<PAGE>   1



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                   For the fiscal year ended December 31, 1996

                                      or

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT

 For the Transition period from ..................... to ......................

                         COMMISSION FILE NUMBER 0-20328

                                   AMTROL INC
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

        RHODE ISLAND                                             05-0246955
(STATE OR OTHER JURISDICTION OF                               (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                               IDENTIFICATION NO.)

1400 DIVISION ROAD, WEST WARWICK, RI                                02893
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                         (ZIP CODE)

       Registrant's telephone number, including area code: (401) 884-6300
        Securities registered pursuant to Section 12(b) of the Act: NONE.
        Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

As of March 8, 1997, the aggregate market value of the Registrant's voting stock
held by non-affiliates was none.

As of March 27, 1997, 100 shares of Common Stock $0.01 par value, of the
Registrant were outstanding.

Documents Incorporated by Reference:  NONE

The Exhibit Index for this document appears on page 65 hereof.
<PAGE>   2
                                    PART I

ITEM 1.  BUSINESS

OVERVIEW

      AMTROL Inc ("AMTROL" or the "Company"), is a leading designer,
      manufacturer and marketer of water flow and control products used in the
      water systems markets and selected sectors of the HVAC market. The
      Company's principal products include well water accumulators, hot water
      expansion controls, water treatment products, indirect-fired water heaters
      and non-returnable pressure-rated cylinders used primarily to store,
      transport and dispense refrigerant gases. Many of these products are based
      on a technology originated and developed by the Company, which uses a
      pre-pressurized vessel with an internal diaphragm to handle fluids under
      pressure.

      The Company believes that its leading market positions in its key product
      categories are attributable to the strength of AMTROL's brand names and
      product breadth, quality and innovation, as well as its marketing,
      distribution and manufacturing expertise. In addition, AMTROL's principal
      markets are highly replacement-oriented, with 60 to 70% of the Company's
      core business coming from replacement sales. These factors, combined with
      the Company's large installed base of products, have enabled AMTROL to
      demonstrate sales and earnings stability over the past five years, even
      during periods of weak domestic economic activity.

      AMTROL's brand names are among the most widely known in its markets. For
      example, the Company's key hot water expansion control product, the
      Extrol, is so widely recognized that customers frequently refer to any hot
      water expansion control as an "Extrol." Other well-known brand names of
      the Company include Well-X-Trol, Therm-X-Trol, Hot Water Maker and
      CHAMPION. The Company also believes that it is the recognized technology
      leader in virtually all of its core product lines. In many of the
      Company's major product lines, AMTROL's products are considered the
      industry standard, a key marketing advantage, because of their recognized
      quality and reliability.

      The Company's strong reputation and brand recognition ensure that nearly
      every significant wholesaler carries at least one AMTROL product. This
      facilitates new product introduction, effectively "pulling" the Company's
      new products through its distribution system. AMTROL also offers a broad
      range of products, including over 100 models of well water accumulators.
      This broad product offering allows AMTROL's customers to consolidate their
      suppliers and to purchase and manage inventory more efficiently. These
      factors have established the Company's products as a preferred brand and
      allow the Company to realize premium pricing on most of its branded
      products. During its 50-year history, the Company has built a strong
      franchise with wholesalers and OEMs, resulting in a broad distribution
      network serving more than 5,000 customers throughout North



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      America. In addition, the Company has recently refocused its efforts to
      better serve the DIY market, a rapidly growing channel of distribution,
      primarily through private label arrangements with Lowe's Companies,
      Menards, Cotter & Company (True Value) and Ace Hardware.

      In 1996, approximately 13% of the Company's net sales were derived from
      international markets, and the Company is expanding internationally,
      especially in the fast growing Asia/Pacific region. The Company recently
      opened a new manufacturing facility in Singapore and intends to introduce
      several new products which the Company believes will be well received in
      international markets.


