<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Lifeline Systems, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--Enter Company Name Here--
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
LIFELINE SYSTEMS, INC.
----------------
NOTICE OF ANNUAL MEETING
MAY 20, 1998
To the Stockholders of
LIFELINE SYSTEMS, INC.:
Notice is hereby given that the Annual Meeting of Stockholders of Lifeline
Systems, Inc., a Massachusetts corporation (the "Company"), will be held on
Wednesday, May 20, 1998, at 10:00 A.M., Boston time, at the offices of
Lifeline Systems, Inc., 640 Memorial Drive, Cambridge, Massachusetts 02139, to
consider and act upon the following matters:
1. To elect three Class III Directors, each to hold office until the Annual
Meeting of Stockholders in 2001 and until his or her successor is
elected and qualified;
2. To approve an amendment to the Company's Articles of Organization
increasing the authorized number of shares of Common Stock from
10,000,000 to 20,000,000;
3. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the current fiscal year; and
4. To transact such other business as may properly come before the meeting
or any adjournment or adjournments of the meeting.
This Notice and the accompanying proxy materials are being mailed to all
holders of the Company's Common Stock. The close of business at 5:00 P.M.,
March 27, 1998 is the record date for determining stockholders entitled to
receive notice of and to vote at the Annual Meeting or any adjournment or
adjournments thereof, and only stockholders of record at the close of business
on that date are entitled to notice of and to vote at the meeting. The stock
transfer books of the Company remain open.
By Order of the Board of Directors,
NORMAN B. ASHER, Clerk
Cambridge, Massachusetts
April 10, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED
IN THE UNITED STATES.
<PAGE>
LIFELINE SYSTEMS, INC.
640 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Lifeline Systems, Inc. (the "Company")
for use at the Annual Meeting of Stockholders to be held at 10:00 A.M. on
Wednesday, May 20, 1998 (the "Annual Meeting") and at any adjournment or
adjournments of the Annual Meeting. All proxies will be voted in accordance
with the instructions contained therein, and if no choice is specified, the
proxies will be voted in favor of the proposals set forth in the Notice of
Meeting. Any proxy may be revoked by a stockholder at any time before it is
exercised by giving written notice to that effect to the Clerk of the Company,
by the submission of another signed proxy bearing a later date or by the
stockholder's personal attendance at the meeting and voting by ballot.
The Board of Directors has fixed March 27, 1998 as the record date for
determining stockholders who are entitled to vote at the Annual Meeting. At
the close of business on March 27, 1998, there were outstanding and entitled
to vote 5,803,096 shares of the Common Stock, $.02 par value per share, of the
Company. Each share is entitled to one vote.
The Company's Annual Report and these proxy materials were first mailed to
stockholders on or about April 10, 1998.
THE COMPANY WILL, UPON WRITTEN REQUEST OF ANY STOCKHOLDER, PROVIDE WITHOUT
CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. REQUESTS SHOULD BE ADDRESSED TO THE COMPANY IN CARE OF
CORPORATE SECRETARY, 640 MEMORIAL DRIVE, CAMBRIDGE, MASSACHUSETTS 02139.
VOTES REQUIRED AND TABULATION OF VOTES
The holders of a majority of the shares of Common Stock issued, outstanding
and entitled to vote on any matter shall constitute a quorum at the Annual
Meeting. Shares of Common Stock represented in person or by proxy (including
shares which abstain or do not vote with respect to one or more of the matters
presented for stockholder approval) will be counted for purposes of
determining whether a quorum is present.
The affirmative vote of the holders of a plurality of the votes cast by the
stockholders entitled to vote at the Annual Meeting is required for the
election of directors. The affirmative vote of the holders of a majority of
the shares of Common Stock outstanding and entitled to vote is required to
adopt the proposed amendment to the Company's Articles of Organization
increasing the authorized shares of Common Stock. The affirmative vote of the
holders of a majority of the shares of Common Stock present or represented and
voting on the matter is required for the ratification of the approval of the
selection of Coopers & Lybrand L.L.P. as the Company's independent accountants
for the current year.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote such shares as to a
particular matter, will not be voted in favor of such matter, and will also
not be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on the
matter being presented for stockholder approval at the Annual Meeting other
than with respect to proposal two, in which case abstentions and broker non-
votes will have the effect of a vote against such proposal.
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information, as of January 31, 1998
unless otherwise indicated, with respect to the beneficial ownership of the
Company's Common Stock by (i) each person known by the Company to beneficially
own more than 5% of the outstanding shares of Common Stock, (ii) each director
of the Company, (iii) each executive officer of the Company named in the
Summary Compensation Table set forth under the caption "Executive
Compensation" below, and (iv) all directors and executive officers of the
Company as of January 31, 1998 as a group:
<TABLE>
<CAPTION>
STOCK PERCENTAGE OF
NAME OF BENEFICIAL BENEFICIALLY COMMON STOCK
OWNER OWNED(1) OUTSTANDING(2)
------------------ ------------ -------------
<S> <C> <C>
SAFECO Corporation(3)........................ 737,450 12.8%
4333 Brooklyn Ave. N.E.
Seattle, WA 98185
L. Dennis Shapiro(4)......................... 706,833 12.2
24 Essex Road
Chestnut Hill, MA 02167
J.P. Morgan & Co. Incorporated(5)............ 455,200 7.8
60 Wall Street
New York, NY 10260
Dawson-Samberg Capital Management, Inc.(6)... 399,100 6.9
354 Pequot Avenue
Southport, CT 06490
Ronald Feinstein(7).......................... 359,605 6.0
c/o Lifeline Systems, Inc.
640 Memorial Drive
Cambridge, MA 02139
Susan S. Bailis.............................. -- *
Everett N. Baldwin(8)........................ 29,500 *
John D. Gugliotta(9)......................... 41,775 *
Dennis M. Hurley(10)......................... 33,588 *
Joseph E. Kasputys, Ph.D.(11)................ 34,650 *
Thomas E. Loper(12).......................... 34,157 *
Richard M. Reich(13)......................... 67,665 1.2
Carolyn C. Roberts(14)....................... 12,000 *
Steven M. Tritman(15)........................ 47,025 *
Gordon C. Vineyard, M.D.(16)................. 23,501 *
All directors and executive officers as a
group
(14 persons)(17)............................ 1,435,057 23.2
</TABLE>
- --------
*Less than 1% of the outstanding Common Stock.
