Edgar Filing: LIFELINE SYSTEMS INC

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
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Lifeline Systems, Inc.
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(Name of Registrant as Specified in its Charter)

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LIFELINE SYSTEMS, INC.
111 Lawrence Street Framingham, MA 01702-8156

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS May 15, 2002

To the Stockholders of
LIFELINE SYSTEMS, INC.:

Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Lifeline Systems, Inc., a Massachusetts corporation (the
"Company"), will be held on Wednesday, May 15, 2002, at 10:00 A.M., local time,
at the offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts,
02109, to consider and vote upon the following matters:

1. The election of two Class I Directors, each to hold office until the
Annual Meeting of Stockholders in 2005 and until his successor is
elected and qualified;

2. The ratification of the selection of PricewaterhouseCoopers LLP as the
Company's independent accountants for the current fiscal year ending
December 31, 2002;

3. 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.,
April 5, 2002 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.

All stockholders are cordially invited to attend the meeting.

By Order of the Board of Directors,

JEFFREY A. STEIN, Clerk

Framingham, Massachusetts
April 12, 2002

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.

LIFELINE SYSTEMS, INC.
111 Lawrence Street
Framingham, MA 01702-8156

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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

May 15, 2002

This Proxy Statement contains information about the Annual Meeting of
Stockholders of Lifeline Systems, Inc. (the "Company"). The Annual Meeting is
scheduled to be held at 10:00 A.M. local time on Wednesday, May 15, 2002 (the
"Annual Meeting") at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts.

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company for use at 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
instruction is specified, the proxies will be voted in favor of proposals 1 and
2 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 Chief Financial Officer 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. This
Proxy Statement is being mailed to all holders of the Company's common stock on
or about April 12, 2002.

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

What is the purpose of the Annual Meeting?

At the Annual Meeting, stockholders will consider and vote on the following
matters:

1. The election of two Class I Directors, each to hold office until the
Annual Meeting of Stockholders in 2005 and until his successor is
elected and qualified.

2. The ratification of the selection by the Company's directors of
PricewaterhouseCoopers LLP as the Company's independent accountants for
the 2002 fiscal year.

The stockholders will also act on any other business that may properly come
before the Annual Meeting.

Who can vote?

To be able to vote, you must have been a stockholder of record at the close
of business on April 5, 2002. This date is the record date for the Annual
Meeting.

On April 5, 2002, there were 6,407,576 shares of common stock, $0.02 par
value per share, of the Company (the "Common Stock") issued, outstanding and
entitled to vote at the Annual Meeting.

How many votes do I have?

Each share of Common Stock that you own on the record date entitles you to
one vote on each matter that is proposed.

How can I vote?

You can vote in one of two ways:

You may vote by mail. You may vote by completing and signing the proxy card
that accompanies this proxy statement and promptly mailing it in the enclosed
envelope. You do not need to put a stamp on the enclosed envelope if you mail
it in the United States.

You may vote in person. If you attend the meeting, you may vote by
delivering your completed proxy card in person or you may vote by completing a
ballot. Ballots will be available at the Annual Meeting.

Can I vote if my shares are held in "street name?"

If the shares you own are held in "street name" by a bank or brokerage firm,
your bank or brokerage firm, as the record holder of your shares, is required
to vote your shares according to your instructions. In order to vote your
shares you will need to follow the directions your bank or brokerage firm
provides to you. If you do not give instructions to your bank or brokerage
firm, it will still be able to vote your shares with respect to certain
"discretionary" items, but will not be allowed to vote your shares with respect
to certain "non-discretionary" items. In the case of non-discretionary items,
the shares will be treated as "broker non-votes."

If your shares are held in street name and you wish to attend the Annual
Meeting on May 15, 2002, you must bring an account statement or letter from
your brokerage firm or bank showing that you are the beneficial owner of the
shares. To be able to vote your shares held in street name at the Annual
Meeting, you will need to obtain a proxy card from your brokerage firm or bank.

Can I change my vote after I mail my proxy card?

Yes. You can change your vote and revoke your proxy at any time before the
polls close at the Annual Meeting by doing any one of the following:

. signing another proxy with a later date;

. giving the Chief Financial Officer of the Company a written notice before
or at the Annual Meeting that you want to revoke your proxy; or

. voting in person at the meeting.

Your attendance at the Annual Meeting alone will not revoke your proxy.

What constitutes a quorum?

In order for business to be conducted at the Annual Meeting, a quorum must
be present. A quorum consists of the holders of a majority of the shares of
Common Stock issued, outstanding and entitled to vote at the Annual Meeting, or
at least 3,203,789 shares.

