applicable  transfer  taxes) was
made;  provided,  however,  that if the date of such  surrender and payment is a
date upon which the Preferred  Shares  transfer books of the Company are closed,
such person shall be deemed to have become the record  holder of such shares on,
and such certificate  shall be dated, the next succeeding  Business Day on which
the  Preferred  Shares  transfer  books of the  Company  are open.  Prior to the
exercise of the Rights  evidenced  thereby,  the holder of a Rights  Certificate
shall not be  entitled to any rights of a holder of  Preferred  Shares for which
the Rights shall be exercisable,  including,  without  limitation,  the right to
vote, to receive dividends or other  distributions or to exercise any preemptive
rights,  and shall not be entitled to receive any notice of any  proceedings  of
the Company, except as provided herein.

     Section 11.  Adjustment  of Purchase  Price,  Number of Shares or Number of
Rights The  Purchase  Price,  the  number  and kind of shares or other  property
covered  by each  Right and the  number of Rights  outstanding  are  subject  to
adjustment from time to time as provided in this Section 11.

     (a) (i) In the event the  Company  shall at any time after the date of this
Agreement (A) declare a dividend on the Common Shares  payable in Common Shares,
(B) subdivide the outstanding  Common Shares, (C) combine the outstanding Common
Shares (by reverse  stock split or  otherwise)  into a smaller  number of Common
Shares,  or (D) issue any shares of its capital stock in a  reclassification  of
the Common Shares  (including  any such  reclassification  in connection  with a
consolidation  or merger in which the  Company is the  continuing  or  surviving
corporation),  then,  in each such event,  except as otherwise  provided in this
Section 11(a) and Section 7(e) hereof: (1) each of the Rights outstanding at the
time  of the  record  date  for  such  dividend  or the  effective  date of such
subdivision,  combination or reclassification shall be proportionately  adjusted
to  that  number  of  Rights  (calculated  to  the  nearest  one  ten-thousandth
(1/10,000) of a Right) equal to a fraction (the "Exchange Ratio"), the numerator
of which shall be the total number of Common  Shares or shares of capital  stock
issued in such  reclassification  of the Common Shares  outstanding  immediately
following such dividend,  subdivision,  combination or reclassification  and the
denominator  of which  shall be the total  number of Common  Shares  outstanding
immediately  prior to such time, and the number of Rights that shall  thereafter
be issued with respect to each Common Share or share of such other capital stock
that shall become outstanding thereafter prior to the Distribution Date shall be
equal to the total number of outstanding Rights immediately after such event (as
adjusted pursuant to this clause (1)) divided by the total number of outstanding
Common Shares or shares of such other capital stock immediately after such event
(subject to further  adjustment  pursuant to the provisions of this  Agreement);
(2) the  Purchase  Price  in  effect  at the  time of the  record  date for such
dividend  or  of  the  effective  date  of  such  subdivision,   combination  or
reclassification  shall be adjusted so that the Purchase Price  thereafter shall
equal the result  obtained by dividing the Purchase Price in effect  immediately
prior to such time by the Exchange Ratio;  provided,  however,  that in no event
shall the  consideration  to be paid upon the exercise of one Right be less than
the aggregate  par value of the shares of capital stock of the Company  issuable
upon  exercise of such Right;  and (3) the number of Common  Shares or shares of
such other capital  stock  issuable upon the exercise of each Right shall remain
unchanged immediately after such event, but, in the event of a reclassification,
the kind of shares  issuable upon the exercise of each Right  immediately  after
such  reclassification  shall be adjusted to be the kind of shares of such other
capital stock issued in such reclassification,  rather than Common Shares. If an
event occurs which would require an adjustment  under both this Section 11(a)(i)
and Section  11(a)(ii)  hereof,  the  adjustment  provided  for in this  Section
11(a)(i)  shall be in  addition  to, and shall be made prior to, any  adjustment
required pursuant to Section 11(a)(ii) hereof.

     (ii)  Subject to Section 24 of this  Agreement,  in the event a  Triggering
Event shall have occurred, then promptly following such Triggering Event, proper
provision  shall be made so that each  holder of a Right,  except as provided in
Section 7(e) hereof,  shall thereafter have the right to receive for each Right,
upon exercise thereof in accordance with the terms of this Agreement and payment
of the then-current Total Exercise Price, in lieu of a number of one-thousandths
of a Preferred Share, such number of Common Shares of the Company as shall equal
the result obtained by multiplying the  then-current  Purchase Price by the then
number of one-thousandths of a Preferred Share for which a Right was exercisable
(or  would  have  been  exercisable  if  the  Distribution  Date  had  occurred)
immediately  prior to the first  occurrence of a Triggering  Event, and dividing
that product by 50% of the current per share market price  (determined  pursuant
to Section  11(d)  hereof) for Common  Shares on the date of  occurrence  of the
Triggering  Event (such  number of shares being  hereinafter  referred to as the
"Adjustment Shares").

     (iii) The right to buy Common  Shares of the  Company  pursuant  to Section
11(a)(ii) hereof shall not arise as a result of any Person becoming an Acquiring
Person through an acquisition of Common Shares pursuant to a Permitted Offer.

     (iv) In lieu of issuing Common Shares in accordance with Section  11(a)(ii)
hereof,  the Company may, if the Board of Directors  determines that such action
is  necessary  or  appropriate  and not  contrary to the  interest of holders of
Rights (and, in the event that the number of Common Shares which are  authorized
by the Company's  Articles of Incorporation  but not outstanding or reserved for
issuance for purposes  other than upon exercise of the Rights are not sufficient
to permit the  exercise in full of the Rights,  or if any  necessary  regulatory
approval  for such  issuance has not been  obtained by the Company,  the Company
shall):  (A) determine the excess of (1) the value of the Common Shares issuable
upon the exercise of a Right (the "Current  Value") over (2) the Purchase  Price
(such excess,  the  "Spread") and (B) with respect to each Right,  make adequate
provision to substitute for such Common Shares, upon exercise of the Rights, (1)
cash, (2) a reduction in the Purchase Price, (3) other equity  securities of the
Company (including,  without limitation, shares or units of shares of any series
of  preferred  stock which the Board of  Directors  of the Company has deemed to
have  the same  value as  Common  Shares  (such  shares  or units of  shares  of
preferred  stock are herein called "common stock  equivalents")),  except to the
extent that the Company has not obtained any necessary shareholder or regulatory
approval for such issuance,  (4) debt  securities of the Company,  except to the
extent that the Company has not obtained any necessary shareholder or regulatory
approval  for such  issuance,  (5) other  assets or (6) any  combination  of the
foregoing,  having an  aggregate  value equal to the Current  Value,  where such
aggregate  value has been  determined  by the Board of  Directors of the Company
based  upon the  advice  of a  nationally  recognized  investment  banking  firm
selected by the Board of  Directors of the Company;  provided,  however,  if the
Company  shall not have made  adequate  provision to deliver  value  pursuant to
clause (B) above within  thirty (30) days  following  the later of (x) the first
occurrence of a Triggering  Event and (y) the date on which the Company's  right
of redemption  pursuant to Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section  11(a)(ii)  Trigger Date"),  then the Company
shall be obligated to deliver,  upon the  surrender  for exercise of a Right and
without  requiring  payment of the Purchase Price,  Common Shares (to the extent
available), except to the extent that the Company has not obtained any necessary
shareholder or regulatory  approval for such  issuance,  and then, if necessary,
cash,  which shares and/or cash have an aggregate value equal to the Spread.  If
the Board of Directors of the Company  shall  determine in good faith that it is
likely that sufficient additional Common Shares could be authorized for issuance
upon  exercise in full of the Rights or that any necessary  regulatory  approval
for such issuance  will be obtained,  the thirty (30) day period set forth above
may be  extended  to the extent  necessary,  but not more than  ninety (90) days
after the Section  11(a)(ii)  Trigger  Date,  in order that the Company may seek
shareholder  approval for the  authorization  of such additional  shares or take
action to obtain such regulatory  approval (such period,  as it may be extended,
the "Substitution  Period"). To the extent that the Company determines that some
action  need be taken  pursuant to the first  and/or  second  sentences  of this
Section  11(a)(iv),  the  Company  (x) shall  provide,  subject to Section  7(e)
hereof, that such action shall apply uniformly to all outstanding Rights and (y)
may  suspend  the  exercisability  of the  Rights  until the  expiration  of the
Substitution  Period in order to seek any authorization of additional shares, to
take any action to obtain any required  regulatory approval and/or to decide the
appropriate  form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement  stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect.  For purposes of this Section  11(a)(iv),
the value of the Common  Shares  shall be the current per share market price (as
determined pursuant to Section 11(d) hereof) of the Common Shares on the Section
11(a)(ii)  Trigger Date and the value of any "common stock  equivalent" shall be
deemed to have the same value as the Common Shares on such date. (b) In case the
Company shall, at any time after the date of this  Agreement,  fix a record date
for the issuance of rights,  options or warrants to all holders of Common Shares
or of any class or series of  Equivalent  Shares  entitling  such holders (for a
period expiring within  forty-five (45) calendar days after such record date) to
subscribe  for or purchase  Common  Shares or  Equivalent  Shares or  securities
convertible  into Common  Shares or  Equivalent  Shares at a price per share (or
having a  conversion  price per share,  if a security  convertible  into  Common
Shares or  Equivalent  Shares) less than the then current per share market price
of the Common Shares or Equivalent  Shares (as defined in Section 11(d)) on such
record date,  then, in each such case,  the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately  prior to such  record date by a fraction,  the  numerator  of which
shall be the number of Common Shares and Equivalent  Shares (if any) outstanding
on such record date, plus the number of Common Shares or Equivalent  Shares,  as
the case may be,  which the  aggregate  offering  price of the  total  number of
Common Shares or Equivalent Shares, as the case may be, so to be offered (and/or
the aggregate  initial  conversion price of the convertible  securities so to be
offered)  would purchase at such current  market price,  and the  denominator of
which  shall be the  number of Common  Shares  and  Equivalent  Shares  (if any)
outstanding on such record date, plus the number of additional  Common Shares or
Equivalent  Shares,  as the case  may be,  to be  offered  for  subscription  or
purchase  (or  into  which  the  convertible  securities  so to be  offered  are
initially  convertible).  In  case  such  subscription  price  may be  paid in a
consideration part or all of which shall be in a form other than cash, the value
of such  consideration  shall be as  determined  in good  faith by the  Board of
Directors of the Company,  whose determination shall be described in a statement
filed  with the Rights  Agent and shall be  binding on the Rights  Agent and the
holders of the Rights.  Common Shares and Equivalent Shares owned by or held for
the account of the Company  shall not be deemed  outstanding  for the purpose of
any such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights, options or warrants are
not so issued,  the Purchase  Price shall be adjusted to be the  Purchase  Price
which would then be in effect if such record date had not been fixed.

     (c) In  case  the  Company  shall,  at any  time  after  the  date  of this
Agreement,  fix a record date for the making of a distribution to all holders of
the Common Shares or of any class or series of Equivalent  Shares (including any
such distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular  quarterly cash dividend,  if any, or a dividend
payable in Common Shares) or subscription rights, options or warrants (excluding
those referred to in Section 11(b)), then, in each such case, the Purchase Price
to be in effect after such record date shall be  determined by  multiplying  the
Purchase  Price in effect  immediately  prior to such record date by a fraction,
the numerator of which shall be the current market price (as determined pursuant
to Section 11(d) hereof) of a Common Share or an Equivalent Share on such record
date,  less the fair  market  value per  Common  Share or  Equivalent  Share (as
determined  in good  faith  by the  Board of  Directors  of the  Company,  whose
determination  shall be described in a statement filed with the Rights Agent) of
the  portion  of  the  cash,  assets  or  evidences  of  indebtedness  so  to be
distributed or of such  subscription  rights or warrants  applicable to a Common
Share or  Equivalent  Share,  as the case may be, and the  denominator  of which
shall be such current  market  price (as  determined  pursuant to Section  11(d)
hereof)  of a  Common  Share  or  Equivalent  Share on such  record  date.  Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such  distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.