(1) The inclusion herein of any shares of Common Stock deemed beneficially
owned does not constitute an admission that the named stockholders are
direct or indirect beneficial owners of such shares. Unless otherwise
indicated, each person listed above has sole voting and investment power
with respect to the shares listed.
(2) Number of shares deemed outstanding includes 5,783,842 shares outstanding
as of January 31, 1998, plus any shares subject to options held by the
named person or entity that are currently exercisable or exercisable
within 60 days after January 31, 1998.
(3) Represents holdings based on information provided to the Company by
SAFECO Corporation. Includes the following shares, as to all of which
SAFECO Corporation disclaims beneficial ownership: 514,450 shares held by
SAFECO Common Stock Trust, an investment company for which SAFECO Asset
2
<PAGE>
Management Company, a wholly owned subsidiary of SAFECO Corporation, acts
as the investment advisor; 213,000 shares held by SAFECO Resource Series
Trust, an investment company for which SAFECO Asset Management Company, a
wholly owned subsidiary of SAFECO Corporation, acts as the investment
advisor; and 10,000 shares held by SAFECO Employee Savings Plan, an
employee benefit plan for which SAFECO Corporation is the sponsor.
(4) Includes 22,500 shares subject to stock options held by Mr. Shapiro that
are currently exercisable or exercisable within 60 days after January 31,
1998. Also includes the following shares, as to all of which Mr. Shapiro
disclaims beneficial ownership: 4,124 shares held by Mr. Shapiro as
custodian for three children, over which he has sole voting and investment
power; 35,312 shares held by Mr. Shapiro's wife; 12,360 shares held by Mr.
Shapiro's wife as custodian for three children, 66,000 shares held by Mr.
Shapiro's wife as co-trustee of three trusts for his children; and 17,062
shares held by Mr. Shapiro's children, over which he has shared voting and
investment power.
(5) Represents holdings as of December 31, 1997, based on a Schedule 13G filed
with the Securities and Exchange Commission on February 13, 1998 by J.P.
Morgan & Co. Incorporated ("J.P. Morgan") as the parent holding company
for Morgan Guaranty Trust Company of New York, J.P. Morgan Investment
Management, Inc. and J.P. Morgan Florida Federal Savings Bank. Includes
377,900 shares as to which J.P. Morgan has sole voting power and 455,200
shares as to which J.P. Morgan has sole dispositive power.
(6) Represents holdings of Pequot Scout Fund, L.P., based on information
provided to the Company by Dawson-Samberg Capital Management, Inc.
(7) Includes 165,070 shares subject to stock options held by Mr. Feinstein
that are currently exercisable or exercisable within 60 days after January
31, 1998. Includes 16,000 shares held by Mr. Feinstein's children.
Includes 8,001 shares beneficially owned by Mr. Feinstein through the
Lifeline Employees' Savings and Investment Plan (the "401(k) Plan") as of
December 31, 1997, as to which shares Mr. Feinstein possesses sole
investment and voting power.
(8) Includes 14,500 shares subject to stock options held by Mr. Baldwin that
are currently exercisable or exercisable within 60 days after January 31,
1998 and 7,000 shares held by the Everett N. Baldwin Revocable Trust of
1997.
(9) Includes 19,574 shares subject to stock options held by Mr. Gugliotta that
are currently exercisable or exercisable within 60 days after January 31,
1998. Also includes 2,201 shares beneficially owned by Mr. Gugliotta
through the 401(k) Plan as of December 31, 1997, as to which shares Mr.
Gugliotta possesses sole investment power and voting power.
(10) Includes 24,193 shares subject to stock options held by Mr. Hurley that
are currently exercisable or exercisable within 60 days after January 31,
1998 and 1,700 shares beneficially owned by Mr. Hurley through an
individual retirement account ("IRA"). Includes 572 shares beneficially
owned by Mr. Hurley through the 401(k) Plan, as to which shares Mr. Hurley
possesses sole investment and voting power. Also includes 7,123 shares
owned by Mr. Hurley jointly with his wife.
(11) Includes 22,500 shares subject to stock options held by Dr. Kasputys
that are currently exercisable or exercisable within 60 days after
January 31, 1998.
(12) Includes 25,018 shares subject to stock options held by Mr. Loper that
are currently exercisable or exercisable within 60 days after January
31, 1998. Also includes 8,939 shares pledged to the Company to secure a
$100,000 loan by the Company to Mr. Loper. See "Other Arrangements--
Loans to Related Parties."
(13) Includes 19,704 shares subject to stock options held by Mr. Reich that
are currently exercisable or exercisable within 60 days after January
31, 1998. Includes 42,500 shares owned by Mr. Reich jointly with his
wife. Also includes 5,461 shares beneficially owned by Mr. Reich through
the 401(k) Plan, as to which shares Mr. Reich possesses sole investment
and voting power.
3
<PAGE>
(14) Includes 11,000 shares subject to stock options held by Ms. Roberts that
are currently exercisable or exercisable within 60 days after January
31, 1998.
(15) Includes 1,650 shares held by Mr. Tritman's wife, as to which he
disclaims beneficial ownership and 7,325 shares jointly held by Mr.
Tritman and his wife. Also includes 15,500 shares subject to stock
options held by Mr. Tritman that are currently exercisable or
exercisable within 60 days after January 31, 1998.
(16) Includes 22,500 shares subject to stock options held by Dr. Vineyard
that are currently exercisable or exercisable within 60 days after
January 31, 1998.
(17) Includes an aggregate of 400,847 shares subject to stock options that
are currently exercisable or exercisable within 60 days after January
31, 1998. Also includes 16,235 shares beneficially owned by such persons
through the 401(k) Plan, as to which 16,235 shares such persons possess
sole investment and voting power.
1. ELECTION OF DIRECTORS
The Company's Board of Directors is classified into three classes
(designated Class I Directors, Class II Directors and Class III Directors),
with members of each class holding office for staggered three-year terms.
