Item 2.04. Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.

On September 23, 2008, in connection with the preparation of its 2009 second fiscal quarter financial statements, Q.E.P. Co., Inc. (the "Company") determined that the Company was in violation of a financial covenant under the Company's credit facility (the "Credit Facility") with its senior lenders (collectively, the "Lenders"), which covenant required the Company to maintain a certain liabilities to tangible net worth ratio as defined in the Credit Facility. A violation of this financial covenant would, unless waived by the Lenders, constitute an event of default under the Credit Facility, giving the Lenders the right to prohibit additional borrowing under the Credit Facility, accelerate the Company's indebtedness thereunder, and take other actions as provided for in the Credit Facility. As of September 23, 2008, $30,956,000 of borrowings and letters of credit were outstanding under the Credit Facility.

The Company has requested that the Lenders waive the current non-compliance with the financial covenant and consent to certain changes through November 30, 2008 in the financial covenants included in the Credit Facility. There can be no assurance that the Company will be able to negotiate a waiver or changes in the covenants or that such a waiver or changes will be on terms acceptable to the Company. If the Company is unable to obtain a waiver from the Lenders, it could have a material adverse effect on the Company's financial position.

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