HEALTHCARE ACQUISITION CORP
S-4, 1997-02-19
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<PAGE>   1
 
   
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 19, 1997
    
                                                        REGISTRATION NO. 33-
================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------
                                    FORM S-4
 
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                             ---------------------
 
                          HEALTHCARE ACQUISITION CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                  <C>                                  <C>
              DELAWARE                               6770                              65-0572565
  (State or other jurisdiction of        (Primary Standard Industrial               (I.R.S. Employer
   incorporation or organization)        Classification Code Number)              Identification No.)
</TABLE>
 
                             ---------------------
                           200 EAST BROWARD BOULEVARD
                         FORT LAUDERDALE, FLORIDA 33301
                                 (954) 761-2908
   (Address, including zip code and telephone number, including area code, of
                   registrant's principal executive offices)
 
                                  JAY M. HAFT
                             CHAIRMAN AND SECRETARY
                          HEALTHCARE ACQUISITION CORP.
                           200 EAST BROWARD BOULEVARD
                         FORT LAUDERDALE, FLORIDA 33301
                                 (954) 761-2908
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)
 
                                   COPIES TO:
 
<TABLE>
<S>                                                    <C>
                SCOTT H. MARGOL, ESQ.                                 MARK D. WASSERMAN, ESQ.
   RUDEN, MCCLOSKY, SMITH, SCHUSTER & RUSSELL, P.A.             SUTHERLAND, ASBILL & BRENNAN, L.L.P.
              200 EAST BROWARD BOULEVARD                             999 PEACHTREE STREET, N.E.
            FORT LAUDERDALE, FLORIDA 33301                             ATLANTA, GEORGIA 30309
                    (954) 527-2408                                         (404)853-8398
</TABLE>
 
                             ---------------------
 
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement and the effective time of the merger (the "Merger") of Healthcare
Acquisition, Inc., a wholly owned subsidiary of Healthcare Acquisition Corp.,
with and into Encore Orthopedics, Inc. pursuant to the Agreement and Plan of
Merger, as amended, described herein.
 
    If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.  [ ]
                             ---------------------
                        CALCULATION OF REGISTRATION FEE
 
   
<TABLE>
<CAPTION>
===========================================================================================================================
                                                                 PROPOSED MAXIMUM    PROPOSED MAXIMUM
     TITLE OF EACH CLASS OF SECURITIES         AMOUNT TO BE     OFFERING PRICE PER  AGGREGATE OFFERING       AMOUNT OF
             TO BE REGISTERED                   REGISTERED             SHARE               PRICE        REGISTRATION FEE(3)
- ------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                 <C>                 <C>                 <C>
Common Stock, par value $.001 per share....    11,000,000(1)           N.A.           $54,000,000(2)          $16,364
- ------------------------------------------------------------------------------------------------------------------------
$7.00 Warrants.............................      1,650,000              --                  --                  (5)
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per share,
  issuable upon exercise of the $7.00
  Warrants(6)..............................      1,650,000             $7.00            11,550,000            $3,500
- ------------------------------------------------------------------------------------------------------------------------
$7.00 Warrants(4)..........................       150,000               --                  --                  (5)
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per share,
  issuable upon exercise of the $7.00
  Warrants(6)..............................       150,000              $7.00             1,050,000             $319
- ------------------------------------------------------------------------------------------------------------------------
Total......................................                                                                   $20,183
========================================================================================================================
</TABLE>
    
 
                                                       (Continued on next page.)
                             ---------------------
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
 
   
    Pursuant to Rule 429 under the Securities Act of 1933, as amended, the
prospectus contained herein relates to the Registrant's earlier Registration
Statement on Form S-1 (No. 33-92854) and updates the information contained
therein. Such Registration Statement relates to, among other things, shares of
Common Stock of the Registrant issuable upon the exercise of outstanding
warrants.
    
================================================================================
<PAGE>   2
 
(Continued from previous page.)
 
(1) Based on the maximum number of Healthcare Acquisition Corp. ("HCAC") Common
    Shares issuable in the Merger, assuming the exercise of all currently
    outstanding options to purchase Encore Orthopedics, Inc. ("Encore") Common
    Shares.
   
(2) Estimated solely for the purpose of calculating the registration fee
    required by Section 6(b) of the Securities Act of 1933, as amended (the
    "Securities Act"), and computed pursuant to Rule 457(f) under the Securities
    Act. Fee calculated by multiplying $4.875, the average of the high and low
    prices on December 13, 1996 (the date used for calculation of the filing fee
    paid on December 18, 1996, in connection with the filing of preliminary
    proxy materials) as reported on the OTC Bulletin Board, by 9,500,000 shares;
    and by multiplying $5.125, the average of the high and low prices on
    February 14, 1997 as reported on the OTC Bulletin Board, by 1,500,000
    additional shares to be registered herewith.
    
   
(3) Pursuant to Rule 457(b) under the Securities Act, the amount of the
    registration fee of $20,183 is offset by the $11,258 previously paid in
    connection with the filing of preliminary proxy materials on December 18,
    1996, resulting in a remaining $8,925 to be paid hereunder.
    
   
(4) Warrants to be issued to Rodman and Renshaw, as financial advisor to HCAC,
    to purchase 150,000 HCAC Common Shares.
    
   
(5) No separate registration fee is required pursuant to Rule 457(i),
    promulgated under the Securities Act of 1933, as amended.
    
   
(6) Pursuant to Rule 416 promulgated under the Securities Act of 1933, as
    amended, this Registration Statement also covers such indeterminable
    additional shares of HCAC Common Shares as may be issuable as a result of
    any future antidilution adjustments made in accordance with the terms of the
    Warrants issued in connection with the Merger.
    
<PAGE>   3
 
                          HEALTHCARE ACQUISITION CORP.
 
            CROSS-REFERENCE SHEET TO FORM S-4 REGISTRATION STATEMENT
                  (PURSUANT TO ITEM 501(B) OF REGULATION S-K)
 
                PART 1 -- INFORMATION REQUIRED IN THE PROSPECTUS
 
<TABLE>
<CAPTION>
           FORM S-4 ITEM NUMBERS AND CAPTIONS        LOCATION IN JOINT PROXY STATEMENT/PROSPECTUS
           ----------------------------------        --------------------------------------------
<C>  <C>  <S>                                        <C>
 A.  INFORMATION ABOUT THE TRANSACTION
      1.  Forepart of Registration Statement and
            Outside Front Cover Page of
            Prospectus.............................  Facing Page; Cross Reference Sheet; Outside
                                                       Front Cover Page of Joint Proxy
                                                       Statement/Prospectus
      2.  Inside Front and Outside Back Cover Pages
            of Prospectus..........................  Inside Front Cover Page of Joint Proxy
                                                       Statement/Prospectus; Available
                                                       Information; Table of Contents
      3.  Risk Factors, Ratio of Earnings to Fixed
            Charges and Other Information..........  Summary; Risk Factors
      4.  Terms of the Transaction.................  Summary; The Merger; Description of HCAC
                                                       Capital Stock; Comparison of Stockholder
                                                       Rights
      5.  Pro Forma Financial Information..........  Summary
      6.  Material Contacts with the Company Being
            Acquired...............................  The Merger
      7.  Additional Information Required for
            Reoffering by Persons and Parties
            Deemed to be Underwriters..............  *
      8.  Interests of Named Experts and Counsel...  Summary; The Merger; Legal Opinions; Experts
      9.  Disclosure of Commission Position on
            Indemnification for Securities Act
            Liabilities............................  *
 B.  INFORMATION ABOUT THE REGISTRANT
     10.  Information with respect to S-3
            Registrants............................  *
     11.  Incorporation of Certain Information by
            Reference..............................  *
     12.  Information with Respect to S-2 or S-3
            Registrants............................  *
     13.  Incorporation of Certain Information by
            Reference..............................  *
     14.  Information with Respect to Registrants
            Other than S-2 or S-3 Registrants......  Business of HCAC; Description of HCAC
                                                       Capital Stock; Market Prices of HCAC's
                                                       Securities; Other Transactions;
                                                       Management's Discussion and Analysis of
                                                       Financial Condition and Results of
                                                       Operations of HCAC; Financial Statements
</TABLE>
<PAGE>   4
   
<TABLE>
<CAPTION>
           FORM S-4 ITEM NUMBERS AND CAPTIONS        LOCATION IN JOINT PROXY STATEMENT/PROSPECTUS
           ----------------------------------        --------------------------------------------
<C>  <C>  <S>                                        <C>
 C.  INFORMATION ABOUT THE COMPANY BEING ACQUIRED
     15.  Information with Respect to S-3
            Companies..............................  *
     16.  Information with Respect to S-2 or S-3
            Companies..............................  *
     17.  Information with Respect to Companies
            Other than S-2 or S-3 Companies........  Summary; Business of Encore; Management's
                                                       Discussion and Analysis of Financial
                                                       Condition and Results of Operations of
                                                       Encore; Financial Statements
 D.  VOTING AND MANAGEMENT INFORMATION
     18.  Information if Proxies, Consents or
            Authorizations are to be Solicited.....  Summary; The Merger; Management of HCAC;
                                                       Principal Stockholders of HCAC; Management
                                                       of Encore; Principal Shareholders of
                                                       Encore
     19.  Information if Proxies, Consents or
            Authorizations are not to be Solicited,
            or in an Exchange Offer................  *
</TABLE>
    
 
- ---------------
 
* Omitted since the answer is negative or the Item is not applicable.
<PAGE>   5
 
   
HEALTHCARE ACQUISITION CORP.
    
 
To the Stockholders of Healthcare Acquisition Corp.:
 
   
     The Special Meeting (the "Special Meeting") of the stockholders of
Healthcare Acquisition Corp. ("HCAC") will be held on March 25, 1997, at 10:00
a.m., local time, at 200 East Broward Boulevard, 15th Floor, Fort Lauderdale,
Florida 33301. At this meeting, you will be asked (i) to consider and act upon a
proposal to approve an Agreement and Plan of Merger providing for the merger
(the "Merger") of Healthcare Acquisition, Inc. ("Acquisition"), a Texas
corporation and a wholly-owned subsidiary of HCAC, with and into Encore
Orthopedics, Inc. ("Encore"), (ii) to consider and act upon a proposal to
approve certain amendments to HCAC's Certificate of Incorporation and (iii) to
consider and act upon a proposal to approve the Encore Medical Corporation 1996
Incentive Stock Option Plan (the "Option Plan"). If the Agreement and Plan of
Merger is not approved, however, the HCAC Certificate of Incorporation will not
be amended and the Option Plan will not be implemented, notwithstanding
stockholder approval of such proposals. Approval of the Agreement and Plan of
Merger by the stockholders of HCAC and Encore will also constitute approval of
the assumption of certain stock options of Encore by HCAC. CONSUMMATION OF THE
MERGER IS CONDITIONED NOT ONLY UPON HCAC STOCKHOLDER APPROVAL OF THE AGREEMENT
AND PLAN OF MERGER, BUT ALSO UPON STOCKHOLDER APPROVAL OF THE AMENDMENTS TO
HCAC'S CERTIFICATE OF INCORPORATION AND ADOPTION OF THE OPTION PLAN.
    
 
   
     Subject to the terms and conditions of the Agreement and Plan of Merger, if
the Merger is approved by the stockholders of HCAC and the shareholders of
Encore, Acquisition will be merged into Encore, with Encore continuing as the
surviving corporation, and Encore will become a wholly-owned subsidiary of HCAC.
Each outstanding Encore Common Share and Encore Preferred Share, other than
shares held by dissenting Encore shareholders, will be converted into the right
to receive shares of Common Stock of HCAC ("HCAC Common Shares") and warrants to
purchase HCAC Common Shares ("HCAC $7.00 Warrants"), plus cash paid (without
interest) in lieu of any resulting fractional shares, subject to certain
adjustments. All of the foregoing is more fully described in the attached Joint
Proxy Statement/Prospectus, which you are encouraged to read in its entirety.
    
 
   
     The affirmative vote of a majority of the outstanding HCAC Common Shares is
required to approve the Agreement and Plan of Merger; provided, however, that if
conversion rights are exercised with respect to 20% or more of the HCAC Common
Shares held by HCAC stockholders (excluding the HCAC Common Shares held by those
persons who acquired the HCAC Common Shares prior to HCAC's initial public
offering ("Initial Stockholders")), HCAC will not consummate the Merger. The
Initial Stockholders, owning an aggregate of approximately 17.9% of the HCAC
Common Shares outstanding, have agreed to vote the HCAC Common Shares owned by
them immediately prior to HCAC's initial public offering in accordance with the
majority in interest of all other HCAC stockholders on the proposal to approve
the Agreement and Plan of Merger. Stockholders who vote shares against the
Agreement and Plan of Merger have the right to demand that HCAC convert their
shares for cash if the Merger is approved and consummated.
    
 
     After careful consideration of the terms and conditions of the proposed
Agreement and Plan of Merger, the Board of Directors of HCAC has determined that
the Agreement and Plan of Merger and the transactions contemplated thereby are
in the best interests of HCAC and its stockholders and unanimously recommends
that stockholders vote for approval and adoption of the Agreement and Plan of
Merger and the transactions contemplated thereby and the other proposals being
submitted to the stockholders.
 
     Enclosed is a Notice of Special Meeting and a Joint Proxy
Statement/Prospectus containing detailed information concerning the Agreement
and Plan of Merger and the transactions contemplated thereby. Whether or not you
are able to attend the Special Meeting, we urge you to read this material
carefully. Your vote is important. We request that you mark, date, sign and
return the enclosed proxy as soon as possible.
 
                                          Sincerely,
 
                                          Jay M. Haft
                                          Chairman of the Board
<PAGE>   6
 
   
                          HEALTHCARE ACQUISITION CORP.
    
 
                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
 
   
     NOTICE IS HEREBY GIVEN that the Special Meeting (the "Special Meeting") of
the stockholders of Healthcare Acquisition Corp. ("HCAC") will be held on March
25, 1997, at 10:00 a.m., local time, at 200 East Broward Boulevard, 15th Floor,
Ft. Lauderdale, Florida 33301, for the following purposes:
    
 
   
          (1) To consider and act upon a proposal to approve an Agreement and
     Plan of Merger providing for the merger (the "Merger") of Healthcare
     Acquisition, Inc. ("Acquisition"), a Texas corporation and a wholly-owned
     subsidiary of HCAC, with and into Encore Orthopedics, Inc., a Texas
     corporation ("Encore"), with Encore continuing as the surviving corporation
     and as a wholly-owned subsidiary of HCAC. Pursuant to the Agreement and
     Plan of Merger, holders of outstanding Encore Common and Preferred Shares,
     other than shares held by dissenting shareholders, will be converted into
     the right to receive common stock, par value $.001 per share ("HCAC Common
     Shares") and warrants to purchase HCAC Common Shares, plus cash paid
     (without interest) in lieu of any resulting fractional shares, subject to
     certain adjustments. All of the foregoing is more fully described in the
     attached Joint Proxy Statement/Prospectus, which you are encouraged to read
     in its entirety.
    
 
          (2) To consider and act upon a proposal to approve certain amendments
     to HCAC's Certificate of Incorporation.
 
          (3) To consider and act upon a proposal to approve the Encore Medical
     Corporation 1996 Incentive Stock Option Plan (the "Option Plan").
 
          (4) To transact such other business as may properly come before the
     Special Meeting and any adjournments thereof.
 
   
     The affirmative vote of a majority of the outstanding HCAC Common Shares is
required to approve the Agreement and Plan of Merger; provided, however, that if
conversion rights are exercised with respect to 20% or more of HCAC Common
Shares held by HCAC stockholders (excluding the HCAC Common Shares held by those
persons who acquired the HCAC Common Shares prior to HCAC's initial public
offering ("Initial Stockholders")), HCAC will not consummate the Merger. The
Initial Stockholders, owning an aggregate of approximately 17.9% of the HCAC
Common Shares outstanding, have agreed to vote the HCAC Common Shares owned by
them immediately prior to HCAC's initial public offering in accordance with the
majority in interest of all other HCAC stockholders on the proposal to approve
the Agreement and Plan of Merger. Stockholders who vote shares against the
Agreement and Plan of Merger have the right to demand that HCAC convert those
shares for cash if the Merger is approved and consummated. CONSUMMATION OF THE
MERGER IS CONDITIONED NOT ONLY UPON HCAC STOCKHOLDER APPROVAL OF THE AGREEMENT
AND PLAN OF MERGER, BUT ALSO UPON STOCKHOLDER APPROVAL OF THE AMENDMENTS TO
HCAC'S CERTIFICATE OF INCORPORATION AND ADOPTION OF THE OPTION PLAN. If the
Agreement and Plan of Merger is not approved, however, the HCAC Certificate of
Incorporation will not be amended and the Option Plan will not be implemented,
notwithstanding stockholder approval of such proposals.
    
 
   
     THE BOARD OF DIRECTORS OF HCAC HAS UNANIMOUSLY APPROVED THE TERMS OF THE
PROPOSED MERGER AND RECOMMENDS THAT HCAC'S STOCKHOLDERS VOTE TO APPROVE AND
ADOPT THE AGREEMENT AND PLAN OF MERGER AND THE PROPOSALS BEING SUBMITTED TO THE
STOCKHOLDERS.
    
<PAGE>   7
 
   
     Only stockholders of record as of the close of business on February 14,
1997 will be entitled to notice of the Special Meeting and to vote at the
Special Meeting and any adjournments thereof. A list of stockholders of HCAC as
of the close of business on February 14, 1997 will be available for inspection
during normal business hours for ten days prior to the Special Meeting at HCAC's
executive offices at 200 East Broward Boulevard, 15th Floor, Fort Lauderdale,
Florida 33301.
    
 
                                          By order of the Board of Directors,
 
                                          Jay M. Haft
                                          Secretary
 
   
February 24, 1997
    
 
     EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF A STOCKHOLDER DECIDES TO ATTEND THE SPECIAL MEETING, HE OR SHE MAY,
IF SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
 
                                        2
<PAGE>   8
 
   
ENCORE ORTHOPEDICS, INC.
    
 
   
To the Shareholders of Encore Orthopedics, Inc.:
    
 
   
     The Special Meeting (the "Special Meeting") of the shareholders of Encore
Orthopedics, Inc. ("Encore") will be held on March 25, 1997, at 10:00 a.m.,
local time, at 9800 Metric Boulevard, Austin, Texas 78758. At this meeting, you
will be asked to consider and act upon a proposal to approve an Agreement and
Plan of Merger providing for the merger (the "Merger") of Encore with and into
Healthcare Acquisition, Inc. ("Acquisition"), a Texas corporation and a
wholly-owned subsidiary of Healthcare Acquisition Corp. ("HCAC").
    
 
   
     Subject to the terms and conditions of the Agreement and Plan of Merger, if
the Merger is approved by the stockholders of HCAC and the shareholders of
Encore, Acquisition will be merged into Encore, with Encore continuing as the
surviving corporation, and Encore will become a wholly-owned subsidiary of HCAC.
Each outstanding Encore Common Share and Encore Preferred Share, other than
shares held by dissenting Encore shareholders, will be converted into the right
to receive shares of HCAC Common Stock ("HCAC Common Shares") and warrants to
purchase HCAC Common Shares, plus cash paid (without interest) in lieu of any
resulting fractional shares, subject to certain adjustments. All of the
foregoing is more fully described in the attached Joint Proxy
Statement/Prospectus, which you are encouraged to read in its entirety.
    
 
   
     The affirmative vote of 66 2/3% of the outstanding Encore Common Shares and
Encore Preferred Shares, voting as a single class, is required to approve the
Agreement and Plan of Merger.
    
 
   
     After careful consideration of the terms and conditions of the proposed
Agreement and Plan of Merger, the Board of Directors of Encore has determined
that the Agreement and Plan of Merger and the transactions contemplated thereby
are in the best interests of Encore and its shareholders and unanimously
recommends that shareholders vote for approval and adoption of the Agreement and
Plan of Merger and the transactions contemplated thereby and the other proposals
being submitted to the shareholders.
    
 
     Enclosed is a Notice of Special Meeting and a Joint Proxy
Statement/Prospectus containing detailed information concerning the Agreement
and Plan of Merger and the transactions contemplated thereby. Whether or not you
are able to attend the Special Meeting, we urge you to read this material
carefully. Your vote is important. We request that you mark, date, sign and
return the enclosed proxy as soon as possible.
 
                                          Sincerely,
 
                                          Nick Cindrich
                                          Chairman and Chief Executive Officer
<PAGE>   9
 
   
                            ENCORE ORTHOPEDICS, INC.
    
 
   
                   NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
    
 
   
     NOTICE IS HEREBY GIVEN that the Special Meeting (the "Special Meeting") of
the shareholders of Encore Orthopedics, Inc. ("Encore") will be held on March
25, 1997, at 10:00 a.m., local time, at 9800 Metric Boulevard, Austin, Texas
78758, for the following purposes:
    
 
   
          (1) To consider and act upon a proposal to approve an Agreement and
     Plan of Merger providing for the merger (the "Merger") of Healthcare
     Acquisition, Inc. ("Acquisition"), a Texas corporation and a wholly-owned
     subsidiary of Healthcare Acquisition Corp. ("HCAC"), with and into Encore,
     with Encore continuing as the surviving corporation and a wholly-owned
     subsidiary of HCAC. Pursuant to the Agreement and Plan of Merger, holders
     of outstanding Encore Common and Preferred Shares, other than shares held
     by dissenting shareholders, will be converted into the right to receive
     shares of HCAC Common Stock and warrants to purchase shares of Common Stock
     of HCAC, plus cash paid (without interest) in lieu of any resulting
     fractional shares, subject to certain adjustments. All of the foregoing is
     more fully described in the attached Joint Proxy Statement/Prospectus,
     which you are encouraged to read in its entirety.
    
 
          (2) To transact such other business as may properly come before the
     Special Meeting and any adjournments thereof.
 
   
     The affirmative vote of 66 2/3% of the outstanding Encore Common Shares and
Encore Preferred Shares, voting as a single class, is required to approve the
Agreement and Plan of Merger.
    
 
   
     THE BOARD OF DIRECTORS OF ENCORE HAS UNANIMOUSLY APPROVED THE TERMS OF THE
PROPOSED MERGER AND RECOMMENDS THAT ENCORE'S SHAREHOLDERS VOTE TO APPROVE AND
ADOPT THE AGREEMENT AND PLAN OF MERGER AND THE PROPOSALS BEING SUBMITTED TO THE
SHAREHOLDERS.
    
 
   
     Only shareholders of record as of the close of business on February 14,
1997 will be entitled to notice of the Special Meeting and to vote at the
Special Meeting and any adjournments thereof. A list of shareholders of Encore
as of the close of business on February 14, 1997 will be available for
inspection during normal business hours for ten days prior to the Special
Meeting at Encore's executive offices at 9800 Metric Boulevard, Austin, Texas
78758.
    
 
                                          By order of the Board of Directors,
 
   
                                          Harry L. Zimmerman
    
                                          Secretary
 
   
February 24, 1997
    
 
   
     EACH SHAREHOLDER IS URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF A SHAREHOLDER DECIDES TO ATTEND THE SPECIAL MEETING, HE OR SHE MAY,
IF SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
    
<PAGE>   10
 
   
                             JOINT PROXY STATEMENT
    
                                      FOR
 
   
<TABLE>
       <S>                              <C>
         HEALTHCARE ACQUISITION CORP.       ENCORE ORTHOPEDICS, INC.
       SPECIAL MEETING OF STOCKHOLDERS  SPECIAL MEETING OF SHAREHOLDERS
               MARCH 25, 1997                   MARCH 25, 1997
</TABLE>
    
 
                             ---------------------
 
                          HEALTHCARE ACQUISITION CORP.
 
                                   PROSPECTUS
                                      FOR
   
    UP TO 11,000,000 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE, AND
    
   
         UP TO 1,650,000 WARRANTS TO PURCHASE ONE SHARE OF COMMON STOCK
    
                    AT AN EXERCISE PRICE OF $7.00 PER SHARE.
 
   
                  3,450,000 OUTSTANDING COMMON STOCK WARRANTS
    
   
                 AND 3,450,000 SHARES OF COMMON STOCK ISSUABLE
    
   
                   UPON EXERCISE OF THE OUTSTANDING WARRANTS
    
 
   
                      400,000 OUTSTANDING BRIDGE WARRANTS
    
   
                  AND 400,000 SHARES OF COMMON STOCK ISSUABLE
    
   
                UPON EXERCISE OF THE OUTSTANDING BRIDGE WARRANTS
    
 
   
     This Joint Proxy Statement/Prospectus of Healthcare Acquisition Corp., a
Delaware corporation ("HCAC"), is being furnished to holders of HCAC common
stock, par value $.001 per share ("HCAC Common Shares"), in connection with the
solicitation of proxies by HCAC's Board of Directors (the "HCAC Board") for use
at the Special Meeting of Stockholders of HCAC (the "HCAC Meeting") to be held
on March 25, 1997, at 200 East Broward Boulevard, Fort Lauderdale, Florida 33301
at 10:00 a.m., local time, and any adjournment thereof.
    
 
   
     This Joint Proxy Statement/Prospectus of Encore Orthopedics, Inc., a Texas
corporation ("Encore"), is being furnished to holders of Encore common stock,
par value $0.01 per share ("Encore Common Shares"), and to holders of Encore's
Series A Preferred Stock, par value $1.00 per share ("Encore Preferred Shares")
(the Encore Common Shares and the Encore Preferred Shares are hereinafter
referred to as the "Encore Shares"), in connection with the solicitation of
proxies by Encore's Board of Directors (the "Encore Board") for use at the
Special Meeting of Shareholders of Encore (the "Encore Meeting") to be held on
March 25, 1997, at 9800 Metric Boulevard, Austin, Texas 78758 at 10:00 a.m.,
local time, and any adjournment thereof.
    
 
   
     The stockholders of HCAC and the shareholders of Encore will be asked to
consider and act upon a proposal to approve an Agreement and Plan of Merger, as
amended (the "Agreement and Plan of Merger"), providing for the merger (the
"Merger") of Healthcare Acquisition, Inc. ("Acquisition"), a Texas corporation
and a wholly-owned subsidiary of HCAC, with and into Encore, with Encore
continuing as the surviving corporation (the "Surviving Corporation") and as a
wholly-owned subsidiary of HCAC. The stockholders of HCAC will also be asked to
consider and act upon proposals to approve amendments to HCAC's Certificate of
Incorporation (the "HCAC Certificate Amendment") and to approve the Encore
Medical Corporation 1996 Incentive Stock Option Plan (the "Option Plan").
Approval of the Agreement and Plan of Merger by the stockholders of HCAC and
Encore will constitute approval of the assumption by HCAC of the stock options
of Encore outstanding immediately prior to the effective time of the Merger. If
the stockholders of HCAC vote in favor of the proposal to approve the Agreement
and Plan of Merger but vote against the proposals to approve the HCAC
Certificate Amendment or to adopt the Option Plan, Encore may terminate the
Agreement and Plan of Merger and abandon the Merger or may elect to proceed with
the Merger by waiving certain conditions to the Merger related to such
proposals. CONSUMMATION OF THE MERGER IS CONDITIONED NOT ONLY UPON HCAC
STOCKHOLDER APPROVAL OF THE AGREEMENT AND PLAN OF MERGER, BUT IS ALSO
CONDITIONED ON, AMONG OTHER THINGS, STOCKHOLDER APPROVAL OF THE HCAC CERTIFICATE
AMENDMENT AND ADOPTION OF THE OPTION PLAN. If the Agreement and Plan of Merger
is not approved, however, the HCAC Certificate of Incorporation will not be
amended and the Option Plan will not be implemented, notwithstanding stockholder
approval of such proposals.
    
 
   
     To approve and authorize the Merger, HCAC's Certificate of Incorporation
requires the affirmative vote of at least a majority of the outstanding HCAC
Common Shares and also requires that the right of HCAC's
    
<PAGE>   11
 
stockholders to convert their HCAC Common Shares to cash upon consummation of
the Merger be exercised with respect to less than 20% of the Public Shares (as
defined below) pursuant to the provisions of HCAC's Certificate of
Incorporation. The affirmative vote of a majority of outstanding HCAC Common
Shares entitled to vote is required to approve the HCAC Certificate Amendment.
The affirmative vote of a majority of shares represented in person or by proxy
at the HCAC Meeting and entitled to vote thereat is required to approve the
Option Plan.
 
     All of the HCAC stockholders who acquired HCAC Common Shares prior to
HCAC's initial public offering (the "Initial Stockholders"), including all of
the officers and directors of HCAC, have agreed to vote the HCAC Common Shares
owned by them immediately prior to HCAC's initial public offering (the "Initial
Shares"), which constitute approximately 17.9% of the outstanding HCAC Common
Shares, in accordance with the vote of the majority of all the other HCAC Common
Shares ("Public Shares") voted on any Business Combination. The holders of the
Public Shares will be referred to herein as the "Public Stockholders." The
Initial Stockholders shall be deemed Public Stockholders with respect to any
Public Shares they own.
 
   
     Pursuant to HCAC's Certificate of Incorporation, HCAC's stockholders have
the right to convert their HCAC Common Shares to cash, subject to consummation
of the Merger and the stockholders' compliance with certain conditions to the
exercise of such rights (the "Conversion Rights"). The Initial Stockholders have
no Conversion Rights as to their Initial Shares. The Merger will not be
consummated if Conversion Rights are exercised with respect to 20% or more of
the Public Shares, notwithstanding approval of the Merger by a majority of the
HCAC stockholders. See "The Merger -- Conversion Rights." An HCAC stockholder
who desires to exercise his Conversion Rights must vote the HCAC Common Shares
he wants to convert by proxy or in person "AGAINST" the proposal to approve the
Agreement and Plan of Merger or such stockholder will be precluded from
exercising his Conversion Rights. A stockholder who executes and returns an
unmarked proxy will have his shares voted "FOR" the Agreement and Plan of Merger
and as a consequence thereof such stockholder will be precluded from exercising
his Conversion Rights. An HCAC stockholder need not vote in any particular
manner as to any other proposal submitted to HCAC stockholders in order to be
permitted to exercise his Conversion Rights.
    
 
     Holders of Encore Shares will have dissenters' rights of appraisal in
connection with the Merger. It is a condition precedent to the consummation of
the Merger that shareholders owning no more than 5% of the aggregate number of
Encore Common Shares and Encore Preferred Shares exercise their dissenters'
rights. See "The Merger -- Dissenters' Rights." In order to properly exercise
his dissenters' rights, a dissenting Encore shareholder must refrain from voting
by proxy or in person in favor of the Agreement and Plan of Merger. A
shareholder of Encore who executes and returns an unmarked proxy will have his
shares voted "FOR" the Agreement and Plan of Merger and as a consequence thereof
such Encore shareholder will be precluded from exercising his rights as a
dissenting shareholder.
 
   
     The Joint Proxy Statement/Prospectus also constitutes a prospectus of HCAC
filed as part of a Registration Statement (defined below) filed with the
Securities and Exchange Commission (the "SEC") with respect to up to 11,000,000
HCAC Common Shares and 1,650,000 warrants to purchase one HCAC Common Share at
an exercise price of $7.00 per share ("HCAC $7.00 Warrants") to be issued to
shareholders of Encore pursuant to the terms of the Agreement and Plan of
Merger, dated as of November 12, 1996, and amended as of February 14, 1997,
among HCAC, Acquisition and Encore (the "Agreement and Plan of Merger"),
described in this Joint Proxy Statement/Prospectus and attached hereto as
Appendix A. Under the terms of the Agreement and Plan of Merger, (i) Acquisition
will be merged with and into Encore, (ii) Encore will become a wholly-owned
subsidiary of HCAC, and (iii) each outstanding Encore Share, other than shares
as to which statutory dissenters' rights are exercised, will be converted into
the right to receive HCAC Common Shares and HCAC $7.00 Warrants, with cash paid
in lieu of any resulting fractional shares, as described herein under the
heading "The Merger -- Conversion of Shares; Exchange Ratio. IN EVALUATING THE
MERGER, HCAC AND ENCORE STOCKHOLDERS SHOULD CAREFULLY CONSIDER THE FACTORS
DESCRIBED BELOW UNDER "RISK FACTORS" AND SHOULD CAREFULLY CONSIDER THE
ASSUMPTIONS UPON WHICH THE EXCHANGE RATIO IS BASED AND THE FACTORS AFFECTING THE
POTENTIAL ADJUSTMENTS TO THE EXCHANGE RATIO, ALL OF WHICH ARE DESCRIBED BELOW
UNDER THE HEADING "THE MERGER -- CONVERSION OF SHARES; EXCHANGE RATIO."
    
 
   
     In addition to the foregoing, this Joint Proxy Statement/Prospectus relates
to the possible exercise of (i) outstanding warrants of HCAC to purchase an
aggregate of 3,450,000 HCAC Common Shares, which warrants were issued by HCAC in
connection with its initial public offering of securities in 1996, and (ii)
outstanding financing warrants ("Bridge Warrants") of HCAC to purchase an
aggregate of 400,000
    
 
                                        2
<PAGE>   12
 
   
HCAC Common Shares, which Bridge Warrants were issued by HCAC in connection with
its interim financing in 1995. See "Description of HCAC Capital Stock."
    
 
   
     The HCAC Common Shares are quoted on the OTC Bulletin Board and on February
14, 1997, the last reported high bid and ask prices were $5.00 and $5.25 per
share, respectively. An application has been filed to list the HCAC Common
Shares for quotation on the Nasdaq National Market under the symbol "ENMC" upon
or shortly after consummation of the Merger.
    

  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
       ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
             REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
   
     This Joint Proxy Statement/Prospectus and the accompanying forms of proxies
are first being mailed to the stockholders of HCAC and Encore on or about
               , 1997.
    
 
   
   THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS               , 1997.
    
 
     NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HCAC,
ACQUISITION OR ENCORE. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN
THE SECURITIES COVERED BY THIS JOINT PROXY STATEMENT/PROSPECTUS, OR THE
SOLICITATION OF A PROXY TO OR FROM ANY PERSON IN ANY JURISDICTION WHERE IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION ABOUT HCAC,
ACQUISITION OR ENCORE CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS SINCE
THE DATE HEREOF.
 
                             AVAILABLE INFORMATION
 
     HCAC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, accordingly, files
reports, proxy statements and other information with the SEC. Such reports,
proxy statements and other information filed with the SEC are available for
inspection and copying at the public reference facilities maintained by the SEC
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the SEC's Regional Offices located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World
Trade Center, New York, New York 10048. Copies of such documents may also be
obtained from the Public Reference Section of the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
the SEC maintains a World Wide Web site on the Internet, through which
electronic access to reports, proxy statements, information statements and other
information that has been electronically filed with the SEC is available. The
Internet address of this site is "http://www.sec.gov."
 
     HCAC has filed with the SEC under the Securities Act a Registration
Statement on Form S-4 (together with all amendments, schedules and exhibits
thereto, the "Registration Statement") with respect to HCAC Common Shares and
HCAC $7.00 Warrants issuable in connection with the Merger. This Joint Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. The Registration Statement, including any
amendments, schedules and exhibits thereto, is available for inspection and
copying as set forth above. Statements contained in this Joint Proxy
Statement/Prospectus as to the contents of any contract or other document are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
                             ---------------------
"SPAC(R)" and "Specified Purpose Acquisition Company(R)" are registered
servicemarks of GKN Securities Corp.
 
                                        3
<PAGE>   13
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
AVAILABLE INFORMATION.......................................    3
SUMMARY.....................................................    8
  The Parties...............................................    8
  The Merger................................................    8
  The Meetings..............................................    8
  Risk Factors..............................................    9
  Effective Time............................................    9
  Conversion of Shares; Exchange Ratio......................    9
  Stock Options.............................................   10
  Lock-Up Agreements........................................   10
  Recommendations of the Boards of Directors................   10
  Opinion of Financial Advisor..............................   10
  The Agreement and Plan of Merger..........................   11
  Exchange of Stock Certificates............................   11
  Fractional Shares.........................................   11
  Interests of Certain Persons in Merger....................   11
  Operations After the Merger...............................   12
  Comparison of Stockholder Rights..........................   12
  Absence of Regulatory Filings and Approvals...............   12
  Accounting Treatment......................................   12
  Certain Federal Income Tax Consequences...................   13
  Conversion Rights.........................................   13
  Dissenters' Rights........................................   13
  Market Price Data.........................................   13
SELECTED FINANCIAL DATA OF HCAC.............................   15
SELECTED FINANCIAL DATA OF ENCORE...........................   16
  Comparative Per Share Data................................   17
PRO FORMA COMBINED BALANCE SHEET OF ENCORE AND HCAC
  (UNAUDITED)...............................................   18
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET OF
  ENCORE AND HCAC...........................................   20
RISK FACTORS................................................   21
  Risks Relating to Encore..................................   21
  Risks Relating to HCAC....................................   27
INTRODUCTION................................................   29
  General...................................................   29
  Purposes of the Meetings..................................   29
  Voting Rights.............................................   29
  Solicitation and Revocation of Proxies....................   30
THE MERGER..................................................   32
  General...................................................   32
  Effective Time............................................   32
  Conversion of Shares; Exchange Ratio......................   32
  Background of the Merger..................................   35
  Reasons for the Merger; Recommendations...................   36
  Opinion of HCAC's Financial Advisor.......................   37
  The Agreement and Plan of Merger..........................   41
  Listing...................................................   43
</TABLE>
    
 
                                        4
<PAGE>   14
   
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
  Interests of Certain Persons in the Merger................   43
  Stock Options.............................................   44
  Exchange of Stock Certificates............................   44
  Fractional Shares.........................................   45
  Amendment to HCAC Certificate of Incorporation............   45
  Adoption of the Encore Medical Corporation 1996 Incentive
     Stock Plan.............................................   45
  Management After the Merger...............................   45
  Absence of Regulatory Filings and Approvals...............   46
  Accounting Treatment......................................   46
  Certain Federal Income Tax Consequences...................   46
  Consequences Under Federal Securities Laws................   48
  Lock-Up...................................................   49
  Warrants..................................................   50
  Voting Agreements.........................................   50
  Conversion Rights.........................................   50
  Dissenters' Rights........................................   51
DESCRIPTION OF HCAC CAPITAL STOCK...........................   54
  General...................................................   54
  Units.....................................................   54
  HCAC Common Shares........................................   54
  Preferred Stock...........................................   54
  HCAC Warrants.............................................   54
  Bridge Warrants...........................................   56
  Underwriter's Unit Purchase Option........................   56
  Dividends.................................................   56
  Transfer Agent............................................   56
COMPARISON OF STOCKHOLDER RIGHTS............................   56
  Removal of Directors; Filling Vacancies on the Board of
     Directors..............................................   57
  Quorum of Stockholders....................................   57
  Adjournment and Notice of Stockholder Meetings............   57
  Call to Special Stockholder Meetings......................   58
  Stockholder Consent in Lieu of Meeting....................   58
  Dissenters' Rights........................................   58
  Derivative Actions........................................   59
  Dividends and Distributions...............................   59
  Director Qualification and Number.........................   60
  Indemnification of Officers and Directors.................   60
  Director Liability........................................   61
  Amendment to Certificate of Incorporation and Bylaws......   61
  Vote Required for Extraordinary Corporate Transactions....   62
  Class Voting..............................................   63
  Interested Stockholder Transactions.......................   63
  Provisions with Possible Anti-Takeover Effects............   63
MARKET PRICES OF HCAC'S SECURITIES..........................   65
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
  AND RESULTS OF OPERATIONS OF HCAC.........................   66
</TABLE>
    
 
                                        5
<PAGE>   15
   
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
  AND RESULTS OF OPERATIONS OF ENCORE.......................   67
  General...................................................   67
  Results of Operations.....................................   67
  Capital Expenditures......................................   68
  Liquidity.................................................   69
DESCRIPTION OF AMENDMENT TO HCAC CERTIFICATE OF
  INCORPORATION.............................................   70
ADOPTION OF THE ENCORE MEDICAL CORPORATION 1996 INCENTIVE
  STOCK PLAN................................................   71
  General...................................................   71
  Administration............................................   71
  Stock Options.............................................   71
  Stock Appreciation Rights.................................   72
  Restricted Stock and Unrestricted Stock...................   72
  Deferred Stock............................................   72
  Performance Units.........................................   73
  Other Stock-based Awards..................................   73
  Supplemental Grants.......................................   73
  Dividends and Deferrals; Nature of HCAC's Obligations
     Under the Option Plan..................................   74
  Adjustments...............................................   74
  Amendment and Termination.................................   74
  Federal Income Tax Consequences...........................   74
  Stockholder Approval......................................   76
BUSINESS OF HCAC............................................   77
  General...................................................   77
  Competition...............................................   77
  Employees.................................................   78
  Facilities................................................   78
  Legal Proceedings.........................................   78
MANAGEMENT OF HCAC..........................................   79
  Directors and Executive Officers..........................   79
  Executive and Director Compensation.......................   80
OTHER TRANSACTIONS..........................................   81
PRINCIPAL STOCKHOLDERS OF HCAC..............................   82
BUSINESS OF ENCORE..........................................   84
  Overview..................................................   84
  Industry Background.......................................   84
  Strategy..................................................   86
  Products..................................................   86
  Marketing and Sales.......................................   88
  International Sales and Distribution......................   89
  Affiliated Surgeons.......................................   89
  Research and Development..................................   90
  Competition...............................................   90
  Manufacturing.............................................   91
  Intellectual Property.....................................   91
  Properties................................................   91
  Employees.................................................   92
  Litigation................................................   92
  Government Regulation.....................................   92
</TABLE>
    
 
                                        6
<PAGE>   16
   
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
MANAGEMENT OF ENCORE........................................   95
  Directors and Executive Officers..........................   95
  Other Transactions........................................   98
  Director Compensation.....................................   99
  Committees of the Board...................................   99
  Executive Compensation....................................   99
  Agreements with Executive Officers........................  100
  Bonus Payments to Executive Officers......................  101
PRINCIPAL SHAREHOLDERS OF ENCORE............................  101
OTHER MATTERS...............................................  102
LEGAL OPINIONS..............................................  103
EXPERTS.....................................................  103
INDEX TO FINANCIAL STATEMENTS...............................  F-1
</TABLE>
    
 
   
<TABLE>
<CAPTION>
APPENDICES
- ----------
<S>         <C>
Appendix A  Agreement and Plan of Merger dated November 12, 1996 By and
              Among Healthcare Acquisition Corp., Healthcare
              Acquisition, Inc. and Encore Orthopedics, Inc., as amended
              by Amendment dated as of February 14, 1997.
Appendix B  Opinion of Rodman & Renshaw
Appendix C  HCAC Certificate Amendment
Appendix D  Encore Medical Corporation 1996 Incentive Stock Plan
Appendix E  Texas Business Corporation Act Dissenter's Rights Provisions
</TABLE>
    
 
                                        7
<PAGE>   17
 
                                    SUMMARY
 
     The following is a summary of certain significant matters discussed
elsewhere in this Joint Proxy Statement/Prospectus. This summary is qualified in
its entirety by reference to the more detailed information appearing elsewhere
in this Joint Proxy Statement/Prospectus and the Appendices hereto. Stockholders
are urged to read the entire Joint Proxy Statement/Prospectus, including the
Appendices hereto. Certain items used in this summary and elsewhere in this
Joint Proxy Statement/Prospectus are used as defined in the Summary or elsewhere
in this Joint Proxy Statement/Prospectus.
 
THE PARTIES
 
     HCAC was formed in March 1995 as a Specified Purpose Acquisition Company
("SPAC"), the objective of which is to acquire an operating business (a "Target
Business") in the healthcare industry (the "Healthcare Industry") by merger,
exchange of stock, stock or asset acquisition or other similar type of
reorganization (a "Business Combination"). The Healthcare Industry encompasses
pharmaceuticals, diagnostics, medical devices, equipment and supplies, medical
services and biotechnology companies. In March 1996, HCAC successfully
consummated an initial public offering of its equity securities (the "IPO") from
which it derived net proceeds of approximately $9,000,000 after expenses. Of
such net proceeds, a total of $8,383,500 was placed in a trust account (the
"Trust Fund") and will be released either upon consummation of a Business
Combination (including the Merger) or upon the liquidation of HCAC, which must
occur on September 8, 1997 (or March 8, 1998, if certain conditions are met)
unless HCAC has consummated a Business Combination by such time. Other than its
IPO and pursuit of a Business Combination, HCAC has not engaged in any business
to date. The mailing address of HCAC's principal executive offices is 200 East
Broward Boulevard, Fort Lauderdale, Florida 33301, and its telephone number is
(954) 761-2908. See "Business of HCAC."
 
     Acquisition is a Texas corporation and a wholly-owned subsidiary of HCAC
organized solely for the purpose of facilitating the Merger. Upon consummation
of the Merger and the transactions associated therewith, Encore will merge with
Acquisition and be the surviving company. Encore will be a wholly-owned
subsidiary of HCAC. The mailing address of Acquisition's principal executive
offices is 200 East Broward Boulevard, Fort Lauderdale, Florida 33301, and its
telephone number is (954) 761-2908.
 
   
     Encore, a Texas corporation, is a designer, marketer and distributor of
orthopedic products and supplies. Its products are used primarily by orthopedic
medical specialists to treat patients with musculoskeletal conditions resulting
from degenerative diseases, deformities, traumatic events and participation in
sporting events. Encore's products cover a broad variety of orthopedic needs and
include hip, knee and shoulder implants to reconstruct damaged joints and trauma
products to reconstruct bone fractures. Encore also distributes surgical
instruments to be used in implantation of its products. The mailing address of
Encore's principal executive offices is 9800 Metric Boulevard, Austin, Texas
78758 and its telephone number is (512) 832-9500. For a more detailed
description of Encore's business, see "Business of Encore."
    
 
THE MERGER
 
     Under the terms of the Agreement and Plan of Merger, Acquisition will merge
with and into Encore, and Encore will be the surviving corporation (the
"Surviving Corporation") and a wholly-owned subsidiary of HCAC. Upon
consummation of the Merger, HCAC will change its name to Encore Medical
Corporation. Stockholders of HCAC and Encore will each vote separately on the
Agreement and Plan of Merger. See "The Merger."
 
THE MEETINGS
 
   
     HCAC.  The HCAC Meeting will be held on March 25, 1997 at 10:00 a.m., local
time, at 200 East Broward Boulevard, 15th Floor, Fort Lauderdale, Florida 33301.
At the HCAC Meeting, stockholders of HCAC will be asked (i) to consider and act
upon a proposal to approve the Agreement and Plan of Merger dated as of November
12, 1996, as amended as of February 14, 1997, among HCAC, Acquisition and
Encore, (ii) to consider and act upon a proposal to approve the HCAC Certificate
Amendment and (iii) to approve
    
                                        8
<PAGE>   18
 
the adoption of the Option Plan. If the Agreement and Plan of Merger is not
approved, however, the HCAC Certificate of Incorporation will not be amended,
and the Option Plan will not be adopted, notwithstanding stockholder approval of
either of such proposals. Approval of the Agreement and Plan of Merger by the
stockholders of HCAC and Encore will constitute approval of the assumption by
HCAC of the stock options of Encore outstanding immediately prior to the
effective time of the Merger. To approve and authorize the Merger, HCAC's
Certificate of Incorporation requires the affirmative vote of at least a
majority of the outstanding HCAC Common Shares and also requires that Conversion
Rights are exercised with respect to fewer than 20% of the Public Shares. The
affirmative vote of a majority of the outstanding HCAC Common Shares entitled to
vote is required to approve the HCAC Certificate Amendment. The affirmative vote
of a majority of shares represented in person or by proxy at the HCAC Meeting
and entitled to vote thereat is required to approve and adopt the Option Plan.
CONSUMMATION OF THE MERGER IS CONDITIONED NOT ONLY UPON HCAC STOCKHOLDER
APPROVAL OF THE AGREEMENT AND PLAN OF MERGER, BUT ALSO UPON STOCKHOLDER APPROVAL
OF THE HCAC CERTIFICATE AMENDMENT AND THE ADOPTION OF THE OPTION PLAN.
 
   
     Holders of record of HCAC Common Shares as of the close of business on
February 14, 1997 will be entitled to cast one vote for each HCAC Common Share
held as of such date. At such date, there were 2,100,000 HCAC Common Shares
outstanding and entitled to vote. See "Introduction." THE HCAC BOARD UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE PROPOSALS BEING SUBMITTED TO THE HCAC STOCKHOLDERS.
    
 
   
     Encore.  The Encore Meeting will be held on March 25, 1997 at 10:00 a.m.,
local time, at 9800 Metric Boulevard, Austin, Texas 78758. At the Encore
Meeting, shareholders will be asked to consider and act upon a proposal to
approve the Agreement and Plan of Merger. The affirmative vote of at least
66 2/3% of the outstanding Encore Shares, voting together as one class, is
required to approve the Agreement and Plan of Merger. Holders of record of
Encore Shares as of the close of business on February 14, 1997 will be entitled
to cast one vote for each Encore Share held as of such date. At such date, there
were outstanding and entitled to vote 6,924,811 Encore Shares, consisting of
6,337,911 Encore Common Shares and 586,900 Encore Preferred Shares. THE ENCORE
BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL BEING SUBMITTED TO THE
ENCORE SHAREHOLDERS.
    
 
RISK FACTORS
 
     Stockholders should carefully consider certain factors in evaluating the
Merger. See "Risk Factors."
 
EFFECTIVE TIME
 
     Following the satisfaction or waiver of all conditions to the Merger, the
Merger will be consummated on the date and time of filing of the Articles of
Merger and all other necessary documents with the Secretary of State of the
State of Texas (the "Effective Time"). Assuming that the Merger is approved at
the Meetings and all other conditions to the Merger are satisfied, or waived, it
is anticipated that the Effective Time will occur on the date of the Meetings,
or as soon thereafter as practicable. See "The Merger -- Effective Time."
 
CONVERSION OF SHARES; EXCHANGE RATIO
 
   
     Pursuant to the provisions of the Agreement and Plan of Merger, assuming no
dissenting Encore shareholders, no additional issuances of Encore Shares or
Encore options at an exercise price of less than $5.00 and that at the Effective
Time, HCAC's cash position net of accounts payable remains as it was on December
31, 1996, each issued and outstanding Encore Common Share would be converted
into 0.8656 HCAC Common Shares and 0.1298 HCAC $7.00 Warrants, and each issued
and outstanding Encore Preferred Share would be converted into 1.0820 HCAC
Common Shares and 0.1623 HCAC $7.00 Warrants (the "Minimum Exchange Ratio"). The
actual exchange ratio will differ from the Minimum Exchange Ratio to the extent
these assumptions vary from actual conditions at the Effective Time. The
managements of HCAC and Encore believe that the actual exchange ratio will not
be identical to the Minimum Exchange Ratio, but they do not believe that the
actual exchange ratio will provide fewer HCAC Common Shares or HCAC $7.00
Warrants for Encore's shareholders than the Minimum Exchange Ratio, assuming no
Encore shareholders exercise their dissenters' rights and that no additional
Encore Shares are issued between the date
    
                                        9
<PAGE>   19
 
   
of this Joint Proxy Statement/Prospectus and the Effective Time. Based upon the
Minimum Exchange Ratio, holders of Encore Shares, in the aggregate, would own
approximately 74% of the outstanding HCAC Common Shares as a result of the
Merger, without giving effect to the issuance of HCAC Common Shares pursuant to
options and warrants outstanding at the Effective Time. All HCAC Common Shares
outstanding as of the consummation of the Merger will remain issued and
outstanding. SEE "THE MERGER -- CONVERSION OF SHARES; EXCHANGE RATIO" FOR A
DISCUSSION OF THE DETERMINATION OF THE EXCHANGE RATIO AND THE ASSUMPTIONS ON
WHICH THE MINIMUM EXCHANGE RATIO IS BASED.
    
 
STOCK OPTIONS
 
   
     The Agreement and Plan of Merger provides that from and after the Effective
Time each outstanding option and warrant to purchase Encore Common Shares that
was outstanding as of November 12, 1996 or issued subsequently thereto in
accordance with the Agreement and Plan of Merger (the "Assumed Options"), will
be assumed by HCAC and will be exercisable for HCAC Common Shares and HCAC $7.00
Warrants on the same terms and conditions as are set forth in the option or
warrant and for that number of HCAC Common Shares and HCAC $7.00 Warrants as the
optionee or warrantholder would have been entitled to receive had the optionee
or warrantholder exercised his option or warrant immediately prior to the
Effective Time. As of December 31, 1996, options and warrants to purchase
4,316,606 Encore Common Shares were outstanding. Assuming no exercises or
cancellations of such options or warrants between December 31, 1996 and the
Effective Time and assuming that the Encore Shares are converted pursuant to the
Minimum Exchange Ratio, immediately after the Effective Time, Assumed Options to
purchase 3,736,520 HCAC Common Shares and 560,478 HCAC $7.00 Warrants will be
outstanding. Each Assumed Option shall constitute a continuation of the option
that was outstanding prior to the Effective Time. Other than accelerated
vesting, which may occur under certain option agreements as a result of the
Merger, an Assumed Option shall not give the optionee or warrantholder
additional benefits that he did not have under the option or warrant that was
outstanding prior to the Effective Time. See "The Merger-Conversion of Shares;
Exchange Ratio" for a discussion of the determination of the exchange ratio and
the assumptions on which the Minimum Exchange Ratio is based. Approval of the
Merger by the stockholders of HCAC and Encore will constitute approval of the
assumption by HCAC of the Assumed Options.
    
 
   
LOCK-UP AGREEMENTS
    
 
     Certain officers, directors and shareholders of Encore will be required to
agree not to sell or transfer the HCAC Common Shares and HCAC $7.00 Warrants
received by them in connection with the Merger for specified periods of time.
See "The Merger-Lock-Up Agreements of Certain Parties."
 
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
 
   
     The HCAC and Encore Boards have each unanimously approved the Agreement and
Plan of Merger and determined that the terms of the proposed Merger are fair to,
and in the best interests of, their respective stockholders. Prior to the date
of this Joint Proxy Statement/Prospectus, the HCAC Board received a fairness
opinion from Rodman and Renshaw, Inc. ("Rodman"), HCAC's financial advisor,
stating that, based upon its review and subject to the assumptions and
limitations stated therein, the consideration to be paid by HCAC pursuant to the
Agreement and Plan of Merger is fair, from a financial point of view, to the
stockholders of HCAC. See "The Merger -- Background of the Merger" and "The
Merger -- Reasons for the Merger; Recommendations." The HCAC Board unanimously
recommends a vote "FOR" the proposals to approve the HCAC Certificate Amendment
and the Option Plan.
    
 
OPINION OF FINANCIAL ADVISOR
 
   
     Rodman has rendered its opinion to the HCAC Board stating that, based upon
its review and subject to the assumptions and limitations stated therein, the
consideration to be paid by HCAC pursuant to the Agreement and Plan of Merger is
fair, from a financial point of view, to the stockholders of HCAC and that the
fair market value of Encore is at least 80% of the net assets of HCAC. See "The
Merger -- Opinion of Financial Advisor" and Appendix B.
    
                                       10
<PAGE>   20
 
THE AGREEMENT AND PLAN OF MERGER
 
     The Agreement and Plan of Merger sets forth the terms by which the Merger
will be consummated and the rights of holders of Encore Shares to receive HCAC
Common Shares and HCAC $7.00 Warrants pursuant to the Merger. The Agreement and
Plan of Merger contains representations, warranties and agreements of the
parties, and provides specific conditions to the consummation of the Merger and
terms under which the Merger may be terminated or abandoned. See "The
Merger -- Representations and Warranties, Conduct of Business Prior to Merger,
Certain Covenants, Conditions to the Merger and Amendment; Waiver; Termination."
 
EXCHANGE OF STOCK CERTIFICATES
 
     As of the Effective Time of the Merger, each Encore shareholder whose
shares are converted in the Merger into HCAC Common Shares and HCAC $7.00
Warrants will be entitled to receive, upon surrender of certificate(s) formerly
representing Encore Shares, certificates representing the HCAC Common Shares and
HCAC $7.00 Warrants to which such holder is entitled in respect of the
conversion of such shares. Instructions with regard to the surrender of
certificates, together with a letter of transmittal to be used for this purpose,
will be forwarded to the former Encore shareholders as promptly as possible
following the Effective Time of the Merger. Each shareholder should only
surrender such certificates with an accompanying letter of transmittal. See "The
Merger -- Exchange of Stock Certificates."
 
FRACTIONAL SHARES
 
   
     No fractional HCAC Common Shares or HCAC $7.00 Warrants will be issued as a
result of the Merger. Each holder of a fractional interest in HCAC Common Shares
will be entitled to receive a cash amount in lieu of such fractional interest
equal to such fraction multiplied by the average of the closing bid prices of
HCAC Common Shares for the five trading days prior to the Effective Time, as
reported on the OTC Bulletin Board. Fractional interests in HCAC $7.00 Warrants
will be rounded to the closest whole number. See "The Merger -- Fractional
Shares."
    
 
INTERESTS OF CERTAIN PERSONS IN MERGER
 
   
     As contemplated by the Agreement and Plan of Merger, HCAC has agreed to
cause Nick Cindrich, Craig Smith, Richard Martin, Richard Relyea, Lamar Laster,
Dennis Enright and Kenneth Davidson, each an Encore designee, and Jay Haft, John
Abeles, M.D. and Joel Kanter, each an HCAC designee, to be elected to HCAC's
Board of Directors following the Merger. Encore's designees will represent seven
of the ten members of HCAC's Board following the Effective Time.
    
 
   
     Northlea Partners, Ltd., an Initial Stockholder of HCAC, owns 158,918
Encore Common Shares, which, based upon the Minimum Exchange Ratio, would,
subject to possible adjustments, convert to 137,562 HCAC Common Shares and
20,634 HCAC $7.00 Warrants upon consummation of the Merger. John H. Abeles,
M.D., the President, Treasurer and a director of HCAC, is the general partner of
Northlea Partners, Ltd., a limited partnership of which the Abeles Family Trust
is the sole limited partner. See "The Merger -- Conversion of Shares; Exchange
Ratio" for a discussion of the determination of the exchange ratio and the
assumptions on which the Minimum Exchange Ratio is based.
    
 
   
     Pursuant to an Engagement Letter dated December 2, 1996 (the "Engagement
Letter"), HCAC also retained Rodman to furnish financial advisory and investment
banking services with respect to potential post-Merger acquisitions, mergers and
debt or equity financings by HCAC. The Engagement Letter provides for
compensation payable to Rodman in two installments and final payment due upon
the closing of the Merger, consisting of: (i) an advisory fee of $100,000
payable in cash; (ii) upon consummation of the Merger, an investment banking fee
of $100,000 payable in cash; and (iii) upon consummation of the Merger, warrants
to purchase 150,000 HCAC Common Shares exercisable for a period of four (4)
years at an exercise price of $7.00 per share with such provisions as are
customary in transactions of this nature, including cashless conversion rights.
HCAC has also agreed to reimburse Rodman for its reasonable out-of-pocket
expenses not
    
                                       11
<PAGE>   21
 
to exceed $25,000 and to indemnify Rodman against certain liabilities relating
to or arising out of services performed and opinions rendered by Rodman pursuant
to the Engagement Letter.
 
   
     The Agreement and Plan of Merger provides that from and after the Effective
Time each outstanding option and warrant to purchase Encore Common Shares will
be converted into an option or warrant to purchase HCAC Common Shares and HCAC
$7.00 Warrants on the same terms and conditions as are set forth in the option
or warrant and for that number of HCAC Common Shares and HCAC $7.00 Warrants as
the optionee or warrantholder would have been entitled to receive had the
optionee or warrantholder exercised his option or warrant immediately prior to
the Effective Time. As of December 31, 1996, options and warrants to purchase
4,316,606 Encore Common Shares were outstanding. The executive officers and
directors of Encore hold options to purchase 2,388,897 (1,965,147 of which were
vested as of December 31, 1996) Encore Common Shares that will be converted as
provided above. See "The Merger -- Conversion of Shares; Exchange Ratio" for a
discussion of the determination of the exchange ratio and the assumptions on
which the Minimum Exchange Ratio is based.
    
 
   
OPERATIONS AFTER THE MERGER
    
 
   
     As a result of the Merger, Acquisition will be merged with and into Encore,
and HCAC will own all of the outstanding shares of Encore. Accordingly, after
the Merger, HCAC will own the business of Encore, Encore will be a wholly-owned
subsidiary of HCAC, and the HCAC Certificate of Incorporation will be amended as
of the Effective Time to change HCAC's name to Encore Medical Corporation.
    
 
     Effective as of the Effective Time, all of the HCAC directors will resign,
and, prior to resigning, will elect ten members, seven of whom will be Encore
designees and three of whom will be pre-Merger HCAC directors. In addition,
HCAC's two executive officers will resign effective at the Effective Time and be
replaced by officers of Encore. Certain members of the post-merger HCAC Board
also will be members of the board of directors of the Surviving Corporation.
Encore's executive officers will remain executive officers of the Surviving
Corporation. See "The Merger -- Management After the Merger."
 
   
     Neither Encore nor HCAC currently intends to pay any cash dividends for the
year ending December 31, 1997, other than as required to be paid to holders of
Encore Preferred Shares, as all available cash will be utilized to further the
growth of Encore's business subsequent to the Effective Time and for the
foreseeable future thereafter. The payment of any subsequent cash dividends will
be subject to the discretion of the post-Merger HCAC Board. See "The
Merger -- Management After the Merger" and "Description of HCAC Capital
Stock -- Dividends."
    
 
COMPARISON OF STOCKHOLDER RIGHTS
 
     If the Merger is consummated, holders of Encore Common Shares and Encore
Preferred Shares will become holders of HCAC Common Shares, which will result in
their rights as shareholders being governed by Delaware law. A discussion of the
material differences between the rights of holders of Encore Common Shares and
Encore Preferred Shares and holders of HCAC Common Shares is set forth in "The
Merger-Comparison of Stockholder Rights." Consummation of the Merger will also
result in the rights of holders of Encore Common Shares and Encore Preferred
Shares being governed by HCAC's Certificate of Incorporation, as amended, bylaws
and the Delaware General Corporation Law.
 
ABSENCE OF REGULATORY FILINGS AND APPROVALS
 
     Neither HCAC nor Encore is aware of any governmental or regulatory
requirements for consummation of the Merger, other than compliance with
applicable federal and state securities laws. See "The Merger -- Absence of
Regulatory Filings and Approvals."
 
ACCOUNTING TREATMENT
 
   
     Based upon the Minimum Exchange Ratio of 0.8656 HCAC Common Shares and
0.1298 HCAC $7.00 Warrants per Encore Common Share and 1.0820 HCAC Common Shares
and 0.1623 HCAC $7.00 Warrants
    
                                       12
<PAGE>   22
 
   
per Encore Preferred Share, upon completion of the Merger, the current holders
of Encore Shares, in the aggregate, would own approximately 74% of the
outstanding shares of HCAC (without giving effect to the issuance of HCAC Common
Shares pursuant to options and warrants outstanding at the Effective Time) and
the current Encore executive officers and management team will become the
executive officers and management team of HCAC and the Surviving Corporation.
For accounting and financial reporting purposes, the Merger will be accounted
for as a recapitalization of Encore, with the issuance of shares by Encore for
the net assets of HCAC, consisting primarily of cash. Since HCAC is a SPAC with
no business operations other than the search for a suitable Target Business, its
assets will be recorded in the balance sheet of the combined company at book
value. The unaudited pro forma balance sheet in this Joint Proxy
Statement/Prospectus has been prepared on this basis. See "The
Merger -- Accounting Treatment" and see "The Merger-Conversion of Shares;
Exchange Ratio" for a discussion of the determination of the exchange ratio and
the assumptions on which the Minimum Exchange Ratio is based.
    