      On August 28, 1996, as a result of a five-month public auction process
      conducted with the assistance of AMTROL's legal and financial advisers,
      AMTROL entered into a merger agreement (the "Merger Agreement") with
      AMTROL Holdings, Inc. ("Holdings") and its wholly-owned subsidiary, AMTROL
      Acquisition, Inc. ("Acquisition"), providing for the merger of AMTROL with
      Acquisition, with AMTROL continuing as the surviving corporation (the
      "Surviving Corporation"). The Merger Agreement was approved at a special
      meeting of shareholders of AMTROL held on November 12, 1996, and
      Acquisition was merged with and into AMTROL on November 13, 1996 (the
      "Merger"). Under the terms of the Merger Agreement, each outstanding share
      of common stock of AMTROL, par value $.01 per share ("AMTROL Common
      Stock") was converted into the right to receive $28.25 in cash, without
      interest, and all outstanding options to acquire AMTROL Common Stock
      (other than options exchanged for options for Holdings common stock as
      described under Item 11) were canceled in exchange for cash in an amount
      equal to the excess of $28.25 over the per share exercise price of the
      canceled options, multiplied by the number of shares subject to the
      option. Each share of common stock of Acquisition was converted into and
      exchanged into one share of common stock of the Surviving Corporation,
      with the result that AMTROL became a wholly-owned subsidiary of Holdings,
      a Delaware corporation controlled by The Cypress Group L.L.C. ("Cypress").


      The aggregate consideration paid pursuant to the Merger, including amounts
      payable to holders of outstanding options for AMTROL Common Stock, was
      approximately $218.9 million (the "Merger Consideration"). The Merger
      Consideration, and transaction fees and related expenses of $13.8 million,
      were financed by an equity contribution of $69.3 million (including the
      exchange of options) and the proceeds from the issuance of $115 million of
      Senior Subordinated Notes due 2006 and $45 million in borrowings under a
      Bank Credit Agreement, as described under Item 7, "Management's Discussion
      and Analysis of Results of Operations and Financial Condition".


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      The Company was incorporated in Rhode Island in 1973, and is the successor
      to all of the assets and liabilities of a predecessor Rhode island
      corporation which was incorporated in 1946. The Company's principal
      executive offices are located at 1400 Division Road, West Warwick, Rhode
      Island 02893 (telephone number: (401) 884-6300).

NEW MANAGEMENT AND BUSINESS STRATEGY

      Upon the Merger, Mr. John P. (Jack) Cashman became the Chairman, Chief
      Executive Officer and President of the Company. Mr. Cashman has over 30
      years of general industrial management experience in the filtration,
      minerals, building products and pharmaceutical industries, most
      recently as Chairman and Co-Chief Executive Officer of R.P. Scherer
      Corporation, which position he resigned in March 1996. Mr. Cashman has
      worked closely with key members of AMTROL's management to develop a new
      strategic plan. To implement this new strategic plan, a new streamlined
      management structure has been put in place.

      Since the beginning of the fourth quarter of 1996, the Company has been
      executing the new strategic plan, which is designed to immediately reduce
      costs and capitalize on AMTROL's position as a technological and market
      leader. The new strategic plan consists of the following key elements: (i)
      reduce operating expenses, (ii) enhance sales and profitability of core
      product offerings, (iii) introduce new products and (iv) grow
      internationally.

      This Annual Report includes "forward-looking statements" within the
      meaning of the securities laws. All statements other than statements of
      historical facts included in this Annual Report regarding the Company's
      financial position and cost cutting and strategic plans are
      forward-looking statements. Although the Company believes that the
      expectations reflected in such forward-looking statements are reasonable,
      it can give no assurance that such expectations will prove to have been
      correct. Important factors that could cause actual results to differ
      materially from such expectations include, but are not limited to, the
      Company's ability to successfully implement its new business strategy and
      to achieve the estimated cost savings, the availability and cost of raw
      materials, changes in government regulation or enforcement policies,
      particularly related to refrigerant gases, development of competing
      technologies, acceptance of the Company's existing and planned new
      products in international markets, competition in the Company's markets,
      the rate of growth of developing economies and demand for the Company's
      products, and general economic, financial and business conditions, both
      domestically and internationally.