     (d) For the purpose of any computation  hereunder,  other than computations
made pursuant to Section 11(a)(iv) hereof,  the "current per share market price"
of any security (a "Security" for the purpose of this Section 11(d)) on any date
shall be deemed to be the average of the daily closing  prices per share of such
Security  for  the  thirty  (30)  consecutive  Trading  Days  (as  such  term is
hereinafter  defined)  immediately  prior  to such  date,  and for  purposes  of
computations made pursuant to Section  11(a)(iv) hereof,  the "current per share
market  price" of any  Security on any date shall be deemed to be the average of
the daily closing prices per share of such Security for the ten (10) consecutive
Trading Days  immediately  prior to such date;  provided,  however,  that in the
event that the  current per share  market  price of the  Security is  determined
during a period following the announcement by the issuer of such Security of (i)
a dividend or distribution  on such Security  payable in shares of such Security
or securities convertible into such shares or (ii) any subdivision,  combination
or  reclassification  of such  Security,  and  prior  to the  expiration  of the
requisite  thirty  (30)  Trading Day or ten (10)  Trading Day period,  after the
ex-dividend date for such dividend or distribution,  or the record date for such
subdivision,  combination or reclassification,  then, and in each such case, the
current per share  market price shall be  appropriately  adjusted to reflect the
current market price per share  equivalent of such  Security.  The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes  place on such day,  the  average  of the  closing  bid and asked  prices,
regular  way,  in  either  case  as  reported  in  the  principal   consolidated
transaction  reporting  system with respect to securities  listed or admitted to
trading  on the New York Stock  Exchange  or, if the  Security  is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated  transaction  reporting system with respect to securities listed on
the principal  national  securities  exchange on which the Security is listed or
admitted to trading or, if the  Security is not listed or admitted to trading on
any  national  securities  exchange,  the last sale  price or, if such last sale
price is not  reported,  the average of the high bid and low asked prices in the
over-the-counter  market, as reported by the National  Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in
use,  or,  if on  any  such  date  the  Security  is  not  quoted  by  any  such
organization,  the average of the closing bid and asked prices as furnished by a
professional  market maker making a market in the Security selected by the Board
of  Directors  of the  Company.  If on any such date no market maker is making a
market  in the  Common  Shares,  the fair  value of such  shares on such date as
determined in good faith by the Board of Directors of the Company shall be used.
The  term  "Trading  Day"  shall  mean a day on  which  the  principal  national
securities  exchange  on which the  Security is listed or admitted to trading is
open for the  transaction  of  business  or, if the  Security  is not  listed or
admitted to trading on any national securities  exchange, a Business Day. If the
Common Shares are not publicly  held or so listed or traded,  "current per share
market price" shall mean the fair value per share as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a  statement  filed  with the  Rights  Agent  and  shall be  conclusive  for all
purposes.

     (e) Anything herein to the contrary  notwithstanding,  no adjustment in the
Purchase  Price  shall be  required  unless  such  adjustment  would  require an
increase or decrease of at least 1% in the Purchase  Price;  provided,  however,
that any  adjustments  which by reason of this Section 11(e) are not required to
be made  shall be carried  forward  and taken  into  account  in any  subsequent
adjustment.  All calculations under this Section 11 shall be made to the nearest
cent or to the nearest  ten-thousandth  of a Common  Share or other share or one
hundred-thousandth of a Preferred Share, as the case may be. Notwithstanding the
first sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the  earlier of (i) three (3) years from the date of
the transaction which requires such adjustment or (ii) the Expiration Date.

     (f) If as a result of an adjustment made pursuant to Section 11(a) or 13(a)
hereof,  the holder of any Right  thereafter  exercised shall become entitled to
receive any shares of capital stock other than Preferred Shares,  thereafter the
number of such other  shares so  receivable  upon  exercise  of any Right and if
required,  the Purchase Price thereof,  shall be subject to adjustment from time
to time in a manner  and on terms as nearly  equivalent  as  practicable  to the
provisions with respect to the Common Shares  contained in Sections 11(a),  (b),
(c), (e), (h), (i), (j), (k), (1) and (m), and the  provisions of Sections 7, 9,
10, 13 and 14 with respect to the Preferred  Shares shall apply on like terms to
any such other shares.

     (g)  All  Rights  originally  issued  by  the  Company  subsequent  to  any
adjustment  made to the Purchase  Price  hereunder  shall  evidence the right to
purchase,  at the adjusted  Purchase Price, the number of  one-thousandths  of a
Preferred  Share  purchasable  from time to time  hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.

     (h) Unless the Company  shall have  exercised  its  election as provided in
Section  11(i),  upon each  adjustment of the Purchase  Price as a result of the
calculations made in Section 11(b), each Right outstanding  immediately prior to
the making of such adjustment shall  thereafter  evidence the right to purchase,
at the adjusted Purchase Price,  that number of Preferred Shares  (calculated to
the nearest one  hundred-thousandth  of a share) obtained by (i) multiplying (x)
the number of  Preferred  Shares  covered by a Right  immediately  prior to this
adjustment,  by (y) the  Purchase  Price  in  effect  immediately  prior to such
adjustment of the Purchase  Price,  and (ii) dividing the product so obtained by
the Purchase Price in effect  immediately  after such adjustment of the Purchase
Price.

     (i) The  Company  may elect on or after the date of any  adjustment  of the
Purchase Price as a result of the  calculations  made in Section 11(b) to adjust
the  number of  Rights,  in  substitution  for any  adjustment  in the number of
Preferred Shares  purchasable  upon the exercise of a Right.  Each of the Rights
outstanding  after such  adjustment of the number of Rights shall be exercisable
for the number of  one-thousandths  of a  Preferred  Share for which a Right was
exercisable  immediately  prior to such  adjustment.  Each  Right held of record
prior to such  adjustment  of the number of Rights  shall  become that number of
Rights  (calculated  to the nearest  ten-thousandth)  obtained  by dividing  the
Purchase Price in effect  immediately  prior to adjustment of the Purchase Price
by the Purchase  Price in effect  immediately  after  adjustment of the Purchase
Price.  The Company shall make a public  announcement  of its election to adjust
the number of Rights,  indicating  the record date for the  adjustment,  and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter,  but,
if the Rights  Certificates  have been  issued,  shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have been
issued,  upon each  adjustment of the number of Rights  pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing,  subject to Section 14 hereof,  the additional  Rights to which such
holders shall be entitled as a result of such  adjustment,  or, at the option of
the  Company,  shall  cause to be  distributed  to such  holders  of  record  in
substitution  and replacement for the Rights  Certificates  held by such holders
prior to the date of adjustment,  and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall  be  entitled  after  such  adjustment.   Rights  Certificates  so  to  be
distributed  shall be issued,  executed and countersigned in the manner provided
for herein (and may bear,  at the option of the Company,  the adjusted  Purchase
Price) and shall be  registered  in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.

     (j)  Irrespective  of any adjustment or change in the Purchase Price or the
number of Preferred Shares issuable upon the exercise of the Rights,  the Rights
Certificates  theretofore  and  thereafter  issued may  continue  to express the
Purchase  Price per one  one-thousandth  of a Preferred  Share and the number of
one-thousandths  of a Preferred Share which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before  taking any action that would cause an  adjustment  reducing the
Purchase  Price  below  the par or  stated  value,  if  any,  of the  number  of
one-thousandths  of a Preferred Share issuable upon exercise of the Rights,  the
Company  shall  take any  corporate  action  which  may,  in the  opinion of its
counsel, be necessary in order that the Company may validly and legally issue as
fully  paid  and  nonassessable  shares  such  number  of  one-thousandths  of a
Preferred Share at such adjusted Purchase Price.

     (1) In any case in which this Section 11 shall  require that an  adjustment
in the  Purchase  Price be made  effective  as of a record  date for a specified
event,  the Company may elect to defer  until the  occurrence  of such event the
issuing  to the holder of any Right  exercised  after  such  record  date of the
number of  one-thousandths  of a  Preferred  Share and  other  capital  stock or
securities  of the Company,  if any,  issuable upon such exercise over and above
the number of  one-thousandths  of a Preferred  Share and other capital stock or
securities of the Company,  if any,  issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment;  provided,  however, that
the  Company  shall  deliver  to such  holder a due  bill or  other  appropriate
instrument  evidencing  such holder's  right to receive such  additional  shares
(fractional  or  otherwise)  upon the  occurrence  of the event  requiring  such
adjustment.

     (m) Anything in this Section 11 to the contrary  notwithstanding,  prior to
the Distribution  Date, the Company shall be entitled to make such reductions in
the Purchase Price, in addition to those adjustments  expressly required by this
Section 11, as and to the extent that it in its sole discretion  shall determine
to be  advisable  in order  that any (i)  consolidation  or  subdivision  of the
Preferred or Common  Shares,  (ii) issuance  wholly for cash of any Preferred or
Common Shares at less than the current market price,  (iii) issuance  wholly for
cash of  Preferred  or Common  Shares  or  securities  which by their  terms are
convertible  into or  exchangeable  for Preferred or Common  Shares,  (iv) stock
dividends  or (v)  issuance of rights,  options or warrants  referred to in this
Section 11,  hereafter made by the Company to holders of its Preferred or Common
Shares shall not be taxable to such shareholders.

     (n) The Company  covenants  and agrees that it shall not, at any time after
the Distribution Date, effect or permit to occur any Triggering Event or Section
13 Event,  if (i) at the time or  immediately  after  such  Triggering  Event or
Section  13  Event  there  are any  rights,  warrants  or other  instruments  or
securities  outstanding  or  agreements  in  effect  which  would  substantially
diminish or  otherwise  eliminate  the  benefits  intended to be afforded by the
Rights or (ii) prior to,  simultaneously  with or immediately after such Section
13 Event, the shareholders of the Person who constitutes,  or would  constitute,
the "Principal Party" for purposes of Section 13(b) hereof shall have received a
distribution of Rights  previously owned by such Person or any of its Affiliates
and Associates.

     (o) The Company covenants and agrees that, after the Distribution  Date, it
will not,  except as permitted by Sections 23, 24 or 27 hereof,  take (or permit
to be taken)  any  action if at the time such  action is taken it is  reasonably
foreseeable that such action will diminish  substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.