 
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
 
   
     Consummation of the Merger is conditioned upon the receipt of an opinion of
counsel to Encore that, for federal income tax purposes (i) the Merger will
constitute a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended; (ii) no gain or loss will be
recognized to Encore shareholders upon receipt of HCAC Common Shares in exchange
for their Encore Shares pursuant to the Merger, although Encore shareholders
will recognize gain, if any, to the extent of the fair market value of the HCAC
$7.00 Warrants received in exchange for their Encore Shares pursuant to the
Merger; (iii) the basis of the HCAC Common Shares received by an Encore
shareholder (including interests in fractional HCAC Common Shares not actually
received) will be the same as the basis of the Encore Common Shares or Encore
Preferred Shares surrendered for exchange in the Merger, decreased by the fair
market value of the HCAC $7.00 Warrants received by such shareholder and
increased by the amount of gain, if any, recognized on the exchange by such
shareholder; and (iv) Encore shareholders in the Merger will include the holding
period for the Encore Shares in their holding period for HCAC Common Shares
received in the Merger, assuming such Encore Shares were held as capital assets
at the Effective Time. The tax opinion to be received is subject to various
assumptions and qualifications and is not binding on the Internal Revenue
Service. See "The Merger -- Certain Federal Income Tax Consequences."
    
 
CONVERSION RIGHTS
 
     Public Stockholders who vote against the Agreement and Plan of Merger and
comply with certain other requirements will have the right to demand that HCAC
convert their shares for cash if the Merger is approved and consummated. See
"The Merger -- Conversion Rights."
 
DISSENTERS' RIGHTS
 
     No right of dissent or appraisal is available to holders of HCAC Common
Shares, although such holders do have Conversion Rights, as described above,
which may be exercised by following certain specific procedures described below.
See "The Merger -- Conversion Rights." Holders of Encore Shares will have
dissenters' rights of appraisal in connection with the Merger. See "The
Merger -- Dissenters' Rights."
 
MARKET PRICE DATA
 
   
     HCAC Common Shares, as well as HCAC's redeemable common stock purchase
warrants (the "HCAC $5.00 Warrants"), are traded in the over-the-counter market
and quoted on the OTC Bulletin Board, an inter-dealer automated quotation system
sponsored and operated by the National Association of Securities Dealers, Inc.
("NASD"). An application has been filed to list the HCAC Common Shares and HCAC
$5.00 Warrants on the Nasdaq National Market ("Nasdaq") under the symbols "ENMC"
and "ENMCW." There is no established trading market for the Encore Shares.
    
                                       13
<PAGE>   23
 
   
     On October 16, 1996, the last full trading day prior to the public
announcement of the execution and delivery of a Letter of Intent between HCAC
and Encore (the "Letter of Intent"), the high bid prices of the HCAC Common
Shares and HCAC $5.00 Warrants, as reported on the OTC Bulletin Board, were
$4.63 and $0.75, respectively. On February 14, 1997, the most recent date for
which it was practicable to obtain market price information prior to the
printing of this Joint Proxy Statement/Prospectus, such closing bid prices were
$5.00 and $0.78, respectively. See "Market Prices of HCAC's Securities."
    
 
   
     Because the market price of HCAC Common Shares is subject to fluctuation,
the market value of the HCAC Common Shares and the HCAC $7.00 Warrants that
holders of Encore Common Shares and Encore Preferred Shares will receive in the
Merger may increase or decrease prior to the Merger. ENCORE SHAREHOLDERS ARE
URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR HCAC COMMON SHARES.
    
 
   
     Encore is privately held, and there is no established public market for any
of the Encore Common Shares or Encore Preferred Shares. As of the date of this
Joint Proxy Statement/Prospectus, there were 84 holders of record of Encore
Common Shares, representing 100% of the ownership of Encore Common Shares, and
28 holders of record of Encore Preferred Shares, representing 100% of the
ownership of Encore Preferred Shares.
    
                                       14
<PAGE>   24
 
                        SELECTED FINANCIAL DATA OF HCAC
 
   
     The following table sets forth selected financial data with respect to HCAC
for the periods indicated, which data has been derived from financial statements
audited by Richard A. Eisner & Company, LLP, independent accountants, and
included elsewhere in this Joint Proxy Statement/Prospectus. The data set forth
below should be read in conjunction with the financial statements of HCAC,
including the notes thereto, included elsewhere herein and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
HCAC."
    
 
   
<TABLE>
<CAPTION>
                                                         MARCH 21, 1995       YEAR       MARCH 21, 1995
                                                         (INCEPTION) TO      ENDED       (INCEPTION) TO
                                                          DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                              1995            1996            1996
                                                         --------------   ------------   --------------
<S>                                                      <C>              <C>            <C>
STATEMENT OF OPERATIONS DATA:
Interest income........................................           --       $ 360,939        $360,939
Expenses...............................................     $ 38,921         230,050         268,971
Net income (loss)......................................      (38,921)        107,889          68,968
Net income (loss) per share............................     $  (0.10)      $    0.06
Weighted average common shares outstanding.............      375,000       1,750,437
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                                          DECEMBER 31,                    DECEMBER 31,
                                                              1995                            1996
                                                         --------------                  --------------
<S>                                                      <C>              <C>            <C>
BALANCE SHEET DATA:
Working capital (deficit)..............................    $(195,715)                      $8,645,342
Total assets...........................................      233,356                        9,358,278
Current liabilities....................................      227,277                          301,093
Common stock subject to possible conversion to cash....           --                        1,746,368
Common stock...........................................          375                            1,755
Additional paid-in capital.............................       44,625                        7,309,767
Deficit accumulated during the development stage.......      (38,921)                            (705)
</TABLE>
    
 
                                       15
<PAGE>   25
 
                       SELECTED FINANCIAL DATA OF ENCORE
 
   
     The following sets forth selected financial data with respect to Encore for
the periods indicated. The data as of December 31, 1995 and 1996 and for each of
the three years in the period ended December 31, 1996 have been derived from
financial statements audited by Price Waterhouse LLP, independent accountants,
which are included elsewhere in this Joint Proxy Statement/Prospectus. The data
as of December 31, 1993 and 1994 and for the nine months ended December 31, 1993
and the year ended December 31, 1994 have been derived from financial statements
audited by Price Waterhouse LLP, independent accountants, not included herein.
The data as of and for the year ended March 31, 1993 have been derived from
unaudited financial statements not presented herein. In the opinion of Encore's
management, the unaudited financial statements have been prepared on the same
basis as the audited financial statements contained in this Joint Proxy
Statement/Prospectus and include all adjustments (consisting only of normal
recurring adjustments) necessary to state fairly the data included therein in
accordance with generally accepted accounting principles. The following selected
financial data are qualified by reference to, and should be read in conjunction
with, the financial statements and related notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Encore" included elsewhere in this Joint Proxy Statement/Prospectus.
    
 
   
<TABLE>
<CAPTION>
                                                             YEAR      NINE MONTHS
                                                             ENDED        ENDED        YEAR ENDED DECEMBER 31,
                                                           MARCH 31,   DECEMBER 31,   --------------------------
                                                             1993        1993(B)       1994     1995      1996
                                                           ---------   ------------   ------   -------   -------
                                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                        <C>         <C>            <C>      <C>       <C>
STATEMENT OF OPERATIONS DATA
Sales....................................................   $ 2,045       $3,295      $7,762   $13,791   $17,621
Gross margin.............................................       870        1,647       4,487     8,051    11,563
Income (loss) from operations............................    (2,176)        (931)        166     1,758     2,129
Net income (loss)........................................    (1,706)        (928)        447     1,408     1,033
Net income (loss) applicable to common stockholders......    (1,706)        (928)        442     1,370      (236)
Net income (loss) applicable to common stockholders per
  share..................................................     (0.34)       (0.18)       0.07      0.20     (0.04)
Weighted average shares outstanding......................     5,071        5,082       6,624     6,941     6,149
PRO FORMA EQUIVALENT STATEMENT OF OPERATIONS DATA(A)
Pro forma net income.....................................                                                $ 1,033
Pro forma equivalent net income per share................                                                   0.12
Weighted average equivalent shares outstanding...........                                                  8,287
BALANCE SHEET DATA
Working capital..........................................   $ 2,652       $2,714      $3,752   $ 7,231   $10,012
Total assets.............................................     4,981        5,098       7,712    12,757    20,275
Note payable and current portion of long-term debt.......       100          100         200       293     2,764
Long-term debt, less current portion.....................     1,800        1,800       1,600     4,479     6,013
Stockholders' equity.....................................     2,349        2,313       3,275     5,170     6,589
</TABLE>
    
 
- ---------------
 
   
(a) Pro forma equivalent net income per share has been presented to give effect
    to the Merger. Pro forma equivalent net income per share is based on (i) net
    income available for holders of Encore Common Shares adjusted by adding back
    cumulative dividends on Encore Preferred Shares (the Encore Preferred Shares
    will be exchanged for HCAC Common Shares) and the change in the redemption
    amount of the common stock put warrants (since the redemption feature of the
    common stock put warrants will terminate in connection with the Merger), and
    (ii) weighted average equivalent shares outstanding, adjusted by the Minimum
    Exchange Ratio. See "The Merger -- Conversion of Shares; Exchange Ratio" for
    a discussion of the determination of the exchange ratio and the assumptions
    on which the Minimum Exchange Ratio is based.
    
   
(b) Encore converted from a March 31 fiscal year to a December 31 fiscal year as
    of December 31, 1993.
    
                                       16
<PAGE>   26
 
COMPARATIVE PER SHARE DATA
 
     The following table sets forth per share data of HCAC and Encore on a
historical basis and the merged entity on a pro forma basis. This table should
be read in conjunction with the historical financial statements and notes
thereto of HCAC and Encore appearing elsewhere in this Joint Proxy
Statement/Prospectus.
 
   
<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                                DECEMBER 31,
                                                                    1996
                                                              -----------------
<S>                                                           <C>
HCAC HISTORICAL INFORMATION
  Net income per share......................................       $ 0.06
  Book value per common share...............................         4.31
  Conversion value per share(a).............................         5.06
ENCORE HISTORICAL INFORMATION
  Net loss applicable to common stockholders per share......        (0.04)
  Book value per common share...............................         0.58
  Equivalent pro forma book value per common share(b).......         1.81
PRO FORMA INFORMATION
  Net income per share (c)..................................         0.10
  Book value per common share(d)............................         2.09
</TABLE>
    
 
- ---------------
 
   
(a) Conversion value per share equals the amount held in the Trust Fund at
    December 31, 1996 divided by the number of Public Shares. Such per share
    amount is payable to Public Stockholders who exercise their Conversion
    Rights, provided that the Merger is consummated and Conversion Rights are
    exercised with respect to less than 20% of the Public Shares.
    
(b) Equivalent pro forma book value per common share for Encore is determined by
    multiplying the pro forma book value per common share by the Minimum
    Exchange Ratio to represent equivalent per share amounts to shareholders of
    Encore. See "The Merger -- Conversion of Shares; Exchange Ratio" for a
    discussion of the determination of the exchange ratio and the assumptions on
    which the Minimum Exchange Ratio is based.
   
(c) Pro forma net income per share represents the net income of Encore of
    $1,033,000, divided by pro forma weighted average shares outstanding of
    10,037,240. The net income of HCAC is not considered in this calculation as
    the Merger is considered a recapitalization of Encore with the issuance of
    shares by Encore for the net assets of HCAC, consisting primarily of cash.
    HCAC has had no business operations other than the search for a suitable
    Target Business; therefore, its results of operations are not considered
    meaningful.
    
   
         Pro forma weighted average shares outstanding includes (i) Encore's
    weighted average shares outstanding adjusted by the Minimum Exchange Ratio,
    and (ii) HCAC's weighted average common shares outstanding. Pro forma
    weighted average shares outstanding further assumes that no Encore
    shareholders exercise dissenters' rights and no additional issuance of
    shares by Encore between the date of this Joint Proxy Statement/Prospectus
    and the Effective Time. See "The Merger -- Conversion of Shares; Exchange
    Ratio" for a discussion of the determination of the Exchange Ratio and the
    assumptions on which the Minimum Exchange Ratio is based.
    
   
(d) Pro forma book value per common share represents pro forma stockholders'
    equity of $17,192,185, divided by pro forma common shares outstanding of
    8,217,811.
    
   
         Pro forma common shares outstanding represents (i) Encore Preferred
    Shares and Common Shares outstanding at December 31, 1996, adjusted by the
    Minimum Exchange Ratio, and (ii) HCAC Common Shares outstanding at December
    31, 1996. The calculation further assumes that no Encore shareholders
    exercise dissenters' rights and no additional issuance of Encore Shares
    between the date of this Joint Proxy Statement/Prospectus and the Effective
    Time. See "The Merger -- Conversion of Shares; Exchange Ratio" for a
    discussion of the determination of the exchange ratio and the assumptions on
    which the Minimum Exchange Ratio is based.
    
                                       17
<PAGE>   27
 
   
                               PRO FORMA COMBINED
    
   
                  BALANCE SHEET OF ENCORE AND HCAC (UNAUDITED)
    
 
   
     The following unaudited pro forma combined balance sheet gives effect to
the proposed Merger to be accounted for as a recapitalization of Encore, with
the issuance of shares by Encore for the net assets of HCAC, consisting
primarily of cash. The unaudited pro forma balance sheet is based on the
individual balance sheets of Encore and HCAC appearing elsewhere in this Joint
Proxy Statement/Prospectus and has been prepared to reflect the proposed Merger
as of December 31, 1996 based on the two assumptions described as Illustration A
and Illustration B in "The Merger -- Conversion of Shares; Exchange Ratio." Both
illustrations assume that no Encore shareholders exercise dissenters' rights.
Illustration A assumes that no HCAC stockholders exercise their Conversion
Rights. Illustration B assumes that Conversion Rights are exercised with respect
to one share less than 20% of the HCAC Public Shares, the maximum allowable
number. Unaudited pro forma statements of operations have not been provided
herein as HCAC is a SPAC(R) with no business operations other than the search
for a suitable Target Business; therefore the results of its operations are not
considered meaningful.
    
                                       18
<PAGE>   28
 
     This unaudited pro forma combined balance sheet should be read in
conjunction with the historical financial statements and notes thereto of Encore
and HCAC included elsewhere in this Joint Proxy Statement/Prospectus.
 
   
        PRO FORMA COMBINED BALANCE SHEET OF ENCORE AND HCAC (UNAUDITED)
    
   
                               DECEMBER 31, 1996
    
                                 (IN THOUSANDS)
 
   
<TABLE>
<CAPTION>
                                                                  PRO FORMA                        PRO FORMA
                                                        ------------------------------   ------------------------------
                                                                          ASSUMING                         ASSUMING
                                                                          NO HCAC                         MAX. HCAC
                                     ENCORE     HCAC    ADJUSTMENTS      CONVERSION      ADJUSTMENTS      CONVERSION
                                     -------   ------   -----------   ----------------   -----------   ----------------
                                                                      (ILLUSTRATION A)                 (ILLUSTRATION B)
<S>                                  <C>       <C>      <C>           <C>                <C>           <C>
                                                        ASSETS
Current assets:
  Cash and cash equivalents........  $   472   $8,925     $  (260)(e)     $ 9,137          $(1,746)(h)     $ 7,391
  Accounts receivable..............    4,467       --          --           4,467               --           4,467
  Inventories......................    9,912       --          --           9,912               --           9,912
  Prepaid expenses and other
    current assets.................      537       21         (58)(e)         479               --             479
                                                              (21)(f)
                                     -------   ------     -------        --------          -------        --------
         Total current assets......   15,388    8,946        (339)         23,995           (1,746)         22,249
Property and equipment, net........    3,931       --          --           3,931               --           3,931
Other noncurrent assets............      956      412        (407)(e)         956               --             956
                                                               (5)(f)
                                     -------   ------     -------        --------          -------        --------
         Total assets..............  $20,275   $9,358     $  (751)        $28,882          $(1,746)        $27,136
                                     =======   ======     =======        ========          =======        ========
 
                                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long term
    debt...........................  $ 2,464   $   --     $    --         $ 2,464          $    --         $ 2,464
  Current portion of payable to a
    related party..................      300       --          --             300               --             300
  Accounts payable and accrued
    expenses.......................    2,612      301          --           2,913               --           2,913
                                     -------   ------     -------        --------          -------        --------
         Total current
           liabilities.............    5,376      301          --           5,677               --           5,677
Long term debt, net of current
  portion..........................    4,913       --          --           4,913               --           4,913
Payable to a related party, net of
  current portion..................    1,100       --          --           1,100               --           1,100
                                     -------   ------     -------        --------          -------        --------
         Total liabilities.........   11,389      301          --          11,690               --          11,690
Common stock put warrants..........    2,297       --      (2,297)(g)          --               --              --
Common stock, subject to possible
  conversion.......................       --    1,746      (1,746)(c)          --               --              --
Stockholders' equity:
  Preferred stock..................    2,935       --      (2,935)(b)          --               --              --
  Common stock.....................       63        2         (58)(a)           8               --               8
                                                                1(b)
  Additional paid in capital.......    6,258    7,310          58(a)       17,554           (1,746)(h)      15,808
                                                            2,934(b)
                                                            1,746(c)
                                                               (1)(d)
                                                             (725)(e)
                                                              (26)(f)
  Accumulated deficit..............   (2,667)      (1)      2,297(g)         (370)              --            (370)
                                                                1(d)
                                     -------   ------     -------        --------          -------        --------
         Total stockholders'
           equity..................    6,589    7,311       3,292          17,192           (1,746)         15,446
                                     -------   ------     -------        --------          -------        --------
         Total liabilities and
           stock-holders' equity...  $20,275   $9,358     $  (751)        $28,882          $(1,746)        $27,136
                                     =======   ======     =======        ========          =======        ========
</TABLE>
    
 
   
            See notes to unaudited pro forma combined balance sheet
    
   
                              of Encore and HCAC.
    
                                       19
<PAGE>   29
 
              NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
   
                               OF ENCORE AND HCAC
    
 
1.  MERGER
 
     Pursuant to the terms of the Agreement and Plan of Merger, each Encore
Common Share and Encore Preferred Share outstanding immediately prior to the
Merger will be exchanged for HCAC Common Shares and HCAC $7.00 Warrants based on
the exchange ratio discussed elsewhere in this Joint Proxy Statement/
Prospectus. See "The Merger -- Conversion of Shares; Exchange Ratio." In
addition, the terms of Encore options and warrants to acquire Encore Common
Shares will be adjusted by the same exchange ratio.
 
   
     The unaudited pro forma combined balance sheet at December 31, 1996 has
been prepared to reflect the Merger based on two assumptions described as
Illustration A and Illustration B in "The Merger -- Conversion of Shares;
Exchange Ratio." Both illustrations assume that no Encore shareholders exercise
dissenters' rights and no additional Encore Shares or HCAC Common Shares are
issued prior to the Effective Time. Illustration A assumes that no HCAC
stockholders exercise their Conversion Rights. Illustration B assumes that
Conversion Rights are exercised with respect to one share less than 20% of the
HCAC Public Shares, the maximum allowable number. In addition, the unaudited pro
forma balance sheet assumes the issuance of HCAC Common Shares to the
shareholders of Encore; however, for accounting and financial reporting
purposes, the Merger will be treated as a recapitalization of Encore, with the
issuance of shares by Encore for the net assets of HCAC, consisting primarily of
cash. See "The Merger -- Accounting Treatment".
    
 
2.  PRO FORMA ADJUSTMENTS
 
     The pro forma adjustments in the accompanying unaudited pro forma combined
balance sheet are listed below:
 
   
          (a) To reflect the exchange of Encore Common Shares for HCAC Common
     Shares at the Minimum Exchange Ratio of 0.8656 HCAC Common Shares for each
     Encore Common Share and the related change in par value per share from
     $0.01 to $0.001.
    
 
   
          (b) To reflect the exchange of Encore Preferred Shares for HCAC Common
     Shares at the Minimum Exchange Ratio of 1.0820 HCAC Common Shares for each
     Encore Preferred Share.
    
 
          (c) To reflect the reclassification of HCAC Common Shares subject to
     possible conversion to stockholders' equity assuming no such conversion.
 
          (d) To reflect the elimination of HCAC's retained earnings against
     additional paid-in capital.
 
          (e) To reflect the estimated merger expenses of Encore and HCAC.
 
          (f) To eliminate non-cash assets of HCAC.
 
   
          (g) To reflect the cancellation of the put feature of the common stock
     put warrants issued in connection with Encore obtaining financing. Such
     cancellation will occur in connection with the Merger.
    
 
          (h) To reflect payment to HCAC stockholders of the conversion value of
     the maximum number of HCAC Common Shares subject to possible conversion.
                                       20
<PAGE>   30
 
                                  RISK FACTORS
 
     The following are certain risk factors or investment considerations that
should be carefully considered in evaluating the Merger, in addition to the
risks and other information described elsewhere in this Joint Proxy
Statement/Prospectus.
 
RISKS RELATING TO ENCORE
 
   
     Operating History; No Assurance of Profits; Future Operating
Results.  Encore has a 4 3/4-year operating history as a full-line orthopedic
implant manufacturer. Encore began to manufacture and distribute its products in
the fourth quarter of calendar year 1992. Only in its last three fiscal years
did Encore produce net profits for a full fiscal year. The loss for the fiscal
year ended March 31, 1993, was $1,706,000, of which $741,000 of the expenses
were for preoperating expenses. Encore adopted a calendar year for its fiscal
year effective December 31, 1993, and its loss for the period April 1, 1993
through December 31, 1993 was $928,000. Net income for 1994, 1995 and 1996 was
$447,000, $1,408,000 and $1,033,000, respectively. There can be no assurance as
to whether or the extent to which Encore will continue to be profitable. Encore
has experienced negative cash flows from operations for each year of its
existence through the year ended December 31, 1996. From 1992 to 1993, these
negative cash flows from operations stemmed from losses as well as increases to
inventory and accounts receivable resulting from Encore's efforts to expand its
operations. From 1994 through 1996, the negative cash flows from operations were
due primarily to working capital increases largely in inventory resulting from
Encore's efforts to expand its operations. Encore's strategic plan provides for
Encore to grow at a rapid pace, thereby incurring the business risks associated
with rapidly growing companies, and Encore's management expects to continue to
incur negative cash flows from operations at least through fiscal year 1997.
    
 
   
     Future Capital Requirements; Dilution.  Encore will require substantial
capital resources to continue developing, manufacturing and marketing its
products, expanding its product line and funding its operations. Encore has
experienced negative cash flows from operations for each year of its existence
through the year ended December 31, 1996 and expects to continue to incur
negative cash flows from operations at least through fiscal year 1997. Encore
expects that HCAC's funds upon conclusion of the Merger and after paying
stockholders who exercise Conversion Rights, together with operating revenues,
will be sufficient to fund its operations for the next 12 months. Thereafter, it
is likely Encore may need to raise a substantial amount of capital. No assurance
can be given that such financing will be available when needed, if at all, or on
terms favorable to Encore. Any additional equity financings will be dilutive to
shareholders, and debt financings, if available, will affect operating results
and may require Encore to agree to restrictive covenants. Failure to generate or
raise sufficient funds may require Encore to delay or abandon some or all of its
planned future expansion or expenditures, which could have a material adverse
effect on Encore's business, financial condition and operating results. In
addition, in the event that Encore shall (i) enter into a merger in which it is
not the surviving entity or the Encore shareholders are not in control of the
surviving entity; (ii) sell all or substantially all of its assets or
intellectual property rights (including trade secrets, manufacturing processes,
instrumentation, technical know how and patent rights); (iii) conduct a private
placement that results in a net amount of $15,000,000 or more; (iv) undergo a
change in control in which any person or entity who did not own, directly or
indirectly, any Encore Common Shares or Encore Preferred Shares on July 31, 1992
becomes the beneficial owner, directly or indirectly, of Encore Common Shares or
Encore Preferred Shares representing 50% or more of the combined voting power of
Encore's then outstanding Common Shares and Preferred Shares, or (v) complete an
initial public offering of Encore Common Shares, Encore may be required to
immediately pay all amounts owing under a Technology Transfer Agreement, dated
March 27, 1992, between T&R Manufacturing, Inc., the predecessor of Encore, and
Sandor Turanyi, which amounts, as of December 31, 1996, equaled $1.4 million.
    
 
   
     Encore currently has loans outstanding with Sirrom Capital Corporation
("Sirrom") and Norwest Bank Texas, South Central (formerly Franklin Federal
Bancorp, F.S.B.) ("Norwest"). The loan documents for these borrowings include
financial covenants, and Encore was in violation of a debt coverage covenant
under the Norwest agreement for the period of October and November 1996, which
violation was waived by Norwest. There can be no assurance that Encore will not
be in default of this or other loan covenants in the
    
 
                                       21
<PAGE>   31
 
   
future or that, in the event of any default, Encore's lenders will waive the
default. Any default that is not waived could have a material adverse effect on
Encore's business, results of operations and financial condition. The line of
credit from Norwest expires on July 28, 1997, but Encore's management believes
that it can be renewed for another year. Failure to renew this line of credit
could have a material adverse effect on Encore's business, results of operations
and financial condition.
    
 
     Exchange Ratio Not Fixed.  The number of HCAC Common Shares and HCAC $7.00
Warrants to be issued to Encore shareholders in the Merger will not be known
until the Effective Time and will be subject to adjustment thereafter if HCAC's
actual accounts payable at the Effective Time exceed the amount thereof
certified by HCAC at the Effective Time. See "The Merger -- Conversion of
Shares; Exchange Ratio" for a description of the formula by which the exchange
ratio will be determined. The Minimum Exchange Ratio and the additional
illustration provided in this Joint Proxy Statement/Prospectus are intended to
demonstrate how the exchange ratio would be computed based upon certain
assumptions that may or may not occur. The illustrations provided in this Joint
Proxy Statement/Prospectus are not intended to imply any certain number of HCAC
Common Shares or HCAC $7.00 Warrants that will be issued in the Merger. Pro
forma information and other information presented in this Joint Proxy
Statement/Prospectus based on any of these illustrations may be materially
different than they would be if they were based on the actual exchange ratio.
 
   
     Competition.  The orthopedic and related products market is highly
competitive. Encore currently competes with a number of companies, including
some that are part of corporate groups that have significantly greater resources
than Encore and each of which has been engaged in the business of marketing
orthopedic products longer than Encore. Several of these competitors also have
international operations that may allow them to compete more effectively in
international markets. There can be no assurance that competition from these
larger, as well as other smaller and medium sized, competitors will not have a
material adverse effect on Encore's financial results or its expansion plans.
    
 
   
     Dependence on Officers and Key Personnel of Encore.  Encore's success is
dependent upon the professional and managerial experience of its officers and
management. Although Encore has entered into employment agreements with its key
management personnel, if any of such personnel cease to be affiliated with
Encore for any reason, Encore's business and prospects could suffer material
adverse effects, and no assurances can be provided that suitable replacements
could be hired, if at all, except at substantial additional cost to Encore.
Encore's development, management of its growth and other activities all depend
on the efforts of other key management and technical employees. Competition for
such persons is intense. Encore has in the past and intends to continue to offer
competitive compensation packages, including grants under stock option plans, to
attract and retain well-qualified employees. There can be no assurance, however,
that Encore will continue to attract and retain personnel with the requisite
capabilities and experience. Encore's future success is dependent upon its
ability to effectively attract, train, motivate, manage and retain its
employees. Failure to do so could have a material adverse effect on Encore's
business and operating results.
    
 
   
     Dependence on Surgeon Advisors and Sales Associates.  Encore's marketing
success depends to a significant extent on the use by, and study of certain of
Encore's key products by, surgeons with national and in some cases international
reputations in a particular area of orthopedic surgery. The failure of Encore's
key products to retain the support of such surgeons, or the failure of new
Encore products to secure and retain similar support from leading surgeons,
could have a material adverse effect on Encore's business, financial condition
and results of operations. Encore's marketing success in the United States also
depends largely upon marketing arrangements with independent sales associates,
who are managed by an Encore employee or by an independent agent. Encore's
success depends upon its sales associates' sales and service expertise and
relationships with the customers in the marketplace. The failure by Encore to
attract and retain skilled sales associates could also have a material adverse
effect on Encore's business, financial condition and results of operations.
    
 
     Subject to Regulation.  Encore's products and business are subject to
regulation by the United States Food and Drug Administration ("FDA"), with
respect to sales of products within the United States, and in some
jurisdictions, by state authorities. In particular, in order for Encore to
market its products for clinical use in the United States, it must obtain
approval from the FDA of a Section 510(k) Premarket Notification (a
 
                                       22
<PAGE>   32
 
"510(k)") or approval of a more extensive submission known as a Premarket
Approval ("PMA") application. With the exception of certain exempt devices, all
of Encore's new products intended for implantation will be subject to some form
of FDA premarket clearance or approval. There can be no assurance that the FDA
will act favorably or quickly in its review of Encore's 510(k) or PMA
submissions, or that significant difficulties and costs will not be encountered
by Encore in its efforts to obtain FDA clearance, all of which could delay or
preclude Encore from selling certain new products in the United States.
Furthermore, there can be no assurance that the FDA will not request additional
data, require that Encore conduct additional tests or compile additional data in
support of a 510(k) submission or, instead of accepting a 510(k) submission,
require Encore to conduct a full clinical study to support a PMA application.
Any of these would cause Encore to incur further cost and delay. There can be no
assurance that Encore will be able to meet the requirements to obtain 510(k)
clearance or PMA approval or that any necessary clearances or approvals will be
granted by the FDA. In addition, there can be no assurance that the FDA will not
place significant limitations upon the intended use of Encore's products as a
condition to a 510(k) clearance or PMA approval. Product approvals by the FDA
can also be withdrawn due to failure to comply with regulatory requirements or
the occurrence of unforeseen problems following initial approval. Failure to
receive, or delays in receipt of, FDA clearances or approvals, including the
need to conduct clinical trials or compile additional data as a prerequisite to
clearance or approval, or any FDA limitations on the intended use of Encore's
products, or withdrawal of any approval of any of Encore's existing or future
products, could have a material adverse effect on Encore's business, financial
condition and results of operations.
 
     Encore is also subject to regulations in many of the foreign countries in
which it sells its products, in the areas of product standards, packaging
requirements, labeling requirements, import restrictions, tariff regulations,
duties and tax requirements. In addition, the national health or social security
organizations in certain countries require Encore's products to be qualified
before they can be marketed in those countries. Failure to receive, or delays in
the receipt of, relevant foreign qualifications could also have a material
adverse effect on Encore's business, financial condition and results of
operations.
 
     In addition, Encore is subject to the provisions of the Medicare Fraud and
Abuse Statute, which prohibits entities such as Encore from offering, paying,
soliciting or receiving remuneration in return for the referral of Medicare or
state health program patients or patient care opportunities, or in return for
the recommendation, arrangement, purchase, lease or order of items or services
that are covered by Medicare or state health programs. Many states have similar
prohibitions against payments intended to induce referrals of Medicaid on other
third party payor patients. Encore is also subject to federal and state
legislation that prohibits a physician or a member of his immediate family from
referring Medicare or Medicaid patients to an entity providing certain
designated health services in which the physician has an ownership or investment
interest, or with which the physician has entered into a compensation
arrangement. Although Encore has been advised that its arrangements with
designing and consulting surgeons do not violate any of these statutes, no
assurance can be given that these arrangements are in compliance with all such
laws.
 
   
     Customer Concentration.  Since its inception, a high percentage of Encore's
sales have been made to a small number of customers. Encore's three largest
customers, PLUS Endoprothetik GmbH ("PLUS Germany"), PLUS Endoprothetik AG
("PLUS Switzerland"), and EndoPLUS, K.K. ("PLUS Japan"), together accounted for
approximately 47%, 49%, 54% and 47% of net sales during 1993, 1994, 1995 and
1996, respectively. The three PLUS companies are each affiliated through a
common shareholder, Medica Holding AG ("Medica"). Medica is also a shareholder
in Encore, and a principal of Medica was on the Encore Board until August 1996
when he resigned. The PLUS entities are distributors that resell Encore products
to end users. By contrast, Encore's other customers are typically hospitals and
other end users that require fewer products individually. Other than PLUS
Germany and PLUS Switzerland (29% and 14%, respectively, of 1996 sales), no
other Encore customer accounted for more than 10% of Encore's sales in its last
three fiscal years. Although there can be no assurance that Encore's principal
customers will continue to purchase products and services from Encore at current
levels, if at all, Encore expects to continue to depend upon its principal
customers for a significant portion of its net sales. The loss of or decrease in
orders from one or more major customers could have a material adverse effect on
Encore's business, financial condition and results of operations.
    
 
                                       23
<PAGE>   33
 
   
     Control by Certain Shareholders.  The ownership of Encore is concentrated
in the hands of a few persons. As of December 31, 1996, Mr. and Mrs. Sandor
Turanyi, Nick Cindrich and Wolfgang Schweizer (directly and through MVI AG (a
Swiss corporation) and Medica) owned approximately 67.7% of the outstanding
Encore Common Shares and Encore Preferred Shares after giving effect to the
exercise of all options that have been granted to such persons or entities and
the conversion to Encore Common Shares of all outstanding Encore Preferred
Shares. Based upon the Minimum Exchange Ratio, these shareholders would own
approximately 49.5% of the HCAC Common Shares outstanding upon the consummation
of the Merger (after giving effect to the exercise of all options that have been
granted to them but prior to the exercise of the HCAC $7.00 Warrants or any
other options or warrants outstanding upon consummation of the Merger). The
percentage owned by Mr. and Mrs. Turanyi, Nick Cindrich and Wolfgang Schweizer
would be higher if, as anticipated, the actual exchange ratio is greater than
the Minimum Exchange Ratio. As a result, such persons will effectively have the
ability to control HCAC and Encore and direct the affairs and businesses of
both. See "The Merger -- Conversion of Shares; Exchange Ratio" for a discussion
of the determination of the exchange ratio and the assumptions on which the
Minimum Exchange Ratio is based.
    
 
     Technological Change and New Products.  The market for Encore's products is
characterized by rapidly changing technological advances, evolving industry
standards and frequent product introductions. The introduction of products
embodying new technology and the emergence of new industry standards may render
existing products obsolete and unmarketable in a relatively short period of
time. Encore's ability to successfully develop and introduce on a timely basis
products that embody new technology, meet evolving industry standards, and
achieve levels of functionality at prices acceptable to the market will be a
significant factor in Encore's ability to grow and to remain competitive. If
Encore is unable, for technological or other reasons, to develop and deliver
competitive products in a timely manner at competitive prices in response to
changes in the industry, Encore's business and operating results may be
materially and adversely affected.
 
     Intellectual Property.  Encore's success depends in part on its ability to
protect its proprietary products and technology in the U.S. and abroad under
patent laws and other intellectual property laws. Encore currently has been
granted one patent in the United States, has five trademarks registered in the
United States and a trademark registered in several European countries. Encore
anticipates that it will apply for such additional patents and trademarks as it
deems appropriate. There can be no assurance as to the breadth or degree of
protection that existing or future patents or trademarks, if any, may afford,
that any patent or trademark applications will result in issued patents or
trademarks, or that patents or trademarks will not be circumvented or
invalidated. No assurance can be given that further patent or trademark
protection will be obtained to protect Encore's products or trademarks from
duplication. Absent patent protection, it is possible that Encore's technologies
could be "reverse engineered" by competitors, allowing such competitors to
market similar products. There can be no assurance that any patent, even when
issued, will provide adequate protection for the technology or products it
covers. In addition, the process of obtaining and protecting patents and
trademarks can be extremely costly and time consuming.
 
     Encore has exclusive licenses from third parties to use four patents
through the lives of such patents. It also has a non-exclusive license from a
third party to use a fifth patent through the life of that patent. The loss of
such licenses would prevent Encore from manufacturing and selling certain of its
products, which would have a material adverse effect on Encore's business,
financial condition and results of operations.
 
     Encore's success also depends on non-patented proprietary know-how, trade
secrets, processes and other proprietary information. Encore employs various
methods to protect its proprietary information, including confidentiality
agreements and proprietary information agreements. However, such methods may not
provide adequate protection, and no assurance can be given that such information
will not become known to, or be independently developed by, competitors, or that
Encore's proprietary rights in such knowledge will not be challenged.
 
     Patent Litigation.  The medical device industry has experienced extensive
litigation regarding patents and other intellectual property rights. There can
be no assurance that Encore or its products will not become subject to patent
infringement claims or litigation or interference proceedings declared by the
United States Patent and Trademark Office ("USPTO") to determine the priority of
inventions. The defense and
 
                                       24
<PAGE>   34
 
prosecution of intellectual property suits, USPTO interference proceedings and
related legal and administrative proceedings are both costly and time-consuming.
Litigation may also be necessary to enforce patents issued to Encore, to protect
trade secrets or know-how owned by Encore or to determine the enforceability,
scope and validity of the proprietary rights of others. Any litigation or
interference proceedings will result in substantial expense to Encore and
significant diversion of effort by Encore's technical and management personnel.
An adverse determination in litigation or interference proceedings to which
Encore may become a party could subject Encore to significant liabilities to
third parties, require disputed rights to be licensed from a third party for
royalties that may be substantial or require Encore to cease using such
technology. Any one of these could have a material adverse effect on Encore.
Furthermore, there can be no assurance that necessary licenses would be
available to Encore on satisfactory terms, if at all. Accordingly, adverse
determinations in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent Encore from manufacturing and selling certain
of its products, which would have a material adverse effect on Encore's
business, financial condition and results of operations.
 
   
     Product Liability.  The development, manufacture and sale of medical
devices and products entail significant risk of product liability claims or
recalls. Encore's products are, in the substantial majority of cases, designed
to be implanted in the human body for long periods of time. Design defects,
manufacturing defects or inadequate disclosure of product-related risks, with
respect to products sold by Encore, could result in exacerbation of a patient's
condition, further injury or even death of the patient. The occurrence of such
an event could result in product liability claims and/or a recall of one or more
of Encore's products. To date, Encore has never been party to any product
liability claim. No assurance can be given that Encore's current product
liability insurance, which it carries in the amount of $10,000,000, will be
adequate to protect Encore from any liabilities it might incur in connection
with the development, manufacture and sale of its current and potential
products, or that Encore will continue to be able to obtain insurance on
satisfactory terms or in adequate amounts. A successful claim or claims brought
against Encore in excess of available insurance coverage could have a material
adverse effect on Encore. Moreover, product liability claims or product recalls
in the future could, regardless of their outcome, have a material adverse effect
on Encore's reputation and on its ability to obtain and retain customers for its
products. Even unsuccessful claims could result in Encore's expenditure of funds
in litigation and management time and resources. See "Business -- Legal
Proceedings" and "Certain Transactions."
    
 
   
     Management of Growth.  Encore has experienced, and expects to continue to
experience, a period of substantial growth and increased personnel. Such growth
has placed, and will continue to place, a significant strain on Encore's
resources. Encore anticipates expanding its overall product development,
manufacturing, marketing and sales capacity. In the event Encore is unable to
identify, hire, train and retain qualified individuals in such capacities or
develop the necessary systems and procedures within a reasonable time frame,
such failure could have a material adverse effect on Encore. In addition,
Encore's ability to manage future growth, if any, in the scope of its operations
or personnel will depend on significant expansion of its research and
development, marketing, manufacturing, sales, management, financial and
administrative capabilities. The failure of Encore's management to effectively
manage expansion in its business could have a material adverse effect on
Encore's business, results of operations and financial condition.
    
 
     Payment of Dividends.  The present policy of Encore is to retain earnings
to provide funds for the operation and expansion of its business. Encore has
never paid cash dividends on the Encore Common Shares and does not, except as
required by the terms of the Encore Preferred Shares, anticipate paying cash
dividends in the foreseeable future. The Encore Preferred Shares bear an annual
cumulative dividend of $0.01 per share. Encore will pay all of the dividends
accrued on the Encore Preferred Shares, (a total of $10,128, as of December 31,
1996) upon the conversion of the Encore Preferred Shares pursuant to the Merger.
 
     Uncertainty in Health Care Industry.  The health care industry is subject
to changing political, economic and regulatory influences that may affect the
procurement practices and operation of health care facilities. During the past
several years, the health care industry has been subject to an increase in
governmental regulation of, among other things, reimbursement rates and certain
capital expenditures. Certain legislators have announced that they intend to
examine proposals to reform certain aspects of the U.S. health care system
including proposals which may increase governmental involvement in health care,
lower reimbursement rates
 
                                       25
<PAGE>   35
 
and otherwise change the operating environment for Encore's clients. Health care
providers may react to these proposals and the uncertainty surrounding such
proposals by curtailing or deferring investments, including those for Encore's
products and related services. Encore cannot predict what impact, if any, such
proposals or health care reforms might have on its business, financial condition
and results of operations.
 
   
     Potential Fluctuations in Quarterly Results.  Encore's quarterly operating
results may vary depending on factors such as the timing of significant orders,
the timing of new product introductions by Encore and its competitors, including
customer order deferrals in anticipation of new versions of Encore's products as
well as competitors' products, the mix of distribution channels through which
Encore's products are sold, increased competition, failure to reduce product
costs or maintain product quality, interruptions or delays in supply of key
components and seasonal patterns of spending by customers. Sales in the third
calendar quarter are typically lower than the other three quarters due to the
holiday taken throughout Europe, which, because of Encore's level of
international sales, has a material effect on Encore's overall sales. There can
be no assurances that Encore will be able to remain profitable or continue its
growth in revenues on a quarterly basis. Encore's expense levels are based, in
part, on its expectations as to future revenue, which can be difficult to
predict. If revenue levels are below expectations, operating results may be
adversely affected.
    
 
     Uncertainty Relating to Third-Party Reimbursement.  In the United States,
health care providers, such as hospitals and clinics, who purchase Encore's
products generally rely on third-party payors, principally federal Medicare,
state Medicaid and private health insurance plans, to reimburse all or part of
the cost of the procedure in which the product is being used, including the cost
of Encore's product utilized in such procedure. There can be no assurance that
third-party reimbursement for Encore's products will continue to be available or
at what rate the reimbursement will be offered. Congress and certain state
legislatures are considering reforms in the health care industry that may affect
current reimbursement practices, including controls on health care spending
through limitations on the growth of Medicare and Medicaid spending. The
development of managed care programs in which the providers contract to provide
comprehensive health care to a patient population at a fixed cost per person
(referred to as capitation) has given rise to similar pressures on health care
providers to lower costs. Outside the United States, the success of Encore's
products is dependent, in part, upon the availability of reimbursement and
health care payment systems. These reimbursement and health care payment systems
vary significantly by country and include both government-sponsored health care
and private insurance plans. Several governments (most notably Germany, France
and Japan) have recently attempted to dramatically reshape reimbursement
policies affecting medical devices. The ability of physicians, hospitals and
other users of a company's products to obtain appropriate reimbursement from
governmental and private third-party payors for procedures in which Encore's
products are used is critical to the success of all medical device companies,
including Encore. Failure by users of Encore's products to obtain sufficient
reimbursement from third-party payors for procedures in which Encore's products
are used or adverse changes in governmental and private payors' policies toward
reimbursement for such procedures could have a material adverse effect on
Encore's business, financial condition and results of operations.
 
   
     Responses by Health Care Providers to Price Pressures; Formation of Buying
Groups.  Within the United States, health care reform and the emergence of
managed care are changing the dynamics of the orthopedic market. As a result of
health care reform, the U.S. health care industry has seen a rapid expansion of
managed care. The advent of managed care has resulted in greater attention to
the balance between patient need and product costs, so-called demand matching,
where patients are evaluated as to age, need for mobility and other parameters
and are matched with orthopedic products that are cost effective in light of
such evaluation. A further result of managed care and the related pressure on
costs has been the advent of hospital buying groups, national purchasing
contracts and various bidding procedures imposed by hospitals or buying groups.
Such buying groups often enter into extensive preferred supplier arrangements
with one or more manufacturers of orthopedic or other medical products in return
for price discounts. The extent to which buying groups are able to obtain
compliance by their constituent organizations with such preferred supplier
arrangements varies considerably depending on the particular buying groups. No
assurance can be given that Encore will be able to obtain preferred supplier
commitments from major buying groups, in which case Encore could lose
significant potential sales, at least to the extent such groups are able to
command a high level of compliance by their constituent organizations. On the
other hand, should Encore receive preferred supplier
    
 
                                       26
<PAGE>   36
 
commitments from groups that do not deliver high levels of compliance, any
increases in unit sales or in market share may be insufficient to offset the
negative impact of lower per unit prices. See "Business of Encore."
 
     Encore Preferred Shares to be Converted to HCAC Common Shares.  Upon
consummation of the Merger, the Encore Preferred Shares will be converted into
HCAC Common Shares and HCAC $7.00 Warrants. The holders of the Encore Preferred
Shares possess dividend and liquidation rights that are senior to the rights of
the holders of Encore Common Shares in general. Following the Merger, the former
holders of Encore Preferred Shares will no longer be entitled to rights senior
to common stock, but will possess rights on a parity with all holders of the
HCAC Common Shares. Among other consequences, in the event of a liquidation,
dissolution or winding up of HCAC, the former holders of Encore Preferred Shares
will not have a liquidation preference over any other stockholders.
 
   
     Significant International Operations.  Encore's international sales are all
made to distributors and are all dollar-denominated. Approximately 57.8% of
Encore's sales in 1995 and approximately 49.4% of Encore's sales in 1996 were
derived from sales in foreign markets. Certain risks are inherent in
international operations, including political and economic conditions,
unexpected changes in regulatory requirements, exposure to different legal
standards, particularly with respect to intellectual property, future import and
export restrictions and difficulties in staffing and managing operations. There
can be no assurance that the risks associated with such international sales will
not have material adverse effects on Encore. See "Business -- Business
Strategy," and "-- Marketing and Sales" and see "Risk Factors Relating to
Encore -- Customer Concentration."
    
 
RISKS RELATING TO HCAC
 
   
     Ability of Encore Shareholders to Control HCAC after Merger.  Based upon
the Minimum Exchange Ratio, following the Merger, the former Encore shareholders
would own approximately 74% of the outstanding HCAC Common Shares (without
giving effect to the issuance of HCAC Common Shares pursuant to options and
warrants outstanding at the Effective Time). Accordingly, the former Encore
shareholders would be able to elect the members of the HCAC Board and control
the business, policies and affairs of HCAC.
    
 
   
     Shares Eligible for Future Sale.  A substantial number of outstanding HCAC
Common Shares and HCAC Common Shares issuable upon exercise of the HCAC $7.00
Warrants, the HCAC $5.00 Warrants, the Bridge Warrants, the Underwriter's Unit
Purchase Options, and the Assumed Options will become available for resale in
the public market at prescribed times. Based upon the Minimum Exchange Ratio,
upon completion of the Merger, there would be approximately 8,217,811 HCAC
Common Shares outstanding and an aggregate of approximately 9,664,670 HCAC
Common Shares issuable upon exercise of outstanding warrants, options and other
securities exercisable for the purchase of HCAC Common Shares (which amount
includes (i) 917,672 HCAC Common Shares issuable upon exercise of outstanding
HCAC $7.00 Warrants exchanged for Encore Preferred Shares and Encore Common
Shares, (ii) 150,000 HCAC Common Shares issuable to Rodman upon exercise of
warrants issued to Rodman in connection with services rendered, (iii) 3,736,520
HCAC Common Shares issuable upon exercise of the Assumed Options, (iv) 560,478
HCAC Common Shares issuable upon exercise of the HCAC $7.00 Warrants reserved
for issuance upon exercise of the Assumed Options, (v) 3,850,000 HCAC Common
Shares issuable upon exercise of the HCAC $5.00 Warrants and the Bridge
Warrants, (vi) 150,000 HCAC Common Shares issuable upon exercise of the
Underwriter's Unit Purchase Options and (vii) 300,000 HCAC Common Shares
issuable upon exercise of the HCAC $5.00 Warrants included in the Underwriter's
Unit Purchase Options). See "The Merger -- Conversion of Shares; Exchange Ratio"
for a discussion of the determination of the exchange ratio and the assumptions
on which the Minimum Exchange Ratio is based. Of the 8,217,811 HCAC Common
Shares outstanding upon completion of the Merger, approximately 7,842,811 shares
would be immediately eligible for resale in the public market following the
consummation of the Merger without restriction under the Securities Act, but the
resale of certain of these shares may be restricted pursuant to the terms of the
Lock-Up Agreements, and (i) 9,264,670 HCAC Common Shares would be immediately
eligible for resale upon exercise of the outstanding HCAC $5.00 Warrants, HCAC
$7.00 Warrants, the HCAC Common Shares issuable upon exercise of Assumed
Options, and the HCAC Common Shares issuable upon exercise of the HCAC $7.00
Warrants issuable upon conversion of the Assumed Options (however, HCAC will
only be able
    
 
                                       27
<PAGE>   37
 
   
to issue such shares if there is at the time of exercise a current prospectus
relating to such shares under an effective registration statement), and (ii)
400,000 shares would be eligible for resale 90 days after the consummation of a
Business Combination such as the Merger upon exercise of the Bridge Warrants
(however, HCAC will only be able to issue such shares if there is at the time of
exercise a current prospectus relating to such shares under an effective
registration statement). Sales of substantial numbers of such shares in the
public market could adversely affect the market price of the HCAC Common Shares,
the HCAC $5.00 Warrants and the HCAC $7.00 Warrants.
    
 
     Possible Volatility of Stock Price.  Following the consummation of the
Merger, factors such as announcements of technological innovation or the
introduction of new products by Encore or its competitors, as well as market
conditions in the orthopedic implant industry, or changes in earnings estimates
by securities analysts may cause the market price of the HCAC Common Shares to
fluctuate significantly. In addition, the stock market in recent years has
experienced significant price and volume fluctuations which has particularly
affected the market prices of equity securities of many medical products and
services companies and which often has been unrelated to the operating
performance of such companies. These market fluctuations may adversely affect
the price of the HCAC Common Shares, and the HCAC $7.00 Warrants.
 
     Dividends Unlikely.  HCAC has not paid any dividends on the HCAC Common
Shares to date. The payment of dividends after the proposed Merger will be
contingent upon HCAC's revenues and earnings, if any, capital requirements and
general financial condition. The payment of any dividends subsequent to the
Merger will be subject to the discretion of HCAC's then Board of Directors. See
"Description of HCAC Capital Stock -- Dividends."
 
     No Trading Market for HCAC $7.00 Warrants.  There is no public market for
the HCAC $7.00 Warrants, and HCAC does not intend to apply for listing of the
HCAC $7.00 Warrants on any securities exchange. No assurance can be given as to
the liquidity of the trading market for the HCAC $7.00 Warrants, and there can
be no assurance that an active market for the HCAC $7.00 Warrants will develop.
 
     Current Prospectus and State Blue Sky Registration Required in Connection
with Exercise of Warrants. HCAC will be able to issue HCAC Common Shares upon
exercise of the HCAC $7.00 Warrants only if there is at the time a current
prospectus relating to the HCAC Common Shares issuable upon the exercise of the
HCAC $7.00 Warrants under an effective registration statement filed with the
SEC, and only if such HCAC Common Shares are qualified for sale or exempt from
qualification under applicable state securities laws of the jurisdictions in
which the various holders of the HCAC $7.00 Warrants reside. Although HCAC has
agreed to use its best efforts to meet such requirements, no assurance can be
given that HCAC will be able to do so.
 
   
     Liquidation if No Business Combination.  If HCAC does not consummate a
Business Combination by September 8, 1997, or March 8, 1998, if certain criteria
are satisfied, HCAC will be dissolved pursuant to the terms of its Certificate
of Incorporation and will distribute to all Public Stockholders, in proportion
to their respective equity interests in HCAC, an amount equal to the amount in
the Trust Fund, plus any remaining net assets of HCAC. If the Merger is not
consummated, there can be no assurance that a Business Combination will be
achieved within the required time frame, in which case the HCAC stockholders
will have foregone any opportunity to invest in the Healthcare Industry through
HCAC. As of December 31, 1996, the aggregate amount held in the Trust Fund was
approximately $8,732,000 or $5.06 per HCAC Common Share held by Public
Stockholders. The Public Stockholders will not receive any liquidation
distribution with respect to any HCAC $5.00 Warrants owned by them. See
"Business of HCAC -- General."
    
 
                                       28
<PAGE>   38
 
                                  INTRODUCTION
 
GENERAL
 
   
     This Joint Proxy Statement/Prospectus is being furnished to the holders of
HCAC Common Shares and to the holders of Encore Shares in connection with the
solicitation of proxies by the HCAC Board for use at the HCAC Meeting of
Stockholders to be held on March 25, 1997, at 200 East Broward Boulevard, 15th
Floor, Fort Lauderdale, Florida 33301 at 10:00 a.m., local time, and any
adjournment thereof, and the solicitation of proxies by the Encore Board for use
at the Encore Meeting of Shareholders to be held on March 25, 1997, at 9800
Metric Boulevard, Austin, Texas 78758 at 10:00 a.m., local time, and any
adjournment thereof.
    
 
   
     This Joint Proxy Statement/Prospectus, the respective Notices of Meeting
and the accompanying forms of proxies are first being mailed to stockholders of
HCAC and Encore on or about February 24, 1997.
    
 
PURPOSES OF THE MEETINGS
 
   
     At the HCAC Meeting and the Encore Meeting, stockholders of HCAC and Encore
will be asked to consider and act upon a proposal to approve the Agreement and
Plan of Merger, providing for the Merger of Acquisition with and into Encore.
From and after the Effective Time, Encore will continue as the surviving
corporation and be a wholly-owned subsidiary of HCAC. HCAC stockholders will
also be asked to consider and vote upon proposals to approve the HCAC
Certificate Amendment and to adopt the Option Plan. If the Agreement and Plan of
Merger is not approved, however, the HCAC Certificate of Incorporation will not
be amended notwithstanding stockholder approval of such proposal, and the Option
Plan will not be adopted notwithstanding stockholder approval of such proposal.
Approval of the Agreement and Plan of Merger by the stockholders of HCAC and
Encore will constitute approval of the assumption by HCAC of the Assumed
Options. If the stockholders of HCAC vote in favor of the proposal to approve
the Agreement and Plan of Merger but vote against the proposals to approve the
HCAC Certificate Amendment or to adopt the Option Plan, Encore may terminate the
Agreement and Plan of Merger and abandon the Merger or may elect to proceed with
the Merger by waiving certain conditions to the Merger related to such
proposals. As of the date of this Joint Proxy Statement/Prospectus, no
determination has been made regarding how Encore will proceed if the Merger is
approved, but the HCAC Certificate Amendment is not approved or the Option Plan
is not adopted. Approval of the Agreement and Plan of Merger by HCAC
stockholders and Encore shareholders and approval of the HCAC Certificate
Amendment and adoption of the Option Plan by HCAC stockholders at the HCAC
Meeting and the Encore Meeting are among the conditions to the consummation of
the Merger under the terms of the Agreement and Plan of Merger, which conditions
may be waived by Encore. See "The Merger -- The Agreement and Plan of
Merger -- Conditions to the Merger."
    
 
     This Joint Proxy Statement/Prospectus and its contents have been approved
and its distribution authorized by the Board of Directors of each of HCAC and
Encore.
 
     THE HCAC BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AGREEMENT AND
PLAN OF MERGER, THE HCAC CERTIFICATE AMENDMENT AND THE ADOPTION OF THE OPTION
PLAN.
 
     THE ENCORE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AGREEMENT AND
PLAN OF MERGER.
 
VOTING RIGHTS
 
   
     HCAC.  The HCAC Board has fixed February 14, 1997 as the record date (the
"HCAC Record Date") for the determination of HCAC stockholders entitled to
notice of and to vote at the HCAC Meeting. Accordingly, only holders of record
of HCAC Common Shares at the close of business on the HCAC Record Date will be
entitled to vote at the HCAC Meeting. At the close of business on the HCAC
Record Date, there were 2,100,000 HCAC Common Shares outstanding, each of which
is entitled to one vote on each matter properly submitted to a vote at the HCAC
Meeting.
    
 
                                       29
<PAGE>   39
 
     To approve and authorize the Merger, HCAC's Certificate of Incorporation
requires the affirmative vote of at least a majority of the outstanding HCAC
Common Shares and also requires that Conversion Rights be exercised with respect
to less than 20% of the Public Shares. The affirmative vote of a majority of the
outstanding HCAC Common Shares entitled to vote is required to approve the HCAC
Certificate Amendment. The affirmative vote of a majority of the HCAC Common
Shares represented in person or by proxy at the HCAC Meeting and entitled to
vote thereat is required to adopt the Option Plan.
 
     Abstentions may be specified on each of the proposals to approve the
Agreement and Plan of Merger, to approve the HCAC Certificate Amendment and to
adopt the Option Plan. Such abstentions will be considered present and entitled
to vote at the HCAC Meeting but will not be counted as votes cast in the
affirmative and will therefore have the effect of a negative vote.
 
   
     HCAC believes that brokers that are member firms of the New York Stock
Exchange and that hold HCAC Common Shares in "street" name for customers have
the authority to vote those shares with respect to the proposal to approve the
HCAC Certificate Amendment if they have not received instructions from the
beneficial owner; however, HCAC does not believe that brokers have the authority
to vote those shares with respect to the approval of the Agreement and Plan of
Merger and adoption of the Option Plan if they have not received such
instructions. Any failure to vote or to specify abstention of those or any other
HCAC Shares will have no effect on the approval of the Option Plan, but will
have the same effect as a vote against the proposals to approve the Agreement
and Plan of Merger and the HCAC Certificate Amendment.
    
 
   
     All of the Initial Stockholders have agreed to vote the Initial Shares
(approximately 17.9% of the HCAC Common Shares outstanding as of the date of
this Joint Proxy Statement/Prospectus) in accordance with the vote of a majority
of the Public Shares on the proposal to approve the Agreement and Plan of
Merger. The Initial Stockholders may vote any Public Shares they own in their
own discretion. To the best of HCAC's knowledge, as of the date of this Joint
Proxy Statement/Prospectus, the Initial Stockholders do not own any Public
Shares.
    
 
     Each stockholder can vote personally or by proxy; a person acting as a
proxy need not be a stockholder.
 
   
     Encore.  The Encore Board has fixed February 14, 1997 as the Record Date
(the "Encore Record Date") for the determination of Encore shareholders entitled
to notice of and to vote at the Encore Meeting. Accordingly, only holders of
record of Encore Shares at the close of business on the Encore Record Date will
be entitled to vote at the Encore Meeting. At the close of business on the
Encore Record Date, there were outstanding 6,337,911 Encore Common Shares and
586,900 Encore Preferred Shares, each of which is entitled to one vote on each
matter properly submitted to a vote at the Encore Meeting. The affirmative vote
of at least 66 2/3% of the outstanding shares of stock, voting as a single
class, is required to approve the Agreement and Plan of Merger.
    
 
     Each shareholder can vote personally or by proxy; a person acting as a
proxy need not be a shareholder.
 
SOLICITATION AND REVOCATION OF PROXIES
 
   
     Each of the HCAC Board and the Encore Board is making the solicitation of
proxies from its respective stockholders hereby. All shares represented by
properly executed proxies will be voted in accordance with the directions of the
proxies, unless such proxies are revoked prior to the vote. FORMS OF PROXY
CONTAINING NO INSTRUCTIONS REGARDING ANY PARTICULAR MATTER SPECIFIED THEREIN
WILL BE VOTED FOR THE APPROVAL OF SUCH MATTER. Neither the HCAC Board nor the
Encore Board knows of any other matters which may come before the meeting of its
respective stockholders. If any other matters are properly presented for action
at either the HCAC Meeting or the Encore Meeting, it is intended that the named
proxies will vote in accordance with their best judgment on such matters. HCAC
will bear the cost of solicitation of proxies for the HCAC Meeting, and Encore
will bear the cost of solicitation of proxies for the Encore Meeting. In
addition to the use of the mails, proxies may be solicited by telephone by
directors and officers and employees of HCAC and Encore who will not be
specially compensated for such services. Any proxy solicitation firm or
organization, if engaged by HCAC, will be reimbursed by HCAC for reasonable
expenses and receive customary fees for its services. HCAC has engaged
    
 
                                       30
<PAGE>   40
 
   
Georgeson & Company, Inc. ("Georgeson") to act as its proxy solicitor in
connection with the HCAC Meeting. HCAC has agreed to pay Georgeson a fee of
$6,500 and reimburse it for expenses incurred in connection with the provision
of such services. HCAC will request that the Notice of Special Meeting, this
Joint Proxy Statement/Prospectus, the proxy and related materials, if any, be
forwarded to beneficial owners and expects to reimburse banks, brokers and other
persons for their reasonable out-of-pocket expenses in handling such matters.
    
 
   
     A stockholder of either HCAC or Encore who executes and returns a proxy has
the power to revoke it at any time before it is voted. The giving of a proxy
does not affect a stockholder's rights to attend and vote in person at the HCAC
Meeting or the Encore Meeting. A stockholder's presence at a meeting, however,
will not in itself revoke the stockholder's proxy. An HCAC stockholder giving a
proxy pursuant to this solicitation may revoke such proxy by delivering a
written revocation to the Secretary of HCAC at 200 East Broward Boulevard, Fort
Lauderdale, Florida 33301, and an Encore shareholder giving a proxy pursuant to
this solicitation may revoke such proxy by delivering a written revocation to
the Secretary of Encore at 9800 Metric Boulevard, Austin, Texas 78758. No
revocation by written notice, however, will be effective unless and until such
notice is received by the respective Secretary of HCAC or Encore prior to the
date of the applicable meeting or by the inspector of election at the applicable
meeting prior to the closing of the polls.
    
 
                                       31
<PAGE>   41
 
                                   THE MERGER
 
GENERAL
 
   
     The following is a brief summary of certain aspects of the Merger. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Agreement and Plan of Merger, a copy of which is attached to
this Joint Proxy Statement/Prospectus as Appendix A and is incorporated herein
by reference. Shareholders are urged to read carefully the Agreement and Plan of
Merger in its entirety.
    
 
     Pursuant to the Agreement and Plan of Merger, Acquisition will merge with
and into Encore. Following the Merger, Encore, as the Surviving Corporation,
will continue in existence as a Texas corporation, all of its issued and
outstanding shares will be owned by HCAC, and the separate corporate existence
of Acquisition will cease.
 
EFFECTIVE TIME
 
     Acquisition and Encore anticipate filing Articles of Merger and all other
documents required to effect the Merger with the Secretary of State of the State
of Texas within one business day after the adoption of the matters to be
considered at the HCAC Meeting and Encore Meeting and the satisfaction, or
waiver, of the conditions contained in the Agreement and Plan of Merger. See
"The Merger -- The Agreement and Plan of Merger -- Conditions of the Merger."
The Merger will be consummated on the date and time of such filing (the
"Effective Time").
 
