BROOKTROUT TECHNOLOGY INC
PRE 14A, 2000-03-17
TELEPHONE & TELEGRAPH APPARATUS
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<PAGE>   1

                                  SCHEDULE 14A
                                 (RULE 14a-101)
                    INFORMATION REQUIRED IN PROXY STATEMENT

                            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:
[X]  Preliminary Proxy Statement
[ ]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Confidential, For Use of the Commission Only (as permitted by Rule
     14a-6(e)(2))

[ ]  Fee computer on table below per Exchange Act Rules 14a-6(i)(1) 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 previous paid:

   (2) Form, Schedule or Registration Statement no.:

   (3) Filing Party:

   (4) Date Filed:

- --------------------------------------------------------------------------------
<PAGE>   2

                                BROOKTROUT, INC.

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                      TO BE HELD ON THURSDAY, MAY 11, 2000

     NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of
Brooktrout, Inc. (the "Company") will be held on Thursday, May 11, 2000 at 9:30
a.m., local time, at Fleet National Bank, One Federal Street, 8th Floor, Boston,
Massachusetts 02109 for the following purposes:

     1. To elect one Class II Director, to serve for a three-year term until the
2003 annual meeting of stockholders and until his successor is duly elected and
qualified;

     2. To approve an amendment to the Company's 1992 Stock Incentive Plan, as
amended (the "Stock Incentive Plan"), to increase the number of shares of the
Company's common stock reserved for issuance under the Stock Incentive Plan;

     3. To consider and act upon a proposal to approve an amendment to the
Company's Amended and Restated 1992 Stock Purchase Plan (the "Purchase Plan") to
increase the number of shares of the Company's common stock subject to issuance
under the Purchase Plan;

     4. To consider and act upon a proposal to adopt an amendment to the
Company's Restated Articles of Organization, as amended, increasing the number
of authorized shares of the Company's common stock, $.01 par value per share;

     5. To ratify the selection of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000; and

     6. To consider and act upon any other matters which may properly be brought
before the annual meeting and any adjournments or postponements thereof.

     Any action may be taken on the foregoing proposals at the annual meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the annual meeting may be adjourned, or to which the annual meeting
may be postponed.

     The Board of Directors has fixed the close of business on March 22, 2000 as
the record date for determining the stockholders entitled to notice of and to
vote at the annual meeting and any adjournments or postponements thereof. Only
stockholders of record of the Company's common stock, at the close of business
on that date will be entitled to notice of and to vote at the annual meeting and
at any adjournments or postponements thereof.

     You are requested to fill in and sign the enclosed proxy which is solicited
by the Board of Directors and to mail it promptly in the enclosed
postage-prepaid envelope. Any proxy may be revoked by delivery of a later dated
proxy. Stockholders of record who attend the annual meeting may vote in person,
even if they have previously delivered a signed proxy.

                                            By Order of the Board of Directors,

                                            David W. Duehren
                                            Clerk

Needham, Massachusetts
April   , 2000

     WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE POSTAGE-PREPAID ENVELOPE PROVIDED.
IF YOU WISH TO VOTE YOUR SHARES IN PERSON AT THE MEETING, YOUR PROXY MAY BE
REVOKED.
<PAGE>   3

                                BROOKTROUT, INC.
                                410 FIRST AVENUE
                          NEEDHAM, MASSACHUSETTS 02494

                        -------------------------------
                                PROXY STATEMENT
                        -------------------------------

                    FOR 2000 ANNUAL MEETING OF STOCKHOLDERS

                      TO BE HELD ON THURSDAY, MAY 11, 2000

                                                                  April   , 2000

     This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Brooktrout, Inc. ("Brooktrout" or the
"Company") from stockholders of the outstanding shares of common stock of the
Company for use at the 2000 annual meeting of stockholders of the Company to be
held on Thursday, May 11, 2000, and any adjournments or postponements thereof,
for the purposes set forth in the accompanying notice of annual meeting.

     This proxy statement, the accompanying notice of annual meeting and the
proxy card are first being sent to stockholders on or about April   , 2000. The
Board of Directors has fixed the close of business on March 22, 2000 as the
record date for the determination of stockholders entitled to notice of and to
vote at the annual meeting. Only stockholders of record of the Company's common
stock, par value $.01 per share, at the close of business on the record date
will be entitled to notice of and to vote at the annual meeting. As of the
record date, there were [11,905,530] shares of common stock outstanding and
entitled to vote at the annual meeting. Holders of common stock outstanding as
of the close of business on the record date will be entitled to one vote for
each share.

     The presence, in person or by proxy, of holders of at least a majority of
the total number of outstanding shares of common stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the annual
meeting. Shares that reflect abstentions or "broker nonvotes" (i.e., shares
represented at the annual meeting held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote such shares and, with respect to one or more but not all
issues, such brokers or nominees do not have discretionary voting power to vote
such shares) will be counted for purposes of determining whether a quorum is
present for the transaction of business at the annual meeting. With respect to
the proposal to (i) increase the authorized shares under the 1992 Stock
Incentive Plan, as amended (the "Stock Incentive Plan"), (ii) increase the
authorized shares under the Amended and Restated 1992 Stock Purchase Plan (the
"Purchase Plan") and (iii) amend the Articles of Organization to increase the
aggregate number of authorized shares of common stock, the affirmative vote of a
majority of the shares of common stock present or represented and entitled to
vote at the annual meeting is required to approve these proposals. Thus,
abstentions will have the effect of a vote against the proposal while a broker
non-vote will have no effect on the outcome. With respect to the election of
Director, such election shall be determined by a plurality of vote cast by
stockholders. Votes for the election of Director may only be cast in favor of or
withheld from the nominee, and votes that are withheld will be excluded entirely
from the vote and will have no effect.

     YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE. SHARES REPRESENTED BY A
PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE VOTE AT THE ANNUAL MEETING AND NOT
REVOKED WILL BE VOTED AT THE ANNUAL MEETING AS DIRECTED IN THE PROXY. IF A
PROPERLY EXECUTED PROXY IS SUBMITTED AND NO INSTRUCTIONS ARE GIVEN, THE PROXY
WILL BE VOTED FOR: (I) THE ELECTION OF W. BROOKE TUNSTALL AS THE CLASS II
DIRECTOR OF THE COMPANY; (II) THE APPROVAL OF AN AMENDMENT TO THE STOCK
INCENTIVE
<PAGE>   4

PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE STOCK
INCENTIVE PLAN; (III) THE APPROVAL OF AN AMENDMENT TO THE PURCHASE PLAN TO
INCREASE THE NUMBER OF SHARES SUBJECT TO ISSUANCE UNDER THE PURCHASE PLAN; (IV)
THE APPROVAL OF AN AMENDMENT TO THE COMPANY'S RESTATED ARTICLES OF ORGANIZATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK; AND
(V) THE RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE 2000 FISCAL YEAR. IT IS NOT ANTICIPATED THAT ANY
MATTERS OTHER THAN THOSE SET FORTH IN THIS PROXY STATEMENT WILL BE PRESENTED AT
THE ANNUAL MEETING. IF OTHER MATTERS ARE PRESENTED, PROXIES WILL BE VOTED IN
ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS.

