NEW YORK--(BUSINESS WIRE)--Dec. 27, 2004--Alloy, Inc. (Nasdaq:ALOY), a media, marketing services, direct marketing and retail company primarily targeting the dynamic Generation Y population, today announced that it has settled the putative class action, entitled In Re Alloy, Inc. Securities Litigation, 03 CV 1597 (WHP) (the "Securities Litigation"), which action was filed against Alloy and certain of its directors in March 2003. A preliminary settlement of the Securities Litigation was reached by the parties thereto on July 12, 2004. After a hearing held on November 4, 2004, the Honorable William H. Pauley III of the United States District Court for the Southern District of New York signed an Order and a Final Judgment, each dated December 2, 2004, approving the settlement and dismissing the Securities Litigation and all claims asserted therein on the merits and with prejudice as to the plaintiffs and the Settlement Class. The Securities Litigation was settled in exchange for a payment of $6.75 million, which amount was paid by the Company's insurers.

In addition, the Company announced that it has reached a settlement in the related derivative action brought by Plaintiff Yeung Chan (the "Plaintiff") on behalf of Alloy in October 2003 and amended in March 2004 against officers and directors Matthew C. Diamond, James K. Johnson, Jr., Samuel A. Gradess, Peter M. Graham, David Yarnell and Edward Monnier (the "Derivative Action"). By order dated December 7, 2004, the Court preliminarily approved the settlement. The Company expects that an order and final judgment approving the settlement and dismissing the Derivative Action will be entered following the fairness hearing scheduled for February 25, 2005.

In connection with the proposed settlement of the Derivative Action, Alloy has agreed to make certain corporate governance changes. Alloy is sending to all of its shareholders of record as of December 14, 2004 a Notice Of Proposed Settlement Of Derivative Action, Settlement Hearing And Right To Appear (the "Notice"). The Notice is not an expression of any opinion as to the merits of any claim or defense which has been or may be asserted in the Derivative Action, but is being given to advise Alloy's shareholders that the Honorable William H. Pauley III, United States District Judge, will conduct a hearing on February 25, 2005, at 10:00 a.m. in Courtroom #11D, United States Courthouse, 500 Pearl Street, New York, New York 10007-1213 (or at such adjourned date as the Court may direct without further notice) (the "Hearing") to determine whether the Court should approve the proposed settlement of the Derivative Action (the "Settlement") as fair, reasonable and adequate, and enter judgment thereon (the "Judgment"). If the Court approves the Settlement, it will also determine the application of Plaintiff's counsel for an award of attorneys' fees and reimbursement of expenses, which fees and expenses will not exceed $198,000. Alloy expects that any fees awarded on Plaintiff's application, which Alloy has agreed not to oppose, will be paid by applicable insurance. A copy of the Notice is also being posted on Alloy's Web site, www.alloyinc.com. Requests for additional copies of the notice for this purpose should be directed to Candace Turner, Alloy, Inc., Executive Administrator, 151 West 26th Street, 11th Floor, New York, New York 10001.

Any shareholder of Alloy who objects to the Agreement, the Settlement, the Judgment to be entered thereon, and/or the application for an award of attorneys' fees and expenses, or who otherwise wishes to be heard, may appear in person or by counsel at the Hearing and present any evidence or argument that may be proper or relevant. Shareholders wishing to be heard at the Hearing, however, must, no later than fourteen (14) days before the Hearing, file with the Clerk of the United States District Court for the Southern District of New York, United States Courthouse, 500 Pearl Street, New York, New York 10007-1213 (unless the Court in its discretion shall thereafter otherwise direct): (a) a notice of the intention to appear at the Hearing; (b) a statement of their objections to any matter before the Court; and (c) the grounds for such objections or their reasons for wanting to appear and be heard, as well as all the documents and writings which they want the Court to consider. Such shareholders must also provide their name, address and telephone number; the name, address and telephone number of their attorney, if they have one; the number of shares of Alloy common stock they own and the date(s) they acquired them; and proof of ownership of such shares or a sworn statement explaining why such proof is unavailable. Contemporaneously with the filing of these documents with the Clerk of the Court, shareholders must serve them by hand delivery or first class mail, postage prepaid, upon Alloy's and the Plaintiff's counsel of record at the addresses set forth in the Notice.

The foregoing is only a summary of the provisions of the Notice and the related settlement of the Derivative Action and interested parties are referred to the text of the Notice for a complete discussion of the provisions of the Notice and the related settlement of the Derivative Action.

About Alloy

Alloy, Inc. (Nasdaq:ALOY) is a media, marketing services, direct marketing and retail company primarily targeting Generation Y, a key demographic segment comprising the more than 60 million boys and girls in the United States between the ages of 10 and 24. Alloy's convergent media model uses a wide range of media assets to reach more than 25 million Generation Y consumers each month and is comprised of two distinct divisions: Alloy Media + Marketing and Alloy Merchandising Group. Alloy Media + Marketing is one of the largest providers of targeted media and promotional marketing programs incorporating such industry recognized divisions as Alloy Marketing & Promotions (AMP), 360 Youth, American Multicultural Marketing (AMM), Market Place Media (MPM), Alloy Education, Alloy Entertainment, and Alloy Out-of-Home. Working with these groups, marketers can connect with their targeted audience through a host of advertising and marketing programs incorporating Alloy's wide ranging media and marketing assets such as direct mail catalogs, college and high school newspapers, Web sites, display media boards, college guides, and promotional events. Alloy Merchandising Group, our direct marketing and retail store division, includes the dELiA*s, Alloy, CCS and Dan's Competition brand names and sells apparel, accessories, footwear, room furnishings and action sports equipment directly to the youth market through catalogs, Web sites and retail stores. For further information regarding Alloy, please visit our corporate Web site at (www.alloyinc.com).

This announcement may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding our expectations and beliefs regarding our future results or performance. Because these statements apply to future events, they are subject to risks and uncertainties. When used in this announcement, the words "anticipate", "believe", "estimate", "expect", "expectation", "project" and "intend" and similar expressions are intended to identify such forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements. Additionally, you should not consider past results to be an indication of our future performance. Factors that might cause or contribute to such differences include, among others, our ability to: increase revenues, generate high margin sponsorship and multiple revenue streams, increase visitors to our Web sites (www.alloy.com, www.delias.com, www.ccs.com, and www.danscomp.com) and build customer loyalty; develop our sales and marketing teams and capitalize on these efforts, develop commercial relationships with advertisers and the continued resilience in advertising spending to reach the teen market; manage the risks and challenges associated with integrating newly acquired businesses; and identify and take advantage of strategic, synergistic acquisitions and other revenue opportunities. Other relevant factors include, without limitation: our competition; seasonal sales fluctuations; inventory performance; changes in consumer preference or fashion trends; reliance on third party suppliers; our inability to achieve and maintain profitability; the uncertain economic and political climate in the United States and throughout the rest of the world and the potential that such climate may deteriorate further; and general economic conditions. For a discussion of certain of the foregoing factors and other risk factors see the "Risk Factors That May Affect Future Results" section included in our annual report on Form 10-K for the year ended January 31, 2004, as amended, which is on file with the Securities and Exchange Commission. We do not intend to update any of the forward-looking statements after the date of this announcement to conform these statements to actual results or to changes in management's expectations, except as may be required by law.

CONTACT: Alloy, Inc.
Jim Johnson, 212-244-4307
SOURCE: Alloy, Inc.