CONVERSION OF SHARES; EXCHANGE RATIO
 
     Pursuant to the Agreement and Plan of Merger, the rate at which Encore
Common Shares and Encore Preferred Shares will be exchanged for HCAC Common
Shares and HCAC $7.00 Warrants will be determined according to the following
calculations:
 
          (a) determine the "HCAC Pre-Merger Share Number" by deducting from the
     number of HCAC Common Shares outstanding at the Effective Time (2,100,000)
     the number of HCAC Common Shares as to which Conversion Rights have been
     exercised ("Conversion Shares");
 
          (b) determine the "Remaining Amount" by deducting the amount paid by
     HCAC upon exercise of Conversion Rights by HCAC stockholders and HCAC's
     accounts payable at the Effective Time, as certified at the closing of the
     Merger by HCAC's Chairman ("Certified Accounts Payable"), from the sum of
     the funds held in the Trust Fund (the "Trust Fund Amount"), HCAC's
     additional cash on hand as of the Effective Time and $150,000;
 
          (c) determine the "Per Share Amount" by dividing the Remaining Amount
     by the HCAC Pre-Merger Share Number;
 
          (d) determine the number of "New HCAC Common Shares" by dividing
     40,000,000 by the Per Share Amount;
 
          (e) determine the number of HCAC Common Shares to be issued per Encore
     Common Share upon conversion (the "HCAC Common Shares per Common Share") by
     dividing the number of New HCAC Common Shares by the "Share Conversion
     Sum," which is the sum of (i) the number of Encore Common Shares to be
     converted; (ii) the number of Encore Common Shares for which Included
     Options are exercisable; and (iii) the number of Encore Preferred Shares to
     be converted multiplied by 1.25;
 
   
          (f) determine the number of HCAC $7.00 Warrants to be issued per
     Encore Common Share upon conversion (the "HCAC $7.00 Warrants Per Common
     Share") by dividing the number representing 15% of the New HCAC Common
     Shares by the Share Conversion Sum;
    
 
                                       32
<PAGE>   42
 
          (g) determine the number of HCAC Common Shares to be issued per Encore
     Preferred Share upon conversion (the "HCAC Common Shares Per Preferred
     Share") by multiplying 1.25 by the HCAC Common Shares Per Common Share; and
 
          (h) determine the number of HCAC $7.00 Warrants to be issued per
     Encore Preferred Share upon conversion (the "HCAC $7.00 Warrants Per
     Preferred Share"), by multiplying 1.25 by the HCAC $7.00 Warrants Per
     Common Share.
 
   
     In addition to the above-described adjustments, if HCAC determines within
60 days after the Effective Time that the amount of actual accounts payable of
HCAC at the Effective Time exceeded the amount of Certified Accounts Payable,
then the number of HCAC Common Shares and HCAC $7.00 Warrants into which each
Encore Common Share and Encore Preferred Share is converted will be redetermined
pursuant to the calculations in the prior paragraphs using the actual accounts
payable instead of the Certified Accounts Payable. In such event, the number of
HCAC Common Shares and HCAC $7.00 Warrants to be issued in connection with the
Merger shall be adjusted accordingly.
    
 
     The application of this formula is illustrated by the examples set forth
below:
 
  Illustration A:  Minimum Exchange Ratio
 
     Assumptions:
 
          1) No Encore shareholders exercise dissenters rights, and no
     additional Encore Shares or HCAC Common Shares are issued prior to the
     Effective Time.
 
   
          2) No additional Assumed Options are issued between the date of this
     Joint Proxy Statement/ Prospectus and the Effective Time; therefore, at the
     Effective Time, there are Assumed Options for 4,316,606 Encore Common
     Shares, 3,991,606 shares of which are issuable pursuant to Included
     Options.
    
 
          3) No HCAC stockholders exercise their Conversion Rights, leaving
     2,100,000 HCAC Common Shares issued and outstanding immediately prior to
     the Effective Time.
 
   
          4) The Remaining Amount is $8,774,673, based on the Trust Fund Amount
     of $8,731,867, HCAC's additional cash on hand of $193,899 and HCAC's
     accounts payable of $301,093, all as of December 31, 1996.
    
 
          These assumptions produce the following calculations:
 
   
<TABLE>
<S>                                                           <C>
Per Share Amount:...........................................  $   4.1784
New HCAC Common Shares:.....................................   9,573,006
HCAC Common Shares per Common Share:........................      0.8656
HCAC $7.00 Warrants per Common Share:.......................      0.1298
HCAC Common Shares per Preferred Share:.....................      1.0820
HCAC $7.00 Warrants per Preferred Share:....................      0.1623
Total HCAC Common Shares Issued and Outstanding (giving
  effect to the exchange of Encore Shares at the Effective
  Time:.....................................................   8,217,811
Total HCAC Common Shares Issued in Merger...................   6,117,811
  (% of total):.............................................       74.45%
Total HCAC $7.00 Warrants Issued in Merger:.................     917,672
Total HCAC Common Shares Reserved for Issuance Under Assumed
  Options:..................................................   3,736,520
Total HCAC $7.00 Warrants Reserved for Issuance Under
  Assumed Options:..........................................     560,478
</TABLE>
    
 
                                       33
<PAGE>   43
 
  Illustration B:  Maximum Conversion Rights Exercised
 
     Assumptions:
 
   
          All of the assumptions in Illustration A remain the same except
     Conversion Rights are exercised with respect to one share less than 20% of
     the HCAC Public Shares, or 344,999 shares, and, as a result, the HCAC
     Pre-Merger Share Number is 1,755,001, and the Remaining Amount is reduced
     to $7,028,305, reflecting the payment of $1,746,368 to stockholders
     exercising their Conversion Rights ($5.06 per HCAC Common Share).
    
 
          These assumptions produce the following calculations:
 
   
<TABLE>
<S>                                                           <C>
Per Share Amount:...........................................  $  4.0047
New HCAC Common Shares:.....................................  9,988,189
HCAC Common Shares per Common Share:........................     0.9032
HCAC $7.00 Warrants per Common Share:.......................     0.1355
HCAC Common Shares per Preferred Share:.....................     1.1289
HCAC $7.00 Warrants per Preferred Share:....................     0.1693
Total HCAC Common Shares Issued and Outstanding (giving
  effect to the exchange of Encore Shares at the Effective
  Time):....................................................  8,138,143
Total HCAC Common Shares Issued in Merger...................  6,383,142
  (% of total):.............................................      78.43%
Total HCAC $7.00 Warrants Issued in Merger:.................    957,471
Total HCAC Common Shares Reserved for Issuance Under Assumed
  Options:..................................................  3,898,574
Total HCAC $7.00 Warrants Reserved for Issuance Under
  Assumed Options:..........................................    584,786
</TABLE>
    
 
   
     It is anticipated that some HCAC stockholders will exercise their
Conversion Rights and that the costs of such conversions and additional HCAC
expenses associated with this transaction, incurred since December 31, 1996,
will exceed any earnings received by HCAC between December 31, 1996 and the
Effective Time from investment of its funds. The managements of each of Encore
and HCAC do not believe that the actual exchange ratio will be the same as the
Minimum Exchange Ratio. However, the managements of each of Encore and HCAC
believe that, assuming no Encore shareholders exercise their dissenters' rights
and that no additional Encore Shares are issued between the date of this Joint
Proxy Statement/Prospectus and the Effective Time, the number of HCAC Common
Shares and HCAC $7.00 Warrants into which each Encore Share will be converted in
the Merger will not be less than and will exceed the amounts into which the
Encore Shares would be converted under the Minimum Exchange Ratio.
    
 
   
     The issuance of any additional Encore Shares prior to the Effective Time,
other than upon exercises of options having an exercise price of less than
$5.00, will not affect the total number of HCAC Common Shares and HCAC $7.00
Warrants into which the Encore Shares will be converted in the Merger but will
decrease the number of HCAC Common Shares and HCAC $7.00 Warrants into which
each Encore Share will be converted in the Merger. If any Encore shareholders
exercise their dissenters rights, the total number of HCAC Common Shares and
HCAC $7.00 Warrants into which the Encore Shares will be converted in the Merger
will be reduced based upon the amount Encore must pay its shareholders who
exercise such rights. In addition, in the unlikely event that, as a result of
higher than anticipated earnings on HCAC's investments or lower than anticipated
expenses in this transaction, the HCAC Per Share Amount exceeds $4.18, the
number of HCAC Common Shares and HCAC $7.00 Warrants into which each Encore
Share will be converted in the Merger will be less than the number into which
each Encore Share would be converted based upon the Minimum Exchange Ratio.
    
 
                                       34
<PAGE>   44
 
BACKGROUND OF THE MERGER
 
     The terms of the Agreement and Plan of Merger are the result of
arm's-length negotiations between representatives of HCAC and Encore. The
following is a brief discussion of the background of these negotiations, the
Merger and related transactions.
 
   
     HCAC was formed in Delaware in March 1995 to serve as a vehicle to
accomplish a Business Combination with a Target Business in the Healthcare
Industry, which HCAC believes has significant growth potential. Following the
consummation of HCAC's IPO in March 1996, from which HCAC derived net proceeds
of approximately $9,000,000 after payment of expenses, HCAC's officers and
directors commenced an active search for a prospective Target Business. Of the
offering proceeds, a total of $8,383,500 was placed in the Trust Fund
immediately following the IPO, and in accordance with HCAC's Certificate of
Incorporation, will be released therefrom either upon the consummation of a
Business Combination or upon the liquidation of HCAC, which liquidation must
occur on September 8, 1997 (or March 8, 1998, if certain criteria are met)
unless HCAC has consummated a Business Combination. As of December 31, 1996, the
Trust Fund contained approximately $8,732,000.
    
 
     Excluding Encore, during the period from March 1996 through August 1996,
HCAC evaluated several prospective Target Businesses in the Healthcare Industry,
including an oncology medical practice company, a gynecological products
company, a medical video product company and a generic drug company, and
received proposals from several other companies. HCAC, however, did not engage
in serious acquisition negotiations with any of such Target Businesses, except
the oncology medical practice company, with which HCAC was unable to reach a
mutually satisfactory arrangement.
 
     In evaluating each prospective Target Business, HCAC's officers and
directors considered, among other factors, all or a majority of the following:
 
          (1) financial condition and results of operations of the Target
     Business;
 
          (2) costs associated with consummating the Business Combination;
 
          (3) growth potential;
 
          (4) experience and skill of management and availability of additional
     personnel;
 
          (5) capital requirements;
 
          (6) competitive position;
 
          (7) stage of development of the Target Business' products, processes
     or services;
 
          (8) degree of current or potential market acceptance of the products,
     processes or services; and
 
          (9) proprietary features and degree of intellectual property or other
     protection of the products, processes or services.
 
   
     In August 1996, the President of Applied Osteo Systems, Inc. ("AOS"), a
California corporation acquired by Encore in May 1996, discussed the attributes
of Encore as a potential Target Business with John H. Abeles, M.D., the
President, Treasurer and a director of HCAC. Dr. Abeles is the general partner
of Northlea Partners Ltd., which was a stockholder of AOS and, at the time of
these discussions, had become a shareholder of Encore as a result of Encore's
acquisition of the assets of AOS. An initial meeting between the senior
management of Encore and Jay Haft and John H. Abeles, M.D., of HCAC, took place
on August 15, 1996. At the initial meeting, Mr. Haft and Dr. Abeles received
information about Encore's business, products, financial condition and
structure.
    
 
   
     Nick Cindrich, Craig Smith and Harry Zimmerman, of Encore, and Dr. John
Abeles, Jay Haft and Joel Kanter, of HCAC, met again on October 2, 1996 in Fort
Lauderdale, Florida, to continue the discussions between Encore and HCAC, and
particularly to discuss the terms of a merger agreement. Subsequently, on
October 14, 1996, the parties entered into a Letter of Intent.
    
 
                                       35
<PAGE>   45
 
     Subsequent to the August 15, 1996 meeting, both Encore and HCAC commenced
their "due diligence" review of the companies and began negotiation of the
Agreement and Plan of Merger. Telephone conferences were held among the
principals of HCAC and Encore, often including their respective counsel, on
numerous occasions in August, September, October and November 1996.
 
   
     The material terms of the Agreement and Plan of Merger were reviewed by the
HCAC Board, the Acquisition Board and the Encore Board on November 8, 1996,
November 12, 1996 and November 1, 1996, respectively. Each Board discussed the
Agreement and Plan of Merger and each voted (without dissent) to approve and
adopt the Agreement and Plan of Merger and the transactions contemplated
thereby, subject to the satisfactory completion of the due diligence
investigation and the execution of a definitive version of the Agreement and
Plan of Merger.
    
 
   
     On November 12, 1996, HCAC, Acquisition and Encore entered into the
Agreement and Plan of Merger, and its execution was announced by HCAC and Encore
on December 3, 1996, through press releases. On February 10, 1997, HCAC and
Encore amended the Agreement and Plan of Merger to extend the date by which
either party may terminate the Agreement and Plan of Merger and to remove
certain escrow provisions.
    
 
REASONS FOR THE MERGER; RECOMMENDATIONS
 
     The HCAC and Encore Boards believe that the Merger is in the best interests
of their respective stockholders and each unanimously recommends to its
respective stockholders that they vote "FOR" approval and adoption of the
Agreement and Plan of Merger. The HCAC and Encore Boards believe that their
respective companies and stockholders will benefit from the Merger. As discussed
below, the Merger would fulfill certain major strategic objectives of both HCAC
and Encore.
 
     The HCAC Board believes that for the reasons set forth below the Merger
offers the HCAC stockholders the opportunity to participate in the future
possible growth and anticipated profitability of Encore. Consequently, the HCAC
Board has determined that the Merger is in the best interests of HCAC and its
stockholders. Accordingly, the HCAC Board unanimously approved and adopted the
Agreement and Plan of Merger and the transactions contemplated thereby and
recommends that the HCAC stockholders vote for approval and adoption of the
Agreement and Plan of Merger and the transactions contemplated thereby.
 
   
     In considering the Merger, the HCAC Board gave significant import to the
experience of Encore's management in the orthopedic implant field, Encore's
product lines and Encore's potential for expansion. The HCAC Board also
considered potentially negative factors such as intense competition in the
orthopedic implant market, the concentration of Encore's customer base, and the
size of Encore when compared with industry leaders. The HCAC Board concluded,
however, that notwithstanding the latter considerations, a Business Combination
with Encore would satisfy HCAC's business objective of effecting a Business
Combination with a Target Business in the Healthcare Industry that provides
health care products and/or services that have proven or potential cost savings
or other advantages in their reference market.
    
 
   
     The Encore Board unanimously believes that the Merger is in the best
interest of Encore and its shareholders for the various reasons set forth below.
Accordingly, the Encore Board unanimously approved and adopted the Agreement and
Plan of Merger and the transactions contemplated thereby and recommends that the
Encore shareholders vote for approval and adoption of the Agreement and Plan of
Merger and the transactions contemplated thereby.
    
 
   
     In considering the Merger, the Encore Board noted that the combination of
Encore and HCAC would permit Encore to expand its business without having to
obtain additional equity or debt financing for its short term needs. In this
regard, the Encore Board noted that as of September 30, 1996, HCAC had
approximately $8,617,000 in the Trust Fund and approximately $384,000 in other
cash, which amount (less any amounts paid to HCAC stockholders who exercise
their Conversion Rights and unpaid expenses to be satisfied with such proceeds)
would be available to Encore upon consummation of the Merger. The Board also
recognized that if HCAC's currently outstanding HCAC $5.00 Warrants (excluding
the Underwriters' Unit Purchase
    
 
                                       36
<PAGE>   46
 
Options) were to be exercised, as to which no assurance can be given, HCAC would
derive net proceeds of approximately $19,250,000. In addition, the Encore Board
considered the following:
 
          (a) the availability of a public trading market for the HCAC Common
     Shares to be received by Encore shareholders in the Merger, which will
     provide such shareholders with substantially more investment liquidity than
     that associated with their Encore Shares, for which there is no established
     trading market; and
 
          (b) the future prospects of Encore and potential negative impact that
     could result if Encore were unable to obtain future financial resources.
 
   
     In determining whether to approve the Merger, the Encore Board also
considered whether the following were more attractive alternatives to a merger
with HCAC: (i) expanding its business using internally generated cash flows and
(ii) consummating an initial public offering of its capital stock. The Encore
Board rejected the first alternative because Encore's business does not
currently generate positive cash flows from operations and does not expect to
generate positive cash flows from operations through fiscal 1997, and as a
result, Encore would be forced to raise outside capital in order to cover the
costs relating to any such expansion. The second alternative was also rejected
because the Merger would give Encore's shareholders access to the public markets
for the sale of their shares at a lower cost to them, without incurring the
additional expenses associated with an initial public offering, including
underwriting discounts.
    
 
   
     In reaching these conclusions, the respective Boards of HCAC and Encore
considered a number of factors, including among other things, the terms and
conditions of the Agreement and Plan of Merger; information with respect to the
financial condition, business operations and prospects of both HCAC and Encore
on both a historical and a prospective basis, including information reflecting
the two companies on a pro forma combined basis; and the views and opinions of
their respective managements and, in the case of HCAC, Rodman, its financial
advisor.
    
 
     THE HCAC BOARD UNANIMOUSLY RECOMMENDS THAT HCAC STOCKHOLDERS VOTE TO
APPROVE THE AGREEMENT AND PLAN OF MERGER.
 
     THE ENCORE BOARD UNANIMOUSLY RECOMMENDS THAT ENCORE SHAREHOLDERS VOTE TO
APPROVE THE AGREEMENT AND PLAN OF MERGER.
 
OPINION OF HCAC'S FINANCIAL ADVISOR
 
     Pursuant to an engagement letter dated December 2, 1996 (the "Engagement
Letter"), HCAC retained Rodman to act as its exclusive financial advisor in
connection with rendering an opinion to the Board of Directors of HCAC as to
whether or not the consideration to be paid by HCAC in the Merger is fair from a
financial point of view to the stockholders of HCAC and as to whether the Fair
Market Value of Encore is at least 80% of the net assets of HCAC (as of the date
of such opinion), and to provide certain investment banking services to HCAC
after the consummation of the Merger. "Fair Market Value" for the purposes of
the foregoing opinion was defined in the prospectus of HCAC relating to its IPO
(the "HCAC IPO Prospectus") as fair market value based on standards generally
accepted by the financial community, such as earnings and potential therefor,
cash flow and book value. Rodman was not requested to and did not make any
recommendation to the HCAC Board as to the form or amount of the consideration
to be paid to Encore. The form and amount of such consideration was determined
through arm's length negotiations between HCAC and Encore.
 
     In connection with the HCAC Board's consideration of the Agreement and Plan
of Merger, Rodman delivered its written opinion dated December 17, 1996, that as
of the date of such opinion, based on its review and assumptions and subject to
the limitations described therein: (i) the consideration to be paid by HCAC in
the Merger is fair, from a financial point of view, to the stockholders of HCAC
and (ii) the Fair Market Value of Encore is at least 80% of the net assets of
HCAC. The Rodman opinion does not constitute a recommendation to any stockholder
of HCAC as to how such stockholder should vote with respect to the proposed
Merger. The full text of the Rodman opinion, which sets forth the assumptions
made, procedures
 
                                       37
<PAGE>   47
 
followed, matters considered and limits of its review, is attached hereto as
Appendix B and is incorporated herein by reference. HCAC stockholders are urged
to read the Rodman opinion carefully and in its entirety.
 
   
     In connection with the Rodman opinion, Rodman: (i) reviewed the Joint Proxy
Statement/Prospectus; (ii) reviewed the financial terms of the Agreement and
Plan of Merger; (iii) met with certain senior officers, directors and other
representatives and advisors of Encore and HCAC to discuss the business,
operations and prospects of Encore and HCAC, respectively; (iv) examined certain
business and financial information relating to HCAC and Encore as well as
certain financial forecasts and other data that were provided to Rodman by HCAC
and Encore, respectively; (v) examined the periodic reports filed by HCAC with
the SEC; (vi) to the extent publicly available, examined the financial terms of
certain other similar transactions recently effected which Rodman considered
comparable to the Merger; (vii) reviewed the financial terms of the Merger in
relation to, among other things, the cash value per HCAC Common Share; (viii)
analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations
Rodman considered comparable to those of Encore; (ix) reviewed the terms of the
HCAC IPO Prospectus including the characteristics and risk factors of a
Specified Purpose Acquisition Company; (x) assessed certain long term strategic
benefits of the Merger; (xi) analyzed the pro forma financial impact of the
Merger on HCAC; and (xii) performed discounted cash flow analyses. In addition
to the foregoing, Rodman conducted such other analyses and examinations and
considered such other financial, economic and market information as Rodman
deemed necessary or appropriate in arriving at its opinion.
    
 
   
     In rendering its opinion, Rodman assumed and relied, without independent
verification, on the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise discussed with
Rodman. With respect to financial forecasts and other information provided to or
otherwise discussed with Rodman, Rodman assumed that such forecasts and other
information were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of HCAC and
Encore as to the expected future financial performance of HCAC and Encore,
respectively. Rodman did not express any opinion as to what the value of the
HCAC Common Shares actually will be subsequent to the Merger, or whether the
potential dilutive effect of the HCAC warrants and options existing after
consummation of the Merger will have a negative effect on the price of the HCAC
Common Shares. Further, the Rodman opinion does not address whether the
liquidation value per HCAC Common Share will exceed the value at which the HCAC
Common Shares will trade or otherwise be transferable subsequent to the
completion of the Merger, or the relative merits of the Merger as compared to
any alternative business strategies that might exist for HCAC or the effect of
any other transaction in which HCAC might engage.
    
 
     In preparing its opinion to the HCAC Board, Rodman performed a variety of
financial and comparative analyses, including those described below. The summary
of such analyses does not purport to be a complete description of the analyses
underlying the Rodman opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. In arriving at its opinion,
Rodman did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis factor. Accordingly, Rodman believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and factors, without considering all analyses and factors, could create
a misleading or incomplete view of the processes underlying such analyses and
its opinion. In its analyses, Rodman made numerous assumptions with respect to
HCAC and Encore, industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
HCAC and Encore. The estimates contained in such analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by such analyses.
In addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold.
 
                                       38
<PAGE>   48
 
  Discounted Cash Flow Analysis
 
     A discounted cash flow analysis is a traditional valuation methodology used
to derive a valuation of a corporate entity by capitalizing the estimated future
earnings and calculating the estimated future free cash flows of such corporate
entity and discounting such aggregated results back to the present. Rodman
performed a discounted cash flow analysis of the financial performance of Encore
using certain assumptions, including but not limited to, exit multiples and
discount rates. This analysis was based upon information, including certain
projected financial information, provided by HCAC and Encore (the "Encore
Projections").
 
     Relying on the information set forth in the Encore Projections, Rodman
calculated the estimated "free cash flow" based on projected unleveraged net
income (earnings before interest and after taxes) adjusted for, among other
things, (i) certain projected non-cash items (i.e. depreciation and
amortization); (ii) projected capital expenditures; and (iii) projected non-cash
working capital investment. Rodman analyzed the Encore Projections and
discounted the stream of free cash flows provided in such projections back to
December 31, 1996 using discount rates ranging from 10.0% to 15.0%. To estimate
the residual value of Encore at the end of the Encore Projections period, Rodman
applied terminal multiples of 7.0x to 9.0x to the projected fiscal earnings
before interest, taxes, depreciation and amortization ("EBITDA") and discounted
such value estimated back to December 31, 1996 using discount rates ranging from
10.0% to 15.0%. Rodman then added the present values of the free cash flows and
the present values of the residual values to derive a range of implied equity
values for Encore of approximately $48.5 million to $77.0 million, compared to
an implied equity value in the Minimum Exchange Ratio scenario of $42.3 million.
A 10.0% to 15.0% discount rate range was selected based on, among other things,
estimated weighted average costs of capital for other similar companies.
Terminal value multiples of 7.0x to 9.0x were selected based on, among other
things, multiples from comparable merger and acquisition transactions and
comparable publicly-traded companies as set forth below. Higher discount rates
lower the value of the stream of cash flows and are used when there is more
uncertainty in the underlying cash flows. Higher terminal value multiples
indicate greater value being placed on the stream of cash flows.
 
  Analysis of Public Trading Valuation of Selected Comparable Companies
 
     Rodman analyzed the public trading valuations of selected comparable
companies, including share price, market value, multiples of market value, and
multiples of market capitalization. Rodman also reviewed five-year estimated
earnings per share growth for such selected comparable companies. All earnings
per share figures and five-year earnings growth rates for the comparable
companies were based on the consensus estimates of selected investment banking
firms and all earnings per share estimates for Encore were based on estimates
provided by HCAC and Encore.
 
     Such comparable companies that Rodman examined included the following
orthopedic device companies: ArthroCare Corporation; Biomet, Inc.; Danninger
Medical Technology, Inc.; DePuy, Inc.; Exactech, Inc.; Innovasive Devices, Inc.;
Interpore International; OrthoLogic Corp.; Osteotech, Inc.; Sofamor Danek Group,
Inc.; Spine-Tech, Inc. and Stryker Corporation.
 
     Rodman compared market values as multiples to, among other things, latest
twelve months net income and estimated calendar 1996, 1997 and 1998 net income
for orthopedic device companies, to the extent the comparable companies
demonstrated net income; of the twelve comparable companies, three are
forecasted to be unprofitable for calendar 1996. The respective multiples of the
orthopedic device comparable companies were between the following ranges: (i)
latest twelve months ended September 30, 1996 net income: 17.4x to 60.8x (with a
mean of 32.3x); and (ii) estimated 1996 calendar net income: 16.2x to 60.0x
(with a mean of 33.4x). Assuming a $5.00 per share amount paid to HCAC
stockholders exercising their Conversion Rights (the "Conversion Price"), the
multiple for latest twelve months ended September 27, 1996, net income was
159.0x for Encore. Assuming a $5.00 per share Conversion Price, the multiple for
estimated twelve months ended December 31, 1996, net income was 88.3x for
Encore.
 
     Rodman compared market capitalization to, among other things, latest twelve
months net revenue and latest twelve months EBITDA of the comparable companies.
The respective multiples of the orthopedic device comparable companies were
between the following ranges: (i) latest twelve months net revenue: 1.2x to
 
                                       39
<PAGE>   49
 
35.3x (with a mean of 4.6x, excluding one company that was significantly in
excess of its comparable peers); and (ii) latest twelve months EBITDA: 6.6x to
88.6x (with a mean of 22.9x). Assuming a $5.00 per share Conversion Price,
multiples for the latest twelve months ended September 27, 1996, net revenue and
EBITDA were 3.3x and 23.6x, respectively, for Encore.
 
     Net income is a measure of a company's financial performance over a given
period of time based on the accrual method of accounting. Projected net income
is a measure of a company's projected financial performance over a period of
time in the future. Revenues are a measure of the amount of business generated
by a company over a given period of time. EBITDA is a measure of a company's
earnings before taking into account non-cash expenses such as depreciation and
amortization and the financing of its capital structure over a given period of
time.
 
  Selected Merger and Acquisition Transactions Analysis
 
     Rodman compared certain financial and operating statistics of Encore with
such financial and operating statistics of selected orthopedic device companies
immediately prior to being acquired. Transactions involving the acquisition of
selected orthopedic device companies were chosen based on conversations with
Encore's management as to acquired companies which possessed general business,
operations and financial characteristics representative of Encore. Using
publicly available information, Rodman analyzed the purchase prices and implied
transaction multiples in the following selected merger and acquisition
transactions in the orthopedic device industry: Hologic, Inc.'s acquisition of
FluoroScan Imaging Systems, Inc.; Depuy, Inc.'s acquisition of Orthopedic
Technology, Inc.; Orthofix International N.V.'s acquisition of American Medical
Electronics, Inc.; Johnson & Johnson's acquisition of Mitek Surgical Products,
Inc.; and Wright Medical Technology's acquisition of Orthomet, Inc. (the
"Selected Acquisitions"). Rodman compared purchase prices as multiples of latest
twelve months net income of the Selected Acquisitions and transaction values as
multiples of latest twelve months revenues and latest twelve months EBITDA of
the Selected Acquisitions and compared these multiples to the multiples of
Encore's performance implied by the consideration to be paid pursuant to the
Merger. The multiples of revenues, EBITDA, and net income for latest twelve
months of the Selected Acquisitions were between the following ranges: (i)
revenues: 1.7x to 4.6x (with a mean of 2.9x); (ii) EBITDA: 13.8x to 22.0x (with
a mean of 19.1x); and (iii) net income: 27.3x to 48.3x (with an average of
36.2x). Assuming a $5.00 per share Conversion Price, multiples for estimated
twelve months ended September 27, 1996, net revenues, EBITDA and net income were
3.3x, 23.6x and 159.0x, respectively, for Encore.
 
     In its evaluation of the Merger and in arriving at its conclusions, Rodman
took into account all factors deemed relevant, including the multiples derived
for Encore as compared with the range of multiples derived for the selected
comparable companies and the Selected Acquisitions, and that the multiple for
Encore's net income fell outside of the range for comparable companies and
Selected Acquisitions. No single multiple of the selected comparable companies
or the Selected Acquisitions or relationship between multiples of the selected
comparable companies or the Selected Acquisitions and those of Encore was
dispositive to Rodman's opinion, and no company, transaction or business used in
the comparable company and selected merger and acquisition transactions analyses
as a comparison is identical to HCAC, Encore or the Merger. Accordingly,
analysis of the results of the foregoing is not entirely mathematical; rather,
it involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect the
acquisition or public trading value of the comparable companies or the business
segments or company to which they are being compared.
 
     Pursuant to the Engagement Letter, HCAC also retained Rodman to furnish
financial advisory and investment banking services with respect to potential
post-Merger acquisitions, mergers and debt or equity financings by HCAC. The
Engagement Letter provides for compensation payable to Rodman in two
installments and final payment due upon the closing of the Merger, consisting
of: (i) an advisory fee of $100,000 payable in cash; (ii) upon consummation of
the Merger, an investment banking fee of $100,000 payable in cash, and (iii)
upon consummation of the Merger, warrants to purchase 150,000 HCAC Common Shares
exercisable for a period of four (4) years at an exercise price of $7.00 per
share with such provisions as are customary in transactions of this nature,
including cashless conversion rights. HCAC has also agreed to
 
                                       40
<PAGE>   50
 
reimburse Rodman for its reasonable out-of-pocket expenses not to exceed $25,000
and to indemnify Rodman against certain liabilities relating to or arising out
of services performed and opinions rendered by Rodman pursuant to the Engagement
Letter.
 
     Rodman has advised HCAC that, in the ordinary course of business, it may
actively trade the equity securities of HCAC for its own account or for the
account of its customers and, accordingly, may at any time hold a long or short
position in such securities.
 
   
     Rodman is a nationally recognized investment banking firm and, as part of
its investment banking activities, is regularly engaged in the evaluation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements, and valuations for corporate and other purposes.
Rodman has not been involved in any prior transaction with either HCAC or
Encore.
    
 
THE AGREEMENT AND PLAN OF MERGER
 
   
     Representations and Warranties.  The Agreement and Plan of Merger contains
representations and warranties by each of HCAC, Acquisition and Encore, relating
to, among other things, (a) proper organization, proper organization of their
respective subsidiaries and similar corporate matters; (b) the respective
capital structures of each corporation; (c) the authorization, performance and
enforceability of the Agreement and Plan of Merger; (d) the absence of
violations of governing instruments and applicable laws and agreements; (e)
governmental authorizations required to effect the Merger; (f) fair presentation
of financial condition and the absence of undisclosed liabilities; (g) the
absence of encumbrances; (h) the absence of claims and litigation; (i)
compliance with applicable laws; (j) taxes; (k) labor relations; (l) the absence
of material adverse changes or other conduct; (m) fees payable to third parties
arising from the Agreement and Plan of Merger; (n) board recommendations; (o)
employee benefit plans; (p) absence of false or misleading statements in the S-4
Registration Statement and Joint Proxy Statement/Prospectus and compliance with
applicable provisions of the securities laws; (q) vote required by stockholders;
(r) related party transactions; (s) interests in real property; (t) contracts;
(u) insurance coverage; and (v) corporate records.
    
 
     The Agreement and Plan of Merger provides further representations and
warranties of HCAC and Acquisition concerning, among other things, (a) funds
held in the Trust Fund and liquidation of HCAC; (b) formation, assets and
liabilities of Acquisition; and (c) inapplicability of state takeover statutes.
 
     The Agreement and Plan of Merger contains further representations and
warranties of Encore concerning (a) Encore's title to its assets; (b) Encore's
intellectual property rights, inventory and accounts receivable; (c) Encore's
post-merger relationship with distributors, customers or suppliers; and (d) the
absence of warranty claims against Encore and the absence of defects in its
technology and products.
 
   
     Conduct of Business Prior to Merger.  Each of HCAC, Acquisition and Encore
has agreed that, prior to the Merger, it will conduct its operations only in the
ordinary course of business. HCAC and Acquisition and Encore also agreed that
they will not, without the consent of the other, (a) change or amend governing
instruments and material contracts; (b) issue or sell any capital stock or any
securities convertible into or exercisable or exchangeable for shares of capital
stock, except issuances of stock pursuant to exercises of existing options and
HCAC warrants, if requested by the holder thereof; (c) declare dividends or
redeem capital stock; (d) organize a new subsidiary; (e) make any changes in
organization; (f) waive material rights or incur material liabilities; (g) adopt
or amend any employee benefit plans or become obligated to grant general
increases in compensation except in the ordinary course of business; (h) acquire
any business organization; (i) sell assets outside the ordinary course of
business; (j) decrease the liquidity or availability of assets; and (k) take any
action that would make any representation or warranty materially untrue or
incorrect. HCAC and Acquisition further agree (a) to file all SEC reports in a
timely manner that complies with the rules; and (b) not to encourage exercise by
HCAC stockholders of their Conversion Rights.
    
 
     Certain Covenants.  Pursuant to the Agreement and Plan of Merger, each of
HCAC, Acquisition and Encore has agreed that it will, among other things, (a)
provide the other party with reasonable access to their
 
                                       41
<PAGE>   51
 
   
personnel, properties, contracts, books and records; (b) consult with the other
party prior to making any press releases regarding the Merger and any matters
contained in the Agreement and Plan of Merger; (c) promptly inform the other
party of certain events related to the Agreement and Plan of Merger and the
transactions contemplated thereby and provide any necessary supplements to the
disclosure schedules; (d) use reasonable efforts to take all necessary actions
or cause to be done all things necessary to consummate the transactions
contemplated by the Agreement and Plan of Merger as soon as practicable
including seeking or making all required filings, orders, consents or
authorizations required under applicable law or consents from any governmental
bodies or parties to any material contracts; and (e) except as contemplated by
the Agreement and Plan of Merger and except as required by law in accordance
with the fiduciary duties of their respective Boards (the "Fiduciary Duty
Exception"), neither Encore or its subsidiaries nor HCAC shall, nor shall any
director, officer or advisor of HCAC or Encore or its subsidiaries, be
authorized or permitted to solicit or initiate proposals from, provide
information to or hold discussions with any party concerning any sale of assets
or all or substantially all of any capital stock of HCAC or Encore or its
subsidiary or any merger, consolidation, business combination, liquidation or
similar transaction; provided, that should the Board of Directors of either
Encore or HCAC terminate the Agreement and Plan of Merger in favor of a superior
proposal, in accordance with its fiduciary duty, the company terminating the
Agreement shall pay the other company $200,000 at the time it gives notice of
the termination.
    
 
     The Agreement and Plan of Merger further provides that Encore (a) shall
deliver to HCAC a comfort letter of Price Waterhouse LLP; (b) will use
reasonable efforts to obtain required consents relating to agreements covering
its indebtedness; (c) will use its reasonable efforts to cause its officers,
directors and certain shareholders to enter into lock-up agreements; and (d)
will amend certain severance agreements with its officers and certain employees.
 
   
     The Agreement and Plan of Merger also provides that HCAC will, among other
things, (a) work with Encore to file an application with the NASD to list the
HCAC Common Shares on the Nasdaq National Market, effective as of the Effective
Time; (b) cause the trustee of the HCAC Trust Fund to provide confirmation of
the Trust Fund Amount; (c) use reasonable efforts to cause certain directors,
officers and stockholders to comply with their respective voting obligations
under certain agreements; (d) cause to be presented to its stockholders certain
amendments to its Certificate of Incorporation and cause the election of each of
Encore's seven designees and Jay Haft, John Abeles, M.D. and Joel Kanter to the
HCAC Board and the resignation of all current members of the HCAC Board, each
such action effective as of the Effective Time; and (e) for a three-year period,
indemnify current officers and directors of HCAC to the extent provided in the
current HCAC Certificate of Incorporation and Bylaws.
    
 
   
     Conditions to the Merger.  The obligations of HCAC, Acquisition and Encore
to consummate the Merger are subject to, among other matters, satisfaction of
the following conditions (unless waived where permissible): (a) approval of the
Merger by Encore and HCAC stockholders and Conversion Rights exercised with
respect to less than 20% of the Public Shares; (b) the Registration Statement is
declared effective and no stop order has been issued suspending such
effectiveness; (c) HCAC Common Shares shall have been approved for listing on
the Nasdaq National Market; (d) all applicable waiting periods shall have been
terminated or expired and all consents and authorizations from government
agencies shall have been obtained; (e) the aggregate number of Encore Shares
held by dissenting Encore shareholders shall not exceed 5% of the aggregate
number of Encore Shares outstanding; (f) the representations and warranties of
the other party shall be true and correct in all material respects at the
Effective Time; (g) performance and compliance in all material respects with the
agreements required by the Agreement and Plan of Merger to be performed or
complied with by it prior to the Effective Time; (h) obtaining all consents and
approvals necessary to consummate the Merger, except for those that would not
have a material adverse effect; (i) no pending or threatened action, proceeding
or claim, or any order, decree or injunction, concerning certain matters
involving the Merger; (j) receipt of a legal opinion from the other party's
counsel; and (k) receipt by HCAC of a fairness opinion.
    
 
     The obligation of Encore to consummate the Merger is further subject to,
among other matters, satisfaction of the following conditions (unless waived by
Encore): (a) effective as of the Effective Time, the resignation of the HCAC
Board and the election of ten directors, including at least seven Encore
designees, to
 
                                       42
<PAGE>   52
 
the HCAC Board as set forth above, and the amendments to the HCAC Certificate of
Incorporation and the Option Plan shall have been approved and adopted by HCAC
stockholders and shall have become effective; (b) Encore shall have received a
legal opinion from Encore's counsel regarding federal income tax consequences;
and (c) receipt of confirmation of amounts in the Trust Fund, a schedule of
HCAC's Certified Accounts Payable and other documents required to be delivered.
 
     The obligation of HCAC to consummate the Merger is further subject to,
among other matters, the execution and delivery of lock-up agreements by certain
Encore officers, directors and shareholders.
 
   
     Amendments; Waiver; Termination.  The Agreement and Plan of Merger may be
changed or modified by written agreement of each of the parties. In addition,
each party may at any time waive the other party's compliance with certain terms
and conditions of the Agreement and Plan of Merger. The Agreement and Plan
Merger may be terminated at any time prior to the Effective Time (a) by either
HCAC or Encore if there has been a material breach of representations and
warranties, or a failure to comply with covenants, of the other party, and such
breach or noncompliance shall not have been cured within five business days
after receipt of written notice from the terminating party; (b) by either HCAC
or Encore if the Agreement and Plan of Merger is not approved by HCAC or Encore
stockholders; (c) by either HCAC or Encore if the conditions to the terminating
party's obligations have not been satisfied or waived; (d) by mutual agreement
of the Boards of HCAC and Encore; (e) by either HCAC or Encore if the Merger has
not occurred on or before April 30, 1997 or such later date as the parties agree
upon; (f) by either HCAC or Encore if any court or governmental body issues an
order or takes any action restraining, enjoining or prohibiting consummation of
the Agreement and Plan of Merger; (g) by either HCAC or Encore if any supplement
or amendment to the disclosure schedules to the Agreement and Plan of Merger
submitted by the other party reveals a material adverse change; (h) by Encore or
HCAC pursuant to the Fiduciary Duty Exception and subject to a fee of $200,000
to be paid by the company terminating the Agreement and Plan of Merger pursuant
to such exception; (i) by HCAC if Rodman's fairness opinion at the time of
mailing of the proxy statement is not reasonably satisfactory to its Board; or
(j) by HCAC if at the time of the mailing of the proxy statement, the required
lock-up agreements shall not have been obtained by Encore.
    
 
LISTING
 
   
     HCAC, with the cooperation of Encore, filed an application on January 14,
1997 to list on the Nasdaq National Market the HCAC Common Shares and the HCAC
$5.00 Warrants, including the HCAC Common Shares to be issued in the Merger, and
is using all reasonable efforts to cause such application to be approved prior
to the Effective Time. The HCAC $7.00 Warrants will not be listed on any
exchange or market.
    
 
INTERESTS OF CERTAIN PERSONS IN THE MERGER
 
     No director or officer of Encore has a personal or business relationship
with HCAC. In considering recommendations of the HCAC and Encore Boards with
respect to the Merger, however, stockholders should be aware that certain
directors, officers and employees of HCAC and Encore have an interest in the
consummation of the Merger, as described below.
 
     As contemplated by the Agreement and Plan of Merger, the current members of
the HCAC Board will resign therefrom immediately upon the Effective Time and,
prior to resigning, will cause Encore's designees, and Jay Haft, John H. Abeles,
M.D. and Joel Kanter, current HCAC directors, to be elected as directors
effective upon the Effective Time. Encore's designees to the HCAC Board will
represent seven of the ten members of the post-Merger HCAC Board and,
consequently, will control the business and affairs of HCAC and the Surviving
Corporation. Such resignations and elections by the current members of the HCAC
Board are contingent upon the consummation of the Merger and will not be
effective until the Effective Time.
 
   
     Additionally, Northlea Partners, Ltd., an Initial Stockholder of HCAC, owns
158,918 Encore Common Shares, which, based upon the Minimum Exchange Ratio,
would convert to 137,562 HCAC Common Shares and 20,634 HCAC $7.00 Warrants upon
consummation of the Merger. John H. Abeles, M.D., the President, Treasurer and a
director of HCAC is the general partner of Northlea Partners, Ltd., a limited
partnership of which the Abeles Family Trust is the sole limited partner. See
"The Merger -- Conversion of Shares;
    
 
                                       43
<PAGE>   53
 
Exchange Ratio" for a discussion of the determination of the exchange ratio and
the assumptions on which the Minimum Exchange Ratio is based.
 
     Pursuant to the Engagement Letter, HCAC also retained Rodman to furnish
financial advisory and investment banking services with respect to potential
post-Merger acquisitions, mergers and debt or equity financings by HCAC. The
Engagement Letter provides for compensation payable to Rodman in two
installments and final payment due upon the closing of the Merger, consisting
of: (i) an advisory fee of $100,000 payable in cash; (ii) upon consummation of
the Merger, an investment banking fee of $100,000 payable in cash, and (iii)
upon consummation of the Merger, warrants to purchase 150,000 HCAC Common Shares
exercisable for a period of four (4) years at an exercise price of $7.00 per
share with such provisions as are customary in transactions of this nature,
including cashless conversion rights. HCAC has also agreed to reimburse Rodman
for its reasonable out-of-pocket expenses not to exceed $25,000 and to indemnify
Rodman against certain liabilities relating to or arising out of services
performed and opinions rendered by Rodman pursuant to the Engagement Letter.
Rodman's investment banking services are to include, but not be limited to (i)
introducing and evaluating potential merger or acquisition candidates to HCAC
and (ii) evaluating financing alternatives available to HCAC, which alternatives
may include a public debt or equity financing or a private debt or equity
financing. In the event Rodman advises or represents HCAC in a merger or
acquisition or acts as the underwriter in a public offering or as an agent in a
private placement, the terms and conditions of such arrangement shall be
embodied in an additional engagement letter to be signed at a later date and the
fees due for such an arrangement shall be reduced by the amount of the $100,000
investment banking fee.
 
STOCK OPTIONS
 
   
     The Agreement and Plan of Merger provides that from and after the Effective
Time each Assumed Option to purchase Encore Common Shares will be assumed by
HCAC and exercisable for HCAC Common Shares and HCAC $7.00 Warrants on the same
terms and conditions as are set forth in the option and for that number of HCAC
Common Shares and HCAC $7.00 Warrants as the optionee would have been entitled
to receive had the optionee exercised his option immediately prior to the
Effective Time. As of December 31, 1996, options to purchase an aggregate of
4,316,606 Encore Common Shares were outstanding under Encore's 1992 Employee
Stock Option Plan, 1993 Distributor Stock Option Plan, 1993 Advisory Surgeon
Stock Option Plan, pursuant to options granted to certain surgeons retained by
Encore to assist in designing its products, and pursuant to other options
granted by Encore outside of these plans. Assuming no exercises or cancellations
of existing Encore options between December 31, 1996 and the Effective Time and
assuming that the Encore Shares are converted pursuant to the Minimum Exchange
Ratio immediately after the Effective Time, Assumed Options to purchase
3,736,520 HCAC Common Shares and 560,478 HCAC $7.00 Warrants would be
outstanding. Other than accelerated vesting, which may occur under certain
option agreements pursuant to the Merger, an Assumed Option shall not give the
optionee additional benefits that he did not have prior to the Effective Time
under the existing stock option. See "The Merger -- Conversion of Shares;
Exchange Ratio" for a discussion of the determination of the exchange ratio and
the assumptions on which the Minimum Exchange Ratio is based. Approval of the
Merger by the stockholders of HCAC and Encore will constitute approval of the
assumption by HCAC of the Assumed Options.
    
 
EXCHANGE OF STOCK CERTIFICATES
 
     As of the Effective Time, each certificate formerly representing Encore
Common Shares and Encore Preferred Shares, other than certificates representing
shares held by Encore shareholders exercising dissenters' rights (the "Encore
Certificates"), shall be deemed for all purposes to evidence ownership of the
right to receive the HCAC Common Shares and HCAC $7.00 Warrants issuable
pursuant to the Agreement and Plan of Merger until surrendered to the exchange
agent, Continental Stock Transfer & Trust Company, New York, New York (the
"Exchange Agent").
 
     As soon as practicable after the Effective Time, a letter of transmittal
and instructions will be mailed to each holder of record of Encore Shares as of
the Effective Time (excluding those Encore Shares held by
 
                                       44
<PAGE>   54
 
shareholders exercising dissenters' rights) to be used by such holder in
forwarding Encore Certificates to the Exchange Agent. Each shareholder will be
required to return a properly completed transmittal letter, together with any
Encore Certificates listed on the transmittal letter, to the Exchange Agent in
order to receive a whole number of HCAC Common Shares and HCAC $7.00 Warrants.
SHAREHOLDERS OF ENCORE SHOULD NOT SEND ENCORE CERTIFICATES TO THE EXCHANGE AGENT
UNTIL THEY RECEIVE A TRANSMITTAL LETTER.
 
FRACTIONAL SHARES
 
     No fractional HCAC Common Shares or HCAC $7.00 Warrants will be issued as a
result of the Merger. Each Encore shareholder who would otherwise receive a
fractional interest in HCAC Common Shares in the Merger will be entitled to
receive a cash payment in lieu of such fractional amount equal to such fraction
times the average of the closing bid prices of HCAC Common Shares for the five
trading days prior to the Effective Time, as reported on the OTC Bulletin Board.
Fractional interests in HCAC $7.00 Warrants will be rounded to the closest whole
number.
 
AMENDMENT TO HCAC CERTIFICATE OF INCORPORATION
 
   
     The Agreement and Plan of Merger is subject to approval of HCAC
stockholders of the HCAC Certificate Amendment (i) changing HCAC's corporate
name to "Encore Medical Corporation," (ii) increasing the number of authorized
HCAC Common Shares from 20,000,000 to 35,000,000 and (iii) changing the Board to
three classes, with each class of directors elected to staggered three year
terms. Therefore, in order to assure that the Merger is consummated, HCAC
stockholders favoring the Merger are advised to vote in favor of the HCAC
Certificate Amendment. If the HCAC Certificate Amendment is not approved, but
the Merger is approved, the Encore Board may terminate the Agreement and Plan of
Merger and abandon the Merger, or may elect to proceed with the Merger by
waiving this condition. As of the date hereof, no decision has been made by the
Encore Board as to how it will proceed if the Merger is approved, but the HCAC
Certificate Amendment is not approved. If the Agreement and Plan of Merger is
not approved, however, the HCAC Certificate of Incorporation will not be
amended, notwithstanding stockholder approval of such proposal.
    
 
   
     The effectiveness of the HCAC Certificate Amendment, accomplished by filing
such amendment with the Secretary of State of the State of Delaware, is a
condition to the Merger. See "Description of Amendment to HCAC Certificate of
Incorporation."
    
 
ADOPTION OF THE ENCORE MEDICAL CORPORATION 1996 INCENTIVE STOCK PLAN
 
   
     General.  The Encore Medical Corporation 1996 Incentive Stock Plan (the
"Option Plan") is proposed to be approved by the HCAC stockholders. The Option
Plan was adopted by the Board of Directors of HCAC in November 1996. Subject to
stockholder approval and consummation of the Merger, the Option Plan provides
for the award of Stock Options, Stock Appreciation Rights, Restricted Stock,
Unrestricted Stock, Deferred Stock, Performance Units, Other Stock-based Awards
and certain Supplemental Grants. The maximum number of HCAC Common Shares
reserved and available for distribution pursuant to the Option Plan shall be
2,000,000 shares. The purpose of the Option Plan is to enhance the ability of
HCAC to attract and retain key employees. It is also intended to stimulate the
efforts of these employees by providing an opportunity for capital appreciation
and recognition of outstanding service to HCAC, all of which management believes
will contribute to the long-term growth and profitability of HCAC. For a more
complete explanation of the Option Plan, see "Adoption of the Encore Medical
Corporation 1996 Incentive Stock Plan."
    
 
   
     Stockholder Approval.  The affirmative vote of holders of a majority of the
HCAC Common Shares at the HCAC Meeting, either in person or by proxy, is
required to approve the Option Plan. The HCAC Board recommends a vote "FOR"
approval. If the Option Plan is not approved by a majority of the HCAC Common
Shares present at the Meeting or the Merger is not consummated, the Option Plan
shall become void.
    
 
                                       45
<PAGE>   55
 
MANAGEMENT AFTER THE MERGER
 
     Prior to the Effective Time, all members of the HCAC Board will resign
therefrom, and, prior to resigning, the HCAC Board will have elected ten
directors, seven of whom will have been Encore designees and three of whom will
be pre-Merger HCAC directors. The Board shall elect Lamar Laster, Richard Relyea
and John Abeles for a term of office expiring at the annual stockholders meeting
of HCAC occurring in 1998 or until their successors have been duly elected and
qualified; the Board shall elect Dennis Enright, Kenneth Davidson and Jay Haft
for a term of office expiring at the annual stockholders meeting of HCAC
occurring in 1999 or until their successors have been duly elected and
qualified, and the Board shall elect Nick Cindrich, Craig Smith, Richard Martin
and Joel Kanter for a term of office expiring at the annual stockholders meeting
of HCAC occurring in 2000 or until their successors have been duly elected and
qualified. In addition, HCAC's two executive officers will resign effective at
the Effective Time, to be replaced by the current officers of Encore. Certain
members of the post-Merger HCAC Board also will be members of the board of
directors of the Surviving Corporation, and Encore's executive officers will
remain executive officers of the Surviving Corporation. See "Management of
Encore" for information as to Messrs. Cindrich, Smith, Relyea, Laster, Martin,
Enright and Davidson and the executive officers of Encore expected to replace
the HCAC officers, and "Management of HCAC" for information as to Messrs. Haft,
Kanter and Abeles.
 
ABSENCE OF REGULATORY FILINGS AND APPROVALS
 
     The Merger is not subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder, which provide that certain merger transactions may not be
consummated until required information and material have been furnished to the
Antitrust Division of the Department of Justice of the Federal Trade Commission
and certain waiting periods have expired or been terminated. Other than certain
filings to be made and approvals obtained under certain state securities or
"blue sky" laws, there are no federal or state regulatory requirements that must
be complied with or approvals obtained in connection with the Merger.
 
ACCOUNTING TREATMENT
 
   
     Based upon the Minimum Exchange Ratio, upon completion of the Merger, the
current holders of Encore Shares, in the aggregate, will own approximately 74%
of the outstanding HCAC Common Shares, and the current Encore executive officers
and management team will become the executive officers and management team of
HCAC and the Surviving Corporation. For accounting and financial reporting
purposes, the Merger will be accounted for as a recapitalization of Encore, with
the issuance of shares by Encore for the net assets of HCAC, consisting
primarily of cash. Since HCAC is a SPAC with no business operations other than
the search for a suitable Target Business, its assets will be recorded in the
balance sheet of the combined company at book value. The unaudited pro forma
balance sheet contained in this Joint Proxy Statement/ Prospectus has been
prepared on this basis.
    
 
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
 
     Set forth below is a discussion that summarizes the material federal income
tax consequences of the Merger to holders of Encore Shares and Assumed Options
under the Internal Revenue Code of 1986, as amended (the "Code"), and the tax
opinion (the "Tax Opinion") of Sutherland, Asbill & Brennan, L.L.P., counsel of
Encore, which will be rendered in connection with the Merger. Neither the
discussion nor the Tax Opinion deals with (i) all federal income tax
considerations of the Merger, such as the tax consequences to HCAC or Encore,
(ii) all of the tax considerations that may be relevant to particular
shareholders of Encore, such as shareholders who are dealers in securities,
foreign persons, tax-exempt entities or shareholders who received their stock in
Encore in connection with Encore stock option plans, (iii) the impact of the
alternative minimum tax (except to the limited discussion herein presented
regarding alternative minimum tax) or (iv) the impact of "parachute payments."
In addition, neither the discussion nor the Tax Opinion addresses any state,
local or foreign tax considerations or any federal estate, gift, employment,
excise or other non-income tax considerations. The following discussion and the
Tax Opinion are based upon provisions of the
 
                                       46
<PAGE>   56
 
   
Code, regulations, administrative rulings and judicial decisions presently in
effect, all of which are subject to change (possibly with retroactive effect) or
to different interpretations.
    
 
     ALL ENCORE SHAREHOLDERS AND OPTIONHOLDERS ARE URGED TO CONSULT WITH THEIR
OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER,
INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
 
     No ruling from the Internal Revenue Service ("IRS") has been or will be
sought with respect to the tax consequences of the Merger. In satisfaction of a
condition to the consummation of the Merger, Encore will receive the Tax Opinion
from Sutherland, Asbill & Brennan, L.L.P., summarized below, with respect to
certain federal income tax consequences of the Merger to the shareholders of
Encore. The Tax Opinion is not binding on the IRS, nor will it preclude the IRS
from taking a contrary position.
 
     In the Tax Opinion rendered in connection with the Merger, Sutherland,
Asbill & Brennan, L.L.P. has advised that it will opine as follows with respect
to certain federal income tax consequences of the Merger to the shareholders of
Encore:
 
          (1) The Merger will constitute a "reorganization" within the meaning
     of Section 368(a) of the Code;
 
   
          (2) No gain or loss will be recognized to Encore shareholders upon
     receipt of HCAC Common Shares in exchange for their Encore Shares pursuant
     to the Merger, although Encore shareholders will recognize gain, if any, to
     the extent of the fair market value of the HCAC $7.00 Warrants received in
     exchange for their Encore Shares pursuant to the Merger;
    
 
   
          (3) The basis of the HCAC Common Shares received by an Encore
     shareholder (including interests in fractional HCAC Common Shares not
     actually received) will be the same as the basis of the Encore Common
     Shares or Encore Preferred Shares surrendered for exchange in the Merger,
     decreased by the fair market value of the HCAC $7.00 Warrants received by
     such shareholder and increased by the amount of gain, if any, recognized on
     the exchange by such shareholder; and
    
 
   
          (4) Encore shareholders will include the holding period for the Encore
     Shares surrendered in the Merger in their holding period of HCAC Common
     Shares received in the Merger, assuming such Encore Shares were held as
     capital assets at the Effective Time of the Merger.
    
 
     In rendering the Tax Opinion, Sutherland, Asbill & Brennan, L.L.P. relied
on representations from Encore or HCAC (i) as to no Planned Dispositions (as
hereinafter defined) of a substantial portion of the HCAC Common Shares; (ii)
that HCAC has no plan or intention to reacquire any of the HCAC Common Shares
other than in connection with the exercise of Conversion Rights by HCAC
stockholders; (iii) that HCAC has no plan or intention to liquidate Encore, to
merge Encore into or with another corporation, to sell, distribute or otherwise
dispose of the stock of Encore, or to cause Encore to sell or dispose of any of
its assets, except for dispositions made in the ordinary course of business or
the payment of expenses incurred by Encore pursuant to the Merger; (iv) that
Encore will continue its historic business or use a significant portion of its
historic business assets in a business; and (v) that none of the compensation
received by any shareholder-employees of Encore will be separate consideration
for, or allocable to, any of their shares of Encore capital stock; none of the
HCAC Common Shares received by any shareholder-employee of Encore will be
separate consideration for, or allocable to, any of their shares of Encore
capital stock; and the compensation paid to any shareholder-employees of Encore
will be for services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's length for similar services; and other
representations relating to various technical requirements of the Code.
 
     Sutherland, Asbill & Brennan, L.L.P. has also advised that qualification of
the Merger as a "reorganization" will be based upon, among other things, the
Merger's satisfaction of the "continuity of interest" requirement. In order for
this requirement to be met, Encore shareholders must not, pursuant to a plan or
intent existing on or prior to the Merger, dispose of or transfer so much of
either (i) their Encore Shares in anticipation of the Merger or (ii) the HCAC
Common Shares received in the Merger (collectively, "Planned
 
                                       47
<PAGE>   57
 
Dispositions") such that Encore shareholders as a group would no longer have a
meaningful equity interest in Encore after the Merger. Planned Dispositions
include, among other things, shares disposed of pursuant to the exercise of
dissenters' rights. Encore shareholders will generally be regarded as having a
meaningful equity interest so long as the HCAC Common Shares received in the
Merger (after taking into account Planned Dispositions) in the aggregate,
represent a "substantial portion" of the entire consideration received by the
Encore shareholders in the Merger. The law is unclear as to what constitutes a
meaningful equity interest or a "substantial portion." The IRS ruling guidelines
require that the HCAC Common Shares received in the Merger, after excluding all
shares subject to a Planned Disposition, must equal at least 50% of the total
consideration received in the Merger for the Encore Shares. Such guidelines,
however, do not purport to represent the applicable substantive law. If the
continuity of interest requirement is not satisfied, the Merger would not be
treated as a "reorganization."
 
     A shareholder who exercises dissenters' rights with respect to an Encore
Share and who receives payment for such stock in cash should generally recognize
capital gain or loss (if such share were held as a capital asset at the
Effective Time of the Merger) measured by the difference between the
shareholder's basis in such share and the amount of cash received, provided that
such payment is neither essentially equivalent to a dividend nor has the effect
of a distribution or a dividend.
 
     An Encore shareholder will be required to recognize the amount of any gain
realized upon the exchange of Encore Shares for HCAC Common Shares and HCAC
$7.00 Warrants pursuant to the Merger to the extent of the fair market value, if
any, of the HCAC $7.00 Warrants received.
 
     A shareholder of Encore who receives cash pursuant to the Merger in lieu of
fractional share interests will be treated as having received such fractional
shares of HCAC Common Shares pursuant to the Merger and then as having received
such cash in redemption of such fractional share interests subject to the
provisions of Section 302 of the Code. The circumstances under which cash is
being issued pursuant to the Merger in lieu of a fractional share interest
appear to satisfy the guidelines under which the IRS will generally issue a
ruling that the receipt of such cash will qualify for capital gain or loss
treatment (provided such fractional interest is held as a capital asset at the
time of such exchange). No such advance ruling will be sought from the IRS, nor
is the receipt of such a ruling a condition to the consummation of the Merger.
 
   
     Federal Income Tax Information for Encore Option Holders.  The assumption
or substitution of a compensatory stock option of Encore by HCAC should not
generally result in the recognition of gain or loss to the holders thereof.
Incentive stock options ("ISOs") of HCAC received in exchange for Encore ISOs
should be treated as ISOs for purposes of Section 422 of the Code, provided no
additional benefits are received by the Option Holders in connection with the
assumption or substitution or the options by HCAC. If an additional benefit is
received, the assumed or substituted option will be treated as a nonstatutory
stock option.
    
 
     Federal Income Tax Information for HCAC Converting Stockholders.  A
stockholder of HCAC who exercises Conversion Rights with respect to HCAC Common
Shares and who receives payment for such stock in cash should generally
recognize capital gain or loss (if such shares were held as a capital asset at
the Effective Time of the Merger) measured by the difference between the
stockholder's basis in such shares and the amount of cash received, provided
that such payment is neither essentially equivalent to a dividend nor has the
effect of a distribution or a dividend.
 
CONSEQUENCES UNDER FEDERAL SECURITIES LAWS
 
     The HCAC Common Shares, HCAC $7.00 Warrants and HCAC Common Shares issuable
upon exercise of the HCAC $7.00 Warrants: (i) issued in connection with the
Merger; (ii) issuable upon exercise of the Assumed Options; and (iii) to be
issued to Rodman in connection with the provision of the fairness opinion to
HCAC, will be registered under the Securities Act. Accordingly, there will be no
restrictions upon the resale or transfer or such shares by Encore shareholders
other than under the lock-up agreements, except for those shareholders who are
deemed "affiliates" of Encore, as that term is defined in Rule 144 and Rule 145
adopted under the Securities Act. However, there is no trading market in the
HCAC $7.00 Warrants, and no assurance can be given that any such market will
develop in the future. See "Risk Factors -- Absence of a Trading Market in HCAC
$7.00 Warrants" and "Lock-Up Agreements."
 
                                       48
<PAGE>   58
 
     Notwithstanding the foregoing, HCAC will be able to issue HCAC Common
Shares upon exercise of the HCAC $7.00 Warrants only if there is then a current
prospectus relating to the HCAC Common Shares issuable upon the exercise of the
HCAC $7.00 Warrants under an effective registration statement filed with the
SEC, and only if such HCAC Common Shares are qualified for sale or exempt from
qualification under applicable state securities laws of the jurisdictions in
which the various holders of the HCAC $7.00 Warrants then reside. Although HCAC
has agreed to use its best efforts to meet such requirements, there can be no
assurance that HCAC will be able to do so. See "Risk Factors of HCAC -- Current
Prospectus and State Blue Sky Registration Required in Connection with Exercise
of HCAC $7.00 Warrants."
 