Shares of Common Stock represented in person or by proxy (including "broker
non-votes" and shares that abstain or do not vote with respect to one or more
of the matters to be voted upon) will be counted for the purpose of determining
whether a quorum exists. "Broker non-votes" are shares that are held in "street
name" by a bank or brokerage firm that indicates on its proxy that it does not
have discretionary authority to vote on a particular matter.

If a quorum is not present, the meeting will be adjourned until a quorum is
obtained.

What vote is required for each item?

Election of Directors. 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.

Ratification of Accountants. 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
PricewaterhouseCoopers LLP as the Company's independent accountants for the
current fiscal year ending December 31, 2002.

How will votes be counted?

The shares you own will be voted according to the instructions on the proxy
card you mail. If you mail the proxy card, but do not give any instructions on
a particular matter described in this proxy statement, the shares you own will
be voted in favor of proposals 1 and 2 as set forth in the Notice of Meeting.

If you abstain from voting on a particular matter or your shares are "broker
non-votes" your shares will not be voted in favor of any particular matter
described in this proxy statement and will also not be counted as votes cast or
shares voting on such matter. As a result, abstentions and broker non-votes
will have no effect on the outcome of voting at the Annual Meeting.

Who will count the votes?

The votes will be counted, tabulated and certified by the Company's transfer
agent, Registrar and Transfer Company.

How does the Board of Directors recommend that I vote on the proposals?

Your Board of Directors recommends that you vote:

FOR the election of two Class I Directors each to hold office until the
Annual Meeting of Stockholders in 2005 and until his successor is elected and
qualified.

FOR the ratification of the selection of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year ending December 31, 2002.

Will any other business be conducted at the Annual Meeting or will other
matters be voted upon?

The Board of Directors does not know of any other matters that may come
before the meeting. Under the Company's by-laws, the deadline for stockholders
to notify the Company of any proposals or nominations for director to be
presented for action at the Annual Meeting has passed. If any other matter
properly comes before the stockholders for a vote at the Annual Meeting, the
persons named in the proxy that accompanies this proxy statement will exercise
their judgment in deciding how to vote, or otherwise act, at the Annual Meeting
with respect to that matter or proposal.

Where can I find the voting results?

The Company will report the voting results in its quarterly report on Form
10-Q for the second quarter of fiscal 2002, which the Company expects to file
with the Securities and Exchange Commission, commonly referred to as the SEC,
on or before August 14, 2002.

How can I obtain an annual report on Form 10-K?

A copy of the Company's annual report on Form 10-K for the fiscal year ended
December 31, 2001 is included with this proxy statement.

The Company will, upon written request of any stockholder, provide without
charge an additional 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:

Chief Financial Officer
Lifeline Systems, Inc.
111 Lawrence Street
Framingham, MA 01702-8156
(508) 988-1000

Whom should I contact if I have any questions?

If you have any questions about the Annual Meeting or your ownership of the
Company's Common Stock, please contact the Company's Chief Financial Officer,
at the address or telephone number listed above.

STOCK OWNERSHIP INFORMATION

The following table sets forth certain information, as of January 31, 2002
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 a group. 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 has sole voting and investment power with respect to the
shares listed. The share amounts include those shares as to which the following
persons had a right to acquire beneficial ownership by exercising stock options
as of January 31, 2002, or within 60 days following that date: Mr. Baldwin,
14,001 shares, Mr. Feinstein, 141,475 shares, Mr. Hurley, 63,445 shares, Dr.
Kasputys, 22,001 shares, Mr. Reich, 44,545 shares, Ms. Roberts, 22,001 shares,
Mr. Shapiro, 9,001 shares, Mr. Strange, 50,598 shares, Dr. Vineyard, 26,001
shares and Mr. Wechsler, 11,333 shares. The share amounts also include shares
beneficially owned by certain executive officers through participation in the
Company's 401(k) Plan, as to which shares such person exercises sole investment
and voting power.

Percent of
Beneficially Common Stock
Name of Beneficial Owner Owned Outstanding(1)
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VA Partners, LLC (2)............... 858,600 13.6%
One Maritime Plaza, Suite 1400
San Francisco, CA 94111

Pequot Capital Management, Inc. (3) 745,025 11.8%
500 Nyala Farm Road
Westport, CT 06880

L. Dennis Shapiro (4).............. 716,209 11.3%
24 Essex Road
Chestnut Hill, MA 02467

T. Rowe Price Associates, Inc. (5). 559,700 8.9%
100 E. Pratt Street
Baltimore, MD 21202

David L. Babson & Company, Inc. (3) 431,300 6.8%
One Memorial Drive
Cambridge, MA 02142

