8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 12, 2006

Q.E.P. CO., INC.

(Exact name of registrant as specified in its charter)

DELAWARE	0-21161	13-2983807
(State or other jurisdiction of incorporation)	(Commission File No.)	(IRS Employer Identification No.)

1001 Broken Sound Parkway

Boca Raton, Florida 33487

(Address of principal executive offices)

561-994-5550

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a–12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 1- Financial Information

Item 1.01. Entry into a Material Definitive Agreement.

As disclosed under Item 5.02, on January 12, 2006, Q.E.P. Co., Inc. (the “Company”) appointed Randall N. Paulfus to serve as Interim Chief Financial Officer, effective as of January 31, 2006. The description of the terms of Mr. Paulfus’ employment arrangement in Item 5.02 is incorporated herein by reference.

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

On January 12, 2006, the Company appointed Randall N. Paulfus to serve as Interim Chief Financial Officer, effective January 31, 2006. Mr. Paulfus is a partner with Tatum LLC (“Tatum”), an executive services and consulting firm. Mr. Paulfus’ services will be engaged through an interim executive services agreement between the Company and Tatum, and a separate letter agreement between the Company and Mr. Paulfus (collectively, the “Employment Arrangement”). Under the terms of the Employment Arrangement, the Company will pay Mr. Paulfus a salary of $6,000 per week and pay Tatum a fee of $1,500 per week through the term of Mr. Paulfus’ engagement with the Company. After the first three months, the Company, Tatum, or Mr. Paulfus may terminate the Employment Arrangement upon at least 30 days’ prior written notice. The Company has no obligation to provide Mr. Paulfus any stock or incentive compensation, or medical benefits. Mr. Paulfus will be eligible to participate in any Company employee retirement and/or 401(k) plan and entitled to vacation and holidays in accordance with the Company’s policy as it applies to senior management. The Company will reimburse Mr. Paulfus for the reasonable out-of-pocket expenses incurred in connection with his service as Interim Chief Financial Officer to the same extent that the Company is responsible for such expenses of senior officers of the Company.

Mr. Paulfus, age 59, is a certified public accountant. He joined Tatum in 1998 and has served a variety of manufacturing and service company clients as an interim chief financial officer while affiliated with Tatum. From 1997 to 1998, Mr. Paulfus served as the chief financial officer of Advanced Electronic Support Products, Inc., a publicly-traded manufacturing company. From 1992 to 1997, Mr. Paulfus served in various interim corporate roles for companies in financial transition as an employee and consultant of Lissner Associates, Ltd.

Section 9- Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

As described in Items 1.01 and 5.02 of this Report, the following Exhibits are filed as part of this Current Report on Form 8-K:

Exhibit No.	Description
10.1	Interim Executive Services Agreement between the Company and Tatum dated January 12, 2006.
10.2	Letter Agreement between the Company and Randall N. Paulfus dated January 12, 2006.

SIGNATURES

Pursuant to the requirements 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.

	Q.E.P. Co., Inc.
Date: January 13, 2006	By:	/s/  Lewis Gould
	Name:	Lewis Gould
	Title:	Chairman of the Board of Directors and Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
10.1	Interim Executive Services Agreement between the Company and Tatum dated January 12, 2006.
10.2	Letter Agreement between the Company and Randall N. Paulfus dated January 12, 2006.

EX-10.1

Exhibit 10.1

Tatum LLC

Interim Executive Services Agreement

January 12, 2006                

Q.E.P. Co., Inc.

1081 Holland Drive

Boca Raton, FL 33487

Dear Mr. Gould

Tatum LLC (“Tatum”) understands Q.E.P. Co., Inc. (“the Company”) desires to engage a partner of Tatum to serve as interim chief financial officer. This Interim Executive Services Agreement sets forth the conditions under which such services will be provided.

Services; Fees

Tatum will make available to the Company Randall Paulfus (the “Tatum Partner”), who will serve as interim chief financial officer of the Company. The Tatum Partner will become an employee and a duly elected or appointed officer of the Company and subject to the supervision and direction of the CEO of the Company, the board of directors of the Company, or both. Tatum will have no control or supervision over the Tatum Partner.

The Company will pay the Tatum Partner directly a salary of $6,000 per week (“Salary”).

In addition, the Company will pay directly to Tatum a fee of $1,500 per week.

The Company will have no obligation to provide the Tatum Partner any other benefits or compensation other than the salary stated above. In lieu of the Tatum Partner participating in the Company-sponsored employee medical insurance benefit plan, the Tatum Partner will remain on his or her current medical plan. As an employee, the Tatum Partner will be eligible for any Company employee retirement and/or 401(k) plan and for vacation and holidays consistent with the Company’s policy as it applies to senior management, and the Tatum Partner will be exempt from any delay periods otherwise required for eligibility.