     (p)  Anything in this  Agreement to the  contrary  notwithstanding,  in the
event the Company shall at any time after the date of this Agreement (A) declare
a dividend on the Preferred  Shares payable in Preferred  Shares,  (B) subdivide
the outstanding  Preferred Shares, (C) combine the outstanding  Preferred Shares
(by reverse stock split or otherwise) into a smaller number of Preferred Shares,
or (D)  issue any  shares  of its  capital  stock in a  reclassification  of the
Preferred  Shares  (including  any such  reclassification  in connection  with a
consolidation  or merger in which the  Company is the  continuing  or  surviving
corporation),  then,  in each such event,  except as otherwise  provided in this
Section 11 and Section 7(e) hereof:  (1) each of the Rights  outstanding  at the
time  of the  record  date  for  such  dividend  or the  effective  date of such
subdivision,  combination or reclassification shall be proportionately  adjusted
to  that  number  of  Rights  (calculated  to  the  nearest  one  ten-thousandth
(1/10,000)  of a Right)  equal to a  fraction  (the  "Exchange  Fraction"),  the
numerator of which shall be the total  number of  Preferred  Shares or shares of
capital  stock  issued  in  such   reclassification   of  the  Preferred  Shares
outstanding  immediately  following such time and the denominator of which shall
be the total number of Preferred Shares  outstanding  immediately  prior to such
time,  and the number of Rights that shall  thereafter be issued with respect to
each  Common  Share or share of other  capital  stock  that shall be issued in a
reclassification  of the Common Shares prior to the  Distribution  Date shall be
equal to the total number of outstanding Rights immediately after such event (as
adjusted pursuant to this clause (1)) divided by the total number of outstanding
Common Shares or shares of such other capital stock immediately after such event
(subject to further  adjustment  pursuant to the provisions of this  Agreement);
(2) the  Purchase  Price  in  effect  at the  time of the  record  date for such
dividend  or  of  the  effective  date  of  such  subdivision,   combination  or
reclassification  shall be adjusted so that the Purchase Price  thereafter shall
equal the result  obtained by dividing the Purchase Price in effect  immediately
prior to such time by the Exchange Fraction; provided, however, that in no event
shall the  consideration  to be paid upon the exercise of one Right be less than
the aggregate  par value of the shares of capital stock of the Company  issuable
upon  exercise  of such  Right;  and  (3) the  number  of  one-thousandths  of a
Preferred  Share or share of such other capital stock issuable upon the exercise
of each Right shall remain unchanged  immediately  after such event, but, in the
event of a  reclassification,  the kind of shares  issuable upon the exercise of
each Right immediately after such  reclassification  shall be adjusted to be the
kind of shares of such  other  capital  stock  issued in such  reclassification,
rather than Preferred Shares.

     Section  12.  Certificate  of Adjusted  Purchase  Price or Number of Shares
Whenever an  adjustment  is made as  provided in Sections 11 and 13 hereof,  the
Company shall promptly (a) prepare a certificate  setting forth such  adjustment
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Preferred Shares a copy of
such certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Section 26 hereof.  Notwithstanding the foregoing
sentence,  the  failure of the Company to make such  certification  or give such
notice shall not affect the validity of such  adjustment  or the force or effect
of the  requirement  for  such  adjustment.  The  Rights  Agent  shall  be fully
protected in relying on any such  certificate  and on any  adjustment  contained
therein and shall not be deemed to have knowledge of such adjustment  unless and
until it shall have received such certificate.

     Section 13. Consolidation,  Merger or Sale or Transfer of Assets or Earning
Power.

     (a) In the event that,  following the Shares Acquisition Date,  directly or
indirectly:
(i) the Company shall  consolidate  with, or merge with and into, any other
Person (other than a Subsidiary  of the Company in a  transaction  the principal
purpose of which is to change the state of incorporation of the Company or which
complies with Section 11(o) hereof);

     (ii) any Person  (other than a Subsidiary  of the Company in a  transaction
that complies with Section 11(o) hereof) shall consolidate with the Company,  or
merge with and into the  Company  and the  Company  shall be the  continuing  or
surviving corporation of such consolidation or merger; or

     (iii) the Company  shall sell or otherwise  transfer (or one or more of its
Subsidiaries  shall sell or otherwise  transfer),  in one or more  transactions,
assets or earning power  aggregating  50% or more of the assets or earning power
of the Company and its  Subsidiaries  (taken as a whole) to any other  Person or
Persons (other than the Company or one or more of its wholly owned  Subsidiaries
in one or more transactions, each of which complies with Section 11(o) hereof),

     then, and in each such case, proper provision shall be made so that

     (A) each holder of a Right  (except as  otherwise  provided  herein)  shall
thereafter  have the right to receive,  upon the exercise  thereof in accordance
with the terms of this Agreement,  such number of validly authorized and issued,
fully  paid  and  nonassessable   Common  Shares  of  the  Principal  Party  (as
hereinafter defined), free of any liens,  encumbrances,  rights of first refusal
or other  adverse  claims,  as shall be  equal  to the  result  obtained  by (1)
multiplying the then current Purchase Price by the number of  one-thousandths of
a Preferred  Share for which a Right was  exercisable  immediately  prior to the
first  occurrence of a Section 13 Event (or, if a Triggering  Event has occurred
prior to the first  occurrence of a Section 13 Event,  multiplying the number of
such  one-thousandths  of a  Preferred  Share for which a Right was  exercisable
immediately  prior to the first occurrence of a Triggering Event by the Purchase
Price in effect  immediately  prior to such first  occurrence)  and (2) dividing
that product (which, following the first occurrence of a Section 13 Event, shall
be referred to as the "Total Exercise Price" for each Right and for all purposes
of this  Agreement)  by 50% of the current per share  market  price  (determined
pursuant to Section 11(d) hereof) of the Common Shares of such  Principal  Party
on the date of consummation of such Section 13 Event;

     (B) such Principal Party shall  thereafter be liable for, and shall assume,
by virtue  of such  Section  13 Event,  all the  obligations  and  duties of the
Company pursuant to this Agreement;

     (C) the  term  "Company"  shall  thereafter  be  deemed  to  refer  to such
Principal Party, it being  specifically  intended that the provisions of Section
11  hereof  shall  apply  only to  such  Principal  Party  following  the  first
occurrence of a Section 13 Event;

     (D) such Principal Party shall take such steps (including,  but not limited
to, the  reservation of a sufficient  number of its Common Shares) in connection
with the consummation of any such transaction as may be necessary to assure that
the provisions  hereof shall  thereafter be applicable,  as nearly as reasonably
may be,  in  relation  to its  Common  Shares  thereafter  deliverable  upon the
exercise of the Rights.
(b) "Principal Party" shall mean, in the case of any transaction  described
in clause (i), (ii) or (iii) of Section  13(a),  the Person or Acquiring  Person
referred  to  therein  (or  such  Person's  or  Acquiring  Person's   successor,
including,  if  applicable,  the Company,  if it is the surviving  corporation),
provided,  however,  that in any such  case,  (i) if such  Person is a direct or
indirect  Subsidiary of another  Person,  "Principal  Party" shall refer to such
other  Person  and  (ii)  in case  such  Person  is a  Subsidiary,  directly  or
indirectly,  of more than one Person, "Principal Party" shall refer to whichever
of such Persons is the issuer of the Common Shares having the greatest aggregate
value,  and provided,  further,  that for purposes of transactions  described in
clause (iii) hereof,  "Principal Party" shall refer to that Person receiving the
greatest  portion of the assets or earning  power  transferred  pursuant to such
transaction or transactions.

     (c) If, for any reason, the Rights cannot be exercised for Common Shares of
such Principal  Party as provided in Section  13(a),  then each holder of Rights
shall have the right to exchange its Rights for cash from such  Principal  Party
in an amount  equal to the number of Common  Shares that it would  otherwise  be
entitled  to  purchase  times 50% of the  current  per share  market  price,  as
determined  pursuant to Section  11(d)  hereof,  of such  Common  Shares of such
Principal Party. If, for any reason, the foregoing formulation cannot be applied
to determine  the cash amount into which the Rights are  exchangeable,  then the
Board of Directors,  based upon the advice of one or more nationally  recognized
investment  banking firms, and based upon the total value of the Company,  shall
determine  such amount  reasonably and with good faith to the holders of Rights.
Any such determination shall be final and binding on the Rights Agent.

     (d) Notwithstanding anything in this Agreement to the contrary,  Section 13
shall not be applicable  to a  transaction  described in clauses (i) and (ii) of
Section 13(a) if: (i) such  transaction is consummated  with a Person or Persons
who acquired  Common  Shares  pursuant to a Permitted  Offer (or a  wholly-owned
Subsidiary  of any such Person or  Persons);  (ii) the price per share of Common
Shares  offered  in such  transaction  is not less  than the  price per share of
Common Shares paid to all holders of Common  Shares whose shares were  purchased
pursuant to such  Permitted  Offer;  and (iii) the form of  consideration  being
offered to the remaining  holders of Common Shares pursuant to such  transaction
is the same form as the form of  consideration  paid pursuant to such  Permitted
Offer.  Upon  consummation of any such transaction  contemplated by this Section
13(d), all Rights hereunder shall expire.

     (e) The  Company  shall not  consummate  any  Section  13 Event  unless the
Principal Party shall have a sufficient  number of authorized Common Shares that
have not been issued or reserved  for issuance to permit the exercise in full of
the Rights in  accordance  with this  Section 13 and unless  prior  thereto  the
Company and such issuer shall have  executed and delivered to the Rights Agent a
supplemental   agreement  confirming  that  such  Principal  Party  shall,  upon
consummation of such Section 13 Event,  assume this Agreement in accordance with
Sections  13(a) and (b) hereof,  that all rights of first  refusal or preemptive
rights in respect of the issuance of Common Shares of such Principal  Party upon
exercise  of  outstanding  Rights  have been  waived,  that there are no rights,
warrants,   instruments   or  securities   outstanding   or  any  agreements  or
arrangements  which, as a result of the consummation of such transaction,  would
eliminate or substantially  diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such Principal
Party under this Agreement,  and further  providing that, as soon as practicable
after the date of such Section 13 Event, such Principal Party will:

     (i) prepare and file a registration statement under the Securities Act with
respect to the Rights and the securities purchasable upon exercise of the Rights
on an  appropriate  form,  use its  best  efforts  to  cause  such  registration
statement to become  effective as soon as practicable  after such filing and use
its best efforts to cause such registration  statement to remain effective (with
a prospectus at all times meeting the  requirements of the Securities Act) until
the Expiration Date, and similarly comply with applicable state securities laws;

     (ii) use its best  efforts to list (or  continue the listing of) the Rights
and the  securities  purchasable  upon  exercise  of the  Rights  on a  national
securities  exchange or to meet the  eligibility  requirements  for quotation on
NASDAQ; and

     (iii) deliver to holders of the Rights historical  financial statements for
such  Principal  Party which comply in all respects  with the  requirements  for
registration on Form 10 (or any successor form) under the Exchange Act.

     In the event that at any time after the  occurrence  of a Triggering  Event
some or all of the  Rights  shall  not  have  been  exercised  at the  time of a
transaction  described in this Section 13, the Rights which have not theretofore
been  exercised  shall  thereafter  be  exercisable  in the manner  described in
Section  13(a)  (without  taking into account any prior  adjustment  required by
Section 11(a)(ii)).

     (f) The provisions of this Section 13 shall  similarly  apply to successive
mergers or consolidations or sales or other transfers.

     Section 14. Fractional Rights and Fractional Shares.

     (a) The Company  shall not be required to issue  fractions  of Rights or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional  Rights,  there shall be paid to the registered holders of the Rights
Certificates  with regard to which such  fractional  Rights  would  otherwise be
issuable,  an amount in cash equal to the same  fraction of the  current  market
value of a whole  Right.  For the purposes of this  Section  14(a),  the current
market  value of a whole Right shall be the closing  price of the Rights for the
Trading Day immediately  prior to the date on which such fractional Rights would
have been otherwise  issuable,  as determined pursuant to the second sentence of
Section 11(d) hereof.

