Case 3 : 07-cv-01538 Document 1 Filed 09/10/2007 Page 1 of 31

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS ^:^.. DALLAS DIVISION

VULCAN LEE, Individually and On Behalf No. of All Others Similarly Situated, 3 O'7 CVI538- M Plaintiff,

V. JURY TRIAL DEMANDED // , nq o , INC., MICHAEL G. STAFFARONI, MICHAEL W. HESSONG, PATRICK F. HAMNER, ROGER R. LL^_S. D1IST C L COURT ADAMS, RICHARD E. MIDDLEKAUFF, NORJLHERN DIST R I's ( Of TEXAS SAMUEL B. LIGON, WILLIAM R. F I LE D THOMAS, CAPITAL SOUTHWEST CORPORATION, CAPITAL SOUTHWEST VENTURE CORPORATION, BEAR, SEP 1 0 200T STEARNS & CO. INC., WACHOVIA CAPITAL CLERK, l ISTRICT COURT MARKETS, LLC, J.P. MORGAN By SECURITIES INC. and CIBC WORLD Deputy MARKETS CORP.,

Defendants.

COMPLAINT - CLASS ACTION

1. This is a securities class action against Heelys, Inc. ("Heelys" or the "Company"),

certain of its directors, its controlling shareholder and its investment bankers (collectively, the

"Defendants") for violations of the Securities Act of 1933. Plaintiff brings this action

individually and on behalf of all other purchasers of Heelys' stock issued pursuant or traceable to

the Company' s Registration Statement filed with the Securities and Exchange Commission

("SEC") by Heelys in connection with the Company's December 2006 initial public stock

offering ("IPO")

2. Heelys designs, markets and distributes which comes with a removable

. The Registration Statement and Defendant ' s pre-IPO marketing and promotional Case 3:07-cv-01538 Document 1 Filed 09/10/2007 Page 2 of 31

campaigns represented that Heelys users could "seamlessly" switch from or running to skating (aka "heeling") by shifting weight to their heels. Heelys targets its wheeled footwear - which costs approximately $60 a pair - at the six to fourteen year-old age group. Operating solely as a distributor, Heelys has its footwear manufactured by third party suppliers in Asia and sells to independent retailers and national chains in the United States and internationally. Heelys itself manufactures nothing. Eighty percent of its products are shipped directly from the factory to the retailer. Sales revenue is recognized immediately upon shipment from the third-party suppliers.

To increase brand awareness and sales of their wheeled footwear known as

"Heelys," in the months leading up to the December 2006 IPO, Defendants caused Heelys to be featured in numerous television and print spots, including on television networks CNN and

CNBC, on television shows such as "So You Think You Can Dance," "Good Morning America,"

"Radical Sabbatical, Livin' Large," "CSI: Miami" and "Invent This," in magazines and newspapers such as Time, People, The Wall Street Journal, In Style, Newsweek and Sports

Illustrated and the World Book Encyclopedia and in McGraw Hill school textbooks. Heelys were also featured in the Miramax film "Spy Kids 2" and in music videos and television specials featuring pop artist Usher. As a result of this aggressive marketing campaign, the then seven- year-old Company's sales exponentially increased in the months leading up to the IPO. Heelys sold 3.9 million pairs during the first nine months of 2006 alone, more than five times the

697,000 pairs sold in all of 2004. The Company achieved $117 million in sales revenues during the first nine months of 2006, more than 260% of the $44 million in sales achieved during all of fiscal 2005. Essentially, Heelys went into the IPO having recently reported huge sales on the

Company's single product that had never before been so widely sold.

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4. The Company's Registration Statement on Form S-1 (Registration No. 333-

137046) (first filed with SEC on September 1, 2006 and declared effective on December 7, 2006 after several amendments and iterations) represented that the Company's 2006 "product placement activities enable[d the Company] to build awareness of [Heelys'] products and ... brand in a cost-effective manner." However, rather than providing adequate safety warnings,

Heelys' users were featured in promotional ads needing no protective gear whatsoever. In fact, demonstrational videos on the Company's own website featured Heelys users in action "crashing and burning," tripping, falling, jumping off railings, flying into pools, wearing no protective padding and no helmets. When questioned about these depictions, Heelys responded that the videos featured highly trained professionals who did not need protective gear. In fact, of the ten youths pictured on the front cover of the IPO Prospectus wearing/riding Heelys, three were clearly wearing safety gear, three were clearly wearing none, and four of the photos were inconclusive.

Moreover, Heelys' advertising, marketing and promotional materials failed to disclose that reports of broken bones, skull fractures and other serious injuries suffered by Heelys users had exponentially increased in the months leading up to the IPO as sales of Heelys increased. In fact, while the Heelys website said that the Company highly "recommend[ed]" the use of protective gear "when the [were] in the ," the Company's bottom line - as stated on its website - was that "protective gear is not required" when using Heelys. Instead, as represented in the Company's IPO Registration Statement and Prospectus (collectively, the

"Registration Statement"), Heelys were marketed to children, preteens and teenagers alike as

"stylish" shoes that reflected "individualism," "independence" and "freedom" and permitted the

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user to "seamlessly" switch back and forth between walking, running and skating, without missing a beat, much less stopping to don wrist guards, knee pads, elbow pads and helmets.

6. In the December 2006 IPO, the Company and certain of its senior executives and directors sold $155 million worth of Heelys stock at $21 per share. The Registration Statement filed by defendants in connection with the IPO was misleading in that it represented that Heelys had a viable, well-established business plan and that its tremendous revenue growth and resulting profits were based on sound business and stable sales practices. Moreover, the Registration

Statement failed to disclose the staggering number of injuries suffered by Heelys' users in the months leading up to the IPO.

7. At the time of the Heelys IPO, Consumer Product Safety Commission ("CPSC") had received more than two million injury reports related to Heely's use between 2001 and 2006.

Beginning in the Spring of 2007, following the IPO, it would be disclosed that doctors from

Ireland to Singapore had, in the months leading up to the IPO, reported treating hundreds of additional injuries -- including head injuries, dislocated elbows and fractures -- suffered by children wearing Heelys. Between September 2005 and December 2006 alone, one death and at least an additional 64 roller- injuries were reported to the CPSC. Sixty-seven children were treated for injuries from wheeled shoes at Temple Street Children's University Hospital in

Dublin, Ireland, over one ten-week period during the summer 2006. Doctors in Singapore reported that 37 children had been treated for similar injuries at a hospital there during a seven- month period in 2004 - adding that none were wearing protective gear. Balancing on the wheels was reported to be tricky, especially for novices. In the Irish study, most injuries were in new users and occurred when children fell backward while trying to transfer their body weight. As a

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result, in June 2007, the American Academy of Orthopedic Surgeons (the "AAOS") issued new safety advice that mandated the use of helmets, wrist protectors and knee and elbow pads for children using wheeled shoes.