     You may revoke a proxy at any time before it has been exercised by filing a
written revocation with the Clerk of the Company at the address of the Company
set forth above, by filing a duly executed proxy bearing a later date, or by
appearing in person and voting by ballot at the annual meeting. Any stockholder
of record as of the record date attending the annual meeting may vote in person
whether or not a proxy has been previously given, but the presence (without
further action) of a stockholder at the annual meeting will not constitute
revocation of a previously given proxy.

     The Annual Report of the Company, including financial statements for the
fiscal year ended December 31, 1999, is being mailed to stockholders
concurrently with this proxy statement. The annual report, however, is not part
of the proxy solicitation materials, except for certain parts of the Annual
Report which are expressly incorporated by reference herein. See "Incorporation
of Certain Documents by Reference."

                        ELECTION OF A CLASS OF DIRECTORS

                           (ITEM 1 OF THE PROXY CARD)

     Effective as of May 11, 2000, the Board of Directors of the Company will be
comprised of five members, divided into three classes. The Directors in each
class serve for a term of three years and until each of their successors are
duly elected and qualified. At each annual meeting of stockholders, each
successor to the class of Directors whose term expires at that meeting will be
elected to hold office for a term continuing until the annual meeting of
stockholders held in the third year following the year of his election and the
election and qualification of his successor.

     At the annual meeting, one Class II Director will be elected to serve until
the 2003 annual meeting of stockholders and until his successor is duly elected
and qualified. The Board of Directors has nominated W. Brooke Tunstall to serve
as the Class II Director. Mr. Tunstall is currently serving as a Director of the
Company. The Board of Directors anticipates that Mr. Tunstall will serve, if
elected, as a Class II Director. However, if he is unable to accept election,
the proxies will be voted for the election of such other person or persons as
the Board of Directors may recommend. Patrick T. Hynes, a current Class II
Director is not seeking re-election at the annual meeting and will cease being a
Director as of May 11, 2000.

     The election of a Director shall be determined by a plurality of the votes
of shares of common stock cast in person or by proxy at the annual meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF W. BROOKE TUNSTALL
AS THE CLASS II DIRECTOR.

                                        2
<PAGE>   5

INFORMATION REGARDING DIRECTORS

     The following table sets forth certain information with respect to the
nominee of the Board of Directors for election at the annual meeting and those
continuing Directors of the Company whose terms expire at the annual meetings of
stockholders in 2001 and 2002, based on information furnished to the Company by
each Director as of March 7, 2000.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL                                                   DIRECTOR
OCCUPATION FOR PAST FIVE YEARS                                AGE     SINCE
- ------------------------------                                ---    --------
<S>                                                           <C>    <C>
CLASS II NOMINEE FOR ELECTION AT 2000 ANNUAL MEETING -- TERM
  TO EXPIRE IN 2003
W. Brooke Tunstall..........................................  78       1990
  President of Brooke Tunstall Associates since January 1,
  1985; Senior Advisor to Mercer Management Consulting, a
  subsidiary of Marsh and McLennan, Inc., from November 1987
  to January 1994.

CLASS III CONTINUING DIRECTORS -- TERM TO EXPIRE IN 2001

Eric R. Giler...............................................  44       1984
  President and a Director of Brooktrout since the Company's
  inception in 1984; Director of Interspeed, Inc. since
  1996; Director of Netegrity, Inc.; Director of the
  Massachusetts Telecommunications Council; and director of
  various privately-held high technology companies
Robert G. Barrett...........................................  55       1990
  General Partner of Battery Ventures, L.P. since 1983;
  Director of Interspeed, Inc. since 1999; Director of
  Peerless Systems Corp.; and director of various
  privately-held high technology companies

CLASS I CONTINUING DIRECTORS -- TERM TO EXPIRE IN 2002

David L. Chapman............................................  65       1992
  President and Chief Executive Officer of NorthPoint
  Software Ventures, Inc. since February 1992; General
  Partner and Executive Vice President of Landmark Ventures,
  Inc. from March 1990 to February 1992.
David W. Duehren............................................  42       1984
  Vice President of Research and Development, and a Director
  of Brooktrout since the Company's inception in 1984.
</TABLE>

THE BOARD OF DIRECTORS AND ITS COMMITTEES

     Board of Directors.  The Board of Directors of the Company held 5 meetings
during fiscal 1999. During fiscal 1999, each of the Directors attended at least
75% of the total number of meetings of the Board of Directors and of the
committees of which he was a member.

     Audit Committee.  The members of the Audit Committee are Messrs. Barrett,
Chapman and Tunstall. The Audit Committee reviews the internal accounting
procedures of the Company and consults with and reviews the services provided by
the Company's independent auditors. During fiscal 1999, the Audit Committee held
4 meetings.

     Compensation Committee.  The members of the Compensation Committee are
Messrs. Barrett, Chapman and Giler. The Compensation Committee reviews and
recommends to the Board of Directors the compensation and benefits of all of the
officers of the Company and reviews general policy matters relating to
compensation and benefits of employees of the Company. During Fiscal 1999, the
Compensation Committee held 2 meetings. The non-employee Directors who are
members of the Compensation Committee, Messrs. Barrett and Chapman, also
administer the Company's stock option plans and employee stock purchase plan.

                                        3
<PAGE>   6

     The Board of Directors selects nominees for election as Directors of the
Company. The Board of Directors will consider a nominee recommended by a
stockholder for election to the Board of Directors if such recommendation is
presented on a timely basis in accordance with, and is accompanied by the
information required by the Company's Amended and Restated By-laws. The Company
does not maintain a standing nominating committee.

DIRECTOR COMPENSATION

     Directors of the Company who are also employees receive no additional
compensation for their services as Directors. Each non-employee Director
receives an annual Director's fee of $10,000, payable quarterly. Each
non-employee Director also receives $1,000 in connection with each Board of
Directors or committee meeting attended. The Stock Incentive Plan provides that
non-employee Directors who are not stockholders who beneficially own 10% or more
of the common stock, or affiliates of such stockholders, will receive stock
options according to a specified formula.

OWNERSHIP OF EQUITY SECURITIES

     The following table shows the beneficial ownership of the common stock as
of March 7, 2000, (i) of each Director and nominee for Director, the President
and the four other most highly compensated executive officers of the Company who
earned in excess of $100,000 during fiscal 1999 (the President and such
executive officers are herein referred to as the "Named Executives") and (ii) of
all Directors and executive officers of the Company, as a group. The Company is
not aware of any person, including any group of persons, who beneficially owns
five percent or more of the outstanding common stock.