     (b) The  Company  shall not be  required to issue  fractions  of  Preferred
Shares (other than fractions that are integral  multiples of one  one-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute  certificates
which  evidence  fractional  Preferred  Shares  (other than  fractions  that are
integral  multiples  of one  one-thousandth  of a Preferred  Share).  In lieu of
fractional   Preferred   Shares  that  are  not   integral   multiples   of  one
one-thousandth  of a Preferred  Share,  the Company shall pay to the  registered
holders of Rights  Certificates  at the time such Rights are exercised as herein
provided  an amount in cash equal to the same  fraction  of the  current  market
value of a Common Share.  For purposes of this Section 14(b), the current market
value of a  Common  Share  shall be the  closing  price  of a Common  Share  (as
determined  pursuant  to the second  sentence of Section  11(d)  hereof) for the
Trading Day immediately prior to the date of such exercise.

     (c) The holder of a Right by the acceptance of the Right  expressly  waives
his or her right to receive any fractional  Rights or any fractional shares upon
exercise of a Right.

     Section  15.  Rights of Action  All  rights  of action in  respect  of this
Agreement,  excepting  the  rights of action  given to the  Rights  Agent  under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares);  and any registered holder of any Rights  Certificate (or, prior
to the  Distribution  Date,  of the Common  Shares),  without the consent of the
Rights Agent or of the holder of any other Rights  Certificate (or, prior to the
Distribution Date, of the Common Shares),  may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or  proceeding  against the Company to enforce,  or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights  Certificate in
the manner provided in such Rights  Certificate  and in this Agreement.  Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically  acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this  Agreement and will be entitled to specific
performance of the obligations  under,  and injunctive  relief against actual or
threatened  violations  of,  the  obligations  of any  Person  subject  to  this
Agreement.

     Section  16.  Agreement  of Rights  Holders  Every  holder  of a Right,  by
accepting  the same,  consents  and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

     (a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Shares;

     (b) after the Distribution  Date, the Rights  Certificates are transferable
only on the registry  books of the Rights Agent if  surrendered at the principal
office or  offices  of the  Rights  Agent  designated  for such  purposes,  duly
endorsed  or  accompanied  by a  proper  instrument  of  transfer  and  with the
appropriate forms and certificates fully executed; and

     (c) subject to Sections  6(a) and 7(f)  hereof,  the Company and the Rights
Agent may deem and treat the person in whose name the  Rights  Certificate  (or,
prior to the  Distribution  Date, the associated  Common Shares  certificate) is
registered  as the absolute  owner thereof and of the Rights  evidenced  thereby
(notwithstanding   any   notations   of  ownership  or  writing  on  the  Rights
Certificates or the associated  Common Shares  certificate  made by anyone other
than the Company or the Rights Agent) for all purposes  whatsoever,  and neither
the  Company  nor the  Rights  Agent  shall be  affected  by any  notice  to the
contrary.

     Section 17. Rights  Certificate  Holder Not Deemed a Shareholder No holder,
as such, of any Rights  Certificate shall be entitled to vote, receive dividends
or be deemed for any  purpose  the holder of the  Preferred  Shares or any other
securities  of the Company  which may at any time be issuable on the exercise of
the Rights  represented  thereby,  nor shall anything contained herein or in any
Rights  Certificate  be  construed  to  confer  upon the  holder  of any  Rights
Certificate,  as such,  any of the rights of a shareholder of the Company or any
right to vote for the  election of  directors  or upon any matter  submitted  to
shareholders  at any  meeting  thereof,  or to give or  withhold  consent to any
corporate  action,  or to receive notice of meetings or other actions  affecting
shareholders  (except as provided in Section 25 hereof), or to receive dividends
or subscription  rights,  or otherwise,  until the Right or Rights  evidenced by
such  Rights  Certificate  shall  have been  exercised  in  accordance  with the
provisions hereof.

     Section 18. Concerning the Rights Agent.

     (a) The Company agrees to pay to the Rights Agent  reasonable  compensation
for all services  rendered by it hereunder  and, from time to time, on demand of
the  Rights  Agent,   its  reasonable   expenses  and  counsel  fees  and  other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company also agrees to
indemnify  the Rights  Agent for,  and to hold it  harmless  against,  any loss,
liability or expense,  incurred without gross  negligence,  bad faith or willful
misconduct on the part of the Rights Agent,  for anything done or omitted by the
Rights  Agent in  connection  with the  acceptance  and  administration  of this
Agreement,  including  the costs and expenses of defending  against any claim of
liability in the premises.

     (b) The Rights Agent shall be protected  and shall incur no liability  for,
or in respect of any action taken, suffered or omitted by it in connection with,
its  administration of this Agreement in reliance upon any Rights Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the  Company,   instrument  of  assignment  or  transfer,   power  of  attorney,
endorsement,   affidavit,  letter,  notice,  direction,   consent,  certificate,
statement  or other  paper or  document  believed  by it to be genuine and to be
signed, executed and, where necessary,  verified or acknowledged,  by the proper
Person or  Persons,  or  otherwise  upon the  advice of  counsel as set forth in
Section 20 hereof.

     Section 19. Merger or Consolidation or Change of Name of Rights Agent.

     (a) Any  corporation  into which the Rights Agent or any  successor  Rights
Agent may be merged or with  which it may be  consolidated,  or any  corporation
resulting  from any merger or  consolidation  to which the  Rights  Agent or any
successor  Rights Agent shall be a party, or any  corporation  succeeding to the
corporate  trust  business of the Rights Agent or any  successor  Rights  Agent,
shall be the  successor  to the Rights  Agent under this  Agreement  without the
execution  or filing of any paper or any  further  act on the part of any of the
parties hereto;  provided,  however, that such corporation would be eligible for
appointment  as a  successor  Rights  Agent under the  provisions  of Section 21
hereof.  In case at the time such  successor  Rights Agent shall  succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned  but not delivered,  any such successor Rights Agent may adopt the
countersignature  of the  predecessor  Rights  Agent  and  deliver  such  Rights
Certificates  so  countersigned;  and in  case at that  time  any of the  Rights
Certificates shall not have been  countersigned,  any successor Rights Agent may
countersign  such  Rights  Certificates  either  in the name of the  predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such  Rights  Certificates  shall  have the full  force  provided  in the Rights
Certificates and in this Agreement.

     (b) In case at any time the name of the Rights  Agent  shall be changed and
at such time any of the Rights  Certificates  shall have been  countersigned but
not delivered,  the Rights Agent may adopt the countersignature  under its prior
name and deliver Rights Certificates so countersigned;  and in case at that time
any of the Rights  Certificates  shall not have been  countersigned,  the Rights
Agent may countersign  such Rights  Certificates  either in its prior name or in
its changed name; and in all such cases such Rights  Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.

     Section 20. Duties of Rights Agent The Rights Agent  undertakes  the duties
and  obligations  imposed  by  this  Agreement  upon  the  following  terms  and
conditions,  by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:

     (a) The  Rights  Agent may  consult  with legal  counsel  (who may be legal
counsel for the  Company),  and the opinion or advice of such  counsel  shall be
full and complete  authorization  and  protection  to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance  with such opinion
or advice.

     (b)  Whenever in the  performance  of its duties under this  Agreement  the
Rights  Agent  shall  deem it  necessary  or  desirable  that any fact or matter
(including,  without  limitation,  the identity of any Acquiring  Person and the
determination  of "current per share market  price") be proved or established by
the Company  prior to taking or  suffering  any action  hereunder,  such fact or
matter  (unless  other  evidence  in  respect  thereof  be  herein  specifically
prescribed)  may be  deemed  to be  conclusively  proved  and  established  by a
certificate  signed by any one of the Chairman of the Board, the Chief Executive
Officer,  the President,  any Vice President,  the Chief Financial Officer,  the
Secretary or any Assistant  Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full  authorization to the Rights Agent for
any action  taken or suffered in good faith by it under the  provisions  of this
Agreement in reliance upon such certificate.

     (c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own gross negligence, bad faith or willful misconduct.

     (d) The  Rights  Agent  shall not be liable  for or by reason of any of the
statements  of fact or recitals  contained  in this  Agreement  or in the Rights
Certificates (except its countersignature  thereof) or be required to verify the
same, but all such  statements and recitals are and shall be deemed to have been
made by the Company only.

     (e) The Rights  Agent shall not be under any  responsibility  in respect of
the validity of this Agreement or the execution and delivery  hereof (except the
due  execution  hereof by the Rights  Agent) or in respect  of the  validity  or
execution of any Rights Certificate (except its countersignature  thereof);  nor
shall it be  responsible  for any  breach  by the  Company  of any  covenant  or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be  responsible  for any  change  in the  exercisability  of the  Rights  or any
adjustment in the terms of the Rights  (including  the manner,  method or amount
thereof)  provided for in Sections 3, 11, 13, 23 or 24, or the  ascertaining  of
the existence of facts that would require any such change or adjustment  (except
with respect to the exercise of Rights  evidenced by Rights  Certificates  after
receipt by the Rights Agent of a  certificate  furnished  pursuant to Section 12
describing  such change or  adjustment);  nor shall it by any act  hereunder  be
deemed  to make  any  representation  or  warranty  as to the  authorization  or
reservation of any Preferred  Shares to be issued  pursuant to this Agreement or
any Rights  Certificate or as to whether any Preferred Shares will, when issued,
be validly authorized and issued, fully paid and nonassessable.

     (f) The  Company  agrees that it will  perform,  execute,  acknowledge  and
deliver or cause to be performed, executed,  acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying  out or  performing  by the Rights Agent of
the provisions of this Agreement.

     (g)  The  Rights  Agent  is  hereby   authorized  and  directed  to  accept
instructions  with respect to the  performance of its duties  hereunder from any
one of the Chairman of the Board,  the Chief Executive  Officer,  the President,
any Vice President,  the Chief Financial Officer, the Secretary or any Assistant
Secretary  of the  Company,  and  to  apply  to  such  officers  for  advice  or
instructions in connection  with its duties,  and it shall not be liable for any
action taken or suffered by it in good faith in accordance with  instructions of
any  such  officer  or  for  any  delay  in  acting  while   waiting  for  those
instructions.  Any application by the Rights Agent for written instructions from
the  Company  may, at the option of the Rights  Agent,  set forth in writing any
action  proposed  to be taken or omitted by the Rights  Agent  under this Rights
Agreement  and the date on and/or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any action
taken by, or  omission  of,  the  Rights  Agent in  accordance  with a  proposal
included  in any  such  application  on or  after  the  date  specified  in such
application  (which date shall not be less than five (5) Business Days after the
date any officer of the Company actually receives such  application,  unless any
such officer shall have  consented in writing to an earlier date) unless,  prior
to taking any such action (or the  effective  date in the case of an  omission),
the Rights Agent shall have received  written  instructions  in response to such
application specifying the action to be taken or omitted.

     (h) The Rights Agent and any shareholder,  director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other  securities
of the Company or become pecuniarily  interested in any transaction in which the
Company  may be  interested,  or  contract  with or lend money to the Company or
otherwise  act as fully and freely as though it were not Rights Agent under this
Agreement.  Nothing  herein  shall  preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.

     (i) The Rights  Agent may execute and  exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its  attorneys  or  agents,  and the Rights  Agent  shall not be  answerable  or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the  Company  resulting  from any such  act,  default,
neglect or misconduct,  provided  reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk  its own  funds  or  otherwise  incur  any  financial  liability  in the
performance  of any of its duties  hereunder or in the exercise of its rights if
there shall be reasonable  grounds for believing that repayment of such funds or
adequate  indemnification  against  such  risk or  liability  is not  reasonably
assured to it.