Disclosure of the unacceptably high safety risk associated with the use of Heelys was material as it would have multiple detrimental effects on Heelys' sales (and profits) - each of which was borne out in the months following the IPO. Parents of many younger children would refuse to let them continue using their Heelys and cease making additional purchases. Older youth would reject the fashion statement that wrist guards, elbow pads, knee pads and helmets make. Certain retailers fearing potential legal exposure would refuse to carry Heelys in their stores. By the end of the week of August 5, 2007, following warnings by the CPSC, the AAOS and other industry safety watchers, Heelys sales had decreased 37% on a year-over-year basis - the third week in a row marking such declines.

9. By the end of the second quarter of 2007, retailers were holding more than a years' backlog in inventory and the unsold inventory at Heelys' own distribution center had grown 175% year-over-year from the second quarter of 2006. On August 8, 2007, Defendants were forced to significantly downgrade the Company's revenue and earnings guidance for the second half of 2007, admitting that retailers were sitting on huge unsold inventory and refusing to place additional orders, causing the Company's stock price to plunge 45% in a single trading session on more than six-times the average daily trading volume over the preceding month.

10. When the truth about the dangers associated with use of Heelys reached the market on August 8, 2007, ratings of the Company's common stock were slashed and Heelys' stock price plummeted to less than $13 per share. Plaintiff and the other members of the Class

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who acquired Heelys stock in or traceable to the IPO have suffered tens of millions of dollars in damages as a result of their purchases of Heelys' shares.

JURISDICTION AND VENUE

11. The claims herein arise under §§ 11 and 15 of the Securities Act of 1933 (the

"Securities Act"), 15 U.S.C. §§77k and 77o. Jurisdiction is conferred by §22 of the Securities

Act and venue is proper in this District pursuant to §22 of the Securities Act and 28 U.S.C.

§ 1391(b).

12. The violations of law complained of herein occurred in substantial part in this

District, including the preparation and dissemination of materially false and misleading statements and the omission of material information complained of herein. In connection with the conduct complained of herein, Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including the mails and interstate telephone communications, and the facilities of a national securities exchange.

THE PARTIES

13. Plaintiff Vulcan Lee purchased Heelys common stock issued pursuant and/or traceable to the Registration Statement, as indicated on the Certification attached hereto, and has been damaged thereby.

14. Defendant Heelys is headquartered at 3200 Belmeade Drive, Suite 100,

Carrollton, Texas 75006. In connection with the IPO, Heelys issued and sold 3.125 million shares for gross proceeds of $65. 6 million; the Company registered another 4,263,750 for resale by certain insiders and its controlling shareholder for gross proceeds of $89.5 million.

15. Defendant Michael G. Staffaroni ("Staffaroni") was, at all times relevant hereto,

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Chief Executive Officer ("CEO"), President and a director of Heelys. Staffaroni prepared, reviewed and signed the Registration Statement filed in connection with the IPO.

16. Defendant Michael W. Hessong ("Hessong") was, at all times relevant hereto,

Vice President of Finance , Chief Financial Officer, Treasurer and the Secretary of the Company.

Hessong prepared, reviewed and signed the Registration Statement filed in connection with the

IPO.

17. Defendant Patrick F. Hamner ("Hamner") was, at all times relevant hereto, the

Chairman of Heelys' Board of Directors. Hamner prepared, reviewed and signed the Registration

Statement filed in connection with the IPO.

18. Defendant Roger R. Adams ("Adams"), the inventor of Heelys and founder of the Company was, at all times relevant hereto, Director of Research and Development and a director of the Company. Adams prepared, reviewed and signed the Registration Statement filed in connection with the IPO which registered for sale by him 928,637 shares of Heelys common stock (plus 324,872 shares pursuant to the underwriters' over-allotment). Adams received gross proceeds exceeding $26 million in the IPO.

19. Defendant Richard E. Middlekauff ("Middlekauff'), the first cousin of defendant

Adams, was at all times relevant hereto a director of the Company. Middlekauff prepared, reviewed and signed the Registration Statement filed in connection with the IPO which registered for resale by him 494,725 shares of Heelys common stock (plus 95,791 shares pursuant to the underwriters' over-allotment). Middlekauff received gross proceeds exceeding $12 million in the

IPO. Defendant Middlekauff may be served at 17612 Cedar Creek Canyon Drive, Dallas, Texas

75252.

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20. Defendant Samuel B. Ligon ("Ligon") was at all times relevant hereto a director of the Company. Ligon prepared, reviewed and signed the Registration Statement filed in connection with the IPO which registered for resale by him 66,321 shares of Heelys common stock (plus 13,189 shares pursuant to the underwriters' over-allotment). Ligon received $1.66 million in gross proceeds in the IPO. Defendant Ligon may be served at 3707 Villanova Street,

University Park, Texas 75225.

21. Defendant William R. Thomas ("Thomas") was at all times relevant hereto a director of the Company. Thomas prepared, reviewed and signed the Registration Statement filed

in connection with the IPO which registered for resale by him (and defendant Capital Southwest

(as defined below)) 1,591,790 shares of Heelys common stock. Thomas (and Capital Southwest) received in excess of $33 million in gross proceeds from the IPO. Defendant Thomas may be

served at 7418 Overdale Drive, Dallas, Texas 75254.

22. The individuals named in ¶15-21 are referred to herein as the "Individual

Defendants." The Individual Defendants (by reason of their stock ownership and positions with

Heelys and/or Capital Southwest) were controlling persons of Heelys.

23. Defendants Capital Southwest Corporation and Capital Southwest Venture

Corporation, its wholly owned subsidiary (collectively, "Capital Southwest"), owned 10,909,100

shares, or 45.6% of Heelys common stock at the time of the IPO. By virtue of its stock ownership, its contractual right to designate up to two nominees to management's slate of directors at the time of the IPO and the fact that defendant Hamner was a senior vice president of finance at Capital Southwest until May 2006 (when he resigned in anticipation of Heelys' IPO), defendant Thomas served as Capital Southwest's president, chairman and a director at the time

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of the IPO, and defendant Ligon served as a Capital Southwest director at the time of the IPO,

Capital Southwest was at all relevant times a controlling shareholder of Heelys. In May 2000,

Heelys borrowed $1.8 million from Capital Southwest, which was repaid in August 2003, and

sold to Capital Southwest 1,745,455 shares of Series A Preferred Stock for a purchase price of

$480,000 and 436,364 shares of Series B Preferred Stock for a purchase price of $120,000. In

May 2005, Heelys redeemed all of its Series A Preferred Stock for a purchase price of $480,000.