There are currently two Class I Directors, whose terms expire at the 1999
Annual Meeting of Stockholders, two Class II Directors, whose terms expire at
the 2000 Annual Meeting of Stockholders, and three Class III Directors, whose
terms expire at the 1998 Annual Meeting of Stockholders.
The persons named in the proxy will vote to elect as Class III Directors the
three nominees named below unless authority to vote for the election of any or
all of the nominees is withheld by marking the proxy to that effect. Because
the Board of Directors has fixed the number of Class III Directors at three
members, the proxy may not be voted for more than three directors. If any of
the nominees becomes unavailable, the person acting under the proxy may vote
the proxy for the election of a substitute. It is not presently contemplated
that any of the nominees will be unavailable. Gordon C. Vineyard, M.D. and
Carolyn C. Roberts have served as members of the Board of Directors of the
Company since 1985 and 1994, respectively. Susan S. Bailis is nominated for
the first time as a Class III Director. Each of the nominees will be elected
to hold office until the Annual Meeting of Stockholders in 2001, and until his
or her successor is elected and qualified.
4
<PAGE>
The following table sets forth the name of each of the nominees for election
to the Board of Directors at the Annual Meeting, followed by the name of each
other director who will continue in office after the Annual Meeting, and each
such person's principal occupation and business experience during the past
five years, his or her age and the year in which he or she became a director
of the Company:
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION
AND BUSINESS EXPERIENCE FIRST BECAME A
DURING THE PAST FIVE YEARS AGE DIRECTOR
-------------------------- --- --------------
<S> <C> <C>
THE THREE NOMINEES FOR ELECTION AS CLASS III
DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING OF
STOCKHOLDERS IN 2001:
SUSAN S. BAILIS 52 --
Ms. Bailis has been President and Chief Executive
Officer of the A.D.S. Group ("A.D.S."), owned by an
affiliate of Genesis Health Ventures, since October
1997. From December 1996 to October 1997, Ms. Bailis
held the positions of Senior Vice President of the
Multicare Companies and President and Chief
Executive Officer of A.D.S., at which time A.D.S.
was a wholly owned subsidiary of the Multicare
Companies. From 1986 to December 1996 Ms. Bailis was
President of A.D.S.
GORDON C. VINEYARD, M.D. 61 1985
Dr. Vineyard has been Director of Surgical
Specialties and Radiology and Surgeon-in-Chief of
the Harvard Vanguard Medical Associates (formerly
Harvard Pilgrim Health Care) since 1991. From 1980
to 1991, he was its Chief of Surgery. He is also an
Associate Clinical Professor of Surgery at The
Harvard Medical School. Dr. Vineyard was a surgeon
at Boston's Brigham and Women's Hospital from
January 1972 through August 1995.*
CAROLYN C. ROBERTS 59 1994
Ms. Roberts has been President and Chief Executive
Officer of Copley Health Systems, Inc. since 1985.
Since 1982, she has also been President and Chief
Executive Officer of Copley Hospital, Inc. Ms.
Roberts has served on the Board of Trustees of the
American Hospital Association since 1990, was Chair
of the Board in 1994 and, from 1991 to 1996, was a
member of its Executive Committee. Ms. Roberts is
currently a member of the Board of Commissioners of
the Joint Commission for Accreditation of Health
Care Organizations ("JCAHO").** ***
THE TWO CLASS I DIRECTORS NAMED BELOW WILL CONTINUE
IN OFFICE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS
IN 1999:
L. DENNIS SHAPIRO 64 1978
Mr. Shapiro has been Chairman of the Board since
1978 and was Chief Executive Officer and Treasurer
of the Company from 1978 through December 1988.* **
EVERETT N. BALDWIN 65 1991
Mr. Baldwin served as President and Chief Executive
Officer of Welch Foods, Inc. from August 1982 to
August 1995, and as a Director of Welch Foods, Inc.
from August 1982 to December 1995.*
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION
AND BUSINESS EXPERIENCE FIRST BECAME A
DURING THE PAST FIVE YEARS AGE DIRECTOR
-------------------------- --- --------------
<S> <C> <C>
THE TWO CLASS II DIRECTORS NAMED BELOW WILL CONTINUE
IN OFFICE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS
IN 2000:
RONALD FEINSTEIN 51 1985
Mr. Feinstein has been President and Chief Executive
Officer of the Company since January 1, 1993. In
October 1992, Mr. Feinstein was appointed Chief
Operating Officer and Executive Vice President of
the Company. Mr. Feinstein was the President and
Chief Executive Officer of International Business
Interiors from January 1991 to September 1992.
JOSEPH E. KASPUTYS, Ph.D. 61 1985
Dr. Kasputys has been Chairman, President and Chief
Executive Officer of Primark Corporation, an
international company primarily engaged in
information service businesses, since June 1987.**
***
</TABLE>
- --------
* Member of the Audit Committee.
** Member of the Compensation Committee.
***Member of the Stock Option Plans Committee.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Company has an Audit Committee, which held three meetings during the
fiscal year ended December 31, 1997. The principal functions of the Audit
Committee are to make recommendations to the Board of Directors regarding the
engagement of the Company's independent auditors, to review and approve any
major accounting policy changes affecting the Company's operating results, to
review the arrangements for and scope of the independent audit and the results
of the audit, to review the scope of non-audit activities performed by the
independent auditors and to assure that the auditors are in fact independent,
and to establish and monitor policies to prohibit unethical, questionable or
illegal activities by employees of the Company.
The Company has a Compensation Committee, which held two meetings during the
fiscal year ended December 31, 1997. The principal function performed by the
Compensation Committee is to make recommendations to the Board of Directors as
to compensation arrangements, including bonuses for senior management. The
Company also has a Stock Option Plans Committee, which held two meetings
during the fiscal year ended December 31, 1997. The principal function of the
Stock Option Plans Committee is to grant stock options to employees of the
Company and to otherwise administer the Company's stock option plans.
The Company has no nominating committee of the Board of Directors or
committee performing similar functions. The Board of Directors will consider
nominees for director recommended by stockholders of the Company. The names of
such nominees should be forwarded to the Corporate Secretary, Lifeline
Systems, Inc., 640 Memorial Drive, Cambridge, Massachusetts 02139, who will
submit them to the Board of Directors for its consideration.
