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UNITED STATES DISTRICT COURT
NOTICE OF PENDENCY OF DERIVATIVE ACTION, PROPOSED
AGREEMENT OF SETTLEMENT AND RELEASE, AND SETTLEMENT HEARING
PLEASE READ THIS NOTICE
CAREFULLY AND IN ITS ENTIRETY. THIS NOTICE RELATES TO A PROPOSED SETTLEMENT OF WEAVER V. MOEN,
ET AL., CASE NO. 22-cv-01063 (the "Action" or "derivative action"), A SHAREHOLDER DERIVATIVE ACTION pending
in the united states district court for the district of delaware, AND CONTAINS IMPORTANT INFORMATION REGARDING YOUR RIGHTS. IF THE COURT
APPROVES THE SETTLEMENT, YOU WILL BE FOREVER BARRED FROM CONTESTING THE APPROVAL OF THE PROPOSED SETTLEMENT AND FROM PURSUING THE "RELEASED
CLAIMS," AS DEFINED IN THE STIPULATION.
ACTION IS NOT A "CLASS ACTION." THUS, THERE IS NO COMMON FUND UPON WHICH YOU CAN MAKE A CLAIM FOR A MONETARY
is hereby provided to you of the proposed settlement (the "Settlement") of this shareholder derivative lawsuit pursuant to
Federal Rule of Civil Procedure 23.1.1 This Notice is provided by Order of the United States District Court for
the District of Delaware (the "Court"). It is not an expression of any opinion by the Court. It is to notify you of the terms
of the proposed Settlement, and your rights related thereto.
June 6, 2024, Tactile, in its capacity as a nominal defendant, as well as certain current and former officers and directors of Tactile
who were named as individual defendants,2 entered into a Stipulation of Settlement (the "Stipulation")3
in the Derivative Action pending before the Court, styled Weaver v. Moen, et al. The Stipulation also settles the Litigation
terms of the Settlement are set forth fully in the Stipulation, which can be viewed and downloaded at https://investors.tactilemedical.com/static-files/dd4bebe5-a348-4b9b-888a-c0d0e8fe8d5c.
This Notice is a summary only and does not describe all of the details of the Stipulation and terms of the Settlement. For full details
of the matters discussed in this Notice, please review the Stipulation and visit https://investors.tactilemedical.com/compliance.
On August 28, 2024, at
10:00 a.m., in Courtroom 6B of the Honorable Judge Gregory B. Williams, the Court will hold a hearing (the "Settlement Hearing").
The purpose of the Settlement Hearing is to determine: (i) whether the terms of the Settlement are fair, reasonable, and adequate
and should be approved; (ii) whether a final judgment should be entered; (iii) whether to approve Plaintiff's application
for attorneys' fees and reimbursement of expenses; and (iv) such other matters as may be necessary or proper under the circumstances.
A derivative lawsuit involves claims brought by a shareholder on behalf of a company, rather than on behalf of himself or
herself or the other shareholders of the company. The recovery in a derivative action is for the benefit of the company rather than directly
for individual shareholders.
Specifically, Brent Moen, William Burke, Peter Soderberg, Raymond O. Huggenberger, Richard Nigon, Kevin H. Roche, Lynn Blake,
Gerald R. Mattys, Robert Folkes and Bryan F. Rishe (collectively, the "Individual Defendants"; the Individual Defendants
together with Tactile, the "Defendants").
This Notice should be read in conjunction with, and is qualified in its entirety by reference to, the text of the Stipulation,
which has been filed with the Court (Docket No. 22-cv-01063). A link to the Form 8-K filed with the U.S. Securities and Exchange Commission
("SEC") containing the text of the Stipulation may be found on the Company's website at the Investor Relations page at https://investors.tactilemedical.com/annual-reports-sec-filings.
All capitalized terms herein have the same meanings as set forth in the Stipulation.
"Litigation Demand" means the demand served on Tactile and/or members of its Board of Directors on behalf of
stockholder Cory Griffin on September 2, 2022.
Tactile, as well as certain
of its current and now former officers, were named as defendants in a federal securities fraud class action, entitled Brian Mart, Individually
and on Behalf of All Others Similarly Situated v. Tactile Systems Technology, Inc., et al., No. 0:20-cv-02074-NEB-BRT (D.
Minn. 2020) (the "Securities Action"). On October 18, 2022, the Securities Action
settled for a payment of $5 million to be distributed to buyers of Tactile stock during the Class Period.
COURT HAS NO ROLE IN THE SECURITIES ACTION.
On May 24, 2022, Plaintiff
filed a shareholder derivative complaint on behalf of Tactile in the United States District Court for the District of Minnesota, pleading
claims against the Individual Defendants, including violations of section 14(a) of the Securities Exchange Act, rescind compensation
under section 29(b) of the Securities Exchange Act, rescind employment contract compensation under section 29(b) of the Securities
Exchange Act, contribution under 15 U.S.C. 77 k(f) and 21d(5)(a)-(d) and for violations of sections 10(b) and 21d
of the Securities Exchange Act, breach of fiduciary duty, and unjust enrichment. On August 9, 2022, the case was transferred to this
Court upon joint motion and stipulation of the parties. The claims were based on similar facts and circumstances as the Securities Action.