<TABLE>
<CAPTION>
                                                              AMOUNT AND NATURE OF
                                                              BENEFICIAL OWNERSHIP   PERCENT
           NAME AND ADDRESS OF BENEFICIAL OWNER*               OF COMMON STOCK(1)    OF CLASS
           -------------------------------------              --------------------   --------
<S>                                                           <C>                    <C>

Robert G. Barrett...........................................          29,908(2)          **
David L. Chapman............................................          53,010(3)          **
W. Brooke Tunstall..........................................          48,656(4)          **
Eric R. Giler...............................................         555,270(5)         4.6%
David W. Duehren............................................         553,049(6)         4.6%
Patrick T. Hynes............................................          48,984             **
Robert C. Leahy.............................................         253,662(7)         2.1%
Jonathan J. Sirota..........................................         195,514(8)         1.6%
R. Andrew O'Brien...........................................         218,231(9)         1.8%
All Directors and executive officers as a group (13
  persons)..................................................       2,025,035(10)       16.9%
</TABLE>

- ---------------
 *    Except as otherwise indicated, the address of the beneficial owner is:
      c/o Brooktrout, Inc., 410 First Avenue, Needham, MA 02494.

**    Less than 1%.

(1)   Beneficial share ownership is determined pursuant to Rule 13d-3 under the
      Securities Exchange Act of 1934, as amended (the "Exchange Act").
      Accordingly, a beneficial owner of a security includes any person who,
      directly or indirectly, through any contract, arrangement, understanding,
      relationship or otherwise has or shares the power to vote such security or
      the power to dispose of such security. The amounts set forth above as
      beneficially owned include shares owned, if any, by spouses and relatives
      living in the same home as to which beneficial ownership may be
      disclaimed. The amounts set forth as beneficially owned include shares of
      common stock which such persons had the right to acquire within 60 days of
      March 7, 2000, pursuant to stock options.

                                        4
<PAGE>   7

(2)   Includes 20,158 shares subject to options exercisable within 60 days.

(3)   Includes 22,031 shares subject to options exercisable within 60 days and
      675 shares held by Mr. Chapman's wife, as to which 675 shares he disclaims
      beneficial ownership.

(4)   Includes 39,531 shares subject to options exercisable within 60 days and
      1,125 shares held by Mr. Tunstall's wife, as to which 1,125 shares he
      disclaims beneficial ownership.

(5)   Includes 40,482 shares subject to options exercisable within 60 days,
      212,092 shares held jointly with Mr. Giler's wife and 675 shares held by
      Mr. Giler's minor children, as to which 675 shares he disclaims beneficial
      ownership.

(6)   Includes 40,475 shares subject to options exercisable within 60 days and
      102,510 shares held by Mr. Duehren's wife, as to which 102,510 shares he
      disclaims beneficial ownership.

(7)   Includes 65,432 shares subject to options exercisable within 60 days.

(8)   Includes 41,683 shares subject to options exercisable within 60 days and
      450 shares held by Mr. Sirota's wife, as to which 450 shares he disclaims
      beneficial ownership.

(9)   Includes 60,920 share subject to options exercisable within 60 days.

(10)  Includes the information set forth in notes 2-9 above and 390,462 shares
      subject to options exercisable within 60 days.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     The Exchange Act requires that the Company's officers and directors, and
persons who own more than 10% of the Company's outstanding shares of common
stock file initial reports of ownership and reports of changes in ownership with
the Commission and NASDAQ. Based solely upon a review of Forms 3 and 4 and
amendments thereto furnished to the Company under Rule 16a-3(e) of the Exchange
Act during fiscal 1999 and Form 5 and amendments thereto furnished to the
Company with respect to fiscal 1999, no officer, director or person who owns
more than 10% of the Company's outstanding shares of common stock failed to file
on a timely basis such reports, other than Michael Donoghue, John Ison and John
Faiman who each inadvertently failed to timely file a Form 3. Each of Messrs.
Donoghue, Ison and Faiman will file a Form 3 shortly.

EXECUTIVE COMPENSATION

     Summary of Compensation in Fiscal 1999.  The following table sets forth
information for the fiscal years ended December 1997, 1998 and 1999 concerning
compensation for services in all capacities awarded to, earned by or paid to the
Named Executives during such years.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                     LONG-TERM
                                                                    COMPENSATION
                                                                    ------------
                                        ANNUAL COMPENSATION          SECURITIES
                                   -----------------------------     UNDERLYING         ALL OTHER
   NAME AND PRINCIPAL POSITION     YEAR    SALARY($)    BONUS($)     OPTIONS(#)     COMPENSATION($)(1)
   ---------------------------     ----    ---------    --------    ------------    ------------------
<S>                                <C>     <C>          <C>         <C>             <C>
Eric R. Giler....................  1999    $320,000     $515,000       45,000             $2,400
President, Brooktrout, Inc         1998     265,000      243,200           --              2,500
                                   1997     220,000      112,343       37,500              2,375
David W. Duehren.................  1999     187,000      187,000       20,000              2,400
Vice President of Research and     1998     175,000      135,679           --              2,458
Development, Brooktrout, Inc.      1997     165,000       49,768       25,000              2,249
</TABLE>

                                        5
<PAGE>   8

<TABLE>
<CAPTION>
                                                                     LONG-TERM
                                                                    COMPENSATION
                                                                    ------------
                                        ANNUAL COMPENSATION          SECURITIES
                                   -----------------------------     UNDERLYING         ALL OTHER
   NAME AND PRINCIPAL POSITION     YEAR    SALARY($)    BONUS($)     OPTIONS(#)     COMPENSATION($)(1)
   ---------------------------     ----    ---------    --------    ------------    ------------------
<S>                                <C>     <C>          <C>         <C>             <C>
Robert C. Leahy..................  1999     215,000      305,000       30,000              2,400
Vice President of Finance and
Operations and Treasurer,          1998     175,000      164,160           --              2,500
Brooktrout, Inc.                   1997     160,000       59,728       25,000              2,263
Jonathan J. Sirota...............  1999     195,000      160,480       20,000              2,400
Vice President, Brooktrout, Inc.   1998     175,000      121,600           --              2,500
General Manager, Data              1997     165,000       51,909       25,000              2,375
Technology Division
R. Andrew O'Brien................  1999     195,000      210,000       30,000              2,400
Vice President Business            1998     165,000      121,600           --              2,400
Development, Brooktrout, Inc.      1997     150,000       39,191       25,000              2,375
</TABLE>

- ---------------
(1) The Company's matching contributions pursuant to the Company's 401(k) plan.

     Stock Options Granted in Fiscal 1999.  In 1992, the Company implemented the
Stock Incentive Plan pursuant to which options to purchase common stock may be
granted to non-employee Directors, officers and other key employees of the
Company. The following table sets forth the stock options granted under the
Stock Incentive Plan during fiscal 1999 to the Named Executives.

