Gadzooks plan of liquidation takes effect

New York, Feb. 23 - Gadzooks, Inc.'s first amended plan of liquidation became effective on Feb. 17, according to a filing with the U.S. Bankruptcy Court for the Northern District of Texas.

The plan was previously confirmed by the court on Feb. 6.

As previously announced, the liquidation will be funded by a trust made up of funds from the proceeds of the sale of all the company's assets, existing cash balances and the release of any funds held in reserve.

The company expects to have between $850,000 and $2.48 million in the liquidating trust by Sept. 26, 2006, when the final payment for the assets is due.

Treatment of creditors includes:

• Holders of secured claims will receive the property securing their claim.

• Holders of $8.89 million in general unsecured claims will receive their share of the proceeds of the sale of the company's estate.

• Holders of $26 million in senior unsecured claims will receive payments that would have been made to the holders of the company's 5% convertible subordinated notes until the claims are satisfied in full.

• Payments intended for holders of $14 million in 5% convertible subordinated notes will be redirected to senior unsecured claims until they are paid in full. After the senior unsecured claims are paid, payments will be directed back to noteholder claims.

• Holders of old stock and pre-bankruptcy warrants and securities will receive no distribution.

Gadzooks, a Dallas-area apparel retailer, filed for bankruptcy on Feb. 3, 2004. Its Chapter 11 case number is 04-31486.

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