Once the Action was transferred
to the Court, the litigation proceeded. On August 25, 2022, the parties entered into a stipulation and [proposed] scheduling order
governing briefing on Defendants' motion to stay. On September 27, 2022, Defendants filed their motion and brief in support
of their motion to stay. On November 14, 2022, Plaintiff filed his brief in opposition to Defendants' motion to stay. On November 30,
2022, Defendants filed their notice to withdraw motion to stay. On January 31, 2023, the parties filed their stipulation for a briefing
schedule on Defendants' motion to dismiss. On February 10, 2023, Defendants filed their motion to dismiss for failure to state
a claim. On March 6, 2023, Plaintiff filed his amended complaint in this Court pleading claims against the Individual Defendants,
including violations of section 14(a) of the Securities Exchange Act, rescind compensation under section 29(b) of the Securities
Exchange Act, rescind employment contract compensation under section 29(b) of the Securities Exchange Act, contribution under 15
U.S.C. 77 k(f) and 21d(5)(a)-(d) and for violations of sections 10(b) and 21d of the Securities Exchange Act, breach
of fiduciary duty, and unjust enrichment. On March 31, 2023, Defendants filed their motion to dismiss the amended complaint. On April 14,
2023, the parties filed their first joint stipulation extending the briefing schedule on Defendants' motion to dismiss. On May 3,
2023, the parties filed their second joint stipulation extending the briefing schedule on Defendants' motion to dismiss. On June 5,
2023, the parties filed their third joint stipulation extending the briefing schedule on Defendants' motion to dismiss.
engaged in extensive and ongoing settlement negotiations with the Defendants' Counsel over the course of several months. On November 11,
2022, Plaintiff made an initial settlement demand. On December 26, 2022, Plaintiff agreed to invite the mediator who mediated the
Securities Action settlement to review their settlement demand. Over the next several months, the Settling Parties5 exchanged
proposals and counter proposals and participated in multiple conference calls. These extensive negotiations resulted in the execution
on October 26, 2023 of a settlement term sheet that memorialized the material terms of the settlement ("Term Sheet").
The Settling Parties have expended significant time and resources participating in settlement communications in which the merits of the
claims asserted in the Derivative Action, as well as the defenses thereto, were extensively discussed between the Settling Parties. The
Settling Parties have now reached a definitive agreement to settle the Derivative Action, upon the terms and subject to the conditions
set forth in the Stipulation.
On June 6, 2024, the
Plaintiff, 6 Demand Shareholder,7 and Defendants entered into the Stipulation to resolve the Action.
Pursuant to the Stipulation,
the Defendants shall cause Tactile to adopt, implement and maintain the corporate guidance provisions described in Exhibit A to the
and its Board acknowledged and agreed that Plaintiff's efforts, including his efforts in investigating, preparing, commencing, and
prosecuting the Derivative Action, was a material cause for the implementation of these reforms, and that the reforms confer substantial
benefits upon Tactile and its shareholders.
The Stipulation also provides
for the entry of judgment dismissing the Action against the Defendants with prejudice and, as explained fully in the Stipulation, releasing
and discharging certain known and unknown claims that could have been brought in any court, whether arising under federal, state, common,
or foreign law, which exist derivatively on behalf of Tactile, by Plaintiff or any other shareholder of Tactile that arise out of or relate
in any way to the claims asserted or that could have been asserted in any of the complaints in the Action, or the Litigation Demand, or
that arise out of, or relate in any way to the institution, prosecution, or settlement of the claims against the Defendants by Plaintiff
in the Action or Litigation Demand against Defendants, Tactile, and Tactile's past, present, and future officers and/or directors.
As set forth in the Stipulation, "Settling Parties" refers to Plaintiff, Demand Shareholder, and Defendants,
As set forth in the Stipulation, "Plaintiff" refers to Jack Weaver.
As set forth in the Stipulation, "Demand Shareholder" refers to Cory Griffin.
After negotiating the financial
recovery and the corporate guidance provisions, the Settling Parties began negotiating the attorneys' fees that Tactile or Defendants'
insurance carrier(s) would pay to Plaintiff's Counsel and Demand Shareholder's Counsel. In light of the substantial benefits
secured for Tactile by Plaintiff, Demand Shareholder, and their respective counsel in connection with the Settlement and the litigation
leading up to it, the Settling Parties have agreed that Plaintiff will seek an award of attorneys fees and expenses and service awards
for Plaintiff and Demand Shareholder not to exceed $485,000, all inclusive. Tactile has agreed that it or its insurers will pay any award
up to $485,000 but will not pay in connection with any request for fees from Plaintiff's counsel or Litigation Demand counsel which
exceeds $485,000. All of the foregoing is subject to Court approval. Plaintiff's Counsel will
request Court approval for the payment to Plaintiff and Demand Shareholder of service awards in an amount not to exceed $7,500, subject
to Court approval, which will be funded from the Fee and Expense Award.