China Electronics Optics Valley Union : Announcements and Notices -

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China Electronics Optics Valley Union Holding Company Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 798)

CONTINUING CONNECTED TRANSACTIONS

IN RELATION TO

THE PROCUREMENT OF FLOODLIGHTING EQUIPMENT AND

RELATED SERVICES

FOR THE GROUP'S INDUSTRIAL PARKS

THE FRAMEWORK AGREEMENT

The Board hereby announces that on 24 February 2022, Wuhan OVU (an indirect wholly-owned subsidiary of the Company) entered into the Framework Agreement with CEC Lighting in relation to the provision of the procurement of floodlighting equipment and related services by the CEC Lighting Group to the Group for the period from 1 January 2022 to 31 December 2024.

LISTING RULES IMPLICATIONS

As at the date of this announcement, CEC indirectly holds 2,550,000,000 Shares (representing approximately 33.67% of the issued share capital of the Company). Therefore, CEC is a substantial shareholder of the Company. CEC Lighting, being a subsidiary of CEC, is therefore a connected person of the Company under the Rule 14A.07(4) of the Listing Rules. Accordingly, the transactions contemplated under the Framework Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

Since the highest applicable percentage ratio calculated in accordance with the Listing Rules in respect of the Framework Agreement exceeds 0.1% but all of them are less than 5%, the Framework Agreement and the transactions contemplated thereunder are subject to reporting, annual review and announcement requirements but are exempt from the independent shareholders' approval requirement under Rule 14A.76(2) of the Listing Rules.

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INTRODUCTION

The Board hereby announces that on 24 February 2022, Wuhan OVU (an indirect wholly-owned subsidiary of the Company) entered into the Framework Agreement with CEC Lighting in relation to the provision of the procurement of floodlighting equipment and related services by the CEC Lighting Group to the Group.

THE FRAMEWORK AGREEMENT

A summary of the salient terms of the Framework Agreement is set out below:

Date:	24 February 2022
Parties:	(1)	Wuhan OVU; and
	(2)	CEC Lighting
Term:	1 January 2022 to 31 December 2024
Subject matter

Pursuant to the Framework Agreement, the Group shall, on a non-exclusive basis, engage the CEC Lighting Group as its contractor in procuring floodlighting equipment and providing related services (including designing of lighting effects, formulation of installation work plans, selection and installation of lights and relevant equipment, and provision of relevant technical services).

During the term of the Framework Agreement, the Group may, from time to time, enter into specific agreements (the "Specific Agreement(s)") with the CEC Lighting Group which will set out the detailed terms of the scope of the procurement of lighting equipment and related services of individual projects of the Group. Each such Specific Agreement shall conform with the principles and provisions set out in the Framework Agreement; and the terms and conditions of each such Specific Agreement shall be no less favourable than those being offered by the Independent Third Parties to the Group for comparable services.

Payment and pricing terms

The fees payable by the Group to the CEC Lighting Group in respect of the procurement of floodlighting equipment and provision of related services comprises (a) the Construction Work Fees,

(b) the Design Fee and (c) if applicable, fee for civil engineering work (土建費用).

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The Construction Work Fees and the Design Fee shall be payable by the relevant member of the Group to the relevant member of the CEC Lighting Group in tranches at different stages of the relevant installation work and in line with the usual industry practice, in the following manner:

1. up to 65% of the contract price for the construction work completed in a particular month (as confirmed based on the relevant assessment of qualified work completed), shall be payable in the following month;
2. up to 75% of the contract price as set out in the Specific Agreement, shall be payable in the month following the completion of the relevant project, successful handover of the worksite and the passing of the completion inspection conducted by the relevant member of the Group and work supervising party;
3. up to 90% of the final settlement price (as confirmed by the relevant assessment) shall be payable in the month after the assessment for settlement of work completed;
4. up to 97% of the final settlement price (as confirmed by the relevant assessment) shall be payable six months after the assessment for settlement of work completed; and
5. the remaining balance of the final settlement price (as confirmed by the relevant assessment), being work quality bond, shall be payable, after deduction of any maintenance fees, upon the expiration of the works quality warranty period of two years from the date of upon passing the aforementioned inspection of completion.

The payment terms of the fee for civil engineering work (if any), which will be set out in each Specific Agreement, shall be determined after arm's length negotiations between the relevant parties with reference to the usual industry practice.