                       OPTION GRANTS IN FISCAL YEAR 1999

<TABLE>
<CAPTION>
                                                                 INDIVIDUAL GRANTS
                                          ---------------------------------------------------------------
                                                         PERCENT
                                            NUMBER       OF TOTAL     EXERCISE
                                          OF SHARES      OPTIONS         OR                      GRANT
                                          UNDERLYING    GRANTED TO      BASE                     DATE
                                           OPTIONS     EMPLOYEES IN    PRICE     EXPIRATION     PRESENT
NAME                                      GRANTED(#)   FISCAL YEAR     ($/SH)       DATE      VALUE($)(1)
- ----                                      ----------   ------------   --------   ----------   -----------
<S>                                       <C>          <C>            <C>        <C>          <C>
Eric R. Giler...........................    45,000         4.9%        $11.81    10/18/2009    $351,014
David W. Duehren........................    20,000         2.2%        $11.81    10/18/2009     156,006
Robert C. Leahy.........................    30,000         3.3%        $11.81    10/18/2009     234,009
Jonathan J. Sirota......................    20,000         2.2%        $11.81    10/18/2009     156,006
R. Andrew O'Brien.......................    30,000         3.3%        $11.81    10/18/2009     234,009
</TABLE>

- ---------------
(1) The estimated grant date value reflected is determined using the
    Black-Scholes option pricing model. The material assumptions and adjustments
    incorporated in the Black-Scholes option pricing model in estimating the
    value of the options reflected above include (i) an exercise price as
    indicated in the table above; (ii) options are exercised at the end of a
    five year period; (iii) interest rates representing the interest rate on
    U.S. Treasury securities with maturity dates of five years as of the date of
    grant; and (iv) volatility of approximately 76% calculated using daily stock
    prices from October 1992 to the date of grant. The ultimate value of the
    options will depend on the future market price of the common stock, which
    cannot be forecast with reasonable accuracy. The actual value an optionee
    will realize upon exercise of an option will depend on the excess of the
    market value of the common stock on the date the option is exercised over
    the exercise price.

     Aggregated Stock Option Exercises in Fiscal 1999 and Stock Option
Values.  The following table contains information concerning each exercise of
options to purchase common stock during fiscal 1999 by each of the Named
Executives and the number and value of unexercised stock options held by the
Named

                                        6
<PAGE>   9

Executives, as listed below, on December 31, 1999. On December 31, 1999, the
last trading day in fiscal 1999, the closing price of the common stock on The
NASDAQ Stock Market, Inc.'s ("NASDAQ") National Market System was $18.5625 per
share

             AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FISCAL
                          YEAR-END 1999 OPTION VALUES

<TABLE>
<CAPTION>
                                                                   NUMBER OF
                                                                  SECURITIES             VALUE OF
                                                                  UNDERLYING            UNEXERCISED
                                                                  UNEXERCISED          IN-THE-MONEY
                                   SHARES                      OPTIONS AT FISCAL     OPTIONS AT FISCAL
                                  ACQUIRED                        YEAR-END(#)           YEAR-END(#)
                                     ON            VALUE         EXERCISABLE/          EXERCISABLE/
             NAME                EXERCISE(#)    REALIZED($)      UNEXERCISABLE       UNEXERCISABLE(1)
             ----                -----------    -----------    -----------------    -------------------
<S>                              <C>            <C>            <C>                  <C>
Eric R. Giler..................    20,378         214,293       295,625/43,125      $2,057,630/$302,264
David W. Duehren...............     4,378           5,093       170,790/21,250      $1,063,820/$150,866
Robert C. Leahy................     8,250         103,035       213,700/28,750      $1,727,866/$201,509
Jonathan J. Sirota.............        --              --       173,750/21,250      $1,092,285/$150,866
R. Andrew O'Brien..............     3,000          30,960       217,600/28,750      $1,617,929/$201,509
</TABLE>

- ---------------
(1) Market value of underlying common stock based on the closing price of
    $18.5625 on December 31, 1999 minus the exercise price of the options.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The Compensation Committee consists of Robert G. Barrett, David L. Chapman
and Eric R. Giler. Mr. Giler is the President of the Company. Mr. Giler does not
participate in actions or consideration by the Compensation Committee with
respect to his own compensation, and is not a part of the Compensation Committee
(comprised of the other members of the Compensation Committee) which administers
the Stock Incentive Plan.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

     The Compensation Committee's executive compensation philosophy (which is
intended to apply to all senior management, including Mr. Giler) is to provide a
balanced compensation package while recognizing the Company's particular needs.
The Compensation Committee seeks to establish competitive levels of
compensation, integrate management's pay with the achievement of the Company's
performance goals, and assist the Company in attracting and retaining qualified
management. With this philosophy in mind, the Company has developed and
implemented compensation policies, plans and programs that seek to closely align
the financial interests of senior management of the Company with those of the
stockholders of the Company and to provide management additional incentive to
enhance the sales growth and profitability of the Company, and, thus,
stockholder value.

     Members of senior management of the Company are being compensated
substantially in accordance with the terms of the Management Compensation Plan
(the "Compensation Plan"), which was established in 1991 and has been updated
annually thereafter. The three components of the Compensation Plan are base
salary, cash bonuses and incentive stock.

     Base Salary.  The Company sets base salary levels for senior management
each year based on a number of factors, including the status of the competitive
marketplace for such positions (including a comparison of base salaries for
comparable positions at comparable companies within the Company's industry), the

                                        7
<PAGE>   10

responsibilities of the position, the experience, and the required knowledge of
the individual. Base salary comparisons are based on a number of industry
compensation surveys which are available to the Compensation Committee.
Companies included in these surveys include a number of companies which are
included in the published industry index shown in the performance comparison on
page 12, but also include some companies which are private or are traded in
markets other than the NASDAQ National Market System. The Compensation Committee
selected the surveys used in the base salary comparison on the basis of
availability and general comparability of the included companies to the Company.
The Compensation Committee has attempted to fix base salaries on a basis
generally in line with base salary levels for comparable companies.

     Variable Compensation -- Cash Bonuses.  The Compensation Plan establishes
criteria for awarding cash bonuses to the Company's executive officers based on
a percentage of each such officer's base salary and consists of up to three
components, weighted differently for different executives: the achievement of
Company sales goals, Company profit goals and departmental/organizational goals
(collectively, the "Bonus Goals"). The Compensation Plan bonus levels for 1999
were established by the Compensation Committee at levels that would make
available bonuses a significant part of the total compensation package if Bonus
Goals were met, in order that the cash bonus component may act as a substantial
performance incentive. The departmental/ organizational goal components of the
cash bonuses are paid on a semi-annual basis. The sales and profit components of
the cash bonuses are proportionally accrued upon achievement of 60% of such
goals and are paid quarterly. An additional bonus (based on a percentage of the
available bonus) is paid for each percentage point by which sales and profits
exceed 100% of the Bonus Goals.