     (k) If, with respect to any Rights  Certificate  surrendered  to the Rights
Agent  for  exercise  or  transfer,  the  certificate  attached  to the  form of
assignment  or form of election to purchase,  as the case may be, has either not
been  completed  or  indicates  an  affirmative  response  to  clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

     Section 21. Change of Rights Agent The Rights Agent or any successor Rights
Agent may resign and be  discharged  from its duties under this  Agreement  upon
thirty (30) days' notice in writing  mailed to the Company and to each  transfer
agent of the  Preferred  Shares and the Common Shares by registered or certified
mail, and to the holders of the Rights  Certificates  by  first-class  mail. The
Company may remove the Rights  Agent or any  successor  Rights Agent upon thirty
(30) days' notice in writing,  mailed to the Rights  Agent or  successor  Rights
Agent,  as the case may be, and to each transfer  agent of the Preferred  Shares
and the Common Shares by registered or certified mail, and to the holders of the
Rights  Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a  successor  to the  Rights  Agent.  If the  Company  shall  fail to make  such
appointment  within a period of thirty  (30) days  after  giving  notice of such
removal  or  after  it has been  notified  in  writing  of such  resignation  or
incapacity by the resigning or incapacitated  Rights Agent or by the holder of a
Rights  Certificate  (who  shall,  with such  notice,  submit  his or her Rights
Certificate  for inspection by the Company),  then the registered  holder of any
Rights  Certificate  may apply to any court of  competent  jurisdiction  for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court,  shall be either (a) a corporation  organized
and doing  business  under the laws of the United  States or of any state of the
United States, in good standing, which is authorized under such laws to exercise
corporate trust or shareholder  services powers and is subject to supervision or
examination  by  federal  or state  authority  and  which has at the time of its
appointment  as Rights  Agent a  combined  capital  and  surplus of at least $50
million  or (b) an  affiliate  of such a  corporation.  After  appointment,  the
successor Rights Agent shall be vested with the same powers,  rights, duties and
responsibilities  as if it had been  originally  named as Rights  Agent  without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose.  Not later than the  effective  date of any such  appointment,  the
Company shall file notice thereof in writing with the  predecessor  Rights Agent
and each transfer agent of the Preferred Shares and the Common Shares,  and mail
a  notice  thereof  in  writing  to  the   registered   holders  of  the  Rights
Certificates.  Failure  to give any  notice  provided  for in this  Section  21,
however, or any defect therein, shall not affect the legality or validity of the
resignation  or removal of the Rights Agent or the  appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates  Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary,  the Company may,
at its option,  issue new Rights Certificates  evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property  purchasable  under the Rights  Certificates made in accordance with
the provisions of this Agreement.  In addition,  in connection with the issuance
or sale of  Common  Shares  following  the  Distribution  Date and  prior to the
redemption or expiration of the Rights,  the Company (a) shall,  with respect to
Common  Shares so issued or sold  pursuant to the  exercise of stock  options or
under any employee  plan or  arrangement  or upon the  exercise,  conversion  or
exchange  of  securities  hereinafter  issued by the Company and (b) may, in any
other case, if deemed  necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the appropriate number of Rights
in connection with such issuance or sale;  provided,  however,  that (i) no such
Rights  Certificate  shall be issued and this sentence shall be null and void ab
initio if, and to the extent that, such issuance or this sentence would create a
significant  risk of or result  in  material  adverse  tax  consequences  to the
Company or the Person to whom such Rights  Certificate  would be issued or would
create a significant  risk of or result in such  options' or employee  plans' or
arrangements'  failing to qualify for otherwise  available special tax treatment
and (ii) no such Rights  Certificate shall be issued if, and to the extent that,
appropriate  adjustment  shall  otherwise have been made in lieu of the issuance
thereof.

     Section 23. Redemption.

     (a) The Company  may,  at its option and with the  approval of the Board of
Directors,  at any time prior to the Close of Business on the earlier of (i) the
tenth day  following  the Shares  Acquisition  Date or such later date as may be
determined  by action of a majority of Continuing  Directors  then in office and
publicly  announced by the Company or (ii) the Final Expiration Date, redeem all
but not less than all the then outstanding Rights at a redemption price of $0.01
per Right,  appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
herein  referred  to as the  "Redemption  Price")  and the  Company  may, at its
option,  pay the Redemption  Price either in Common Shares (based on the current
per share market price thereof (as determined  pursuant to Section 11(d) hereof)
at the time of redemption) or cash. Such redemption of the Rights by the Company
may be made  effective at such time,  on such basis and with such  conditions as
the Board of Directors in its sole discretion may establish;  provided, however,
if the Board of Directors of the Company authorizes  redemption of the Rights on
or after the time a Person  becomes  an  Acquiring  Person,  then  there must be
Continuing  Directors  then in office and such  authorization  shall require the
concurrence of a majority of such Continuing Directors.

     (b)  Immediately  upon the action of the Board of  Directors of the Company
ordering the  redemption of the Rights,  evidence of which shall have been filed
with the Rights  Agent,  and without any further  action and without any notice,
the right to exercise the Rights will terminate and the only right thereafter of
the holders of Rights  shall be to receive  the  Redemption  Price.  The Company
shall  promptly give public notice of any such  redemption;  provided,  however,
that the failure to give, or any defect in, any such notice shall not affect the
validity of such redemption.  Within ten (10) days after the action of the Board
of  Directors  ordering the  redemption  of the Rights,  the Company  shall give
notice  of such  redemption  to the  Rights  Agent and the  holders  of the then
outstanding  Rights by  mailing  such  notice to all such  holders at their last
addresses as they appear upon the  registry  books of the Rights Agent or, prior
to the  Distribution  Date, on the registry  books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption  will state the method by which the payment of the  Redemption  Price
will be made.  Neither the Company nor any of its  Affiliates or Associates  may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and
other  than in  connection  with the  purchase  of  Common  Shares  prior to the
Distribution Date.

     Section 24. Exchange.

     (a)  Subject to  applicable  laws,  rules and  regulations,  and subject to
subsection  (c) below,  the Company may, at its option,  by majority vote of the
Board of Directors and a majority vote of the Continuing Directors,  at any time
after the  occurrence  of a Triggering  Event,  exchange all or part of the then
outstanding  and  exercisable  Rights (which shall not include  Rights that have
become void pursuant to the provisions of Section 7(e) hereof) for Common Shares
at an exchange  ratio of one Common Share per Right,  appropriately  adjusted to
reflect any stock split, stock dividend or similar  transaction  occurring after
the date hereof (such exchange ratio being hereinafter referred to as the "Ratio
of Exchange").  Notwithstanding the foregoing,  the Board of Directors shall not
be  empowered to effect such  exchange at any time after any Person  (other than
the Company,  any  Subsidiary of the Company,  any employee  benefit plan of the
Company or any such  Subsidiary,  or any  entity  holding  Common  Shares for or
pursuant  to the  terms of any such  plan),  together  with all  Affiliates  and
Associates of such Person,  becomes the  Beneficial  Owner of 50% or more of the
Common Shares then outstanding.

     (b)  Immediately  upon the action of the Board of  Directors  ordering  the
exchange of any Rights pursuant to subsection (a) of this Section 24 and without
any further  action and without  any notice,  the right to exercise  such Rights
shall  terminate and the only right  thereafter of a holder of such Rights shall
be to receive  that number of Common  Shares  equal to the number of such Rights
held by such holder multiplied by the Ratio of Exchange.  The Company shall give
public notice of any such exchange; provided, however, that the failure to give,
or any defect in, such notice  shall not affect the  validity of such  exchange.
The  Company  shall mail a notice of any such  exchange to all of the holders of
such Rights at their last  addresses as they appear upon the  registry  books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged.  Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.

     (c) In the event that there shall not be  sufficient  Common  Shares issued
but not  outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with Section 24(a),  the Company shall either take
such  action as may be  necessary  to  authorize  additional  Common  Shares for
issuance  upon  exchange  of the  Rights or  alternatively,  at the  option of a
majority of the Board of  Directors,  with respect to each Right (i) pay cash in
an amount  equal to the  Current  Value  (as  hereinafter  defined),  in lieu of
issuing  Common  Shares  in  exchange  therefor,  or (ii)  issue  debt or equity
securities or a combination thereof,  having a value equal to the Current Value,
in lieu of issuing  Common  Shares in exchange  for each such  Right,  where the
value  of  such  securities  shall  be  determined  by a  nationally  recognized
investment banking firm selected by majority vote of the Board of Directors,  or
(iii)  deliver any  combination  of cash,  property,  Common Shares and/or other
securities having a value equal to the Current Value in exchange for each Right.
For  purposes  of this  Section  24(c) only,  the  Current  Value shall mean the
product of the  current  per share  market  price of Common  Shares  (determined
pursuant to Section 11(d) on the date of the  occurrence of the event  described
above in  subparagraph  (a)) multiplied by the number of Common Shares for which
the Right  otherwise  would be  exchangeable  if there  were  sufficient  shares
available.  To the extent that the Company  determines  that some action need be
taken pursuant to clauses (i), (ii) or (iii) of this Section 24(c), the Board of
Directors may temporarily  suspend the exercisability of the Rights for a period
of up to sixty  (60) days  following  the date on which the event  described  in
Section  24(a)  shall  have  occurred,  in order to seek  any  authorization  of
additional  Common Shares and/or to decide the appropriate  form of distribution
to be made pursuant to the above  provision and to determine the value  thereof.
In  the  event  of any  such  suspension,  the  Company  shall  issue  a  public
announcement  stating that the exercisability of the Rights has been temporarily
suspended.

     (d) The Company  shall not be required to issue  fractions of Common Shares
or to distribute  certificates which evidence  fractional Common Shares. In lieu
of such fractional Common Shares,  there shall be paid to the registered holders
of the Rights  Certificates  with regard to which such fractional  Common Shares
would otherwise be issuable, an amount in cash equal to the same fraction of the
current per share market value of a whole Common Share (as  determined  pursuant
to the second sentence of Section 11(d) hereof).

     (e) The  Company  may,  at its  option,  by  majority  vote of the Board of
Directors,  at any time  before  any  Person  has  become an  Acquiring  Person,
exchange all or part of the then outstanding  Rights for rights of substantially
equivalent  value, as determined  reasonably and with good faith by the Board of
Directors, based upon the advice of one or more nationally recognized investment
banking firms.

     (f)  Immediately  upon the action of the Board of  Directors  ordering  the
exchange of any Rights pursuant to subsection (e) of this Section 24 and without
any further  action and without  any notice,  the right to exercise  such Rights
shall  terminate and the only right  thereafter of a holder of such Rights shall
be to receive that number of rights in exchange  therefor as has been determined
by the Board of Directors in accordance with  subsection (e) above.  The Company
shall give  public  notice of any such  exchange;  provided,  however,  that the
failure to give,  or any defect in, such notice shall not affect the validity of
such  exchange.  The Company  shall mail a notice of any such exchange to all of
the  holders of such  Rights at their last  addresses  as they  appear  upon the
registry books of the transfer  agent for the Common Shares of the Company.  Any
notice  which is mailed in the manner  herein  provided  shall be deemed  given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the Rights will be effected.
Section 25. Notice of Certain Events.