LOCK-UP
 
   
     It is a condition to HCAC's obligations to consummate the Merger that
Encore shall have obtained and delivered to HCAC "lock-up agreements" from each
of Encore's officers and directors and from each shareholder and each holder of
Assumed Options who, upon consummation of the Merger, will own, have the right
to acquire, or otherwise be the "Beneficial Owner," as defined in Rule 13(d)-3
under the Exchange Act, of over 5,000 HCAC Common Shares. The lock-up agreements
will provide that such persons will not, directly or indirectly, sell, offer or
contract to sell, grant an option to purchase or otherwise transfer any of the
"Merger Securities" (as defined below) that the person executing the agreement
owns, will own of record or will have the power to control as to disposition.
Merger Securities are the HCAC Common Shares, the HCAC $7.00 Warrants and the
HCAC Common Shares underlying the HCAC $7.00 Warrants issued pursuant to the
Merger or upon exercise of an Assumed Option. The restrictions on the lock-up
agreements will begin on the date of the lock-up agreements, and the
restrictions will terminate as follows: (i) such persons who will own, have the
right to acquire, or be the beneficial owner of between 5,001 and 99,999 HCAC
Common Shares shall be subject to the lock-up restrictions for a period of 12
months from the Effective Time, provided, however, each such person may sell or
transfer one-half of such person's HCAC Common Shares included in the Merger
Securities upon the expiration of 9 months after the Effective Time; (ii) such
persons who will own, have the right to acquire, or be the beneficial owner of
100,000 or more HCAC Common Shares will be subject to the lock-up agreement
restrictions for 18 months from the Effective Time; provided, however, each such
person may sell or transfer one-third of such person's HCAC Common Shares
included in the Merger Securities upon the expiration of 12 months from the
Effective Time and an additional one-third of such person's HCAC Common Shares
included in the Merger Securities upon the expiration of 15 months from the
Effective Time; and (iii) the officers and directors of Encore, and certain
other major Encore shareholders specified in the Agreement and Plan of Merger
will be subject to the restrictions of the lock-up agreement for 24 months from
the Effective Time, provided, however, each such person may sell or transfer
one-fourth of such person's HCAC Common Shares included in the Merger Securities
on the expiration of 12 months from the Effective Time, an additional one-fourth
of such person's HCAC Common Shares included in the Merger Securities on the
expiration of 15 months from the Effective Time, and an additional one-fourth of
such person's HCAC Common Shares included in the Merger Securities on the
expiration of 18 months from the Effective Time. In order to satisfy the
conditions set forth in the Agreement and Plan of Merger, Encore must obtain
lock-up agreements covering 90% of the HCAC Common Shares to be issued in
connection with the Merger.
    
 
   
     The 375,000 HCAC Common Shares owned by the Initial Stockholders prior to
the IPO, representing approximately 17.9% of the outstanding HCAC Common Shares
as of the date of this Joint Proxy Statement/ Prospectus, have been placed in
escrow with Continental Stock Transfer & Trust Company, as escrow agent, until
March 8, 1999. During such escrow period, the Initial Stockholders may vote
their HCAC Common Shares held in escrow but will not be able to sell or
otherwise transfer such shares, except for estate planning purposes to their
spouses and children (or to trusts established for their benefit).
    
 
   
WARRANTS
    
 
     HCAC will be able to issue HCAC Common Shares upon exercise of the HCAC
$7.00 Warrants only if there is at the time a current prospectus relating to the
HCAC Common Shares issuable upon the exercise of the HCAC $7.00 Warrants under
an effective registration statement filed with the SEC, and only if such
 
                                       49
<PAGE>   59
 
HCAC Common Shares are qualified for sale or exempt from qualification under
applicable state securities laws of the jurisdictions in which the various
holders of the HCAC $7.00 Warrants reside. Although HCAC has agreed to use its
best efforts to meet such requirements, no assurance can be given that HCAC will
be able to do so.
 
VOTING AGREEMENTS
 
     All of the Initial Stockholders have agreed to vote the Initial Shares
(approximately 17.9% of the HCAC Common Shares outstanding as of the date of
this Joint Proxy Statement/Prospectus) in accordance with the vote of a majority
of the Public Shares on the proposal to approve the Agreement and Plan of
Merger. The Initial Stockholders may vote any Public Shares they own in their
discretion; however, to the best of HCAC's knowledge, none of the Initial
Stockholders own any Public Shares.
 
CONVERSION RIGHTS
 
   
     Pursuant to the Conversion Rights, HCAC's stockholders have the right to
convert their HCAC Common Shares to cash, subject to consummation of the Merger
and the stockholders' compliance with certain conditions to the exercise of such
rights. The Initial Stockholders have no Conversion Rights as to their Initial
Shares. Any Public Stockholder may demand that HCAC convert his HCAC Common
Shares for a cash conversion price of at least $5.06 per share (the "Conversion
Price"), which Conversion Price will equal the amount in the Trust Fund, divided
by 1,725,000 (the number of HCAC Common Shares held by the Public Stockholders),
as long as the Public Stockholder votes the shares he wants to convert "AGAINST"
the Agreement and Plan of Merger, properly complies with the procedures set
forth below and the Agreement and Plan of Merger is approved and the Merger
consummated. As of December 31, 1996 the Conversion Price was approximately
$5.06 per share.
    
 
   
     Any Public Stockholder desiring to exercise his Conversion Rights must vote
the shares he wants to convert "AGAINST" the proposal to approve the Agreement
and Plan of Merger and notify HCAC in writing of the intention to convert his
HCAC Common Shares on or before March 24, 1997. The written notice must state
that the stockholder's right to convert will be exercised if the Merger becomes
effective, the number of HCAC Common Shares held by such holder that he wishes
to convert and the address to which the letter of transmittal and instructions
regarding conversion should be delivered or mailed. Neither a proxy nor a vote
against, nor an abstention from voting on, the Merger is sufficient to
constitute an exercise of Conversion Rights.
    
 
   
     ANY WRITTEN NOTICE INFORMING HCAC OF A STOCKHOLDER'S INTENTION TO CONVERT
SHOULD BE SENT IN A MANNER THAT ASSURES THAT SUCH NOTICE IS RECEIVED BY HCAC BY
NO LATER THAN MARCH 24, 1997, ADDRESSED TO HEALTHCARE ACQUISITION CORP.,
ATTENTION: JAY M. HAFT, SECRETARY, 200 EAST BROWARD BOULEVARD, FORT LAUDERDALE,
FLORIDA 33301.
    
 
   
     Upon receipt of such notice, HCAC will mail to the Converting Stockholder a
letter of transmittal and instructions to be used by such holder in forwarding
certificates representing the HCAC Common Shares (the "HCAC Certificates") being
converted. CONVERTING STOCKHOLDERS WILL BE REQUIRED TO RETURN A PROPERLY
COMPLETED TRANSMITTAL LETTER, TOGETHER WITH ANY HCAC CERTIFICATE LISTED ON THE
TRANSMITTAL LETTER, TO HCAC BY NO LATER THAN APRIL 15, 1997. THE FAILURE BY SUCH
HOLDER TO DO SO SHALL TERMINATE THE STOCKHOLDER'S RIGHTS TO CONVERT HIS HCAC
COMMON SHARES.
    
 
     A stockholder who fails to return a valid proxy voting against the proposal
to approve the Agreement and Plan of Merger will be foreclosed from exercising
his rights to convert his HCAC Common Shares. A stockholder who executes and
returns an unmarked proxy will have his shares voted "FOR" the Agreement and
Plan of Merger and as a consequence thereof such stockholder will be precluded
from exercising his rights to convert his HCAC Common Shares. An HCAC
stockholder need not vote in any particular manner as to any other proposal
submitted to HCAC stockholders in order to be permitted to exercise his
Conversion Rights.
 
                                       50
<PAGE>   60
 
     Since only holders of record may exercise Conversion Rights, persons who
beneficially own shares held of record by fiduciaries, nominees or others and
who wish to exercise their Conversion Rights must instruct the record holders of
their shares to satisfy the conditions described herein.
 
     Any Public Stockholder who has properly converted HCAC Common Shares will
not have any rights as a stockholder of HCAC, except the right to receive
payment for his shares.
 
     Concurrently with the consummation of the Merger, the Trustee, as directed
by HCAC, will distribute to HCAC's transfer agent an amount equal to the
Conversion Price multiplied by the number of shares converted by the Converting
Stockholders. As soon as practicable thereafter, the transfer agent will then
distribute such amount to the Converting Stockholders as their respective
interests may appear. Upon payment of the aggregate Conversion Price, the
Converting Stockholder will cease to have any interest in such shares.
 
     Any Converting Stockholder may withdraw his demand for conversion at any
time prior to the date of the HCAC Meeting. No such Converting Stockholder may
withdraw his demand after the HCAC Meeting, and no other HCAC Stockholder may
seek conversion of his HCAC Common Shares following the Effective Date of the
Merger.
 
DISSENTERS' RIGHTS
 
     Any shareholder of record of Encore may exercise dissenters' rights in
connection with the Merger by properly complying with the requirements of
Articles 5.11, 5.12 and 5.13 of the Texas Business Corporation Act, as amended
("TBCA"). By exercising dissenters' rights, any such shareholder would have the
"fair value" of his or her Encore Shares determined by a court and paid to him
or her in cash.
 
     The following is a summary of the statutory procedures that a shareholder
of a Texas corporation must follow in order to exercise his or her dissenters'
rights under Texas law. This summary is not complete and is qualified in its
entirety by reference to Articles 5.11, 5.12 and 5.13 of the TBCA, the text of
which is set forth in full in Appendix E of this Joint Proxy
Statement/Prospectus.
 
     The TBCA provides that each shareholder of a Texas corporation has the
right to dissent from certain transactions, including a plan of merger. Any
shareholder of a Texas corporation who objects to a plan of merger may exercise
the rights and remedies of a dissenting shareholder under Articles 5.11, 5.12
and 5.13 of the TBCA. Any shareholder desiring to exercise his right of dissent
must file a written objection to the plan of merger with the corporation, prior
to the date of the meeting of shareholders called to consider the merger. The
written objections must state that the shareholder's right to dissent will be
exercised if the merger becomes effective and give the address to which notice
of the effectiveness of the merger should be delivered or mailed at such time.
Neither a proxy nor a vote against, nor an abstention from voting on, the merger
is sufficient to constitute a written objection as required under the statute.
 
   
     ANY WRITTEN OBJECTION OR NOTICE REQUIRED OF ANY DISSENTING SHAREHOLDER
UNDER ARTICLES 5.11 THROUGH 5.13 OF THE TBCA SHOULD BE SENT IN A MANNER THAT
ASSURES THAT SUCH NOTICE IS RECEIVED BY ENCORE BY NO LATER THAN MARCH 20, 1997,
ADDRESSED TO ENCORE ORTHOPEDICS, INC., ATTENTION: CORPORATE SECRETARY, 9800
METRIC BOULEVARD, AUSTIN, TEXAS 78758.
    
 
   
     In order to properly exercise his dissenters' rights, a dissenting
shareholder must refrain from voting by proxy or in person in favor of the
Agreement and Plan of Merger. A shareholder who executes and returns an unmarked
proxy will have his shares voted "FOR" the Agreement and Plan of Merger and as a
consequence thereof such shareholder will be foreclosed from exercising his
rights as a dissenting shareholder.
    
 
   
     The corporation must deliver or mail notice of the effectiveness of the
merger to each dissenting shareholder that has not voted in favor of the merger
within ten days of the effectiveness of the merger. Any dissenting shareholder
who has not voted in favor of the merger may then make a written demand on the
surviving corporation (which in such case would be Encore) within ten days of
the delivery or mailing of the notice by the corporation for the payment of the
fair value of his shares. Such demand must state the number and class of the
shares of stock owned by the dissenting shareholder and the dissenting
shareholder's estimate
    
 
                                       51
<PAGE>   61
 
of the fair value of his shares as of the day immediately prior to the meeting,
excluding any increase or decrease in value of the shares in anticipation of the
proposed merger. Any shareholder failing to make such a demand within the
ten-day period will lose the right to dissent and will be bound by the terms of
the merger. In order to preserve his dissenters' rights, a dissenting
shareholder must also submit his stock certificates to the surviving corporation
within 20 days of making a demand for payment with notation thereon that such
demand has been made. The failure of such holder to do so shall, at the option
of the surviving corporation, terminate the shareholder's rights to dissent and
appraisal unless a court of competent jurisdiction for good and sufficient cause
shown shall direct otherwise. Encore intends to terminate a shareholder's rights
to dissent and appraisal for failure of any such shareholder to comply with the
statutory deadlines for submission of stock certificates and any other statutory
requirements, unless a court of competent jurisdiction directs otherwise.
 
   
     Any shareholder who has properly demanded payment for his shares of stock
will not have any rights as a shareholder, except the right to receive payment
for his shares pursuant to Article 5.12 of the TBCA and the right to maintain an
appropriate action to obtain relief on the grounds that the merger and the
related transactions were fraudulent.
    
 
   
     Within 20 days of receipt of the demand for payment, the surviving
corporation must deliver or mail to the dissenting shareholder written notice
that either (i) the corporation agrees to pay the amount of the shareholder's
demand within 90 days after the effectiveness of the merger upon receipt of the
dissenting shareholder's duly endorsed share certificates or (ii) the
corporation offers to pay its own estimate of the fair value of the shares
within 90 days after the effectiveness of the merger upon receipt of the
dissenting shareholder's duly endorsed share certificates and upon receipt of
notice within 60 days after the effectiveness of the merger that the dissenting
shareholder agrees to accept the surviving corporation's estimate. If the
dissenting shareholder and the surviving corporation agree upon the value of the
dissenting shareholder's shares within 60 days after effectiveness of the
merger, the corporation shall pay the amount of the agreed value to the
dissenting shareholder upon receipt of the dissenting shareholder's duly
endorsed share certificates within 90 days of the effectiveness of the merger.
Upon payment of the agreed value, the dissenting shareholder will cease to have
any interest in such shares.
    
 
   
     If the dissenting shareholder and the corporation do not agree upon the
value of the dissenting shareholder's shares within 60 days after the
effectiveness of the merger, then either the dissenting shareholder or the
surviving corporation may, within 60 days after the expiration of such 60-day
period, file a claim in a court of competent jurisdiction in the county in Texas
in which the principal office of the corporation is located (in such case,
Travis County), seeking a determination of the fair value of the shares. The
corporation shall file with the court a list of all shareholders who have
demanded payment for their shares with whom an agreement as to value has not
been reached upon receipt of such a claim filed by a dissenting or upon the
filing of such claim by the corporation. The clerk of the court will give notice
of the hearing of any such claim to the corporation and to all of the dissenting
shareholders on the list provided by the corporation. All dissenting
shareholders notified in this manner and the corporation will be bound by final
judgment of the court as to the value of their shares. Encore has not yet
determined whether it will institute an action seeking a judicial determination
of the fair value of the Encore Shares in the event that Encore and dissenting
Encore shareholders do not agree as to the value of the dissenting shareholders'
shares; such determination will depend, among other considerations, upon the
number of dissenting shareholders with which such a disagreement exists and the
magnitude of the difference in the parties' respective opinion on value of the
dissenting shareholders' shares.
    
 
     In considering such a claim, the court will determine which of the
dissenting shareholders have complied with the provisions of the TBCA and are
entitled to the payment of the fair value of their shares and will appoint one
or more qualified appraisers to assist in the determination of the fair value of
the shares upon such investigation as the appraisers consider proper. The
appraisers shall afford a reasonable opportunity to the dissenting shareholders
and the corporation to submit to them evidence as to the value of the shares.
 
     Upon receipt of the appraisers' report, the court will by its judgment
determine the fair value of the shares of the dissenting shareholders and will
direct the payment to the dissenting shareholders of the amount of the fair
value of their shares, with interest beginning 91 days after the date on which
the merger was effected to
 
                                       52
<PAGE>   62
 
   
the date of the judgment, payable by the corporation, upon receipt of the
dissenting shareholder's share certificates. Upon payment of the judgment, the
dissenting shareholders will cease to have any interest in the shares or the
corporation. The court will allow the appraisers a reasonable fee as court
costs, and all court costs will be allocated between the parties in such manner
as the court determines to be fair and equitable.
    
 
     Under Texas law, "fair value" of shares for purposes of the exercise of
dissenters' rights is defined as the value of the shares as of the date before
the vote is taken authorizing the merger excluding any appreciation or
depreciation in value of the shares in anticipation of the proposed merger. Such
"fair value" is determined in the first instance by appraisers appointed by the
court, who are directed to make such determination "upon such investigation as
to them may seem proper."
 
   
     Any dissenting shareholder may withdraw his demand at any time before
receiving payment for his shares or before a petition has been filed seeking
determination of the fair value of his shares. No such dissenting shareholder
may withdraw his demand after payment has been made or, unless the surviving
corporation consents to the withdrawal, where such a petition has been filed.
    
 
     Shareholders of Encore considering exercising dissenters' rights should
consider that the payment which they eventually receive in exchange for their
shares in a dissenters' rights proceeding under Texas law could be less than,
equal to, or greater than the eventual market value of the consideration they
would receive as a result of the consummation of the Merger.
 
     An Encore shareholder who exercises his dissenters' rights and receives
cash from Encore in exchange for his Encore Shares will recognize taxable gain
or loss in an amount equal to the difference between (a) the sum of cash
received from Encore and (b) the basis of the Encore Shares so exchanged. Any
such gain or loss recognized would be long-term capital gain or loss if the
Encore Shares constitute capital assets in the hands of the dissenting Encore
shareholder and have been held by such shareholder for more than one year at the
Effective Time.
 
     ENCORE SHAREHOLDERS WHO ARE CONSIDERING DISSENTING FROM THE MERGER ARE
URGED TO CONSULT THEIR OWN LEGAL COUNSEL.
 
                                       53
<PAGE>   63
 
                       DESCRIPTION OF HCAC CAPITAL STOCK
 
GENERAL
 
   
     HCAC is authorized to issue 20,000,000 HCAC Common Shares, par value $.001
per share, and 1,000,000 HCAC Preferred Shares, par value $.001 per share. As of
December 31, 1996, there were outstanding 2,100,000 HCAC Common Shares, held of
record by 11 shareholders, 3,450,000 HCAC $5.00 Warrants and 400,000 Bridge
Warrants held of record by 12 and 6 warrantholders, respectively. No HCAC
Preferred Shares are currently outstanding.
    
 
UNITS
 
   
     In its IPO, HCAC issued 1,725,000 Units. Each Unit consisted of one HCAC
Common Share and two HCAC $5.00 Warrants, each HCAC $5.00 Warrant entitling the
holder to purchase one HCAC Common Share. The securities constituting the Units
became separable and transferable on March 13, 1996, and such securities
currently trade separately.
    
 
HCAC COMMON SHARES
 
     The holders of HCAC Common Shares are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voted for the election of
directors can elect all of the directors then being elected. The holders of HCAC
Common Shares are entitled to receive dividends when, as and if declared by the
HCAC Board out of funds legally available therefor. In the event of liquidation,
dissolution or winding up of HCAC, the holders of HCAC Common Shares (except for
the Initial Stockholders who have agreed, with regard to the HCAC Common Shares
owned by them prior to HCAC's IPO, to waive their rights to share in any
distribution relating to a liquidation of HCAC due to the failure of HCAC to
consummate a Business Combination within 18 months, or 24 months if certain
criteria are satisfied, from the consummation of HCAC's IPO) are entitled to
share ratably in all assets remaining available for distribution to them after
payment of liabilities and after provision has been made for each class of
stock, if any, having preference over the HCAC Common Shares. Holders of HCAC
Common Shares, as such, have no conversion, preemptive or other subscription
rights, and, except as described under "Business of
HCAC -- General -- Conversion Rights," there are no redemption provisions
applicable to the HCAC Common Shares. All of the outstanding HCAC Common Shares
are fully paid and nonassessable.
 
PREFERRED STOCK
 
   
     HCAC's Certificate of Incorporation authorizes the issuance of 1,000,000
shares of preferred stock ("Preferred Shares") with such designations, rights
and preferences as may be determined from time to time by the HCAC Board.
Accordingly, the HCAC Board is empowered, without stockholder approval, to issue
Preferred Shares with dividend, liquidation, conversion, voting or other rights
that could adversely affect the voting power or other rights of the holders of
the HCAC Common Shares, although the Underwriting Agreement prohibits HCAC,
prior to a Business Combination, from issuing Preferred Shares that participate
in any manner in the proceeds of the Trust Fund or that vote as a class with the
HCAC Common Shares on a Business Combination. HCAC may issue some or all of such
Preferred Shares in connection with a Business Combination. The Preferred Shares
could be utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of HCAC. Although HCAC has no
commitments as of the date of this Joint Proxy Statement/Prospectus to issue any
Preferred Shares, there can be no assurance that HCAC will not do so in the
future.
    
 
HCAC WARRANTS
 
     HCAC intends to issue, in connection with the Merger and as otherwise
described herein, the HCAC $7.00 Warrants, each entitling the registered holder
to purchase one HCAC Common Share at a price of $7.00 per share (which exercise
price may be paid in cash or in HCAC Common Shares already owned by the
 
                                       54
<PAGE>   64
 
warrant holder), subject to adjustment in certain circumstances, at any time
commencing on the Effective Date and ending at 5:00 p.m., Eastern Standard Time,
four years thereafter. The HCAC $7.00 Warrants are not subject to mandatory
redemption at the call of HCAC (unlike the HCAC $5.00 Warrants described below).
 
     HCAC has also issued the HCAC $5.00 Warrants, which entitle the registered
holder thereof to purchase one HCAC Common Share at a price of $5.00 per share,
subject to adjustment in certain circumstances, at any time commencing on the
later of the consummation by HCAC of its Business Combination or March 8, 1997
and ending at 5:00 p.m., Eastern Standard Time, on March 8, 2003, at which time
the HCAC $5.00 Warrants will expire. HCAC may call the HCAC $5.00 Warrants for
redemption, in whole and not in part, at a price of $.01 per Warrant at any time
after they become exercisable upon notice of not less than 30 days prior written
notice if the last sale price of the HCAC Common Shares has been at least $8.50
per share ("Redemption Price") for the 20 consecutive trading days ending on the
third day prior to the date on which the notice of redemption is given. The
warrantholders shall have exercise rights until the close of business on the
date fixed for redemption.
 
     The HCAC $5.00 Warrants and the HCAC $7.00 Warrants are issued in
registered form under a Warrant Agreement between HCAC and Continental Stock
Transfer and Trust Company, as Warrant Agent.
 
     The exercise price, number of HCAC Common Shares issuable on exercise of
the HCAC $5.00 Warrants and the HCAC $7.00 Warrants and, as to the HCAC $5.00
Warrants only, the Redemption Price, are subject to adjustment in certain
circumstances including in the event of a stock dividend, recapitalization,
reorganization, merger or consolidation of HCAC. The HCAC $5.00 Warrants and the
HCAC $7.00 Warrants, however, are not subject to adjustment for issuances of
HCAC Common Shares or rights to purchase HCAC Common Shares at prices less than
their exercise prices.
 
     HCAC has the right, in its sole discretion, to decrease the exercise price
of the HCAC $5.00 Warrants and the HCAC $7.00 Warrants, for a period of not less
than 30 days on not less than 30 days prior written notice to the
warrantholders. In addition, HCAC has the right, in its sole discretion, to
extend the expiration date of the HCAC $5.00 Warrants and the HCAC $7.00
Warrants on five business days prior written notice to the warrantholders.
 
   
     The HCAC $5.00 Warrants and the HCAC $7.00 Warrants may be exercised upon
surrender of the Warrant certificate on or prior to the expiration date at the
offices of the Warrant Agent, with the exercise form on the reverse side of the
Warrant certificate completed and executed as indicated, accompanied by full
payment of the exercise price for the number of HCAC $5.00 Warrants or HCAC
$7.00 Warrants being exercised. The warrantholders do not have the rights or
privileges of holders of HCAC Common Shares prior to the exercise of the HCAC
$5.00 Warrants or the HCAC $7.00 Warrants.
    
 
     No HCAC $5.00 Warrant or HCAC $7.00 Warrant will be exercisable unless at
the time of exercise HCAC has filed with the Securities and Exchange Commission
a current prospectus covering the HCAC Common Shares issuable upon exercise of
such HCAC $5.00 Warrant or HCAC $7.00 Warrant and such shares have been
registered or qualified for sale or been determined to be exempt under the
securities laws of the state of residence of the holders of such HCAC $5.00
Warrants or HCAC $7.00 Warrants. Although HCAC intends to have all shares so
qualified for sale in those states where the holders of the HCAC $5.00 Warrants
or HCAC $7.00 Warrants reside and to maintain a current prospectus relating
thereto until the expiration of the HCAC $5.00 Warrants or HCAC $7.00 Warrants,
subject to the terms of the Warrant Agreements, there can be no assurance that
it will be able to do so.
 
   
     No fractional shares will be issued upon exercise of the HCAC $5.00
Warrants or HCAC $7.00 Warrants. If a warrantholder exercises all HCAC $5.00
Warrants or HCAC $7.00 Warrants then owned of record by him, however, HCAC will
pay to such warrantholder, in lieu of the issuance of any fractional share which
is otherwise issuable to such warrantholder, an amount in cash based on the
market value of the HCAC Common Shares on the last trading day prior to the date
of exercise.
    
 
                                       55
<PAGE>   65
 
BRIDGE WARRANTS
 
     In May 1995, HCAC raised $200,000 in a bridge financing ("Bridge
Financing"). In connection therewith, six investors were issued 400,000 warrants
(the "Bridge Warrants"). The Bridge Warrants are identical to the HCAC $5.00
Warrants, except that they are not redeemable by HCAC until 90 days after the
consummation of a Business Combination. The holders of the Bridge Warrants have
agreed not to transfer them until after the consummation of a Business
Combination and not to exercise them until 90 days after such Business
Combination is consummated.
 
UNDERWRITER'S UNIT PURCHASE OPTION
 
     In connection with the IPO, HCAC sold to the underwriters of the IPO, GKN
Securities Corp. and Gaines, Berland, Inc. (the "Underwriters"), for nominal
consideration, the option to purchase up to an aggregate of 150,000 Units (the
"Underwriter's Unit Purchase Option"). The units issuable upon exercise of the
Underwriter's Unit Purchase Option are identical to the Units described above
except that the HCAC $5.00 Warrants contained therein expire on March 8, 2001.
The Underwriter's Unit Purchase Option is exercisable initially at $6.60 per
Unit (the "Exercise Price") for a period of four years commencing on March 8,
1997.
 
     The Underwriter's Unit Purchase Option contains anti-dilution provisions
providing for adjustment of the Exercise Price upon the occurrence of certain
events including the recapitalization, reclassification, stock dividend, stock
split, stock combination or similar transactions. The Underwriter's Unit
Purchase Option granted to the holders thereof certain "piggyback" and demand
rights for periods of seven and five years, respectively, from March 8, 1996,
with respect to registration under the Securities Act of the securities directly
and indirectly issuable upon exercise of the Underwriter's Unit Purchase Option.
The Underwriters' Unit Purchase Option may not be sold, assigned, transferred or
hypothecated until March 8, 1997, except to the Underwriters and members of the
selected dealers who assisted in the IPO and their officers and partners.
 
DIVIDENDS
 
     HCAC has not paid any dividends on the HCAC Common Shares, the HCAC $5.00
Warrants or the HCAC $7.00 Warrants to date and does not intend to pay any cash
dividends prior to the consummation of a Business Combination. The payment of
any dividends subsequent to the Merger will be within the discretion of HCAC's
then Board of Directors.
 
TRANSFER AGENT
 
     The transfer agent and registrar for the HCAC Common Shares is Continental
Stock Transfer and Trust Company, 2 Broadway, New York, New York 10004.
 
                        COMPARISON OF STOCKHOLDER RIGHTS
 
   
     At the Effective Time, the shareholders of Encore will become stockholders
of HCAC. Differences between the Texas Business Corporation Act (referred to in
this section as "TBCA") and the Delaware General Corporation Law (referred to in
this section as "DGCL") and between Encore's existing Articles of Incorporation
and Bylaws (respectively, the "Encore Articles" and "Encore Bylaws") and HCAC's
Certificate of Incorporation and Bylaws (respectively, the "HCAC Certificate"
and "HCAC Bylaws") will result in various changes in the rights of shareholders
of Encore.
    
 
     The following is a summary of the rights of HCAC stockholders, as compared
with those of Encore shareholders. This summary does not purport to be a
complete description of the provisions discussed and is qualified in its
entirety by the TBCA, DGCL, Encore Articles, Encore Bylaws, HCAC Certificate and
HCAC Bylaws, to which Encore shareholders are referred.
 
                                       56
<PAGE>   66
 
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
 
   
     Under the DGCL, directors generally may be removed, with or without cause,
by a vote of the holders of a majority of the shares being voted. However,
unless a corporation's certificate of incorporation provides otherwise, if a
board of directors is classified (i.e., elected for staggered terms), directors
may only be removed for cause. Because HCAC's Board will be classified after the
Merger and the HCAC Certificate will not provide that directors may be removed
without cause, stockholders of HCAC will only be able to remove directors from
its Board for cause. Under the TBCA, a Texas corporation may provide in its
articles or bylaws that directors may be removed with or without cause in
accordance with the provisions of the bylaws or articles of incorporation. The
Encore Bylaws provide that the directors may be removed, with or without cause,
by a vote of the holders of a majority of the shares entitled to be cast at an
election of directors or by a majority of the Board of Directors. If a director
is elected by holders of a class or series of shares, the TBCA provides that
only the shareholders of that class or series can vote to remove that director,
and the DGCL provides that only the stockholders of that class can vote to
remove that director. As HCAC stockholders, the former Encore shareholders will
be unable to remove directors of HCAC without cause as they generally are
permitted to do as holders of Encore Shares.
    
 
     The TBCA provides that a vacancy among the directors may be filled for the
remainder of the term by the vote of a majority of the remaining directors. A
directorship to be filled by reason of an increase in the number of directors
may be filled by the shareholders, or by the remaining directors for a term of
office continuing only until the next election of directors by the shareholders,
provided that the board of directors may not fill more than two such
directorships during the period between any two successive annual meetings of
shareholders. The Encore Bylaws provide that shareholders or a majority of the
remaining directors may fill a vacancy among the directors provided that the
directors may not fill more than two such vacancies during the period between
any two successive annual meetings. The HCAC Bylaws provide, as permitted by the
DGCL, that a vacancy on the board occurring during the course of the year,
including a vacancy created by an increase in the number of directors, shall be
filled until the next annual election of directors by a majority of the
remaining directors or by a sole remaining director, and does not provide for
stockholders to fill such vacancies prior to such next annual election. Thus, as
a result of the Merger, the former Encore shareholders, as holders of HCAC
Common Shares, will not have the right, as they presently have, to fill
vacancies arising in the HCAC Board until the next election, which right is
reserved to the HCAC Board, and, unlike Encore, there will be no limit on the
number of vacancies that may be created by the HCAC Board by increasing the
number of directors.
 
QUORUM OF STOCKHOLDERS
 
     A quorum for a meeting of Encore shareholders under the Encore Bylaws
consists of the holders of a majority of the shares issued and outstanding
entitled to vote thereat, present in person or represented by proxy. Under the
DGCL, a quorum consists of a majority of the shares entitled to vote, present in
person or represented by proxy, unless otherwise provided in the charter or
Bylaws, but in no event can the quorum be less than one-third of the outstanding
shares entitled to vote. The HCAC Bylaws provide that a quorum for a meeting of
holders of HCAC Common Shares consists of a majority of the shares entitled to
vote thereat, represented in person or by proxy. Thus, there will be no material
change in the rights of the Encore shareholders in this respect as a result of
the Merger.
 
ADJOURNMENT AND NOTICE OF STOCKHOLDER MEETINGS
 
     Both the HCAC Bylaws and the Encore Bylaws provide that if a quorum is not
present or represented at a stockholders meeting, the stockholders entitled to
vote may adjourn the meeting without notice other than an announcement at the
meeting. The DGCL provides that a meeting of stockholders may be adjourned by
one more adjournments for up to 30 days without, subject to such corporation's
bylaws, giving notice of the adjourned meeting (so long as the record date for
stockholders entitled to vote does not change) other than by announcement at the
earliest meeting adjourned. The HCAC Bylaws provide that if after the
adjournment of a meeting, the Board chooses a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be delivered to the
stockholders of record on the new record date.
 
                                       57
<PAGE>   67
 
     Under the TBCA, the Encore Bylaws, the DGCL and the HCAC Bylaws, notice of
stockholder meetings must be given between 10 and 60 days before a meeting.
Thus, while Delaware law will afford further notice to HCAC stockholders in the
case of adjournments beyond 30 days, there will be no material change in the
rights of Encore shareholders with respect to notice of stockholders meetings as
a result of the Merger.
 
CALL TO SPECIAL STOCKHOLDER MEETINGS
 
   
     Under the TBCA, special meetings of shareholders may be called by the
president, the board of directors, a person authorized by the articles of
incorporation or bylaws or by holders of not less than 10% of all the shares
entitled to vote, unless the articles of incorporation provide otherwise, but in
no event may the articles of incorporation provide for a number of shares
greater than 50% as required to call a special meeting of shareholders.
Stockholders of a Delaware corporation do not have a right to call special
meetings unless it is conferred in the corporation's certificate of
incorporation or bylaws. The DGCL provides that special meetings of stockholders
may be called by the board of directors or by a person authorized by the charter
or Bylaws. The HCAC Bylaws provide that special meetings of stockholders may be
called by the President, a majority of the board of directors, the secretary, or
at the written request of holders of not less than thirty percent (30%) of all
of the shares entitled to vote at the meeting. The Encore Bylaws provide that
special meetings of shareholders may be called by the Encore Board pursuant to a
resolution approved by a majority of the members of the Board. Thus, because the
HCAC Certificate of Incorporation and Bylaws authorize the stockholders holding
thirty percent (30%) of the voting shares to call a special meeting, and the
Encore Articles and Bylaws do not authorize the shareholders to call a special
shareholders' meeting, Encore shareholders may have the right to call
stockholders meetings under certain circumstances as a result of the Merger.
    
 
STOCKHOLDER CONSENT IN LIEU OF MEETING
 
   
     The DGCL permits and the HCAC Bylaws provide that action by stockholders
may be taken without a meeting if a consent in writing is signed by the holders
of outstanding stock having not less than the minimum number of votes that would
be necessary to authorize such action at a meeting at which all shares entitled
to vote thereon were present and voted. The TBCA permits, and the Encore
Articles and Bylaws provide, that action by shareholders may be taken without a
meeting if a consent in writing is signed by all holders of Encore Shares having
not less than the minimum number of votes that would be necessary to take such
action at a meeting at which the holders of all Encore Shares entitled to vote
on the action were present and voted. In this respect, there will be no material
change in the rights of the Encore shareholders in respect of, or as a result
of, the consummation of the Merger.
    
 
DISSENTERS' RIGHTS
 
     The DGCL generally entitles a stockholder to exercise its appraisal rights
upon a merger or consolidation of the corporation effected pursuant to the DGCL
if the holder complies with the requirements of Section 262 thereof. The DGCL,
however, does not provide (unless required by a charter provision which the HCAC
Certificate does not include) appraisal rights for stockholders of a corporation
that engages in (a) a sale of substantially all assets; (b) an amendment to its
certificate of incorporation; (c) in the event of a merger or consolidation of
the corporation if the stock of the Delaware corporation is listed on a national
securities exchange or held of record by more than 2,000 stockholders; or (d) in
the case of a merger in which a Delaware corporation is the surviving
corporation, if (i) the merger agreement does not amend the surviving
corporation's certificate of incorporation, (ii) each share of stock of the
surviving corporation outstanding immediately prior to the effective date of the
merger is to be an identical outstanding share of the surviving corporation
after the merger, and (iii) the increase in the outstanding shares as a result
of the merger does not exceed 20% of the shares of common stock of the surviving
corporation outstanding immediately prior to the effective date of the merger.
 
   
     The TBCA generally entitles a shareholder to exercise its appraisal rights
upon a merger of the corporation (except for the limited classes of mergers for
which no shareholder approval is required, and as set forth hereunder), sale,
lease, exchange or other disposition of all, or substantially all, the property
and assets of the corporation or share exchange in which the shares of the
shareholder are to be acquired if the holder
    
 
                                       58
<PAGE>   68
 
complies with the requirements of Articles 5.12 and 5.13 thereof. The TBCA,
however, does not provide appraisal rights for shareholders with respect to any
plan of merger in which there is a single surviving or new domestic or foreign
corporation or from any plan of exchange, if (a) the shares held by the
shareholder are part of a class of shares which are listed on a national
securities exchange or held by not less than 2,000 shareholders, and (b) the
shareholder is not required by the terms of the plan of merger or exchange to
accept for his shares any consideration other than (i) shares of a corporation
that, immediately after the merger or exchange, will be part of a class or
series of shares which are listed, or authorized for listing, on a national
securities exchange or held of record by not less than 2,000 holders, and (ii)
cash in lieu of fractional shares otherwise entitled to be received. By virtue
of the Merger, the shareholders of Encore, under Delaware law, will no longer be
entitled to appraisal rights in connection with a sale, lease, exchange or other
disposition of property and assets that occurs outside the ordinary course,
whereas under Texas law, a shareholder generally has the right to dissent and
seek appraisal with respect to such types of transactions. See "The Merger --
Dissenters' Rights."
 
   
DERIVATIVE ACTIONS
    
 
     Derivative actions may be brought in Delaware by a stockholder on behalf
of, and for the benefit of, the corporation. The DGCL provides that a
stockholder must aver in the complaint that he was a stockholder of the
corporation at the time of the transaction of which he complains. However, no
action may be brought by a stockholder unless he first seeks remedial action on
his claim from his corporation's board of directors unless such a demand for
redress is excused. The board of directors of a Delaware corporation can appoint
an independent litigation committee to review a stockholder's request for a
derivative action and the litigation committee, acting reasonably and in good
faith, can terminate the stockholder's action subject to a court's review of
such committee's independence, good faith and reasonable investigation. Under
the DGCL, the court in a derivative action may apply a variety of legal and
equitable remedies on behalf of the corporation which vary depending on the
facts and circumstances of the case and the nature of the claim brought.
 
     Derivation actions may be brought under the TBCA by a shareholder in the
right of the corporation. The TBCA provides that a shareholder must plead in the
complaint that (a) he was a record or beneficial owner of shares, or of an
interest in a voting trust for shares, at the time of the transaction of which
he complains, and (b) with particularity, the efforts made by such shareholder
to have suit brought for the corporation by the board of directors, or the
reasons for not making such efforts. The shareholder may be required to give
security for the expenses incurred or expected to be incurred by one or more
defendants if ordered by the court and taking into account the Texas Rules of
Civil Procedure regarding inability to give security. If the shareholder fails
to give such security so ordered within a reasonable time, the court must
dismiss the suit without prejudice. Further, the court may, upon final judgment
for one or more defendants and a finding that the suit against such defendants
was brought without reasonable cause, require the shareholder to pay expenses to
such defendants, whether or not security had been required.
 
DIVIDENDS AND DISTRIBUTIONS
 
     Subject to any restrictions contained in a corporation's charter, the TBCA
generally provides that a corporation may make distributions. Distributions may
not be made if after giving effect to the distribution the corporation would be
insolvent or the distribution exceeds the surplus of the corporation (which is
defined as the excess of the net assets of a corporation over its stated
capital). Subject to the Encore Articles and the TBCA, the Encore Bylaws provide
that the board of directors may declare dividends to be paid in cash, property
or Encore shares, out of funds legally available therefor.
 
     Subject to any restrictions contained in a corporation's charter, the DGCL
generally provides that a corporation may declare and pay dividends out of
surplus (defined as the excess, if any, of net assets over stated capital) or,
when no surplus exists, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. Dividends may not be paid
out of net profits if the stated capital of the corporation is less than the
amount of stated capital represented by the issued and outstanding stock of all
classes having a preference upon the distribution of assets. Thus, because
Delaware law, unlike Texas law, permits dividends out of net profits in certain
specified circumstances, even though no surplus exists, the rights
 
                                       59
<PAGE>   69
 
of a Board of Directors to declare and pay dividends is somewhat more expansive
for Delaware corporations such as HCAC, as contrasted with Texas corporations
such as Encore.
 
DIRECTOR QUALIFICATION AND NUMBER
 
   
     The articles or bylaws of a Texas corporation specify the number of
directors and the articles must fix the number constituting the initial board of
directors. The TBCA provides that directors need not be state residents or
shareholders of the corporation to qualify to serve unless the articles or
bylaws so require. Further, the articles or bylaws may prescribe other
qualifications for directors. The Encore Articles and Bylaws do not impose more
restrictive qualifications for directors. The Encore Bylaws provide for seven
directors and such number may be changed by amendment to the bylaws. The number
of directors of a Delaware corporation shall be fixed by, or in the manner
provided in, the Bylaws, unless the charter fixes the number of directors. Under
the DGCL, a director need not be a stockholder to be qualified unless so
required by the charter or Bylaws. The HCAC Bylaws provide that the number of
directors shall be one or more, as may be determined from time to time by the
directors or the shareholders. The HCAC Board, by resolution, will increase the
size of the board to ten directors upon consummation of the Merger. Thus, there
is no meaningful difference between HCAC and Encore regarding director
qualifications and as to number of directors, except Encore presently has seven
directors and HCAC will have ten directors following the Merger, which is not
expected to materially affect the conduct of Board deliberations.
    
 
INDEMNIFICATION OF OFFICERS AND DIRECTORS
 
     Under the TBCA and pursuant to the Encore Articles, Encore may indemnify
its directors, officers, employees and agents (each, an "Indemnitee") against
all expenses, including attorneys' fees, amounts paid in settlement, judgments
and fines actually and reasonably incurred by him in connection with the defense
or settlement of the suit to which he is made a party by reason of being or
having been an Indemnitee of Encore if (a) he is successful on the merits; (b)
he acted in good faith and, in the case of conduct in his official capacity as a
director, his conduct was in the best interests of the corporation, and in all
other cases, his conduct was at least not opposed to the corporation's best
interests; and (c) in the case of a criminal action or proceeding, he had no
reasonable cause to believe his conduct was unlawful. In respect of an action by
or on behalf of Encore or such body corporate, Encore shall indemnify an
Indemnitee meeting the preceding standard against all expenses, including
attorneys' fees, incurred by him in connection with the defense or settlement of
the suit to which he is made a party by reason of being or having been an
Indemnitee of Encore, but if the person is found liable to the corporation or is
found liable on the basis that personal benefit was improperly received by the
person, the indemnification (i) is limited to reasonable expenses actually
incurred, and (ii) shall not be made if the person is found liable for willful
or intentional misconduct.
 
     The DGCL permits a corporation to indemnify its directors, officers,
employees and agents (each, an "Indemnitee") against all reasonable expenses
(including attorneys' fees), and, except in actions initiated by or in the right
of the corporation, against all judgments, fines and amounts paid in settlement
in actions brought against them, provided that such individual is determined to
have acted in good faith and in a manner which he reasonably believed to be in,
or not opposed to, the best interests of the corporation and, in the case of a
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful; provided, further, that in actions initiated by or in the right of the
corporation, no indemnification shall be made if such individual shall have been
adjudicated to be liable to the corporation unless and only to the extent that
the court in which such action or suit was brought shall determine that, despite
the adjudication of liability but in view of all the circumstances of the case,
such individual is fairly and reasonably entitled to indemnification for such
expenses which such court shall deem proper. The DGCL contemplates that the
determination of whether the Indemnitee is entitled to indemnification is to be
made in the specific case by a majority of a quorum of the disinterested
directors, by independent legal counsel or by the stockholders, unless otherwise
determined by a court of competent jurisdiction.
 
     Under the DGCL and the TBCA, there is in effect a right of mandatory
indemnification to the extent that an Indemnitee is successful on the merits or
otherwise in the defense of the proceeding. Both the DGCL and the TBCA allow for
the advance payment of an Indemnitee's expenses prior to the final disposition
of an
 
                                       60
<PAGE>   70
 
action, provided that the Indemnitee undertakes to repay any such amounts
advanced if it is later determined that the Indemnitee is not entitled to
indemnification with regard to the action for which the expenses were advanced.
The HCAC Certificate and Bylaws provide that directors, officers, employees and
agents of HCAC are entitled to be indemnified to the maximum extent permitted by
the DGCL.
 
     The DGCL permits a corporation to maintain insurance on behalf of an
Indemnitee against any expenses incurred in any proceeding and any liability
asserted against such Indemnitee by reason of his having been a director or
officer, whether or not the corporation would have the power to indemnify him
against such expenses or liabilities under the applicable provisions of the
DGCL. The TBCA also provides for the maintaining of such insurance and the
Encore Articles provide that Encore may purchase and maintain such insurance for
the benefit of the Indemnitee and every person who acts or has acted at Encore's
request as a director, officer, agent or employee of another corporation or of a
partnership, joint venture, trust or other enterprise against any liability
incurred by him in such capacity whether or not Encore would have the power to
indemnify him against such liability under the Encore Bylaws.
 
     In addition, the indemnification rights provided by the above DGCL
provisions are not exclusive of any rights to indemnification or advancement of
expenses to which such Indemnitee may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise. Under the TBCA, a
corporation may not validly provide for indemnification in a manner that is
inconsistent with the statutory indemnification provisions, while Delaware law
expressly provides that statutory indemnity shall not be deemed exclusive. In
addition, the power of a Delaware corporation to indemnify and advance expenses
to officers and directors may be somewhat clearer and more liberal than under
Texas law.
 
DIRECTOR LIABILITY
 
     The charter of a Delaware corporation may include a provision which limits
or eliminates the liability of directors to the corporation or its stockholders
for monetary damages for beach of fiduciary duty as a director, provided such
liability does not arise from certain proscribed conduct, including intentional
misconduct and breach of the duty of loyalty. The HCAC Certificate contains such
a provision limiting the liability of its directors. Article 1302-7.06 of the
Texas Miscellaneous Corporation Laws Act expressly provides for limitation of a
director's liability, except to the extent that the director is found liable for
a breach of the director's duty of loyalty; an act or omission not in good faith
that constitutes a breach of the director's duty to the corporation or an act or
omission that involves intentional misconduct or a knowing violation of the law;
a transaction from which the director received an improver benefit; or an act or
omission for which liability is provided by an applicable statute. The Encore
Articles contain a provision so limiting the liability of its directors. Because
of the variation in the statutory framework between Delaware and Texas law, it
is possible that monetary liability of a director may be eliminated in some
cases under one law but not the other.
 
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS
 
     The TBCA requires the affirmative vote of the holders of at least
two-thirds of the outstanding shares entitled to vote thereon for any amendment
to the articles of incorporation, unless such level is decreased by such
articles of incorporation. The Encore Articles do not provide for such decreased
level of approval. The Encore Bylaws provide that the express provisions of the
TBCA shall govern the shareholder voting requirements for such amendments. The
TBCA provides that the shareholders or board of directors may amend the bylaws,
unless the charter reserves the power exclusively to the shareholders. The TBCA
also permits the shareholders to confer exclusive power on the directors to
adopt, alter, amend or repeal bylaws. The Encore Articles grant to the Board the
exclusive power to adopt, alter, amend or repeal the bylaws. The Encore Bylaws
provide that the board may amend the bylaws at a meeting at which a quorum is
present, by the affirmative vote of the directors present at the meeting.
 
   
     The DGCL requires the approval of the holders of a majority of the
outstanding stock entitled to vote for any amendment to the certificate of
incorporation, unless such level of approval is increased by the certificate of
incorporation. The HCAC Certificate does not provide for an increased level of
approval. The DGCL provides stockholders with the right to amend the Bylaws, and
a corporation is permitted in its charter to give
    
 
                                       61
<PAGE>   71
 
this right to the directors as well, subject to any director action being
amended or repealed by stockholders. The HCAC Certificate of Incorporation gives
the directors this right, and the HCAC Bylaws impose a majority vote requirement
for amendment by the board of directors.
 
   
     By means of the Merger, it will be easier to obtain stockholder approval of
amendments to the HCAC Certificate as compared to the Encore Articles, since
only a majority vote will be required under the DGCL as contrasted with a
minimum affirmative vote of two-thirds required under the TBCA. Further because
Encore shareholders do not have the right to adopt, repeal or amend the Encore
Bylaws, but HCAC stockholders have the right to adopt, repeal and amend the HCAC
Bylaws, the rights of HCAC stockholders to adopt new Bylaws and amend and repeal
Bylaws afford HCAC stockholders rights not possessed by Encore shareholders.
    
 
VOTE REQUIRED FOR EXTRAORDINARY CORPORATE TRANSACTIONS
 
   
     Under the TBCA, a merger or exchange requires the approval of each
constituent corporation's shareholders, except if the domestic corporation meets
the following requirements and unless the charter provides otherwise: (a) the
corporation is the sole surviving corporation in the merger; (b) the charter
will remain unchanged after the merger; (c) each shareholder will hold the same
number of shares, with identical designations, preferences, limitations and
relative rights, immediately after the merger; (d) the voting power of
outstanding voting shares immediately after the merger plus the voting power of
voting shares issuable as a result of the merger will not exceed by more than
20% the voting power of voting shares outstanding before the merger; (e) the
number of outstanding participating shares immediately after the merger plus the
number of participating shares issuable as a result of the merger will not
exceed by more than 20% the total number of participating shares outstanding
before the merger; and (f) the board of directors adopts a resolution approving
the plan of merger. A dissolution and a sale, lease, exchange or other
disposition of substantially all of the corporation's assets if not made in the
usual and regular course of business also require shareholder approval. Such a
transaction is in the usual and ordinary course of business if the corporation
shall, directly or indirectly, either continue to engage in one or more
businesses or apply the consideration received in connection with the
transaction to the conduct of a business in which it engages following the
transaction. The TBCA provides that unless the board of directors requires a
greater vote, the approval of a merger or exchange requires the affirmative vote
of the holders of at least two-thirds of the outstanding shares of each
corporation entitled to vote thereon. The approval of a dissolution or the sale
of substantially all of the corporation's assets requires the affirmative vote
of at least two-thirds of the outstanding shares entitled to vote thereon. While
the TBCA permits a corporation to reduce the minimum vote required to approve a
dissolution or sale of a corporation's assets to a majority vote by including a
provision in the articles of incorporation, the Encore Articles do not contain
such a provision.
    
 
     Under the DGCL, a merger, consolidation, dissolution or sale or other
disposition of substantially all of a corporation's assets must be approved by
the affirmative vote of the holders of a majority of the outstanding stock
entitled to vote thereon, as contrasted with the affirmative vote of at least
two-thirds of the shares applicable to Encore. Additionally, the DGCL provides
that no vote of the stockholders of the surviving corporation is required,
unless the certificate of incorporation provides otherwise, to approve a merger
if (a) the agreement of merger does not amend in any respect the corporation's
certificate of incorporation; (b) each share of the corporation's stock
outstanding immediately prior to the merger is to be an identical outstanding or
treasury share of the surviving corporation after the merger; and (c) either (i)
no shares of common stock of the surviving corporation and no shares, securities
or obligations convertible into such stock are to be issuable as a result of the
merger or (ii) the increase in the outstanding shares as a result of the merger
does not exceed 20% of the shares of common stock of the surviving corporation
outstanding immediately prior to the effective date of the merger.
 
     Because of the variations in the statutory framework between Texas and
Delaware law, a smaller percentage of shares is required under Delaware law to
approve mergers, consolidations, dissolutions and sales of assets, and certain
transactions do not require stockholder approval that would require such
approval under Texas law.
 
                                       62
<PAGE>   72
 
     Neither the Encore Articles not the HCAC Certificate contains a provision
relating to the approval of mergers, consolidations, dissolutions or sales of
assets.
 
CLASS VOTING
 
     Under Texas law, class voting is required in connection with certain
amendments to a corporation's articles of incorporation, a merger or
consolidation if the plan of merger or consolidation contains any provision
which, if contained in a proposed amendment to a corporation's articles of
incorporation, would require class voting or certain sales of all or
substantially all of a corporation's assets. In contrast, under Delaware law,
class voting is not required in connection with such matters except in the case
of an amendment of a corporation's certificate of incorporation which adversely
affects a class of shares. Thus, by virtue of the Merger, holders of Encore
Common Shares and Encore Preferred Shares will no longer be entitled to vote as
a class with respect to the above-mentioned matters.
 
INTERESTED STOCKHOLDER TRANSACTIONS
 
     The DGCL prohibits a "business combination" between the corporation and an
"interested stockholder" within three years of the stockholder becoming an
"interested stockholder." An "interested stockholder" is one who, directly or
indirectly, controls 15% or more of the outstanding voting stock. A "business
combination" includes a merger, consolidation, sale or other disposition of
assets having an aggregate value in excess of 10% of the consolidated assets of
the corporation, and certain transactions that would increase the interested
stockholder's proportionate share ownership in the corporation. This provision
does not apply where (a) the business combination is approved by the
corporation's board of directors prior to the date the interested stockholder
acquired its shares; (b) the interested stockholder acquired at least 85% of the
outstanding voting stock of the corporation in the transaction in which the
stockholder became an interested stockholder excluding, for determining the
number of shares outstanding, shares held by persons who are directors and also
officers and by employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer; (c) the business combination is
approved by the board of directors and the affirmative vote of two-thirds of the
votes entitled to be cast by disinterested stockholders at an annual or special
meeting; (d) the corporation does not have a class of voting stock that is
listed on a national securities exchange, authorized for quotation on an
inter-dealer quotation system of a registered national securities association,
or held by more than 2,000 stockholders unless any of the foregoing results from
action taken, directly or indirectly, by an interested stockholder; or (e) the
corporation has opted out of this provision. HCAC has not opted out of this
statutory provision.
 
     The TBCA has no similar statute currently existing and the Encore Articles
do not contain business combination provisions.
 
PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS
 
     The business combination provision of the DGCL would prohibit "business
combinations" between HCAC and certain stockholders unless the established
requirements are met. Consequently, the business combination provisions may have
the effect of deterring merger proposals, tender offers and other attempts to
effect changes in control of HCAC that are not negotiated with and approved by
the board of directors. Other than the Merger, which has been approved
unanimously by the HCAC Board, HCAC is not aware of any effort or intent to gain
control of HCAC or any effort to organize a proxy contest or to accumulate
HCAC's shares.
 
   
     Additionally, the following provisions of the HCAC Certificate and the HCAC
Bylaws may be considered to have anti-takeover implications: (a) the ability of
the board to fill (but only until the next annual meeting of stockholders) the
vacancies resulting from an increase in the number of directors; (b) the ability
of the board of directors to establish the rights of, and to issue, substantial
amounts of preferred stock without the need for stockholder approval; and (c)
the proposed classification of the HCAC Board of Directors into three groups of
directors, among other things, may be used to create voting impediments with
    
 
                                       63
<PAGE>   73
 
   
respect to changes in control of HCAC or to dilute the stock ownership of
holders of HCAC Common Shares seeking to obtain control of HCAC. In addition,
the provisions of the HCAC Certificate and the proposed amendments thereto
described herein under "Description of Amendment of HCAC Certificate of
Incorporation" which provide for staggered election of directors through a
classified board of directors may make it more difficult to effect a change in
control of HCAC's Board, and therefore may have an anti-takeover effect.
    
 
   
     Neither Encore nor HCAC currently has a stockholders' rights plan.
Stockholders' rights plans, in a variety of forms, are common to many
corporations incorporated in the United States and serve to afford a
corporation's board of directors the opportunity to withstand an unsolicited
takeover attempt while providing the board sufficient time to evaluate the offer
and its adequacy and to consider alternative measures or transactions that may
be appropriate in responding to the offer. The DGCL permits stockholders' rights
plans in general and permits the adoption of stockholders' rights plans by a
board of directors without stockholder approval.
    
 
                                       64
<PAGE>   74
 
                       MARKET PRICES OF HCAC'S SECURITIES
 
     HCAC Common Shares and HCAC $5.00 Warrants are each quoted on the OTC
Bulletin Board under the symbols HCAC and HCACW, respectively. The following
table sets forth the high and low closing bid quotations on the OTC Bulletin
Board for the periods indicated since such HCAC Common Shares and HCAC $5.00
Warrants commenced public trading on March 13, 1996. HCAC has never paid cash
dividends on HCAC Common Shares or its other shares of capital stock.
 
   
<TABLE>
<CAPTION>
                                                                  HCAC
                                                                 COMMON        HCAC $5.00
                                                                 SHARES         WARRANTS
                                                              -------------   -------------
                                                              HIGH     LOW    HIGH     LOW
                                                              -----   -----   -----   -----
<S>                                                           <C>     <C>     <C>     <C>
1st Quarter -- 1996 (from March 13, 1996)...................  $4.50   $4.50   $1.06   $1.06
2nd Quarter -- 1996.........................................   4.63    4.50    1.06    0.91
3rd Quarter -- 1996.........................................   4.84    4.63    1.03    0.84
4th Quarter -- 1996.........................................   4.88    4.63    1.00    0.63
1st Quarter -- 1997 (through February 14, 1997).............   5.13    4.88    0.94    0.63
</TABLE>
    
 
     On October 16, 1996, the last full trading day prior to the public
announcement of the execution and delivery of the Letter of Intent, the high bid
prices of the HCAC Common Shares and the HCAC $5.00 Warrants, as reported on the
OTC Bulletin Board, were $4.63 and $0.73, respectively.
 
   
     On February 14, 1997, the most recent date for which it was practicable to
obtain market price information prior to the printing of this Joint Proxy
Statement/Prospectus, such closing bid prices were $5.00 and $0.78,
respectively.
    
 
     The above quotations represent prices between dealers and do not include
retail markups, markdowns or commissions. They may not necessarily represent
actual transactions. Because the market price of HCAC Common Shares is subject
to fluctuation, the market value of the HCAC Common Shares that Encore
shareholders will receive in the Merger may increase or decrease prior to the
Merger. Encore shareholders are urged to obtain current market quotations for
HCAC Common Shares. See "Risk Factors -- Risks Relating to HCAC -- Possible
Volatility of Stock Prices."
 
                                       65
<PAGE>   75
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HCAC
 
   
     HCAC was incorporated in March 1995 as a SPAC, the objective of which is to
acquire an operating business in the Healthcare Industry. See "Business of HCAC"
for information as to the characteristics of a SPAC.
    
 
   
     In May 1995, HCAC raised $200,000 in the Bridge Financing from six
investors in order to pay certain organizational expenses and the costs of the
Bridge Financing and of its IPO. Such investors were issued promissory notes in
the amount of $200,000, bearing interest at the rate of 10% per annum and
payable at the consummation of HCAC's IPO, and 400,000 Bridge Warrants. Other
than organizational activities and preparing for its IPO, HCAC had no business
activities in 1995.
    
 
   
     HCAC's IPO was consummated in March 1996, and raised net proceeds of
approximately $9,000,000, after payment of offering expenses. HCAC deposited
$8,383,500 of such proceeds in the Trust Fund. As of December 31, 1996,
approximately $8,732,000 was held in the Trust Fund.
    
 
     Substantially all of HCAC's working capital needs subsequent to the IPO
have been attributable to general and administrative expenses, including
director and officer liability insurance and legal and accounting fees primarily
due to SEC filing requirements, the identification, evaluation and selection of
a suitable Target Business and the structuring, negotiation and consummation of
the Merger. HCAC will satisfy all of such working capital needs and the payment
of federal and state income taxes with its existing cash balances and, to the
extent necessary, its working capital after consummation of the Merger. See "The
Merger" for information as to the Agreement and Plan of Merger, the parties
thereto and the transactions contemplated thereby. All income is from interest.
Except for its efforts to effect a Business Combination following its IPO, HCAC
has not engaged in any business activities.
 
     If HCAC does not consummate a Business Combination within 18 months from
the consummation of the IPO (September 8, 1997), or 24 months (March 8, 1998) if
certain criteria are met, HCAC will be dissolved and will distribute to all
Public Stockholders in proportion to their respective equity interests in HCAC,
an aggregate sum equal to the amount in the Trust Fund, inclusive of any
interest thereon, plus any remaining net assets of HCAC. A Public Stockholder
also is entitled to receive funds from the Trust Fund if such stockholder
exercises his Conversion Rights in connection with the Business Combination
against which the stockholder votes but which is consummated by HCAC. See "The
Merger -- Conversion Rights."
 
                                       66
<PAGE>   76
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ENCORE
 
GENERAL
 
     Encore develops, manufactures, markets and sells orthopedic implant devices
and related surgical instrumentation to hospitals and stocking distributors. In
the past four years, Encore has introduced its total joint replacement and
trauma products to the marketplace and established both domestic and
international sales. Its strategy reflects its founders' belief that it must
design and market high quality orthopedic products to a world-wide audience.
Encore's past financial results are reflective of Encore's efforts as an early
stage company to develop the necessary infrastructure and relationships to make
Encore a competitive participant in the orthopedics industry.
 
   
     Encore has expanded its full line of total joint implants to cover knee,
hip and shoulder applications. In addition, in May 1996, Encore acquired all of
the assets and liabilities of AOS, an orthopedic company that markets products
in the trauma implant area, in a transaction accounted for as a pooling of
interests. All financial information included herein reflects this transaction.
Encore has developed a network of independent sales representatives that sell
Encore's products throughout the United States. Encore has also established
relationships with several international stocking distributors. Encore must
receive 510(k) or PMA approval from the FDA for every product that it desires to
sell in the United States and similar regulatory approvals in other countries in
which it sells it products. Encore has received such approvals for most, but not
all, of its products. See "Business of Encore -- Products."
    
 
   
RESULTS OF OPERATIONS
    
 
   
  Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
    
 
   
     Sales for the year ended December 31, 1996 increased to $17,621,000 from
$13,791,000 for the year ended December 31, 1995. This reflects an increase of
27.8%. Net sales of reconstructive products increased to $15,909,000 from
$12,024,000, while sales of trauma products decreased slightly to $1,712,000
from $1,767,000. The increase in reconstructive product sales resulted from
continued expansion of the sales force in more productive sales territories. The
decline in sales of trauma products resulted from the transition in sales forces
as a result of the AOS acquisition in May 1996.
    
 
   
     The gross margin for the year ended December 31, 1996 increased to
$11,563,000 from $8,051,000 for the year ended December 31, 1995. The gross
margin as a percentage of sales increased to 65.6% from 58.4%. This increase was
primarily due to increased volume, changes in the sales mix and continuing
refinement of manufacturing processes. The change in the sales mix resulted from
greater domestic sales, which carry a higher margin than international sales,
and increased sales of higher margin products to international distributors,
i.e., implants which have a higher margin than instrument sales to international
distributors. Some of the margin improvement is offset by increased selling
expenses described below.
    
 
   
     Selling, general and administrative expenses increased to $8,175,000 for
the year ended December 31, 1996 compared to $5,457,000 for the year ended
December 31, 1995. Selling, general and administrative costs as a percentage of
sales increased to 46.4% from 39.6%. This increase reflects higher commission
expenses as a result of increased domestic sales (which carry higher commission
rates than international sales), additional infrastructure to support new
product lines, an expanded sales distribution network in anticipation of
additional sales to be generated in the future, costs related to Encore's
acquisition of AOS ($37,000), and costs to shut down AOS's California operations
($155,000). Additionally, there were approximately $88,000 of expenses related
to acquisitions that were not consummated successfully.
    
 
   
     Research and development expenses increased to $1,259,000 from $836,000 for
1996 compared to 1995. Research and development expenses as a percentage of
sales increased to 7.1% from 6.1%. This reflects increased expenses, primarily
salaries to newly hired staff, in connection with developing new reconstructive
products and extensions of current product lines and development costs related
to the trauma products. In
    
 
                                       67
<PAGE>   77
 
addition, certain clinical studies have begun, and Encore is beginning FDA
Investigational Device Exemption activities related to new products and advances
in its hip system.
 
   
     Income from operations increased to $2,129,000 from $1,758,000 for 1996
compared to 1995, a 21.1% increase, due primarily to the growth in sales
exceeding the increase in operating expenses. Net income decreased to $1,033,000
from $1,408,000 for 1996 as compared to 1995. The primary reason for the
decrease in net income as compared to the increase in income from operations was
the increase in interest expense attributable to the outstanding term debt to
Sirrom, which was outstanding for the full period in 1996 as opposed to only a
partial period (August to December) in 1995. Also, the amount of the outstanding
term debt increased from $3,000,000 to $5,000,000 in February 1996.
    