SAFECO Corporation (6)............. 422,650 6.7%
4333 Brooklyn Ave. N.E.
Seattle, WA 98185

Ronald Feinstein (7)............... 379,507 5.9%
c/o Lifeline Systems, Inc.
111 Lawrence St.
Framingham, MA 01702

Richard M. Reich (8)............... 86,658 1.4%

Dennis M. Hurley (9)............... 72,840 1.1%

Donald G. Strange.................. 53,821 *

Joseph E. Kasputys, Ph.D........... 45,651 *

Percent of
Beneficially Common Stock
Name of Beneficial Owner Owned Outstanding(1)
------------------------ ------------ --------------

Everett N. Baldwin (10)................................ 36,001 *

Gordon C. Vineyard, M.D................................ 32,802 *

Carolyn C. Roberts..................................... 23,001 *

Leonard E. Wechsler.................................... 20,795 *

All directors and officers as a group (13 persons) (11) 1,500,834 22.2%

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* Less than 1% of the outstanding stock

(1) Number of shares deemed outstanding includes 6,316,466 shares outstanding
as of January 31, 2002, 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, 2002.

(2) Represents holdings as of November 30, 2001 based on a Form 4 filed with
the Securities and Exchange Commission on December 10, 2001 by VA
Partners, LLC.

(3) Represents holdings as of December 31, 2001 based on a Schedule 13G filed
with the Securities and Exchange Commission.

(4) 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 their children; 17,062 shares held
by Mr. Shapiro's children, over which he has shared voting and investment
power; 3,375 held by Mr. Shapiro's wife as co-trustee of three trusts for
her mother and sisters.

(5) These securities are owned by various individual and institutional
investors, including T. Rowe Price Small-Cap Stock Fund, Inc., which owns
333,600 shares for which T. Rowe Price Associates, Inc. (Price Associates)
serves as investment advisor with power to direct investments and/or sole
power to vote the securities. For purposes of the reporting requirements
of the Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.

(6) Represents holdings as of December 31, 2001 based on a Schedule 13G filed
with the Securities and Exchange Commission on January 11, 2002 by SAFECO
Corporation. Includes the following shares, as to all of which SAFECO
Corporation disclaims beneficial ownership: 422,650 shares held by SAFECO
Common Stock Trust, an investment company for which SAFECO Asset
Management Company, a wholly owned subsidiary of SAFECO Corporation, acts
as the investment advisor.

(7) Includes 16,000 shares held by Mr. Feinstein's children. Also includes
16,552 shares and 25,641 shares pledged to the Company to secure a
$300,000 and $250,000 loan, respectively, by the Company to Mr. Feinstein.
See "Other Arrangements--Loans to Related Parties."

(8) Includes 36,666 shares owned by Mr. Reich jointly with his wife.

(9) Includes 7,123 shares owned by Mr. Hurley jointly with his wife.

(10) Includes 22,000 shares held by the Everett N. Baldwin Revocable Trust of
1997.

(11) Includes an aggregate of 441,538 shares subject to stock options that are
currently exercisable or exercisable within 60 days after January 31,
2002. Also includes 17,139 shares beneficially owned by such persons
through the 401(k) Plan as to which such persons possess sole investment
and voting power.

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 2002 Annual
Meeting of Stockholders, two Class II Directors, whose terms expire at the 2003
Annual Meeting of Stockholders and two Class III Directors, whose terms expire
at the 2004 Annual Meeting of Stockholders.

The persons named in the proxy will vote to elect as Class I Directors the
two 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. 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 either of the nominees will be unavailable. L. Dennis Shapiro has served
as Chairman of the Board of Directors of the Company since 1978. Everett N.
Baldwin has served as a member of the Board of Directors of the Company since
1991. Both of the nominees will be elected to hold office until the Annual
Meeting of Stockholders in 2005, and until his successor is elected and
qualified.

The following table sets forth the name 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.

First Became
Name, Principal Occupation and Business Experience During the Past Five Years Age a Director
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The two nominees for election as Class I Directors to serve
until the Annual Meeting of Stockholders in 2005:

L. DENNIS SHAPIRO............................................................................ 68 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........................................................................... 68 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. Mr. Baldwin retired from Welch Foods in 1995.*

The two Class II Directors named below will continue in office
until the Annual Meeting of Stockholders in 2003:

RONALD FEINSTEIN............................................................................. 56 1985
Mr. Feinstein has been President and Chief Executive Officer of the Company since
January 1, 1993.