     Incentive Stock.  During each fiscal year the non-employee Directors who
are members of the Compensation Committee may consider granting senior
executives of the Company awards under the Company's Stock Incentive Plan. Such
awards are based on various factors, including both corporate and individual
performance during the preceding year and incentives to reach certain goals
during future years. In fiscal 1999, the Compensation Committee awarded certain
stock options to Eric R. Giler, David W. Duehren, Robert C. Leahy, Jonathan
J.Sirota and R. Andrew O'Brien, which options have an exercise price equal to
$11.81 per share, the closing price of the common stock as reported by NASDAQ on
October 18, 1999, the date of grant. The vesting of these shares will occur
equally over a three year period.

     The non-employee Directors who are members of the Compensation Committee
also administer the Amended and Restated 1992 Stock Purchase Plan (the "Stock
Purchase Plan"). During fiscal 1999, Jonathan J. Sirota and R. Andrew O'Brien
were the only Named Executives who purchased common stock under the Stock
Purchase Plan.

     Compensation of the President.  In January 1999, the Compensation Committee
(without the participation of Mr. Giler) determined the compensation of Mr.
Giler, the President of the Company, for Fiscal 1999 substantially in accordance
with the Compensation Plan, which is more particularly described in the
foregoing section of this report. Mr. Giler's base salary was fixed at a level
designed to be comparable to the salary of the presidents at similarly situated
companies. The cash bonus available to be paid to Mr. Giler under the
Compensation Plan was based upon and determined by Company sales goals, profit
goals and organizational goals, and consideration of the actual financial
performance of the Company relative to the Compensation Plan and to historical
performance in accordance with the rules and procedures described above.

                                            Compensation Committee

                                            Robert G. Barrett
                                            David L. Chapman
                                            Eric R. Giler

                                        8
<PAGE>   11

CERTAIN RELATIONSHIPS

     The Board of Directors of the Company believes that ownership of the
Company's common stock by executive officers of the Company aligns the interests
of such officers with the interests of the stockholders of the Company. To
further such goal of aligning the interests of such officers with the interests
of the stockholders of the Company, the Board of Directors on March 3, 1999
approved and the Company instituted a loan program. Pursuant to this loan
program, the Company may lend amounts to or on behalf of certain of the
Company's executive officers (a "Loan") to finance an executive officer's
payment of the exercise price of one or more stock options to purchase shares of
common stock granted to such officer under the Stock Incentive Plan. As of March
7, 2000, the Company made Loans to Messrs. Giler, Leahy, Duehren, Sirota and
O'Brien under this loan program.

     In connection with the Loans, the executive officers must execute a
Nonrecourse Promissory Note and Security Agreement (the "Promissory Note")
related to each Loan made by the Company. The Promissory Note does not bear
interest and becomes due and payable in full no later than the remaining term of
the option. The Promissory Note provides for automatic repayment upon the sale
of the common stock which is the subject of a Loan or within 90 days following
the termination of the executive officer's employment with the Company. Pursuant
to the Promissory Note, the shares of common stock which are the subject of a
Loan serve as collateral (the "Collateral Stock") for the Promissory Note until
such time as the Promissory Note has been paid in full. Loans made by the
Company through March 7, 2000 were non-recourse against the officer, and
consequently for satisfaction of the Loans the Company's recourse is to the
Collateral Stock. As of March 7, 2000, the Company had extended Loans totaling
approximately $3,470,357, $2,127,716, $2,180,880, $2,011,626, and $2,000,553 to
Messrs. Giler, Leahy, O'Brien, Sirota and Duehren, respectively.

                                        9
<PAGE>   12

COMPARATIVE PERFORMANCE BY THE COMPANY

     The Securities and Exchange Commission requires the Company to present a
chart comparing the cumulative total shareholder return on its common stock with
the cumulative total shareholder return of (i) a broad equity market index and
(ii) a published industry index or peer group. Such chart compares the common
stock with (i) the CRSP Total Return Index for NASDAQ (the "NASDAQ Index") and
(ii) the NASDAQ Computer & Data Processing Services Stocks Total Return Industry
Index (the "NASDAQ Computer Index"). The total return for each of the NASDAQ
Index and the NASDAQ Computer Index assumes the reinvestment of dividends (the
Company has never declared or paid a dividend). This chart assumes an investment
of $100 on December 31, 1995 in each of the common stock, the stocks comprising
the NASDAQ Index and the stocks comprising the NASDAQ Computer Index. The NASDAQ
Index tracks the aggregate price performance of all domestic equity securities
traded on the NASDAQ National Market and the NASDAQ Small-Cap Market. The
Company's common stock is traded on the NASDAQ National Market System.

     Comparison of Cumulative Total Return among Brooktrout's common stock, the
NASDAQ Index and the NASDAQ Computer Index. Stock Performance Graph

                               performance graph

<TABLE>
<CAPTION>
                                                                                                             COMPUTER & DATA
                                              BROOKTROUT TECHNOLOGY, INC.         NASDAQ INDEX              PROCESSING INDEX
                                              ---------------------------         ------------              ----------------
<S>                                           <C>                           <C>                         <C>
12/31/95                                                100.00                       100.00                      100.00
12/31/96                                                221.00                       122.00                      123.00
12/31/97                                                  0.91                       150.00                      152.00
12/31/98                                                135.00                       206.00                      271.00
12/31/99                                                146.00                       379.00                      572.00
</TABLE>

                                       10
<PAGE>   13

             INCREASE IN THE NUMBER OF SHARES RESERVED FOR ISSUANCE
                         UNDER THE STOCK INCENTIVE PLAN

                           (ITEM 2 OF THE PROXY CARD)

     The Board of Directors believes that the availability of an adequate number
of shares under the Stock Incentive Plan has been, and in the future will be, an
important factor in attracting and retaining the highest caliber Directors,
executives and employees for the Company. The purpose of the increase in shares
available under the Stock Incentive Plan is to continue to aid the Company in
attracting and retaining qualified Directors, executives and employees. As such,
the Board of Directors has determined that the number of shares available for
issuance to qualified employees is insufficient and should be increased by
800,000 shares. On March 7, 2000, the Board of Directors adopted, subject to the
approval of the stockholders, an amendment to the Company's Stock Incentive Plan
to increase by 800,000 the number of shares of common stock reserved for
issuance under the Stock Incentive Plan.

SUMMARY OF THE PLAN

     Number of Shares Subject to the Plan.  As of March 7, 2000, options with
respect to 1,864,297 shares remain outstanding and unexercised under the Stock
Incentive Plan and 79,986 shares are available for issuance pursuant to options
under the Stock Incentive Plan. To date, options to purchase a total of
1,530,717 shares have been exercised. If approved, this proposal would increase
the number of shares reserved for issuance pursuant to options under the Stock
Incentive Plan from 3,475,000 to 4,275,000 shares.

     Purpose of the Plan.  The purpose of the Stock Incentive Plan is to provide
a performance incentive to, and encourage the continued employment and service
of Directors, executives and employees of the Company by encouraging them to
acquire a proprietary interest in the Company through stock ownership.