      REDUCE OPERATING EXPENSES

      The Company has initiated a series of actions designed to immediately
      reduce operating expenses and to establish new managerial and
      organizational accountability. Actions already implemented or announced
      are expected to generate approximately $9.4 million


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      of permanent annual cost savings by the end of 1997 (see table below).
      These actions have resulted in related one-time costs of approximately
      $2.3 million of severance and other expenses and $2.3 million in
      connection with the writedown of certain assets related to the
      discontinuation of the 4BA product line. The cost savings estimates 
      described herein are forward-looking statements based on management 
      budgets. Realization of these savings depends upon the effectiveness and
      timing of the planned actions and there can be no assurance that such 
      cost savings can be achieved.

<TABLE>
<CAPTION>
                                                              TOTAL
                                                        ESTIMATED PERMANENT
          ACTIONS IMPLEMENTED OR ANNOUNCED               ANNUALIZED SAVINGS
                                                            (IN MILLIONS)

<S>                                                            <C>
          Reduce corporate overhead expenses                   $ 4.5
          Continue to rationalize manufacturing facilities       3.0
          Reduce manufacturing costs                             1.9
                                                               -----
                                           Total               $ 9.4
                                                               =====
</TABLE>

      REDUCE CORPORATE OVERHEAD EXPENSES. The Company believes that significant
      and immediate cost savings can be realized from restructuring its general
      and administrative staff and consolidating its three autonomous strategic
      business units to eliminate redundant and unnecessary functions. These
      actions have been substantially completed and the Company expects to
      realize permanent annual cost savings aggregating approximately $4.5
      million, including non-personnel expense reductions commencing in 1997. As
      a result of the headcount reductions undertaken in 1996, the number of
      persons employed at corporate headquarters as of December 31, 1996 has
      decreased by approximately 15% since January 1, 1996. The Company
      estimates that one-time costs related to these measures will total
      approximately $2.3 million, which has been reserved for on its
      consolidated balance sheet as part of purchase accounting in connection
      with the Merger.

      CONTINUE TO RATIONALIZE MANUFACTURING FACILITIES. Since September 1995,
      the Company has closed two manufacturing facilities and relocated their
      production to remaining facilities. As a result of these plant
      consolidations, 125 salaried and non-salaried positions have been
      eliminated. The Company also discontinued its unprofitable 4BA reusable
      pressure-rated cylinder business in the fourth quarter of 1996 as part of
      its cost reduction initiatives. The Company recently introduced a new
      reusable pressure-rated cylinder which serves the same growing market as
      the 4BA product line, but has lower manufacturing costs. These actions are
      expected to generate permanent annual manufacturing cost savings of
      approximately $3.0 million. The Company recorded a $3.8 million charge to
      operating expense in 1995 in connection with the two plant closures. The
      discontinuation of the 4BA reusable pressure-rated cylinder business will
      result in a $2.0 million writedown of certain assets, which has been
      reserved for on the Company's consolidated balance sheet as part of
      purchase accounting in connection with the Merger.


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      In addition, as part of its ongoing efforts to rationalize its
      manufacturing operations, the Company intends to close its Peru, Indiana
      facility, to relocate production of certain products to other facilities
      and to outsource the production of other products. The Company anticipates
      that this plant closure will be completed in the second quarter of 1997
      and estimates the costs associated with this action will approximate
      $500,000, which amount has been reserved for on the Company's consolidated
      balance sheet. As part of its implementation of its growth strategy, the
      Company is also exploring the possible sale of its American Granby Inc.
      subsidiary, which has little strategic overlap with AMTROL's core water
      systems and HVAC product lines. The Company continually evaluates its
      manufacturing capacity to identify opportunities to further reduce
      manufacturing costs by maximizing production at lower cost facilities and
      reducing or eliminating production at higher cost facilities.

      REDUCE MANUFACTURING COSTS. The Company intends to reduce labor costs
      through automating certain labor-intensive manufacturing processes and
      redesigning existing product lines. For example, the Company is currently
      automating its small vessel manufacturing line in its West Warwick, Rhode
      Island facility. These projects are expected to generate approximately
      $1.9 million in permanent annual cost savings by the end of 1997. The
      Company has identified and intends to implement several other
      manufacturing improvement projects which are expected to yield additional
      annual savings by the end of 1998.