JOSEPH E. KASPUTYS, PH.D..................................................................... 65 1985
Dr. Kasputys founded and has been Chairman and Chief Executive Officer of Global
Insight, Inc. since March 2001. Through its acquired companies, Global Insight provides
economic and financial information and forecasts to clients in government, finance and
industry. Prior to that, he was Chairman of Thomson Financial, a $2 billion division of The
Thomson Corporation, from September 2000 to March 2001. He was Chairman, President
and Chief Executive Officer of Primark Corporation, an international company traded on
the NYSE primarily engaged in the information industry, from June 1987 to September
2000, when Primark Corporation was acquired by The Thomson Corporation.** ***

The two Class III Directors named below will continue in office
until the Annual Meeting of Stockholders in 2004:

GORDON C. VINEYARD, M.D.................................................................... 65 1985
Dr. Vineyard served as Director of Surgical Specialties and Radiology and Surgeon-in-
Chief of the Harvard Vanguard Medical Associates from 1991 to May 1999 when he
became interim Chief Executive Officer. From 1980 to 1991, he was its Chief of Surgery.
Dr. Vineyard retired in March, 2000. Dr. Vineyard is also an Associate Clinical Professor
of Surgery at the Harvard Medical School.*

CAROLYN C. ROBERTS......................................................................... 63 1994
Ms. Roberts is CEO Emerita of Copley Health Systems, Inc., where she served as President
and Chief Executive Officer from 1982 to October 2000. Ms. Roberts is currently the
Health Policy Advisor for Senator James Jeffords of Vermont. Ms. Roberts served on the
Board of Trustees of the American Hospital Association from 1990 to 1997, 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") and the Board of Directors of Joint
Commission Resources and Joint Commission International.** ***

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* Member of Audit Committee
** Member of Compensation Committee
*** Member of Stock Option Plans Committee

Board and Committee Meetings

The Company has an Audit Committee, consisting of Messrs. Baldwin, Shapiro
and Dr. Vineyard, each of whom is independent as defined by the applicable
listing standards of the National Association of Securities Dealers. The
principal functions of the Audit Committee are to make recommendations to the
Board of Directors regarding the engagement of the Company's independent
accountants, 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 accountants and to
assure that the accountants are in fact independent, and to establish and
monitor policies to prohibit unethical, questionable or illegal activities by
employees of the Company. The Audit Committee held five meetings during the
fiscal year ended December 31, 2001. The Audit Committee operates under a
written charter adopted by the Board of Directors in June 2000.

Mr. Shapiro, Ms. Roberts and Dr. Kasputys serve as the members of the
Compensation Committee. 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
Compensation Committee held two meetings during the fiscal year ended December
31, 2001.

Dr. Kasputys and Ms. Roberts serve as the members of the Stock Option Plans
Committee. 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 Stock Option Plans Committee held four
meetings during the fiscal year ended December 31, 2001.

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 Chief Financial Officer,
Lifeline Systems, Inc., 111 Lawrence Street, Framingham, Massachusetts
01702-8156, who will submit them to the Board of Directors for its
consideration.

During the fiscal year ended December 31, 2001, the Board of Directors of
the Company held seven 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.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the directors,
executive officers and the holders of more than 10% of the Common Stock of the
Company to file with the SEC initial reports of ownership of the Company's
Common Stock and other equity securities on a Form 3 and reports of changes in
such ownership on a Form 4 or Form 5. Officers, directors and 10% stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.

Based solely on its review of copies of reports filed by reporting persons
of the Company or written representations from certain reporting persons that
no Form 5 filing was required for such person, the Company believes that during
fiscal 2001 all filings required to be made by its reporting persons were
timely made in accordance with the requirements of the Exchange Act.

Directors' Compensation

For the fiscal year ended December 31, 2001, each director who is not an
executive officer received an annual retainer fee of $8,000 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 $3,500 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 $12,500 for his
services as Chairman in addition to his regular annual retainer fee. Members of
the Board of Directors receive $500 for each telephonic Committee meeting
attended by them.

The Company's 2000 Stock Incentive Plan (the "2000 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. In January 2001, the Stock Option Plans Committee granted
non-employee directors additional options to purchase 2,000 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.

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, 2001 who were
serving as executive officers at December 31, 2001 (the "Named Executive
Officers").