 
   
     There was a significant decrease in net income applicable to common stock
in 1996 as result of a change in the valuation of common stock put warrants held
by Sirrom for financial accounting purposes. These warrants contain a put
feature that allows them to be redeemed for cash in the years 2000 and 2001 at
fair market value. As such, they are reflected in the financial statements at
their current fair market value. The change in 1996 reflects the increase in the
value of the Encore Common Shares. While this change in value does not affect
net income, it does affect net income applicable to common stock. A condition of
the merger with HCAC is that the put feature of these warrants be released so
that this charge against net income applicable to common stock will no longer be
required.
    
 
   
  Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
    
 
   
     Net sales for the year ended December 31, 1995, were $13,791,000 compared
to net sales for the year ended December 31, 1994, of $7,762,000. This reflects
an increase of 77.7%. Net sales of reconstructive products increased to
$12,024,000 from $6,240,000 while the sales of trauma products increased to
$1,767,000 from $1,522,000, for the years ended December 31, 1995, and December
31, 1994, respectively. This reflects increased penetration in the market place
of the Foundation(R) Knee system, as well as the introduction of the
Foundation(R) Posterior Stabilized Knee and the beginning of the introduction of
the Foundation(R) Hip and Shoulder Systems. Additionally, more productive sales
territories were added while weak sales territories were eliminated. During
1995, significant sales of the Foundation(R) Knee System to Encore's Japan
distributor occurred following receipt of registration in late 1994.
    
 
     In 1995, gross margin in dollars and as a percent of sales was $8,051,000
and 58.4%, respectively, versus $4,487,000 and 57.8%, respectively, during 1994.
The increase was primarily due to increased volume discussed in the prior
paragraph.
 
     Selling, general and administrative expenses increased to $5,457,000 from
$3,594,000. This increase substantially reflects greater commissions and
royalties on the increased sales. As a percent of sales, these expenses declined
to 39.6% in 1995 from 46.3% in 1994. This reflects the spreading of relatively
fixed costs over a greater sales base.
 
     Research and development expenses increased minimally from 1994 to 1995,
rising to $836,000 from $727,000. As a percent of sales, the decrease was
significant, falling to 6.1% of sales from 9.4% of sales, since the sales base
increased substantially.
 
     Income from operations increased to $1,758,000 from $166,000 for 1995 as
compared to 1994. This was approximately a 1000% increase. The primary reasons
for this were increased sales accompanied by a tight control on expenses to
preserve cash. Net income increased to $1,408,000 in 1995 from $447,000 in 1994.
The reasons this did not increase as much as income from operations for 1995 was
an increase in interest expense in 1995 and the fact that in 1994 there was a
one time gain of $181,000 from the sale of older manufacturing equipment.
 
   
CAPITAL EXPENDITURES
    
 
     Encore has spent a significant amount of its resources over the past
several years on building a state-of-the-art, fully integrated orthopedic
implant company. These expenditures have included the investment in surgical
instrumentation, machine tools to increase manufacturing capacity, computer
hardware and software,
 
                                       68
<PAGE>   78
 
   
and equipment required to support a growing organization. Over the last two
years, Encore has acquired machine tools primarily through capital leases.
Encore has made significant investments in surgical instrumentation as such
instrumentation is necessary to implant Encore reconstructive products. In the
United States, these instruments are capitalized and depreciated. They are then
leased or loaned to the sales force to aid in sales. Internationally, these
instruments are sold to the distributors at cost. The amounts of surgical
instruments capitalized in 1994, 1995 and 1996 were $189,000, $816,000 and
$1,433,000 respectively. Other capital expenditures were $313,000, $508,000 and
$527,000 respectively.
    
 
   
     Encore relocated its facilities in January 1997. This is expected to
require approximately $700,000 of expenditures for leasehold improvements and
furniture and fixtures. Encore's relocation will result in the unification of
its manufacturing and administrative functions and provide Encore the space it
needs to meet its objectives over the next several years.
    
 
LIQUIDITY
 
   
     Over the past three years, Encore's working capital requirements have
increased. The increases have been in the areas of inventory and accounts
receivable as sales and product base have expanded. During 1996, Encore
increased the amounts available to it under its credit facilities by increasing
its loan from Sirrom from $3,000,000 to $5,000,000. The interest rate on the
loan from Sirrom is 13.5% for the first $3,000,000 and 13% for the next
$2,000,000. In connection with obtaining this loan, Encore issued common stock
put warrants which were valued at $821,000 and reflected as a debt discount.
Amortization of this discount amounted to approximately $30,000 and $138,000 for
1995 and 1996, respectively, and such amounts are reflected as part of interest
expense. In addition, Encore increased its revolving line-of-credit with Norwest
Bank Texas, South Central (formerly Franklin Federal Bancorp, F.S.B. "Norwest")
from $1,500,000 to $5,000,000. As of December 31, 1996, the outstanding balance
on this loan was $2,300,000. The interest rate on the revolving line-of-credit
is the institution's base rate plus 1%. Encore received a waiver for October and
November 1996 from Norwest, with respect to maintaining a required debt coverage
ratio. The line of credit from Norwest expires July 28, 1997, but management
believes that it can be renewed for another year.
    
 
   
     Over the past 4 3/4 years, Encore has raised approximately $7,654,000 in
equity capital. This has been through the sale of a combination of Encore Common
and Preferred Shares, and such shares have been sold at prices ranging from
$1.40 to $5.00. Included in this amount is $1,275,000 raised through the sale,
during 1996, of Encore Preferred Shares at a price of $5.00 per share.
    
 
   
     For each year presented in the financial statements appearing elsewhere in
this Joint Proxy Statement/ Prospectus, there has been negative cash flows from
operations. During each year, the primary reason for the negative cash flows
from operations has been an increase in working capital, primarily inventory.
The amount of inventory increase in 1994, 1995 and 1996 was $1,146,000,
$2,560,000, and $4,187,000 respectively. This build up of inventory was required
to support the growing product line, the growing sales network, and the growth
in overall sales that Encore has sustained over the past several years and
anticipates in 1997.
    
 
     In addition, if any of the events that would cause the payments under the
Technology Transfer Agreement between Encore and Sandor Turanyi to accelerate,
Encore would be required to use its cash to satisfy such liability. See "Risk
Factors -- Relating to Encore -- Future Capital Requirements; Dilution."
 
   
     Encore intends to use the proceeds from the Merger to primarily fund
working capital, specifically inventory and the expected increase in accounts
receivable, as well as capital expenditures. The increase in inventory in 1996
is due to the introduction of several new products, and the increase in selling
territories in 1996, as well as anticipated increases in such territories in
1997, in which Encore's products are or are intended to be sold.
    
 
   
     Encore believes that through the combination of the cash generated from
sales, its credit facilities and the funds available as a result of the merger
with HCAC, the cash available to meets its needs will be sufficient over at
least the next 12 months. Thereafter or sooner, in the event that Encore
consummates an acquisition (a course of action that Encore intends to actively
pursue), it will require additional funds.
    
 
                                       69
<PAGE>   79
 
         DESCRIPTION OF AMENDMENT TO HCAC CERTIFICATE OF INCORPORATION
 
   
     The Agreement and Plan of Merger requires that, as of the Effective Time,
the HCAC Certificate of Incorporation be amended by restating Articles First and
Sixth in their entirety and increasing the number of authorized shares. The
following description of the HCAC Certificate Amendment does not purport to be
complete and is qualified in its entirety by reference to the text of such HCAC
Certificate Amendment, a copy of which is attached to this Joint Proxy
Statement/Prospectus as Appendix C and is incorporated herein by reference.
    
 
     Pursuant to the HCAC Certificate Amendment, Article First of HCAC's
Certificate of Incorporation would be amended to change HCAC's name to "Encore
Medical Corporation" and Article Sixth, which contained provisions applicable to
HCAC only prior to the consummation of a Business Combination, would be amended
to provide for staggered terms for the directors, with each director being
elected for a term of three (3) years. The HCAC Board shall, effective as of the
Effective Time, elect as directors: Lamar Laster, Richard Relyea and John
Abeles, M.D., for a term of office expiring at the annual meeting of HCAC
stockholders occurring in 1998 or until their successors shall have been duly
elected and qualified; Dennis Enright, Kenneth Davidson and Jay Haft, for a term
of office expiring at the annual meeting of HCAC stockholders occurring in 1999
or until their successors shall have been duly elected and qualified; and Nick
Cindrich, Craig L. Smith, Richard Martin and Joel Kanter for a term of office
expiring at the annual meeting of HCAC stockholders occurring in 2000 or until
their successors shall have been duly elected and qualified. Article Four would
be amended to increase the number of authorized HCAC Common Shares to
35,000,000.
 
     THE HCAC BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE HCAC
CERTIFICATE AMENDMENT. If the Agreement and Plan of Merger is not approved, the
HCAC Certificate of Incorporation will not be amended notwithstanding
stockholder approval of such proposal.
 
   
     Consummation of the Merger is conditioned not only upon HCAC stockholder
approval of the Agreement and Plan of Merger, but also upon stockholder approval
of the HCAC Certificate Amendment and approval and adoption of the Option Plan.
Therefore, in order to assure that the Merger is consummated, HCAC stockholders
favoring the Merger are advised to vote in favor of the HCAC Certificate
Amendment and the adoption of the Option Plan.
    
 
                                       70
<PAGE>   80
 
      ADOPTION OF THE ENCORE MEDICAL CORPORATION 1996 INCENTIVE STOCK PLAN
 
GENERAL
 
     The Encore Medical Corporation 1996 Incentive Stock Plan (the "Option
Plan") is proposed to be approved by the stockholders. The Option Plan was
adopted by the Board of Directors of HCAC in November 1996. The Option Plan
provides for the award of Stock Options, Stock Appreciation Rights, Restricted
Stock, Unrestricted Stock, Deferred Stock, Performance Units, Other Stock-based
Awards and certain Supplemental Grants. The maximum number of Common Shares
reserved and available for distribution pursuant to the Option Plan shall be
2,000,000 shares.
 
     The purpose of the Option Plan is to enhance the ability of HCAC to attract
and retain key employees. It is also intended to stimulate the efforts of these
employees by providing an opportunity for capital appreciation and recognition
of outstanding service to HCAC, all of which management believes will contribute
to the long-term growth and profitability of HCAC.
 
   
     The full text of the Option Plan is attached as Appendix D to this Joint
Proxy Statement/Prospectus. The following summary of certain features of the
Option Plan is qualified in its entirety by the full text of the Option Plan.
    
 
ADMINISTRATION
 
   
     Eligible Employees.  The Option Plan is administered by the Management
Compensation and Organization Committee of the Board of Directors (the
"Committee"). Members of the Committee and other non-employee directors will not
be eligible for awards. The Committee has full power to select, from among the
employees eligible for awards, the individuals to whom awards will be made, to
make any combination of awards to any participants, and to determine the
specific terms of each award, subject to the provisions of the Option Plan.
    
 
     Persons eligible to participate in the Option Plan will be those officers
and other key employees of HCAC and its subsidiaries (expected to be
approximately 100 persons) who are responsible for or contribute to the
management, growth or profitability of the business of HCAC and its
subsidiaries, as selected from time to time by the Committee.
 
STOCK OPTIONS
 
     The Option Plan permits the granting of non-transferable stock options that
qualify as incentive stock options under Section 422A(b) of the Code ("incentive
options" or "ISOs") and non-transferable stock options that do not qualify
("nonstatutory options"). The option exercise price of each option shall be
determined by the Committee in its discretion but may not be less than the fair
market value of the HCAC Common Shares on the date the option is granted in the
case of incentive options, and may not be less than 50% of such fair market
value in the case of nonstatutory options, except that the Committee may
establish an exercise price equal to par value for nonstatutory options.
 
     The term of each option will be fixed by the Committee but may not exceed
ten years from the date of grant.
 
     The Committee will determine at what time or times each option may be
exercised. Options may be made exercisable in installments, and the
exercisability of options may be accelerated by the Committee. The exercise
price of options granted under the Option Plan must be paid in cash or by
delivery of unrestricted HCAC Common Shares or a combination of cash and shares.
 
     In the event of termination of employment for normal retirement, disability
or death, an option may thereafter be exercised to the extent it was then
exercisable for a period of one year (except in the case of retirement and
exercise of an ISO, in which case for a period of three months) unless the
Committee specifies another period, subject to the stated term of the option. In
case of death after normal retirement or disability while the option is still
exercisable, the option will in general be exercisable for one year following
death, or
 
                                       71
<PAGE>   81
 
   
other period specified by the Committee, subject to the stated term of the
option. If an optionee terminates employment for any reason other than normal
retirement, disability, or death, generally his or her options will terminate 30
days after termination, subject to the stated term of the option, unless
provided otherwise by the Committee.
    
 
     To qualify as incentive options, options must currently meet additional
federal tax requirements, including limits on the value of shares subject to
incentive options first exercisable annually to any participant, a shorter
exercise period and a higher minimum exercise price in the case of certain large
shareholders. To the extent these special requirements are changed or
eliminated, the Option Plan will be amended accordingly.
 
STOCK APPRECIATION RIGHTS
 
     The Committee may also grant non-transferable rights, alone or in
conjunction with options, entitling the holder to receive upon exercise an
amount in any combination of cash or unrestricted HCAC Common Shares, Restricted
Stock, or Deferred Stock awards equal to (or if determined by the Committee at
the time of grant, less than) the increase since the date of grant in the value
of the shares covered by such right ("stock appreciation right"). Each tandem
stock appreciation right terminates upon the termination or exercise of any
accompanying option.
 
     The fair market value of a share will generally be the average of the
closing prices on the Nasdaq Stock Market on the last three trading days prior
to and including the date of exercise. The Option Plan gives the Committee
discretion to establish a uniform "fair market value" that would apply to any
rights that are exercised or requests that are made and honored with respect to
certain officers of HCAC during certain designated periods, irrespective of the
market price of the HCAC Common Shares on the particular day during such period
on which such rights are exercised. However, the Committee may not establish for
this purpose a value for any period that exceeds the highest closing sale price
of the Common Shares reported on the Nasdaq Stock Market during such period.
 
RESTRICTED STOCK AND UNRESTRICTED STOCK
 
   
     The Committee may also award HCAC Common Shares subject to such conditions
and restrictions as the committee may determine ("Restricted Stock"). The
purchase price, if any, of shares of Restricted Stock shall be determined by the
Committee.
    
 
     Recipients of Restricted Stock must enter into a Restricted Stock award
agreement with HCAC, in such form as the Committee determines, setting forth the
restrictions to which the shares are subject and the date or dates on which the
restrictions will lapse. The Committee may at any time waive such restrictions
or accelerate such dates. Shares of Restricted Stock are non-transferable. If a
participant who holds shares of Restricted Stock terminates employment for any
reason (including death) prior to the lapse or waiver of the restrictions, then,
unless otherwise provided in the award agreement or otherwise determined by the
Committee, the shares shall be forfeited and HCAC shall pay the participant any
cash consideration paid by the participant. Prior to the lapse of restrictions
on shares of Restricted Stock, the participant will have all rights of a
shareholder with respect to the shares, including voting and dividend rights,
subject only to the conditions and restrictions generally applicable to
Restricted Stock or specifically set forth in the Restricted Stock award
agreement.
 
   
     The Committee may also grant HCAC Common Shares which are free from any
restrictions under the Option Plan ("Unrestricted Stock"). Unrestricted Stock
could be issued (at no cost or for par value) in recognition of past services or
in other circumstances where the Committee determines the grant to be in the
best interests of HCAC.
    
 
DEFERRED STOCK
 
   
     The Committee may also make Deferred Stock awards under the Option Plan.
These are non-transferable awards entitling the recipient to receive HCAC Common
Shares without any payment in one or more installments at a future date or
dates, as determined by the Committee. Receipt of Deferred Stock may
    
 
                                       72
<PAGE>   82
 
be conditioned on such matters as the Committee shall determine, including
continued employment or attainment of performance goals. Any deferral
restrictions under a Deferred Stock award may be waived by the Committee at any
time prior to termination of employment.
 
PERFORMANCE UNITS
 
   
     The Committee may also award non-transferable Performance Units entitling
the recipient to receive HCAC Common Shares or cash in such combinations as the
Committee may determine. Payment of the award may be conditioned on achievement
of individual or HCAC performance goals over a fixed or determinable period and
such other conditions as the Committee shall determine. Except as otherwise
determined by the Committee, rights under a Performance Unit award will
automatically terminate 30 days after the participant's termination of
employment for any reason excluding death, in which case, such right shall
automatically terminate one year after such termination. Any conditions in an
award may be waived or modified by the Committee at any time prior to
termination of employment.
    
 
     Performance Units may be awarded independently or in connection with stock
options or other awards under the Option Plan. Unless otherwise determined by
the Committee, exercise of Performance Units issued in connection with stock
options shall reduce the number of shares subject to the option on such basis as
is specified in the award agreement.
 
OTHER STOCK-BASED AWARDS
 
     The Committee may in its discretion grant other types of awards of, or
based on, HCAC Common Shares ("Other Stock-based Awards"). Such awards may
include debt securities convertible into or exchangeable for HCAC Common Shares
upon such conditions, including attainment of performance goals, as the
Committee shall determine. The Committee may determine the amount and form of
consideration, if any, payable upon the issuance or exercise of an Other
Stock-based Award. The Committee may prescribe limitations or conditions
requiring forfeiture by the participant, or permitting repurchase by HCAC, of
Other Stock-based Awards or related securities, and may at any time, if it
determines such action to be in the best interests of HCAC, accelerate or waive
any such limitations or conditions.
 
     Other Stock-based Awards may not be transferred other than by will or by
the laws of descent and distribution, but only to the extent provided in the
award agreement, or be exercised, during the life of the participant, other than
by the participant or the participant's guardian or legal representative. The
recipient of an Other Stock-based Award will have the rights of a shareholder
only to the extent, if any, specified by the Committee in the Other Stock-based
Award agreement.
 
SUPPLEMENTAL GRANTS
 
     In connection with awards granted or exercised under the Option Plan, the
Committee may authorize loans from HCAC to the participant. Loans, including
extensions, may be for up to 10 years and may be either secured or unsecured.
Each loan shall be subject to such terms and conditions and shall bear such rate
of interest, if any, as the Committee shall determine. However, any such loan
shall not be used to pay the par value of any shares issued to the borrower, and
the amount of any such loan shall not exceed the total exercise or purchase
price paid by the borrower under an award or for related stock plus an amount
equal to the cash payment which could have been paid to the borrower in respect
of taxes as described in the next paragraph. Loans may be made at any time,
subject to such limitations as the Committee shall prescribe.
 
     The Committee may at any time also grant to a participant the right to
receive a cash payment in connection with taxable events (including the lapse of
restrictions) under grants or awards. The amount of any such payment may not
exceed the amount estimated to be necessary to cover the federal, state and
local income taxes due with respect to the award and cash payment.
 
                                       73
<PAGE>   83
 
DIVIDENDS AND DEFERRALS; NATURE OF HCAC'S OBLIGATIONS UNDER THE OPTION PLAN
 
     The Committee may require or permit the immediate payment or deferral of
dividends and amounts equal to dividends on awards under the Option Plan. The
Committee may also provide for the accrual of interest on amounts deferred under
the Option Plan on such terms as the Committee may determine.
 
     Unless the Committee expressly determines otherwise, participants in the
Option Plan will have no rights greater than those of a general creditor of
HCAC. The Committee may authorize the creation of trusts and other arrangements
to facilitate or ensure HCAC's obligations under the Option Plan, provided that
such trusts and arrangements are consistent with the foregoing provisions.
 
ADJUSTMENTS
 
     The Committee is required to make appropriate adjustments in connection
with outstanding awards to reflect stock dividends, stock splits and similar
events. In the event of a merger in which HCAC is the surviving corporation,
recapitalization or similar reorganization, HCAC shall make appropriate
adjustments to outstanding stock options and stock appreciation rights and, in
the Committee's discretion, may make other equitable or appropriate adjustments
to other outstanding awards. In the event of a liquidation, dissolution or
merger in which HCAC is not the survivor, the Committee in its discretion may
provide for substitution or adjustments or may accelerate or, upon payment of
other consideration for the vested portion of any award as the Committee deems
equitable in the circumstances, terminate such awards.
 
AMENDMENT AND TERMINATION
 
   
     The HCAC Board may at any time amend or discontinue the Option Plan and the
Committee may at any time amend or cancel awards or provide substitute awards to
satisfy changes in the law or for any other lawful purpose. However, no such
action shall adversely affect any rights under outstanding awards without the
holder's consent. Stockholder approval is required for any amendment that would
materially increase benefits accruing under the Option Plan, increase the number
of HCAC Common Shares reserved under the Option Plan, or materially modify
eligibility requirements under the Option Plan.
    
 
FEDERAL INCOME TAX CONSEQUENCES
 
     Under the federal income tax laws now in effect:
 
          Incentive Options.  For regular income tax purposes, no taxable income
     is realized by the optionee upon the grant or exercise of an ISO, if no
     disposition of shares issued upon exercise of the ISO is made by the
     optionee within two years from the date of grant or within one year after
     the transfer of such shares to the optionee. In such case, (a) upon sale of
     such shares, any amount realized in excess of the option price will be
     taxed to the optionee as a long-term capital gain and any loss sustained
     will be a long-term capital loss, and (b) no deductions will be allowed to
     HCAC for federal income tax purposes. However, the exercise of an ISO will
     give rise to an item of tax preference that may result in alternative
     minimum tax liability for the optionee.
 
   
          If shares acquired upon the exercise of an ISO are disposed of prior
     to the expiration of the holding periods described above (a "disqualifying
     disposition"), generally (a) the optionee will realize ordinary income in
     the year of disposition in an amount equal to the excess (if any) of the
     fair market value of the shares at exercise (or, if less, the amount
     realized on a sale of such shares) over the option price thereof, and (b)
     HCAC will be entitled to deduct such amount. Any further gain realized will
     be taxed as short-term or long-term capital gain and will not result in any
     deduction by HCAC. Special rules apply when all or a portion of the
     exercise price of the ISO is paid by tendering HCAC Common Shares, and
     special rules may also apply where the optionee is subject to Section 16(b)
     of the Exchange Act. A disqualifying disposition will eliminate the item of
     tax preference associated with the exercise of the ISO if it occurs in the
     same taxable year as the exercise of the ISO.
    
 
          Nonstatutory Options.  No income is realized by the optionee at the
     time a nonstatutory option is granted. Generally, (a) at exercise, ordinary
     income is realized by the optionee in an amount equal to the
 
                                       74
<PAGE>   84
 
     difference between the option price and the fair market value of the shares
     on the date of exercise and HCAC receives a tax deduction for the same
     amount, and (b) at disposition, appreciation or depreciation after the date
     of the exercise is treated as either short-term or long-term capital gain
     or loss depending on how long the shares have been held. Special rules
     could apply in some situations if the optionee is subject to Section 16(b)
     of the Exchange Act.
 
          Stock Appreciation Rights.  No income will be realized by a
     participant in connection with the grant of a stock appreciation right.
     When the stock appreciation right is exercised, or when a participant
     receives payment in cancellation of a right, the participant will generally
     be required to include as taxable ordinary income in the year of such
     exercise or payment an amount equal to the amount of cash received and the
     fair market value of any stock received. HCAC will generally be entitled at
     the same time to a deduction for federal income tax purposes equal to the
     amount includable as ordinary income by such participant.
 
          Restricted Stock, Unrestricted Stock.  The recipient of Restricted
     Stock generally will realize ordinary income equal to the fair market value
     of the stock at the time the stock is no longer subject to forfeiture,
     minus any amount paid for such stock and HCAC will receive a corresponding
     deduction. However, unless prohibited by the award agreement, a recipient
     may elect under Section 83(b) of the Code to realize ordinary income on the
     date of issuance equal to the fair market value of the shares of Restricted
     Stock at that time (measured as if the shares were unrestricted and could
     be sold immediately), minus any amount paid for such stock. If the shares
     are forfeited, the recipient will not be entitled to any deduction, refund
     or loss for tax purposes with respect to the shares. Upon sale of the
     shares after the forfeiture period has expired, the holding period to
     determine whether the recipient has long-term or short-term capital gain or
     loss begins when the restriction period expires (or upon earlier issuance
     of the shares, if the recipient elected immediate recognition of income
     under Section 83(b) of the Code). If Restricted Stock is received in
     connection with another award under the Option Plan, the income and the
     deduction, if any, associated with such award may be deferred in accordance
     with the rules described above for Restricted Stock.
 
          The recipient of Unrestricted Stock will realize ordinary income equal
     to the fair market value of the stock at the time the stock is transferred,
     minus any amount paid for such stock. Where the recipient is subject to
     Section 16(b) of the Exchange Act, special rules apply under which the
     timing and the amount of ordinary income to the recipient and the timing
     and amount of tax deduction available to HCAC may be deferred until the
     date six months after receipt of the Unrestricted Stock.
 
          Deferred Stock.  The recipient of a Deferred Stock award generally
     will realize ordinary income equal to the fair market value of the stock on
     the date that the stock is distributed to the participant. The capital gain
     or loss holding period for such stock will also commence on such date. HCAC
     generally will be entitled to a deduction equal to the amount taxable as
     ordinary income to the employee.
 
          If a right to Deferred Stock is received under another award, the
     income and the deduction, if any, associated with such award may be
     deferred in accordance with the rules described above.
 
   
          Performance Units.  The recipient of a Performance Unit award
     generally will realize ordinary income equal to any cash received and the
     fair market value of any HCAC Common Shares issued under the award, and
     HCAC will generally be entitled to a deduction equal to the amount of
     ordinary income realized by the recipient. Any cash received under a
     Performance Unit award will be included in income at the time of receipt.
     The fair market value of any HCAC Common Shares received will also
     generally be included in income (and a corresponding deduction will
     generally be available to HCAC) at the time of receipt. The capital gain or
     loss holding period for any HCAC Common Shares distributed under a
     Performance Unit award will begin when the recipient recognizes ordinary
     income in respect of that distribution.
    
 
          Other Stock-based Awards.  The federal income tax consequences of
     Other Stock-based Awards will depend on how such awards are structured.
     Generally, HCAC will be entitled to a deduction with respect to such awards
     only to the extent that the individual realizes compensation taxable as
     ordinary
 
                                       75
<PAGE>   85
 
     income in connection with such awards. It is anticipated that Other
     Stock-based Awards will usually result in compensation income to the
     participant in some amount. However, some forms of Other Stock-based Awards
     may not result in any compensation income to the participant or any income
     tax deduction for HCAC.
 
          Supplemental Grants.  Generally speaking, bona fide loans made under
     the Option Plan will not result in taxable income to the recipient or in a
     deduction to HCAC. However, any such loan made at a rate of interest lower
     than certain rates specified under the Internal Revenue Code may result in
     an amount (measured, in general, by reference to the difference between the
     actual rate and the specified rate) being included in the borrower's income
     and deductible by HCAC. Forgiveness of all or a portion of a loan will also
     result in ordinary income to the borrower and a deduction for HCAC. If
     outright cash grants are given in order to facilitate the payment of
     award-related taxes, the grants will be includable as ordinary income by
     the recipient at the time of receipt and will in general be deductible by
     HCAC.
 
          Dividends.  Dividends paid on HCAC Common Shares (including Restricted
     Stock), to the extent includable in a participant's income under the Option
     Plan, will be taxed as ordinary income. Generally, HCAC will not be
     entitled to any deduction for dividends. However, if dividends are paid
     with respect to shares that are not transferable and are subject to a
     substantial risk of forfeiture, and if the participant has not elected
     immediate recognition of income under Section 83(b) of the Code with
     respect to those shares, the dividends will be treated as additional
     compensation deductible by HCAC at such time as the dividends are included
     in the participant's income.
 
   
     The foregoing discussion is provided for the information of stockholders
and is not a complete description of the federal tax consequences in respect of
transactions under the Option Plan, nor does it describe state or local tax
consequences.
    
 
     No determination has been made by the Committee regarding the future grant
of specific awards under the Option Plan.
 
   
STOCKHOLDER APPROVAL
    
 
   
     The affirmative vote of a majority of the HCAC Common Shares at the HCAC
Meeting, represented either in person or by proxy, is required to approve the
Option Plan. The Board of Directors of HCAC recommends a vote "FOR" approval. If
the Option Plan is not approved by a majority of the HCAC Common Shares present
at the Meeting, the Option Plan shall become void.
    
 
                                       76
<PAGE>   86
 
                                BUSINESS OF HCAC
 
GENERAL
 
   
     HCAC was formed in March 1995 as a SPAC the objective of which is to
acquire an operating business in the Healthcare Industry. To date, HCAC's
efforts have been limited to organizational activities, completion of its IPO
and evaluation of possible Business Combinations.
    
 
     A SPAC is an entity incorporating the following selected investor
safeguards. Immediately after the consummation of a Business Combination, these
provisions (other than as described under "Escrow of Initial Stockholders'
Shares") will no longer be applicable.
 
   
     Offering Proceeds Held in Trust.  The proceeds of HCAC's IPO consummated in
March 1996 after payment of underwriting discounts and the underwriter's
nonaccountable expense allowance, totalled approximately $9,000,000, after
payment of expenses. Approximately $8,383,500 of such proceeds was placed in the
Trust Fund and invested in United States government securities. The Trust Fund
will not be released until the earlier of the consummation of a Business
Combination or the liquidation of HCAC. The Trust Fund contained approximately
$8,732,000 as of December 31, 1996. If the Merger is consummated, the Trust Fund
will be released to HCAC, less amounts paid to HCAC stockholders exercising
Conversion Rights in the Merger. See "The Merger -- Conversion of Shares;
Exchange Ratio" and "The Merger -- Conversion Rights."
    
 
     Stockholder Approval of Business Combination.  To approve and authorize the
Merger, HCAC's Certificate of Incorporation requires the affirmative vote of at
least a majority of the outstanding HCAC Common Shares and also requires that
Conversion Rights be exercised with respect to less than 20% of the Public
Shares. In addition, the Initial Stockholders have agreed to vote the Initial
Shares (approximately 17.9% of the HCAC Common Shares outstanding as of the date
of this Joint Proxy Statement/Prospectus) in accordance with the vote of the
holders in interest of a majority of the Public Shares on the proposal to
approve the Agreement and Plan of Merger. The Initial Stockholders may vote any
Public Shares they own in their discretion.
 
     Conversion Rights.  HCAC's Certificate of Incorporation provides that each
Public Stockholder has the right to have his HCAC Common Shares converted to
cash if such stockholder votes against the Business Combination and follows
specified procedures, and the Agreement and Plan of Merger is approved and the
Merger consummated. See "The Merger -- Conversion Rights."
 
   
     Escrow of Initial Stockholders' Shares.  The Initial Shares owned by the
Initial Stockholders, representing approximately 17.9% of the outstanding HCAC
Common Shares as of the date of this Joint Proxy Statement/Prospectus, have been
placed in escrow with Continental Stock Transfer and Trust Company, as escrow
agent, until March 8, 1999. During such escrow period, the Initial Stockholders
may vote their HCAC Common Shares held in escrow but will not be able to sell or
otherwise transfer such shares, except for estate planning purposes to their
spouses and children (or to trusts established for their benefit).
    
 
     Liquidation if No Business Combination.  If HCAC does not consummate a
Business Combination within 18 months of the consummation of HCAC's IPO
(September 8, 1997), or 24 months from the consummation of the IPO if certain
extension criteria have been satisfied (March 8, 1998), HCAC will be dissolved
and will distribute to all Public Stockholders, in proportion to their
respective equity interests in HCAC, an aggregate sum equal to the amount in the
Trust Fund, inclusive of any interest thereon, plus any remaining net assets of
HCAC. The Initial Stockholders have waived their respective rights to
participate in any liquidation distribution with respect to the HCAC Common
Shares owned by them prior to HCAC's IPO, and, in addition, if HCAC liquidates
prior to consummation of a Business Combination, the Initial Stockholders have
agreed to contribute an aggregate of an additional $25,000 to HCAC.
 
COMPETITION
 
     If the Merger is consummated, HCAC will become subject to competition from
competitors of Encore. See "Business of Encore -- Competition."
 
                                       77
<PAGE>   87
 
EMPLOYEES
 
   
     HCAC has no employees except three executive officers who receive no
compensation.
    
 
FACILITIES
 
     HCAC does not lease any permanent office space. However, it does pay an
administrative services fee to its legal counsel for the periodic use of office
space and secretarial and other basic office services. If the Merger is
consummated, HCAC will discontinue its use of such offices and its utilization
of such services and conduct its activities from the current offices of Encore.
See "Business of Encore -- Facilities".
 
LEGAL PROCEEDINGS
 
     There are no legal proceedings pending against HCAC.
 
                                       78
<PAGE>   88
 
                               MANAGEMENT OF HCAC
 
DIRECTORS AND EXECUTIVE OFFICERS
 
     The following individuals are the current directors and executive officers
of HCAC.
 
   
<TABLE>
<CAPTION>
                   NAME                      AGE                    POSITION
                   ----                      ---                    --------
<S>                                          <C>   <C>
Jay M. Haft................................  61    Chairman, Secretary and Director
John H. Abeles, M.D........................  52    President, Treasurer and Director
Joel S. Kanter.............................  40    Vice President and Director
Paul E. Freiman............................  62    Director
</TABLE>
    
 
     JAY M. HAFT has been Chairman of the Board and Secretary of HCAC since its
inception. Since November 1994, Mr. Haft has been interim Chief Executive
Officer of Noise Cancellation Technologies Inc. (a company engaged in the
development of noise cancellation technology and products that is traded on the
Nasdaq National Market). From January 1994 to February 1996, Mr. Haft was of
counsel to the law firm of Ruden, McClosky, Smith, Schuster & Russell, P.A. in
Fort Lauderdale, Florida. Since December 1993, Mr. Haft has been of counsel to
the law firm of Parker, Duryee, Rosoff & Haft in New York, New York. Mr. Haft
was a partner of Parker, Duryee, Rosoff & Haft from September 1989 through
December 1993 and a partner in the New York law firm of Rivkin, Radler, Dunne
and Bayh from 1988 to August 1989. Mr. Haft currently serves as a member of the
board of directors of Robotic Vision Systems, Inc., Noise Cancellation
Technologies Inc., DUSA Pharmaceuticals, Inc., PC Service Source, Inc., Extech
Inc., Viragen, Inc. and Oryx Technology Corporation. Mr. Haft earned both his
B.A. and J.D. degrees from Yale University.
 
     JOHN H. ABELES, M.D. has been President, Treasurer and a director of HCAC
since its inception. From 1971 to 1975, Dr. Abeles was an executive with several
major pharmaceutical companies in the United Kingdom and the United States,
including Sterling Drugs (UK), Pfizer Labs and USV Pharmaceuticals (a division
of Revlon Healthcare). From 1975 to 1980, he was an analyst in Kidder Peabody's
healthcare research department. Since 1980, Dr. Abeles has been President of
MedVest Inc., which has provided consulting services to, and has been active in
the founding and financing of, emerging companies, principally in the healthcare
industry. Dr. Abeles is currently a member of the board of directors of Oryx
Technology Corporation, DUSA Pharmaceuticals, Inc., AccuMed International, Inc.,
PharmaPrint Corporation and IFlow Corporation. Dr. Abeles earned a M.B., Ch.B.
from the University of Birmingham (England).
 
     PAUL E. FREIMAN has been a director of HCAC since June 8, 1995. Prior to
joining HCAC as a director, he was a member of the Board of Advisors to HCAC
since its inception. From 1963 to February 1995, Mr. Freiman was employed with
Syntex Corporation, where he served as Chairman of the Board and CEO from
January 1991 through September 1994. In September 1994, Syntex was acquired by
Roche Holdings Inc., and thereafter he was Chairman of Syntex USA, a division of
Roche, from September 1994 through February 1995. Mr. Freiman is currently a
member of the Board of Directors of Penwest Corp. Mr. Freiman has been actively
involved as a member and former Chairman of the Pharmaceutical Manufacturers
Association. In addition, Mr. Freiman was recently elected as Chairman of the
University of California San Francisco Foundation. Mr. Freiman earned a B.S.
degree from Fordham University's Pharmacy College.
 
   
     JOEL S. KANTER has been a director of HCAC since its inception. In January
1997, Mr. Kanter was elevated to the role of Vice President of HCAC. Since
February 1995, Mr. Kanter has been President and a director of Walnut Financial
Services, Inc., a financial service and consulting firm listed on the Nasdaq
SmallCap Market, and Walnut Capital Corp., a venture capital firm listed on the
Nasdaq SmallCap Market that has provided financing and consulting services to
many companies in the healthcare industry. In 1996, Mr. Kanter was also named
chief executive officer of these companies. Mr. Kanter is also currently a
consultant to Universal Partners, L.P., which specializes in the provision of
bridge financing to small and medium sized corporations. From 1988 through
February 1995, Mr. Kanter was a consultant to Walnut Capital Corp. and from 1986
through the present, Mr. Kanter has served as the President of Windy City, Inc.,
and currently serves as a director of GranCare, Inc., I-Flow Corporation,
Vitalink Corp. and Osteoimplant Technologies, Inc. Mr. Kanter earned a B.A.
degree from Tulane University.
    
 
                                       79
<PAGE>   89
 
EXECUTIVE AND DIRECTOR COMPENSATION
 
     No officer, director or stockholder of HCAC received any compensation other
than reimbursement for any out-of-pocket business expenses incurred in
connection with activities on behalf of HCAC. None of HCAC's officers, directors
or stockholders or their respective affiliates have received any consulting or
finder's fees in connection with introducing HCAC to Encore, or evaluating
Encore or any other Target Business. The HCAC Board has no compensation policies
required to be disclosed as none of its executive officers receives any
compensation.
 
                                       80
<PAGE>   90
 
                               OTHER TRANSACTIONS
 
     In April 1995, HCAC issued 425,000 HCAC Common Shares for an aggregate
purchase price of $25,000 to the Initial Stockholders and a former director of
HCAC. In June 1995 such former director resigned, and in July 1995 he
transferred his shares to certain Initial Stockholders for approximately $0.06
per share. In January 1996, the Initial Stockholders contributed an aggregate of
100,000 HCAC Common Shares to HCAC, and in March 1996, HCAC effected a 1 2/13
for 1 stock split, so that the Initial Stockholders' ownership of HCAC would
equal 375,000 HCAC Common Shares. The Initial Stockholders have agreed that, if
HCAC liquidates prior to consummating a Business Combination, they will
contribute an aggregate of an additional $25,000 to HCAC.
 
     In May 1995, HCAC consummated its Bridge Financing in order to pay certain
organizational expenses, the costs of the Bridge Financing and certain costs of
the IPO. Six "Bridge Investors" loaned an aggregate of $200,000 to HCAC and were
issued "Bridge Notes" in that amount, each note bearing interest at the rate of
10% per annum and payable at the consummation of the IPO, and 400,000 Bridge
Warrants. None of the Bridge Investors is affiliated with HCAC or any of HCAC's
Initial Stockholders. One of the six Bridge Investors is a minority stockholder
of GKN Holding Corp., the sole stockholder of GKN Securities Corp., and a
minority stockholder of Gaines, Berland Inc., the underwriters in the IPO. The
Bridge Warrants are identical to the HCAC $5.00 Warrants except they are not
redeemable by HCAC until 90 days after consummation of a Business Combination.
The Bridge Investors have agreed not to transfer the Bridge Warrants until after
the consummation of a Business Combination and not to exercise them until 90
days after such consummation. The resale of the Bridge Warrants and the issuance
of the HCAC Common Shares underlying the Bridge Warrants were registered under
the Registration Statement filed with respect to the IPO, and the Bridge Notes
issued in the Bridge Financing were paid in full from the proceeds of the IPO.
 
     HCAC has engaged GKN Securities Corp. ("GKN") on a non-exclusive basis, as
its agent for the solicitation of the exercise of the HCAC $5.00 Warrants. To
the extent not inconsistent with the guidelines of the NASD and the rules and
regulations of the Commission, HCAC has agreed to pay GKN for bona fide services
rendered a commission equal to 5% of the exercise price for each HCAC $5.00
Warrant exercised more than one year after the date of the Prospectus relating
to HCAC's IPO if the exercise was solicited by GKN. In addition to soliciting,
either orally or in writing, the exercise of the HCAC $5.00 Warrants, such
services may also include disseminating information, either orally or in
writing, to warrantholders about the HCAC or the market for HCAC's securities,
and assisting in the processing of the exercise of HCAC $5.00 Warrants. No
compensation will be paid to GKN in connection with the exercise of the HCAC
$5.00 Warrants if the market price of the underlying HCAC Common Shares is lower
than the exercise price, the holder of the HCAC $5.00 Warrants has not confirmed
in writing that GKN solicited such exercise, the HCAC $5.00 Warrants are held in
a discretionary account, the HCAC $5.00 Warrants are exercised in an unsolicited
transaction or the arrangement to pay the commission is not disclosed in the
prospectus provided to warrantholders at the time of exercise. In addition,
unless granted an exemption by the Commission from Rule 10b-6 under the Exchange
Act, while it is soliciting exercise of the HCAC $5.00 Warrants, GKN will be
prohibited from engaging in any market making activities or solicited brokerage
activities with regard to HCAC's securities unless GKN has waived its right to
receive a fee for the exercise of the HCAC $5.00 Warrants.
 
                                       81
<PAGE>   91
 
                         PRINCIPAL STOCKHOLDERS OF HCAC
 
   
     The following table sets forth certain information regarding beneficial
ownership of the HCAC Common Shares as of December 31, 1996, by (i) each
stockholder known by HCAC to be the beneficial owner of more than 5% of the
outstanding HCAC Common Shares, (ii) each director of HCAC and (iii) all
directors and executive officers of HCAC as a group. Except as otherwise
indicated, HCAC believes that the beneficial owners of the HCAC Common Shares
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.
    
 
<TABLE>
<CAPTION>
                                                               NUMBER            PERCENTAGE
                   PRINCIPAL STOCKHOLDERS                     OF SHARES      BENEFICIALLY OWNED
                   ----------------------                     ---------      ------------------
<S>                                                           <C>            <C>
Jay M. Haft and Clayre Haft.................................   131,250(1)           6.25%
  10 Edgewater Drive
  Coral Gables, Florida 33133
John H. Abeles, M.D.........................................   131,250(2)           6.25
  c/o Medvest Inc.
  2365 N.W. 41st Street
  Boca Raton, Florida 33431
Northlea Partners Ltd.......................................   131,250              6.25
  c/o Medvest Inc.
  2365 N. W. 41st Street
  Boca Raton, Florida 33431
Joel S. Kanter..............................................    37,500(3)           1.79
  c/o Windy City, Inc.
  8000 Towers Crescent Drive
  Suite 1070
  Vienna, Virginia 22182
Windy City, Inc.............................................    37,500              1.79
  8000 Towers Crescent Drive
  Suite 1070
  Vienna, Virginia 22182
Paul E. Freiman.............................................    37,500              1.79
  66 Bret Harte Terrace
  San Francisco, California 94133
Barry Rubenstein............................................   359,000(4)          17.10
  39 Woodland Road
  Roslyn, New York 11576
Marilyn Rubenstein..........................................   359,000(5)          17.10
  39 Woodland Road
  Roslyn, New York 11576
All Officers and Directors as a group.......................   337,500             16.07
  (four persons)
</TABLE>
 
- ---------------
 
(1) Represents shares owned by husband and wife as joint tenants, with right of
     survivorship.
   
(2) Represents the 131,250 HCAC Common Shares owned by Northlea Partners Ltd., a
     limited partnership of which Dr. Abeles is the general partner and the
     Abeles Family Trust is the sole limited partner. Northlea Partners Ltd.'s
     principal activity is investment for its own account. Dr. Abeles has sole
     voting and investment power with respect to such shares.
    
   
(3) Represents the 37,500 HCAC Common Shares owned by Windy City, Inc., a
     corporation of which Joel Kanter is the President and a member of the Board
     of Directors. Windy City, Inc.'s principal activity is
    
 
                                       82
<PAGE>   92
 
     investment for its own account. Mr. Kanter has sole voting and investment
     power with respect to such shares.
(4) Represents 169,000 shares individually owned by Mr. Rubenstein, 20,000
     shares owned by Mr. Rubenstein's wife, 50,000 shares owned by Woodland
     Partners, a general partnership of which Mr. Rubenstein is a general
     partner, 50,000 shares owned by Seneca Ventures, a limited partnership of
     which Mr. Rubenstein is a general partner, 50,000 shares owned by Woodland
     Venture Fund, a limited partnership of which Mr. Rubenstein is a general
     partner, and 20,000 shares owned by the Marilyn and Barry Rubenstein Family
     Foundation, a tax-exempt organization under Section 501(a) of the Code, of
     which Mr. Rubenstein is a trustee. Except for the 169,000 shares
     individually owned by Mr. Rubenstein, Mr. Rubenstein disclaims beneficial
     ownership of these securities, except to the extent of his pecuniary
     interest therein. Mr. Rubenstein has sole voting and investment power with
     respect to 169,000 of these shares and shared voting and investment power
     with respect to 190,000 of these shares.
(5) Represents 20,000 shares individually owned by Mrs. Rubenstein, 169,000
     shares owned by Mrs. Rubenstein's husband, 50,000 shares owned by Woodland
     Partners, a general partnership of which Mrs. Rubenstein is a general
     partner, 50,000 shares owned by Seneca Ventures, a limited partnership of
     which Mrs. Rubenstein is a limited partner, 50,000 shares owned by Woodland
     Venture Fund, a limited partnership of which Mr. Rubenstein, Mrs.
     Rubenstein's husband, is a general partner and 20,000 shares owned by the
     Marilyn and Barry Rubenstein Family Foundation, a tax-exempt organization
     under Section 501(a) of the Code, of which Mrs. Rubenstein is a trustee.
     Except for the 20,000 shares individually owned by Mrs. Rubenstein, Mrs.
     Rubenstein disclaims beneficial ownership of these securities, except to
     the extent of her pecuniary interest therein. Mrs. Rubenstein has sole
     voting power with respect to 20,000 of these shares and shared voting power
     with respect to 339,000 of these shares.
 
                                       83
<PAGE>   93
 
                               BUSINESS OF ENCORE
 
OVERVIEW
 
     Encore designs, markets and distributes orthopedic products and supplies.
Its products are used primarily by orthopedic medical specialists to treat
patients with musculoskeletal conditions resulting from degenerative diseases,
deformities, traumatic events and participation in sporting events. Encore's
products cover a broad variety of orthopedic needs and include hip, knee and
shoulder implants to reconstruct damaged joints and trauma products to
reconstruct bone fractures.
 
   
     In April 1992, seven former executives of Intermedics Orthopedics, Inc., an
orthopedic products company, joined T&R Manufacturing, Inc., an original
equipment manufacturer that was engaged in the supply of orthopedic implants and
related instruments. T&R Manufacturing, Inc. then changed its name to Encore
Orthopedics, Inc. and began to produce and distribute orthopedic products under
its own name. The members of Encore's management team possess over 100 years of
combined experience in the orthopedic products industry.
    
 
     Encore's first product, the Foundation(R) Knee System, was introduced in
Europe in October 1992 and in the United States in February 1993, upon Encore's
receipt of FDA 510(k) approval. Encore obtained registration for the
Foundation(R) Knee System in Japan, and sales began in Japan in late 1994. Since
that time, Encore has developed and obtained regulatory approval for additional
products and product improvements and has several products awaiting receipt of
510(k) approval from the FDA. In August 1992, Encore entered into a strategic
alliance with PLUS Switzerland, which directly and through its affiliates has
provided Encore with equity capital for the initial phases of its growth, the
ability to sell its products in European and Japanese markets and the ability to
sell a fully developed total hip replacement system in North America.
 
   
     In May 1996, Encore acquired the assets and liabilities of Applied Osteo
Systems, Inc. ("AOS"). AOS sold several products in the trauma market, primarily
intramedullary nails used for fracture repair. This acquisition expanded
Encore's product line into the market for trauma products, an area in which
Encore had not previously participated. Encore currently offers knee, shoulder,
hip and trauma products that are sold in countries throughout the world.
    
 
INDUSTRY BACKGROUND
 
     Certain of the information contained in this Joint Proxy
Statement/Prospectus, generally, and in this section concerning the definition,
size and development of the various product markets in which Encore
participates, and Encore's general expectations concerning the development of
such product markets, both domestically and internationally, are based on
estimates prepared by Encore using data from various sources (primarily
MediFacts International, MDIS Publications and Knowledge Enterprises, as well as
data from Encore's internal research), which data Encore has no reason to
believe are unreliable, and on assumptions made by Encore, based on such data,
and Encore's knowledge of the orthopedic product industry, which Encore believes
to be reasonable. While Encore is not aware of any misstatements contained in
these sections, its estimates, in particular as they relate to Encore's general
expectations concerning the product markets in which Encore participates,
involve risks and uncertainties and are subject to change based on various
factors, including those discussed in "Risk Factors."
 
     Over the last two decades, the orthopedic products market, which consists
of implants for joint replacement, spinal implants, trauma products, certain
arthroscopic, sports medicine and soft goods products, bone cement and related
products and instrumentation, has experienced significant growth in both
revenues and unit sales. In 1995, the worldwide market for orthopedic products
produced approximately $7.0 billion in revenue. In the United States, the
orthopedic products market represented approximately $3.9 billion in revenue in
1995. From 1989 to 1995, the average annual revenue growth rate was
approximately 16%. Unit growth accounted for approximately 10% of this growth;
the remainder of the growth was attributable to technology driven price
increases.
 
                                       84
<PAGE>   94
 
   
     Joint reconstruction products accounted for approximately $1.8 billion of
the overall orthopedic products market in the U.S. in 1995 and approximately
$3.5 billion worldwide. Among the joint replacement products, hip replacement
products account for approximately 48% of worldwide revenues (with approximately
$1.7 billion in worldwide sales in 1995), knee replacement products account for
approximately 48% of worldwide revenues (with approximately $1.7 billion in
worldwide sales in 1995) and shoulder replacement and other related products
(spinal, elbow, wrist, finger, toe, ankle and ligament prostheses) account for
approximately 4% of worldwide revenues (with approximately $110 million in
worldwide sales in 1995). The trauma, or fracture fixation, segment of the
orthopedic products market approached $500 million in 1995, representing
approximately 14% growth over 1994. The trauma product market is divided between
internal and external fixation products. In 1995, internal fixation products
accounted for about 75% of the revenues from the sale of all trauma products.
The other segments of the orthopedic products market (soft goods, cast room
products, power and hand instruments, arthroscopy, etc.) account for
approximately 40% of the revenue for the total orthopedic products market.
    
 
   
     The international orthopedic market remains concentrated in a few primary
areas. The United States alone accounts for approximately 50% of the worldwide
market, and five countries, the United States, Germany, France, Japan and the
United Kingdom, account for approximately 80% of the worldwide market for such
products. There are, however, other markets being developed in areas such as
China, Eastern Europe and Russia, where there is significant growth potential
for sales of orthopedic products of the type Encore markets.
    
 
     Encore's management believes that the markets in the United States,
Germany, France, Japan and the United Kingdom are mature and that growth will be
largely due to the increase in the number of persons over age 65, the increase
in the fitness orientation of the populations, which leads to increased strain
and wear on joints, improvements in implant technology and development of
successful procedures for additional body parts, the increased use of implant
products in younger patients and the increased survivorship of parties involved
in automobile accidents. In the United States, the "baby-boomer" generation is
approaching the age at which conditions such as arthritis and osteoporosis begin
to require corrections involving orthopedic products. Similar circumstances
exist in Japan, Germany and other highly developed countries. Moreover, many of
the early generation of hip and knee implants have begun to reach the end of
their useful lives, resulting in an increased demand for hip and knee revision
surgeries.
 
     Typically, hospitals and clinics are the primary customers for orthopedic
products. However, in the United States, health care reform and the emergence of
managed care systems are changing the dynamics of the health care industry. As a
result, major third-party payors, including Medicare, Medicaid and commercial
health care insurers, have either revised their existing payment methodologies
or adopted new methodologies, in an attempt to contain rising health care costs.
Such changes, which affect reimbursement levels, along with the overall
escalation in the cost of medical products and services, have placed increasing
pressure on hospitals and clinics to reduce the cost of such products and
services.
 
   
     In response to and as a result of these pressures, health care providers
are authorizing fewer elective surgical procedures, requiring the use of less
expensive products and devices, instituting review committees to review buying
decisions and pressuring product manufacturers to lower prices. Whereas in the
past, orthopedic surgeons had the primary decision-making authority with respect
to which orthopedic devices and supplies to use, the advent of hospital buying
groups, national purchasing contracts and various bidding procedures imposed by
hospitals or buying groups to increase buying power and encourage lower prices
have added to the number of people who make or influence the purchasing
decision. These trends have expanded the traditional customer base in the
orthopedic industry beyond the individual surgeons to include hospital
administrators, material management personnel, purchasing agents and review
committees. With the increased focus on the economics of orthopedic procedures,
manufacturers have been forced to adjust their marketing practices. Even though
several factors have influenced the decision-making process, the surgeon still
remains the most critical decision maker. Encore will continue to emphasize
surgeon involvement with its products, also involving the other decision makers
in its sales efforts.
    
 
                                       85
<PAGE>   95
 
     The emergence of managed care is also increasing the importance of clinical
data and patient satisfaction information. In a managed care environment,
physicians and hospitals rely heavily on the relationships and contracts they
have with local third party payors and integrated health care delivery networks
for patient referrals. Payors and health care networks often demand that
surgeons and health care facilities prove their status as suppliers of quality
health care. In order to establish such proof, surgeons and health care
facilities are increasingly seeking documented clinical outcomes, such as time
to failure/survival rates (the probability an implant is still functioning in
patients for a given period), and patient satisfaction information, and are
electing to use products for which such data is available.
 
     In the 1980s and 1990s, the market growth measured by sales in the
orthopedic products market increased more rapidly in the United States than in
the balance of the world. Encore's management believes that cost containment
programs and managed care will affect future price growth in the United States.
As a result, it expects that overall market growth in the United States will
become comparable to worldwide growth, where cost containment programs are
already in place.
 
STRATEGY
 
     Encore has established its knee, hip and shoulder total joint products as
the core of its product line. Encore's management believes that it must offer a
complete line of reconstructive total joint implant products, along with
specialty trauma and spinal products, to remain competitive in the orthopedic
products marketplace. Encore will continue to design and acquire technology to
assemble complete, high quality, competitively-priced, U.S.-designed product
lines and will continue to expand its network of independent sales agents for
the sale of its products in the United States and its distributor relationships
worldwide. Concurrent with its U.S. designed total joint market segment, Encore
will also expand its distribution of PLUS products to serve niche markets.
Encore's goal is to increase its penetration in the United States and foreign
markets by introducing total joint replacement ancillary products and specialty
products, grow its line of trauma products and enter the spinal implant
marketplace, most likely through the acquisition of existing products or
companies. The acquisition of AOS is indicative of the type of product and/or
market coverage Encore will seek in future transactions.
 
     Outside the United States, Encore's strategy is to expand its existing
distribution arrangements and enter into new distribution agreements in other
parts of the world. For both its United States and its international products,
Encore will continue to work with a team of experienced orthopedic surgeons to
help design and promote its products, develop clinical results, assist in
marketing the products and participate in educational programs focusing on the
products.
 
PRODUCTS
 
   
     Encore currently designs, manufactures and markets over 3,400 separate
orthopedic reconstructive joint products, trauma products and instruments used
by surgeons to perform orthopedic surgery. Encore plans to continue to develop
or acquire new hip, knee and shoulder systems as well as new trauma products,
including line extensions, systems that address the differing preferences of
surgeons (i.e., cruciate sparing v. posterior stabilized knees or straight v.
anatomic hip stems) and new systems for new indications (i.e., primary v.
revision). There can be no assurance that Encore will be successful in
designing, manufacturing or selling such new products or that 510(k) or other
regulatory approval will be received for such products.
    
 
  Reconstructive Knee Products
 
   
     Encore currently offers the Foundation(R) Knee System in both cruciate
sparing and posterior stabilized versions, for both primary and revision
applications, all of which are designed to duplicate as closely as possible the
anatomical function of the patient's knee, thereby improving its range of motion
and stability. Encore's knee systems are used to replace the articulating
surfaces of the knee: the knee cap (patella), top of the shin bone (tibia), and
bottom of the thigh bone (femur). The knee system consists of eight different
sizes of knee components, which are made of cobalt chrome alloy, titanium alloy
and high density polyethylene. Sales of knee products and related instruments
accounted for approximately 66% of total sales in fiscal 1996.
    
 
                                       86
<PAGE>   96
 
  Reconstructive Hip Products
 
   
     Encore is currently marketing three internally designed hip systems as the
initial components of the Foundation(R) Hip System. Encore also markets the
SL-PLUS Hip System for both primary and revision applications, a hip system
designed and manufactured by PLUS. Encore's hip implant consists of the same
basic parts as the normal hip, including a femoral stem (thighbone) with a
spherical femoral head (ball) and an acetabular cup (socket) on which the
femoral head articulates. Sales of hip products and related instruments
accounted for approximately 12% of total sales in fiscal 1996.
    
 
  Reconstructive Shoulder Products
 
   
     Encore has received FDA approval for, and is manufacturing and marketing,
its own internally designed Foundation(R) Shoulder System. Encore's shoulder
implant consists of the same basic parts as the normal shoulder, including a
humeral stem with a spherical humeral head (ball) and a glenoid component on
which the humeral head articulates. Sales of shoulder products and related
instruments accounted for approximately 3% of total sales in fiscal 1996.
    
 
  Trauma Products
 
     The acquisition of AOS in May 1996 has provided Encore with a complementary
extension of its product line into trauma products. AOS's products include a
patented system of intramedullary nails used in repairing bone fractures. AOS
sells products for use in correcting upper extremity fractures and has recently
begun to sell products in the higher volume market for products used in
correcting lower extremity conditions.
 
   
     Encore plans to access the trauma market not only through its sale and
distribution of AOS products, but also through its association with PLUS. PLUS
trauma products include an intramedullary nail used for proximal femoral
fractures, which has been approved through the 510(k) process and is generally
used to repair fractures or deformities to the long bones of the body. In
addition, Encore plans to expand the trauma product line by concentrating on
"specialty" trauma products. Sales of trauma products and related instruments
accounted for approximately 10% of total sales in fiscal 1996.
    
 
  Instrumentation
 
     Encore's complementary instrumentation serves as an important sales aid for
Encore's implant systems. These instrumentation sets contain many individual
instruments per set and are designed to enhance a surgeon's ability to perform
quality, reproducible surgeries. Encore's instrumentation sets are designed so
that they can be used in connection with various procedures involving Encore's
products for a specific body part.
 
   
  Products With FDA 510(k) Approval
    
 
     The following Encore products have received FDA 510(k) approval:
 
<TABLE>
<CAPTION>
                                                                   DATE
                          PRODUCT                                APPROVED
                          -------                             --------------
<S>                                                           <C>
FOUNDATION(R) IMPLANT SYSTEM PRODUCTS
  KNEE PRODUCTS
  Cruciate Sparing Knee System..............................  February 1993
  Bone Screws...............................................  February 1994
  Metal Backed Patella......................................  August 1994
  Modular Tibial Base plate.................................  August 1994
  Posterior Stabilized Knee System..........................  November 1994
  Augmentation Blocks (knee system).........................  February 1995
  Ultacongruent Insert......................................  October 1996
  HIP PRODUCTS
  All Polyethylene Acetabular Cup...........................  June 1994
  Metal Backed Acetabular Cup...............................  June 1994
</TABLE>
 
                                       87
<PAGE>   97
<TABLE>
<CAPTION>
                                                                   DATE
                          PRODUCT                                APPROVED
                          -------                             --------------
<S>                                                           <C>
  All Polyethylene Acetabular Cup with Cement Spacers.......  September 1994
  Non-Porous Coated Femoral Hip Stems with CoCr Heads.......  March 1995
  Textured Acetabular Cup...................................  May 1995
  Porous Coated Femoral Hip Stems with CoCr Heads...........  July 1995
  Textured Femoral Hip Stem.................................  July 1995
  Bi-Polar Acetabular Component.............................  August 1995
  Ceramic Heads.............................................  August 1996
  Vitality Femoral Hip Stem.................................  September 1996
  SHOULDER PRODUCTS
  Total Shoulder System.....................................  May 1995
  Hemi Shoulder System......................................  May 1995
 
PLUS PRODUCTS
  HIP PRODUCTS
  SL -- PLUS Primary Hip Stem...............................  February 1994
  SLR -- PLUS Revision Hip Stem.............................  February 1994
  CS -- PLUS Hip Stem.......................................  June 1994
  CCG Cerclage System.......................................  February 1995
  OTHER PRODUCTS
  DDS Spinal System.........................................  February 1995
  Intramedullary Gliding Nail...............................  August 1995
 
AOS PRODUCTS
  TRAUMA PRODUCTS
  True/Flex(R) Humerus, Ulna, and Radius Intramedullary Rods
     with Caps..............................................  July 1990
  True/Flex(R) Clavicle Intramedullary Rods.................  February 1994
  True/Flex(R) End-Caps for Intramedullary Rods.............  November 1994
  True/Flex(R) Femur Rods, Caps, Screws and
     Instrumentation........................................  January 1995
  True/Flex(R) Tibia Intramedullary Rods with Caps..........  October 1991
  True/Flex(R) Fibular Intramedullary Rods..................  November 1992
  True/Flex(R) Upper Extremity Traction Device..............  August 1990
  True/Flex(R) Upper Extremity Instrumentation..............  January 1992
  True/Flex(R) Humerus End-Cap (fracture) and
     Instrumentation........................................  April 1992
  True/Fit(TM) Femoral Rod (non-modular stainless steel)....  August 1993
  True/Fit(TM) Femoral Rod (modular titanium)...............  March 1995
  True/Lok(TM) External Fixation System (Associated
     nonimplantable devices for Ringed system)..............  February 1994
  True/Lok(TM) External Fixation System (Associated
     implantable devices)...................................  February 1994
  True/Lok(TM) External Fixation System (Monolateral,
     Bilateral components)..................................  October 1994
  True/Fix(TM) Ligament Interference Screw and
     Instrumentation........................................  October 1994
</TABLE>
 
MARKETING AND SALES
 
     Encore's products are currently marketed and sold in the United States,
Western Europe and Japan. In the United States, products are sold to hospitals
and orthopedic surgeons through a network of independent commissioned sales
agents. Outside the United States, Encore's products are sold through
distributors, primarily PLUS and its affiliates. In addition, Encore works
closely with affiliated surgeons who use the products, assist in the preparation
of marketing materials and participate in educational and professional
activities relating to the products.
 
   
     Encore strives to place its sales agents in the United States in sales
territories whose populations contain significant concentrations of individuals
over 55 years of age. As of December 31, 1996, Encore has
    
 
                                       88
<PAGE>   98
 
   
independent sales agents selling either reconstructive products, trauma
products, or both, in 38 sales territories in 29 states of the United States.
Sales agents are generally granted a contract with a term of one to three years
and are typically paid a sales commission ranging from 20% to 25% of the gross
selling price of all products sold, with the possibility of a 5% bonus on all
annual sales if the agent exceeds established sales goals. Encore's sales agents
are also eligible to receive stock options under the 1993 Distributor Stock
Option Plan, pursuant to which 550,000 Encore Common Shares have been reserved
for option grants. As of December 31, 1996, there were outstanding options
issued to such agents to purchase 266,500 Encore Common Shares (36,425 of which
are vested) at exercise prices of $2.50 to $5.00. Each of Encore's sales agents
are assigned an exclusive sales territory. The sales agents may sell
non-competing lines of orthopedic products manufactured by other companies but
may not carry competing product lines. Encore provides its agents product
inventories on consignment for their use in marketing its products and for
filling customer orders. All sales agents are required to participate in
periodic product and sales training courses given by Encore at its corporate
offices in Austin, Texas as well as other locations around the United States.
    