In June 2006, in anticipation of the IPO, each share of Series B Preferred Stock held by Capital

Southwest was converted into one share of Heelys common stock, prior to giving effect to a 25- for-1 stock split effected in October 2006. Capital Southwest sold 1,591,790 shares of Heelys common stock in the IPO for gross proceeds in excess of $33 million.

24. The defendants named in ¶¶18-21 and 23 were statutory sellers in the IPO and are referred to herein as the "Selling Stockholders."

25. Defendants Bear, Stearns & Co. Inc. ("Bear Stearns"), Wachovia Capital Markets,

LLC ("Wachovia"), J.P. Morgan Securities Inc. ("JP Morgan"), and CIBC World Markets Corp.

("CIBC") were the lead underwriters for the IPO and were primarily involved in selling such

shares to the public. Defendants Bear Stearns, Wachovia, JP Morgan and CIBC are referred to herein as the "Underwriter Defendants." The Underwriter Defendants are investment banking houses which specialize, inter alia, in underwriting public offerings of securities. They served as the underwriters of the IPO and received fees of more than $9 million collectively. The

Underwriter Defendants determined that in return for their share of the IPO proceeds, they were willing to merchandise Heelys stock in the IPO. The Underwriter Defendants arranged a multi- city roadshow prior to the IPO during which they, and certain of the Individual Defendants,

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including Staffaroni, Hessong, Adams, Middlekauff, Ligon and Thomas, met with potential investors and presented highly favorable information about the Company, including forecasts of strong revenue and profit growth.

26. The Underwriter Defendants also demanded and obtained an agreement from

Heelys that Heelys would indemnify and hold the Underwriter Defendants harmless from any liability under the federal securities laws. They also made certain that Heelys had purchased millions of dollars in directors' and officers' liability insurance.

27. Representatives of the Underwriter Defendants also assisted Heelys and the

Individual Defendants in planning the IPO, and purportedly conducted an adequate and reasonable investigation into the business and operations of Heelys, an undertaking known as a

"due diligence" investigation. The due diligence investigation was required of the Underwriter

Defendants in order to engage in the IPO. During the course of their "due diligence," the

Underwriter Defendants had continual access to confidential corporate information concerning

Heelys' business (including the safety profile of its essentially single product offering that accounted for 99% of its sales), financial condition, and its future business plans and prospects, as demonstrated by the fact that each of the Underwriter Defendants was called upon again in the

Spring of 2007 to conduct an additional secondary offering for certain of the Individual

Defendants which was ultimately cancelled, as the true safety profile of Heelys, along with the status of the Company' s business and sales projections, was revealed.

28. In addition to availing themselves of virtually unbridled access to internal corporate documents, agents of the Underwriter Defendants, including their counsel for the IPO, met with Heelys' management and top executives and engaged in "drafting sessions" in the

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months leading up to the IPO. During these sessions, understandings were reached as to: (i) the strategy to best accomplish the IPO; (ii) the terms of the IPO, including the price at which Heelys stock would be sold; (iii) the language to be used in the Registration Statement; (iv) what disclosures about Heelys would be made in the Registration Statement; and (v) what responses would be made to the SEC in connection with its review of the Registration Statement. As a result of those constant contacts and communications between the Underwriter Defendants' representatives and Heelys' management and top executives, the Underwriter Defendants knew, or should have known, of Heelys' existing problems as detailed herein. The Underwriter

Defendants caused the Registration Statement to be filed with the SEC and declared effective in connection with the offer and sale of Heelys stock, including to plaintiff and the Class.

THE IPO

29. On or about December 7, 2006, Heelys completed its IPO, selling a total of

7,388,750 shares to the public at $21.00 per share for net proceeds of $155 million. Each of the

Individual Defendants signed the Registration Statement issued in connection with the IPO. The

Selling Stockholders collectively sold 3,515,325 shares of their previously issued and privately held Heelys stock and received $73 million in gross selling proceeds.

30. The Registration Statement filed with the SEC in connection with the IPO included a Prospectus which discussed, among other things, the product safety profile of Heelys and the Company's business strategy, its outlook, and anticipated sales growth.

31. With respect to Heelys' safety/use profile, the Registration Statement stated:

"HEELYS-wheeled footwear allows the user to seamlessly transition from walking or running to skating by shifting weight to the heel."

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"HEELYS-wheeled footwear provides users with a unique combination of fun and style that differentiates it from other footwear and wheeled sports products."

"HEELYS brand message emphasizes individuality and independence and is represented by [the Company's] marketing slogan, `Freedom is a wheel in your sole."'

32. These statements were materially misleading when made, based on injury incident data available at the time of the IPO, including the two million injury reports the CPSC had accumulated between 2001 and 2006, because they failed to disclose that Heelys users needed to don helmets, wrist guards, knee-pads and elbow pads while using the wheeled shoes to avoid possible death or serious injury. The required attire and "style" was entirely inconsistent with what the average teenage or pre-teen adolescent the shoes were targeted at would be willing to don while simply walking or even running. The simultaneous donning of helmets, wrist guards, knee-pads and elbow pads reflects neither "individuality" nor "independence," and most certainly does not equate to "freedom." The required use of safety gear - and the conflict with the fun, free image used to ramp up pre-IPO sales of Heelys' wheeled footwear - was disclosed nowhere in the Registration Statement. Compliance with these safety requirements would cause Heelys' older users to reject Heelys, adversely affecting the Company's net sales and result of operations on a going forward basis.

33. With respect to disclosure of known safety risks associated with the use of the

Company's wheeled footwear, the Registration Statement stated that the Company "employ[ed] a grass-roots marketing program designed to ... maintain a connection with our target consumer and capture consumer feedback on our products," and attributed as one of its "business strengths" its "in-depth understanding of [its] target market." The Registration Statement further described

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Heelys' "primary market" as "six to fourteen year old boys and girls." The Registration

Statement, however, failed to disclose that between 2001 and 2006, there were over two million injury reports lodged with the CPSC resulting from the use of Heelys, which would result in decreased sales to the younger customers obtained through the Company's pre-IPO misleading marketing practices and sales promotions that misrepresented the footwear as safe for younger users.