     Awards Under the Plan.  The Stock Incentive Plan authorizes (i) the grant
of options to purchase common stock intended to qualify as incentive stock
options under Section 422 of the Code ("Incentive Options"), (ii) the grant of
options that do not so qualify ("Non-Qualified Options"), (iii) direct grants or
sales of common stock not subject to any transfer or other restrictions or
conditions ("Unrestricted Stock"), (iv) direct grants or sales of common stock
subject to transfer or other restrictions or conditions determined by the Board
of Directors at the date of grant ("Restricted Stock") and (v) grants of common
stock subject to the attainment of certain performance goals ("Performance Share
Awards").

     Plan Administration.  The Stock Incentive Plan is administered by a
committee of the Board of Directors (the "Committee") consisting of the
non-employee Directors who are members of the Compensation Committee. The
Committee has full power to select the individuals to whom awards will be
granted, to make any combination of awards to such individuals and to determine
the specific terms of each award, subject to the provisions of the Stock
Incentive Plan. Persons eligible to participate in the Stock Incentive Plan are
officers and other employees of the Company. Non-employee Directors of the
Company are eligible to participate in the Stock Incentive Plan only on a
limited basis as described below.

     Incentive Options and Non-Qualified Options.  Under the Stock Incentive
Plan, both Incentive Options and Non-Qualified Options may be granted to
employees, and Non-Qualified Options may be granted to non-employee Directors.
The option exercise price of each option shall be determined by the Committee,
but shall not be less than 100% of the fair market value of the shares on the
date of grant in the case of Incentive Options and not less than 85% of the fair
market value of the shares on the date of grant in the case of Non-Qualified
Options. No Incentive Option may be granted to any employee who owns, at the
date of grant, stock representing in excess of 10% of the combined voting power
of all classes of stock of the Company or a parent

                                       11
<PAGE>   14

or a subsidiary of the Company unless the exercise price for stock subject to
such option is at least 110% of the fair market value of such stock at the time
of grant and the option term does not exceed five years.

     Other Option Terms.  The term of each option shall be fixed by the
Committee and may not exceed ten years from the date of grant in the case of an
Incentive Option. The Committee determines at what time or times each option may
be exercised and, subject to the provisions of the Stock Incentive Plan, the
period of time, if any, after death, disability or termination of employment
during which options may be exercised. Options may be made exercisable in
installments and the exercisability of options may be accelerated by the
Committee.

     Under the Stock Incentive Plan, each non-employee Director who is not a
stockholder, or an affiliate of a stockholder, with beneficial ownership of 10%
or more of the outstanding common stock (an "Eligible Director"), will
automatically receive Non-Qualified Options according to a formula upon his or
her election or re-election as a Director. Options for an Eligible Director are
exercisable at the fair market value of the common stock at the date of issuance
and vest generally in monthly installments at a rate of 5,625 per year of
service as a Director.

     Restricted Stock.  The Committee also may award shares of Restricted Stock
to employees, subject to such conditions and restrictions as the Committee may
determine. The purchase price, if any, of shares of Restricted Stock is
determined by the Committee. If a participant who holds shares of Restricted
Stock terminates employment for any reason (including death) prior to the
vesting of such Restricted Stock, the Company has the right to repurchase the
shares or to acquire their forfeiture in exchange for the amount, if any, which
the participant paid for them. Prior to the vesting of Restricted Stock, the
participant will have all the rights of a stockholder with respect to the
shares, including voting and dividend rights, subject only to the conditions and
restrictions set forth in the Stock Incentive Plan or in the Restricted Stock
award agreement.

     Unrestricted Stock.  The Committee also may grant shares, at a purchase
price, if any, determined by the Committee, which are free from any restrictions
under the Stock Incentive Plan. Unrestricted Stock may be issued to employees in
recognition of past services or other valid consideration and may be issued in
lieu of cash bonuses to be paid to employees pursuant to other bonus plans of
the Company. Non-employee Directors of the Company may elect to receive all or a
portion of the Directors' meeting fees in shares of Unrestricted Stock by
entering into an irrevocable agreement with the Company regarding such election
at least six months prior to the beginning of the next calendar year. Employees,
with the permission of the Committee, may make similar irrevocable elections to
receive a portion of their compensation in Unrestricted Stock.

     Performance Share Awards.  The Committee also may grant Performance Share
Awards to employees entitling the recipient to receive shares of common stock
upon the achievement of individual or Company performance goals and such other
conditions as the Committee may determine. Except as otherwise determined by the
Committee, rights under a Performance Share Award will terminate upon a
participant's termination of employment.

     Tax Withholding.  Participants under the Stock Incentive Plan are
responsible for paying to the Company or for making arrangements satisfactory to
the Compensation Committee of the Board of Directors regarding payment of any
federal, state, or local taxes of any kind required by law to be withheld with
respect to income from the value of an award or of any stock or amounts received
thereunder. Participants may elect to have the minimum tax withholding
obligations satisfied either by authorizing the Company to withhold from shares
of common stock to be issued pursuant to any award a number of shares with an
aggregate fair market value, as of the date of the withholding is effected, that
would satisfy the withholding amount due, or transferring to the Company shares
of common stock owned by the participant with an aggregate fair market value, as
of the date of the withholding is effected, that would satisfy the withholding
amount due.


                                       12
<PAGE>   15

FEDERAL INCOME TAX CONSEQUENCES

     Set forth below is a description of the federal income tax consequences
under the Internal Revenue Code of 1986, as amended (the "Code"), of the grant
and exercise of the awards under the Stock Incentive Plan.

     The optionee will recognize no income upon the grant of an Incentive Option
and incur no tax on its exercise (unless the optionee is subject to alternative
minimum tax). If the optionee holds the stock acquired upon exercise of an
Incentive Option (the "ISO Shares") for two years after the date the options
were granted and for one year after the option was exercised, the optionee
generally will recognize long term capital gain or loss (rather than ordinary
income or loss) upon disposition of the ISO Shares and the Company will not be
entitled to any deduction. This long term capital gain or loss will be equal to
the difference between the amount realized upon such disposition and the amount
paid for the ISO Shares.

     If the optionee disposes of ISO Shares prior to the expiration of either
required holding period (a "disqualifying disposition"), the gain realized upon
such disposition, up to the difference between the fair market value of the ISO
Shares on the date of exercise (or, if less, the amount realized on a sale of
such shares) and the option exercise price, will be treated as ordinary income
and the Company will receive a corresponding deduction for federal income tax
purposes. Any additional gain will be long-term or short-term capital gain,
depending upon the amount of time the ISO Shares were held by the optionee.

     An optionee will not recognize any taxable income at the time a
Non-Qualified Option is granted. However, upon exercise of a Non-Qualified
Option the optionee will, in most cases, include in income as compensation an
amount equal to the difference between the fair market value of the shares
received on the date of exercise and the optionee's exercise price. The included
amount will be treated as ordinary income by the optionee and may be subject to
tax withholding by the Company (either by payment in cash or withholding out of
the optionee's salary). The Company will generally be entitled to a deduction
for federal income tax purposes of the same amount. Upon resale of the shares by
the optionee, any subsequent appreciation or depreciation in the value of the
shares will be treated as a capital gain or loss.