During the fiscal year ended December 31, 1997, the Board of Directors of
the Company held six meetings. All directors attended at least 75% of the
aggregate number of meetings of the Board of Directors and of the committees
of the Board on which they respectively served.
6
<PAGE>
DIRECTORS' COMPENSATION
Each director who is not an executive officer received an annual retainer
fee of $5,000 plus $750 for each Board meeting attended and $500 for each
Committee meeting attended ($750 for each day during which a director attended
both a Board and a Committee meeting). The Chairmen of the Audit Committee and
the Compensation Committee each received an annual fee of $2,500 for their
services in this capacity in addition to their regular annual retainer fee.
Executive officers do not receive any additional remuneration for their
services as directors. The Chairman of the Board, Mr. Shapiro, received an
annual fee of $10,000 for his services as Chairman in addition to his regular
annual retainer fee.
The Company's 1991 Stock Option Plan (the "1991 Plan") provides that non-
employee directors receive, on the sixth business day of each calendar year,
options to purchase 3,000 shares of Common Stock at an exercise price equal to
the fair market value of such shares on the date of grant, vesting one-third
on the date of grant and one-third on each of the next two anniversary dates.
Pursuant to this provision, on January 9, 1997, each of the then non-employee
directors received options to purchase 3,000 shares of Common Stock at an
exercise price of $17.625 per share (the fair market value on the date of
grant), and on January 9, 1998, each of the then non-employee directors
received options to purchase 3,000 shares of Common Stock at an exercise price
of $22.75 per share (the fair market value on the date of grant). Upon her
election to the Board, Ms. Bailis will receive options to purchase 3,000
shares of Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Kasputys, Shapiro and Tritman and Ms. Roberts served as members of
the Compensation Committee during the Company's most recent fiscal year. Mr.
Shapiro is the Chairman of the Board of Directors and previously served at
various times as the Company's President, Chief Executive Officer and
Treasurer.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely on its review of copies of reports filed by Reporting Persons
of the Company pursuant to Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") or written representations from certain
Reporting Persons that no Form 5 filing was required for such person, the
Company believes that during fiscal 1997 all filings required to be made by
its Reporting Persons were timely made in accordance with the requirements of
the Exchange Act.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information concerning the
compensation for each of the last three fiscal years of the Company's Chief
Executive Officer and the Company's four other most highly compensated
executive officers during the fiscal year ended December 31, 1997 who were
serving as executive officers at December 31, 1997 (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------------ ----------------------------------
SECURITIES
UNDERLYING
NAME AND SALARY BONUS OTHER ANNUAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR ($) ($) COMPENSATION($) GRANTED (#)(1) COMPENSATION ($)(2)
------------------ ---- ------ ----- --------------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Ronald Feinstein.................. 1997 $242,826 -- (3) -- 34,810(5) $2,657(7)
President and Chief 1996 230,000 $128,238(4) -- -- 1,718(7)
Executive Officer 1995 218,000 191,317(4) -- -- (6) 1,000(7)
Richard M. Reich.................. 1997 146,750 -- (3) -- 12,411(9) 2,331(10)
Vice President, Technology, 1996 139,550 45,544(8) -- 7,000 1,436(10)
and Advanced Services 1995 134,333 60,772(8) -- 3,000 1,000(10)
Thomas E. Loper................... 1997 145,333 -- (3) $24,000(13) 12,052(14) 2,278(15)
Vice President, 1996 136,750 47,450(8) 24,000(13) 7,500 427(15)
Customer Care (11) 1995 36,750 74,440(12) -- 47,000 178(15)
Dennis M. Hurley.................. 1997 136,917 -- (3) -- 11,978(18) 2,302(19)
Vice President, Finance, and 1996 130,417 41,311(8) -- 7,500 1,407(19)
Chief Financial Officer(16) 1995 104,168 81,979(17) -- 45,000 250(19)
John G. Gugliotta................. 1997 130,166 -- (3) -- 8,920(20) 2,230(21)
Vice President, Operations 1996 125,617 37,064(8) -- 3,000 1,592(21)
1995 122,867 52,057(8) -- 4,500 1,650(21)
</TABLE>
- --------
(1) Reflects the grant of options to purchase Common Stock.
(2) Represents Company contributions to the Company's 401(k) Plan and Group
Term Life Insurance Plan, except as indicated below.
(3) For the year ended December 31, 1997, Mr. Feinstein, Mr. Reich, Mr.
Loper, Mr. Hurley and Mr. Gugliotta each elected to take stock options in
lieu of a cash bonus. See column entitled "Securities Underlying Options
Granted."
(4) Represents amounts paid under the Company's Executive Bonus Plan. Also
includes $14,950 paid to Mr. Feinstein in each of 1995 and 1996 as a
special bonus pursuant to the terms of his employment agreement with the
Company, which amount was based on the Company's pre-tax profit in each
of those years. See "Other Arrangements--Feinstein Employment Agreement."
8
<PAGE>
(5) Includes options to purchase 14,810 shares granted under the 1994 Stock
Option Plan in lieu of cash bonus for the year ended December 31, 1997.
The exercise price of these options was $24.00 per share, representing
the fair market value of the underlying shares on the date of grant,
February 13, 1998. These options became exercisable one-third immediately
upon grant, with an additional one-third becoming exercisable on each of
the next two anniversary dates.
(6) Excludes an option exercisable for 150,000 shares of Common Stock granted
on August 27, 1992, which was amended on December 6, 1995 to extend the
exercise period of the option from five years to ten years. Also excludes
an option exercisable for 100,000 shares of Common Stock granted on
August 27, 1992, which originally vested in three equal annual
installments following the achievement of certain financial goals but was
amended on September 27, 1995 to provide for vesting on the earlier of
the six-year anniversary of the date of grant or in three equal annual
installments following the achievement of certain financial goals and on
June 14, 1996, was further amended to provide for full vesting in any
event on August 27, 1998. See "Other Arrangements--Feinstein Employment
Agreement."
(7) Includes contributions to the Company's Group Term Life Insurance Plan on
behalf of Mr. Feinstein in the following amounts: $657 in 1997, $718 in
1996 and $1,151 in 1995.
(8) Represents amounts paid under the Company's Executive Bonus Plan.