SUMMARY COMPENSATION TABLE

Long Term
Annual Compensation Compensation
---------------------------- --------------------------
Securities All Other
Underlying Compensation
Name and Principal Position Year Salary($) Bonus($) Options(#)(1) ($)(2)
--------------------------- ---- --------- --------- ------------- ------------

Ronald Feinstein............... 2001 $297,252 $345,091 (3) 40,000 $2,472
President and Chief 2000 281,836 122,198 (3) 32,900 2,400
Executive Officer 1999 267,712 -- 25,000 2,000

Richard M. Reich............... 2001 179,850 87,144 (4) 7,500 2,422
Senior Vice President and 2000 173,250 37,083 (4) 5,000 2,400
Chief Information Officer 1999 160,292 8,450 (4) 11,000 2,000

Dennis M. Hurley............... 2001 161,933 75,218 (4) 7,500 --
Senior Vice President, Finance 2000 155,583 30,224 (4) 7,000 1,200
and Chief Financial Officer 1999 149,416 7,525 (4) 7,000 2,000

Donald G. Strange.............. 2001 156,667 76,070 (4) 7,500 2,424
Senior Vice President, Sales 2000 148,917 31,950 (4) 7,000 2,400
1999 142,417 8,610 (4) 7,000 2,000

Leonard E. Wechsler............ 2001 115,286 113,389 (5) 9,000 --
President, Lifeline Systems 2000 114,411 129,668 (5) 13,000 --
Canada and Vice President 1999 (6) -- -- -- --

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(1) Reflects the grant of options to purchase Common Stock.

(2) Represents Company contributions to the Company's 401(k) Plan.

(3) Represents amounts paid under the Company's Executive Bonus Plan. Also
includes $41,117 and $92,216 paid to Mr. Feinstein in each of 2000 and 2001
as a special bonus pursuant to the terms of a Special Bonus Agreement with
the Company, which amount was based on the Company's pre-tax profit in each
of those years. See "Other Arrangements--Loans to Related Parties."

(4) Represents amounts paid under the Company's Executive Bonus Plan.

(5) Represents amounts paid in accordance with the Amended Employment Agreement
between Mr. Wechsler and Lifeline Systems Canada, Inc.

(6) Mr. Wechsler did not serve as an executive officer of the Company during
any part of the 1999 fiscal year.

Option Grants

The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended December 31, 2001 to each of
the Named Executive Officers:

OPTION GRANTS IN LAST FISCAL YEAR

Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term(1)
-------------------------------------------------------- ----------------------
Securities Percent of Total
Underlying Options Granted Exercise or
Options To Employees Base Price
Name Granted(#) in Fiscal Year ($/Share) Expiration Date 5%($) 10%($)
---- ---------- ---------------- ----------- --------------- -------- --------

Ronald Feinstein... 40,000 (2) 19.57% $13.375 2/07/11 $336,459 $852,652
Richard M. Reich... 7,500 (2) 3.67% 13.375 2/07/11 63,086 159,872
Dennis M. Hurley... 7,500 (2) 3.67% 13.375 2/07/11 63,086 159,872
Donald G. Strange.. 7,500 (2) 3.67% 13.375 2/07/11 63,086 159,872
Leonard E. Wechsler 9,000 (2) 4.40% 13.375 2/07/11 75,703 191,847

--------
(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 thereby becoming
exercisable on each of the next two anniversary dates. Under the terms of
the Company's 2000 Stock Incentive 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.

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, 2001 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, 2001:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at Fiscal Year-End(#) Fiscal Year-End($)(1)
Acquired on Value ----------------------------- -------------------------
Name Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- ----------- ----------------------------- -------------------------

Ronald Feinstein... 96,800 $1,434,768 122,444/70,266 $1,071,790/$692,986
Richard M. Reich... 13,166 131,794 38,179/19,566 358,119/ 161,738
Dennis M. Hurley... 15,000 168,867 56,412/19,566 674,134/ 169,153
Donald G. Strange.. 5,000 56,539 43,565/19,566 490,197/ 169,153
Leonard E. Wechsler -- -- 6,833/20,167 44,135/ 175,332

--------
(1) Based on the fair market value of the Common Stock on December 31, 2001
(approximately $23.32), less the option exercise price.

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 employment agreement, Mr. Feinstein
is eligible to receive a bonus equal to 50% of his base salary if the Company
achieves the annual profit performance plan goals adopted by the Board of
Directors and greater than 50% of his base salary if the Company exceeds such
goals. Effective 2002, the Board of Directors increased this bonus to 60% of
Mr. Feinstein's base salary for achieving such goals and greater than 60% of
his base salary if the Company exceeds them. 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 would have
expired on August 27, 2002. Mr. Feinstein exercised his remaining options under
this grant on October 31, 2001.

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. On June 14, 1996, Mr. Feinstein's employment agreement was

amended to provide for full vesting of this option 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
would expire on August 27, 1999. Mr. Feinstein exercised this option on August
23, 1999. See "Loans to Related Parties."

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. 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).