Payments

Payments to Tatum should be made by direct deposit through the Company’s payroll, or by an automated clearing house (“ACH”) payment at the same time as payments are made to the Tatum Partner. If such payment method is not available and payments are made by check, Tatum will issue invoices to the Company, and the Company agrees to pay such invoices no later than ten (10) days after receipt of invoices.

The Company will reimburse the Tatum Partner directly for out-of-pocket expenses incurred by the Tatum Partner in providing services hereunder to the same extent that the Company is responsible for such expenses of senior officers of the Company.

Converting Interim to Permanent

The Company will have the opportunity to make the Tatum Partner a permanent member of Company management at any time during the term of this agreement by entering into another form of Tatum agreement, the terms of which will be negotiated at such time.

Hiring Tatum Partner Outside of Agreement

During the twelve (12)-month period following termination or expiration of this agreement, other than in connection with another Tatum agreement, the Company will not employ the Tatum Partner, or engage the Tatum Partner as an independent contractor, to render services of substantially the same nature as those to be performed by the Tatum Partner as contemplated by this agreement. The parties recognize and agree that a breach by the Company of this provision would result in the loss to Tatum of the Tatum Partner’s valuable expertise and revenue potential and that such injury will be impossible or very difficult to ascertain. Therefore, in the event this provision is breached, Tatum will be entitled to receive as liquidated damages an amount equal to forty-five percent (45%) of the Tatum Partner’s Annualized Compensation (as defined below), which amount the parties agree is reasonably proportionate to the probable loss to Tatum and is not intended as a penalty. If, however, a court or arbitrator, as applicable, determines that liquidated damages are not appropriate for such breach, Tatum will have the right to seek actual damages. The amount will be due and payable to Tatum upon written demand to the Company. For this purpose, “Annualized Compensation” will mean weekly Salary equivalent to what the Tatum Partner would receive on a full-time basis multiplied by fifty two (52), plus the maximum amount of any bonus for which the Tatum Partner was eligible with respect to the then current bonus year.

Term & Termination

Effective upon thirty (30) days’ advance written notice, either party may terminate this agreement, such termination to be effective on the date specified in the notice, provided that such date is no earlier than thirty (30) days after the date of delivery of the notice. However, this agreement will not be cancelable within the first three months of services. Tatum will continue to render services and will be paid during such notice period.

Tatum retains the right to terminate this agreement immediately if (1) the Company is engaged in or asks the Tatum Partner to engage in or to ignore any illegal or unethical activity or, (2) the Tatum Partner ceases to be a partner of Tatum for any other reason,. This agreement will terminate immediately upon the death or disability of the Tatum Partner. For purposes of this agreement, disability will be as defined by the applicable policy of disability insurance or, in the absence of such insurance, by the Company’s Board of Directors acting in good faith. The Company retains the right to terminate this agreement immediately if Tatum Partner engages in any illegal or unethical activity.

In the event that either party commits a breach of this agreement, other than for reasons described in the above paragraph, and fails to cure the same within seven (7) days following delivery by the non-breaching party of written notice specifying the nature of the breach, the non-breaching party will have the right to terminate this agreement immediately effective upon written notice of such termination.

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Insurance

The Company will provide Tatum or the Tatum Partner with written evidence that the Company maintains directors’ and officers’ insurance in an amount reasonably acceptable to the Tatum Partner at no additional cost to the Tatum Partner, and the Company will maintain such insurance at all times while this agreement remains in effect. In addition, if at such time it is necessary to put a “tail” in place, the Tatum Partner would be covered no less favorably than the other Company officers.

Disclaimers, Limitations of Liability & Indemnity

Tatum assumes no responsibility or liability under this agreement other than to render the services called for hereunder and will not be responsible for any action taken by the Company in following or declining to follow any of Tatum’s advice or recommendations. Tatum represents to the Company that Tatum has conducted its standard screening and investigation procedures with respect to the Tatum Partner becoming a partner in Tatum, and the results of the same were satisfactory to Tatum. Tatum disclaims all other warranties, either express or implied. Without limiting the foregoing, Tatum makes no representation or warranty as to the accuracy or reliability of reports, projections, forecasts, or any other information derived from use of Tatum’s resources, and Tatum will not be liable for any claims of reliance on such reports, projections, forecasts, or information. Tatum will not be liable for any non-compliance of reports, projections, forecasts, or information or services with federal, state, or local laws or regulations. Such reports, projections, forecasts, or information or services are for the sole benefit of the Company and not any unnamed third parties.