 
     Encore's management believes that the changing orthopedic product
marketplace will require orthopedic product companies to emphasize the
value-added services provided together with products in order to be successful.
Towards that end, Encore has instituted programs to formalize training of
support personnel in both hospital and medical office environments, has included
key customers (i.e., surgeons and hospital administrators) in defining the
desired levels and types of customer service, and is upgrading its order
processing system to allow the creation of a simple and effective interface with
both hospitals, sales agents and international distributors. In addition, Encore
is developing a comprehensive distribution support system that will provide for
instrument and inventory loaners, in order to enable sales agents to service low
volume territories, and an on-line inventory control system. Encore is also
developing a dedicated field support group to provide rapid response to
technical issues.
 
     Encore continues to evaluate the most efficient methods of product
marketing and distribution and to assess its use of sales agents and stocking
distributors. Encore is designing its sales efforts to take into account the
fact that the customer base for its products now includes, in addition to
surgeons, hospital administrators, material management personnel, purchasing
agents and review committees. The need to sell effectively to all of these
groups will continue to grow, and Encore intends to continue to address the
evolving landscape of the orthopedic marketplace.
 
INTERNATIONAL SALES AND DISTRIBUTION
 
   
     Encore's total joint implant products are currently sold to Encore's
strategic partner, PLUS, and distributed by PLUS and its sales subsidiaries in
Western Europe. A PLUS affiliate, PLUS Japan, distributes Encore's total joint
implant products in Japan. Pursuant to Encore's distribution agreement with
PLUS, Encore distributes PLUS products in North America. In addition, Encore
distributes trauma products (formerly AOS products) through distributors in
certain Western European countries and Japan, pursuant to arrangements
originally entered into by AOS. Encore's management is continuing to look for
opportunities to expand the international market for Encore's products and will
continue its efforts to identify, along with PLUS, international markets in
which its U.S.-designed products can obtain rapid acceptance with surgeons,
hospitals and other buyer groups. Encore's management will also continue to seek
markets outside of the Encore/PLUS network that have sufficient profit potential
and appropriate size and market conditions.
    
 
AFFILIATED SURGEONS
 
   
     A key aspect in Encore's development, marketing and sale of its products is
the use of designing and consulting surgeons. Each major product is supported by
three to five designing surgeons who assist Encore not only with the design of
the product but who also give demonstrations using the product, assist in
developing marketing materials and participate at symposia addressing both
clinical and economic aspects of the product. The designing surgeons working on
a product are compensated with a royalty of approximately 5%, which is typically
split among the group members. The designing surgeons also receive stock
options, which vest over a four year period. Encore has reserved 200,000 Encore
Common Shares for issuance of options to designing surgeons. As of December 31,
1996, there were outstanding options issued to designing
    
 
                                       89
<PAGE>   99
 
   
surgeons to purchase 169,000 Encore Common Shares (75,000 of which are vested)
at exercise prices of $1.00 to $5.00. Encore has encouraged interaction among
the surgeons with visits to designing surgeons' institutions (e.g., viewing
surgeries, training meetings and regional workshops) and by attempting to
regionalize the designing surgeon groups.
    
 
     Advocacy groups are being formed among U.S. and European surgeons that,
through clinical visits and information exchanges, will support conversions to
PLUS designed products in the United States and to Encore designed products in
Europe.
 
   
     Encore also has established relationships with six to twelve consulting
surgeons, who perform various consulting services for Encore. Such services
include conduct of clinical studies on various products, analysis of economic
issues relating to use of the products, establishment of protocols for use of
the products and participation at various symposia. The consulting surgeons do
not receive royalty payments but are granted stock options under the 1993
Surgeon Advisory Stock Option Plan, pursuant to which 250,000 Encore Common
Shares have been reserved for issuance. As of December 31, 1996, there were
outstanding options issued to consulting surgeons to purchase 217,500 Encore
Common Shares (41,250 of which are vested) at exercise prices of $2.50 to $5.00.
Consulting surgeons are also occasionally paid consulting fees for their
services relating to Encore's products.
    
 
RESEARCH AND DEVELOPMENT
 
   
     Encore conducts extensive research and development programs at its
manufacturing facility in Austin, Texas. Such activities are focused on making
improvements to existing products and developing new products using new
materials and surgical applications.
    
 
COMPETITION
 
     The market for orthopedic products is highly competitive and is dominated
by a number of large companies, each of which has research and development,
sales, marketing and manufacturing capabilities greater than those of Encore.
These competitors also feature a wider range of product offerings than Encore,
and many have the endorsement of leading orthopedic surgeons for their products.
 
     The major companies in the industry offering products similar to those
offered by Encore are as set forth below:
 
<TABLE>
<CAPTION>
                                                               PRODUCT LINES
                                           -----------------------------------------------------
                                           TOTAL                      SOFT    CAST
                                           JOINTS   SPINAL   TRAUMA   GOODS   ROOM   INSTRUMENTS
                                           ------   ------   ------   -----   ----   -----------
<S>                                        <C>      <C>      <C>      <C>     <C>    <C>
Zimmer...................................    X                 X        X      X          X
Howmedica................................    X        X        X
DePuy....................................    X        X        X        X      X          X
Smith & Nephew (Richards)................    X        X        X        X      X
Biomet...................................    X        X        X        X      X          X
Osteonics................................    X        X                        X          X
Wright Technology........................    X        X        X
Johnson & Johnson........................    X                 X        X      X          X
Intermedics Orthopedics..................    X
Sofamor Danek............................             X                                   X
AcroMed..................................             X
AO Syntheses.............................             X        X                          X
Ace......................................                      X
</TABLE>
 
     In the last ten years, new technologies and product concepts have been
introduced into the orthopedic market at a rapid rate, often before prior
technologies and concepts have been fully integrated. Many of Encore's
competitors have entered into various agreements and joint ventures with other
companies to develop innovative products for the industry. Furthermore, most
orthopedic product companies are attempting to
 
                                       90
<PAGE>   100
 
develop new implant surfaces to enhance bone ingrowth and are experimenting with
new materials such as hydroxylapatite and ceramics. It is the opinion of
Encore's management that this evolution in high technology products will
continue for the foreseeable future.
 
     In addition to the race for technology, orthopedic product companies must
now devote attention to the prices of their products. Price has become
increasingly important as a competitive factor, due particularly to governmental
and third party payors' adoption of prospective payment systems. Thus, although
Encore's management believes that the design and quality of its products compare
favorably with those of its competitors, should Encore be unable to offer
products with the latest technological advances at relatively modest prices, its
ability to successfully compete with its competitors could be materially and
adversely affected. Currently, Encore competes favorably on price with most of
its competitors.
 
MANUFACTURING
 
     Encore's management believes that Encore must be a low-cost manufacturer in
order to effectively compete and that its manufacturing system must be flexible
and responsive to ongoing supply demands. Encore uses both in-house
manufacturing capabilities and partnership relationships with third party
vendors to supply products. The third party vendors may have special
manufacturing capabilities (i.e., casting, forging, porous coating or
sterilization) or may be general suppliers of finished components. With the
exception of those vendors supplying special capabilities, the choice of
in-house or vendor supply is based on available in-house capacity, lead time
control, and cost control.
 
     Encore's in-house capacity includes CNC machine tools (four mills, three
lathes), belting, polishing, cleaning, packaging and quality control. Encore
recently obtained the ISO 9001 and Medical Device Directive "CE" certification
for its manufacturing facility. At present, the machining capacity is used to
produce about 50% of the implant units; the remainder are produced by third
party manufacturers. Encore's machine tools are presently being used to over 90%
capacity over two shifts. The primary raw materials used in the manufacture of
Encore's reconstructive products are cobalt chromium alloy, stainless steel
alloys, titanium alloy and ultra high molecular weight polyethylene. Encore has
alternate sources for all of its vendors and suppliers and believes that
adequate capacity exists at its suppliers to meet all anticipated needs.
 
     All implants and instruments go through in-house quality control, cleaning
and packaging operations. Quality control measures begin with an inspection of
all raw materials and castings to be used. Each piece is inspected at each step
of the manufacturing process. As a final step, products pass through a "clean
room" environment designed and maintained to reduce product exposure to
particulate matter.
 
INTELLECTUAL PROPERTY
 
     Encore holds one United States patent, covering a tibia base plate design,
used in connection with its Foundation(R) Knee System. It also has four
exclusive patent licenses, which protect Encore both in the United States and in
several foreign countries. Encore has five trademarks registered in the United
States, one of which is also registered in Germany, Switzerland and Austria.
Encore is in the process of registering that trademark with the European
Community, Japan and China. Encore also depends on four unregistered trademarks,
two of which have been submitted for registration in the United States. In the
future, Encore will apply for such additional patents and trademarks as it deems
appropriate. Finally, Encore relies on non-patented proprietary know-how, trade
secrets, process and other proprietary information, which it protects through a
variety of methods, including confidentiality agreements and proprietary
information agreements.
 
PROPERTIES
 
     As of the date of this Joint Proxy Statement/Prospectus, Encore owns no
real property but leases the following facilities:
 
   
<TABLE>
<CAPTION>
       TYPE OF FACILITY         APPROX. SQUARE FOOTAGE      LOCATION          EXPIRATION
       ----------------         ----------------------      --------          ----------
<S>                             <C>                      <C>              <C>
Manufacturing.................  18,000 square feet       Red Rock, Texas  March 31, 1997
Administrative/Manufacturing... 70,000 square feet       Austin, Texas    February 28, 2007
</TABLE>
    
 
                                       91
<PAGE>   101
 
   
EMPLOYEES
    
 
   
     As of December 31, 1996, Encore employed approximately 82 people worldwide.
Approximately 47 people are engaged in operations, 11 in marketing and sales, 12
in research and development and 12 in general administrative functions. Encore
believes that its employee relations are satisfactory.
    
 
LITIGATION
 
     Encore may become subject to various legal actions arising out of its
operations in the ordinary course of business. No Encore property is presently
the subject of any pending legal proceeding and, with the exception of being
named a defendant (on December 5, 1996) in Intermedics Orthopedics, Inc. vs.
Encore Orthopedics, Inc., Joint Concepts, Inc. and Bob Wolf, cause no. 9614729,
98th Judicial District Court of Travis County, Texas, Encore is not currently a
party to any pending legal proceeding. The plaintiff in the Intermedics action
claims that Encore tortiously interfered with the plaintiff's contractual
relationship with its former sales agent and sub-agent in eastern Pennsylvania,
southern New Jersey and Delaware by contracting with said agent and sub-agent.
The plaintiff seeks unspecified damages and injunctive relief. Encore denies the
plaintiff's allegations and plans to vigorously defend the suit.
 
GOVERNMENT REGULATION
 
     Encore's products are subject to rigorous government agency regulation in
the United States and certain other countries. In the United States, the FDA
regulates the testing, labeling, manufacturing and marketing of medical devices
to ensure that medical products distributed in the United States are safe and
effective for their intended uses. The FDA also regulates the export of medical
devices manufactured in the United States to international markets. Encore's
products are subject to such FDA regulation.
 
     Under the Food, Drug and Cosmetic Act, as amended, medical devices are
classified into one of three classes depending on the degree of risk imparted to
patients by the medical device. Class I devices are those for which safety and
effectiveness can be assured by adherence to General Controls, which include
compliance with Good Manufacturing Practices ("GMPs"), facility and device
registrations and listings, reporting of adverse medical events, and appropriate
truthful and non-misleading labeling, advertising and promotional materials.
Some Class I devices also require premarket review and clearance by the FDA
through the 510(k) Premarket Notification process described below. Class II
devices are subject to General Controls as well as premarket demonstration of
adherence to certain Performance Standards or other Special Controls as
specified by the FDA. Premarket review and clearance by the FDA is accomplished
through the 510(k) Premarket Notification procedure. In the 510(k) Premarket
Notification procedure, the manufacturer submits appropriate information to the
FDA in a Premarket Notification submission. If the FDA determines that the
device is "substantially equivalent" to a device that was legally marketed prior
to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were
enacted, or to another similar commercially available device subsequently
cleared through the 510(k) Premarket Notification process, it will grant
clearance to commercially market the device. It generally takes from three to 12
months from the date of submission to obtain clearance of a 510(k) submission,
but the process may take longer. If the FDA determines that the device, or its
"labeled" intended use, is not "substantially equivalent," the FDA will
automatically place the device into Class III.
 
     A Class III product is a product that has a wholly new intended use or is
based on advances in technology for which the device's safety and effectiveness
cannot be assured solely by the General Controls, Performance Standards and
Special Controls applied to Class I and II devices. These devices often require
formal clinical investigation studies to assess their safety and effectiveness.
A PMA from the FDA is required before the manufacturer of a Class III product
can proceed in marketing the product. The PMA process is much more extensive
than the 510(k) Premarket Notification process. In order to obtain a PMA, Class
III devices, or a particular intended use of any such device, must generally
undergo clinical trials pursuant to an application submitted by the manufacturer
for an IDE. An approved IDE exempts the manufacturer from the otherwise
applicable FDA regulations and grants approval for the conduct of human clinical
investigation in order to
 
                                       92
<PAGE>   102
 
generate the clinical data necessary to scientifically evaluate the safety and
efficacy of the Class III device or intended use.
 
     When a manufacturer believes that sufficient pre-clinical and clinical data
has been generated to prove the safety and efficacy of the new device or new
intended use, it may submit a PMA application to the FDA. An FDA review of a PMA
application generally takes one to two years from the date the PMA application
is accepted for filing, but the process may take significantly longer. In
approving a PMA application, the FDA may also require some form of post-market
surveillance whereby the manufacturer follows certain patient groups for a
number of years, making periodic reports to the FDA on the clinical status of
those patients. This helps to ensure that the long-term safety and effectiveness
of the device are adequately monitored for adverse events. Most pre-amendment
devices (those marketed prior to the enactment of the Medical Device Amendment
of 1976) are, in general, exempt from such Premarket Approval requirements, as
are Class I and Class II devices.
 
     Encore's products include both pre-amendment and post-amendment Class I, II
and III medical devices. All currently marketed devices hold the relevant
exemptions or premarket clearances or approvals, as appropriate, required under
federal medical device law.
 
     Encore's manufacturing processes are also required to comply with GMP
regulations that cover the methods and documentation of the design, testing,
production, control, quality assurance, labeling, packaging and shipping of
Encore's products. Further, Encore's facilities, records and manufacturing
processes are subject to periodic unscheduled inspections by the FDA or other
agencies. Failure to comply with applicable U.S. medical device regulatory
requirements could result in, among other things, warning letters, fines,
injunctions, civil penalties, repairs, replacements, refunds, recalls or
seizures of products, total or partial suspensions of production, refusal of the
FDA to grant future pre-market clearances or approvals, withdrawals or
suspensions of current clearances or approvals and criminal prosecution. There
are currently no adverse regulatory compliance issues or actions pending with
the FDA, and no FDA GMP audits conducted at Encore's facilities have resulted in
any adverse compliance enforcement actions.
 
     Encore is subject to regulations in many of the foreign countries in which
it sells its products, in the areas of product standards, packaging
requirements, labeling requirements, import restrictions, tariff regulations,
duties and tax requirements. Many of the regulations applicable to Encore's
devices and products in such countries are similar to those of the FDA. The
national health or social security organizations of certain countries require
Encore's products to be qualified before they can be marketed in those
countries. To date, Encore has not experienced any difficulty in complying with
these regulations. Encore has also implemented policies and procedures allowing
it to position itself for the changing international regulatory environment. The
ISO 9000 series of standards has been developed as an internationally recognized
set of guidelines that are aimed at ensuring the design and manufacture of
quality products. A company that passes an ISO audit and obtains ISO
registration becomes internationally recognized as well run and functioning
under a competent quality system. In certain foreign markets, it may be
necessary or advantageous to obtain ISO 9000 series certification, which is in
some ways analogous to compliance with the FDA's GMP requirements. The European
Community has promulgated rules requiring medical products to receive a CE mark
by mid-1998. A CE mark is an international symbol of adherence to certain
standards and compliance with applicable European medical device requirements.
ISO 9000 series certification is one of the prerequisites for CE marking for
most of Encore's products. ISO 9001 is the highest level of ISO certification,
covering both the quality system for manufacturing as well as the quality system
for product design control. Encore has received an ISO 9001 certification and
"CE" certification.
 
     Encore must obtain export certificates from the FDA before it can export
certain of its products.
 
   
     Certain provisions of the Social Security Act, commonly known as the
"Medicare Fraud and Abuse Statute," prohibit entities, such as Encore, from
offering, paying, soliciting or receiving any form of remuneration in return for
the referral of Medicare or state health program patients or patient care
opportunities, or in return for the recommendation, arrangement, purchase, lease
or order of items or services that are covered by Medicare or state health
programs. Violation of this statute is a felony, punishable by fines of up to
$25,000 per violation and imprisonment of up to five years. In addition, the
federal Department of
    
 
                                       93
<PAGE>   103
 
Health and Human Services may impose civil penalties excluding violators from
participation in Medicare or state health programs. Many states have adopted
similar prohibitions against payments intended to induce referrals of Medicaid
and other third party payor patients.
 
     Federal physician self-referral legislation prohibits, subject to certain
exemptions, a physician or a member of his immediate family from referring
Medicare or Medicaid patients to an entity providing "designated health
services" in which the physician has an ownership or investment interest, or
with which the physician has entered into a compensation arrangement. The
penalties for violations include a prohibition on payment by these government
programs and civil penalties of as much as $15,000 for each referral in
violation of the statute and $100,000 for participation in a "circumvention
scheme."
 
                                       94
<PAGE>   104
 
                              MANAGEMENT OF ENCORE
 
DIRECTORS AND EXECUTIVE OFFICERS
 
     The following individuals are the current directors and executive officers
of Encore.
 
   
<TABLE>
<CAPTION>
                   NAME                     AGE                     CURRENT POSITION
                   ----                     ---                     ----------------
<S>                                         <C>    <C>
Nick Cindrich.............................  65     Chief Executive Officer and Chairman of the Board
                                                   of Directors
Craig L. Smith............................  53     President and Director
August Faske..............................  44     Vice President -- Finance and Chief Financial
                                                   Officer
Kenneth Ludwig, Jr........................  44     Vice President -- Marketing
Jim Abraham...............................  37     Vice President -- Sales
J.D. Webb, Jr.............................  44     Vice President -- Research and Development
Lowell Davis..............................  64     Vice President -- Operations
Harry L. Zimmerman........................  41     Vice President -- General Counsel, Secretary
Dennis J. Enright.........................  58     Director
Richard D. Relyea.........................  49     Director
Richard Martin............................  56     Director
Lamar Laster..............................  45     Director
Kenneth Davidson..........................  49     Director
</TABLE>
    
 
   
  Nick Cindrich, Chief Executive Officer
    
 
   
     Mr. Cindrich founded Encore in March of 1992 and served as President until
August 1992. From 1992 through August 1994, Mr. Cindrich was self-employed as a
business consultant, while being restricted from participation in the management
of Encore as a result of the settlement of a lawsuit involving his prior
employer. Since August 1994, he has served as the Chief Executive Officer and
Chairman of the Board of Directors of Encore. Mr. Cindrich has over 25 years of
experience in the medical device industry. He founded Encore after leaving
Intermedics Orthopedics, Inc. ("Intermedics") where he served as President from
1984 to 1991. From 1980 to 1984, Mr. Cindrich was the Group Vice
President -- Operations for DePuy, Inc. From 1969 to 1980, Mr. Cindrich held a
series of positions at Zimmer Inc., the last of which was Vice President of
Manufacturing.
    
 
  Craig L. Smith, Ph.D., President
 
     Dr. Smith has been a director of Encore since July 1992 and President since
August 1992. Dr. Smith first joined Encore as its Vice President of Research and
Development in April 1992, with 10 years of experience in the medical device
industry. From 1985 to April 1992, he served as Vice President -- Research and
Development for Intermedics. During this period, his responsibilities included
product design, materials development and qualification, quality assurance,
clinical studies and FDA product approval submissions. Dr. Smith also oversaw
major research programs pertaining to the characterization of hydroxyl-apatite
coated implants and the characterization of bone growth factors derived from
bovine sources. Prior to his experience with Intermedics, Dr. Smith served from
1982 to 1984 as Vice President -- Engineering for Carbomedics, Inc., a
manufacturer of pyrolytic carbon coated heart valve components, and from 1972 to
1982 at General Atomic Co., where he did work producing and characterizing
carbon coatings. Dr. Smith has a BS in Metallurgical Engineering from the
University of Washington (1966) and a Ph.D. in Materials Science from Carnegie
Mellon University (1971).
 
  August Faske, Vice President -- Finance and Chief Financial Officer
 
     Mr. Faske joined Encore in April 1992 with four years experience in the
orthopedics industry and a total of 17 years experience in finance and
accounting. Prior to joining Encore, he served from 1988 to April 1992 as Vice
President -- Finance and Controller for Intermedics. Prior to joining
Intermedics, Mr. Faske was the Manager of Financial Accounting for Cooper
Industries, Inc. and Internal Staff Auditor and Factory
 
                                       95
<PAGE>   105
 
Accounting Manager for Hughes Tool Company. Mr. Faske has a BBA in Accounting
from Southwest Texas State University (1974). He is a Certified Public
Accountant and is a member of the Texas Society of Certified Public Accountants
and the American Institute of Certified Public Accountants.
 
  Kenneth Ludwig, Jr., Vice President -- Marketing
 
     Mr. Ludwig joined Encore in April 1992 with 11 years of medical device
industry experience and a total of 18 years experience in medical products.
Prior to joining Encore, he served as Group Product Manager, Director of
Marketing and Vice President -- Marketing for Intermedics from 1984 to April
1992. At Intermedics, he oversaw general marketing and communications, product
management, new product introduction, hospital cost containment analysis and bid
negotiations. During 1991, he owned and operated an Intermedics sales agency in
Arizona. From 1982 to 1984, he was Group Product Manager, PCA Knee at Howmedica,
Inc. From 1976 to 1982 he held positions in sales and product management at
Breon Laboratories (Sterling Drug, Inc.). From 1974 to 1976, he executed quality
control and FDA compliance related duties at Hoffman LaRoche. Mr. Ludwig has a
BS in Biology from St. Lawrence University (1974). He has completed graduate and
executive level courses in Marketing and Business at Fairleigh-Dickinson
University, Dartmouth College and The Wharton School of Executive Education.
 
  James P. Abraham, Vice President -- Sales
 
     Mr. Abraham joined Encore in August 1995 with over 13 years of experience
in medical device sales and marketing experience. Prior to joining Encore, he
had been Director of Sales for Intermedics from April 1992 through August 1995.
At Intermedics, he was responsible for the domestic sales force which included 6
regional managers, a national sales development manager and 40 agencies with a
combined force of approximately 240 sales representatives. Mr. Abraham was also
responsible for corporate sales training and continuing medical education. Prior
to his employment with Intermedics, Mr. Abraham was Executive Vice President for
Sales and Marketing for Implant Technologies from 1989 to 1992 and Director of
Sales for Orthomet, Inc. from 1986 to 1989. Mr. Abraham received his BS/BA
degree in Finance from Creighton University in Omaha, Nebraska in 1981. He has
completed graduate and executive level courses in Marketing and Business at The
Wharton School of Executive Education, the Southern Methodist University
Executive Education Program and the Philip Crosby Total Quality College.
 
  J.D. Webb, Jr., Vice President -- Research and Development
 
   
     Mr. Webb joined Encore in April 1992 with nine years of orthopedic industry
experience. From 1988 to April 1992, he served as Manager-Engineering,
Director -- Product Development and Director -- Regulatory and Clinical Affairs
at Intermedics. During that time, his responsibilities included product design
and testing, quality assurance, clinical studies and FDA approval to market.
Under his direction, Intermedics completed several development projects
including the APRII and Collared Revision Hip Systems, the Unicondylar Natural
Knee and the High Tibial Osteotomy System. From 1983 to 1988, Mr. Webb served as
Development Engineer, Senior Development Engineer and Group Development Manager
for Specialty Orthopedic Products at Zimmer, Inc. Mr. Webb holds a BS in
Mechanical Engineering and an MS in Bioengineering from the University of Utah
(1982 and 1983).
    
 
  Lowell Davis, Vice President -- Operations
 
     Mr. Davis joined Encore in October 1992 with 41 years of experience in all
phases of operations management. He had previously served as factory general
manager for BJ-Hughes from 1977 to 1983 where he was responsible for
manufacturing activities, overseeing scheduling, cost, quality control and
inventories. From 1987 to October 1992, Mr. Davis was employed by Dee Howard
Corporation as Director of Corporate Bids and Proposals. From 1983 to 1987, Mr.
Davis was self-employed as an engineering consultant. Among his other
accomplishments, Mr. Davis has managed, staffed and overseen facility
construction for start-up of a large metal working facility at Round Rock,
Texas. He holds a BS in Industrial Engineering from San Diego State University
(1958).
 
                                       96
<PAGE>   106
 
  Harry L. Zimmerman, Vice President -- General Counsel, Secretary
 
     Mr. Zimmerman joined Encore in April 1994 with 12 years of experience in
the private practice of corporate, real estate and tax law. From 1992 to April
1994, Mr. Zimmerman was associated with the law firm of Winstead Sechrest &
Minick, P.C., a law firm based in Texas, where he was responsible for the
corporate, tax and real estate practices. Mr. Zimmerman was a partner in the law
firm of Bissex & Hedricks, P.C. from 1991 to 1992. He has a BS in Economics from
the Wharton School of the University of Pennsylvania (1977), with honors, and a
JD from the University of Texas School of Law (1982), with honors. He has been
licensed as a Certified Public Accountant in Texas since 1979.
 
  Dennis J. Enright, Director
 
   
     Mr. Enright has been a director of Encore since August 1994. Prior to his
retirement in 1995, Mr. Enright was employed by 3M as Staff Vice President,
Technology Development and had been with 3M since 1965. Mr. Enright began his
career as a product development engineer in the telecommunications area and then
progressed to Technical Director, General Manager and then Division Vice
President for 12 years. His primary focus during the past several years has been
acquisitions. Mr. Enright was elected to the Carlton Society, an internal 3M
recognition for technical people.
    
 
   
     Mr. Enright has been a board member of Associated Electronics of Mentor,
Ohio; Japan Interconnect Systems (a joint venture with Nippon Steel); Precision
Interconnect; and Raycom of Denver, Colorado.
    
 
  Lamar F. Laster, Director
 
     Mr. Laster has been a director of Encore since August 1994. Mr. Laster is
currently Chief Executive Officer of Lamarz Interests, Inc., a Houston-based
financial consulting and investment firm, with which he has been associated
since 1994. Previously he served as Executive Vice President and Chief Operating
Officer of STAAR Surgical Company from October 1989 to February 1994, and he was
Chairman of the Board of STAAR from June 1990 to February 1994. He was also Vice
President of Finance and Chief Financial Officer of STAAR from November 1987 to
October 1989. He served as a director of STAAR beginning in 1984.
 
   
     From March 1978 through July 1982, Mr. Laster was associated with
Intermedics. He served as the Corporate Vice President -- Finance of Intermedics
and as President of the Intermedics Venture Capital Investment subsidiary. Mr.
Laster also served as the Corporate Treasurer and Assistant Secretary for
Intermedics, Inc. and its seventeen worldwide subsidiaries.
    
 
     Mr. Laster is a member of the Board of Directors of Citizens National Bank
of Houston, Texas. He holds a bachelor's degree in Mathematics and Economics
from Macalester College, St. Paul, Minnesota, as well as a Master of Business
Administration from the University of Chicago.
 
  Richard D. Relyea, Director
 
   
     Mr. Relyea has been a director of Encore since August 1994. Mr. Relyea is
currently Chairman of the Board and Chief Executive Officer of EduCare Community
Living Corporation, which he founded in August 1987. EduCare provides
community-based long-term care and support services for persons with mental
retardation and other developmental disabilities. Prior to forming EduCare, Mr.
Relyea was President and a Director of Pro-Health Facilities, Inc. and Texas
Health Investments, Inc. These companies acquired, developed, operated and
financed ambulatory care and surgery centers, imaging centers and rehabilitation
centers.
    
 
   
     Prior to entering the field of healthcare management, Mr. Relyea worked as
a registered professional engineer. Mr. Relyea received a Bachelor of Science in
Mechanical Engineering and a Master of Business Administration from the
University of Texas at Austin.
    
 
                                       97
<PAGE>   107
 
  Richard Martin, Ph.D., Director
 
   
     Dr. Martin has been a director of Encore since February 1996. Dr. Martin is
currently President and Chief Executive Officer of Physio-Control Corporation,
positions that he has held since 1991. Prior to joining Physio-Control, Mr.
Martin was Vice President, Cardiovascular Business Development for Sulzermedica,
in Angleton, Texas. He has also served as President and Chief Operating Officer
of Positron Corporation in Houston, Texas, and held a variety of positions with
other companies, culminating as President and Chief Operating Officer of
Intermedics.
    
 
     Dr. Martin is a member of the Institute of Electrical and Electronic
Engineers, the Association for Advancement of Medical Instrumentation, and the
American Society for Engineering Education. He holds a BSEE in Electrical
Engineering from Christian Brothers College (1962), a MSEE in Electrical
Engineering from Notre Dame University (1964) and a Ph.D. in
Electrical/Biomedical Engineering from Duke University (1978).
 
  Kenneth W. Davidson, Director
 
   
     Mr. Davidson has been a director of Encore since November 1996. Mr.
Davidson has served as Chairman, President and CEO of Maxxim Medical, Inc. since
November 1986. Previously, Mr. Davidson held various positions with Intermedics,
Baxter Laboratories, and Merck & Co. Mr. Davidson presently serves on the Board
of Directors and is the current President of Operation Rainbow, an international
charity organization. Mr. Davidson also serves on the Board of Directors of
Lasermedics, Inc., a public company with a focus on physical therapy.
    
 
     Mr. Davidson received a Bachelor of Science degree in Biology and Chemistry
from Laurentian University, Sudbury Ontario, Canada.
 
OTHER TRANSACTIONS
 
     Encore has engaged in certain transactions with the directors of Encore and
with companies in which the directors of Encore are also officers, directors or
shareholders. Such transactions include: (1) a lease by Encore of its
manufacturing facilities in Red Rock, Texas from Mr. and Mrs. Sandor Turanyi;
(2) a Technology Transfer Agreement between Encore and Mr. Sandor Turanyi
relating to certain technical know how that Mr. Turanyi possessed prior to April
1, 1992; (3) a Distribution Agreement with PLUS-Switzerland, an affiliate of
Wolfgang Schweizer, and (4) a Sales Representative Agreement with VS
Investments, Inc., an affiliate of Wolfgang Schweizer. The lease for the
manufacturing facilities is for a period expiring on March 31, 1997, with a
monthly rent of $8,600, triple net. The Technology Transfer Agreement calls for
an aggregate amount of $1,400,000 to be paid to Mr. Turanyi over the next four
years, or sooner if sales of Encore's primary knee product significantly exceed
expectations. The Distribution Agreement provides for both Encore and
PLUS-Switzerland to have the right to sell the other company's products in its
primary geographic territory. The Sales Representative Agreement provides that
VS Investments shall receive a commission on all Encore sales to PLUS.
 
   
     On April 1, 1992, Encore sold Encore Common Shares to MVI AG, an affiliate
of Wolfgang Schweizer, at a sale price of $5.00 per share. In 1993, Encore sold
Encore Preferred Shares to Medica, an affiliate of Wolfgang Schweizer, at a sale
price of $5.00 per share, payable partially in cash and partially by a
promissory note, and Encore Common Shares at a sale price of $2.00 per share
payable in cash. On March 31, 1995, Encore redeemed 172,000 Encore Preferred
Shares from Medica at a price of $5.00 per share, and Medica used the proceeds
of the redemption to pay in full the outstanding balance of the promissory note.
    
 
   
     On May 17, 1995 Encore granted Mr. and Mrs. Nick Cindrich options to
purchase 20,000 Encore Common Shares, at an exercise price of $1.40 per share,
in exchange for the Cindrichs' pledge of certain of their assets as security for
Encore's revolving line of credit from Franklin.
    
 
   
     On March 31, 1996 Encore granted Nick Cindrich options to purchase 115,000
Encore Common Shares at an exercise price of $2.50. These options were issued to
Mr. Cindrich to replace options sold by Mr. Cindrich to distributors and
surgeons affiliated with Encore.
    
 
                                       98
<PAGE>   108
 
     Encore believes that all of such transactions were fair to, and in the best
interest of, Encore.
 
DIRECTOR COMPENSATION
 
     Encore directors who serve as officers of Encore receive no compensation
for their services as directors. Those directors who are not employees of Encore
receive 10,000 stock options for every year of service on the Encore Board,
which options vest after the year of service. In addition, Encore reimburses all
of the directors for any expenses incurred in attending meetings of the Board,
including travel expenses, the costs of meals and the costs of lodging.
 
COMMITTEES OF THE BOARD
 
     Encore currently has two committees of the Board of Directors: the Audit
Committee and the Compensation Committee. Craig L. Smith, Richard D. Relyea and
Dennis J. Enright currently serve on the Audit Committee, and Dr. Richard Martin
and Lamar Laster serve on the Compensation Committee.
 
EXECUTIVE COMPENSATION
 
   
     The following table summarizes for the fiscal year ended December 31, 1996
the compensation of Encore's Chief Executive Officer and the other four most
highly compensated executive officers (the "Named Executives") who will continue
to serve as executive officers of the Surviving Corporation upon consummation of
the Merger.
    
 
                           SUMMARY COMPENSATION TABLE
   
<TABLE>
<CAPTION>
                                          ANNUAL COMPENSATION                   LONG TERM COMPENSATION
                            ------------------------------------------------   ------------------------
                                                                                        AWARDS
                                                                               ------------------------
                                                                                             SECURITIES
                                                                               RESTRICTED    UNDERLYING
                                                                 OTHER            STOCK       OPTIONS/
         NAME AND                                                ANNUAL           AWARD         SARS
    PRINCIPAL POSITION      YEAR   SALARY ($)   BONUS ($)   COMPENSATION ($)     (S)($)         (#)
    ------------------      ----   ----------   ---------   ----------------   -----------   ----------
<S>                         <C>    <C>          <C>         <C>                <C>           <C>
Nick Cindrich.............  1996    $140,000       0.00              *               *        196,053
  Chief Executive Officer
Craig L. Smith............  1996     130,000       0.00              *            0.00         60,211
  President
James Abraham.............  1996     130,000      6,000              *               *         16,500
  Vice President -- Sales
Kenneth Ludwig, Jr........  1996     105,000       0.00              *            0.00         36,474
  Vice President --
  Marketing
August Faske..............  1996     100,000       0.00              *            0.00         34,737
  Vice
  President -- Finance;
  Chief Financial Officer
Harry L. Zimmerman........  1996     100,000       0.00              *            0.00         35,097
  Vice
  President -- General
  Counsel
 
<CAPTION>
                                LONG TERM COMPENSATION
                            ------------------------------
                                       PAYOUTS
                            ------------------------------
 
         NAME AND              LTIP          ALL OTHER
    PRINCIPAL POSITION        PAYOUTS     COMPENSATION ($)
    ------------------      -----------   ----------------
<S>                         <C>           <C>
Nick Cindrich.............     0.00         0.00
  Chief Executive Officer
Craig L. Smith............     0.00         0.00
  President
James Abraham.............     0.00         0.00
  Vice President -- Sales
Kenneth Ludwig, Jr........     0.00         0.00
  Vice President --
  Marketing
August Faske..............     0.00         0.00
  Vice
  President -- Finance;
  Chief Financial Officer
Harry L. Zimmerman........     0.00         0.00
  Vice
  President -- General
  Counsel
</TABLE>
    
 
- ---------------
 
All options apply to Encore Common Shares.
   
* Excludes certain personal benefits, the total value of which did not exceed
  the lesser of $50,000 or 10% of the total annual salary for the Named
  Executive.
    
 
                                       99
<PAGE>   109
 
   
                           OPTIONS/SAR GRANTS IN 1996
    
 
   
<TABLE>
<CAPTION>
                                        INDIVIDUAL GRANTS                                               POTENTIAL REALIZABLE
                          ---------------------------------------------                                   VALUE AT ASSUMED
                                NUMBER OF                                                                  ANNUAL RATES OF
                          SECURITIES UNDERLYING                                                              STOCK PRICE
                               UNEXERCISED           PERCENT OF TOTAL       EXERCISE                      APPRECIATION FOR
                                OPTIONS/               OPTIONS/SARS            OR                            OPTION TERM
                              SARS GRANTED         GRANTED TO EMPLOYEES    BASE PRICE     EXPIRATION    ---------------------
          NAME                     (#)                IN FISCAL YEAR         ($/SH)          DATE        5% ($)      10% ($)
          ----            ---------------------    --------------------    -----------    ----------    --------    ---------
<S>                       <C>                      <C>                     <C>            <C>           <C>         <C>
Nick Cindrich...........          33,207                   4.64%              $1.90       12/31/2004     $33,814     $ 82,860
                                 115,000                  16.06                2.50       3/31/2001           --(1)    64,996
                                  47,846                   6.68                2.09       12/31/2000      14,874       43,636
Craig L. Smith..........          60,211                   8.41                1.90       12/31/2004      61,312      150,242
James Abraham...........          16,500                   2.30                1.90       12/31/2004      16,802       41,172
Kenneth Ludwig, Jr......          36,474                   5.09                1.90       12/31/2004      37,141       91,012
August Faske............          34,737                   4.85                1.90       12/31/2004      35,372       86,678
Harry L. Zimmerman......          35,097                   4.90                1.90       12/31/2004      35,739       87,576
</TABLE>
    
 
- ---------------
 
   
(1) These options were granted with an exercise price greater than the fair
     market value of Encore Common Shares on the date of grant. Based on a 5%
     annual rate of return during the option term, the fair market value of
     Encore Common Shares received upon exercise would be less than the exercise
     price.
    
 
   
     The following table sets forth certain information concerning the
unexercised options to purchase Encore Common Shares held by the Named
Executives as of December 31, 1996. See "The Merger -- Interests of Certain
Persons in the Merger and Related Party Transactions."
    
 
        AGGREGATED OPTION/SAR EXERCISE AND FISCAL YEAR-END OPTION VALUES
 
   
<TABLE>
<CAPTION>
                                                           NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                                                         UNDERLYING UNEXERCISABLE        ACQUIRED IN-THE-MONEY
                                                              OPTIONS/SARS AT          OPTIONS/SARS DECEMBER 31,
                                 SHARES                      DECEMBER 31, 1996                1996 ($)(1)
                               ACQUIRED ON    VALUE     ---------------------------   ---------------------------
            NAME                EXERCISE     REALIZED   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
            ----               -----------   --------   -----------   -------------   -----------   -------------
<S>                            <C>           <C>        <C>           <C>             <C>           <C>
Nick Cindrich................        --           --      342,059                     $  565,322      $     --
Craig L. Smith...............        --           --      388,783                      1,030,717            --
James Abraham................        --           --       57,750         93,750         117,800       206,250
Kenneth Ludwig, Jr...........        --           --      327,098                        907,379            --
August Faske.................        --           --      322,951                        899,124            --
Harry L. Zimmerman...........    25,000      $12,500      183,311        115,000         384,736       253,000
</TABLE>
    
 
- ---------------
 
   
(1) For purposes of valuing in-the-money options at December 31, 1996, Encore
    Shares have been valued at $3.60, based on the belief of Encore's management
    that such figure represents the fair value of the Encore Common Shares at
    December 31, 1996. The Encore Shares are privately held and are not actively
    traded.
    
 
     Encore does not currently grant any long-term incentives, other than stock
options, to its executives or other employees. Similarly, Encore does not
sponsor any defined benefit or actuarial plans at this time.
 
AGREEMENTS WITH EXECUTIVE OFFICERS
 
   
     Encore has employment agreements with all of its executive officers,
providing initial five year terms. The contracts for Messrs. Cindrich, Smith,
Ludwig, Faske, Abraham and Zimmerman all expire in August 1999. Each agreement
includes a one year non-competition provision and provides for a severance
payment equal to one year's base salary if the executive officer is terminated
without cause. In addition, each executive officer has a severance agreement
that provides certain benefits to the executive officer in the event that, at
any time during the three year period following a "change in control" of Encore
as defined therein, the executive officer is terminated by Encore for other than
cause or the executive's death or disability, or the executive terminates his
employment for "good reason" as defined therein. The severance agreements
provide for the payment to each of the executives, upon a change in control, of
a sum equal to three times the annual salary of the
    
 
                                       100
<PAGE>   110
 
executive, three times the amount of the average bonus payment paid to the
executive in the last two calendar years and lifetime coverage under various
life and health insurance contracts. As part of the Agreement and Plan of
Merger, the severance agreements will be amended to provide that, beginning two
years after the Effective Time, upon a change in control, each executive will
receive a payment equal to the sum of the executive's annual salary for one
year, the average of the bonus payments paid to the executive in the last two
calendar years and certain life and health insurance benefits for a period of
five years.
 
BONUS PAYMENTS TO EXECUTIVE OFFICERS
 
   
     Encore has historically compensated its executive officers and other
employees for meeting certain performance goals by paying bonuses. In the last
several years, these bonuses have been in the form of incentive stock options,
partially as a means of conserving cash, which bonuses have not required the
recording of an expense.
    
 
                        PRINCIPAL SHAREHOLDERS OF ENCORE
 
   
     The following table sets forth certain information regarding beneficial
ownership of the shares of each class of capital stock of Encore as of December
31, 1996, by (i) each shareholder known by Encore to be the beneficial owner of
more than 5% of the outstanding shares of each class of capital stock, (ii) each
director of Encore, (iii) each executive officer of Encore named in the Summary
Compensation Table, and (iv) all current executive officers and directors as a
group. Except as otherwise indicated, Encore believes that the beneficial owners
of the shares listed below, based on information furnished by such owners, have
sole investment and voting power with respect to such shares, subject to
community property laws where applicable.
    
 
   
<TABLE>
<CAPTION>
                                                                   NUMBER OF
                                             NUMBER OF         SHARES -- SERIES A         PERCENTAGE
         PRINCIPAL SHAREHOLDERS           SHARES -- COMMON         PREFERRED          BENEFICIALLY OWNED
         ----------------------           ----------------     ------------------     ------------------
<S>                                       <C>                  <C>                    <C>
Nick and Mary Louise Cindrich...........      1,885,484(1)(4)      -0-                      25.96%
  6 Candleleaf Court
  Austin, Texas 78734
Sandor and Lois Turanyi.................      2,000,000            -0-                      28.90
  P. O. Box 134
  Red Rock, Texas 78642
MVI AG..................................        777,000(2)          132,000(2)              12.82
  Erlenstrasse 4B
  Rotkreuz, Switzerland
Medica Holding AG.......................        777,000(2)          132,000(2)              12.82
  Erlenstrasse 4B
  Rotkreuz, Switzerland
Wolfgang Schweizer......................        777,000(2)          132,000(2)              12.82
  Erlenstrasse 4B
  Rotkreuz, Switzerland
Richard Relyea..........................         15,000(4)         -0-                       0.22
  5700 Scout Island Cove
  Austin, Texas 78731
Richard Martin..........................       -0-                 -0-                        0.0
  6605 204th Drive, N.E.
  Redmond, Washington 98053
Lamar Laster............................         55,000(3)(4)      -0-                       0.79
  4377 N. MacGregor Way
  Houston, Texas 77004
Dennis Enright..........................         45,000(4)         -0-                       0.65
  9309 Ashton Ridge
  Austin, Texas 78750
</TABLE>
    
 
                                       101
<PAGE>   111
 
   
<TABLE>
<CAPTION>
                                                                   NUMBER OF
                                             NUMBER OF         SHARES -- SERIES A         PERCENTAGE
         PRINCIPAL SHAREHOLDERS           SHARES -- COMMON         PREFERRED          BENEFICIALLY OWNED
         ----------------------           ----------------     ------------------     ------------------
<S>                                       <C>                  <C>                    <C>
Kenneth Davidson........................       -0-                 -0-                        0.0
  6240 Kipps Colony Ct., #106
  St. Petersburg, Florida 33707
Craig Smith.............................        399,783(4)         -0-                       5.47
  5904 Ivy Hills Drive
  Austin, Texas 78759
Kenneth Ludwig, Jr......................        327,098(4)         -0-                       4.51
  396 Sunrise Terrace
  Cedar Park, Texas 78613
August Faske............................        322,951(4)         -0-                       4.46
  10103 Grand Oak Drive
  Austin, Texas 78750
Harry L. Zimmerman......................        208,311(4)         -0-                       2.93
  2628 Barton Hills Drive
  Austin, Texas 78704
James Abraham...........................         58,285            -0-                       0.84
  14819 Calaveras Dr.
  Austin, Texas 78717
All Officers and Directors as a group
  (12 persons)..........................      3,673,392(4)         -0-                      41.52
</TABLE>
    
 
- ---------------
 
(1) Represents shares owned by husband and wife as joint tenants.
   
(2) Represents 600,000 Encore Common Shares owned by MVI AG, 5,000 Encore Common
     Shares owned by Wolfgang Schweizer, 132,000 Encore Preferred Shares owned
     by Medica, 172,000 options held by Medica and 15,000 options held by Mr.
     Schweizer. Mr. Schweizer has sole voting and investment power with respect
     to such shares.
    
(3) Represents the 40,000 shares held by Lamarz Interest, Inc., a corporation of
     which Lamar Laster is the president and primary shareholder. Mr. Laster has
     sole voting and investment power with respect to such shares.
(4) Includes stock options exercisable within 60 days of the Effective Time for
     each of the following persons, in the following amounts:
 
   
<TABLE>
<S>                                                           <C>       <C>
Mr. Cindrich................................................  342,059   options
Mr. Relyea..................................................   15,000   options
Mr. Laster..................................................   15,000   options
Mr. Enright.................................................   15,000   options
Mr. Smith...................................................  388,783   options
Mr. Ludwig..................................................  327,098   options
Mr. Faske...................................................  322,951   options
Mr. Zimmerman...............................................   83,311   options
Mr. Abraham.................................................   57,750   options
</TABLE>
    
 
                                 OTHER MATTERS
 
   
     Neither the HCAC Board nor the Encore Board is aware of any matters not set
forth herein that may come before the Meetings. If, however, further business
properly comes before the Meetings, the persons named in the proxies will vote
the shares represented thereby in accordance with their judgment.
    
 
                                       102
<PAGE>   112
 
                                 LEGAL OPINIONS
 
     Sutherland, Asbill & Brennan, L.L.P., Atlanta, Georgia, will render an
opinion with respect to tax matters and will pass on certain other matters on
behalf of Encore. Ruden, McClosky, Smith, Schuster & Russell, P.A., Fort
Lauderdale, Florida, will render opinions with respect to the validity of the
HCAC Common Shares to be issued in the Merger and certain other matters on
behalf of HCAC.
 
                                    EXPERTS
 
   
     The financial statements of HCAC included in this Joint Proxy
Statement/Prospectus have been audited by Richard A. Eisner & Company, L.L.P.,
independent public accountants, as indicated in their report with respect
thereto, included herein. Such financial statements have been included herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
    
 
   
     The financial statements of Encore as of December 31, 1995 and 1996 and for
each of the three years in the period ended December 31, 1996 included in this
Joint Proxy Statement/Prospectus have been so included in reliance on the report
of Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
    
 
                                       103
<PAGE>   113
 
                         INDEX TO FINANCIAL STATEMENTS
 
   
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
HEALTHCARE ACQUISITION CORP.
Report of Independent Auditors..............................   F-2
Balance Sheets as of December 31, 1995 and December 31,
  1996......................................................   F-3
Statements of Operations for the period March 21, 1995
  (inception) to December 31, 1995; and for the period March
  21, 1995 (inception) to December 31, 1996.................   F-4
Statements of Common Stock, Common Stock Subject to Possible
  Conversion, Preferred Stock, Additional Paid-In Capital
  and Deficit for the period March 21, 1995 (inception) to
  December 31, 1996.........................................   F-5
Statements of Cash Flows for the period March 21, 1995
  (inception) to December 31, 1995; and for the period March
  21, 1995 (inception) to December 31, 1996.................   F-6
Notes to Financial Statements...............................   F-7
ENCORE ORTHOPEDICS, INC.
Report of Independent Accountants...........................  F-10
Balance Sheets as of December 31, 1995 and 1996.............  F-11
Statements of Income for the years ended December 31, 1994,
  1995 and 1996.............................................  F-12
Statements of Changes in Stockholders' Equity for the years
  ended December 31, 1994, 1995 and 1996....................  F-13
Statements of Cash Flows for the years ended December 31,
  1994, 1995 and 1996.......................................  F-14
Notes to Financial Statements...............................  F-15
</TABLE>
    
 
                                       F-1
<PAGE>   114
 
   
                         REPORT OF INDEPENDENT AUDITORS
    
 
   
Board of Directors and Stockholders
    
   
Healthcare Acquisition Corp.
    
   
Fort Lauderdale, Florida
    
 
   
     We have audited the accompanying balance sheets of Healthcare Acquisition
Corp. (a corporation in the development stage) as at December 31, 1995 and
December 31, 1996 and the related statements of operations, common stock, common
stock subject to possible conversion, preferred stock, additional paid-in
capital and deficit and cash flows for the year ended December 31, 1996 and for
the periods from March 21, 1995 (inception) to December 31, 1995, and from March
21, 1995 to December 31, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
    
 
   
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
    
 
   
     In our opinion, the financial statements enumerated above present fairly,
in all material respects, the financial position of Healthcare Acquisition Corp.
as at December 31, 1995 and December 31, 1996 and the results of its operations
and its cash flows for the year ended December 31, 1996 and for the periods from
March 21, 1995 (inception) to December 31, 1995 and March 21, 1995 to December
31, 1996, in conformity with generally accepted accounting principles.
    
 
   
     As discussed in Note 1 to the financial statements, the Company must
liquidate in the event that it does not consummate a business combination, or
satisfy certain extension criteria, by September 8, 1997, and, although the
Company has signed a merger agreement with a target company, there is no
assurance that such merger will take place or that the Company will have
sufficient funds to seek another target company in the event that the proposed
merger does not take place.
    
 
   
New York, New York
    
   
January 17, 1997
    
 
                                       F-2
<PAGE>   115
 
   
                          HEALTHCARE ACQUISITION CORP.
    
   
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
    
 
   
                                 BALANCE SHEETS
    
 
   
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                1995        1996
                                                              --------   ----------
<S>                                                           <C>        <C>
                                      ASSETS
Current assets:
  Cash......................................................  $ 31,562   $  193,899
  U.S. Treasury Bills and cash held in Trust Fund (Note
     1).....................................................        --    8,731,867
  Prepaid expenses..........................................        --       20,669
                                                              --------   ----------
          Total current assets..............................    31,562    8,946,435
  Deferred merger costs (Note 2)............................        --      407,427
  Deferred registration costs...............................   184,056           --
  Deferred financing costs (net of amortization)............    12,543           --
  Organization costs (net of amortization)..................     5,195        4,416
                                                              --------   ----------
          TOTAL.............................................  $233,356   $9,358,278
                                                              ========   ==========
                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Bridge notes payable (Note 5).............................  $190,726           --
  Reimbursable expenses due to stockholder..................     3,489           --
  Accrued interest on notes payable.........................    12,722           --
  Accrued expenses..........................................    20,340   $  278,093
  Income taxes payable......................................        --       23,000
                                                              --------   ----------
          Total current liabilities.........................   227,277      301,093
                                                              --------   ----------
Common stock, subject to possible conversion to cash,
  344,999 shares at conversion value (Note 1)...............        --    1,746,368
                                                              --------   ----------
Stockholders' equity (Notes 1, 4, 5, 6 and 7):
  Preferred stock, $.001 par value -- shares authorized
     1,000,000; none issued.................................        --           --
  Common stock, $.001 par value -- shares authorized
     20,000,000; issued and outstanding 2,100,000 shares at
     December 31, 1996 (including 344,999 shares subject to
     possible conversion to cash) and 375,000 shares at
     December 31, 1995......................................       375        1,755
  Additional paid-in capital................................    44,625    7,309,767
  Deficit accumulated during the development stage..........   (38,921)        (705)
                                                              --------   ----------
          Total stockholders' equity........................     6,079    7,310,817
                                                              --------   ----------
          TOTAL.............................................  $233,356   $9,358,278
                                                              ========   ==========
</TABLE>
    
 
   
           Attention is directed to the foregoing accountants' report
    
   
             and to the accompanying notes to financial statements.
    
 
                                       F-3
<PAGE>   116
 
   
                          HEALTHCARE ACQUISITION CORP.
    
   
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
    
 
   
                            STATEMENTS OF OPERATIONS
    
 
   
<TABLE>
<CAPTION>
                                                                                             MARCH 21,
                                                             MARCH 21,                          1995
                                                                1995                        (INCEPTION)
                                                           (INCEPTION) TO    YEAR ENDED          TO
                                                            DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                                1995            1996            1996
                                                           --------------   ------------   --------------
<S>                                                        <C>              <C>            <C>
Interest income..........................................                    $  360,939       $360,939
                                                               --------      ----------       --------
Expenses:
  General and administrative expenses....................      $    966         204,409        205,375
  Amortization of financing costs on notes payable.......        25,233          21,817         47,050
  Interest...............................................        12,722           3,824         16,546
                                                               --------      ----------       --------
          Total expenses.................................        38,921         230,050        268,971
                                                               --------      ----------       --------
Income (loss) before provision for income taxes..........       (38,921)        130,889         91,968
Provision for income taxes...............................                        23,000         23,000
                                                               --------      ----------       --------
Net income (loss)........................................      $(38,921)     $  107,889       $ 68,968
                                                               ========      ==========       ========
Net income (loss) per share..............................      $  (0.10)     $     0.06
                                                               ========      ==========
Weighted average common shares outstanding...............       375,000       1,750,437
                                                               ========      ==========
</TABLE>
    
 
   
           Attention is directed to the foregoing accountants' report
    
   
             and to the accompanying notes to financial statements.
    
 
                                       F-4
<PAGE>   117
 
   
                          HEALTHCARE ACQUISITION CORP.
    
   
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
    
 
   
          STATEMENTS OF COMMON STOCK, COMMON STOCK SUBJECT TO POSSIBLE
    
   
      CONVERSION, PREFERRED STOCK, ADDITIONAL PAID-IN CAPITAL AND DEFICIT
    
   
      FOR THE PERIOD FROM MARCH 21, 1995 (INCEPTION) TO DECEMBER 31, 1996
    
 
   
<TABLE>
<CAPTION>
                                                  COMMON STOCK,
                                                    SUBJECT TO                                             DEFICIT
                            COMMON STOCK       POSSIBLE CONVERSION      PREFERRED STOCK                  ACCUMULATED
                         ------------------   ----------------------   ------------------   ADDITIONAL   DURING THE
                          NUMBER               NUMBER                   NUMBER               PAID-IN     DEVELOPMENT
                         OF SHARES   AMOUNT   OF SHARES     AMOUNT     OF SHARES   AMOUNT    CAPITAL        STAGE
                         ---------   ------   ---------   ----------   ---------   ------   ----------   -----------
<S>                      <C>         <C>      <C>         <C>          <C>         <C>      <C>          <C>
Original issuance of
  common stock, $.07
  per share............    375,000   $ 375          --            --       --         --    $   24,625           --
Issuance of warrants,
  May 16, 1995.........         --      --          --            --       --         --        20,000           --
Net loss for the
  period...............         --      --          --            --       --         --            --   $  (38,921)
                         ---------   ------    -------    ----------      ---       ----    ----------   ----------
Balance, December 31,
  1995.................    375,000     375          --            --       --         --        44,625      (38,921)
Sale of 1,725,000
  units, net of
  underwriting discount
  and offering
  expenses.............  1,380,001   1,380     344,999    $1,676,695       --         --     7,265,142           --
Accretion to redemption
  value of common stock
  subject to possible
  conversion...........         --      --          --        69,673       --         --            --      (69,673)
Net income for the
  period...............         --      --          --            --       --         --            --      107,889
                         ---------   ------    -------    ----------      ---       ----    ----------   ----------
Balance, December 31,
  1996.................  1,755,001   $1,755    344,999    $1,746,368        0       $  0    $7,309,767   $     (705)
                         =========   ======    =======    ==========      ===       ====    ==========   ==========
</TABLE>
    
 
   
           Attention is directed to the foregoing accountants' report
    
   
             and to the accompanying notes to financial statements.
    
 
                                       F-5
<PAGE>   118
 
   
                          HEALTHCARE ACQUISITION CORP.
    
   
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
    
 
   
                            STATEMENTS OF CASH FLOWS
    
 
   
<TABLE>
<CAPTION>
                                                        MARCH 21, 1995                   MARCH 21, 1995
                                                        (INCEPTION) TO    YEAR ENDED     (INCEPTION) TO
                                                         DECEMBER 31,    DECEMBER 31,     DECEMBER 31,
                                                             1995            1996             1996
                                                        --------------   -------------   ---------------
<S>                                                     <C>              <C>             <C>
Cash flows from operating activities:
  Net income (loss)...................................    $ (38,921)      $   107,889      $    68,968
                                                          ---------       -----------      -----------
  Adjustments to reconcile net income (loss) to net
     cash (used in) operating activities:
     Amortization of organization costs...............           --               779              779
     Amortization of deferred financing costs.........       25,233            21,817           47,050
     (Increase) in interest receivable and interest on
       trust fund investments.........................                       (348,367)        (348,367)
     (Increase) in prepaid expenses...................           --           (20,669)         (20,669)
     Increase (decrease) in accrued interest on notes
       payable........................................       12,722           (12,722)              --
     Increase in accrued expenses.....................           --            27,706           27,706
     Increase in income taxes payable.................           --            23,000           23,000
                                                          ---------       -----------      -----------
          Total adjustments...........................       37,955          (308,456)        (270,501)
                                                          ---------       -----------      -----------
          Net cash (used in) operating activities.....         (966)         (200,567)        (201,533)
                                                          ---------       -----------      -----------
Cash flows from investing activities:
  Cash invested in trust fund.........................           --        (8,383,500)      (8,383,500)
  Payments of deferred merger costs...................           --          (157,040)        (157,040)
                                                          ---------       -----------      -----------
          Net cash (used in) investing activities.....           --        (8,540,540)      (8,540,540)
                                                          ---------       -----------      -----------
Cash flows from financing activities:
  Proceeds from public offering, net of underwriting
     discount and offering expenses...................                      9,103,444        8,943,217
  Registration costs..................................     (160,227)               --               --
  Proceeds from bridge notes payable..................      200,000                --          200,000
  Advances from stockholders..........................        8,000                --            8,000
  Repayment of bridge notes payable...................           --          (200,000)        (200,000)
  Repayments to stockholders..........................       (8,000)               --           (8,000)
  Proceeds from sale of common stock to founding
     stockholders.....................................       25,000                --           25,000
  Financing costs.....................................      (27,050)               --          (27,050)
  Organization costs..................................       (5,195)               --           (5,195)
                                                          ---------       -----------      -----------
          Net cash provided by financing activities...       32,528         8,903,444        8,935,972
                                                          ---------       -----------      -----------
Net increase in cash..................................       31,562           162,337          193,899
Cash at beginning of period...........................           --            31,562               --
                                                          ---------       -----------      -----------
Cash at end of period.................................    $  31,562       $   193,899      $   193,899
                                                          =========       ===========      ===========
Supplemental disclosures of noncash transactions:
  Registration costs included in accrued expenses and
     amounts due to stockholder.......................    $  23,829                --               --
  Merger costs included in accrued expenses...........           --       $   250,387      $   250,387
</TABLE>
    
 
   
           Attention is directed to the foregoing accountants' report
    
   
                 and to the accompanying financial statements.
    
 
                                       F-6
<PAGE>   119
 
   
                          HEALTHCARE ACQUISITION CORP.
    
   
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
    
 
   
                         NOTES TO FINANCIAL STATEMENTS
    
 
   
NOTE 1 -- ORGANIZATION AND BUSINESS OPERATIONS:
    
 
   
     Healthcare Acquisition Corp. (the "Company") was incorporated in Delaware
on March 21, 1995 with the objective of acquiring or merging with an operating
business in the healthcare industry. The Company's founding directors and
advisors purchased 425,000 common shares, $.001 par value, in April 1995. In
January 1996, the stockholders contributed 100,000 shares back to the Company.
In addition, in March 1996, the Company effected a 1 2/13 for 1 stock split. The
contribution and stock split have been reflected retroactively in the
accompanying financial statements. The Company has selected December 31 as its
fiscal year-end.
    
 
   
     The Company consummated an initial public offering of its common stock in
March and April 1996 (the "Offering") and raised net proceeds of approximately
$9,050,000. The Company's management has broad discretion with respect to the
specific application of the net proceeds of the Offering, although substantially
all of the net proceeds of the Offering are intended to be generally applied
toward consummating a business combination with an operating business engaged in
the healthcare industry (the "Business Combination"). Furthermore, there is no
assurance that the Company will be able to successfully effect a Business
Combination. As of December 31, 1996, approximately $8,732,000 or $5.06 per
share held by the Public Stockholders (as defined below) is being held in a
trust account (the "Trust Fund"), and has been invested in government securities
until the earlier of (i) the consummation of a Business Combination or (ii)
liquidation of the Company. The remaining proceeds may be used to pay for
business, legal and accounting due diligence on prospective acquisitions, and
continuing general and administrative expenses in addition to other expenses.
    
 
   
     The Company, after signing a definitive agreement for the acquisition of a
target business, will submit such transaction for stockholder approval (see Note
2). All of the Company's stockholders immediately prior to the Offering,
including all of the officers, directors and the advisors of the Company (the
"Initial Stockholders"), have agreed to vote the shares of common stock owned by
them as of the effective date of the Offering in accordance with the vote of the
majority in interest of all other stockholders of the Company (the "Public
Stockholders") with respect to any Business Combination. After consummation of
the Company's first Business Combination, this voting safeguard will no longer
be applicable.
    
 
   
     With respect to the first Business Combination which is approved and
consummated, any Public Stockholder who votes against the Business Combination
may demand that the Company convert his shares into cash. The per share
conversion price will equal the amount in the Trust Fund as of the record date
of determination of stockholders entitled to vote on the Business Combination
divided by the number of shares held by Public Stockholders. The Company will
not consummate a Business Combination if 20% or more in interest of the Public
Stockholders exercise their conversion rights. Accordingly, Public Stockholders
holding approximately 19.99% of the aggregate number of shares owned by all
Public Stockholders may have their shares converted to cash in the event of a
Business Combination. Such Public Stockholders are entitled to receive their per
share interest in the Trust Fund, computed without regard to shares held by
Initial Stockholders.
    
 
   
     The Company's Certificate of Incorporation provides for mandatory
liquidation of the Company, without stockholder approval, in the event that the
Company does not consummate a Business Combination within 18 months from the
date of the consummation of the Offering March 8, 1996, or 24 months from the
consummation of the Offering if certain extension criteria have been satisfied.
In the event of liquidation, it is likely that the per share value of the
residual assets remaining available for distribution (including Trust Fund
assets) will be less than the initial public offering price per share in the
Offering.
    
