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Case Status:    SETTLED
On or around 12/07/2004 (Date of order of final judgment)

Filing Date: March 07, 2003

Alloy, Inc. is a teen-focused media company and direct marketer that targets Generation Y consumers, i.e. the approximately 60 million people in the United States between the ages of 10 and 24.

The Complaint charges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between August 1, 2002 and January 23, 2003. The Complaint alleges that the Company claimed that its merchandising and advertising segments complemented one another in a way that gave the Company an edge over competitor teen retailers and media businesses and which would enable it to succeed despite difficult market conditions in the second half of 2002. Unbeknownst to investors, the Company faced fierce competition for the youth market and the weak economy forced the Company to cut its prices and increase operating expenses, e.g. by offering free shipping and deep discounts, thereby eroding Alloy's gross profit margin. On January 23, 2003, the Company shocked the market by announcing that EBITA for its fiscal fourth quarter ending January 31, 2003 would be $11 million to $12 million instead of the previously projected $15 million to $16 million and that fiscal 2002 EBITA would be in the range of $30 to $31 million instead of the previously forecast $34 million to $38 million. On this news, the Company's share priced plummeted by 49%, or $4.57, from the previous day's closing price of $9.10.

In a press release dated June 30, 2004, a tentative settlement was reached in the putative class action. The settlement, if approved by the court after notice to the class members and a hearing, is in an amount that is covered by Alloy's applicable directors and officers insurance policies. Also on June 28, 2004, Alloy reached a tentative settlement in the related derivative action entitled Yeung Chan v. Diamond, et al., 03 Civ. 8494 (S.D.N.Y.) (WHP) that was filed in the United States District Court for the Southern District of New York against the then directors of Alloy in October, 2003. That tentative settlement does not require the Company to make any payment except to the extent legal fees are awarded to plaintiff's Counsel by the court.

According to the docket, on December 7, 2004, the Court entered the Final Judgment of Dismissal by U.S. District Judge William H. Pauley III adopting the terms of the stipulation of settlement and dismissing the action with prejudice. The next day, the Court entered the Order awarding attorneys' fees to Plaintiffs' Counsel in the amount of $1,620, 000 and reimbursement of costs and expenses they incurred in the amount of $189,530.30. The parties agreed to settle the action for $6,750,000.

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