(9) Includes options to purchase 6,411 shares granted under the 1994 Stock
Option Plan in lieu of cash bonus for the year ended December 31, 1997.
The exercise price of these options was $24.00 per share, representing
the fair market value of the underlying shares on the date of grant,
February 13, 1998. These options became exercisable one-third immediately
upon grant, with an additional one-third becoming exercisable on each of
the next two anniversary dates.
(10) Includes contributions to the Company's Group Term Life Insurance Plan on
behalf of Mr. Reich in the following amounts: $331 in 1997, $436 in 1996
and $711 in 1995.
(11) Mr. Loper became an executive officer of the Company in September 1995.
(12) Includes $18,500 paid to Mr. Loper under the Company's Executive Bonus
Plan. Also includes $55,940, which represents the fair market value of
5,000 shares of the Company's Common Stock which the Company issued to
Mr. Loper on September 11, 1995 upon his becoming an executive officer of
the Company.
(13) Represents an annual living allowance paid to Mr. Loper.
(14) Includes options to purchase 6,052 shares granted under the 1994 Stock
Option Plan in lieu of cash bonus for the year ended December 31, 1997.
The exercise price of these options was $24.00 per share, representing
the fair market value of the underlying shares on the date of grant,
February 13, 1998. These options became exercisable one-third immediately
upon grant, with an additional one-third becoming exercisable on each of
the next two anniversary dates.
(15) Includes contributions to the Company's Group Term Life Insurance Plan on
behalf of Mr. Loper in the following amounts: $278 in 1997, $427 in 1996
and $178 in 1995.
(16) Mr. Hurley became an executive officer of the Company in March 1995.
(17) Includes $60,104 paid to Mr. Hurley under the Company's Executive Bonus
Plan. Also includes $21,875, representing the fair market value of 3,500
shares of the Company's Common Stock which the Company issued to Mr.
Hurley on March 1, 1995, upon his becoming an executive officer of the
Company.
(18) Includes options to purchase 5,978 shares granted under the 1994 Stock
Option Plan in lieu of cash bonus for the year ended December 31, 1997.
The exercise price of these options was $24.00 per share, representing
the fair market value of the underlying shares on the date of grant,
February 13, 1998. These options became exercisable one-third immediately
upon grant, with an additional one-third becoming exercisable on each of
the next two anniversary dates.
9
<PAGE>
(19) Includes contributions to the Company's Group Term Life Insurance Plan on
behalf of Mr. Hurley in the following amounts: $302 in 1997, $407 in 1996
and $550 in 1995.
(20) Includes options to purchase 5,920 shares granted under the 1994 Stock
Option Plan in lieu of cash bonus for the year ended December 31, 1997.
The exercise price of these options was $24.00 per share representing the
fair market value of the underlying shares on the date of grant, February
13, 1998. These options became exercisable one-third immediately upon
grant, with an additional one-third becoming exercisable on each of the
next two anniversary dates.
(21) Includes contributions to the Company's Group Term Life Insurance Plan on
behalf of Mr. Gugliotta in the following amounts: $293 in 1997, $392 in
1996 and $650 in 1995.
Option Grants
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended December 31, 1997 to each of
the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
------------------------------------------------------------ -----------------
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED
OPTIONS GRANTED TO EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME (#) FISCAL YEAR PRICE ($/SHARE) DATE 5%($) 10%($)
- ---- --------------- ---------------- ---------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ronald Feinstein........ 20,000(2) 18.1% $16.75 2/13/2007 $210,680 $533,904
Richard M. Reich........ 6,000(3) 5.4 16.75 2/13/2007 63,204 160,171
Thomas E. Loper......... 6,000(3) 5.4 16.75 2/13/2007 63,204 160,171
Dennis M. Hurley........ 6,000(3) 5.4 16.75 2/13/2007 63,204 160,171
John G. Gugliotta....... 3,000(3) 2.7 16.75 2/13/2007 31,602 80,086
</TABLE>
- --------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock and the date on which
the options are exercised.
(2) Exercisable in installments beginning 12 months after the date of grant,
with one-third of the shares covered thereby becoming exercisable at that
time and an additional one-third of the shares covered becoming
exercisable on each of the next two anniversary dates. Under the terms of
the Company's 1994 Stock Option Plan, the Stock Option Plans Committee
retains discretion, subject to limits set forth in the plan, to modify the
terms of outstanding options. The options were granted for a term of ten
years, subject to earlier termination in certain events related to
termination of employment. Does not include options to purchase 14,810
shares granted on February 13, 1998 in lieu of cash bonus for the year
ended December 31, 1997, at an exercise price of $24.00 per share.
(3) Exercisable in installments beginning 12 months after the date of grant,
with 20% of the shares covered thereby becoming exercisable on the date of
grant and an additional 20% of the shares covered becoming exercisable on
each successive anniversary date. Under the terms of the Company's 1994
Stock Option Plan, the Stock Option Plans Committee retains discretion,
subject to limits set forth in the plan, to modify the
10
<PAGE>
terms of outstanding options. The options were granted for a term of ten
years, subject to earlier termination in certain events related to
termination of employment. Does not include 6,411 options to purchase
shares granted to Mr. Reich, 6,052 options to purchase shares granted to
Mr. Loper, 5,978 options to purchase shares granted to Mr. Hurley and 5,920
options to purchase shares granted to Mr. Gugliotta, all of which were
granted on February 13, 1998 in lieu of cash bonus for the year ended
December 31, 1997, at an exercise price of $24.00 per share.
Option Exercises and Year-End Values
The following table sets forth certain information concerning each exercise
of stock options during the fiscal year ended December 31, 1997 by each of the
Named Executive Officers and the number and value of unexercised options held
by each of the Named Executive Officers on December 31, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
ACQUIRED OPTIONS AT FISCAL THE-MONEY OPTIONS AT
ON VALUE YEAR-END(#) FISCAL YEAR-END($)(1)
EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Ronald Feinstein........ 60,700(2) $924,800 153,466/103,334 $3,182,669/$1,966,056
Richard M. Reich........ 12,500 186,194 13,000/ 25,500 204,312/ 398,781
Thomas E. Loper......... -- -- 20,300/ 40,200 272,644/ 503,700
Dennis M. Hurley........ -- -- 13,500/ 45,000 240,094/ 731,438
John G. Gugliotta....... -- -- 13,800/ 16,700 224,862/ 278,481
</TABLE>
- --------
(1) Based on the fair market value of the Common Stock on December 31, 1997
(approximately $24.69), less the option exercise price.