In the event that any partner of Tatum (including without limitation the Tatum Partner to the extent not otherwise entitled in his or her capacity as an officer of the Company) is subpoenaed or otherwise required to appear as a witness or Tatum or such partner is required to provide evidence, in either case in connection with any action, suit, or other proceeding initiated by a third party or by the Company against a third party, then the Company shall reimburse Tatum for the costs and expenses (including reasonable attorneys’ fees) actually incurred by Tatum or such partner and provide Tatum with compensation at Tatum’s customary rate for the time incurred.

The Company agrees that, with respect to any claims the Company may assert against Tatum in connection with this agreement or the relationship arising hereunder, Tatum’s total liability will not exceed eight (8) weeks of Services Agreement fees paid to Tatum hereunder.

As a condition for recovery of any liability, the Company must assert any claim against Tatum within three (3) months after discovery or ninety (90) days after the termination or expiration of this agreement, whichever is earlier.

Tatum will not be liable in any event for incidental, consequential, punitive, or special damages, including without limitation, any interruption of business or loss of business, profit, or goodwill.

Arbitration

If the parties are unable to resolve any dispute arising out of or in connection with this agreement, either party may refer the dispute to arbitration by a single arbitrator selected by the parties according to the rules of the American Arbitration Association (“AAA”), and the decision of the arbitrator will be final and binding on both parties. Such arbitration will be conducted by the New York, NY, office of the AAA. In the event that the parties fail to agree on the selection of the arbitrator within thirty (30) days after either party’s request for arbitration under this paragraph, the arbitrator will be chosen by AAA. The arbitrator may in his discretion order documentary discovery but shall not allow depositions without a showing of compelling need.

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The arbitrator will render his decision within ninety (90) days after the call for arbitration. The arbitrator will have no authority to award punitive damages. Judgment on the award of the arbitrator may be entered in and enforced by any court of competent jurisdiction. The arbitrator will have no authority to award damages in excess or in contravention of this agreement and may not amend or disregard any provision of this agreement, including this paragraph. Notwithstanding the foregoing, either party may seek appropriate injunctive relief from a court of competent jurisdiction, and either party may seek injunctive relief in any court of competent jurisdiction.

Miscellaneous

Tatum will be entitled to receive all reasonable costs and expenses incidental to the collection of overdue amounts under this Interim Executive Services Agreement, including but not limited to attorneys’ fees actually incurred.

Neither the Company nor Tatum will be deemed to have waived any rights or remedies accruing under this agreement unless such waiver is in writing and signed by the party electing to waive the right or remedy. This agreement binds and benefits the respective successors of Tatum and the Company.

Neither party will be liable for any delay or failure to perform under this agreement (other than with respect to payment obligations) to the extent such delay or failure is a result of an act of God, war, earthquake, civil disobedience, court order, labor dispute, or other cause beyond such party’s reasonable control.

The provisions concerning payment of compensation and reimbursement of costs and expenses, limitation of liability, directors’ and officers’ insurance, and arbitration will survive the expiration or any termination of this agreement.

This agreement will be governed by and construed in all respects in accordance with the laws of the State of New York, without giving effect to conflicts-of-laws principles.

The terms of this agreement are severable and may not be amended except in writing signed by the party to be bound. If any portion of this agreement is found to be unenforceable, the rest of the agreement will be enforceable except to the extent that the severed provision deprives either party of a substantial benefit of its bargain.

Nothing in this agreement shall confer any rights upon any person or entity other than the parties hereto and their respective successors and permitted assigns and the Tatum Partner.

Each person signing below is authorized to sign on behalf of the party indicated, and in each case such signature is the only one necessary.

Bank Lockbox Mailing Address for Deposit and Fees:

Tatum LLC

P.O. Box 403291

Atlanta, GA 30384-3291

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Electronic Payment Instructions for Deposit and Fees:

Bank Name: Bank of America
Branch: Atlanta
Routing Number:	For ACH Payments: 061 000 052
	For Wires: 026 009 593
Account Name: Tatum LLC
Account Number: 003 279 247 763
Please reference Q.E.P. Co., Inc. in the body of the wire.

Please sign below and return a signed copy of this letter to indicate the Company’s agreement with its terms and conditions.

We look forward to serving you.