 
   
     As discussed in Note 2, the Company has entered into a merger agreement
with Encore Orthopedics, Inc. ("Encore"). However, the completion of the merger
is contingent on among other conditions, the prior approval of the stockholders
of the Company and Encore and there is no assurance that the merger will be
consummated. In addition, the Company's current liabilities exceed its
unrestricted current assets by $86,525.
    
 
                                       F-7
<PAGE>   120
 
   
                          HEALTHCARE ACQUISITION CORP.
    
   
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
    
 
   
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
Accordingly should the merger not take place, there is no assurance that the
Company will have sufficient funds to seek another target company.
    
 
   
NOTE 2 -- MERGER AGREEMENT:
    
 
   
     On November 12, 1996, the Company, Healthcare Acquisition, Inc., a newly
formed wholly-owned subsidiary of the Company ("Acquisition"), and Encore
entered into an Agreement and Plan of Merger ("Merger Agreement") pursuant to
which Acquisition will merge with and into Encore, with Encore being the
surviving corporation and becoming a wholly-owned subsidiary of the Company. The
consummation of the transactions contemplated by the Merger Agreement are
subject, among other conditions, to the prior approval of the stockholders of
the Company and Encore.
    
 
   
     As of December 31, 1996, the Company has incurred merger related costs
aggregating approximately $407,000 which are included as deferred merger costs
on the accompanying balance sheet. These costs, together with additional
anticipated costs relating to the merger, will be charged to expense upon either
consummation or abandonment of the merger.
    
 
   
NOTE 3 -- SUMMARY OF ACCOUNTING POLICIES:
    
 
   
INCOME TAXES:
    
 
   
     The Company follows Statement of Financial Accounting Standards No. 109
("FAS 109"), "Accounting for Income Taxes". FAS 109 is an asset and liability
approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized in
the Company's financial statements or tax returns.
    
 
   
DEFERRED FINANCING COSTS:
    
 
   
     Costs incurred in connection with the Company's initial bridge financing
were amortized over the term of the notes.
    
 
   
NET INCOME (LOSS) PER SHARE:
    
 
   
     Net income (loss) per common share is computed on the basis of the weighted
average number of common shares outstanding during the period. Warrants to
purchase shares of common stock are anti-dilutive and are excluded from the
calculation.
    
 
   
CASH EQUIVALENTS:
    
 
   
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
    
 
   
NOTE 4 -- PUBLIC OFFERING:
    
 
   
     On March 13, 1996, the Company sold 1,500,000 units ("Units") in the
Offering. On March 25, 1996 and April 10, 1996, the underwriters of the Company
exercised their over allotment option and the Company sold an additional 160,000
units and 65,000 units, respectively. Each Unit consists of one share of the
Company's common stock, $.001 par value, and two Redeemable Common Stock
Purchase Warrants ("Warrants"). Each Warrant entitles the holder to purchase
from the Company one share of common stock at an exercise price of $5.00 during
the period commencing on the later of one year from the effective date of the
Offering (March 8, 1996) or the consummation of a Business Combination and
ending seven years from the effective date of the Offering. The Warrants will be
redeemable at a price of $.01 per warrant upon 30 days
    
 
                                       F-8
<PAGE>   121
 
   
                          HEALTHCARE ACQUISITION CORP.
    
   
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
    
 
   
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
notice at any time, only in the event that the last sale price of the common
stock is at least $8.50 per share for 20 consecutive trading days ending on the
third day prior to the date on which notice of redemption is given.
    
 
   
NOTE 5 -- BRIDGE NOTES PAYABLE:
    
 
   
     In May 1995, the Company issued an aggregate of $200,000 of promissory
notes to certain accredited investors. These notes bore interest at the rate of
10% per annum and were repaid upon the consummation of the Company's Offering
with accrued interest thereon of $16,546. In addition, the investors were issued
warrants to purchase 400,000 shares of common stock (valued at $20,000) ("Bridge
Warrants") which have been accounted for as a debt discount increasing the
effective interest rate to 19%. These warrants are identical to the Warrants
discussed in Note 3, except that they are not redeemable by the Company until 90
days after the consummation of a Business Combination.
    
 
   
NOTE 6 -- COMMON STOCK:
    
 
   
     The Company has 4,300,000 shares of common stock reserved for issuance upon
exercise of the Warrants, the Bridge Warrants and underwriters' warrants.
    
 
   
NOTE 7 -- PREFERRED STOCK:
    
 
   
     The Company is authorized to issue 1,000,000 shares of preferred stock with
such designations, voting and other rights and preferences as may be determined
from time to time by the Board of Directors.
    
 
                                       F-9
<PAGE>   122
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and
Stockholders of Encore Orthopedics, Inc.
 
   
     In our opinion, the accompanying balance sheets and the related statements
of income, of changes in stockholders' equity and of cash flows present fairly,
in all material respects, the financial position of Encore Orthopedics, Inc. at
December 31, 1995 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
    
 
   
     As explained in Note 2, the Company executed a definitive agreement on
November 12, 1996 to merge with Healthcare Acquisition Inc., a wholly-owned
subsidiary of Healthcare Acquisition Corp., a publicly traded, specified purpose
acquisition company. The merger is contingent upon, among other matters, the
approval of the shareholders of both companies.
    
 
PRICE WATERHOUSE LLP
 
Austin, Texas
   
February 7, 1997
    
 
                                      F-10
<PAGE>   123
 
                            ENCORE ORTHOPEDICS, INC.
 
   
                                 BALANCE SHEETS
    
   
                       (IN THOUSANDS, EXCEPT SHARE DATA)
    
 
   
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              -----------------
                                                               1995      1996
                                                              -------   -------
<S>                                                           <C>       <C>
                                    ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 1,200   $   472
  Accounts receivable, net of allowance for doubtful
     accounts of $15 and $91, respectively..................    2,416     4,467
  Inventories...............................................    5,725     9,912
  Prepaid expenses and other current assets.................      508       537
                                                              -------   -------
          Total current assets..............................    9,849    15,388
Property and equipment, net.................................    2,519     3,931
Other noncurrent assets.....................................      389       956
                                                              -------   -------
          Total assets......................................  $12,757   $20,275
                                                              =======   =======
                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt.........................  $    93   $ 2,464
  Current portion of payable to a related party.............      200       300
  Accounts payable and accrued expenses.....................    2,325     2,612
                                                              -------   -------
          Total current liabilities.........................    2,618     5,376
                                                              -------   -------
Long-term debt, net of current portion......................    3,079     4,913
Payable to a related party, net of current portion..........    1,400     1,100
                                                              -------   -------
          Total liabilities.................................    7,097    11,389
                                                              =======   =======
Commitments and contingencies
Common stock put warrants...................................      490     2,297
Stockholders' equity:
  Preferred stock, $1.00 par value, 5,000,000 authorized
     shares, 332,000 and 587,000 shares issued and
     outstanding, respectively..............................    1,660     2,935
     Common stock, $0.01 par value, 15,000,000 shares
      authorized, 5,929,000 and 6,334,000 shares issued and
      outstanding, respectively.............................       59        63
Additional paid-in capital and deferred compensation........    5,391     6,258
Accumulated deficit.........................................   (1,940)   (2,667)
                                                              -------   -------
          Total stockholders' equity........................    5,170     6,589
                                                              -------   -------
          Total liabilities and stockholders' equity........  $12,757   $20,275
                                                              =======   =======
</TABLE>
    
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-11
<PAGE>   124
 
                            ENCORE ORTHOPEDICS, INC.
 
                            STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
   
<TABLE>
<CAPTION>
                                                                  FOR THE YEAR ENDED
                                                                     DECEMBER 31,
                                                              --------------------------
                                                               1994     1995      1996
                                                              ------   -------   -------
<S>                                                           <C>      <C>       <C>
Sales.......................................................  $6,153   $10,878   $14,454
Sales to related distributors...............................   1,609     2,913     3,167
                                                              ------   -------   -------
          Total sales.......................................   7,762    13,791    17,621
Cost of sales...............................................   2,434     4,208     4,588
Cost of sales to related distributors.......................     841     1,532     1,470
                                                              ------   -------   -------
          Total cost of sales...............................   3,275     5,740     6,058
                                                              ------   -------   -------
Gross margin................................................   4,487     8,051    11,563
Operating expenses:
  Selling, general and administrative.......................   3,594     5,457     8,175
  Research and development..................................     727       836     1,259
                                                              ------   -------   -------
Income from operations......................................     166     1,758     2,129
Interest income.............................................     110        86        49
Interest expense............................................      (3)     (280)     (954)
Other income (expense)......................................     181      (105)      (47)
                                                              ------   -------   -------
Income before income taxes..................................     454     1,459     1,177
Current provision for income taxes..........................       7        51       144
                                                              ------   -------   -------
          Net Income........................................  $  447   $ 1,408   $ 1,033
                                                              ======   =======   =======
Net income..................................................  $  447   $ 1,408   $ 1,033
Preferred stock dividends...................................      (5)       (3)       (3)
Change in redemption amount of put warrants.................      --       (35)   (1,266)
                                                              ------   -------   -------
Net income (loss) applicable to common stock................  $  442   $ 1,370   $  (236)
                                                              ======   =======   =======
Net income (loss) applicable to common stockholders per
  share.....................................................  $ 0.07   $  0.20   $ (0.04)
                                                              ======   =======   =======
Weighted average shares outstanding.........................   6,624     6,941     6,149
                                                              ======   =======   =======
Pro Forma Data (Note 1):
  Unaudited pro forma net income............................                     $ 1,033
                                                                                 =======
  Unaudited pro forma equivalent net income per share.......                     $  0.12
                                                                                 =======
  Weighted average equivalent shares outstanding............                       8,287
                                                                                 =======
</TABLE>
    
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-12
<PAGE>   125
 
                            ENCORE ORTHOPEDICS, INC.
 
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
   
<TABLE>
<CAPTION>
                             PREFERRED
                               STOCK         COMMON STOCK     ADDITIONAL           STOCKHOLDER                     TOTAL
                          ---------------   ---------------    PAID-IN     DEF.       NOTE       ACCUMULATED   STOCKHOLDERS'
                          SHARES   AMOUNT   SHARES   AMOUNT    CAPITAL     COMP.   RECEIVABLE      DEFICIT        EQUITY
                          ------   ------   ------   ------   ----------   -----   -----------   -----------   -------------
<S>                       <C>      <C>      <C>      <C>      <C>         <C>      <C>           <C>           <C>
BALANCE AT DECEMBER 31,
  1993..................    504   $2,520    5,342    $  53      $4,558    $  --      $(1,060)      $(3,760)       $ 2,311
Issuance of common
  stock.................     --       --      221        2         515       --           --            --            517
Net income..............     --       --       --       --          --       --           --           447            447
                           ----   ------    -----    -----      ------    -----      -------       -------        -------
BALANCE AT DECEMBER 31,                                    
  1994..................    504    2,520    5,563       55       5,073       --       (1,060)       (3,313)         3,275
Issuance of common                                         
  stock.................     --       --      404        4         294       --           --            --            298
Collections on note                                        
  receivable from                                          
  stockholder...........     --       --       --       --          --       --          200            --            200
Redemption of preferred                                    
  stock.................   (172)    (860)      --       --          --       --          860            --             --
Change in redemption                                       
  amount of put                                            
  warrants..............     --       --       --       --          --       --           --           (35)           (35)
Deferred compensation...     --       --       --       --          --      (41)          --            --            (41)
Amortization of deferred                                   
  compensation..........     --       --       --       --          --       32           --            --             32
Other...................     --       --      (38)      --          33       --           --            --             33
Net income..............     --       --       --       --          --       --           --         1,408          1,408
                           ----   ------    -----    -----      ------    -----      -------       -------        -------
BALANCE AT DECEMBER 31,                                    
  1995..................    332    1,660    5,929       59       5,400       (9)          --        (1,940)         5,170
Issuance of preferred                                      
  stock.................    255    1,275       --       --          --       --           --            --          1,275
Issuance of common                                         
  stock.................     --       --      316        3         409       --           --            --            412
Change in redemption                                       
  amount of put                                            
  warrants..............     --       --       --       --          --       --           --        (1,266)        (1,266)
Stock dividend of pooled                                   
  company...............     --       --       89        1         442       --           --          (443)            --
Adjustment to conform                                      
  year end of pooled                                       
  company...............     --       --       --       --          --       --           --           (24)           (24)
Deferred compensation...     --       --       --       --         160     (160)          --            --             --
Amortization of deferred                                   
  compensation..........     --       --       --       --          --       16           --            --             16
Other...................     --       --       --       --          --       --           --           (27)           (27)
Net income..............     --       --       --       --          --       --           --         1,033          1,033
                           ----   ------    -----    -----      ------    -----      -------       -------        -------
BALANCE AT DECEMBER 31,                                    
  1996..................    587   $2,935    6,334    $  63      $6,411    $(153)     $    --       $(2,667)       $ 6,589
                           ====   ======    =====    =====      ======    =====      =======       =======        =======
</TABLE>                                                   
    
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-13
<PAGE>   126
 
                            ENCORE ORTHOPEDICS, INC.
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
   
<TABLE>
<CAPTION>
                                                             FOR THE YEAR ENDED DECEMBER 31,
                                                            ---------------------------------
                                                             1994         1995         1996
                                                            -------      -------      -------
<S>                                                         <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income..............................................  $   447      $ 1,408      $ 1,033
  Adjustments to reconcile net income to net cash used in
     operating activities:
     Depreciation and amortization........................      436          562        1,091
     Gain on sale of property and equipment...............     (181)          --           --
     Amortization of debt discount........................       --           30          138
     Other................................................       --           24          (28)
  Changes in operating assets and liabilities:
     Increase (decrease) in accounts receivable...........   (1,805)         246       (2,051)
     Increase in inventories..............................   (1,146)      (2,560)      (4,187)
     Decrease (increase) in prepaid expenses and other
       assets.............................................       22         (324)        (629)
     Increase (decrease) in accounts payable and accrued
       expenses...........................................    1,751         (312)         287
                                                            -------      -------      -------
          Net cash used in operating activities...........     (476)        (926)      (4,346)
                                                            -------      -------      -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment.....................     (502)      (1,324)      (1,960)
  Proceeds from sale of property and equipment                  521           --           --
                                                            -------      -------      -------
          Net cash provided by (used in) investing
            activities....................................       19       (1,324)      (1,960)
                                                            -------      -------      -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Collections on stockholder note receivable..............       --          200           --
  Proceeds from issuance of preferred stock...............       --           --        1,275
  Proceeds from issuance of common stock..................      517          298          412
  Payment on payable to a related party...................     (100)        (200)        (200)
  Proceeds from debt......................................       --        3,000        4,300
  Payments on debt........................................       --          (78)        (130)
  Payment of debt issuance costs..........................       --         (348)         (48)
  Net change in cash due to conforming fiscal year-end of
     pooled company.......................................       --           --          (31)
                                                            -------      -------      -------
          Net cash provided by financing activities.......      417        2,872        5,578
                                                            -------      -------      -------
  Net increase (decrease) in cash and cash equivalents....      (40)         622         (728)
  Cash and cash equivalents at beginning of year..........      618          578        1,200
                                                            -------      -------      -------
  Cash and cash equivalents at end of year................  $   578      $ 1,200      $   472
                                                            =======      =======      =======
</TABLE>
    
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-14
<PAGE>   127
 
                            ENCORE ORTHOPEDICS, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
1.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
DESCRIPTION OF BUSINESS
 
   
     Encore Orthopedics, Inc. (the "Company"), a Texas corporation, designs,
manufactures, markets and sells products for the orthopedic implant industry
primarily in the United States, Europe and Asia.
    
 
   
     The Company's products are subject to regulation by the Food and Drug
Administration ("FDA") with respect to their sale in the United States, and the
Company must obtain FDA authorization to market each of its products before they
can be sold in the United States. Additionally, the Company is subject to
similar regulations in many of the international countries in which it sells
products.
    
 
   
     As explained in Note 2, the Company has agreed to merge with Healthcare
Acquisition, Inc., a wholly-owned subsidiary of Healthcare Acquisition Corp.
("HCAC"). The merger is contingent upon, among other matters, the approval of
the shareholders of both companies.
    
 
BASIS OF PRESENTATION
 
   
     In May 1996, the Company acquired the net assets of Applied Osteo Systems,
Inc. ("AOS") in exchange for 1,306,073 shares of the Company's common stock.
This acquisition has been accounted for as a pooling of interests and,
accordingly, the accompanying financial statements have been restated for all
periods to include the accounts of AOS. See Note 2. AOS had previously reported
on a February 28 fiscal year end. As such, its accounts for the years ended
February 28, 1995 and February 29, 1996 have been combined with the accounts of
the Company for the years ended December 31, 1994 and 1995, respectively. The
duplication of the AOS results of operations for the two months ended February
29, 1996 has been reflected as an adjustment to the accumulated deficit. Sales
and net income of AOS for this two-month period were approximately $256,000 and
$24,000, respectively.
    
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
CASH AND CASH EQUIVALENTS
 
     Cash consists of deposits with financial institutions. The Company
considers all highly liquid investments with original maturities of less than
three months to be cash equivalents.
 
INVENTORIES
 
   
     Inventories are stated at the lower of cost or market, with cost being
determined under the first in, first out method.
    
 
PROPERTY AND EQUIPMENT
 
     Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets which range from three to seven years.
Leasehold improvements and assets subject to capital lease are amortized using
the straight-line method over the terms of the leases or lives of the assets, if
shorter. Maintenance and repairs are expensed as incurred.
 
                                      F-15
<PAGE>   128
 
                            ENCORE ORTHOPEDICS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
OTHER NONCURRENT ASSETS
 
   
     Other noncurrent assets consist primarily of the noncurrent portion of
advanced commissions to sales representatives of $600,000 and the unamortized
portion of deferred debt issuance costs of $354,000. The advanced commissions
are offset against future sales commissions earned, and deferred debt issuance
costs are being amortized over the period of the related debt. Amortization
expense related to deferred debt issuance costs totaled $-- , $35,000 and
$85,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
    
 
COMMON STOCK PUT WARRANTS
 
   
     The common stock put warrants were issued in 1995 and 1996 and are further
described in Notes 6 and 7. Changes in the estimate of the redemption amount
from the date of issuance have been recognized on a prospective basis as a
charge to the accumulated deficit.
    
 
REVENUE RECOGNITION
 
     The Company's products are sold through a network of sales representatives
and distributors. Revenues from sales made by representatives, who are paid
commissions upon the ultimate sale of the products, are recorded at the time the
product is utilized in a surgical procedure. Revenues from sales to distributors
are recorded when the product is shipped to the distributor. The distributors,
who sell the products to other customers, take title to the products and have no
right of return.
 
RESEARCH AND DEVELOPMENT
 
   
     Research and development expenses relate primarily to the technological
development and enhancement of reconstructive and trauma devices. Research and
development costs are charged to expense as incurred.
    
 
INCOME TAXES
 
     The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".
Under SFAS No. 109, the asset and liability approach requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of assets
and liabilities. See Note 9.
 
NET INCOME (LOSS) PER SHARE
 
   
     Net income (loss) per share is computed based on the weighted average
number of outstanding common and common equivalent shares, which includes
preferred stock, stock options and warrants, using the treasury stock method.
Common equivalent shares are not included in the per share calculation where the
effect of their inclusion would be anti-dilutive.
    
 
UNAUDITED PRO FORMA EQUIVALENT NET INCOME PER SHARE
 
   
     Unaudited pro forma equivalent net income per share has been presented to
give effect to the proposed merger with a subsidiary of HCAC, as discussed in
Note 2. Unaudited pro forma equivalent net income per share is based on (1) net
income (loss) applicable to common stockholders adjusted by adding back
cumulative dividends on preferred stock (the preferred stock will be exchanged
for HCAC common stock) and the change in the redemption amount of the common
stock put warrants (since the redemption feature of the common stock put
warrants will terminate in connection with the merger transaction), and (2)
weighted average common shares outstanding adjusted by the minimum exchange
ratio for the exchange of HCAC common stock issued for the outstanding shares of
preferred and common stock of the Company. Pro forma weighted average equivalent
shares outstanding includes dilutive stock options and warrants, using the
treasury stock method, adjusted by the conversion ratio discussed above.
    
 
                                      F-16
<PAGE>   129
 
                            ENCORE ORTHOPEDICS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The carrying amounts of the Company's financial instruments, including cash
and cash equivalents, trade accounts receivable and payable, long-term debt and
the common stock put warrants approximate fair values.
 
RECENT PRONOUNCEMENT
 
   
     Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting
for Stock-Based Compensation". SFAS No. 123 introduces a fair-value based method
of accounting for stock-based compensation. It encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock options
and other equity instruments to employees based on their estimated fair market
value on the date of grant. The Company has opted to continue to apply the
existing accounting rules contained in Accounting Principles Board Opinion
("APB") No. 25, "Accounting for Stock Issued to Employees". As such, SFAS No.
123 did not have any effect on the Company's financial position or results of
operations.
    
 
   
2.  ACQUISITIONS
    
 
   
HCAC MERGER
    
 
   
     In November 1996, the Company and a wholly-owned subsidiary of HCAC, a
publicly traded, specified purpose acquisition company ("SPAC(R)"), executed a
definitive agreement and plan of merger. The merger is contingent upon, among
other matters, the approval of the shareholders of both the Company and HCAC at
meetings which are currently anticipated to be held in March 1997. HCAC has no
operations and reported a net loss of $39,000 for the period from inception
(March 21, 1995) to December 31, 1995 and net income of $108,000 for the year
ended December 31, 1996. At December 31, 1996, HCAC's financial position
consisted of approximately $8.9 million in cash (approximately $1.7 million of
which is subject to redemption by certain of its shareholders should they not
vote in favor of the merger) and $301,000 in liabilities. The merger, if
completed, will be effected by HCAC issuing HCAC common shares and warrants with
an exercise price of $7.00 ("HCAC $7.00 warrants") for each common and preferred
share of the Company in accordance with the exchange ratio set forth in the
agreement and plan of merger.
    
 
   
     In addition, outstanding options and warrants to purchase common stock of
the Company will be exchanged for options and warrants to purchase HCAC common
shares and HCAC $7.00 warrants based on the exchange ratio discussed above.
    
 
   
     These exchange ratios are based on assumptions set forth in the Joint Proxy
Statement/Prospectus being filed as part of the transaction.
    
 
   
     For financial reporting and accounting purposes, the merger will be
accounted for as a recapitalization of the Company, with the issuance of shares
by the Company for the net assets of HCAC, consisting primarily of cash. Since
HCAC is a SPAC(R) with no business operations other than the search for a
suitable target business, its assets will be recorded in the balance sheet of
the combined company at book value.
    
 
   
     If completed, the merger may result in limitations on the ultimate use of
the Company's net operating loss carryforwards, and the put feature associated
with the warrants of the Company will terminate.
    
 
   
AOS ACQUISITION
    
 
   
     As described in Note 1, the Company acquired the net assets of AOS in May
1996 in exchange for 1,306,073 shares of the Company's common stock. AOS
designed, marketed and sold trauma-related orthopedic products in the United
States, Europe and Asia. The acquisition has been accounted for as a pooling of
interests and, accordingly, the accompanying financial statements have been
restated for all periods
    
 
                                      F-17
<PAGE>   130
 
                            ENCORE ORTHOPEDICS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
   
to include the accounts of AOS. Sales and net income of the separate companies
for the periods preceding the acquisition were as follows (in thousands):
    
 
   
<TABLE>
<CAPTION>
                                                             ENCORE     AOS      TOTAL
                                                             -------   ------   -------
<S>                                                          <C>       <C>      <C>
Year ended December 31, 1994
  Sales....................................................  $ 6,240   $1,522   $ 7,762
  Net income...............................................      381       66       447
Year ended December 31, 1995
  Sales....................................................   12,024    1,767    13,791
  Net income...............................................    1,196      212     1,408
</TABLE>
    
 
3.  INVENTORIES
 
     Inventories consists of the following (in thousands):
 
   
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              ----------------
                                                               1995      1996
                                                              ------    ------
<S>                                                           <C>       <C>
Components and raw materials................................  $1,138    $1,563
Work in process.............................................     565       985
Finished goods..............................................   4,022     7,364
                                                              ------    ------
                                                              $5,725    $9,912
                                                              ======    ======
</TABLE>
    
 
4.  PROPERTY AND EQUIPMENT
 
     Property and equipment consists of the following (in thousands):
 
   
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              -----------------
                                                               1995      1996
                                                              -------   -------
<S>                                                           <C>       <C>
Equipment...................................................  $ 2,345   $ 3,081
Furniture and fixtures......................................      757       772
Leasehold improvements......................................      212       341
Surgical instrumentation devices............................    1,402     2,835
                                                              -------   -------
                                                                4,716     7,029
Less -- accumulated depreciation and amortization...........   (2,197)   (3,098)
                                                              -------   -------
                                                              $ 2,519   $ 3,931
                                                              =======   =======
</TABLE>
    
 
   
     Depreciation and amortization expense relating to property and equipment
for the years ended December 31, 1994, 1995 and 1996, was $432,000, $527,000 and
$990,000 respectively.
    
 
                                      F-18
<PAGE>   131
 
                            ENCORE ORTHOPEDICS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
5.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES
 
     Accounts payable and accrued expenses consists of the following (in
thousands):
 
   
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                              ---------------
                                                               1995     1996
                                                              ------   ------
<S>                                                           <C>      <C>
Accounts payable............................................  $1,571   $1,139
Accrued wages and related expenses..........................     227      310
Accrued commissions.........................................     280      465
Accrued royalties...........................................     108      212
Accrued taxes...............................................     133      334
Other accrued liabilities...................................       6      152
                                                              ------   ------
                                                              $2,325   $2,612
                                                              ======   ======
</TABLE>
    
 
6.  LONG-TERM DEBT AND LEASES
 
LONG-TERM DEBT
 
     Long-term debt (including capital lease obligations and a payable to a
related party) consists of the following (in thousands):
 
   
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              ----------------
                                                               1995      1996
                                                              ------    ------
<S>                                                           <C>       <C>
Note payable to a corporation; interest at 13.5% per annum,
  payable monthly; secured by all assets of the Company,
  subordinated to accounts receivable, inventory and
  surgical instrumentation; principal due in July 2000......  $3,000    $3,000
Note payable to a corporation; interest at 13% per annum,
  payable monthly; secured by all assets of the Company,
  subordinated to accounts receivable, inventory and
  surgical instrumentation; principal due in February
  2001......................................................      --     2,000
Less -- unamortized discount on the above notes.............    (349)     (653)
                                                              ------    ------
                                                               2,651     4,347
$5,000,000 revolving line of credit from a financial
  institution; interest at institution's base rate, plus 1%
  (9.25% at December 31, 1996), payable monthly; secured by
  all accounts receivable, inventory and surgical
  instrumentation; commitment fee of 0.25% of unused
  balance, payable quarterly; due July 1997; available
  borrowings at December 31, 1996 of $3,876,000, calculated
  as a percentage of eligible receivables and inventories,
  less a related letter of credit of $240,000...............      --     2,300
Non-interest bearing, unsecured payable to a related party,
  principal payable through March 1999 or due in full upon
  the closing of an initial public offering of the Company's
  common stock or certain other corporate transactions (see
  Note 10)..................................................   1,600     1,400
Capital lease obligations, secured by related equipment.....     521       730
                                                              ------    ------
                                                               4,772     8,777
Less -- current portion.....................................     293     2,764
                                                              ------    ------
                                                              $4,479    $6,013
                                                              ======    ======
</TABLE>
    
 
   
     The debt agreements related to the notes payable to a corporation and the
revolving line of credit contain warranties and covenants and require
maintenance of certain financial ratios. Default on any warranty or
    
 
                                      F-19
<PAGE>   132
 
                            ENCORE ORTHOPEDICS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
   
covenant could affect the ability to borrow under the agreements and, if not
waived or corrected, could accelerate the maturity of any borrowings outstanding
under the applicable agreement.
    
 
   
     In connection with negotiating the notes payable to a corporation, the
Company issued warrants in 1995 and 1996 to purchase 291,550 and 174,905 shares
of the Company's common stock, respectively, at an exercise price of $0.01 per
share. Both warrants were immediately exercisable and expire five years from the
date of issuance (see Note 7). The Company valued these warrants at $379,000 and
$332,000, respectively, and such amounts have been reflected as a discount to
the related debt.
    
 
   
     The discount is being amortized using the effective interest method over
the term of the related debt. The Company recorded $30,000 and $138,000 related
to the amortization of the discount during the years ended December 31, 1995 and
1996, with such amounts reflected in the accompanying financial statements as
interest expense.
    
 
   
     At December 31, 1996, the aggregate amount of annual principal maturities
of long-term debt (excluding capital lease obligations) is as follows (in
thousands):
    
 
   
<TABLE>
<CAPTION>
  YEAR ENDING
  DECEMBER 31,
  ------------
  <S>            <C>                                                           <C>
     1997....................................................................  $2,600
     1998....................................................................     300
     1999....................................................................     800
     2000....................................................................   3,000
     2001....................................................................   2,000
                                                                               ------
                                                                               $8,700
                                                                               ======
</TABLE>
    
 
   
     Interest paid totaled $3,000, $220,000 and $816,000 during the years ended
December 31, 1994, 1995 and 1996, respectively.
    
 
   
LEASES
    
 
   
     The Company leases building space, manufacturing facilities and equipment
under noncancelable lease agreements which expire at various dates. At December
31, 1996, future minimum lease payments are as follows (in thousands):
    
 
   
<TABLE>
<CAPTION>
                                                              CAPITAL    OPERATING
                  YEAR ENDING DECEMBER 31,                    LEASES      LEASES
                  ------------------------                    -------    ---------
<S>                                                           <C>        <C>
          1997..............................................   $ 241      $  499
          1998..............................................     241         502
          1999..............................................     241         502
          2000..............................................     171         502
          2001..............................................      23         502
                                                               -----      ------
Total minimum lease payments................................     917      $2,507
                                                                          ======
Less -- amounts representing interest.......................    (187)
                                                               -----
Net minimum lease payments..................................     730
Less -- current portion of obligations under capital
  leases....................................................     164
                                                               -----
                                                               $ 566
                                                               =====
</TABLE>
    
 
   
     Rental expense under operating leases totaled $157,000, $196,000 and
$259,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
    
 
                                      F-20
<PAGE>   133
 
                            ENCORE ORTHOPEDICS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     Leased equipment under capital leases, included in property and equipment
in the accompanying financial statements, is as follows (in thousands):
 
   
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                              -------------
                                                              1995    1996
                                                              ----    -----
<S>                                                           <C>     <C>
Equipment...................................................  $600    $ 952
Less -- accumulated amortization............................   (86)    (168)
                                                              ----    -----
                                                              $514    $ 784
                                                              ====    =====
</TABLE>
    
 
7.  CAPITAL STOCK
 
PREFERRED STOCK
 
     Preferred stock may be issued at the discretion of the Board of Directors
(the "Board") of the Company with such designation, rights and preferences as
the Board may determine from time to time. The preferred stock may have
dividend, liquidation, conversion, voting or other rights which may be more
expansive than the rights of the holders of the common stock. The Company has
5,000,000 shares of authorized preferred stock. During December 1992, the Board
created a series of preferred stock, designated as Series A Preferred Stock,
consisting of 1,000,000 authorized shares with a par value of $1.00 per share.
 
   
     During 1995, the Company redeemed 172,000 of these shares and credited the
unpaid amount of the related note for such redemption.
    
 
     The holders of Series A Preferred Stock are entitled to receive dividends
at the rate of $0.01 per share per annum. The first dividend payment of $0.01
per share accumulated in arrears on March 31, 1994 and the Company will continue
to accumulate a dividend annually in arrears on March 31 of each year. Dividends
on outstanding Series A Preferred Stock will be paid or declared and set apart
for payment before any dividends on outstanding common stock.
 
     Upon liquidation or dissolution of the Company, the holders of Series A
Preferred Stock will be entitled to convert their shares into common stock or to
receive, prior and in preference to any distribution of any of the assets of the
Company to the holders of the common stock, an amount equal to the number of
shares of Series A Preferred Stock owned by such holder multiplied by the
liquidation value per share. The liquidation value per share of Series A
Preferred Stock is equal to $5.00, plus any accrued but unpaid dividends.
 
     Holders of Series A Preferred Stock have the option to convert the Series A
Preferred Stock held into shares of common stock at any time. Each share of
Series A Preferred Stock is currently convertible into one share of common
stock.
 
   
     Pursuant to an effective registration statement under the Securities Act of
1933, as amended, whereby the Company's proceeds equal or exceed $10,000,000,
each outstanding share of Series A Preferred Stock will automatically convert
into common stock based on the conversion rate in effect on that date.
    
 
COMMON STOCK
 
   
     In connection with the sale of certain common stock in 1993, the Company
agreed to adjust the price per share paid for such stock to an amount equal to
the price at which the Company sold common stock during 1994 and 1995 if such
price was less than the per share amount paid. During 1995, the Company issued
102,857 shares of common stock in connection with this agreement.
    
 
STOCK OPTION PLANS
 
   
     The Company has three stock option plans, which are described below. The
Company applies APB No. 25 and related interpretations in accounting for its
plans. Accordingly, no compensation cost has been
    
 
                                      F-21
<PAGE>   134
 
                            ENCORE ORTHOPEDICS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
   
recognized for grants under the stock option plans, except for grants made to
individuals other than employees (as defined in APB No. 25) for services
provided by the Company. The Company has recorded $201,000 in deferred
compensation for the fair value of grants made to individuals other than
employees and is amortizing such amount to income over the vesting period for
the options. Had compensation cost for all stock option grants been determined
based on their fair value at the grant dates consistent with the method
prescribed by SFAS No. 123, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
    
 
   
<TABLE>
<CAPTION>
                                                              FOR THE YEAR ENDED
                                                                 DECEMBER 31,
                                                              ------------------
                                                               1995        1996
                                                              ------      ------
<S>                                                           <C>         <C>
Net income
  As reported...............................................  $1,408      $1,033
  Pro forma.................................................   1,186         647
Net income (loss) applicable to common stock
  As reported...............................................   1,370        (236)
  Pro forma.................................................   1,148        (622)
Net income (loss) applicable to common stock per share
  As reported...............................................    0.22       (0.04)
  Pro forma.................................................    0.19       (0.12)
</TABLE>
    
 
   
     The 1992 Stock Option Plan provides for the grant of both incentive and
non-qualified stock options to directors, employees and certain other persons
affiliated with the Company. The 1993 Distributor Stock Option Plan provides for
the grant of stock options to those who are sales representatives and
distributors of the Company's products, and the 1993 Surgeon Advisory Panel
Stock Option Plan provides for the grant of stock options to those who are
serving as members of the Company's surgeon advisory panel. The stock options
granted under each of these plans are granted at or in excess of fair market
value on the date of grant, vest ratably over a four-year period, unless
determined otherwise by the Board, and generally expire no more than 10 years
from the date of grant. At December 31, 1996, the Company had reserved 4,000,000
shares of common stock for the plans.
    
 
   
     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1995 and 1996:
    
 
   
<TABLE>
<CAPTION>
                                                               1995         1996
                                                              -------      -------
<S>                                                           <C>          <C>
Employee options --
  Dividend yield............................................   -- %         -- %
  Expected volatility.......................................   -- %         30.0%
  Risk-free interest rate...................................   5.39%        6.01%
  Expected life.............................................  4 years      3 years
Other than employee options --
  Dividend yield............................................   -- %         -- %
  Expected volatility.......................................   -- %         30.0%
  Risk-free interest rate...................................   5.51%        6.01%
  Expected life.............................................  5 years      4 years
</TABLE>
    
 
                                      F-22
<PAGE>   135
 
                            ENCORE ORTHOPEDICS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
   
     A summary of the status of the Company's stock option plans is presented
below:
    
 
   
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                          1994                    1995                    1996
                                  ---------------------   ---------------------   ---------------------
                                              WEIGHTED-               WEIGHTED-               WEIGHTED-
                                               AVERAGE                 AVERAGE                 AVERAGE
                                              EXERCISE                EXERCISE                EXERCISE
                                   SHARES       PRICE      SHARES       PRICE      SHARES       PRICE
                                  ---------   ---------   ---------   ---------   ---------   ---------
<S>                               <C>         <C>         <C>         <C>         <C>         <C>
EMPLOYEE OPTIONS
  Outstanding, beginning of
    year........................    905,000     $0.50     1,264,500     $0.89     2,443,595     $1.08
  Granted --
    At market...................     18,000      0.50     1,253,513      1.40       527,187      1.84
    Above market................    352,000      2.00       304,935      1.51       188,846      2.74
  Exercised.....................         --        --          (500)     0.50      (208,684)     1.37
  Canceled......................    (10,500)     0.50      (378,853)     1.89       (93,867)     1.55
                                  ---------               ---------               ---------
  Outstanding, end of year......  1,264,500      0.89     2,443,595      1.08     2,857,077      1.30
                                  =========               =========               =========
  Options exercisable at year
    end.........................    440,000      0.50     1,577,345      1.05     2,357,827      1.24
  Weighted-average fair value of
    options granted during the
    year --
    At market...................                                        $0.27                   $0.52
    Above market................                                         0.18                    0.38
OTHER THAN EMPLOYEE OPTIONS
  Outstanding, beginning of
    year........................     60,000     $1.00       180,000     $1.67       606,584     $1.95
  Granted --
    At market...................         --        --       198,250      1.40            --        --
    Above market................    120,000      2.00       245,834      2.56       428,500      4.10
  Exercised.....................         --        --            --        --       (85,000)     1.56
  Canceled......................         --        --       (17,500)     1.40      (125,084)     2.76
                                  ---------               ---------               ---------
  Outstanding, end of year......    180,000      1.67       606,584      1.95       825,000      2.98
                                  =========               =========               =========
  Options exercisable at year
    end.........................     15,000      1.00       345,750      1.52       314,750      1.65
  Weighted-average fair value of
    options granted during the
    year --
    At market...................                                        $0.33                   $  --
    Above market................                                         0.08                    0.37
</TABLE>
    
 
   
     The following table summarizes information about stock options outstanding
at December 31, 1996:
    
 
   
<TABLE>
<CAPTION>
                                            OPTIONS OUTSTANDING            OPTIONS EXERCISABLE
                                    -----------------------------------   ---------------------
                                                 WEIGHTED-
                                                  AVERAGE
                                                 REMAINING    WEIGHTED-               WEIGHTED-
             RANGE OF                           CONTRACTUAL    AVERAGE                 AVERAGE
         EXERCISE PRICES             NUMBER        LIFE         PRICE      NUMBER       PRICE
- ----------------------------------  ---------   -----------   ---------   ---------   ---------
                                                  (YEARS)
<S>                                 <C>         <C>           <C>         <C>         <C>
$0.50 to $1.90....................  2,940,231      5.99         $1.20     2,431,981     $1.17
$2.09 to $2.50....................    421,846      6.37          2.45       233,096      2.42
$5.00.............................    320,000      7.55          5.00         7,500      5.00
                                    ---------                             ---------
                                    3,682,077                             2,672,577
                                    =========                             =========
</TABLE>
    
 
                                      F-23
<PAGE>   136
 
                            ENCORE ORTHOPEDICS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
   
COMMON STOCK PUT WARRANTS
    
 
   
     The Company issued a warrant to purchase 291,550 shares of common stock in
connection with obtaining long-term financing. The warrant has an exercise price
of $0.01 per share and is currently exercisable in whole or in part through July
2000. The warrant agreement has a provision whereby the warrant can be put to
the Company for cash for a period of 30 days prior to its expiration. The amount
that would be paid by the Company would be based on the per share fair market
value of the common stock at the date the warrant was put to the Company. The
warrant agreement also contains provisions whereby the number of shares issuable
upon exercise of the warrant are increased if the related debt remains
outstanding on July 31, 1997, 1998 or 1999, or if the Company increases the
number of shares issuable under its stock option plans, with the maximum number
being 443,471 shares. The Company has reserved 443,471 shares of common stock in
connection with this warrant. During 1996, the Company increased the number of
shares issuable under its stock option plans and, as such, the number of shares
exercisable under the warrant was increased by 57,639 shares to 349,189 shares.
Also during 1996, the Company issued a warrant to purchase 174,905 shares of
common stock in connection with obtaining additional long-term financing. The
warrant has an exercise price of $0.01 per share and is currently exercisable in
whole or in part through February 2001. The warrant agreement also provides for
additional shares to be issuable upon exercise of the warrant if the related
debt remains outstanding on certain dates and if the Company increases the
number of shares issuable under its stock option plans, and it includes a put
feature consistent with that discussed above. The Company has reserved 490,617
shares of its common stock in connection with this warrant.
    
 
   
     During 1995, the Company issued a warrant to a corporation to purchase
58,310 shares of common stock for professional services rendered in connection
with obtaining long-term financing. The Company valued this warrant at
approximately $76,000 and has reflected this as a deferred debt issuance cost
within other noncurrent assets. The warrant has an exercise price of $0.01 per
share and is currently exercisable in whole or in part through August 2000. The
warrant agreement has a put feature consistent with that discussed above, and
the Company has reserved 58,310 shares of common stock in connection with this
warrant. During 1996, the Company issued a warrant to purchase 52,125 shares of
common stock to the same corporation for consulting services to be rendered over
a 12-month period. The warrant value of approximately $99,000 is being amortized
ratably over the consulting period. The warrant has an exercise price of $0.01
per share and is currently exercisable in whole or in part through February
2001. The warrant agreement also includes a put feature consistent with that
discussed above, and the Company has reserved 52,125 shares of its common stock
in connection with this warrant.
    
 
   
     Changes in the estimate of the redemption amount of the common stock put
warrants are based on independent professional appraisals and estimates made by
management. The following illustrates the change in the estimated redemption
amount through December 31, 1996 (in thousands):
    
 
   
<TABLE>
<S>                                                           <C>
Balance at December 31, 1994................................  $   --
  Issuance of warrants......................................     455
  Change during 1995........................................      35
                                                              ------
Balance at December 31, 1995................................     490
  Issuance of warrants......................................     541
  Change during 1996........................................   1,266
                                                              ------
Balance at December 31, 1996................................  $2,297
                                                              ======
</TABLE>
    
 
                                      F-24
<PAGE>   137
 
                            ENCORE ORTHOPEDICS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
8.  INTERNATIONAL SALES AND SIGNIFICANT CUSTOMERS
 
   
     During the years ended December 31, 1994, 1995 and 1996, the Company's
international sales were primarily to three foreign distributors, two of which
individually account for more than 10% of total Company sales during such
periods. Following are the Company's international sales by geographic area (in
thousands) and the percentage of total Company sales generated by two of the
distributors:
    
 
   
<TABLE>
<CAPTION>
                                                                 FOR THE YEAR ENDED
                                                                    DECEMBER 31,
                                                              ------------------------
                                                               1994     1995     1996
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Europe......................................................  $3,574   $6,635   $7,635
Asia........................................................     688    1,338    1,075
                                                              ------   ------   ------
                                                              $4,262   $7,973   $8,710
                                                              ======   ======   ======
Customer A..................................................      28%      33%      29%
Customer B..................................................      18       15       14
</TABLE>
    
 
   
     Accounts receivable of approximately $2,309,000 from Customers A and B
represented 52% of the Company's accounts receivable at December 31, 1996.
    
 
9.  INCOME TAXES
 
   
     The difference in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before income taxes result
from the following (in thousands):
    
 
   
<TABLE>
<CAPTION>
                                                                FOR THE YEAR ENDED
                                                                   DECEMBER 31,
                                                              ----------------------
                                                              1994    1995     1996
                                                              ----    -----    -----
<S>                                                           <C>     <C>      <C>
Tax (benefit) at statutory rate.............................  $154    $ 496    $ 400
Add (deduct) the effect of --...............................
  FSC benefit...............................................    --       --      (37)
  State income taxes........................................    --       11        8
  Change in valuation allowance.............................    19     (107)    (127)
  Nondeductible expenses and other, net.....................   (72)      11       12
  Utilization of net operating loss carryforwards...........   (94)    (390)    (115)
  Alternative minimum taxes.................................    --       30        3
                                                              ----    -----    -----
                                                              $  7    $  51    $ 144
                                                              ====    =====    =====
</TABLE>
    
 
                                      F-25
<PAGE>   138
 
                            ENCORE ORTHOPEDICS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     The components of deferred income tax assets and liabilities are as follows
(in thousands):
 
   
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                              --------------
                                                              1995     1996
                                                              -----    -----
<S>                                                           <C>      <C>
Deferred tax assets:
  Net operating loss carryforwards..........................  $ 186    $  71
  Purchased technology......................................    178       35
  Research and development credit carryforwards.............    142      161
  Minimum tax credit carryforward...........................     38       43
  Inventory and other reserves..............................    262      291
  Other.....................................................     67      100
                                                              -----    -----
          Deferred tax assets...............................    873      701
Deferred tax liability:
  Depreciation..............................................    (96)    (164)
                                                              -----    -----
          Net deferred tax asset............................    777      537
          Valuation allowance...............................   (777)    (537)
                                                              -----    -----
                                                              $  --    $  --
                                                              =====    =====
</TABLE>
    
 
   
     The Company's net operating loss and research and development credit
carryforwards of approximately $208,000 and $161,000 expire by 2006 and 2005,
respectively. In 1996, upon the acquisition of AOS, the Company experienced
substantial changes in ownership as defined by the Internal Revenue Code. These
changes result in annual limitations on the amount of net operating loss
carryforward generated by AOS prior to the acquisition which can be utilized to
offset future taxable income. The portion of the carryforward available for
utilization in 1997 is $131,000. The remainder will become available in 1998.
Additional limitations may be placed on the utilization of carryforwards if
further substantial changes in the Company's ownership occur.
    
 
   
     Due to the uncertainty surrounding the timing of realizing the benefits of
its favorable tax attributes in future tax returns, the Company has placed a
valuation allowance against its otherwise recognizable net deferred tax asset.
Accordingly, no deferred taxes have been provided for the years ended December
31, 1994, 1995 and 1996.
    
 
   
     Taxes paid totaled $ -- , $20,000 and $165,999 for the year ended December
31, 1994, 1995 and 1996.
    
 
10.  RELATED PARTY TRANSACTIONS
 
     Certain of the Company's international sales are made to two distributors
which are owned in part by an individual and two companies controlled by the
same individual who have an aggregate ownership interest in the Company of
approximately 10%. In addition, this individual had been a member of the Board
of the Company. Sales and cost of sales to these related distributors are
separately reflected in the accompanying financial statements.
 
   
     Effective April 1, 1992, a stockholder of the Company sold certain
intellectual property, including trade secrets, manufacturing processes,
instrumentation, technical knowledge and patent rights for a knee device to the
Company for $2,000,000. The Company contracted to pay annually the greater of an
amount equal to 1.08% of the total gross sales related to sales of any knee
systems incorporating material elements of this knee device (not to exceed
$2,000,000) or certain fixed payments (without interest) through March 31, 1999.
The Company recorded the related asset at the stockholder's basis ($ -- ) and
reflected $2,000,000 in long-term debt. The excess of consideration paid over
the stockholder's basis was charged to stockholders' equity. See Note 6.
    
 
                                      F-26
<PAGE>   139
 
                            ENCORE ORTHOPEDICS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
   
     Prior to December 31, 1993, the Company had certain amounts which were
receivable from two stockholders totaling $118,000. The stockholders provided
consulting services to the Company during 1994 in full satisfaction of the
receivable. The receivable was amortized over 12 months in 1994.
    
 
     Additionally, the Company rents manufacturing facilities from certain of
its stockholders. The lease commenced on April 1, 1992 and will expire on March
31, 1997. Rental expense is $8,600 per month for the facilities. See Note 6.
 
   
11.  COMMITMENTS AND CONTINGENCIES
    
 
   
     As of December 31, 1996, the Company had entered into purchase commitments
for inventory, capital acquisitions and other services totalling $1,120,000 in
the ordinary course of business.
    
 
   
     The Company is, from time to time, subject to claims and suits for damages
arising in the normal course of business. The Company maintains insurance which
management believes would cover substantially most claims.
    
 
   
12.  EMPLOYEE BENEFIT PLAN
    
 
   
     The Company has a qualified defined contribution plan which allows for
voluntary pre-tax contributions by the employees. The Company pays all general
and administrative expenses of the plan and may make contributions to the plan.
During 1995 and 1996, the Company made matching contributions of $48,000 and
$158,000 to the plan based on 50% and 100%, respectively, of the first 6% of
employee contributions. The Company's matching contribution in 1995 was made by
the issuance of 34,442 shares of the Company's common stock. No contributions
were made prior to 1995.
    
 
                                      F-27
<PAGE>   140
 
                                                                      APPENDIX E
 
                         TEXAS BUSINESS CORPORATION ACT
                         DISSENTERS' RIGHTS PROVISIONS
 
ARTICLE 5.11  RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN
CORPORATE ACTIONS
 
     A. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following actions:
 
          (1) Any plan of merger or consolidation to which the corporation is a
     party;
 
          (2) Any sale, lease, exchange or other disposition (not including any
     pledge, mortgage, deed of trust or trust indenture unless otherwise
     provided in the articles of incorporation) of all, or substantially all,
     the property and assets, with or without good will, of a corporation
     requiring the special authorization of the shareholders as provided by this
     Act.
 
ARTICLE 5.12  PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTIONS
 
     A. In case any shareholder of any domestic corporation lawfully elects to
exercise his right to dissent from any of the corporate actions referred to in
the last preceding Article hereof, the following procedure shall be followed:
 
          (1) Such shareholder shall file with the corporation, prior to the
     taking of the vote of shareholders on the proposed corporate action, a
     written objection to such proposed corporate action, setting out that his
     right to dissent will be exercised if such action is effective and giving
     his address, to which notice thereof shall be delivered or mailed in such
     event. If such corporate action be effected and such shareholder shall not
     have voted in favor thereof, the corporation shall, within ten (10) days
     after such corporate action is effected deliver or mail to such shareholder
     written notice thereof, and such shareholder may, within ten days (10) from
     the delivery or mailing of such notice, make written demand on the
     existing, surviving, or new corporation, as the case may be, domestic or
     foreign, for payment of the fair value of his shares. The fair value of
     such shares shall be the value thereof as of the day before the vote was
     taken authorizing such corporate action, excluding any appreciation or
     depreciation in anticipation of such proposed act. Such demand shall state
     the number and class of the shares owned by the dissenting shareholder and
     the fair value of such shares as estimated by him. Any shareholder failing
     to make demand within the ten (10) day period shall be bound by such
     corporate action.
 
          (2) Within twenty (20) days after receipt by the existing, surviving,
     or new corporation, as the case may be, of a demand for payment of the fair
     value of his shares made by such dissenting shareholder in accordance with
     Subsection (1) hereof, such corporation shall deliver or mail to such
     dissenting shareholder a written notice which shall either set out that the
     corporation accepts the amount claimed in such demand and agrees to pay
     such amount within ninety (90) days after the date on which such corporate
     action was effected, upon the surrender of the share certificates duly
     endorsed, or shall contain an estimate by the corporation of the fair value
     of such shares, together with an offer to pay the amount of such estimate
     within ninety (90) days after he date on which such corporate action was
     effected, upon receipt of notice within sixty (60) days after such date
     from such shareholder that he agrees to accept such amount upon the
     surrender of the share certificates duly endorsed.
 
          (3) If, within sixty (60) days after the date on which such corporate
     action was effected the value of such shares is agreed upon between the
     dissenting shareholder and the existing, surviving, or new corporation, as
     the case may be, payment therefor shall be made within ninety (90) days
     after the date on which such corporate action was effected, upon surrender
     of his certificate or certificates representing such shares. Upon payment
     of the agreed value, the dissenting shareholder shall cease to have any
     interest in such shares or in the corporation.
 
     B.  If, within such period of sixty (60) days after the date on which such
corporate action was effected, the shareholder and the existing, surviving, or
new corporation, as the case may be, do not so agree, then the
 
                                       E-1
<PAGE>   141
 
dissenting shareholder or the corporation may, within sixty (60) days after the
expiration of the sixty (60) day period, file a petition in any court of
competent jurisdiction in the county in which the principal office of the
corporation is located, asking for a finding and determination of the fair value
of such shares. Upon the filing of any such petition by a shareholder, service
of a copy thereof shall be made upon the corporation, which shall, within ten
(10) days after such service, file in the office of the clerk of the court in
which such petition was filed a duly verified list containing the names and
addresses of all shareholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the corporation. If the petition shall be filed by the corporation, the petition
shall be accompanied by such a duly verified list. The clerk of the court shall
give notice of the time and place fixed for the hearing of such petition by
registered mail to the corporation and to the shareholders shown upon such list
at the addresses therein stated. The forms of the notices by mail shall be
approved by the court. All shareholders thus notified and the corporation shall
thereafter be bound by the final judgment of the court.
 
     C.  After the hearing of such petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine such value. Such
appraisers shall have power to examine any of the books and records of the
corporation the shares of which they are charged with the duty of valuing, and
they shall make a determination of the fair value of the shares upon such
investigation as to them may seem proper. The appraisers shall also afford a
reasonable opportunity to the parties interested to submit to them pertinent
evidence as to the value of the shares. The appraisers shall also have such
power and authority as may be conferred on Masters in Chancery by the Rules of
Civil Procedure or by the order of their appointment.
 
     D.  The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment therefor and shall
file their report respecting such value in the office of the clerk of the court,
and notice of the filing of such report shall be given by the clerk to the
parties in interest. Such report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment therefor and shall direct the payment of such value by the existing,
surviving, or new corporation, together with interest thereon, to the date of
such judgment, to the shareholders entitled thereto. The judgment shall be
payable only upon, and simultaneously with, the surrender to the existing,
surviving, or new corporation, as the case may be, of the certificate or
certificates representing such shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in such shares, or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs and all court costs shall be allotted between the parties in such manner
as the court shall determine to be fair and equitable.
 
     E.  Shares acquired by the existing, surviving, or new corporation, as the
case may be, pursuant to the payment of the agreed value thereof or to payment
of the judgment entered therefor, as in this Article provided, may be held and
disposed of by such corporation as in the case of other treasury shares.
 
     F.  The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
 
     G.  In the absence of fraud in the transaction, the remedy provided by this
Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to such shareholder with respect to such
corporate action; and if the existing, surviving, or new corporation, as the
case may be, complies with the requirements of this Article, any such
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to such shareholder with respect to such corporate action.
 
ARTICLE 5.13  PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
 
     A.  Any shareholder who has demanded payment for his shares in accordance
with Article 5.12 shall not thereafter be entitled to vote or exercise any other
rights of a shareholder except the right to receive payment
 
                                       E-2
<PAGE>   142
 
for his shares pursuant to the provisions of said Article 5.12 and the right to
maintain an appropriate action to obtain relief on the ground that the corporate
action would be or was fraudulent, and the respective shares for which payment
has been demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
 
     B.  Within twenty (20) days after demanding payment for his shares in
accordance with Article 5.12, each shareholder so demanding payment shall submit
the certificate or certificates representing his shares to the corporation for
notation thereon that such demand has been made. His failure so to do shall, at
the option of the corporation, terminate his rights under Article 5.12 unless a
court of competent jurisdiction for good and sufficient cause shown shall
otherwise direct. If shares represented by a certificate on which notation has
been so made shall be transferred, each new certificate issued therefor shall
bear similar notation together with the name of the original dissenting holder
of such shares and a transferee of such shares shall acquire by such transfer no
rights in the corporation other than those which the original dissenting
shareholder had after making demand for payment of the fair value thereof.
 
     C.  Any shareholder who has demanded payment for his shares in accordance
with Article 5.12 may withdraw such demand at any time before payment for his
shares or before any petition has been filed pursuant to Article 5.12 asking for
a finding and determination of the fair value of such shares, but no such demand
may be withdrawn after such payment has been made or, unless the corporation
shall consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinabove provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12, or if no petition asking for a finding and determination of fair
value of such shares by a court shall have been filed within the time provided
in Article 5.12, or if after the hearing of a petition filed pursuant to Article
5.12, the court shall determine that such shareholder is not entitled to the
relief provided by Article 5.12, then, in any such case, such shareholder and
all persons claiming under him shall be conclusively presumed to have approved
and ratified the corporate action from which he dissented and shall be bound
thereby, the right of such shareholder to be paid the fair value of his shares
shall cease, and his status as a shareholder shall be restored without prejudice
to any corporate proceedings which may have been taken during the interim, and
such shareholder shall be entitled to receive any dividends or other
distributions made to shareholders in the interim.
 
                                       E-3
<PAGE>   143
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 20.  INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
DELAWARE GENERAL CORPORATION LAW
 
     Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of, and advancement of expenses to, directors, officers,
employees and agents of a corporation under certain conditions and subject to
certain limitations, as set forth below. Such indemnification and advancement of
expenses may be continued even if a person ceases to serve as a director,
officer, employee or agent of the corporation and may inure to such person's
heirs, executors or administrators.
 
     Section 145(a) empowers a corporation to indemnify any person who is or was
a party or is threatened to be made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of a corporation, by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or any other enterprise if he is or was serving such enterprise
at the request of the corporation. A corporation may indemnify such person
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with an action,
suit or proceeding, if such person acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, if he had
no reasonable cause to believe his conduct was unlawful. The termination of a
suit, action or other proceeding, or the entry of a plea of nolo contendere, or
its equivalent, does not of itself create a presumption, under Section 145, that
the person to be indemnified did not act in good faith, in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, or in the case of a criminal action, that he had reasonable cause
to believe his conduct was unlawful.
 
     Under Section 145(b), the indemnification a corporation may offer is
extended to include indemnification for expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement of
an action by or in the right of a corporation, to procure a judgment in its
favor, as long as the director, officer, employee or agent to be indemnified
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation; provided, however, that such
indemnification may not be extended to cover any claim, issue, or matter as to
which such person shall have been adjudged to be liable to the corporation
unless, and only to the extent that, the Court of Chancery, or such other court
in which the action, suit or proceeding was brought, shall determine upon
application that despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses as the court deems proper. In addition,
Section 145(c) provides for mandatory indemnification by a corporation,
including indemnification for expenses (including attorneys' fees) actually and
reasonably incurred by a director, officer, employee or agent of the
corporation, in the event that such person is successful on the merits or in
defense of any covered action, or in defense of any claim, issue or matter
therein.
 
     A corporation may indemnify a director, officer, employee or agent only as
authorized in the specific instance and only upon a determination that
indemnification is proper, given the facts and circumstances, because that
person has met the applicable standard of conduct set forth in Sections 145(a)
and (b). Section 145(d) states that such a determination may be made by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though the directors able to vote do not constitute a quorum,
or in the absence of any directors able to vote or at the direction of such
directors, by independent legal counsel in a written opinion, or by the
stockholders of the corporation.
 
     Pursuant to Section 145(e), a corporation may indemnify an officer or
director defending a civil, criminal, administrative or investigative action,
suit or proceeding in advance of the final disposition of such action, suit or
proceeding if it receives from such person or from another on behalf of such
person, an undertaking to repay any amount paid in advance if that person is
ultimately determined not to be entitled to indemnification. Expenses incurred
by other employees and agents may be so paid upon terms and conditions deemed
 
                                      II-1
<PAGE>   144
 
appropriate by the board of directors of a corporation. Pursuant to Section
145(k), the Delaware Court of Chancery may summarily determine a corporation's
obligation to advance expenses (including attorneys' fees).
 
     Under Section 145(f), the indemnification and advancement of expenses
provided for by statute is not to be deemed exclusive of the other rights
persons seeking indemnification or advancement of expenses may have under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise,
both as to actions taken in an official capacity and as to actions taken in
another capacity while holding such office.
 
     Section 145(g) grants a corporation power to purchase and maintain an
insurance policy insuring any person who is or was a director, officer, employee
or agent of the corporation or who is or was serving in such capacity for
another corporation, partnership, joint venture, trust or other enterprise at
the request of the corporation, which policy may insure any liability asserted
against the insured in any such capacity, or arising out of his status,
regardless of whether the corporation would otherwise have the power under
Delaware law to indemnify him against such liability.
 
     Section 145(h) states that the power to indemnify granted to any
"corporation" extends to any constituent corporation absorbed in a consolidation
or merger which, had its separate existence continued, would have been
authorized to extend indemnification to its officers, directors, agents and
employees. Pursuant to Section 145(i), employee benefit plans are covered as
"other enterprises" and service at the request of the corporation includes
service, as a director, officer, employee or agent of the corporation, which
imposes duties on or involves services supplied by, such person with respect to
an employee benefit plan, its beneficiaries or participants.
 
     The Delaware Court of Chancery is vested with exclusive jurisdiction to
hear and determine actions for indemnification or advancement of expenses
brought under Section 145 or under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
 
ARTICLES OF INCORPORATION AND BYLAWS
 
     The Registrant's Certificate of Incorporation provides, in Article Eighth,
for indemnification to the fullest extent permitted by Delaware law,
specifically providing for the advancement of expenses in accordance with
Section 145(e). Moreover, Registrant's Certificate of Incorporation provides
that a director of the corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of a fiduciary duty as a director,
except for liability for any breach of that director's duty of loyalty to the
corporation or its stockholders, acts or omissions not in good faith or that
involve intentional misconduct or knowing violation of law, violations of
Section 174 of the Delaware General Corporation Law, which regulates directors'
liability for unlawful payments of dividends and unlawful stock purchases and
redemptions, and liability for any actions from which the director derived an
improper personal benefit.
 
     The Bylaws of Registrant, as currently in effect, set forth the provisions
of Section 145 and, thus, also provide for indemnification to the full extent of
Delaware law.
 
   
INSURANCE POLICY
    
 
     The Registrant currently maintains an insurance policy providing
reimbursement of indemnification payments to officers and directors of the
Registrant and reimbursement of certain liabilities incurred by directors and
officers of the Registrant in their capacities as such, to the extent that they
are not indemnified by the Registrant.
 