     (a) In case the  Company  shall  propose  to  effect or permit to occur any
Triggering Event having the effects  described in Section  11(a)(ii) hereof or a
Section 13 Event, the Company shall give notice thereof to each holder of Rights
in  accordance  with  Section  26 hereof  at least  twenty  (20)  days  prior to
occurrence of such Triggering Event or Section 13 Event.

     (b) In case any Triggering Event or Section 13 Event shall occur,  then, in
any such case, the Company shall as soon as practicable  thereafter give to each
holder of a Rights  Certificate,  in accordance with Section 26 hereof, a notice
of the  occurrence  of  such  event,  which  shall  specify  the  event  and the
consequences  of the event to holders of Rights under Sections  11(a)(ii) and 13
hereof.

     Section 26. Notices  Notices or demands  authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights  Certificate to
or on the Company  shall be  sufficiently  given or made if sent by  first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:

                           Quality Semiconductor, Inc.
                           851 Martin Avenue
                           Santa Clara, CA  95050
                           Attention:  President

Subject to the provisions of Section 21 hereof,  any notice or demand authorized
by this  Agreement  to be given or made by the  Company  or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail,  postage prepaid,  addressed (until another address
is filed in writing with the Company) as follows:

                           BankBoston, N.A.
                           c/o Boston Equiserve, L.P.
                           435 Tasso Street
                           Palo Alto, CA
                           Attention:  Account Manager

Notices  or  demands  authorized  by this  Agreement  to be given or made by the
Company or the Rights  Agent to the  holder of any Rights  Certificate  shall be
sufficiently  given  or  made  if sent by  first-class  mail,  postage  prepaid,
addressed  to such holder at the address of such holder as shown on the registry
books of the Company.

     Section 27.  Supplements and Amendments Prior to the Distribution Date, the
Company  may  supplement  or amend this  Agreement  in any  respect  without the
approval of any holders of Rights and the Rights Agent shall,  if the Company so
directs,  execute such supplement or amendment.  From and after the Distribution
Date, the Company and the Rights Agent may from time to time supplement or amend
this  Agreement  without  the  approval of any holders of Rights in order to (i)
cure any ambiguity,  (ii) correct or supplement any provision  contained  herein
which may be defective or inconsistent with any other provisions  herein,  (iii)
shorten or lengthen any time period hereunder (which  lengthening or shortening,
following  the first  occurrence of an event set forth in the proviso to Section
23(a)  hereof,  shall be effective  only if there are  Continuing  Directors and
shall require the  concurrence  of a majority of such  Continuing  Directors) or
(iv) to change or  supplement  the  provisions  hereunder in any manner that the
Company may deem necessary or desirable and that shall not adversely  affect the
interests  of the  holders  of  Rights  (other  than an  Acquiring  Person or an
Affiliate or Associate of an Acquiring Person); provided, this Agreement may not
be  supplemented  or  amended  to  lengthen,  pursuant  to clause  (iii) of this
sentence,  (A) a time period relating to when the Rights may be redeemed at such
time as the Rights are not then  redeemable  or (B) any other time period unless
such  lengthening is for the purpose of protecting,  enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a
certificate  from an  appropriate  officer of the  Company  that states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such  supplement  or amendment.  Prior to the
Distribution  Date,  the  interests  of the  holders  of Rights  shall be deemed
coincident with the interests of the holders of Common Shares.

     Section 28.  Successors  All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.

     Section 29.  Determinations and Actions by the Board of Directors,  etc For
all purposes of this  Agreement,  any calculation of the number of Common Shares
outstanding at any particular  time,  including for purposes of determining  the
particular  percentage of such outstanding  Common Shares of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i)  of the General Rules and Regulations under the Exchange Act. The
Board of Directors of the Company (and, where specifically  provided for herein,
the  Continuing  Directors)  shall have the  exclusive  power and  authority  to
administer  this  Agreement  and to exercise all rights and powers  specifically
granted to the Board,  or the  Company  (or,  where  specifically  provided  for
herein,  the Continuing  Directors),  or as may be necessary or advisable in the
administration of this Agreement,  including,  without limitation, the right and
power to (i)  interpret  the  provisions  of this  Agreement  and (ii)  make all
determinations  deemed  necessary or advisable  for the  administration  of this
Agreement  (including a  determination  to redeem or not redeem the Rights or to
amend  the  Agreement).  All such  actions,  calculations,  interpretations  and
determinations  (including, for purposes of clause (y) below, all omissions with
respect  to the  foregoing)  which  are  done or made by the  Board  (or,  where
specifically  provided for herein,  by the Continuing  Directors) in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights Certificates and all other parties and (y) not subject the
Board or the Continuing Directors to any liability to the holders of the Rights.

     Section 30.  Benefits of this Agreement  Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered  holders of the Rights  Certificates  (and, prior to the Distribution
Date,  the Common  Shares) any legal or equitable  right,  remedy or claim under
this Agreement;  but this Agreement shall be for the sole and exclusive  benefit
of the  Company,  the  Rights  Agent and the  registered  holders  of the Rights
Certificates (and, prior to the Distribution Date, the Common Shares).

     Section 31. Severability If any term, provision, covenant or restriction of
this Agreement is held by a court of competent  jurisdiction  or other authority
to be invalid,  void or unenforceable,  the remainder of the terms,  provisions,
covenants  and  restrictions  of this  Agreement  shall remain in full force and
effect  and shall in no way be  affected,  impaired  or  invalidated;  provided,
however, that notwithstanding anything in this Agreement to the contrary, if any
such term, provision, covenant or restriction is held by such court or authority
to be invalid,  void or unenforceable  and the Board of Directors of the Company
determines in its good faith  judgment  that severing the invalid  language from
this Agreement would  adversely  affect the purpose or effect of this Agreement,
the right of redemption  set forth in Section 23 hereof shall be reinstated  and
shall not expire until the Close of Business on the tenth day following the date
of such determination by the Board of Directors.

     Section 32.  Governing  Law This  Agreement  and each Right and each Rights
Certificate  issued  hereunder  shall be deemed to be a contract  made under the
laws of the State of  California  and for all purposes  shall be governed by and
construed in accordance  with the laws of such State  applicable to contracts to
be made and performed entirely within such State.

     Section 33.  Counterparts  This  Agreement may be executed in any number of
counterparts and each of such  counterparts  shall for all purposes be deemed to
be an original,  and all such counterparts shall together constitute but one and
the same instrument.

     Section  34.  Descriptive  Headings  Descriptive  headings  of the  several
Sections of this  Agreement  are  inserted  for  convenience  only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed as of the day and year first above written.

                                         QUALITY SEMICONDUCTOR, INC.

                                         By:     /s/ John P. Goldsberry /s/

                                         Name:   John P. Goldsberry

                                         Title:  Vice President - Finance and
                                                 Chief Financial Officer

                                         BANKBOSTON, N.A.

                                         By:     /s/ Geoffrey D. Anderson /s/

                                         Name:   Geoffrey D. Anderson

                                         Title:  Director, Client Services
EXHIBIT A

     CERTIFICATE  OF  DETERMINATION  OF RIGHTS,  PREFERENCES  AND  PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK OF QUALITY SEMICONDUCTOR, INC.

The undersigned, R. Paul Gupta and John Goldsberry, do hereby certify:

     1. That they are the duly elected  President and Chief Executive Office and
Secretary,   respectively,   of  Quality   Semiconductor,   Inc.,  a  California
corporation (the "Corporation").

     2. That pursuant to the authority  conferred upon the Board of Directors by
the  Articles  of  Incorporation  of the said  Corporation,  the  said  Board of
Directors on August 26, 1997 adopted the following resolutions creating a series
of shares of Preferred  Stock  designated  as Series A  Participating  Preferred
Stock:

     "RESOLVED,  that pursuant to the authority vested in the Board of Directors
of the Corporation by the Articles of Incorporation, the Board of Directors does
hereby provide for the issue of a series of Preferred  Stock,  $0.001 par value,
of the Corporation,  to be designated "Series A Participating  Preferred Stock,"
initially  consisting  of  _____________  shares  and to  the  extent  that  the
designations,  powers, preferences and relative and other special rights and the
qualifications,  limitations  and  restrictions  of the  Series A  Participating
Preferred  Stock are not stated and expressed in the Articles of  Incorporation,
does  hereby  fix and  herein  state  and  express  such  designations,  powers,
preferences  and  relative  and other  special  rights  and the  qualifications,
limitations and  restrictions  thereof,  as follows (all terms used herein which
are  defined  in the  Articles  of  Incorporation  shall be  deemed  to have the
meanings provided therein):

     Section 1.  Designation  and  Amount.  The shares of such  series  shall be
designated  as "Series A  Participating  Preferred  Stock," par value $0.001 per
share, and the number of shares constituting such series shall be _____________.

     Section 2. Dividends and Distributions.

     (A) Subject to the prior and superior right of the holders of any shares of
any series of Preferred Stock ranking prior and superior to the shares of Series
A Participating Preferred Stock with respect to dividends, the holders of shares
of Series A Participating  Preferred Stock shall be entitled to receive when, as
and if declared by the Board of Directors out of funds legally available for the
purpose,  quarterly  dividends  payable in cash on the last day of March,  June,
September and December in each year (each such date being  referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment  Date  after the first  issuance  of a share or  fraction  of a share of
Series A Participating  Preferred  Stock, in an amount per share (rounded to the
nearest cent) equal to, subject to the provision for adjustment  hereinafter set
forth,  1,000 times the  aggregate per share amount of all cash  dividends,  and
1,000 times the  aggregate  per share  amount  (payable in kind) of all non-cash
dividends  or other  distributions  other than a  dividend  payable in shares of
Common  Stock or a  subdivision  of the  outstanding  shares of Common Stock (by
reclassification or otherwise),  declared on the Common Stock of the Corporation
(the "Common Stock") since the immediately  preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly  Dividend  Payment Date, since the
first  issuance of any share or  fraction  of a share of Series A  Participating
Preferred Stock. In the event the Corporation  shall at any time after ________,
1997 (the  "Rights  Declaration  Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding  Common Stock,
or (iii) combine the  outstanding  Common Stock into a smaller number of shares,
then in each  such  case the  amount  to which  holders  of  shares  of Series A
Participating  Preferred  Stock were  entitled  immediately  prior to such event
under the preceding  sentence shall be adjusted by multiplying  such amount by a
fraction,  the  numerator  of which is the  number of  shares  of  Common  Stock
outstanding  immediately  after such event and the  denominator  of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

     (B) The Corporation  shall declare a dividend or distribution on the Series
A Participating  Preferred Stock as provided in paragraph (A) above  immediately
after it declares a dividend or  distribution  on the Common Stock (other than a
dividend payable in shares of Common Stock).

     (C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Participating  Preferred Stock from the Quarterly  Dividend  Payment
Date next  preceding the date of issue of such shares of Series A  Participating
Preferred Stock,  unless the date of issue of such shares is prior to the record
date for the first Quarterly  Dividend  Payment Date, in which case dividends on
such  shares  shall begin to accrue  from the date of issue of such  shares,  or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the  record  date  for the  determination  of  holders  of  shares  of  Series A
Participating  Preferred  Stock  entitled  to receive a quarterly  dividend  and
before such  Quarterly  Dividend  Payment  Date,  in either of which events such
dividends shall begin to accrue and be cumulative  from such Quarterly  Dividend
Payment Date.  Accrued but unpaid  dividends shall not bear interest.  Dividends
paid on the shares of Series A  Participating  Preferred Stock in an amount less
than the total amount of such  dividends at the time accrued and payable on such
shares  shall be  allocated  pro rata on a  share-by-share  basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Participating Preferred Stock
entitled to receive  payment of a dividend  or  distribution  declared  thereon,
which  record date shall be no more than 30 days prior to the date fixed for the
payment thereof.