(2) Includes 10,700 shares of Common Stock which Mr. Feinstein acquired upon
the exercise of stock options on February 24, 1997 at an exercise price of
$3.00 per share and which Mr. Feinstein sold back to the Company at their
fair market value on such date ($17.00 per share).
OTHER ARRANGEMENTS
Feinstein Employment Agreement
Pursuant to the terms of an employment agreement, as amended, effective as
of August 27, 1992, Ronald Feinstein became the Executive Vice President and
Chief Operating Officer of the Company on October 1, 1992, and the President
and Chief Executive Officer on January 1, 1993. Mr. Feinstein receives a base
salary of not less than $200,000 annually. Pursuant to the terms of Mr.
Feinstein's agreement, on September 1, 1992, the Company sold to Mr. Feinstein
83,333 shares of the Company's Common Stock at a price of $3.00 per share
(which represented the fair market value of the Common Stock on August 27,
1992) for an aggregate price of $250,000. The Company loaned $250,000 to Mr.
Feinstein for seven years at an annual interest rate of 5.98% pursuant to the
terms of a promissory note (the "Feinstein Note") which was secured by the
Common Stock that Mr. Feinstein purchased. On February 24, 1997, Mr. Feinstein
repaid the Feinstein Note in full, in part by exercising stock options and
selling 10,700 shares of Common Stock back to the Company at their fair market
value on such date ($17.00), the proceeds of which were used to repay the
Feinstein Note.
Pursuant to the terms of Mr. Feinstein's employment agreement, until the
Feinstein Note was paid in full, the Company agreed to pay Mr. Feinstein a
bonus equal to the lesser of (x) the annual interest due on the Feinstein Note
and (y) 1% of the Company's pre-tax profit (a) in the first year that the
Company achieves a
11
<PAGE>
specified level of after-tax net profit, and (b) in subsequent years, in the
event that the Company achieves certain percent increases in net profit from
the previous year. In addition, Mr. Feinstein is eligible to receive a bonus
equal to 40% of his base salary if the Company achieves the annual profit
performance plan goals adopted by the Board of Directors and a bonus of
greater than 40% of his base salary if the Company exceeds such goals. For the
year ended December 31, 1997, Mr. Feinstein elected to take options to
purchase 14,810 shares in lieu of cash bonus. Pursuant to his employment
agreement, Mr. Feinstein will continue to serve as a member of the Board of
Directors during the period of his employment.
Pursuant to his employment agreement, on August 27, 1992, Mr. Feinstein also
received a nonstatutory stock option to purchase up to 150,000 shares of
Common Stock at an exercise price of $3.00 per share (which represented the
fair market value on the date of grant), vesting one-fifth on the date of
grant and one-fifth on each of the next four anniversary dates. The original
expiration date of this stock option was the fifth anniversary of the date of
grant. On December 6, 1995, the Stock Option Plans Committee extended the
exercise period of the option for an additional five years, so that the option
will expire on August 27, 2002. Pursuant to his employment agreement, Mr.
Feinstein was also granted a stock option to purchase up to 100,000 shares of
Common Stock at $3.00 per share (which represented the fair market value on
the date of grant), subject to a vesting schedule that originally provided for
vesting in three equal annual installments commencing April 15 in the year
following the achievement of certain financial goals. On September 27, 1995,
the Stock Option Plans Committee amended this option to provide for vesting on
the earlier of the six-year anniversary of the date of grant or in three equal
annual installments commencing April 15 in the year following the achievement
of certain financial goals, and on June 14, 1996, the Compensation Committee
further amended this option to provide for full vesting in any event on August
27, 1998. The original expiration date of this option was six years from the
date of grant, but on June 14, 1996, the Compensation Committee extended the
exercise period of the option to seven years from the date of grant, so that
the option will expire on August 27, 1999.
Upon a change in control of the Company, both stock options described in the
preceding paragraph would be accelerated and deemed to be vested. Upon
termination by the Company of his employment as Chief Executive Officer and
his membership on the Board of Directors, other than for cause, Mr. Feinstein
will continue to receive his salary for 12 months. On June 14, 1996, Mr.
Feinstein's employment agreement was amended to provide that in the event of a
change in control of the Company following which Mr. Feinstein no longer
serves as the Chief Executive Officer of the Company within the Boston,
Massachusetts metropolitan area or as a director of the Company, Mr. Feinstein
may terminate the employment agreement and be paid three times his salary and
bonus for the preceding fiscal year (subject to downward adjustment for any
excess parachute payment as defined in Section 280G of the Internal Revenue
Code of 1986, as amended).
Change of Control Agreements
Each of the Company's executive officers, other than Mr. Feinstein, has
entered into an agreement with the Company which provides that, if within 12
months of a change of control of the Company, such officer's employment is
terminated without cause or the officer terminates his or her employment with
the Company due to a significant change in responsibilities or condition of
employment, then such officer would be entitled to receive a payment equal to
one year's base salary then being paid to him or her.
Loans to Related Parties
On September 11, 1995, the Company sold to Mr. Thomas E. Loper, Vice
President, Customer Care, 8,939 shares of the Company's Common Stock at a
price of $11.188 per share (which represented the fair market value of the
Common Stock on the date of issuance) for an aggregate price of $100,000. The
Company loaned $100,000 to Mr. Loper for seven years at an annual interest
rate of 6.3% pursuant to the terms of a promissory note (the "Loper Note"),
which is secured by the Common Stock that Mr. Loper purchased. The Loper Note
will accelerate and become immediately due and payable within 90 days of
termination of Mr. Loper's employment for any reason. As of February 28, 1998,
$106,300 (including $6,300 of accrued interest) was outstanding on the Loper
Note.