Wechsler Employment Agreement

Pursuant to the terms of an employment agreement, effective as of January 1,
2000, between Leonard E. Wechsler and Lifeline Systems Canada, Inc., a
subsidiary of the Company ("Lifeline Canada"), Mr. Wechsler became the
President of Lifeline Canada. Pursuant to the terms of Mr. Wechsler's
employment agreement, Mr. Wechsler is eligible to receive an annual performance
bonus in accordance with the terms set forth in his employment agreement. In
addition, Mr. Wechsler is eligible to receive a strategic bonus each year based
on his achievement of objectives set by the Chief Executive Officer of the
Company and Mr. Wechsler at the beginning of the year. Mr. Wechsler is also
eligible to receive a long-term performance bonus based on three-year revenue
and income goals covering the term of the agreement. Mr. Wechsler's employment
agreement expires on December 31, 2002. Mr. Wechsler's agreement contains
change of control provisions that provides for a certain lump sum payment to
him if within two years of a change of control of Lifeline Canada Mr.
Wechsler's employment is terminated without cause by Lifeline Canada or its
successor or Mr. Wechsler terminates his employment for certain reasons. These
change of control provisions survive the expiration of the agreement so long as
Mr. Wechsler is employed by Lifeline Canada.

Change of Control Agreements

Each of the Company's executive officers, other than Mr. Feinstein and Mr.
Wechsler, 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

In August 1999, the Company loaned $300,000 to Mr. Feinstein pursuant to a
secured promissory note (the "Feinstein Note") for the exercise of a stock
option which was to expire. The Feinstein Note, which bears interest at a rate
of 6.77% per annum, payable annually in arrears, is due August 23, 2004 and is
secured by a pledge of 16,552 shares of Common Stock of the Company. Mr.
Feinstein had been granted the right to put 70,459 shares (representing the net
number of shares issued to Mr. Feinstein with the proceeds of the loan, after
withholding for taxes) back to the Company at a price equal to $16.3125 per
share at any time during the 18-month period following April 30, 2001. In order
to eliminate any potential compensation expense exposure to the Company as a
result of this put right, Mr. Feinstein sold all shares covered by this
agreement in the open market as of March 2002, thereby eliminating any right of
Mr. Feinstein to put shares back to the Company. As of January 31, 2002,
$300,000 was outstanding on the Feinstein Note.

In April 2000, the Company loaned $250,000 to Mr. Feinstein pursuant to a
secured promissory note (the "2000 Note"). The 2000 Note, which bears interest
at a rate of 6.94% payable annually in arrears, is due April 5, 2005 and is
secured by a pledge of 25,641 shares of Common Stock of the Company. As of
January 31, 2002, $250,000 was outstanding on the 2000 Note.

Pursuant to the terms of a special bonus arrangement between Mr. Feinstein
and the Company, until the Feinstein Note and the 2000 Note are paid in full,
the Company has agreed to pay Mr. Feinstein a bonus equal to the lesser of (x)
the annual interest due on the Feinstein Note and the Note and (y) 1.0% of the
Company's pre-tax profit ("Base Income") (a) in the first year that the Company
achieves a specified level of Base Income and (b) in subsequent years, provided
that the Company achieves certain percent increases in Base Income from the
previous year.

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, 1996 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, 1997, 1998, 1999, 2000 and 2001.

[GRAPH APPEARS HERE]

December 31,
-----------------------------------
1996 1997 1998 1999 2000 2001
----- ----- ----- ----- ----- -----

Lifeline Systems, Inc.................. 100.0 143.6 142.9 85.7 72.1 136.7
Nasdaq Composite Index (U.S. Companies) 100.0 122.5 172.7 320.9 193.0 153.2
Nasdaq Health Services Stocks.......... 100.0 102.6 87.0 70.0 96.0 103.8

REPORT OF THE COMPENSATION COMMITTEE

Overview and Philosophy

The Compensation Committee of the Board of Directors (the "Committee") is
composed of the three undersigned 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, and

. 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. Officers are able to elect to receive stock options in lieu of a
cash bonus. The number of such options is 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 interest 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 in lieu of cash 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 2001, the Committee granted
non-qualified options which vest in three equal installments commencing on the
first anniversary date of the grant.