     Section 83 of the Code and the regulations thereunder provide that the date
for reporting and determining the amount of ordinary income (and the Company's
equivalent deduction) upon exercise of a Non-Qualified Option by a person who is
subject to Section 16 of the Exchange Act will be delayed until the date that is
the earlier of (i) six months after the date of exercise and (ii) such time as
the shares received upon exercise could be sold for a gain without the person
being subject to potential liability under Section 16 of the Exchange Act.

GRANTS UNDER THE PLAN

     All employees and all non-employee Directors are currently eligible to
participate in the Stock Incentive Plan. Because option grants under the Stock
Incentive Plan are discretionary (other than grants to Eligible Directors), the
Company cannot now determine the number of options to be received by any
particular current executive officer, by all current executive officers as a
group or by non-executive officer employees as a group that will be granted
under the Stock Incentive Plan in 2000. The number of such options shall be
determined by the Committee pursuant to the terms of the Stock Incentive Plan.
The following table sets forth information regarding Non-Qualified Options to be
granted to the Eligible Director upon re-election under the

                                       13
<PAGE>   16

Stock Incentive Plan during 2000. Each Non-Qualified Option granted to an
Eligible Director will have an exercise price equal to the fair market value of
the common stock on the date of the grant.

<TABLE>
<CAPTION>
                                                                  NUMBER OF
                                                               OPTION SHARES TO
                     NAME AND POSITION                        BE GRANTED IN 2000
                     -----------------                        ------------------
<S>                                                           <C>
Eligible Director Group (1 person)..........................        16,875
</TABLE>

     The approval of the amendment to the Stock Incentive Plan requires the
affirmative vote by holders of a majority of the shares of common stock
represented at the annual meeting and entitled to vote.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL.

                        INCREASE IN STOCK PURCHASE PLAN

                           (ITEM 3 OF THE PROXY CARD)

     As of March 7, 2000, only 57,793 shares remained available for purchase
under the Purchase Plan. The Board of Directors believes that it is desirable
for the Company to continue to provide the opportunity for employees to acquire
common stock through the Purchase Plan. Accordingly, subject to shareholder
approval, the Board of Directors has adopted an amendment to the Purchase Plan
reserving an additional 75,000 shares for issuance under the Purchase Plan.

SUMMARY OF THE PURCHASE PLAN

     Purpose of the Plan.  The Purchase Plan's purpose is to provide eligible
employees with opportunities to purchase shares of the Company's common stock.
The Board of Directors believes that the opportunity to acquire a proprietary
interest in the success of the Company through the acquisition of shares of
common stock pursuant to the Purchase Plan is an important aspect of the
Company's ability to attract and retain highly qualified and motivated
employees. A total of 212,500 shares of common stock have been reserved for the
Purchase Plan.

     Plan Administration.  The Purchase Plan is administered by the Board of
Directors. The Board of Directors has the authority to make rules and
regulations to administer the Purchase Plan and its interpretations and
decisions with regard thereto shall be final and conclusive.

     Eligibility for Participation in the Plan.  All employees of the Company
and its subsidiaries, who are regularly employed by the Company a minimum of 20
hours per week, including directors who are employees, are eligible to
participate in the Purchase Plan. Eligible employees may elect to contribute
from $6 for each weekly pay period or $25 for each monthly pay period up to 10%
of their cash compensation during each pay period. However, no employee may be
granted an option under the Purchase Plan if such employee, immediately after
the option is granted, owns 5% or more of the total combined voting power or
value of the stock of the Company.

     Material Terms of the Plan.  The Company has made a series of offerings
("Offerings") to employees to purchase common stock under this Purchase Plan.
The Initial Offering began on the effective date of the Purchase Plan and ended
on the following December 31 (the "Initial Offering"). All subsequent Offerings
begin on each January 1 or July 1, or the first business day thereafter. The
first day of each Offering is the "Offering Date." Except for the Initial
Offering, each Offering Date will begin a six-month period (a "Plan Period").
The purchase price per share is equal to 85% of the lower of (a) the fair market
value of the common stock on the Offering Date or (b) the fair market value on
the last day of each Plan Period.

                                       14
<PAGE>   17

     Rights under the Purchase Plan are not transferable by a participating
employee other than by will or the laws of descent and distribution, and are
exercisable during the employee's lifetime only by the employee. In the event of
a participating employee's termination of employment prior to the last business
day of a Plan Period, no payroll deduction shall be taken from any pay due and
owing to the employee and the balance in the employee's account shall be paid to
the employee or, in the event of the employee's death, to the employee's
designated beneficiary. If, prior to the last business day of the Plan Period,
the subsidiary by which an employee is employed shall cease to be a designated
subsidiary of the Company, or if the employee is transferred to a subsidiary of
the Company that is not a designated subsidiary, it shall be deemed that the
employee has terminated employment for the purposes of the Purchase Plan.

     The Purchase Plan is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Code. Under the Code, no taxable
income is recognized by the participant with respect to shares purchased under
the Purchase Plan. However, participants will be liable for tax at varying on
the sale of any shares purchased pursuant to the Purchase Plan.

     The approval of the amendment to the Purchase Plan requires the affirmative
vote by holders of a majority of the shares of common stock represented at the
annual meeting and entitled to vote.

           THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL.

                         INCREASE OF AUTHORIZED SHARES

                           (ITEM 4 OF THE PROXY CARD)

     The fourth proposal to be acted upon at that annual meeting is a proposal
to amend Article IV of the Company's Restated Articles of Organization to
increase the aggregate number of aggregate authorized shares of common stock by
15,000,000 shares (the "Additional Shares"), from 25,000,000 to 40,000,000
shares. The Additional Shares will have the identical rights, including, without
limitation, voting, dividend and other rights, as shares of common stock that
are currently authorized.

REASON FOR THE PROPOSAL

     The proposed increase in the authorized common stock has been recommended
by the Board of Directors to assure that an adequate supply of authorized and
unissued shares is available for general corporate needs, such as possible
future stock dividends or stock splits, possible future private or public equity
financings, issuance under the Company's employee benefit plans or issuances in
connection with possible future acquisitions of other companies. As of the
record date, [11,905,530] shares of the 25,000,000 authorized shares of common
stock were issued and outstanding, and 2,277,026 additional shares have been
reserved for issuance under stock plans for employees currently in effect. The
Board of Directors has adopted an increase in the number of shares issuable
under the Stock Incentive Plan and Purchase Plan which, if approved by the
stockholders at the annual meeting, will require availability of additional
shares. See "Increase in Stock Incentive Plan" and "Increase in Stock Purchase
Plan." The Company currently has no other firm plan or arrangements relating to
the issuance of any Additional Shares, although the Company regularly considers
and evaluates various alternatives with respect to the financing of the Company,
which may involve the issuance of common stock or convertible securities and
which may be implemented at such time as determined by the Board of Directors to
be in the best interest of the Company. The Board of Directors believes that it
is in the interest of the Company and its stockholders to maintain a reasonable
supply of additional unauthorized and unissued shares to provide flexibility to
respond to future opportunities or needs as they may arise. The Additional
Shares would be available for issuance without further action by the
stockholders, unless required

                                       15
<PAGE>   18

by the Articles of Organization or the By-laws, this enabling the Company to
avoid the delay and expense of seeking stockholder approval to issue Additional
Shares.

