"With the signing of this deal, we begin the process of emerging from bankruptcy protection with the kind of balance sheet we need to grow this concept appropriately," says Jerry Szczepanski, Gazooks' chairman and CEO, in a statement. With the funding, Gadzooks officials say they will "provide working capital for the reorganized entity" and "fund a distribution to the company's creditors."

To emerge from Chapter 11, Gadzooks needs, among meeting other conditions, approval from the United States Bankruptcy Court for the Northern District of Texas, and the Securities and Exchange Commission. Company officials say that they expect to file a reorganization plan with the court by the end of the month.

As part of its reorganization, the company closed 125 stores earlier this year. In the summer of 2003, the company operated nearly 425 mall-based units across the country. That was when Gadzooks made the transition from selling apparel to both genders to marketing exclusively to females. The chain faced competition from other firms targeting the same age groups, such as Abercrombie & Fitch, Hot Topic and Pacific Sunwear.