Chief Executive Officer's 2001 Compensation

As of March 1, 2001, the Company's President and Chief Executive Officer,
Mr. Ronald Feinstein, received a base salary of $300,000. For the year ended
December 31, 2001, Mr. Feinstein also received options to purchase 40,000
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 salary is reviewed each year by the Compensation Committee, and
was adjusted by the Compensation Committee to $315,000 effective March 1, 2002,
based on the Company's performance in 2001, 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. In addition, effective in 2002, the Compensation Committee
increased the bonus Mr. Feinstein is eligible to receive to 60% of Mr.
Feinstein's base salary if the Company achieves the annual profit performance
plan goals adopted by the Board of Directors and greater than 60% of his base
salary if the Company exceeds such goals. 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 C. Roberts*
L. Dennis Shapiro

--------
* Member of the Stock Option Plans Committee

Compensation Committee Interlocks and Insider Participation

The current members of the Compensation Committee are Dr. Kasputys, Mr.
Shapiro and Ms. Roberts. No member of the Compensation Committee was at any
time during the fiscal year ended December 31, 2001, an officer or employee of
the Company nor has any member of the Compensation Committee had any
relationship with the Company requiring disclosure under Item 404 of Regulation
S-K under the Securities Exchange Act of 1934.

None of the Company's executive officers has served as a director or member
of the compensation committee (or other committee serving an equivalent
function) of any other entity, one of whose executive officers served as a
director of or member of the Compensation Committee.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Company's Board of Directors is composed of the
three undersigned members and acts under a written charter first adopted and
approved in June 2000. The members of the Audit Committee are independent
directors, as defined by its charter and the rules of the Nasdaq Stock Market.

The Audit Committee reviewed the Company's audited financial statements for
the fiscal year ended December 31, 2001 and discussed these financial
statements with management. Management is responsible for the Company's
internal controls and the financial reporting process. The Company's
independent accountants are responsible for performing an independent audit of
the Company's financial statements in accordance with generally accepted
accounting principles and issuing a report on those financial statements. The
Audit Committee is responsible for monitoring and overseeing these processes.
As appropriate, the Audit Committee reviews and evaluates, and discusses with
management, internal accounting, financial and auditing personnel and the
independent accountants, the following:

. the plan for, and the independent accountants' report on, each audit of
the Company's financial statements,

. the Company's financial disclosure documents, including all financial
statements and reports filed with the Securities and Exchange Commission
or sent to the Company's stockholders,

. changes in the Company's accounting practices, principles, controls or
methodologies,

. significant developments or changes in accounting rules applicable to the
Company, and

. the adequacy of the Company's internal controls and accounting, financial
and auditing personnel.

The Audit Committee also reviewed and discussed the audited financial
statements and the matters required by Statement on Auditing Standards 61
(Communication with Audit Committees) with PricewaterhouseCoopers LLP, the
Company's independent accountants. SAS 61 requires the Company's independent
accountants to discuss with the Audit Committee, among other things, the
following:

. methods to account for significant unusual transactions,

. the effect of significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance or
consensus,

. the process used by management in formulating particularly sensitive
accounting estimates and the basis for the accountants' conclusions
regarding the reasonableness of those estimates, and

. disagreements with management over the application of accounting
principles, the basis for management's accounting estimates and the
disclosures in the financial statements.

The Company's independent accountants also provided the Audit Committee with
the written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees). Independence
Standards Board Standard No. 1 requires accountants annually to disclose in
writing all relationships that in the accountants' professional opinion may
reasonably be thought to bear on independence, confirm their perceived
independence and engage in a discussion of independence. In addition, the Audit
Committee discussed with the independent accountants their independence from
the Company.

Based on its discussions with management and the independent accountants,
and its review of the representations and information provided by management
and the independent accountants, the Audit Committee recommended to the
Company's Board of Directors that the audited financial statements be included
in the Company's Annual Report on Form 10-K for the year ended December 31,
2001.

Audit Committee

Everett N. Baldwin
L. Dennis Shapiro
Gordon C. Vineyard

Independent Accountants Fees and Other Matters

Audit Fees

As of January 31, 2002, PricewaterhouseCoopers LLP billed the Company an
aggregate of $173,000 in fees for professional services rendered in connection
with the audit of the Company's financial statements for the most recent fiscal
year and the reviews of the financial statements included in each of the
Company's Quarterly Reports on Form 10-Q during the fiscal year ended December
31, 2001.

Financial Information Systems Design and Implementation Fees

PricewaterhouseCoopers LLP did not bill the Company for any professional
services rendered to the Company or its affiliates for the fiscal year ended
December 31, 2001 in connection with financial information systems design or
implementation, the operation or supervision of the Company's information
system or the management of the Company's local area network.

All Other Fees

PricewaterhouseCoopers LLP billed the Company a total of $130,000 in other
fees during the fiscal year ended December 31, 2001. These fees were related to
professional services rendered in connection with obtaining a Tax Increment
Finance Agreement with the town of Framingham, Massachusetts, where the Company
relocated in 1999. The Audit Committee did not consider the provision of these
services to be incompatible with PricewaterhouseCoopers LLP's independence.