12
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return of (i) the Center for Research in Security Prices ("CRSP") Total
Return Index for the Nasdaq National Market (U.S. Companies) (the "Nasdaq
Composite Index") and (ii) the CRSP Total Return Index for Nasdaq Health
Services Stocks ("Nasdaq Health Services Stocks"). This graph assumes the
investment of $100 on December 31, 1992 in the Company's Common Stock, the
Nasdaq Composite Index and the Nasdaq Health Services Stocks and assumes
dividends are reinvested. Measurement points are at the last trading day of
the fiscal years ended December 31, 1992, 1993, 1994, 1995, 1996 and 1997.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Lifeline Systems, Inc. ......... $100.00 $131.00 $155.20 $334.50 $482.80 $693.10
Nasdaq Composite Index.......... 100.00 114.80 112.20 158.70 195.20 239.50
Nasdaq Health Services Stocks... 100.00 115.40 123.80 157.20 157.30 160.30
</TABLE>
13
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OVERVIEW AND PHILOSOPHY
The Compensation Committee of the Board of Directors (the "Committee") is
composed of four non-employee directors and is responsible for the development
and administration of the Company's executive compensation policies and
programs, subject to the review and approval of the entire Board. The
Committee reviews and recommends to the Board for its approval the salaries
and incentive compensation of the executive officers of the Company. The
Company also has a Stock Option Plans Committee, which grants stock options to
executives and other key employees of the Company and otherwise administers
the Company's stock option plans.
The objectives of the Company's executive compensation program are as
follows:
. support the achievement of strategic goals and objectives of the Company
. attract and retain key executives critical to the long-term success of
the Company
. align the executive officers' interests with the success of the Company
COMPENSATION PROGRAM
The Company's executive compensation program consists of three principal
elements: base salary, annual incentive compensation in the form of cash or
stock options and long-term incentive compensation in the form of stock
options. Generally, the Company's objective is to pay base compensation which
is comparable to the fiftieth percentile total compensation package offered to
officers in similar positions at comparable companies, and to pay total
compensation, including annual bonuses and long-term incentives such as stock
options, comparable to the seventy-fifth percentile total compensation package
offered to officers in similar positions at comparable companies.
The Company's annual bonus plan is designed to create incentives for meeting
pre-tax profit goals. The Committee establishes a target bonus amount, which
would be paid out in full in the event that the Company achieves an
established pre-tax profit level, and which would be paid out to a lesser or
greater extent in the event that the goals are not met or are surpassed. No
annual bonus is paid if the Company's pre-tax profit falls below a minimum
level established by the Committee. Prior to 1997, the annual bonus was
payable in cash. For the year ended December 31, 1997, in order to further
align the executives' interests with those of the stockholders, the
Compensation Committee approved a change to the annual bonus plan pursuant to
which officers were able to elect to receive stock options in lieu of a cash
bonus. The number of such options was determined by a formula based on the
cash bonus each officer would have received, a Black-Scholes option valuation
model as of the grant date, and consideration of the risk associated with
trading stock options for cash.
Long-term incentives for executive officers and key managers are provided
through stock options. The objectives of this program are to align executive
and stockholder long-term interests by creating a strong and direct link
between executive compensation and stockholder return.
Stock options are granted at an option price equal to the fair market value
of the Company's Common Stock on the date of grant and will only have value if
the Company's stock price increases. In selecting executives eligible to
receive option grants and determining the amount of such grants (other than
options granted under the annual bonus plan), the Committee evaluates a
variety of factors, including (i) the job level of the executive, (ii) option
grants awarded by competitors to executives at a comparable job level, and
(iii) past, current and prospective service to the Company rendered, or to be
rendered, by the executive. During 1997, the Committee granted non-qualified
options which vest (except for certain options granted to the Chief Executive
Officer as described below) in five equal annual installments commencing on
the first anniversary date of the grant.
14
<PAGE>
The Compensation Committee periodically reviews all elements of officer
compensation with independent experts retained by the Company for this
purpose. Such a review was conducted during 1997 to help ensure that
compensation levels are appropriate.
CHIEF EXECUTIVE OFFICER'S 1997 COMPENSATION
For the year ended December 31, 1997, the Company's President and Chief
Executive Officer, Ronald Feinstein, received a base salary of $242,826 and
14,810 option shares in lieu of a cash bonus which were granted on February
13, 1998, on which date the fair market value of the shares underlying those
options was $24.00. These options become exercisable in installments, with
one-third exercisable immediately upon grant, and an additional one-third
becoming exercisable on each of the next two anniversary dates. For the year
ended December 31, 1997, Mr. Feinstein also received options to purchase
20,000 shares which become exercisable in installments beginning 12 months
after the date of grant, with one-third becoming exercisable at that time and
an additional one-third becoming exercisable on each successive anniversary
date. Mr. Feinstein's 1993 base salary had been initially established as
$200,000 pursuant to his employment agreement with the Company. His salary is
reviewed each year by the Compensation Committee, and was adjusted by the
Compensation Committee to $245,000 effective March 1, 1997, based on the
Company's performance in 1996, a review of salary data for chief executive
officers of comparable companies, at both the fiftieth and seventy-fifth
percentile, and Mr. Feinstein's performance and the scope of his
responsibilities. Mr. Feinstein is generally compensated on the same basis as
the other executive officers of the Company, including a combination of base
salary, bonus plan payments and stock options.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), disallows a tax deduction to public companies for certain
compensation in excess of $1 million paid to the corporation's Chief Executive
Officer and four other most highly compensated executive officers. The Company
does not believe that Section 162(m) will generally have an effect on the
Company, because of the current and expected compensation levels of its
officers. However, the Committee intends to periodically review the potential
consequences of Section 162(m) and may structure the performance-based portion
of its executive officer compensation (including its stock plans) to comply
with certain exemptions provided in Section 162(m). To meet the requirements
of Section 162(m), the Board has established the Stock Option Plans Committee
to administer all of the Company's stock option plans.
Compensation Committee
Joseph E. Kasputys, Ph.D., Chairman*
Carolyn Roberts*
L. Dennis Shapiro
Steven M. Tritman*
--------
* Member of the Stock Option Plans
Committee
15
<PAGE>
2. APPROVAL OF AMENDMENT TO THE ARTICLES OF ORGANIZATION INCREASING AUTHORIZED
SHARES OF COMMON STOCK
On March 24, 1998, the Board of Directors of the Company adopted, subject to
shareholder approval, a proposed amendment to the Company's Articles of
Organization, providing for an increase in the authorized shares of Common
Stock from 10,000,000 shares to 20,000,000 shares. As of January 31, 1998, a
total of 6,376,390 shares of Common Stock were issued and outstanding
(including 592,548 treasury shares), 291,150 shares had been reserved for
issuance under the Company's stock option plans and 162,116 shares had been
reserved for issuance under the Company's Employee Stock Purchase Plan.