Sincerely yours,

TATUM LLC	Acknowledged and agreed by:
	Q.E.P. Co., Inc.
Signature	Signature
(Print name)
	(Print name)
Area Managing Partner for TATUM LLC
	(Title)
	(Date)

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EX-10.2

Exhibit 10.2

Employment Letter

January 12, 2006

Randall Paulfus

6950 NE 7 Ave.

Boca Raton, FL 33487

Dear Randy,

Please allow this letter to serve as the entire agreement between Q.E.P. Co., Inc. (the “Company”) and you, Randall Paulfus (the “Employee”) with respect to certain aspects of your employment with the Company. The Company acknowledges and agrees that the Employee is and will remain a partner of, and has and will retain an interest in, Tatum LLC (“Tatum”), which will benefit the Company in that the Employee will have access to certain Tatum resources.

Beginning Date

The Employee will work for the Company beginning on January 31, 2006.

Compensation

Salary: $6,000 per week (“Salary”). Employee’s Salary may be increased from time to time, by the Company.

Other Compensation Provisions:

During the course of the Employee’s engagement hereunder, the Employee will remain a partner of Tatum. As a partner of Tatum, Employee will share with Tatum a portion of his or her economic interest in any stock options or equity bonus that the Company may grant the Employee and may also share with Tatum a portion of any cash bonus and severance the Company may pay the Employee, to the extent specified in that certain Interim Executive Services Agreement between the Company and Tatum (the “Services Agreement”). The Company acknowledges and consents to such arrangement.

Benefits

The Employee will be eligible for any Company employment retirement and/or 401(k) plan and for vacation and holidays consistent with the Company’s policy as it applies to senior management, and the Employee will be exempt from any delay periods required for eligibility, unless such exemption creates a violation of the plan.

In lieu of the Employee participating in the Company-sponsored employee medical insurance benefit, the Employee will remain on his or her current Tatum medical plan.

The Employee must receive written evidence that the Company maintains directors’ and officers’ insurance to cover in an amount reasonably acceptable to the Employee at no additional cost to the Employee, and the Company will maintain such insurance at all times while this agreement remains in effect. In addition, if at such times it is necessary to put a “tail” in place, the Employee will be covered no less favorably than the other Company officers.

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The Company agrees to indemnify the Employee to the full extent permitted by law for any losses, costs, damages, and expenses, including reasonable attorneys’ fees, as they are incurred, in connection with any cause of action, suit, or other proceeding arising in connection with the Employee’s employment with the Company, unless such cause of action, suit or other proceeding is caused by the intentional misconduct or gross negligence of the Employee.

Termination

The Company may terminate the Employee’s employment for any reason upon at least 30 days’ prior written notice to the Employee, such termination to be effective on the date specified in the notice, provided that such date is no earlier than 30 days from the date of delivery of the notice. However, employment will not be cancelable within the first three month of service. Likewise, the Employee may terminate his or her employment for any reason upon at least 30 days’ prior written notice to the Company, such termination to be effective on the date 30 days following the date of the notice. The Employee will continue to render services and to be paid during such 30-day period, regardless of who gives such notice. Notwithstanding anything herein to the contrary, the Company may terminate Employee immediately if Employee engages in any illegal or unethical activity. The Employee may terminate this agreement immediately if the Company has not remained current in its obligations under this letter or the Services Agreement between the Company and Tatum or if the Company engages in or asks the Employee to engage in or to ignore any illegal or unethical conduct.

This agreement will terminate immediately upon the death or disability of the Employee. For purposes of this agreement, disability will be as defined by the applicable policy of disability insurance or, in the absence of such insurance, by the Company’s Board of Directors acting in good faith.

Miscellaneous

This agreement contains the entire agreement between the parties with respect to the matters contained herein, superseding any prior oral or written statements or agreements.

The provisions in this agreement concerning the payment of Salary will survive any termination or expiration of this agreement.

The terms of this agreement are severable and may not be amended except in a writing signed by the parties. If any portion of this agreement is found to be unenforceable, the rest of this agreement will be enforceable except to the extent that the severed provision deprives either party of a substantial portion of its bargain.

Employee may not assign his rights and obligations hereunder.

This agreement will be governed by and construed in all respects in accordance with the laws of the State of Florida, without giving effect to conflicts-of-laws principles.

Each person signing below is authorized to sign on behalf of the party indicated, and in each case such signature is the only one necessary.

Please sign below and return a signed copy of this letter to indicate your agreement with its terms and conditions.

Sincerely yours,

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Q.E.P. Co., Inc.

By:

Signature

Name:

Title:

Acknowledged and agreed by:

EMPLOYEE:

(Signature)

(Print name)

Date:                    

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