1. Construction Work Fees
   The Construction Work Fees shall comprise the following items:
2. 1. the purchase prices of the lights (and the relevant installation fees) at such unit price as agreed under the Framework Agreement.
      The said unit prices were determined with reference to, and are lower than, the prices for 148 selected floodlighting products (which are set out in the Framework Agreement) offered to the Group by the suppliers who are Independent Third Parties in respect of the same or similar light products pursuant to the relevant agreements entered into within one year from the date of the Framework Agreement.
      For the light products which are not set out in the Framework Agreement, the relevant purchase prices (and the relevant installation fees) shall be determined after arm's length negotiations between the relevant parties and with reference to the fees for the provision

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of same or similar light products (and the relevant installation fees) to the Group by at least two Independent Third Parties suppliers and shall not be higher than the prices offered to the Group by the relevant suppliers who are Independent Third Parties;

1. the purchase prices of the other relevant lighting equipment, such as cables and pipes, switches, control panels, power distribution boxes etc. and the service fee charged for the relevant installation. Such purchase prices shall be determined with reference to the

indicative market prices of the relevant lighting equipment provided by Guangcaiwang* （廣材網）, an independent agency which provides pricing information of construction materials and equipment in the PRC in the month when the relevant Specific Agreement is entered into; and such relevant service fees shall be determined after arm's length negotiations between the relevant parties, with reference to the fees for the provision of similar services to the Group by the suppliers who are Independent Third Parties pursuant to all relevant previous agreements entered into within one year from the date of the Specific Agreement and in any event shall not be higher than the aforementioned prices in the relevant agreements; and

1. 1. construction measure fees (施工措施費), including but not limited to environmental protection fees, civilization measure fees (文明施工費), safety measure fees (安全施工 費), design sample and supporting framework fees, scaffolding fees (腳手架費), second- time transportation of equipment fees, which shall be charged at 3% on the aggregate of the fees mentioned in paragraphs (i) and (ii) above. The rate of the construction measure fees was determined with reference to the market rates for the provision of similar construction work services in respect of floodlighting by suppliers who are who are Independent Third Parties.
2. Design Fee
   The design fee (the "Design Fee") shall be equivalent to 2% of the amount of the Construction Work Fees (inclusive of taxes). The rate of the Design Fee was determined with reference to the market rates for the provision of similar design services in respect of floodlighting by suppliers who are who are Independent Third Parties.
3. Fee for civil engineering work
   The fee for civil engineering work may be applicable under certain circumstances, for example, there is a delay in notification for worksite entry given by the Group to the CEC Lighting Group. If applicable, the relevant fees shall be determined after arm's length negotiations between the relevant parties and with reference to the fees for the provision of similar services to the Group by Independent Third Parties suppliers and shall not be higher than the prices offered to the Group by the suppliers who are Independent Third Parties.)

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ANNUAL CAPS AND BASIS OF DETERMINATION

The following table summarises the approximate historical transaction amounts in respect of the provision of services of design, procurement and installation of floodlighting equipment by the CEC Lighting Group to the Group for the three years ended 31 December 2021, respectively:

	For the year ended	For the year ended	For the year ended
	31 December 2019	31 December 2020	31 December 2021
	(RMB)	(RMB)	(RMB)
Historical transaction	625,327	658,083	638,620
amounts	(equivalent to	(equivalent to	(equivalent to
	approximately	approximately	approximately
	HK$771,278)	HK$811,680)	HK$787,674)

Pursuant to the Framework Agreement, the relevant annual caps (the "Annual Cap(s)") for the transactions contemplated under the Framework Agreement are as follows:

	For the year ending	For the year ending	For the year ending
	31 December 2022	31 December 2023	31 December 2024
	(RMB)	(RMB)	(RMB)
Annual Caps	21,000,000	24,000,000	28,000,000
	(equivalent to	(equivalent to	(equivalent to
	approximately	approximately	approximately
	HK$25,901,400)	HK$29,601,600)	HK$34,535,200)

In determining the Annual Caps, the Directors have taken into account the historical transaction amounts as disclosed above and the expected substantial increase in the demand for the floodlighting equipment and related services to be provided by the CEC Lighting Group to the Group as estimated based on (i) the expected number of the industrial parks under development by the Group during the term of the Framework Agreement, which, taking into account the track record of the supply of high quality and reliable floodlighting equipment and related services by the CEC Lighting Group to the Group, is expected to result in the Group's increased demand for the relevant equipment and services;

1. the estimated construction timetable for the Group's industrial parks under development; and (iii) the expected types of lighting products and equipment, and complexity of installation work required by the Group.

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