On September 29, 2008, PECO II, Inc. (the "Company") and Delta Electronics, Inc. ("DEI") entered into a supply agreement (the "Supply Agreement") under which DEI granted the Company the right to purchase and incorporate modules and other components into the Company's telecommunications systems and to market, promote, sell, and distribute the modules and other DEI technology. DEI is an affiliate of Delta Products Corporation ("Delta") and Delta International Holding Ltd. ("DIH"), which are affiliates of the Company as a result of DIH's level of ownership in the Company and Delta's ability to designate a nominee to the Company's Board of Directors.

The term of the Supply Agreement is 12 months. The foregoing description of the Supply Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the complete text of the Supply Agreement. A copy of the Supply Agreement is attached hereto as Exhibit 10.1 and incorporated herein by reference.

On September 28, 2008, Mr. Albert Chang resigned from the Company's Board of Directors. Mr. Chang's resignation was not due to any disagreement with the Company known to an executive officer of the Company. Mr. Chang's resignation was made immediately following the expiration of DIH's warrant to purchase a number of shares that, when aggregated with the 474,037 shares owned by DIH, represents 45% of the Company's issued and outstanding shares of common stock.

(d) Exhibits.

Exhibit No.       Description
10.1              Supply Agreement, dated September 29, 2008, between the Company
                  and DEI*

* We have requested that the Securities and Exchange Commission give confidential treatment to portions of this exhibit.