Citibank issued Zale a third notice that requires Zale to
pay $335,000 prior to August 18 to avoid termination of the company’s private
label credit card, according to an SEC filing.   

After the first notice, Zale paid Citibank approximately
$5.4 million on June 15, of which approximately $1.3 million was subsequently
refunded based upon a recalculation of the amount due.  After the second notice, Zale paid
Citibank approximately $1.1 million on July 16. 

Zale and Citibank are continuing negotiations on a
non-exclusive agreement.

JCK