Clothing and accessories designer Guess Inc. (GES) and fashion watch company Fossil, Inc. (FOSL) on Friday said they are in advanced talks over a decade-long license agreement under which Fossil will produce and distribute Guess watches.

Fossil will form a separate company to handle the business, which currently sells about $150 million of Guess and Guess Collection watches globally.

Minimum royalties for the arrangement will be based on $1.36 billion in wholesale sales over the 10-year term, which Guess and Fossil have an option to renew.