34. Furthermore, as a reported 84% of the injuries were being sustained by girls, parents of that demographic group were substantially less likely to permit their children to continue the use of or repurchase Heelys, rendering misleading the use in the Registration

Statement of the growth rate projected by the "U.S. Census Bureau" of the relevant "age group" of potential Heelys users from an "estimated ... 36.4 million people in 2005" to a "projected ...

38.2 million people by 2015," as those demographic group growth targets included girls.

35. Moreover, the statement in the Registration Statement that the Company would

"benefit from greater repeat purchases by [its] consumers relative to other wheeled sports products, driven by the natural replacement cycle of children's footwear and the new styles that

[Heelys would] offer each season," was materially misleading based on the failure to disclose the dangerous propensity of Heelys to cause injury and the effect disclosure of the true safety profile would have on sales of the product.

36. With respect to sales growth outlook, the Registration Statement stated that "the market for HEELYS-wheeled footwear ha[d] grown significantly since [its] first product was introduced in 2000," but represented that the "market has substantial growth potential" and listed

"expanding our customer base" as one of the Company 's "strategies" to "grow [] net sales and

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earnings." These statements were materially false and misleading as they failed to disclose that the Company had materially oversold the product to retailers in the months preceding the IPO.

The Prospectus for the IPO also failed to disclose that much of the increase in 2006 Heelys

"sales" was attributable to adding additional distributors to Heelys' retail network who were accumulating inventory that was either not selling or was cannibalizing the sales of other existing distributors to the extent it was selling, causing the level of unsold inventory on the shelves of retailers to grow.

37. With respect to the cause of the Company's then-present sales trends and pre-IPO product "demand," the Registration Statement stated:

Since 2003, our domestic net sales have increased rapidly. We believe that this increase has resulted primarily from the growing acceptance ofHEEL YS- wheeledfootwear by consumers, increasing recognition of our HEELYS brand name and expanding distribution ofHEEL YS-wheeledfootwear to existing and new retail customers. We believe that our grass-roots marketing programs, high quality products and relationships with our retail customers have contributed to this growing demand.

Many of our retail customers do not initially sell our products in all of their stores, choosing to evaluate consumer acceptance of our products in a limited number of stores. As the demandfor our products continues to grow and our relationships with our retail customers develop, we believe that certain of our retail customers will continue to increase the number ofstores in which our products are sold and expand the selection of our products that they offer. Based on the success that these retailers have had selling our products, we believe that we will have opportunities to expand our sales with existing retail customers in the future....

... We intend to increase our domestic distribution by adding new retail customers. In particular, we believe that there are a number of regions in the United States where we are just beginning to realize the sales potentialfor our products, and we intend to increase our distribution in these regions. We believe that international distribution also represents a significant growth opportunity for us. We intend to take advantage of this opportunity by encouraging our

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existing distributors to expand their market presence and by establishing relationships with distributors in new international markets.

38. The statements concerning the source and expected viability of the Company's rapid sales growth trends and then-present level of sales demand were materially misleading in that they failed to disclose that Heelys had been aggressively marketed as a safe and stylish dual purpose shoes, appropriate for users in the six to fourteen year-old age range, when in fact there had been over two million injuries reported to the CPSC associated with Heelys use between

2001 and 2006. The sales promotions and marketing practices used to sell Heelys' wheeled shoe products did not accurately reflect the safety profile of Heelys, artificially inflating the level of consumer demand and sales revenues then being reported, which would dramatically decrease once the true product safety risk profile was accurately disclosed. Parents of younger potential new and/or repeat customers would not accept the high injury rate and older potential users would reject the safety gear requirements. Retailers, fearing legal exposure, would refuse to carry the product. The net effect would significantly decrease customer demand for Heelys and adversely effect Company revenues and profits.

39. With regards to the Company's future product developments, the Registration

Statement represented that Heelys "intend[ed] to continue to diversify [its] product offering with new HEELYS-wheeled footwear models, product categories and accessories in order to benefit from the increasing recognition of our Heelys brand and the growing market for action sports- inspired products." These statements failed to disclose the then-known safety risks associated with the use of wheeled footwear, as would be reflected by the Company's decision and later announcement in early 2007 to diversify into non-wheeled shoe offerings. Beyond requiring the

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Company to move into heretofore unexplored territory, the sales of non-wheeled footwear by

Heelys would significantly increase the Company's costs, as Defendants admitted in the

Registration Statement that the fact that their wheeled shoe offerings were classified as skates for

import tax purposes resulted in a significantly lower tax cost than the import of non-wheeled

shoes would entail.

40. Finally, the so-called "risk factors" included in the Registration Statement

constituted meaningless generic warnings that were highly misleading themselves in that, among

other things, they misrepresented as future contingencies developments that were in many cases then having a material adverse impact on Heelys' business. For instance, the Registration

Statement said: "We cannot be certain that our safety warning labels are adequate." Meanwhile, the Company' s website indicated that no safety gear was required when using Heelys, despite the

fact that two million injury reports had been lodged with the CPSC between 2001 and 2006, which would more likely than not result in product safety warnings and product use limitations that would diminish sales. Accordingly, the "Risk Factors" included in the Registration

Statement were false and/or misleading because Heelys was not merely facing many of the potential risks or dangers described therein, but rather those factors were already adversely

affecting Heelys' business at the time the Registration Statement was declared effective.

41. Under applicable SEC rules and regulations governing the preparation of the

Registration Statement and Prospectus, the Registration Statement and Prospectus were required to disclose the safety issues with the Company's products and the Company's sales practices prior to the IPO. The Registration Statement did not contain any such disclosures.

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HEELYS' SAFETY HAZARDS ARE DISCLOSED

42. On June 4, 2007, Lauren Pearson of the AAOS issued a release entitled "Don't

Let Your Kids Get Hurt `Heeling,"' which stated in relevant part:

Participation in after school activities and community sports has become increasingly popular. With school closing for the summer, many children will be hitting the baseball, striking the golf ball or to the finish line. From softball to skateboarding, sport participation can lead to injury. For many sports, protective gear is a first step to ensure an injury-free season. The American Academy of Orthopedic Surgeons (AAOS) stresses the importance of protective gear while engaging in a particularly new phenomenon... heeling. Heelys - also known as roller shoes or street gliders - are shoes that have a wheel on the heel. These types of shoes fall into the category of which qualifies them as a sport, and carries warnings for their use including wearing protective gear such as wrist guards and helmets to avoid injuries.

According to James H. Beaty, MD, a pediatric orthopedic surgeon and president of AAOS, "Orthopaedic surgeons are in fact seeing children come into their practices with injuries due to heeleys, mostly of a fracture-type within the hand, wrist or elbow."