RATIFICATION OF APPOINTMENT OF ACCOUNTANTS

Subject to ratification by the stockholders, the Board of Directors has
selected the firm of PricewaterhouseCoopers LLP, certified public accountants,
as independent accountants of the Company for the Company's 2002 fiscal year.
Although stockholder approval of the Board of Directors' selection of
PricewaterhouseCoopers LLP 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 PricewaterhouseCoopers LLP. Representatives of
PricewaterhouseCoopers LLP 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.

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.

Annual Report

A copy of the Company's annual report on Form 10-K for the fiscal year ended
December 31, 2001 is included with this proxy statement and is incorporated
herein by reference.

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. 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.

Householding of Annual Meeting Materials

Some banks, brokers and other nominee record holders may be participating in
the practice of "householding" proxy statements and annual reports. This means
that only one copy of the Company's proxy statement or annual report may have
been sent to multiple shareholders in your household. The Company will promptly
deliver a separate copy of either document to you if you call or write the
Company at the following address or phone number: Lifeline Systems, Inc., 111
Lawrence Street Framingham, MA 01702-8156, Attention: Chief Financial Officer,
(508) 988-1000. If you want to receive separate copies of the annual report and
proxy statement in the future, or if you are receiving multiple copies and
would like to receive only one copy for your household, you should contact your
bank, broker, or other nominee record holder, or you may contact the Company at
the above address and phone number.

Deadline for Submission of Stockholder Proposals

The Company expects to hold its 2003 Annual Meeting in May 2003 and to mail
its proxy statement in connection therewith on or around April 12, 2003.
Accordingly, stockholder proposals submitted pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") for inclusion
in the Company's proxy materials for its 2003 Annual Meeting of Stockholders
must be received by the Chief Financial Officer of the Company at the principal
offices of the Company no later than December 13, 2002. Written notice of
proposals of Stockholders submitted outside the processes of Rule 14a-8 under
the Exchange Act for consideration at the 2002 Annual Meeting must be received
on or before February 26, 2003, in order to be considered timely for purposes
of Rule 14a-4 under the Exchange Act.

By Order of the Board of Directors,

JEFFREY A. STEIN, CLERK

Framingham, Massachusetts
April 12, 2002

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.

REVOCABLE PROXY
Lifeline Systems, Inc.

[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE

ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 2002

The undersigned hereby appoints L. Dennis Shapiro, Ronald Feinstein and
Jeffrey A. Stein, and each of them, with full powers of substitution, to act as
attorneys and proxies for the undersigned to vote all shares of the capital
stock of Lifeline Systems, Inc. (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of Stockholders (the "Meeting") to be
held at Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, on Wednesday,
May 15, 2002 at 10:00 a.m. local time, and at any and all adjournment and
adjournments thereof.

------------------
Please be sure to sign and date Date
this Proxy in the box below.
-----------------------------------------------------------------------

Stockholder sign above Co-holder (if any) sign above
-----------------------------------------------------------------------

With- For All
For hold Except
1. To elect two Class I Directors, each to [_] [_] [_]
hold office until the Annual Meeting of
Stockholders in 2005 and until his
successor is elected and qualified.

(1) L. Dennis Shapiro
(2) Everett N. Baldwin

INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.

--------------------------------------------------------------------------------

For Against Abstain
2. To ratify the selection of Pricewater- [_] [_] [_]
houseCoopers LLP as the Company's
independent accountants for 2002.

3. To transact such other business as may properly come before the meeting or
any adjournment or adjournments of the meeting.

UNLESS OTHERWISE INSTRUCTED, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS 1
AND 2 SET FORTH HEREON.

The Board of Directors recommends a vote "FOR" proposals 1 and 2 listed above.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

+ +
--------------------------------------------------------------------------------
/\ Detach above card, sign, date and mail in postage paid envelope provided. /\

Lifeline Systems, Inc.

--------------------------------------------------------------------------------
Should the above signed be present and choose to vote at the Meeting or at
any adjournment of adjournments thereof, and after notification to the Chief
Financial Officer of the Company at the Meeting of the stockholder's decision to
terminate this proxy, then the power of such attorneys or proxies shall be
deemed terminated and of no further force and effect. This proxy may also be
revoked by filing a written notice of revocation with the Chief Financial
Officer of the Company or by duly executing a proxy bearing a later date.

The above signed acknowledges receipt from the Company, prior to the
execution of this proxy, of notice of the Meeting and a Proxy Statement.

Please sign exactly as your name(s) appear(s) hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give your fill
title. If shares are held jointly, each holder should sign.

PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
--------------------------------------------------------------------------------

IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT IT
IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION
WITH THE PROXY IN THE ENVELOPE PROVIDED.

----------------------------------------------------

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