Yep, if you manage to get an upgraded version of the gear that the boss drops, the rarity goes from Rare to Exotic.
I've managed go get a Precise Reaper Gi and a Precise Reaper Leggings, but I don't know if this also applies for weapons:
There's also an "Orange" quality, but they seem to only apply to cosmetic items, like Bunhost Garb and the Vampiric Coat (the only two exclusively cosmetic items that I've found so far).