On March 22, 2012, Ferrari S.p.A. (“Ferrari”) and Movado Group, Inc. (the "Company") entered into a trademark license agreement (the "Agreement").
GRANT OF LICENSE, TERM AND TERMINATION
Under the Agreement, Ferrari granted the Company a worldwide, exclusive right and license to use the trademarks SCUDERIA FERRARI, the S.F. and Prancing Horse in shield device and FERRARI OFFICIAL LICENSED PRODUCT logo (the “Trademarks) in connection with the development, manufacture, distribution, advertising, promotion and sale of watches to be sold at suggested retail prices not exceeding €1,500 (the “Products”) and agreed to not grant any other entity in the future any rights to use the Trademarks, or any other trademarks identifying the Ferrari brand, on watches. Upon prior notice to Ferrari, the Company has the right to sub-license any of its wholly-owned subsidiaries to exercise and perform any of its rights and obligations under the Agreement and, with Ferrari’s prior approval, may appoint qualified sub-licensees to produce and distribute the Products.
The initial term of the Agreement continues through December 31, 2017 and will be renewed automatically for an additional five years, through December 31, 2022, if total royalty payments each year of the initial term exceed the applicable guaranteed minimum royalty payment amount. The Agreement provides for early termination for industry standard causes, including termination by Ferrari for the Company’s material breach, as well as in the event of certain changes in control of the Company.
PRODUCT DESIGN, MARKETING, ADVERTISING AND DISTRIBUTION
The Company must obtain Ferrari’s approval of all Product designs, packaging and related material as well as all advertising and promotional materials. The Company will be responsible for the promotion and the worldwide distribution and sale of the Products and will provide Ferrari with quarterly royalty and inventory reports, including reports of net sales. The Company is also obligated to make, directly or indirectly, minimum annual expenditures for the advertising and promotion of the Products.
The Company is required to make quarterly royalty payments, in Euros, beginning in the first quarter of calendar 2013 based on a percentage of Product net sales but in no event less than specified guaranteed minimum royalties. Payment of the guaranteed minimum royalties is guaranteed by a bank guaranty.
The Company intends to file the Agreement as an exhibit to its next periodic report and will seek confidential treatment of certain terms in the Agreement at such time.