The Board of Directors recommends the adoption of this amendment by the
stockholders to ensure that the Company will continue to have an adequate
number of authorized and unissued shares of Common Stock available for future
use. As is the case with the shares of Common Stock which are currently
authorized but unissued, if this amendment is adopted by the stockholders, the
Board of Directors will have authority to issue the additional shares of
Common Stock from time to time without further action on the part of
stockholders.
The Board has no present plans, negotiations or agreements, written or oral,
with respect to the issuance of the additional shares to be authorized by this
amendment. However, the additional authorized shares would be available for
issuance at such times and for such proper corporate purposes as the Board of
Directors may approve, including possible future stock splits or stock
dividends or future financing and acquisition transactions. Depending upon the
nature and terms thereof, such transaction or transactions could enable the
Board to render more difficult or discourage an attempt to obtain a
controlling interest in the Company or the removal of the incumbent Board and
may discourage unsolicited takeover attempts which might be desirable to
stockholders. For example, the issuance of shares of common stock in a public
or private sale, merger, or similar transaction would increase the number of
the Company's outstanding shares, thereby diluting the interest of a party
seeking to take over the Company. Furthermore, many companies have issued
warrants or other rights to acquire additional shares to the holders of common
stock to discourage or defeat unsolicited stock accumulation programs and
acquisition proposals. If this amendment is adopted, more common stock of the
Company would be available for such purposes than is currently available.
Stockholders do not have any preemptive or other rights to subscribe for any
shares of Common Stock which may in the future be issued by the Company.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENT IS IN THE BEST
INTEREST OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR THIS
PROPOSAL.
3. RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
Subject to ratification by the stockholders, the Board of Directors has
selected the firm of Coopers & Lybrand L.L.P., certified public accountants,
as independent accountants of the Company for the Company's 1998 fiscal year.
Coopers & Lybrand L.L.P. has served as the Company's independent accountants
since 1979. Although stockholder approval of the Board of Directors' selection
of Coopers & Lybrand L.L.P. is not required by law, the Board of Directors
believes that it is advisable to give the stockholders an opportunity to
ratify this selection. If this proposal is not approved, the Board of
Directors will reconsider its selection of Coopers & Lybrand L.L.P.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
Annual Meeting. They will have an opportunity to make a statement if they
desire to do so, and will also be available to respond to appropriate
questions from stockholders.
16
<PAGE>
4. OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly
presented to the meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their
judgment on such matters.
SOLICITATION OF PROXIES
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, the Company's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, facsimile machine and personal interviews, and the Company reserves
the right to retain outside agencies for the purpose of soliciting proxies.
Brokers, custodians and fiduciaries will be requested to forward proxy
soliciting material to the owners of stock held in their names, and the
Company will reimburse them for their out-of-pocket expenses in this regard.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Cambridge, Massachusetts not later than December 11, 1998 for
inclusion in the proxy statement for that meeting and must comply with the
rules of the Securities and Exchange Commission.
By Order of the Board of Directors,
Norman B. Asher, Clerk
Cambridge, Massachusetts
April 10, 1998
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING, AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
17
<PAGE>
LIFELINE SYSTEMS, INC.
640 MEMORIAL DRIVE, CAMBRIDGE, MASSACHUSETTS 02139
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Those signing on the reverse side, revoking all prior proxies, hereby appoint
Ronald Feinstein and Norman B. Asher, and each of them, with full power of
substitution, as proxies, to represent and to vote as designated hereon, all
shares of stock of Lifeline Systems, Inc. which those signing on the reverse
side would be entitled to vote if personally present at the Annual Meeting of
Stockholders of the Company to be held at the offices of Lifeline Systems, Inc.,
640 Memorial Drive, Cambridge, Massachusetts 02139, on May 20, 1998 at 10:00
a.m., Boston time, and at any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDERS.
________________________________________________________________________________
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE-PAID ENVELOPE.
________________________________________________________________________________
________________________________________________________________________________
Please sign exactly as your name(s) appear(s) hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person and state title.
________________________________________________________________________________
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
___________________________________ ___________________________________
___________________________________ ___________________________________
___________________________________ ___________________________________
<PAGE>
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
---------------------------------------------
LIFELINE SYSTEMS, INC.
---------------------------------------------
UNLESS OTHERWISE INSTRUCTED, THIS PROXY WILL BE
VOTED IN FAVOR OF THE PROPOSALS SET FORTH HEREON.
A VOTE "FOR" EACH PROPOSAL IS RECOMMENDED BY THE BOARD OF DIRECTORS.
RECORD DATE SHARES:
1. To elect three Class III Directors, each to hold office until the Annual
Meeting of Stockholders in 2001 and until their successors are elected and
qualified.
SUSAN S. BAILIS
CAROLYN C. ROBERTS
GORDON C. VINEYARD, MD
FOR ALL NOMINEES WITHHOLD FOR ALL EXCEPT
[_] [_] [_]
If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the name(s) of the nominee(s).
Your shares will be voted for the remaining nominee(s).
2. To approve an amendment to the Company's Articles of Organization increasing
the authorized shares of Common Stock.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent accountants for 1998.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. To transact such other business as may properly come before the meeting or
any adjournments of the meeting.
Mark box at right if an address change or comment has been noted on the reverse
side of this card. [_]
Please be sure to sign and date this Proxy Date
- --------------------------------------------------------------------------------
- ------Stockholder sign here---------------------Co-owner sign here--------------
DETACH CARD DETACH CARD
LIFELINE SYSTEMS, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy. There
are a number of issues related to the management and operation of your Company
that require your immediate attention and approval. These are discussed in
detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted, then sign the card, detach it and return it in the enclosed postage paid
envelope.
Your vote must be received prior to the Annual Meeting of Stockholders to be
held on May 20, 1998.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Lifeline Systems, Inc.