     Section 3. Voting Rights.  The holders of shareIs of Series A Participating
Preferred Stock shall have the following voting rights:

     (A) Subject to the provision for  adjustment  hereinafter  set forth,  each
share of Series A Participating Preferred Stock shall entitle the holder thereof
to 1,000 votes on all matters  submitted  to a vote of the  shareholders  of the
Corporation.  In the event the  Corporation  shall at any time  after the Rights
Declaration  Date (i) declare any dividend on Common Stock  payable in shares of
Common Stock, (ii) subdivide the outstanding  Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the  number  of  votes  per  share  to  which  holders  of  shares  of  Series A
Participating  Preferred  Stock were  entitled  immediately  prior to such event
shall be adjusted by  multiplying  such number by a fraction,  the  numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the  denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

     (B) Except as otherwise provided herein or by law, the holders of shares of
Series A Participating Preferred Stock and the holders of shares of Common Stock
shall  vote  together  as  one  class  on all  matters  submitted  to a vote  of
shareholders of the corporation.

     (C) Except as required by law, holders of Series A Participating  Preferred
Stock  shall  have no  special  voting  rights  and their  consent  shall not be
required  (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.

     Section 4. Certain Restrictions.

     (A)  The   Corporation   shall  not  declare  any  dividend  on,  make  any
distribution  on, or redeem or purchase or otherwise  acquire for  consideration
any shares of Common Stock after the first  issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith it
shall  declare a  dividend  on the  Series A  Participating  Preferred  Stock as
required by Section 2 hereof.

     (B)  Whenever  quarterly  dividends  or other  dividends  or  distributions
payable on the Series A  Participating  Preferred Stock as provided in Section 2
are in  arrears,  thereafter  and until all  accrued  and unpaid  dividends  and
distributions,  whether  or not  declared,  on shares of Series A  Participating
Preferred Stock  outstanding shall have been paid in full, the Corporation shall
not (i) declare or pay dividends on, make any other  distributions on, or redeem
or purchase or otherwise  acquire for  consideration any shares of stock ranking
junior (either as to dividends or upon  liquidation,  dissolution or winding up)
to the Series A Participating Preferred Stock; (ii) declare or pay dividends on,
make any other  distributions on any shares of stock ranking on a parity (either
as to dividends or upon  liquidation,  dissolution  or winding up) with Series A
Participating  Preferred  Stock,  except  dividends paid ratably on the Series A
Participating  Preferred  Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled; (iii) redeem or purchase or otherwise acquire
for  consideration  shares  of any  stock  ranking  on a  parity  (either  as to
dividends  or upon  liquidation,  dissolution  or winding  up) with the Series A
Participating  Preferred  Stock,  provided that the  Corporation may at any time
redeem,  purchase  or  otherwise  acquire  shares  of any such  parity  stock in
exchange for shares of any stock of the Corporation ranking junior (either as to
dividends  or upon  dissolution,  liquidation  or  winding  up) to the  Series A
Participating   Preferred  Stock;   (iv)  purchase  or  otherwise   acquire  for
consideration  any  shares of Series A  Participating  Preferred  Stock,  or any
shares of stock  ranking on a parity with the Series A  Participating  Preferred
Stock,  except  in  accordance  with a  purchase  offer  made in  writing  or by
publication  (as  determined  by the Board of  Directors) to all holders of such
shares upon such terms as the Board of  Directors,  after  consideration  of the
respective  annual  dividend rates and other relative  rights and preferences of
the respective series and classes,  shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.

     (C) The  Corporation  shall not permit any subsidiary of the Corporation to
purchase  or  otherwise  acquire  for  consideration  any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

     Section  5.  Reacquired  Shares.  Any  shares  of  Series  A  Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their  cancellation  become  authorized  but unissued
shares  of  Preferred  Stock  and may be  reissued  as part of a new  series  of
Preferred  Stock to be  created by  resolution  or  resolutions  of the Board of
Directors,  subject to the  conditions  and  restrictions  on issuance set forth
herein.

     Section 6. Liquidation, Dissolution or Winding Up.

     (A) Upon any liquidation  (voluntary or otherwise),  dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Participating Preferred Stock unless, prior thereto,
the  holders  of shares of Series A  Participating  Preferred  Stock  shall have
received  an amount  equal to accrued  and unpaid  dividends  and  distributions
thereon,  whether or not declared,  to the date of such payment,  plus an amount
equal to the  greater of (1) $1,000  per share,  provided  that in the event the
Corporation  does not have sufficient  assets,  after payment of its liabilities
and  distribution  to holders of Preferred  Stock  ranking prior to the Series A
Participating Preferred Stock, available to permit payment in full of the $1,000
per share  amount,  the amount  required to be paid under this  Section 6 (A)(1)
shall,  subject  to  Section  6(B)  hereof,  equal  the  value of the  amount of
available  assets  divided  by the  number  of  outstanding  shares  of Series A
Participating  Preferred  Stock or (2) subject to the  provisions for adjustment
hereinafter  set  forth,  1,000  times  the  aggregate  per  share  amount to be
distributed  to the  holders  of Common  Stock (the  greater of (1) or (2),  the
"Series  A  Liquidation  Preference").  In the event  the  Corporation  shall at
anytime  after the Rights  Declaration  Date (i) declare any  dividend on Common
Stock payable in shares of Common Stock,  (ii) subdivide the outstanding  Common
Stock,  or (iii) combine the  outstanding  Common Stock into a smaller number of
shares, then in each such case the amount to which holders of shares of Series A
Participating  Preferred  Stock were  entitled  immediately  prior to such event
under clause (2) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction  the  numerator  of which is the number of shares of Common
Stock that were outstanding  immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding  immediately
prior to such event.

     (B) In the event,  however,  that there are not sufficient assets available
to  permit  payment  in full of the  Series  A  Liquidation  Preference  and the
liquidation  preferences of all other series of Preferred  Stock,  if any, which
rank on a parity  with the Series A  Participating  Preferred  Stock,  then such
remaining  assets  shall be  distributed  ratably to the  holders of such parity
shares in proportion to their respective liquidation preferences.
Section 7. Consolidation,  Merger, etc. In case the Corporation shall enter
into any  consolidation,  merger,  combination or other transaction in which the
shares  of  Common  Stock are  exchanged  for or  changed  into  other  stock or
securities,  cash and/or any other property, then in any such case the shares of
Series A  Participating  Preferred  Stock  shall at the same  time be  similarly
exchanged  or changed  in an amount  per share  (subject  to the  provision  for
adjustment  hereinafter set forth) equal to 1,000 times the aggregate  amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be,  into  which or for which  each  share of  Common  Stock is  changed  or
exchanged.  In the  event the  Corporation  shall at any time  after the  Rights
Declaration  Date (i) declare any dividend on Common Stock  payable in shares of
Common Stock, (ii) subdivide the outstanding  Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the  preceding  sentence with respect to the exchange or
change of shares of Series A Participating  Preferred Stock shall be adjusted by
multiplying  such amount by a fraction  the  numerator of which is the number of
shares  of  Common  Stock  outstanding  immediately  after  such  event  and the
denominator  of  which is the  number  of  shares  of  Common  Stock  that  were
outstanding immediately prior to such event.

     Section 8. No Redemption.  The shares of Series A  Participating  Preferred
Stock shall not be redeemable.

     Section 9. Ranking.  The Series A Participating  Preferred Stock shall rank
junior  to all  other  series  of the  Corporation's  Preferred  Stock as to the
payment of dividends  and the  distribution  of assets,  unless the terms of any
such series shall provide otherwise.

     Section 10.  Amendment.  The Articles of  Incorporation  of the Corporation
shall not be further  amended  in any manner  which  would  materially  alter or
change the powers,  preference or special  rights of the Series A  Participating
Preferred Stock so as to affect them adversely  without the affirmative  vote of
the  holders  of a  majority  or more of the  outstanding  shares  of  Series  A
Participating Preferred Stock, voting separately as a class.

     Section 11. Fractional Shares. Series A Participating Preferred Stock maybe
issued in fractions of a share which shall entitle the holder,  in proportion to
such holder's  fractional shares, to exercise voting rights,  receive dividends,
participate  in  distributions  and to have the  benefit of all other  rights of
holders of Series A Participating Preferred Stock.

     RESOLVED  FURTHER,  that  the  President  or any  Vice  President  and  the
Secretary or any  Assistant  Secretary of this  Corporation  be, and they hereby
are,  authorized and directed to prepare and file a Certificate of Determination
of  Rights,   Preferences  and  Privileges  in  accordance  with  the  foregoing
resolution and the provisions of California law and to take such actions as they
may deem  necessary  or  appropriate  to carry out the  intent of the  foregoing
resolution."

     3.  That  the  authorized  number  of  shares  of  Preferred  Stock  of the
Corporation is 1,000,000, and that no such Preferred Stock has been issued.

     We further  declare  under penalty of perjury that the matters set forth in
the  foregoing  Certificate  of  Determination  are true and  correct of our own
knowledge.
Executed at Santa Clara, California on __________, 1997.

                                        R. Paul Gupta, President and
                                        Chief Executive Officer

                                        John Goldsberry, Secretary
EXHIBIT B

                           Form of Rights Certificate

Certificate No. ____                                                _____ Rights

        NOT EXERCISABLE AFTER SEPTEMBER 17, 2007 OR EARLIER IF TERMINATED BY THE
COMPANY OR IF THE COMPANY EXCHANGES THE RIGHTS PURSUANT TO THE RIGHTS AGREEMENT.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER
RIGHT  ON  THE  TERMS  SET  FORTH  IN  THE  RIGHTS   AGREEMENT.   UNDER  CERTAIN
CIRCUMSTANCES,  RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE
OR  ASSOCIATE  OF AN  ACQUIRING  PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT)  AND ANY  SUBSEQUENT  HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
[THE RIGHTS  REPRESENTED  BY THIS RIGHTS  CERTIFICATE  ARE OR WERE  BENEFICIALLY
OWNED BY A PERSON  WHO WAS OR BECAME AN  ACQUIRING  PERSON  OR AN  AFFILIATE  OR
ASSOCIATE  OF AN  ACQUIRING  PERSON  (AS SUCH  TERMS ARE  DEFINED  IN THE RIGHTS
AGREEMENT).  ACCORDINGLY,  THIS RIGHTS  CERTIFICATE  AND THE RIGHTS  REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE  CIRCUMSTANCES  SPECIFIED IN SECTION 7(e)
OF SUCH RIGHTS AGREEMENT.1]   

                               Rights Certificate

     This certifies that  _____________________,  or registered  assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of August 29, 1997 (the "Rights Agreement"),  between Quality
Semiconductor,  Inc., a California Corporation (the "Company"),  and BankBoston,
N.A.  (the "Rights  Agent"),  to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights  Agreement)and prior to
5:00 P.M.,  New York time,  on  September  17,  2007 at the office of the Rights
Agent  designated for such purpose,  or at the office of its successor as Rights
Agent,  one  one-thousandth  of a fully  paid  non-assessable  share of Series A
Participating  Preferred  Stock,  par value  $0.001 per share,  (the  "Preferred
Shares"),  of the Company, at a purchase price of $70.00 per one-thousandth of a
Preferred Share (the "Purchase Price"),  upon presentation and surrender of this
Rights Certificate with the Form of Election to Purchase and related Certificate
duly executed.  The number of Rights  evidenced by this Rights  Certificate (and
the number of  one-thousandths  of a Preferred Share which may be purchased upon
exercise  hereof)  and the  Purchase  Price set forth  above are the  number and
Purchase  Price as of  September  17,  1997,  based on the  Preferred  Shares as
constituted  at such date.  As provided in the Rights  Agreement,  the  Purchase
Price and the number and kind of Preferred  Shares or other securities which may
be  purchased  upon  the  exercise  of  the  Rights  evidenced  by  this  Rights
Certificate  are subject to  modification  and adjustment  upon the happening of
certain events.

