Citibank notified Zale Corp that it would terminate the
agreement to finance the company’s credit cards in 180 days, unless the company
pays $1.125 million on or before July 16.

If the Zale makes the payment, the agreement will remain in
effect until its original March 2011 expiration date, subject to the provision
that would entitle the parties to terminate it prior to that time.

Citibank threatened to terminate the agreement on April 1 if
the company did not pay for a shortfall to the minimum volume of credit
sales.  The deadline was extended
to June 15 when Zale made a payment of $5,363,999 for compensation for the shortfall.

JCK