• The US Consumer Product Safety Commission now reports over 1,600 emergency room visits in 2006 due to wheel and roller shoes.

For a child to maneuver in roller shoes, they merely shift their body weight backward over the heels, the wheels then engage and cause a change from walking to rolling. "As these shoes are sold in department stores, parents buying them may develop a false sense of security - that they are like any other shoe," says Beaty. "Roller shoes are very similar to being on roller blades or inline skates and protective gear should be worn at all times. If children are to `heel', it should not be done while going down a hill, over a curb or over rocky areas," continues Beaty. Injuries can be avoided if safety precautions are remembered. Below are a few safety tips for those that take up wheeled-shoe sports:

Learn the basic skills of the sport; particularly how to stop properly, before venturing out.

Wear a helmet, wrist protectors and knee and elbow pads.

Avoid rolling in crowded walkways.

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• Avoid rolling in traffic. If you come to a cross walk, obey traffic signals, stay to the right side of the sidewalk and don't weave in and out of crowds.

• Heel on smooth surfaces, away from traffic.

• Do not let a young child heel unsupervised.

43. On June 4, 2007, Bloomberg reporter Carol Wolfe ran a story entitled "Heelys'

Wheeled Shoes Raise Fracture Risk, Study Says," which stated in relevant part:

Heelys Inc.'s wheeled have led to an increase in limb fractures in children, according to a study released by the American Academy ofPediatrics. Children not wearing protective gear such as wrist guards, a helmet, knee pads and elbow pads, were at the highest risk, the study said. Most of the injuries occurred to the upper body during thefirstfive times the roller shoes were used.

The average age of those hurt was 9.5 years and girls sustained 84 percent of the injuries, the study said.

Orthopedic injuries were studied for 10 weeks at the Temple Street Children's University Hospital in Dublin, Ireland. Injuries from Heelys and Street Gliders, roller shoes made in the U.K. by Glowgadgets Ltd., accounted for 8 percent of the orthopedic department's work load between July 1 and Sept. 15, the study said.

"These new types of injuries have a serious impact on child health and constitute a burden for the pediatric orthopedic service," the study said. "We recommend close supervision of children using Heelys or Street Gliders during the steep learning curve and usage of protective gear at all times."

44. Also on June 4, 2007, the Associated Press published an article titled "Doctors say roller shoes injuring kids," by reporter Lindsey Tanner, stated in relevant part:

Trendy wheeled sneakers that let kids zip down sidewalks, across playgrounds and through mall crowds could also send them rolling into emergency rooms on a , say doctors who blame a rash of injuries on the international craze. It's called "heeling," named after Heelys, the most popular brand. They're sold in 70 countries and are so hot that their Carrollton, Texas, maker, Heelys Inc., recently landed atop BusinessWeek's annual list of fastest growing companies. But doctors from Ireland to Singapore have reported treating broken wrists, arms and ankles; dislocated elbows and even cracked skulls in children injured while wearing roller shoes.

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Over a 10-week period last summer, 67 children were treated for injuries from Heelys or strap-on wheels called Street Gliders at Temple Street Children's University Hospital in Dublin, Ireland, according to a report in the June edition of Pediatrics.

From September 2005 through December 2006, one death and at least 64 roller- shoe injuries were reported to the U.S. Consumer Product Safety Commission, a spokesman said last week.

And doctors in Singapore reported last year that 37 children had been treated for similar injuries at a hospital there during a seven-month period in 2004. None were wearing protective gear.

The American Academy of Orthopaedic Surgeons, based in Rosemont, Ill., this week is issuing new safety advice that recommends helmets, wrist protectors and knee and elbow pads for kids who wear wheeled shoes.

"As these shoes are sold in department stores, parents buying them may develop a false sense of security - that they are like any other shoe," said Dr. James Beaty, academy president and a pediatric orthopedic surgeon in Memphis.

Heelys and their knockoffs look like gym shoes, but with wheel sockets in each heel. They can be used for walking, but the wheels pop out when users shift their weight to their heels.

Balancing on the wheels can be tricky, especially for novices. In the Irish study, most injuries were in new users and occurred when kids fell backward while trying to transfer their body weight.

Dr. Leon Benson of Evanston Northwestern Healthcare in Evanston, Ill., recalled treating a 9-year-old girl who'd had her Heelys for just a week when she fell and broke both wrists.

Nine-year-old Noah Woelfel of Davidsonville, Md., wasn't a novice but still tripped and fell, breaking several fingers and wrist bones in his right hand last year. "All it took was a tiny piece of gravel in the driveway that went up in the wheel and stopped him cold," said his mother, Nancy. "He required surgery and pins, and he was six weeks without using his hand, right at the beginning of school." She threw the removable wheels away and said other parents should know about the risks.

Dr. Dominic Catanese, a foot specialist at Montefiore Medical Center in New York, said balancing on heels can strain feet and Achilles tendons. He has treated several Heelys-related ankle injuries and won't let his 7-year-old daughter have

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the shoes.

"She wants them. Not happening. Just like I took away her trampoline" after reading about trampoline injuries. "It went right to Goodwill," Catanese said.

45. On June 6, 2007, Bloomberg reporter Tom Randall ran a story entitled "Roller

Shoes Caused 1,600 Emergency Injuries in 2006," which stated in relevant part:

Roller shoes , the sneakers with embedded wheels that allow kids to both run and glide, contributed to about 1 , 600 U.S. emergency-room visits last year, according to the U.S. Consumer Product Safety Commission.

The estimate, based on data collected at 100 hospitals, included details of cases involving broken ankles, arms and feet, a broken leg, a concussion, and one death, said Scott Wolfson, a spokesman for the Consumer Product Safety Commission.

"The severity of those injuries leads us to recommend to parents that if they're going to buy wheeled sneakers for kids, their very next purchase needs to be a helmet," Wolfson said in a telephone interview today. "Elbow pads, knee pads would also be recommended gear, but we really want to be sure that any sort of head injuries will be minimized."

During the same period, hospitals treated about 70,000 injuries from and in-line skating, 126,000 from skateboarding, 199,000 from using playground equipment and 460,000 from playing football, according to the commission's online database.

46. Then on August 8, 2007, the Dow Jones Newswire published an article titled

"Heelys Shares Fall As Downgrades Greet Dismal Forecast," by reporter Angela Moore, which

stated in relevant part:

Shares of Heelys Inc. tumbled 45% Wednesday after the company gave a dismal forecast for the year and as four analysts cut their ratings on the wheeled-shoe company.

