THIRD AMENDMENT TO RIGHTS AGREEMENT

EXHIBIT 4

THIRD AMENDMENT TO RIGHTS AGREEMENT

     This THIRD AMENDMENT TO RIGHTS AGREEMENT (this “Amendment”), dated as of July 15, 2004, to that certain Rights Agreement (as the same may be amended from time to time, the “Agreement”) dated as of September 3, 1998 between Gadzooks, Inc., a Texas corporation (the “Company”), and Mellon Investor Services LLC, as successor to ChaseMellon Shareholder Services, L.L.C., as rights agent (the “Rights Agent”), as amended by a First Amendment to the Agreement, dated as of October 7, 2003, between the Company and the Rights Agent (the “First Amendment”) and as further amended by a Second Amendment to the Agreement, dated as of October 23, 2003, between the Company and the Rights Agent (the “Second Amendment”). Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in the Agreement.

     WHEREAS, Gryphon Partners, L.P., Xxxxxxxx Partners, L.P., Pisces Capital and Xxxxxxx Capital Management, L.L.C. (collectively, the “Equity Committee”), are affiliated with institutional investors which own in the aggregate in excess of 20% of the Company’s common stock, par value $0.01 per share (the “Common Stock”);

     WHEREAS, the Equity Committee desires to enter into discussions or negotiations concerning a transaction in which major stockholders of the Company would commit to be the funding guarantors in connection with a rights offering being contemplated by the Company (the “Proposal”) in connection with the Company’s restructuring, which could cause the Equity Committee to be an Acquiring Person under the Agreement; and

     WHEREAS, the Company’s board of directors deems this Amendment to be necessary and desirable and in the best interests of the holders of the Rights and has duly approved this Amendment; and

     WHEREAS, no event has occurred that would cause any Person to be deemed an Acquiring Person; and

     WHEREAS, Section 27 of the Agreement permits the Company at any time before any Person becomes an Acquiring Person to amend the Agreement in the manner provided herein.

     NOW, THEREFORE, the Agreement is hereby amended as follows:

     Section 1. Amendment of Section 1. The two sentences that were added by the Second Amendment to the definition of “Acquiring Person” in Section 1(a) of the Agreement are hereby amended and restated in their entirety as follows:

“Notwithstanding the foregoing, (a) neither the Liberty Xxxxxx Group nor any member thereof shall be an “Acquiring Person” unless and until the Liberty Xxxxxx Group or any one or more members thereof shall become the Beneficial Owner of 25% or more of the then outstanding Common Shares, (b) neither the Liberty Xxxxxx Group nor any member thereof shall be deemed to be the Beneficial Owner of any Common Shares issued or issuable to the Liberty Xxxxxx Group or any member thereof upon conversion of any interest that has or may accrue on the 5%

Convertible Subordinated Notes due October 9, 2008 that were issued by the Company to Liberty Acorn Fund on October 9, 2003 and (c) in connection with any transaction in which the Equity Committee would commit to be the funding guarantors in a rights offering being contemplated by the Company as part of its restructuring, none of the members of the Equity Committee, acting individually or together with any other member(s) of the Equity Committee, shall be an “Acquiring Person.” For purposes hereof, the (x) “Liberty Xxxxxx Group” means Liberty Xxxxxx Asset Management, L.P., WAM Acquisition GP, Inc. and Liberty Acorn Trust and their respective Affiliates and Associates and (y) “Equity Committee” means Gryphon Partners, L.P., Xxxxxxxx Partners, L.P., Pisces Capital and Xxxxxxx Capital Management, L.L.C. and their respective Affiliates and Associates.”

     Section 2. Full Force and Effect. Except as expressly amended hereby, the Agreement shall continue in full force and effect unamended and in accordance with the provisions thereof on the date hereof. This Amendment and the Agreement, as hereby amended, shall constitute one and the same instrument.

     Section 3. Governing Law. This Amendment, the Agreement, as amended, and each Rights Certificate issued hereunder or thereunder shall be deemed to be a contract made under the laws of the State of Texas and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State; provided, however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.

     Section 4. Counterparts. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and year first above written.

						GADZOOKS, INC.
Attest:		/s/ XXXXX X. XXXXXX		By:		/s/ XXXXXX X. XXXXXXXXXXX
		Name: Xxxxx X. Xxxxxx				Name: Xxxxxx X. Xxxxxxxxxxx
		Title: Vice President and Chief Financial Officer				Title: Chief Executive Officer
						MELLON INVESTOR SERVICES LLC
Attest:		/s/ XXXXXXX X. XXXXXXX		By:		/S/ XXXX X. XXXXXX
		Name: Xxxxxxx X. Xxxxxxx				Name: Xxxx X. Xxxxxx
		Title: Vice President and Regional Territory Manager				Title: Assistant Vice President and Client Service Manager