---------------------------
1    The portion of the legend in brackets shall be inserted only if applicable 
and shall replace the preceeding sentence.
This Rights Certificate is subject to all of the terms,  provisions and
conditions of the Rights Agreement,  which terms,  provisions and conditions are
hereby  incorporated  herein by  reference  and made a part  hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights  Agent,  the Company and the  holders of the Rights  Certificates,  which
limitations of rights include the temporary  suspension of the exercisability of
such Rights under the specific  circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned office of the Rights Agent.

         Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Rights Certificate (i) may be redeemed by the Company, at its option, at
a redemption price of $0.01 per Right or (ii) may be exchanged by the Company in
whole or in part for Common  Shares,  substantially  equivalent  rights or other
consideration as determined by the Company.

         This Rights  Certificate,  with or without  other Rights  Certificates,
upon  surrender at the office of the Rights Agent  designated  for such purpose,
may be exchanged for another Rights  Certificate or Rights  Certificates of like
tenor  and date  evidencing  Rights  entitling  the  holder to  purchase  a like
aggregate amount of securities as the Rights evidenced by the Rights Certificate
or Rights Certificates  surrendered shall have entitled such holder to purchase.
If this Rights  Certificate  shall be  exercised  in part,  the holder  shall be
entitled to receive upon surrender  hereof another Rights  Certificate or Rights
Certificates for the number of whole Rights not exercised.

         No fractional  portion of less than one  one-thousandth  of a Preferred
Share will be issued upon the exercise of any Right or Rights  evidenced  hereby
but in lieu  thereof a cash  payment  will be made,  as  provided  in the Rights
Agreement.

         No holder of this  Rights  Certificate,  as such,  shall be entitled to
vote or  receive  dividends  or be  deemed  for any  purpose  the  holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof,  nor shall anything  contained in the Rights
Agreement or herein be construed to confer upon the holder hereof,  as such, any
of the  rights  of a  shareholder  of the  Company  or any right to vote for the
election  of  directors  or upon any matter  submitted  to  shareholders  at any
meeting thereof,  or to give or withhold consent to any corporate  action, or to
receive notice of meetings or other actions  affecting  shareholders  (except as
provided  in the Rights  Agreement),  or to receive  dividends  or  subscription
rights,  or  otherwise,  until  the  Right or Rights  evidenced  by this  Rights
Certificate shall have been exercised as provided in the Rights Agreement.

         This  Rights  Certificate  shall  not be  valid or  obligatory  for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile  signature of the proper  officers of the Company
and its corporate seal. Dated as of _____________, 1997.

ATTEST:                                QUALITY SEMICONDUCTOR, INC.

____________________________           By:________________________
Secretary                                  President

Countersigned:

___________________________
as Rights Agent

By:________________________
     Authorized Signature
Form of Reverse Side of Rights Certificate

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer the Rights Certificate)

      FOR VALUE RECEIVED ________________________ hereby sells,
assigns and transfers unto _________________________________________________
                            (Please print name and address of transferee)

this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably cons titute and appoint ___________________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.  Dated: ____________, ____.

                                           ____________________________________
                                           Signature

Signature Guaranteed:

         The  signature(s)   should  be  guaranteed  by  an  eligible  guarantor
institution(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions
with membership in an approved signature  guarantee  medallion program) pursuant
to S.E.C. Rule 17Ad-15.
CERTIFICATE

         The  undersigned  hereby  certifies by checking the  appropriate  boxes
that:

         (1) this Rights Certificate [ ] is [ ] is not being sold,  assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, or an
Affiliate  or  Associate  of any such  Person (as such terms are  defined in the
Rights Agreement);

         (2) after due inquiry and to the best knowledge of the undersigned,  it
[ ]did [ ] did not acquire the Rights evidenced by this Rights  Certificate from
any  Person  who is,  was or  subsequently  became  an  Acquiring  Person  or an
Affiliate or Associate of any such Person.

Dated:____________, ____

                                      _________________________________________
 
                                      Signature

Signature Guaranteed:

         The  signature(s)   should  be  guaranteed  by  an  eligible  guarantor
institution(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions
with membership in an approved signature  guarantee  medallion program) pursuant
to S.E.C. Rule 17Ad-15.
Form of Reverse Side of Rights Certificate -- continued

                          FORM OF ELECTION TO PURCHASE

                      (To be executed if holder desires to
                        exercise the Rights Certificate)

To:____________________

         The      undersigned       hereby       irrevocably      elects      to
exercise_________________________  Rights represented by this Rights Certificate
to purchase the number of one-thousandths of a Preferred Share issuable upon the
exercise  of such  Rights and  requests  that  certificates  for such  number of
one-thousandths of a Preferred Share issued in the name of:

Please insert social security or
other identifying number

------------------------------------------------------------------------------
(Please print name and add address) ____________________________________________
----------------------------------

If such number of Rights  shall not be all the Rights  evidenced  by this Rights
Certificate,  a new Rights  Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

Please insert social security or
other identifying number
------------------------------------------------------------------------------
(Please print name and address) _______________________________________________
------------------------------

Dated:____________, _____
                                          _____________________________________
                                          Signature

Signature Guaranteed:

         The  signature(s)   should  be  guaranteed  by  an  eligible  guarantor
institution(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions
with membership in an approved signature  guarantee  medallion program) pursuant
to S.E.C. Rule 17Ad-15.
CERTIFICATE

         The  undersigned  hereby  certifies by checking the  appropriate  boxes
that:

         (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an  Affiliate  or Associate of any such Person (as such terms are defined in the
Rights Agreement);

         (2) after due inquiry and to the best knowledge of the undersigned,  it
[ ]did [ ] did not acquire the Rights evidenced by this Rights  Certificate from
any  Person  who is,  was or  subsequently  became  an  Acquiring  Person  or an
Affiliate or Associate of any such Person.

Dated:____________, _____

                                                              Signature

Signature Guaranteed:

         The  signature(s)   should  be  guaranteed  by  an  eligible  guarantor
institution(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions
with membership in an approved signature  guarantee  medallion program) pursuant
to S.E.C. Rule 17Ad-15.
Form of Reverse Side of Rights Certificate -- continued

                                     NOTICE

         The  signature in the foregoing  Forms of Assignment  and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
EXHIBIT C

                           QUALITY SEMICONDUCTOR, INC.
                             SHAREHOLDER RIGHTS PLAN

                                Summary of Rights

Distribution and Transfer of Rights;
Rights Certificate:

     The Board of Directors  has declared a dividend of one Right for each share
of  Quality  Semiconductor,   Inc.  Common  Stock  outstanding.   Prior  to  the
Distribution  Date referred to below,  the Rights will be evidenced by and trade
with the certificates for the Common Stock. After the Distribution Date, Quality
Semiconductor,  Inc.  (the  "Company")  will  mail  Rights  certificates  to the
Company's  shareholders and the Rights will become  transferable  apart from the
Common Stock.

Distribution Date:

     Rights will separate from the Common Stock and become exercisable following
the tenth day (the "Distribution Date") (or such later date as may be determined
by a majority of the Directors not affiliated with the acquiring person or group
(the "Continuing  Directors")) after a person or group (a) announces acquisition
of  beneficial  ownership  of 15% or more of the  Company's  Common  Stock  (the
"Shares Acquisition Date") if such acquisition was not approved by the Company's
Board of Directors or a committee thereof) or (b) announces a tender or exchange
offer,  the consummation of which would result in ownership by a person or group
of 15% or more of the Company's Common Stock.

Preferred Stock Purchasable
Upon Exercise of Rights:

     After  the  Distribution  Date,  each  Right  will  entitle  the  holder to
purchase,  for $70.00, one one-thousandth of a share of the Company's  Preferred
Stock with economic  terms similar to that of one share of the Company's  Common
Stock.
Flip-In:

     If an acquiror (an "Acquiring Person") obtains beneficial  ownership of 15%
or more of the  Company's  Common Stock  (other than  pursuant to a tender offer
deemed  fair  by the  Board  of  Directors  (a  "Permitted  Offer")  and if such
acquisition  was not approved by the Company's Board of Directors or a committee
thereof)),  then each Right (other than Rights  owned by an Acquiring  Person or
its  affiliates)  will entitle the holder thereof to purchase,  for the exercise
price,  a number of shares of the  Company's  Common Stock having a then current
market value of twice the exercise price.

Flip-Over:

     If, after the Shares  Acquisition  Date  (defined  above),  (a) the Company
merges into another entity,  (b) an acquiring  entity merges into the Company or
(c) the Company  sells more than 50% of the Company's  assets or earning  power,
then  each  Right  (other  than  Rights  owned  by an  Acquiring  Person  or its
affiliates) will entitle the holder thereof to purchase, for the exercise price,
a number of shares of Common  Stock of the person  engaging  in the  transaction
having a then  current  market  value of twice the  exercise  price  (unless the
transaction  satisfies  certain  conditions and is consummated with a person who
acquired  shares  pursuant to a Permitted  Offer,  in which case the Rights will
expire).

Exchange Provision:

     At any time after an event  triggering the flip-in or flip-over  rights and
prior  to the  acquisition  by the  Acquiring  Person  of  50%  or  more  of the
outstanding Common Stock, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by the Acquiring Person or its  affiliates),  in
whole or in part, at an exchange ratio of one Common Share per Right (subject to
adjustment).

Redemption of the Rights:

     Rights will be  redeemable  at Company's  option for $0.01 per Right at any
time on or prior to the tenth day (or such later date as may be  determined by a
majority of the Continuing Directors) after the Shares Acquisition Date.
Expiration of the Rights:

     The Rights expire on the earliest of (a)  September 17, 2007,  (b) exchange
or redemption of the Rights as described  above, or (c) consummation of a merger
or  consolidation  or sale of assets  resulting in  expiration  of the Rights as
described above.

Amendment of Terms of Rights:

     The terms of the Rights Agreement may be amended in any respect without the
consent of the Rights holders on or prior to the Distribution Date;  thereafter,
the terms of the Rights  and the Rights  Agreement  may be amended  without  the
consent  of the  Rights  holders  in order to cure  any  ambiguities  or to make
changes which do not adversely  affect the  interests of Rights  holders  (other
than the Acquiring Person).

Voting Rights:

     Rights will not have any voting rights.

Anti-Dilution Provisions:

     Rights will have the benefit of certain customary anti-dilution provisions.

Taxes:

     The  Rights  distribution  should  not be taxable  for  federal  income tax
purposes.  However,  following an event which renders the Rights  exercisable or
upon redemption of the Rights, shareholders may recognize taxable income.

     The foregoing is a summary of certain  principal  terms of the  Shareholder
Rights Plan only and is  qualified  in its entirety by reference to the detailed
terms of the Rights  Agreement dated as of August 29, 1997,  between the Company
and the Rights Agent.