The downgrades, which came in the wake of quarterly results released late Tuesday, cited weak forecasts for the year, bloated inventories, weak retail trends and an uncertain back-to-school season for the new ratings.

Shares of Heelys, which were first sold to the public late last year at $21 a share,

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were recently down $9.89 to $12.10.

The Dallas-based company, which makes athletic-styled shoes with wheels built into the soles, posted robust gains in profit and revenue, but it warned that the rest of the year would be difficult. The company has been trying to branch out into other product lines, including apparel.

Second-quarter net income rose to $12.8 million, or 45 cents a share, from $4.19 million, or 17 cents a share, during the year-earlier period. Revenue for the three months ended June 30 rose to $74.3 million from $30.9 million. Analysts, on average, expected Heelys to earn 42 cents a share, on sales of $73.3 million, according to Thomson Financial.

The company said it is experiencing challenges at retail related primarily to inventory gluts among many of its domestic retail customers.

"While our outlook for the (second and third quarter) periods on a combined basis has not changed, we are experiencing some challenges at retail which will have a significant adverse effect on our (fourth-quarter) results," Chief Financial Officer Mike Hessong said on a conference call. "These challenges relate primarily to an overinventory position of product at many of our domestic accounts. While weekly unit sales at the store level are generally favorable compared to last year, they are lower than the internal projections as many of our retailers."

He said the company is working with key retail customers. "While we are encouraged by improved sell-through at certain accounts in the early stages of the back-to-school season, retailers have shown reluctance to place significant (fourthquarter) orders until current inventories are reduced to targeted levels," Hessong said. "Based on these factors, we believe it is prudent to adopt a more conservative outlook for the remainder of 2007."

CIBC, Wachovia, Bear Stearns and Robert W. Baird & Co. all downgraded the stock Wednesday.

"We continue to believe a main driver of the recent slower growth is more a function of the expanded distribution and weak macro environment rather than a change in kids' attitude toward Heelys," Wachovia analyst John Rouleau wrote in a note to clients. He cut his rating to market perform from outperform, noting that Heelys are now carried in several stores within a single shopping center and overlapping big-box stores, and some stores are experiencing a natural slowdown in their sell through rates.

Baird analyst Mitch Kummetz said he expects retailers to be cautious with spring

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orders, which could affect next year' s results.

"Investors are likely to react harshly to this news, but we don't view this as a buying opportunity, as we see no near-term catalyst for the shares," he wrote in a note to clients downgrading the shares to neutral from outperform. In an earlier sign of weakness in the stock, Heely's on June 28 withdrew a 4.5 million share stock offering. The company had filed for that stock offering May 7, when shares were trading at more than $30 a share.

CLASS ACTION ALLEGATIONS

47. Plaintiff brings this action as a class action, pursuant to Fed. R. Civ. P. 23(a) and

(b)(3), on behalf of a class consisting of all persons who purchased Heelys common stock issued pursuant and traceable to the IPO Registration Statement (the "Class"). Excluded from the Class

are the Defendants named herein, the officers and directors of Heelys, members of the immediate

families of such officers and directors, and subsidiaries and affiliates of Defendants and their

officers and directors. Class members are so numerous that joinder of them is impracticable.

Common questions of law and fact predominate and include: (i) whether Defendants violated the

Securities Act; (ii) whether the IPO Registration Statement negligently failed to disclose material

facts required to be stated therein; and (iii) the extent of and appropriate measure of damages.

48. Plaintiff' s claims are typical of all Class members' claims. Plaintiff has selected counsel experienced in class and securities litigation and will fairly and adequately protect the

interests of the Class. Plaintiff has no interests antagonistic to those of the Class.

49. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. Since the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it virtually impossible for members of the Class individually to seek redress for the wrongful conduct alleged.

50. Plaintiff knows of no difficulty which will be encountered in the management of

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this litigation which would preclude its maintenance as a class action.

COUNT I

For Violation of Section 11 of the Securities Act Against Heelys and the Individual Defendants

51. Plaintiff repeats and realleges each and every allegation contained above as if fully

set forth herein. Plaintiff asserts only strict liability and negligence claims against Heelys and the

Individual Defendants for violations of the Securities Act. Plaintiff does not assert claims of

fraud or intentional misconduct.

52. This Count is asserted against Heelys and the Individual Defendants for violations

of § 11 of the Securities Act, 15 U.S.C. §77k, on behalf of all persons who purchased shares of

Heelys stock issued pursuant to the IPO and traceable to the IPO Registration Statement, as

described above.

53. Heelys was the registrant and issuer for the securities issued pursuant to the IPO.

As the issuer of shares, Heelys is strictly liable to plaintiff and Class members for the misstatements and omissions contained in the Registration Statement. The Individual Defendants were officers and/or directors of the Company at the time of the IPO and, along with Heelys, were responsible for the contents of the Registration Statement. The Individual Defendants are

signatories of the Registration Statement. Defendants Adams, Middlekauf, Ligon, Thomas and

Capital Southwest were statutory sellers in the IPO.

54. Each of the defendants named in this claim issued, caused to be issued and/or participated in the issuance of the materially false and misleading Registration Statement, which misrepresented and failed to disclose, inter alia, the material facts concerning Heelys' business

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model, safety profile and sales trends and outlook, as set forth herein.

55. None of the defendants named in this Claim made a reasonable investigation or possessed reasonable grounds for the belief that the statements contained in the Registration

Statement and Prospectus were true and did not omit any material facts and were not misleading.

56. Each of the defendants named in this Claim issued, caused to be issued and participated in the issuance of materially false and misleading written statements to the investing public which were contained in the Registration Statement, which misrepresented or failed to disclose, inter alia, the adverse facts set forth above. By reasons of the conduct herein alleged, these defendants violated, and/or controlled a person who violated, § 11 of the Securities Act.

57. Plaintiff and other members of the Class purchased Heelys' common stock issued pursuant to the IPO and traceable to the false and misleading IPO Registration Statement without knowledge of the untruths or omissions alleged herein. Plaintiff and the other members of the

Class could not have reasonably discovered the nature of Defendants' untruths and omissions.

58. As a result of their purchases of Heelys shares, plaintiff and the other members of the Class have sustained damages.

59. This action was brought within one year after the discovery of the untrue statements and omissions and less than three years after the IPO.

60. The Defendants are liable to plaintiff and the other members of the Class.

COUNT II

For Violations of Section 11 of the Securities Act Against the Underwriter Defendants

61. Plaintiff repeats and realleges each and every allegation contained above as if fully

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set forth herein. Plaintiff asserts only negligence claims against the Underwriter Defendants for

violations of the Securities Act. Plaintiff does not assert claims of fraud or intentional

misconduct.