CERTAIN POTENTIAL DISADVANTAGES OF THE PROPOSAL

     There are certain potential disadvantages to this proposal of which you
should be aware. The issuance of Additional Shares may, among other things, have
a dilutive effect on earnings per share and on the equity and voting power of
existing holders of common stock. The issuance of Additional Shares by the
Company may also be deemed to have an antitakover effect by making it more
difficult to obtain shareholder approval of various actions, such as merger or
removal of management. The Company has no present intention of issuing
Additional Shares for such purposes, and this proposal is not in response to any
effort of which the Company is aware to accumulate common stock or to obtain
control of the Company.

           THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL.

               RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

                           (ITEM 5 OF THE PROXY CARD)

     The Board of Directors has selected, subject to ratification by the
stockholders of the Company at the annual meeting, the firm of Deloitte & Touche
LLP to serve as the independent auditors for the Company for the fiscal year
ending December 31, 2000. Deloitte & Touche LLP has served as the Company's
independent auditors since 1984. A representative of Deloitte & Touche LLP will
be present at the annual meeting, will be given the opportunity to make a
statement if he or she so desires and will be available to respond to
appropriate questions.

     The ratification of the selection of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000 requires the
affirmative vote of a majority of the shares of common stock represented in
person or by proxy at the annual meeting and voting thereon.

           THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION.

                                 OTHER MATTERS

SOLICITATION OF PROXIES

     The cost of solicitation of proxies in the form enclosed herewith will be
borne by the Company. In addition to the solicitation of proxies by mail, the
Directors, officers and employees of the Company may also solicit proxies
personally or by telephone without special compensation for such activities. The
Company will also request persons, firms and corporations holding shares in
their names or in the names of their nominees, which are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners. The Company will reimburse such holders for their reasonable expenses.
The Company may also retain a proxy solicitation firm to assist in soliciting
proxies. The costs of retaining such a firm would depend upon the amount and
type of services rendered, but the Company does not expect the cost to exceed
$10,000.

STOCKHOLDER PROPOSALS

     For a proposal of a stockholder to be considered at the 2001 annual
meeting, it must be received in writing with appropriate documentation, as set
forth in the Company's Amended and Restated By-laws, at the principal executive
offices of the Company not earlier than January 14, 2000 and not later than
March 15,

                                       16
<PAGE>   19

2000. Proxies solicited by the Board of Directors will confer discretionary
voting authority with respect to these proposals, subject to Commission rules
governing the exercise of this authority.

     A stockholder proposal submitted pursuant to Exchange Act Rule 14a-8 for
inclusion in the Company's proxy statement and form of proxy for the 2001 annual
meeting of stockholders must be received at the principal executive offices of
the Company by no later than                . Such a proposal must also comply
with the requirements as to form and substance established by the Commission for
such a proposal to be included in the proxy statement and form of proxy.

     Any such proposals should be mailed to:  Brooktrout, Inc., 410 First
Avenue, Needham, Massachusetts 02494, Attn: Clerk.

OTHER MATTERS

     The Board of Directors does not know of any matters other than those
described in this proxy statement which will be presented for action at the
annual meeting. If other matters are presented, proxies will be voted in
accordance with the best judgment of the proxy holders.

     REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD
TODAY.

                                       17
<PAGE>   20

                                BROOKTROUT, INC.

          PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 11, 2000

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

         The undersigned hereby constitutes and appoints Eric R. Giler and
Robert C. Leahy, and each of them, as Proxies of the undersigned, with full
power of substitution, and authorizes each of them to represent and to vote all
shares of common stock, $.01 par value per share, of Brooktrout, Inc., a
Massachusetts corporation (the "Company"), held by the undersigned as of the
close of business on March 22, 2000, at the Annual Meeting of Stockholders to be
held at Fleet National Bank, One Federal Street, 8th Floor, Boston,
Massachusetts on Thursday, May 11, 2000, at 9:30 a.m., local time, and at any
adjournments or postponements thereof.

         WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNERS
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S) AND IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEE LISTED IN PROPOSAL 1
AND FOR THE ITEMS DESCRIBED IN PROPOSALS 2, 3, 4 AND 5 AT THE PROXIES'
DISCRETION UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE AND "FOR" PROPOSALS 2, 3,
4 AND 5. A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS NEED ONLY SIGN AND DATE THIS PROXY AND RETURN IT IN
THE ENVELOPE PROVIDED.

                          TO BE SIGNED ON REVERSE SIDE.


<PAGE>   21


 [X]  PLEASE MARK
      VOTES AS IN
      THIS EXAMPLE.

      THE UNDERSIGNED HEREBY ACKNOWLEDGE(S) RECEIPT OF A COPY OF THE
ACCOMPANYING NOTICE OF ANNUAL MEETING OF STOCKHOLDERS, THE PROXY STATEMENT WITH
RESPECT THERETO AND THE COMPANY'S 1999 ANNUAL REPORT TO STOCKHOLDERS, AND HEREBY
REVOKE(S) ANY PROXY OR PROXIES HERETOFORE GIVEN. THIS PROXY MAY BE REVOKED AT
ANY TIME BEFORE IT IS EXECUTED.


1. Proposal to elect the following person as a Class II Director
   Nominee: W. Brooke Tunstall
         [ ]     [ ]
         For     Withhold


2. Proposal to approve an amendment to the Company's 1992 Stock Incentive Plan,
as amended (the "Stock Incentive Plan"), to increase the number of shares of the
Company's common stock reserved for issuance under the Stock Incentive Plan.
         [ ]       [ ]      [ ]
         For     Against  Abstain


3. Proposal to approve an amendment to the Company's Amended and Restated 1992
Stock Purchase Plan (the "Purchase Plan") to increase the number of shares of
the Company's common stock subject to issuance under the Purchase Plan.
         [ ]       [ ]      [ ]
         For     Against  Abstain


4. Proposal to authorize an amendment to the Company's Articles of
Organization, as amended, increasing the number of authorized shares of the
Company's common stock, $.01 par value per share.
         [ ]       [ ]      [ ]
         For     Against  Abstain


5. Proposal to ratify the selection of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000.

         [ ]       [ ]      [ ]
         For     Against  Abstain


                       MARK THERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]

(Please sign name exactly as shown. Where there is more than one holder, each
should sign the proxy. When signing as an attorney, administrator, executor,
guardian or trustee, please add your title as such. If executed by a
corporation, the proxy should be signed by a duly authorized person stating his
or her title or authority.)

 Signature: Date::                        Signature: Date
                  ---------------- ------                ---------------- ------


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