From Larry Brooks of the NY Post:
The status quo is that both the Rangers and Jagr are interested in extending their relationship for at least one more season. Jagr has said so, Sather has said so, and there is no reason to doubt either.
Read the entire article here.
Both sides seem to believe that the contract situation will work itself out. However, once July 1st hits, Jagr will surely be getting other offers and that could complicate things.