62. This Count is asserted against the Underwriter Defendants for violations of § 11 of the Securities Act, 15 U.S.C. §77k, on behalf of all persons who purchased shares of Heelys

issued pursuant to and traceable to the IPO Registration Statement.

63. The Underwriter Defendants issued, caused to be issued, and participated in the

issuance of the materially false and misleading IPO Registration Statement, which misrepresented or failed to disclose, inter alia, the material facts concerning the business of

Heelys as set forth herein.

64. As a direct and proximate result of the false and misleading statements in the IPO

Registration Statement, Heelys common stock was sold in the IPO at prices far exceeding the true value of the shares.

65. Plaintiff and other members of the Class purchased Heelys common stock pursuant and traceable to the IPO without knowledge of the untruths or omissions alleged herein.

Plaintiff and the other members of the Class could not have reasonably discovered the nature of

Defendants' untruths and omissions.

66. As a result of their purchases of Heelys' shares, plaintiff and other members of the

Class have sustained damages.

67. In connection with the IPO, the Underwriter Defendants, directly or indirectly, used means and instrumentalities of interstate commerce and the U.S. mails.

68. The Underwriter Defendants sold stock in the IPO as defined in § 11(a)(5) of the

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Securities Act. The Underwriter Defendants were, therefore, responsible for the contents and

dissemination of the Registration Statement.

69. As underwriters of the IPO, each Underwriter Defendant owed to the purchasers

of the shares of Heelys, including plaintiff and the other members of the Class, the duty to make

a reasonable and diligent investigation of the statements contained in the Registration Statement

at the time it became effective, to ensure that said statement was true and that there was no

omission to state a material fact required to be stated in order to make the statements contained

therein not misleading. In the exercise of reasonable care, the Underwriter Defendants should

have known of the material misstatements and omissions contained in the Registration Statement

as set forth herein. As such, the Underwriter Defendants are liable to plaintiff and the other

members of the Class.

70. None of the defendants named in this Claim made a reasonable investigation or

possessed reasonable grounds for the belief that the statements contained in the Registration

Statement were true, did not omit any material facts and were not misleading.

71. Each of the defendants named in this Claim issued, caused to be issued and participated in the issuance of materially false and misleading written statements to the investing public which were contained in the Registration Statement, which misrepresented or failed to

disclose, inter alia, the adverse facts set forth above. By reasons of the conduct herein alleged, these defendants violated, and/or controlled a person who violated, § 11 of the Securities Act.

72. This action was brought within one year after the discovery of the untrue

statements and omissions and less than three years after the IPO.

73. By reason of the foregoing, the Underwriter Defendants have violated § 11 of the

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Securities Act and are liable to plaintiff and the other members of the Class, each of whom has

been damaged by reason of such violations.

COUNT III

For Violations of Section 15 of the Securities Act Against Capital Southwest and the Individual Defendants

74. Plaintiff repeats and realleges each and every allegation contained above as if fully

set forth herein.

75. This Count is asserted against the Individual Defendants and Capital Southwest

for violation of §15 of the Securities Act, 15 U.S.C. §77o.

76. The Individual Defendants, by virtue of their positions, stock ownership, and

specific acts as described herein, had the power, and exercised the same, to control the

representations and actions of Heelys. Defendants Adams, Middlekauf, Ligon and Thomas, via their positions as current/former officers and/or directors of Capital Southwest, controlled Capital

Southwest and, via Southwest Capital's control of a controlling block of the voting shares of

Heelys and its insiders on Heelys' Board, controlled Heelys.

77. Each of the Individual Defendants and Capital Southwest were culpable participants and are jointly and severally liable to plaintiff and the members of the Class as

"control persons" pursuant to § 15 of the Securities Act.

78. As a result of the foregoing, plaintiff and the members of the Class have suffered

damages.

PRAYER FOR RELIEF

WHEREFORE, plaintiff individually and on behalf of the other members of the Class,

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prays for judgment as follows:

A. Declaring this action to be a proper class action pursuant to Rules 23(a)

and 23(b)(3) of the Federal Rules of Civil Procedure on behalf of the Class

defined herein;

B. Awarding plaintiff rescission or compensatory damages;

C. Awarding plaintiff pre-judgment and post-judgment interest, as well as reasonable attorneys' fees, expert witness fees and other costs;

D. Awarding plaintiff such equitable relief, including preliminary and/or permanent injunctive relief, to freeze or prevent the disposition of the assets of the Defendants as necessary to preserve and protect plaintiff's right to recover; and

E. Awarding such other legal or equitable relief as this Court may deem just and proper.

JURY DEMAND

Plaintiff hereby demands a trial by jury.

Dated: September 6, 2007 CLAXTON & HILL, PLLC

By: Roger F. Claxton '9430-.9000 3131 McKinney Avenue , Suite 700 Dallas, Texas 75204 Telephone : (214) 969-9029 Facsimile : (214) 953-0583

-28- Case 3:07-cv-01538 Document 1 Filed 09/10/2007 Page 29 of 31

GLANCY BINKOW & GOLDBERG LLP Lionel Z. Glancy Michael Goldberg 1801 Avenue of the Stars, Suite 311 Los Angeles, California 90067 Telephone: (310) 201-9150 Facsimile: (310) 201-9160

LAW OFFICES OF HOWARD G. SMITH Howard G. Smith 3070 Bristol Pike, Suite 112 Bensalem, Pennsylvania 19020 Telephone: (215) 638-4847 Facsimile: (215) 638-4867

Attorneys for Plaintiff

-29- Case 3:07-cv-01538 Document 1 Filed 09/10/2007 Page 30 of 31 ,.

SWORN CERTIFICATION OF PLAINTIFF VULCAN LEE HEELYS, INC. SECURITIES LITIGATION

I, Vulcan Lee, certify that:

1. I have reviewed the Complaint and authorized its filing.

2. Plaintiff did not purchase the security that is the subject of this action, at the direction of plaintiffs counsel or in order to participate in any private action arising under this title.

3. I am willing to serve as a representative party on behalf of a class and will testify at deposition and trial, if necessary.

4. My transactions in the securities, which are the subject of this action, during the Class Period set forth in the Complaint are as follows:

Purchased 50 shares on 12/14/2006 for the price of $32.01 per share.

5. I have not served as a representative party on behalf of a class under the federal security laws during the last three years, except if detailed below.