                                      II-2
<PAGE>   145
 
ITEM 21.  EXHIBITS
 
(a)  Exhibits
 
   
<TABLE>
<CAPTION>
EXHIBIT
  NO.                                  DESCRIPTION
- -------                                -----------
<C>       <S>  <C>
    2     --   Agreement and Plan of Merger dated as of November 12, 1996,
               by and among Healthcare Acquisition Corp. ("HCAC"),
               Healthcare Acquisition, Inc. and Encore Orthopedics, Inc.,
               as amended by an Amendment dated February 14, 1997 (included
               as Appendix A to the Joint Proxy Statement/Prospectus that
               is a part of this Registration Statement and incorporated
               herein by reference).
    3.1   --   Certificate of Incorporation of Healthcare Acquisition
               Corp.(1)
    3.2   --   Form of Amendment to the Certificate of Incorporation of
               HCAC (included as Appendix C to the Joint Proxy
               Statement/Prospectus that is a part of this Registration
               Statement and incorporated herein by reference).
    3.3   --   Bylaws of HCAC.(1)
    4.1   --   Form of HCAC Common Stock Certificate.(2)
    4.2   --   Form of Certificate for HCAC $5.00 Warrant.(2)
    4.3   --   Form of Unit Purchase Option granted to GKN Securities Corp.
               and Gaines, Berland Inc.(2)
    4.4   --   Warrant Agreement between Continental Stock Transfer and
               Trust Company and HCAC with respect to the HCAC $5.00
               Warrants.(1)
    4.5   --   Form of HCAC $7.00 Warrant (included as Exhibit E to the
               Agreement and Plan of Merger, filed as Appendix A to the
               Joint Proxy Statement/Prospectus that is a part of this
               Registration Statement and incorporated herein by
               reference).
    4.6   --   Form of Warrant Agreement, by and between Encore Medical
               Corporation and Continental Stock Transfer and Trust Company
               with respect to the HCAC $7.00 Warrants.*
    5     --   Opinion of Ruden, McClosky, Smith, Schuster & Russell, P.A.
               regarding legality of securities being registered.*
    8     --   Opinion of Sutherland, Asbill & Brennan, L.L.P. regarding
               tax consequences of the Merger.*
   10.1   --   Investment Management Trust Agreement between IBJ Schroder
               Bank & Trust Company and HCAC.(1)
   10.2   --   Stock Escrow Agreement between Continental Stock Transfer
               and Trust Company and HCAC.(1)
   10.3   --   Letter Agreement between GKN Securities Corp. and each of
               the initial stockholders of HCAC.(1)
   10.4   --   Engagement Letter dated December 2, 1996, between Rodman &
               Renshaw, Inc. ("Rodman & Renshaw") and HCAC.*
   10.5   --   Encore Medical Corporation 1996 Incentive Stock Plan
               (included as Appendix D to the Joint Proxy
               Statement/Prospectus that is a part of this Registration
               Statement and incorporated herein by reference).
   11.1   --   Statement Regarding the Computation of Net Income (Loss) Per
               Share regarding Encore Orthopedics, Inc.*
   23.1   --   Consent of Ruden, McClosky, Smith, Schuster & Russell, P.A.
               is contained in its legal opinion filed as Exhibit 5.
   23.2   --   Consent of Sutherland, Asbill & Brennan, L.L.P. is contained
               in its legal opinion filed as Exhibit 8.
   23.3   --   Consent of Richard A. Eisner & Company, L.L.P. regarding
               HCAC.*
   23.4   --   Consent of Price Waterhouse LLP regarding Encore.*
   23.5   --   Consent of Rodman & Renshaw is contained in its opinion
               (included as Appendix B to the Joint Proxy
               Statement/Prospectus that is a part of this Registration
               Statement and incorporated herein by reference).
</TABLE>
    
 
                                      II-3
<PAGE>   146
 
   
<TABLE>
<CAPTION>
EXHIBIT
  NO.                                  DESCRIPTION
- -------                                -----------
<C>       <S>  <C>
   24     --   Power of Attorney is included in Part II of this
               Registration Statement.
   99.1   --   Form of Proxy to be used by HCAC.*
   99.2   --   Form of Proxy to be used by Encore.*
</TABLE>
    
 
- ---------------
 
   
  * Filed with this Registration Statement.
    
 
(1) Filed as an exhibit to Amendment No. 1 to HCAC's Registration Statement on
     Form S-1 (33-92854) filed with the SEC on July 14, 1995.
(2) Filed as an exhibit to Amendment No. 2 to HCAC's Registration Statement on
     Form S-1 (33-92854) filed with the SEC on February 20, 1996.
 
   
     (b)  Financial Statement Schedule
    
 
   
        Schedule II -- Valuation and Qualifying Accounts of Encore for
     the years ended December 31, 1994, 1995 and 1996...............S-1
    
 
   
     (c)  Reports, Opinions, Appraisals
    
 
          Opinion of Rodman & Renshaw, dated December 17, 1996 (included as
     Appendix B to the Joint Proxy Statement/Prospectus that is a part of this
     Registration Statement).
 
   
ITEM 22.  UNDERTAKINGS
    
 
     (1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
 
     (2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
 
     (3) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
 
     (4) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
 
     (5) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
 
                                      II-4
<PAGE>   147
 
                                   SIGNATURES
 
   
     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fort Lauderdale, State of
Florida on February 19, 1997.
    
 
                                          HEALTHCARE ACQUISITION CORP.
 
   
                                          By:         /s/ JAY M. HAFT
    
 
                                          --------------------------------------
                                                       Jay M. Haft
                                           Chairman of the Board and Secretary
 
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jay M. Haft and John H. Abeles, M.D., and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this Registration
Statement and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
 
     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
 
   
<TABLE>
<CAPTION>
                      SIGNATURE                                    TITLE                    DATE
                      ---------                                    -----                    ----
<C>                                                    <S>                            <C>
 
                   /s/ JAY M. HAFT                     Chairman of the Board,         February 19, 1997
- -----------------------------------------------------    Principal Executive
                     Jay M. Haft                         Officer, Secretary and
                                                         Director
 
              /s/ JOHN H. ABELES, M.D.                 President, Principal           February 19, 1997
- -----------------------------------------------------    Financial Officer,
                John H. Abeles, M.D.                     Principal Accounting
                                                         Officer, Treasurer and
                                                         Director
 
                 /s/ JOEL S. KANTER                    Vice President and Director    February 19, 1997
- -----------------------------------------------------
                   Joel S. Kanter
 
                 /s/ PAUL E. FREIMAN                   Director                       February 19, 1997
- -----------------------------------------------------
                   Paul E. Freiman
</TABLE>
    
 
                                      II-5
<PAGE>   148
 
                                                                     SCHEDULE II
 
                            ENCORE ORTHOPEDICS, INC.
 
                       VALUATION AND QUALIFYING ACCOUNTS
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                     ADDITIONS
                                                        BALANCE AT   CHARGED TO   WRITEOFFS    BALANCE AT
                                                        BEGINNING    COSTS AND    CHARGED TO      END
YEAR                    DESCRIPTION                      OF YEAR      EXPENSES    ALLOWANCE     OF YEAR
- ----  ------------------------------------------------  ----------   ----------   ----------   ----------
<S>   <C>                                               <C>          <C>          <C>          <C>
1994  Allowance for doubtful accounts.................     $ 82         $ 11         $ --         $ 93
1995                                                         93           --          (78)          15
1996                                                         15           79           (3)          91
1994  Allowance on advances to sales
1995  representatives.................................     $ --         $ --         $ --         $ --
1996                                                         --            8           --            8
                                                              8           75           (8)          75
1994  Allowance for excess and obsolete inventory.....     $102         $ 45         $ --         $147
1995                                                        147          589           --          736
1996                                                        738           --          (86)         650
</TABLE>

<PAGE>   1
                                WARRANT AGREEMENT

     This Warrant Agreement (this "Agreement") is made as of _____________, 1997
between ENCORE MEDICAL CORPORATION, a Delaware corporation, with offices at
_______________________, Austin, Texas 787____ (the "Company"), and CONTINENTAL
STOCK TRANSFER & TRUST COMPANY, a limited purpose trust company, with offices at
2 Broadway, New York, New York 10004 (the "Warrant Agent").

     WHEREAS, the Company has engaged in a merger with Encore Orthopedics, Inc.
("Encore") and in connection therewith, has determined to issue and deliver (i)
up to _____________________ Common Stock Purchase Warrants (the "Warrants") to
the current shareholders and option holders of Encore, each of such Warrants
evidencing the right of the holder thereof to purchase one share of common
stock, $.001 par value per share, of the Company's Common Stock ("Common Stock")
for $7.00, subject to adjustment as described herein; and

     WHEREAS, the Company has filed with the Securities and Exchange Commission
a Registration Statement, No. _____________ on Form S-4 ("Registration
Statement") for the registration, under the Securities Act of 1933, as amended
("Act") of, among other securities, the Warrants and the Common Stock issuable
upon exercise of the Warrants; and

     WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange, redemption and exercise of the
Warrants; and

     WHEREAS, the Company desires to provide for the form and provisions of the
Warrants, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of rights, and immunities of the Company, the
Warrant Agent, and the holders of the Warrants; and

     WHEREAS, all acts and things have been done and performed which are
necessary to make the Warrants, when executed on behalf of the Company and
countersigned by or on behalf of the Warrant Agent, as provided herein, the
valid, binding and legal obligations of the Company, and to authorize the
execution and delivery of this Agreement.

     NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the parties hereto agree as follows:

1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent
to act as agent for the Company for the Warrants, and the Warrant Agent hereby
accepts such appointment and agrees to perform the same in accordance with the
terms and conditions set forth in this Agreement.

2. Warrants.

          2.1. Form of Warrant. Each Warrant shall be issued in registered form 
only, shall be in substantially the form of Exhibit A hereto, shall be signed
by, or bear the facsimile signature of, the Chairman of the Board or President
and the Secretary of the Corporation and shall bear a facsimile of the Company's
seal. In the event the person whose facsimile signature has been placed upon any
Warrant shall have ceased to serve in the capacity in which such person signed
the Warrant before such Warrant is issued, it may be issued with the same effect
as if he had not ceased to be such at the date of issuance.

          2.2. Effect of Countersignature. Unless and until countersigned by the
Warrant Agent pursuant to this Agreement, a Warrant shall be invalid and of no
effect and may not be exercised by the holder thereof.

          2.3. Registration.

               2.3.1. Warrant Register. The Warrant Agent shall maintain books 
("Warrant Register"), for the registration of original issuance and the
registration of transfer of the Warrants. Upon the initial issuance of the
Warrants,

                                      - 1 -



<PAGE>   2



the Warrant Agent shall issue and register the Warrants in the names of the
respective holders thereof in such denominations and otherwise in accordance
with instructions delivered to the Warrant Agent by the Company.

                  2.3.2.   Registered  Holder.  Prior  to  due  presentment  for
registration of transfer of any Warrant, the Company and the Warrant Agent may
deem and treat the person in whose name such Warrant shall be registered upon
the Warrant Register ("registered holder"), as the absolute owner of such
Warrant and of each Warrant represented thereby (notwithstanding any notation of
ownership or other writing on the Warrant Certificate made by anyone other than
the Company or the Warrant Agent), for the purpose of any exercise thereof, and
for all other purposes, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.

3.       Terms and Exercise of Warrants.

         3.1.  Warrant Price.  Each Warrant  shall,  when  countersigned  by the
Warrant Agent, entitle the registered holder thereof, subject to the provisions
of such Warrant and of this Warrant Agreement, to purchase from the Company the
number of shares of Common Stock stated therein, at the price of seven dollars
($7.00) per whole share, subject to the adjustments provided in Section 4
hereof. The term "Warrant Price" as used in this Warrant Agreement refers to the
price per share at which Common Stock may be purchased at the time a Warrant is
exercised.

         3.2.  Duration of Warrants.  Warrant may be  exercised  only during the
period ("Exercise Period") commencing on _______________, 1997 and terminating
at 5:00 p.m., New York City time on ____________, 2001 ("Expiration Date"). Each
Warrant not exercised on or before the Expiration Date shall become void, and
all rights thereunder and all rights in respect thereof under this Agreement
shall cease at the close of business on the Expiration Date. The Company in its
sole discretion may extend the duration of the Warrants by delaying the
Expiration Date.

         3.3.     Exercise of Warrants.

                  3.3.1.  Payment.  Subject to the provisions of the Warrant and
this Warrant Agreement, a Warrant, when countersigned by the Warrant Agent, may
be exercised by the registered holder thereof by surrendering it, at the office
of the Warrant Agent, or at the office of its successor as Warrant Agent, in the
Borough of Manhattan, City and State of New York, with the subscription form, as
set forth in the Warrant, duly executed, and by paying in full, in lawful money
of the United States, in cash, good certified check or good bank draft payable
to the order of the Company, the Warrant Price for each full share of Common
Stock as to which the Warrant is exercised and any and all applicable taxes due
in connection with the exercise of the Warrant, the exchange of the Warrant for
the Common Stock, and the issuance of the Common Stock.

                  3.3.2. Issuance of Certificates.  As soon as practicable after
the exercise of any Warrant, the Company shall issue to the registered holder of
such Warrant a certificate or certificates for the number of full shares of
Common Stock to which he is entitled, registered in such name or names as may be
directed by him, and if such Warrant shall not have been exercised in full, a
new countersigned Warrant for the number of shares as to which such Warrant
shall not have been exercised. Notwithstanding the foregoing, the Company shall
not be obligated to deliver any securities pursuant to the exercise of a Warrant
unless a registration statement under the Act with respect to the Common Stock
is effective. Warrants may not be exercised by, or securities issued to, any
registered holder in any state in which such exercise would be unlawful.

                  3.3.3.   Valid Issuance.  All shares of Common Stock issued 
upon the proper exercise of a Warrant in conformity with this Agreement shall be
validly issued, fully paid and nonassessable.

                  3.3.4.  Date of  Issuance.  Each person in whose name any such
certificate for shares of Common Stock is issued shall for all purposes be
deemed to have become the holder of record of such shares on the date on which
the Warrant was surrendered and payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.



                                      - 2 -




<PAGE>   3



4.       Adjustments.

         4.1. Stock Dividends - Split-Ups. If after the date hereof, and subject
to the provisions of Section 4.5 below, the number of outstanding shares of
Common Stock is increased by a stock dividend payable in shares of Common Stock,
or by a split-up of shares of Common Stock, or other similar event, then, on the
effective date of such stock dividend, split-up or similar event, the number of
shares issuable on exercise of each Warrant shall be increased in proportion to
such increase in outstanding shares and the then applicable Warrant Price shall
be correspondingly decreased.

         4.2.  Aggregation of Shares.  If after the date hereof,  and subject to
the provisions of Section 4.5, the number of outstanding shares of Common Stock
is decreased by a consolidation, combination or reclassification of shares of
Common Stock or other similar event, then, on the effective date of such
consolidation, combination, reclassification or similar event, the number of
shares issuable on exercise of each Warrant shall be decreased in proportion to
such decrease in outstanding shares and the then applicable Warrant Price shall
be correspondingly increased.

         4.3.  Reorganization,  etc.  If  after  the  date  hereof  any  capital
reorganization or reclassification of the Common Stock of the Company, or
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation or other similar
event shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, or sale, lawful and fair provision
shall be made whereby the Warrant holders shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in the Warrants and in lieu of the shares of Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented thereby, such shares of stock, securities, or assets as may
be issued or payable with respect to or in exchange for the number of
outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise of
the rights represented by the Warrants, had such reorganization,
reclassification, consolidation, merger, or sale not taken place and in such
event appropriate provision shall be made with respect to the rights and
interests of the Warrant holders to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Warrant Price
and of the number of shares purchasable upon the exercise of the Warrants) shall
thereafter be applicable, as nearly as may be, to any share of stock,
securities, or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger, or sale unless prior to
the consummation thereof, the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing such
assets, shall assume, by written instrument executed and delivered to the
Warrant Agent, the obligation to deliver to the Warrant holders such shares of
stock, securities, or assets which, in accordance with the foregoing provisions,
such holders may be entitled to purchase.

         4.4.  Notice of  Changes in  Warrants.  Upon  every  adjustment  of the
Warrant Price or the number of shares issuable on exercise of a Warrant, the
Company shall give written notice thereof to the Warrant Agent, which notice
shall state the Warrant Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of a Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Upon the
occurrence of any event specified in Section 4.1, 4.2 or 4.3, then, in any such
event, the Company shall give written notice to the Warrant holder, at the last
address set forth for such holder in the Warrant Register, or the record date
for such dividend, distribution, or subscription rights, or the effective date
of such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, winding up or issuance. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution, or subscription rights, or shall be entitled to
exchange their Common Stock for stock, securities, or other assets deliverable
upon such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, winding up or issuance. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such event.

         4.5. No Fractional Shares.  Notwithstanding  any provision contained in
this Warrant Agreement to the contrary, the Company shall not issue fractional
shares upon exercise of Warrants. If, by reason of any adjustment made pursuant
to this Section 4, the holder of any Warrant would be entitled, upon the
exercise of such Warrant, to receive a fractional interest in a share, the
Company shall, upon such exercise, round up to the nearest whole number the
number of the shares of Common Stock to be issued to the Warrant holder.


                                      - 3 -



<PAGE>   4



         4.6 Form of Warrant. The form of Warrant need not be changed because of
any adjustment pursuant to this Section 4, and Warrants issued after such
adjustment may state the same Warrant Price and the same number of shares as is
stated in the Warrants initially issued pursuant to this Agreement. However, the
Company may at any time in its sole discretion make any change in the form of
Warrant that the Company may deem appropriate and that does not affect the
substance thereof, any Warrant thereafter issued or countersigned, whether in
exchange or substitution for any outstanding Warrant or otherwise, may be in the
form as so changed.

5.       Transfer and Exchange of Warrants.

         5.1.  Registration  of Transfer.  The Warrant Agent shall  register the
transfer, from time to time, of any outstanding Warrant upon the Warrant
Register, upon surrender of such Warrant for transfer, properly endorsed with
signatures properly guaranteed and accompanied by appropriate instructions for
transfer. Upon any such transfer, a new Warrant representing any equal aggregate
number of Warrants shall be issued and the old Warrant shall be cancelled by the
Warrant Agent. The Warrants so cancelled shall be delivered by the Warrant Agent
to the Company from time to time upon request.

         5.2.  Procedure for Surrender of Warrants.  Warrants may be surrendered
to the Warrant Agent, together with a written request for exchange or transfer,
and thereupon the Warrant Agent shall issue in exchange therefor one or more new
Warrants as requested by the registered holder of the Warrants so surrendered,
representing an equal aggregate number of Warrants; provided, however, that in
the event that a Warrant surrendered for transfer bears a restrictive legend,
the Warrant Agent shall not cancel such Warrant and issue new Warrants in
exchange therefor until the Warrant Agent has received an opinion of counsel for
the Company stating that such transfer may be made and indicating whether the
new Warrants must also bear a restrictive legend.

         5.3.     Fractional Warrants.  The Warrant Agent shall not be required
to effect any registration of transfer or exchange which will result in the
issuance of a warrant certificate of a fraction of a warrant.

         5.4.     Service Charges.  No service charge shall be made for any 
exchange or registration of transfer of Warrants.

         5.5 Warrant Execution and Countersignature. The Warrant Agent is hereby
authorized to countersign and to deliver, in accordance with the terms of this
Agreement, the Warrants required to be issued pursuant to the provisions of this
Section 5, and the Company, whenever required by the Warrant Agent, will supply
the Warrant Agent with Warrants duly executed on behalf of the Company for such
purpose.

6.       Other Provisions Relating to Rights of Holders of Warrants.

         6.1.  No  Rights  as  Stockholder.  A  Warrant  does  not  entitle  the
registered holder thereof to any of the rights of a stockholder of the Company,
including, without limitation, the right to receive dividends, or other
distributions, exercise any preemptive rights to vote or to consent or to
receive notice as stockholders in respect of the meetings of stockholders or the
election of directors of the Company or any other matter.

         6.2. Lost, Stolen,  Mutilated, or Destroyed Warrants. If any Warrant is
lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on
such terms as to indemnity or otherwise as they may in their discretion impose
(which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination, tenor, and date as the
Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant shall
constitute a substitute contractual obligation of the Company, whether or not
the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time
enforceable by anyone.

         6.3.  Reservation  of  Common  Stock.  The  Company  shall at all times
reserve and keep available a number of its authorized but unissued shares of
Common Stock that will be sufficient to permit the exercise in full of all
outstanding Warrants issued pursuant to this Agreement.


                                      - 4 -




<PAGE>   5



         6.4.  Registration  of Common Stock.  The Company  agrees it shall file
with the Securities and Exchange Commission a post-effective amendment to the
Registration Statement, or a new registration statement, for the registration,
under the Act, of the Common Stock issuable upon exercise of the Warrants. The
Company will use its best efforts to cause the same to become effective and to
maintain the effectiveness of such registration statement until the expiration
of the Warrants in accordance with the provisions of this Agreement.

7.       Concerning the Warrant Agent and Other Matters.

         7.1.  Payment of Taxes. The Company will from time to time promptly pay
all taxes and charges that may be imposed upon the Company or the Warrant Agent
in respect of the issuance or delivery of shares of Common Stock upon the
exercise of Warrants, but the Company shall not be obligated to pay any transfer
taxes in respect of the Warrants or such shares.

         7.2.     Resignation, Consolidation, or Merger of Warrant Agent.

                  7.2.1.  Appointment of Successor  Warrant  Agent.  The Warrant
Agent, or any successor to it hereafter appointed, may resign its duties and be
discharged from all further duties and liabilities hereunder after giving sixty
(60) days notice in writing to the Company. If the office of the Warrant Agent
becomes vacant by resignation or incapacity to act or otherwise, the Company
shall appoint in writing a successor Warrant Agent in place of the Warrant
Agent. If the Company shall fail to make such appointment within a period of
thirty (30) days after it has been notified in writing of such resignation or
incapacity by the Warrant Agent or by the holder of the Warrant (who shall, with
such notice, submit his Warrant for inspection by the Company), then the holder
of any Warrant may apply to the Supreme Court of the State of New York for the
County of New York for the appointment of a successor Warrant Agent. Any
successor Warrant Agent, whether appointed by the Company or by such court,
shall be a corporation organized and existing under the laws of the State of New
York, in good standing and having its principal office in the Borough of
Manhattan, City and State of New York, and authorized under such laws to
exercise corporate trust powers and subject to supervision or examination by
federal or state authority. After appointment, any successor Warrant Agent shall
be vested with all the authority, powers, rights, immunities, duties, and
obligations of its predecessor Warrant Agent with like effect as if originally
named as Warrant Agent hereunder, without any further act or deed; but if for
any reason it becomes necessary or appropriate, the predecessor Warrant Agent
shall execute and deliver, at the expense of the Company, an instrument
transferring to such successor Warrant Agent all the authority, powers, and
rights of such predecessor Warrant Agent hereunder, and upon request of any
successor Warrant Agent the Company shall make, execute, acknowledge, and
deliver any and all instruments in writing for more fully and effectually
vesting in and confirming to such successor Warrant Agent all such authority,
powers, rights, immunities, duties, and obligations.

                  7.2.2.  Notice  of  Successor  Warrant  Agent.  In the event a
successor Warrant Agent shall be appointed, the Company shall give notice
thereof to the predecessor Warrant Agent and the transfer agent for the Common
Stock not later than the effective date of any such appointment.

                  7.2.3.   Merger  or   Consolidation   of  Warrant  Agent.  Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be party shall be the successor Warrant Agent
under this Agreement without any further act.

         7.3.     Fees and Expenses of Warrant Agent.

                  7.3.1.  Remuneration.  The  Company  agrees to pay the Warrant
Agent reasonable remuneration for its services as such Warrant Agent hereunder
and will reimburse the Warrant Agent upon demand for all expenditures that the
Warrant Agent may reasonably incur in the execution of its duties hereunder.

                  7.3.2.  Further  Assurances.  The  Company  agrees to perform,
execute, acknowledge, and deliver or cause to be performed, executed,
acknowledged, and delivered all such further and other acts, instruments, and
assurances as may reasonably be required by the Warrant Agent for the carrying
out or performing of the provisions of this Agreement.


                                      - 5 -




<PAGE>   6



         7.4.     Liability of Warrant Agent.

                  7.4.1.   Reliance  on  Company  Statement.   Whenever  in  the
performance of its duties under this Warrant Agreement, the Warrant Agent shall
deem it necessary or desirable that any fact or matter be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
statement signed by the President or Chairman of the Board of the Company and
delivered to the Warrant Agent. The Warrant Agent may rely upon such statement
for any action taken or suffered in good faith by it pursuant to the provisions
of this Agreement.

                  7.4.2. Indemnity.  The Warrant Agent shall be liable hereunder
only for its own negligence, willful misconduct or bad faith. The Company agrees
to indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgements, costs and reasonable counsel fees, for
anything done or omitted by the Warrant Agent in the execution of this Agreement
except as a result of the Warrant Agent's negligence, willful misconduct, or bad
faith.

                  7.4.3.   Exclusions.   The   Warrant   Agent   shall  have  no
responsibility with respect to the validity of this Agreement or with respect to
the validity or execution of any Warrant (except its countersignature thereof);
nor shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Warrant; nor shall it be
responsible to make any adjustments required under the provisions of Section 4.
hereof or responsible for the manner, method, or amount of any such adjustment
or the ascertaining of the existence of acts that would require any such
adjustment; nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock to be issued pursuant to this Agreement or any Warrant or as to
whether any shares of Common Stock will when issued be valid and fully paid and
nonassessable.

         7.5.  Acceptance of Agency. The Warrant Agent hereby accepts the agency
established by this Agreement and agrees to perform the same upon the terms and
conditions herein set forth and among other things, shall account promptly to
the Company with respect to Warrants exercised and concurrently account for, and
pay to the Company, all moneys received by the Warrant Agent for the purchase of
shares of the Company's Common Stock through the exercise of Warrants.

8.       Miscellaneous Provisions.

         8.1.     Successors.  All the covenants and provisions of this 
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns.

         8.2.  Notices.  Any  notice,  statement  or demand  authorized  by this
Warrant Agreement to be given or made by the Warrant Agent or by the holder of
any Warrant to or on the Company shall be sufficiently given or made if sent by
certified mail, or private courier service, postage prepaid, addressed (until
another address is filed in writing by the Company with the Warrant Agent), as
follows:

                     Encore Medical Corporation
                     ---------------------
                     Austin, Texas  787______
                     Attn:  Harry L. Zimmerman, Vice President - General Counsel

with a copy to:

                     Jackson & Walker, L.L.P.
                     111 Congress Avenue, Suite 2300
                     Austin, Texas 78701
                     Attn:  Larry Waks, Esq.

Any notice, statement or demand authorized by this Agreement to be given or made
by the holder of any Warrant or by the Company to or on the Warrant Agent shall
be sufficiently given or made if sent by certified mail or private courier
service, postage prepaid, addressed (until another address is filed in writing
by the Warrant Agent with the Company), as follows:

                                      - 6 -




<PAGE>   7



                     Continental Stock Transfer & Trust Company
                     2 Broadway, 19th Floor
                     New York, New York  10004
                     Attn:  Compliance Department

with a copy to:

                     Graubard Mollen & Miller
                     600 Third Avenue
                     New York, New York  10016
                     Attn:  David Alan Miller, Esq.

         8.3.     Applicable Law.  The validity, interpretation, and performance
of this Agreement and of the Warrants shall be governed in all respects by the
laws of the State of New York, without giving effect to conflict of laws.

         8.4.  Persons  Having  Rights  Under  this  Agreement.  Nothing in this
Agreement expressed and nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
person or corporation other than the parties hereto and the registered holders
of the Warrants any right, remedy, or claim under or by reason of this Warrant
Agreement or of any covenant, condition, stipulation, promise, or agreement
hereof. All covenants, conditions, stipulations, promises, and agreements
contained in this Warrant Agreement shall be for the sole and exclusive benefit
of the parties hereto and their successors and assigns and of the registered
holders of the Warrants.

         8.5.  Examination  of the Warrant  Agreement.  A copy of this Agreement
shall be available at all reasonable times at the office of the Warrant Agent in
the Borough of Manhattan, City and State of New York, for inspection by the
registered holder of any Warrant. The Warrant Agent may require any such holder
to submit his Warrant for inspection by it.

         8.6.     Counterparts.  This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

         8.7.     Effect of Headings.  The Section headings herein are for 
convenience only and are not part of this Warrant Agreement and shall not affect
the interpretation thereof.

                                      - 7 -




<PAGE>   8




         IN  WITNESS  WHEREOF,  this  Agreement  has been duly  executed  by the
parties hereto as of the day and year first above written.

Attest:                               ENCORE MEDICAL CORPORATION


_______________________________       By:  ______________________________
Harry L. Zimmerman, Secretary              Nick Cindrich, Chairman and CEO

Attest:                               CONTINENTAL STOCK TRANSFER
                                      & TRUST COMPANY


_____________________________         By:  _____________________________
                                           Name:  Steven G. Nelson
                                           Title:    Chairman of the Board



                                      - 8 -






<PAGE>   1


                                                                       EXHIBIT 5

[RUDEN, MCCLOSKY, SMITH, SCHUSTER & RUSSELL, P.A.  LETTERHEAD]

                                                     200 EAST BROWARD BOULEVARD 
                                                  FORT LAUDERDALE, FLORIDA 33301
                                                             -------------------
                                                            POST OFFICE BOX 1900
                                                  FORT LAUDERDALE, FLORIDA 33302
                                                             -------------------
                                                                  (954) 764-6660
                                                             FAX: (954) 764-4996




                               February 18, 1997



Healthcare Acquisition Corp.
200 East Broward Boulevard
Fort Lauderdale, Florida 33301


                          Re:     Legality Opinion

Gentlemen:

         We are acting as counsel for Healthcare Acquisition Corp., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), pursuant to a Registration
Statement on Form S-4 (as amended to the date of effectiveness, the
"Registration Statement") of the following securities of the Company:

         1.      11,000,000 shares of the Company's common stock, par value
                 $.001 per share (the "Common Stock"), to be issued in
                 connection with the consummation of the merger (the "Merger")
                 contemplated by the Agreement and Plan of Merger dated as of
                 November 12, 1996, as amended through the date hereof, among
                 the Company, Healthcare Acquisition Inc. and Encore
                 Orthopedics, Inc. (the "Agreement and Plan of Merger");

         2.      1,650,000 warrants to purchase Common Stock at an initial
                 exercise price of $7.00 per share (the "$7.00 Warrants");

         3.      1,650,000 shares of Common Stock underlying the $7.00
                 Warrants;

         4.      150,000 warrants to purchase Common Stock at an initial
                 exercise price of $7.00 per share (the "Rodman Warrants") to
                 be issued to Rodman & Renshaw, Inc. ("Rodman") pursuant to the
                 terms of an engagement letter dated December 2, 1996 between
                 the Company and Rodman (the "Engagement Letter"); and

         5.      150,000 shares of Common Stock underlying the Rodman Warrants.

        The Company's securities listed in items 1-5 above are herein
collectively referred to as the "Securities." 

        In rendering this opinion, we have reviewed such documents and made
such investigations as we have deemed appropriate.

<PAGE>   2
Healthcare Acquisition Corp.
February 18, 1997
Page 2



                 It is our opinion that the Securities have been duly
         authorized and, when the Registration Statement shall have become
         effective and the Securities are issued in accordance with the terms
         of the Agreement and Plan of Merger and the Engagement Letter, as
         applicable, the Securities will be validly issued, fully paid and
         non-assessable.

                 We express no opinion as to matters other than the General 
Corporation Law of the State of Delaware (Delaware Code 1953, as amended).


                                        Very truly yours,

                                        RUDEN, McCLOSKY, SMITH,
                                        SCHUSTER & RUSSELL, P.A.






<PAGE>   1
                                                                       EXHIBIT 8

                                 February_, 1997

Encore Orthopedics, Inc.
9800 Metric Boulevard
Austin, Texas 78758

Ladies and Gentlemen:

                We have acted as tax counsel to Encore Orthopedics, Inc.
("Encore") in connection with the merger (the "Merger") of Healthcare
Acquisition, Inc. ("Acquisition"), a wholly-owned subsidiary of Healthcare
Acquisition Corp. ("HCAC"), with and into Encore. The Merger will be effected
pursuant to the terms of the Agreement and Plan of Merger by and among Encore,
HCAC and Acquisition, dated November 12, 1996, and amended as of February 14, 
1997 (the "Merger Agreement"). Section 7.03(f) of the Merger Agreement provides
that the receipt of this opinion is a condition to the obligation of Encore to 
effect the Merger.

                The capitalized terms which are used in this opinion but not
otherwise defined herein have the same meaning in this opinion as in the Merger
Agreement.

                In issuing our opinion, we have reviewed the Merger Agreement,
the Joint Proxy Statement/Prospectus of HCAC and Encore relating to the Merger,
the representations made by Encore in the Encore Certificate of Tax
Representations
<PAGE>   2

Encore Orthopedics, Inc.
February __, 1997
Page 2

delivered to us (a copy of which is attached hereto), the representations made
by HCAC in the HCAC Certificate of Tax Representations delivered to us (a copy
of which is attached hereto) and such other documents as we have deemed
appropriate. Our opinion is based upon our understanding that the facts,
representations and assumptions set forth in this letter are true and correct as
of the present time and will be true and correct as of the Effective Time of the
Merger.

                  Encore, a Texas corporation, is a designer, marketer and
distributor of orthopedic products and supplies. Encore has outstanding a class
of voting common stock ("Encore Common Shares") and a class of voting Series A
Preferred Stock ("Encore Preferred Shares") (the Encore Common Shares and the
Encore Preferred Shares are hereinafter referred to as the "Encore Shares").
HCAC is a Delaware corporation that was formed as a Specified Purpose
Acquisition Company, the objective of which is to acquire an operating business
in the health care industry. HCAC has a single class of voting common stock
("HCAC Common Shares") outstanding. Acquisition is a Texas corporation formed by
HCAC for the sole purpose of facilitating the Merger.

                  Pursuant to the Merger Agreement, Acquisition will merge with
and into Encore, with Encore being the surviving corporation. As a result of the
Merger, Encore
<PAGE>   3

Encore Orthopedics, Inc.
February __, 1997
Page 3

will become a wholly-owned subsidiary of HCAC. At the Effective Time of the
Merger, each of the outstanding Encore Common Shares and Encore Preferred
Shares, other than shares held by dissenting shareholders, will be converted
into the right to receive HCAC Common Shares and HCAC $7.00 Warrants. The number
of HCAC Common Shares and HCAC $7.00 Warrants to be received in exchange for the
Encore Common Shares and Encore Preferred Shares will be based on the exchange
ratios determined under the procedures set forth in section 2.01 of the Merger
Agreement. Cash will be paid in lieu of any fractional HCAC Common Shares.  
Upon consummation of the Merger, HCAC will change its name to Encore Medical 
Corporation.

                  In the Encore Certificate of Tax Representations delivered to
us in connection with this opinion, Encore has stated that the following
statements will be true and correct as of the Effective Time of the Merger:

                  1. There is no plan or intention by the shareholders of Encore
                  to sell, exchange, or otherwise dispose of a number of HCAC
                  Common Shares received in the Merger that would reduce the
                  Encore shareholders' ownership of HCAC Common Shares to a
                  number of shares having a value, as of the date of the Merger,
                  of less than 50 percent of the value of all of the formerly
                  outstanding Encore Shares as of the same date. For purposes of
                  this representation, shares of Encore stock exchanged for HCAC
                  $7.00 Warrants or
<PAGE>   4

Encore Orthopedics, Inc.
February __, 1997
Page 4

                  other property, surrendered by dissenters or exchanged for
                  cash in lieu of fractional HCAC Common Shares will be treated 
                  as outstanding Encore Shares on the date of the Merger.

                  2. Immediately following the Merger, Encore will hold at least
                  90 percent of the fair market value of its net assets and at
                  least 70 percent of the fair market value of its gross assets
                  held immediately prior to the Merger. For purposes of this
                  representation, amounts paid by Encore to dissenters, amounts
                  paid by Encore to shareholders who receive cash or other
                  property in connection with the Merger, amounts used by Encore
                  to pay reorganization expenses, and all redemptions and
                  distributions (excluding regular, normal dividends) made by
                  Encore in connection with the Merger will be treated as assets
                  held by Encore immediately prior to the Merger.

                  3. There is no intercorporate indebtedness existing between
                  HCAC and Encore or between Acquisition and Encore that was
                  issued, acquired, or will be settled at a discount.

                  4. Encore is not an investment company as defined in sections
                  368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.

                  5. On the date of the Merger, the fair market value of Encore
                  will exceed the sum of its liabilities, plus the amount of
                  liabilities, if any, to which its assets are subject.

                  6. Encore is not under the jurisdiction of a court in a
                  Title 11 or similar case within the meaning of section
                  368(a)(3)(A) of the Internal Revenue Code.

                  In the HCAC Certificate of Tax Representations, HCAC has
stated that the following statements will be true and correct as of the
Effective Time:
<PAGE>   5

Encore Orthopedics, Inc.
February __, 1997
Page 5

                  1. The fair market value of the HCAC Common Shares issued in
                  exchange for Encore Shares in the Merger will be equal to at
                  least 80 percent of the aggregate fair market value of the
                  HCAC Common Shares, HCAC $7.00 Warrants, and cash in lieu of
                  fractional HCAC Common Shares received by Encore shareholders 
                  in the Merger.

                  2. Acquisition was formed solely for purposes of effecting the
                  Merger and has had no material assets or liabilities. Any
                  assets or liabilities which are held by Acquisition
                  immediately prior to the Merger will be transferred to Encore
                  pursuant to the Merger.

                  3. HCAC has no plans to cause Encore to issue additional
                  shares of its stock after the Merger that would result in HCAC
                  losing control of Encore within the meaning of section
                  368(c)(1) of the Internal Revenue Code.

                  4. HCAC has no plan or intention to liquidate Encore; to merge
                  Encore with or into another corporation; to sell or otherwise
                  dispose of the stock of Encore except for transfers of stock
                  to corporations controlled by HCAC; or to cause Encore to sell
                  or otherwise dispose of any of its assets except for
                  dispositions made in the ordinary course of business or
                  transfers of assets to a corporation controlled by Encore.

                  5. Following the Merger, HCAC will cause Encore to continue
                  its orthopedic product and supply business or use a
                  significant portion of Encore's business assets in a business.

                  6. HCAC does not own any Encore Shares.

                  7. HCAC is not an investment company as defined in sections
                  368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
<PAGE>   6

Encore Orthopedics, Inc.
February __, 1997
Page 6


                                  * * * * *

                  On the basis of the above facts and representations, it is our
opinion that the Merger will have the following federal income tax consequences:

                  (i)   The Merger will constitute a "reorganization" within the
                  meaning of Sections 368(a)(1) and 368(a)(2)(E) of the Code,
                  and HCAC, Acquisition and Encore will each be a party to that
                  reorganization within the meaning of Section 368(b) of the
                  Code. 

                  (ii)  The Encore shareholders will not recognize gain or loss
                  upon their exchange of Encore Shares for HCAC Common Shares
                  (including interests in fractional HCAC Common Shares)
                  pursuant to the Merger, but will recognize the amount of gain,
                  if any, realized in the Merger which is not in excess of the
                  fair market value of the HCAC $7.00 Warrants received.

                  (iii) The receipt of cash in lieu of fractional HCAC Common
                  Shares will be
<PAGE>   7

Encore Orthopedics, Inc.
February __, 1997
Page 7

                  treated as if such fractional shares were received by the
                  Encore shareholders in the Merger and then redeemed by HCAC.

                  (iv) The aggregate tax basis of the HCAC Common Shares 
                  received by an Encore shareholder (including interests
                  in fractional HCAC Common Shares) in exchange for Encore
                  Shares pursuant to the Merger will be the same as the
                  aggregate tax basis of such Encore Shares, decreased by the
                  fair market value of the HCAC $7.00 Warrants received by such
                  shareholder, and increased by the amount of gain, if any, 
                  recognized on the exchange by such shareholder.

                  (v)  The holding period for HCAC Common Shares (including
                  interests in fractional HCAC Common Shares) received by an
                  Encore shareholder in exchange for Encore Shares in the Merger
                  will include such shareholder's holding period for such Encore
                  Shares, provided the Encore Shares were held as capital assets
                  at the Effective Time of the Merger.

                  This opinion is rendered solely with respect to the federal
  income tax consequences of the Merger specifically set forth above. We express
  no opinion as to
<PAGE>   8

Encore Orthopedics, Inc.
February __, 1997
Page 8

the treatment of the Merger under the income or other tax laws of any foreign,
state or local jurisdiction. Our opinions are based upon the present provisions
of the Code, the regulations issued thereunder, current case law and published
rulings of the Internal Revenue Service. The foregoing are subject to change and
such changes may be given retroactive effect. In the event of such changes, our
opinions may be affected.

                                       Very truly yours,

                                       SUTHERLAND, ASBILL & BRENNAN, L.L.P.

<PAGE>   9
                                                                       EXHIBIT 8

                  ENCORE CERTIFICATE OF TAX REPRESENTATIONS



                 This certificate is being delivered to Sutherland, Asbill &
Brennan, L.L.P. in connection with the opinion required by Section 7.03(f) of
the Agreement and Plan of Merger (the "Merger Agreement") dated November 12,
1996, and amended on February 14, 1997 among Encore Orthopedics, Inc.
("Encore"), Healthcare Acquisition Corp. ("HCAC") and Healthcare Acquisition,
Inc. ("Acquisition").  Defined terms not otherwise defined herein have the
meanings specified in the Merger Agreement.

                 The undersigned hereby certifies that:


                 1.  There is no plan or intention by the shareholders of
                 Encore to sell, exchange, or otherwise dispose of a number of
                 HCAC Common Shares received in the Merger that would reduce
                 the Encore shareholders' ownership of HCAC Common Shares to a
                 number of shares having a value, as of the date of the Merger,
                 of less than 50 percent of the value of all of the formerly
                 outstanding Encore Shares as of the same date.  For purposes
                 of this representation, shares of Encore stock exchanged for
                 HCAC $7.00 Warrants or other property, surrendered by
                 dissenters or exchanged for cash in lieu of fractional HCAC
                 Common Sharess will be treated as outstanding Encore Shares
                 on the date of the Merger.

                 2.  Immediately following the Merger, Encore will hold at
                 least 90 percent of the fair market value of its net assets
                 and at least 70 percent of the fair market value of its gross
                 assets held immediately prior to the Merger.  For purposes of
                 this representation, amounts paid by Encore to dissenters,
                 amounts paid by Encore to shareholders who receive cash or
                 other property in connection with the Merger, amounts used by
                 Encore to pay reorganization expenses, and all redemptions and
                 distributions (excluding regular, normal dividends) made by
                 Encore in connection with the Merger will be treated as assets
                 held by Encore immediately prior to the Merger.

                 3.  There is no intercorporate indebtedness existing between
                 HCAC and Encore or between Acquisition and Encore that was
                 issued, acquired, or will be settled at a discount.
<PAGE>   10

                 4.  Encore is not an investment company as defined in sections
                 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.

                 5.  On the date of the Merger, the fair market value of Encore
                 will exceed the sum of its liabilities, plus the amount of
                 liabilities, if any, to which its assets are subject.

                 6.  Encore is not under the jurisdiction of a court in a Title
                 11 or similar case within the meaning of section 368(a)(3)(A)
                 of the Internal Revenue Code.

                 The undersigned further certifies to you that each of the
statements set forth in this letter will be true, correct and complete as of
the Effective Time.


                                      ENCORE ORTHOPEDICS, INC.



                                      By:     __________________________________
                                      Its:    __________________________________





                                      2
<PAGE>   11

                   HCAC CERTIFICATE OF TAX REPRESENTATIONS



                 This certificate is being delivered to Sutherland, Asbill &
Brennan, L.L.P. in connection with the opinion required by Section 7.03(f) of
the Agreement and Plan of Merger (the "Merger Agreement") dated November 12,
1996, and amended February 14, 1997 among Encore Orthopedics, Inc. ("Encore"),
Healthcare Acquisition Corp. ("HCAC") and Healthcare Acquisition, Inc.
("Acquisition").  Defined terms not otherwise defined herein have the meanings
specified in the Merger Agreement.

                 The undersigned hereby certifies that:


                 1.  The fair market value of the HCAC Common Shares issued in
                 exchange for Encore Shares in the Merger will be equal to at
                 least 80 percent of the aggregate fair market value of the
                 HCAC Common Shares, HCAC $7.00 Warrants, and cash in lieu of
                 fractional HCAC Common Shares, received by Encore shareholders
                 in the Merger.

                 2.  Acquisition was formed solely for purposes of effecting
                 the Merger and has had no material assets or liabilities.
                 Any assets or liabilities which are held by Acquisition
                 immediately prior to the Merger will be transferred to Encore
                 pursuant to the Merger.

                 3.  HCAC has no plans to cause Encore to issue additional
                 shares of its stock after the Merger that would result in HCAC
                 losing control of Encore within the meaning of section
                 368(c)(1) of the Internal Revenue Code.

                 4.  HCAC has no plan or intention to liquidate Encore; to
                 merge Encore with or into another corporation; to sell or
                 otherwise dispose of the stock of Encore except for transfers
                 of stock to corporations controlled by HCAC; or to cause
                 Encore to sell or otherwise dispose of any of its assets
                 except for dispositions made in the ordinary course of
                 business or transfers of assets to a corporation controlled by
                 Encore.

                 5.  Following the Merger, HCAC will cause Encore to continue
                 its orthopedic product and supply business or use a
                 significant portion of Encore's business assets in a
<PAGE>   12

                 business.

                 6.  HCAC does not own any Encore Shares.

                 7.  HCAC is not an investment company as defined in sections
                 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.


                 The undersigned further certifies to you that each of the
statements set forth in this letter will be true, correct and complete as of
the Effective Time.


                                        HEALTHCARE ACQUISITION CORP.


                                        By: __________________________________
                                        Its:__________________________________





                                      2

<PAGE>   1
                                                                EXHIBIT 10.4
                     [Rodman & Renshaw, Inc. Letterhead]







                              December 2, 1996




CONFIDENTIAL

Board of Directors
Healthcare Acquisition Corporation
2365 North West 41 Street
Boca Raton, Florida 33431


Attention: Jay M. Haft

Gentlemen:

        Rodman & Renshaw, Inc. ("Rodman") is pleased to act as financial advisor
to Healthcare Acquisition Corporation (the "Company") regarding the proposed
transaction with Encore Orthopedics, Inc. (Encore) in which a wholly owned
subsidiary of the Company will be merged with and into Encore (the
"Acquisition") pursuant to the Agreement and Plan of Merger by and among 
Healthcare Acquisition Corp., Healthcare Acquisition Inc., and Encore 
Orthopedics, Inc., dated November 12, 1996 the ("Merger Agreement").  This 
letter agreement (the "Agreement") confirms the terms of our engagement.

        Within the scope of Rodman's engagement hereunder, Rodman agrees to:

        (i)     analyze the business, operations, properties, finances, and
                prospects of Encore and examine the terms and
                conditions of agreements relating to the  Acquisition;
 
        (ii)    advise and assist the management and the Board of Directors 
                of the Company (the "Board") in evaluating the Acquisition;
 
        (iii)   render an opinion (the "Opinion") to the Board as to whether or 
                not the consideration to be paid by the Company in the 
                Acquisition is fair, from a financial 
<PAGE>   2
Healthcare Acquisition Corp.
December 2, 1996
Page 2





                point of view, to the stockholders of the Company and as to
                whether the fair market value of Encore is at least 80% of the
                net assets of the Company; and

        (iv)    provide ongoing investment banking services to the Company for
                a period of twelve months from the date of the closing of the
                Acquisition the ("Investment Banking Services").

        As compensation for Rodman's financial advisory services relating to
the Opinion, the Company will pay to Rodman (i) a fee of $100,000, payable in
cash (the "Financial Advisory Fee") and (ii) provided the Acquisition closes,
warrants to purchase 150,000 shares of the Company's Common Stock (the "Common
Stock Purchase Warrants").  The Financial Advisory Fee is payable in two equal
installments of $50,000 each (i) upon the execution of the Agreement and (ii)
when and if the written Opinion is rendered.  The Common Stock Purchase
Warrants are issuable within 30 days of the closing of the Acquisition and
shall be exercisable at a price equal to the exercise price of the Common Stock
warrants issued to Encore in connection with the Acquisition for a period of
four (4) years, and shall contain such provisions as are customary in
transactions of this nature, including cashless conversion rights.

        As compensation for Rodman's Investment Banking Services, the Company
will pay to Rodman a fee of $100,000 (the "Investment Banking Retainer Fee"),
payable within 30 days of the closing of the Acquisition.  No Investment
Banking Retainer Fee shall be due and no Investment Banking Services shall be
rendered hereunder if the Acquisition does not close.  Investment Banking
Services include, but are not limited to, (i) introducing and evaluating
potential merger or acquisition candidates and (ii) evaluating financing
alternatives (a "Financing") available to the Company, which may include a
public debt or equity financing (the "Public Offering") or a private debt or
equity financing (the "Private Placement").  In the event Rodman advises or
represents the Company in a merger or acquisition or acts as the underwriter in
the Public Offering or as an agent in the Private Placement (i) the terms and
conditions of such arrangement shall be embodied in an additional engagement
letter to be signed at a later date and (ii) the fees due for such arrangement
shall be reduced by the amount of the Investment Banking Retainer Fee.

        Regardless of whether or not the Acquisition is completed, the Company
also agrees to reimburse Rodman for all of its out-of-pocket expenses, not to
exceed $25,000, incurred in connection with this engagement, including, but not
limited to, those of legal representation.

        The Company will furnish Rodman and will cause Encore to furnish Rodman
with such information as Rodman believes appropriate to its assignment (all
such information so furnished being the "Information").  The Company recognizes
and confirms that Rodman: (i) will use and rely primarily on the Information
and on information available from generally recognized public sources in
performing the services contemplated by this Agreement without having
independently 
<PAGE>   3
Healthcare Acquisition Corp.
December 2, 1996
Page 3

verified the same; (ii) does not assume responsibility for the accuracy or
completeness of the Information and such other information; and (iii) will not
make an appraisal of any assets of Encore.  To the best of the Company's
knowledge, the Information furnished when delivered, will be true and correct
in all material respects and will not contain any material misstatement of fact
or omit to state any material fact necessary to make the statements contained
therein not misleading. The Company will promptly notify Rodman if it learns of
any material inaccuracy or misstatement in, or material omission from, any
Information delivered to Rodman.

        The Company agrees to the indemnification, contribution and other
matters set forth in the Indemnification Provisions attached hereto, the
provisions of which are incorporated herein by reference and shall survive the
termination, expiration or supersession of this Agreement.

        Rodman's engagement hereunder may be terminated by either the Company
or Rodman at any time upon written notice to that effect to the other party, it
being understood that the provisions relating to the payment of fees and
expenses which have been paid or are payable prior to termination and
indemnification will survive any such termination.

        The Company agrees that any information or advice (including, without
limitation, any opinion) rendered by Rodman in connection with this engagement
is for the confidential use of the Company's Board of Directors only in their
evaluation of a transaction and, except as otherwise required by law, the
Company will not and will not permit any third party to disclose or otherwise
refer to such opinion, advice or information in any manner without Rodman's
prior written consent; provided, however, that Rodman hereby consents to the
inclusion of and references to such opinion in its entirety in any proxy
statement distributed to the Company's shareholders in connection with a
transaction so long as any such inclusion or reference is in form and substance
reasonably satisfactory to Rodman.  The parties further agree that no summary
or excerpt from the opinion may be used, and no public referral to the opinion
may be made, except with the prior written approval of Rodman, which approval
shall not be unreasonably withheld.

        This Agreement does not create, and shall not be construed as creating,
rights enforceable by any person or entity not a party hereto, except those
entitled hereto by virtue of the Indemnification Provisions hereof.  The
Company acknowledges and agrees that Rodman is not and shall not be construed
as a fiduciary of the Company and shall have no duties or liabilities to the
equity holders or the creditors of the Company or any other person by virtue of
this Agreement or the retention of Rodman hereunder, all of which are hereby
expressly waived.   The Company also agrees that Rodman shall not have any
liability (including without limitation, liability for losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs, expenses or
disbursements resulting from any negligent act or omission of Rodman) (whether
direct or indirect, in contract, tort or otherwise) to any person (including,
without limitation, equity holders or creditors of the Company but excluding
the Company itself in the case of intentional wrong doing 
<PAGE>   4
Healthcare Acquisition Corp.
December 2, 1996
Page 4



or negligence) claiming through the Company for or in connection with the
engagement of Rodman, this Agreement and the transactions contemplated hereby
(including, without limitation, any acquisition).

        This Agreement will be governed by, and construed in accordance with,
the laws of the State of New York applicable to agreements made and to be
performed entirely in such State.  This Agreement may not be assigned by either
party without the prior written consent of the other party. Any right to trial
by jury with respect to any dispute arising under this Agreement or any
transaction or conduct in connection herewith is waived.  Any dispute arising
under this Agreement shall be brought into the courts of the State of New York
or of the United States of America for the Southern District of New York and,
by execution and delivery of this Agreement, the Company hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of aforesaid courts.

        This Agreement (including the attached Indemnification Provisions)
embodies the entire agreement and understanding between the parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof.  If any provision of this Agreement is determined to be invalid
or unenforceable in any respect, such determination will not affect such
provision in any other respect or any other provision of this Agreement, which
will remain in full force and effect.  This Agreement may not be amended or
otherwise modified or waived except by an instrument in writing signed by both
Rodman and the Company.

        Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to Rodman the enclosed duplicate copy of this Agreement.

                                        Very truly yours,

                                        RODMAN & RENSHAW, INC.

                                        By: /s/  John J. Borer, III
                                            -----------------------
                                                 John J. Borer, III
                                                 Managing Director


Accepted and Agreed to as of 
the date first written above:

HEALTHCARE ACQUISITION CORPORATION

By: /s/ Jay M. Haft
    ------------------------
        Jay M. Haft
        Chairman

<PAGE>   5

                         INDEMNIFICATION PROVISIONS

        In connection with the engagement of Rodman & Renshaw, Inc. ("Rodman")
by Healthcare Acquisition Corporation and its affiliates (the "Company")
pursuant to a letter agreement dated December 2, 1996 between the Company and
Rodman, as it may be amended from time to time (the "Agreement"), the Company
hereby agrees as follows:

        1.      To the extent permitted by law, the Company will indemnify
                Rodman and its affiliates, stockholders, directors, officers,
                employees and controlling persons (within the meaning of
                Section 15 of the Securities Act of 1933, as amended, or
                Section 20 of the Securities Exchange Act of 1934) against all
                losses, claims, damages, expenses and liabilities, as the same
                are incurred (including the reasonable fees and expenses of
                counsel), relating to or arising out of its activities
                hereunder or pursuant to the Agreement, except to the extent
                that any losses, claims, damages, expenses or liabilities (or
                actions in respect thereof) are found in a final judgment (not
                subject to appeal) by a court of law to have resulted primarily
                and directly from Rodman's willful misconduct or negligence in
                performing the services described herein.

        2.      Promptly after receipt by Rodman of notice of any claim or the
                commencement of any action or proceeding with respect to which
                Rodman is entitled to indemnity hereunder, Rodman will notify
                the Company in writing of such claim or of the commencement of
                such action or proceeding, and the Company will assume the
                defense of such action or proceeding and will employ counsel
                reasonably satisfactory to Rodman and will pay the fees and
                expenses of such counsel. Notwithstanding the preceding
                sentence, Rodman will be entitled to employ counsel separate
                from counsel for the Company and from any other party in such
                action if Rodman reasonably determines that a conflict of
                interests exists which makes representation by counsel chosen
                by the Company not advisable.  In such event, the reasonable
                fees and disbursements of no more than one such separate
                counsel will be paid by the Company. The Company will have the
                exclusive right to settle the claim or proceeding provided that
                the Company will not settle any such claim, action or
                proceeding without the prior written consent of Rodman, which
                will not be unreasonably withheld.

        3.      The Company agrees to notify Rodman promptly of the assertion
                against it or any other person of any claim or the commencement
                of any action or proceeding relating to a transaction
                contemplated by the Agreement.

        4.      If for any reason the foregoing indemnity is unavailable to
                Rodman or insufficient to hold Rodman harmless from a matter as
                to which Rodman is to be indemnified as set forth in 1. above,
                then the Company shall contribute to the amount paid or payable
                by Rodman as a result of such losses, claims, damages or
                liabilities in such proportion as is appropriate to reflect not
                only the relative benefits received by the Company on the one
                hand and Rodman on the other, but also the relative fault of
                the 
<PAGE>   6
Indemnification Provisions
December 2, 1996
Page 2


                Company on the one hand and Rodman on the other that    
                resulted in such losses, claims, damages or liabilities, as
                well as any relevant equitable considerations.  The amounts
                paid or payable by a party in respect of losses, claims,
                damages and liabilities referred to above shall be deemed to
                include any legal or other fees and expense incurred in
                defending any litigation, proceeding or other action or claim.
                Notwithstanding the provisions hereof, Rodman's share of the
                liability hereunder shall not be in excess of the amount of
                fees actually received, or to be received, by Rodman under the
                Agreement (excluding any amounts received as reimbursement of
                expenses incurred by Rodman).

        5.      It is understood and agreed that, in connection with Rodman's
                engagement by the Company, Rodman may also be engaged to act
                for the Company in one or more additional capacities, and
                that the terms of any such additional engagement may be
                embodied in one or more separate written agreements. These
                Indemnification Provisions shall apply to the engagement under
                the Agreement and to any such additional engagement and any
                modification of such additional engagement; provided, however,
                that in the event that the Company engages Rodman to provide
                additional investment banking services, or otherwise, such
                further engagement may be subject to separate indemnification
                and contribution provisions as may be mutually agreed upon.

        6.      These Indemnification Provisions shall remain in full force and
                effect whether or not the Acquisition contemplated by the
                Agreement is completed and shall survive the termination of
                the Agreement, and shall be in addition to any liability that
                the Company might otherwise have to any indemnified party under
                the Agreement or otherwise.

                                                RODMAN & RENSHAW, INC.

                                                By:     /s/  John J. Borer, III
                                                        -----------------------
                                                        John J. Borer, III
                                                        Managing Director

HEALTHCARE ACQUISITION CORPORATION

By:   /s/  Jay M. Haft
   -----------------------
      Jay M. Haft
      Chairman


<PAGE>   1
                                                                    EXHIBIT 11.1



                            ENCORE ORTHOPEDICS, INC.
       STATEMENT REGARDING THE COMPUTATION OF NET INCOME (LOSS) PER SHARE
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                                         1994    1995    1996
                                                        ------  ------  ------
<S>                                                     <C>     <C>     <C>
  Net income (loss) applicable to common stock          $  442  $1,370  $ (236)
  Weighted average shares outstanding                    6,624   6,941   6,149
  Net income (loss) applicable to common
    stock per share (1)                                 $ 0.07  $ 0.20  $(0.04)
                                                        ======  ======  ======

CALCULATION OF WEIGHTED AVERAGE SHARES OUTSTANDING
  Weighted average preferred stock outstanding             504     360       -
  Weighted average common stock outstanding              5,436   5,797   6,149
  Weighted average common stock options outstanding        684     639       -
  Weighted average warrants outstanding                      -     145       -
                                                        ------  ------  ------

    Weighted average shares outstanding                  6,624   6,941   6,149
                                                        ======  ======  ======
</TABLE>

- --------
(1)     Primary and fully diluted net income (loss) applicable to common stock
        per share are the same for all years presented.



<PAGE>   1
                                                                   EXHIBIT 23.3




                        CONSENT OF INDEPENDENT AUDITORS

        We hereby consent to the use in this Registration Statement of our
report dated January 17, 1997, relating to the financial statements of
Healthcare Acquisition Corp. and to the reference to our firm under the caption
"Experts" in the Joint Proxy Statement/Prospectus.



RICHARD A EISNER & CO., LLP
New York, New York
February 19, 1997





<PAGE>   1

                                                                    EXHIBIT 23.4


                       CONSENT OF INDEPENDENT ACCOUNTANTS





        We hereby consent to the use in the Joint Proxy Statement/Prospectus
constituting part of this Registration Statement on Form S-4 of Healthcare 
Acquisition Corp. of our report dated February 7, 1997 relating to the 
financial statements of Encore Orthopedics, Inc., which appears in such Joint 
Proxy Statement/Prospectus.  We also consent to the application of such report
to the Financial Statement Schedule for the three years ended December 31, 1996
listed under Item 21(b) of this Registration Statement, when such schedule is
read in conjunction with the financial statements referred to in our report. 
The audits referred to in such report also included this schedule.  We also
consent to the references to us under the headings "Experts" and "Selected
Financial Data of Encore" in such Joint Proxy  Statement/Prospectus.  However,
it should be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Financial Data of Encore."



PRICE WATERHOUSE LLP

Austin, Texas
February 17, 1997








<PAGE>   1
 
                                                                    EXHIBIT 99.1
 
                          HEALTHCARE ACQUISITION CORP.
                           200 EAST BROWARD BOULEVARD
                         FORT LAUDERDALE, FLORIDA 33301
   
             SHAREHOLDER'S PROXY SPECIAL MEETING -- MARCH 25, 1997
    
 
   
    The undersigned, having received the Notice of Special Meeting and Joint
Proxy Statement/Prospectus dated February   , 1997, hereby appoints Jay M. Haft
and John H. Abeles, and each of them, proxies with power of substitution to vote
for the undersigned at the special meeting of shareholders of Healthcare
Acquisition Corp. on March 25, 1997, and at any adjournments thereof, as
follows:
    
 
The Board of Directors recommends a vote FOR Items 1, 2 and 3.
If no direction is made, this proxy will be voted FOR Items 1, 2 and 3.
 
(1) Approval of Agreement and Plan of Merger among Healthcare Acquisition Corp.,
    Healthcare Acquisition, Inc. and Encore Orthopedics, Inc.
 
        FOR  [ ]              AGAINST  [ ]             ABSTAIN  [ ]
 
(2) Amendments to Certificate of Incorporation
 
        FOR  [ ]              AGAINST  [ ]             ABSTAIN  [ ]
 
(3) Adoption of Encore Medical Corporation 1996 Incentive Stock Option Plan
 
        FOR  [ ]              AGAINST  [ ]             ABSTAIN  [ ]
 
In the absence of an expressed direction, Mr. Haft or Dr. Abeles will vote in
favor of the listed proposal.
 
                        (to be signed on the other side)
 
                         (Continued from reverse side)
 
    PROXY NO. THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF
DIRECTORS. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ITEMS 1, 2 AND 3.
 
                                                  Please sign exactly as names
                                                  appear on this Proxy. Joint
                                                  owners should each sign.
                                                  Trustees, executors, etc.
                                                  should indicate capacity in
                                                  which they are signing.
 
                                                  Dated:                  , 1997
                                                         -----------------
 
                                                  Signature:
                                                       -------------------------
 
                                                  Signature:
                                                       -------------------------
 
  PLEASE SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

<PAGE>   1
 
   
PROXY                                                               EXHIBIT 99.2
    
                            ENCORE ORTHOPEDICS, INC.
          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
 
   
    The undersigned hereby appoints Nick Cindrich and Harry L. Zimmerman, and
each of them, as Proxies, each with the power to appoint a substitute, and
hereby authorizes both or either of them to represent and to vote, as designated
below, all the shares of common stock or preferred stock of Encore Orthopedics,
Inc. held of record by the undersigned on February 14, 1997, at the special
meeting of shareholders to be held on March 25, 1997, or any adjournment
thereof.
    
 
(1)  PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF MERGER dated as of November
     12, 1996, among Healthcare Acquisition Corp., Healthcare Acquisition, Inc.
     and Encore Orthopedics, Inc. (Check applicable box.)
 
                [ ] FOR         [ ] AGAINST         [ ] ABSTAIN
 
(2)  In their discretion, the Proxies are authorized to vote upon such other
     business as may properly come before the meeting.
 
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this proxy will be voted
FOR approval of the Agreement and Plan of Merger.
 
  PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED PREPAID
                                   ENVELOPE.
 
           (Continued and to be signed and dated on the reverse side)
 
                        (Continued from the other side)
 
PROXY -- SOLICITED BY THE BOARD OF DIRECTORS
 
     Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in the full corporate name by the President or other
authorized officer. If a partnership, please sign in the partnership name by an
authorized person.
 
                                                 -------------------------------
                                                 Signature
 
                                                 -------------------------------
                                                 Signature if held jointly
 
                                                 Dated:                   , 1997
                                                       -------------------
                                                 
 
Please mark, sign, date and return this proxy card promptly using the enclosed
envelope which requires no postage if mailed in the United States.


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