6. 1 will not accept any payment for serving as a representative party, except to receive my pro rata share of any recovery or as ordered or approved by the court Including the award to a representative plaintiff of reasonable costs and expenses (including lost wages) directly relating to the representation of the class.

0 Yes • No Are you now or were you ever an employee of the company?

I declare under penalty of perjury that the foregoing are true and correct statements:

Dated : September 2007 (Please Sign Your . Name Above) VULCAN LEE

FAX THIS FORM TO (310) 201-9160 Case 3: 07-cv-01538 CMTeebVE^Fi q/2007 Page 31 of 31 ®JS 44 (Rev. 3/99)

The JS-44 civil cover sheet and t information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as provided y c rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Cou t> se of initiating the civil docket sheet . (SEE INSTRUCTIONS ON TH REVE SE OF H FORM.) 1. (a) PL F\ DEFENDANTS 7 ^V I 3 8 ^u , individually and on behalf of all others Heelys, Inc., Michael G. Staffaroni , Michael W. Hessong, si11r1larly situated Patrick F. Harmer, Roger R. Adams, Richard E. Middlekauff, Samuel B . Ligon, William R. Thomas, Capital Southwest Corporation , Capital Southwest Venture Corporation, (b) County of Residence of First Los Angeles County, CA County of Residence of First Listed (EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY) NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE

(c) Attorney' s (Firm Name, Address, and Telephone Number) Attorneys f Know I Roger F. Claxton Claxton31 & Hill, PLLC 1 O 20 31311 McKinney Ave., Suite 700 ^f+ Dallas , Texas 75204 214-96 9-9029 II. BASIS OF JURISDICTION (Place an "X" in One Box Only) III. CITIZENSHIP I ' AIin111X" in One Box for Plaintiff gonRTH (For Diversity Cases 0 gnome Box for Defendant) PTF DEF PTF DEF q 1 U.S. Government x 3 Federal Question Citizen of This State q 1 q 1 Incorporated or Principal Place q 4 q 4 Plaintiff (U.S. Government Not a Party) of Business In This State q 2 U.S. Government q 4 Diversity Citizen of Another State q 2 q 2 Incorporated and Principal Place q 5 q 5 Defendant (Indicate Citizenship of Parties of Business In Another State in Item III) Citizen or Subject of a q 3 q 3 Foreign Nation q 6 q 6 Foreign Country IV_ NATURE OF SUIT (Place an "X" in f)n& Any Onlvl CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES q 110 Insurance PERSONAL INJURY PERSONAL INJURY q 610 Agriculture D422 Appeal 28 USC 158 q 400 State Reapportionment q 120 Marine q 310 Airplane q 362 Personal Injury- q 620 Other Food & Drug q 410 Antitrust q 130 Miller Act q 315 Airplane Product Med. Malpractice q 625 Drug Related Seizure [1123 Withdrawal q 430 Banks and Banking q 140 Negotiable Instrument Liability q 365 Personal Injury - of Property 21 USC 28 USC 157 q 450 Commerce/ICC Rates/etc. q 150 Recovery of Overpayment q 320 Assault, Lib el & Product Liability q 630 Liquor Laws q 460 Deportation & Enforcement of Judgment Slander q 368 Asbestos Personal q 640 R.R. & Truck PROPERTY RIGHTS q 470 Racketeer Influenced and q 151 Medicare Act q 330 Federal Employers' Injury Product q 650 Airline Regs. Corrupt Organizations U20 Copyrights q 152 Recovery of Defaulted Liability Liability q 660 Occupational q 810 Selective Service L630 Patent Student Loans q 340 Marine PERSONAL PROPERTY Safety/Health x 850 Securities/Commodities/ X40 Trademark (Excl. Veterans) q 345 Marine Product q 370 Other Fraud q 690 Other Exchange q 153 Recovery of Overpayment Liability q 371 Truth in Lending q 875 Customer Chall enge of Veteran's Benefits q 350 Motor Vehicle q 380 Other Personal LABOR SOCIAL SECURITY 12 USC 3410 q 160 Stockholders' Suits q 355 Motor Vehicle Property Damage q 891 Agricultural Acts q 710 Fair Labor Standards CE61 HIA (1395ff) q 190 Other Contract Product Liability q 385 Property Damage q 892 Economic Stabilization Act Act L$62 Black Lung (923) C-1 195 Contract Product Liability q 360 Other Personal Injury Product Liability 893 Ener l otal Matters q 720 Labor/Mgmt. Relations CR63 DIWC/DIWW (405(g)) q gyA q 894 Energy ocation Act [164 SSID Title XVI of REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS q 895 o q 730 Labor/Mgmt.Reporting E865 RSI (405(g)) nforrmat Informationmation Act 210 Land Condemnati on q 441 Voting q 510 Moti ons to Vacate & Disclosure Act q 900 Appeal of Fee q 220 Foreclosure q 442 Employment Sentence q 740 Railway Labor Act FEDERAL TAX SUITS Determination Under Equal q 230 Rent Lease & Ejectment q 443 Housing/ Habeas Corpus: [870 Taxes (U . S. Plaintiff Access Justicei q 240 Torts to Land Accommodations q 530 General q 790 Other Labor Litigation or or Defendant) q 950 Constitutionalityta of El 245 Tort Product Liability q 444 Welfare q 535 Death Penalty Statete Statutess q 290 All Other Real Property q 440 Other Civil Rights q 540 Mandamus & Other q 791 Empl. Ret. Inc. [871 IRS-Third Party 890 Other Statutory Actions q 550 Civil Rights Security Act 26 USC 7609 q 555 Prison Condition

(PLACE AN "X" IN ONE BOX ONLY) V. ORIGIN Transferred from Appeal to District another district Judge from Magistrate x I Original q 2 Removed from q 3 Remanded from q 4 Reinstated or q 5 (specify) q 6 Multidistrict q 7 Judgment Proceeding State Court Appellate Court Reopened Litigation (Cite the U. S. Civil Statute under which you are filing and write brief statement of cause. VI. CAUSE OF ACTION Do not cite jurisdictional statutes unless diversity.) Violaiton of the Securities Act of 1933

VII. REQUESTED IN X CHECK IF THIS IS A CLASS ACTION DEMAND S CHECK YES only if demanded in complaint: COMPLAINT: UNDER F.R.C.P. 23 JURY DEMAND : x Yes q No (See VIII . RELATED CASE (S) instructions): IF ANY JUDGE DOCKET NUMBER

DATE SIG TURE OF ATTO NEY OF RE ORD 7 FOR OF FICF. TISF ONT.V

RECEIPT # AMOUN APPLYING IFP JUDGE MAG. JUDGE