      ENHANCE SALES AND PROFITABILITY OF CORE PRODUCT OFFERINGS

      The Company intends to implement a series of initiatives to reinvigorate
      sales growth and increase profitability of its core product offerings. To
      accomplish this, the Company will seek agreements with major pump and
      boiler OEMs to incorporate AMTROL products into complete systems solutions
      and will modify current products to enhance appearance, facilitate
      installation or meet the requirements of specific domestic and
      international markets. The Company will also expand its efforts to educate
      customers about the benefits of AMTROL products. These actions are
      expected to increase demand for AMTROL's core products and allow AMTROL to
      continue to realize premium pricing and achieve a more favorable product
      mix, especially in international markets.

      INTRODUCE NEW PRODUCTS

      The Company intends to use new product introductions to pursue
      international growth, broaden existing product lines and focus on
      attractive niche market segments within the broader water systems and HVAC
      markets. AMTROL is a technological leader and historically has
      successfully identified trends in the market and capitalized on these
      trends by introducing new products. For example, in recognition of demand
      for an energy efficient alternative to conventional potable water heaters,
      AMTROL successfully developed and introduced the Hot Water Maker line of
      indirect-fired water heaters. Similarly, AMTROL was able to apply its
      pressure regulating technology to develop the Therm-X-Trol, a product
      designed to facilitate compliance with increasingly stringent


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      requirements for backflow prevention systems. As a result of the Company's
      increased focus on research and development, AMTROL has developed several
      new products designed to meet the demands of both the domestic and
      international markets. For example, the Company is currently field testing
      a potable water heater that efficiently utilizes the thermal waste energy
      produced by air conditioning units. New products expected to be introduced
      in 1997 include a small pressure boosting system for International
      markets, a composite reverse osmosis vessel for both the domestic and
      International markets and an indirect-fired water heater designed for use
      with European wall-hung boiler units.

      EXPAND  INTERNATIONALLY

      As a result of the Company's strong brand names, broad product offerings
      and core water systems expertise, AMTROL is well positioned to capitalize
      on growing global demand for enhanced water pressure control and improved
      water quality and refrigerant systems. The Company believes that
      establishing local manufacturing and distribution facilities in
      international markets is critical to the Company's ability to build strong
      customer relationships, understand local product preferences and be price
      competitive while maintaining appropriate profit margins. In order to
      achieve the Company's goal of increasing its international presence, the
      Company has been pursuing and intends to continue to selectively pursue
      joint ventures, OEM alliances and acquisitions. The Company will focus its
      international expansion on the target markets of the Asia/Pacific region
      and Europe and, to a lesser extent, Latin America/Mexico.

      ASIA/PACIFIC. In the developing economies of the Asia/Pacific region,
      rapid economic growth and the emergence of a middle class has spurred
      demand in many markets served by AMTROL products. For example, economic
      development and the commercial building boom underway in Asia are fueling
      demand for air conditioning and refrigeration equipment which in turn
      increases demand for refrigerant gas pressure-rated cylinders. New
      commercial high-rise structures also require potable water pressure
      boosting systems and expansion control products for chilled-water air
      conditioning systems. In addition, as Asian consumers achieve higher
      living standards, they are demanding residential water pressure boosting
      and water treatment systems because municipal water supplies often lack
      the pressure required to operate modern appliances such as dishwashers or
      washing machines and fail to meet acceptable standards for clean and safe
      water. Consequently, this region represents a large potential market for
      the Company's pressure-rated cylinders for refrigerant gases, water
      control systems and water treatment products. To better serve these
      markets, AMTROL has increased the number of distributors in this region
      from 12 to 45 over the past two years and commenced manufacturing at its
      Singapore facility in October 1996.

      EUROPE. In Europe, the large hydronic heating market (believed by the
      Company to be ten times the size of the U.S. market) and the general lack
      of adequate water pressure in municipal systems represent excellent
      opportunities for the Company in light of its core products expertise. The
      Company's brand names are already well recognized in Europe.


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      The Company plans to apply its technical expertise to the special needs of
      the European market. For example, the Company is currently in general
      discussions with leading European OEMs for developing an indirect-fired
      water heater designed for use with European wall-hung boiler units. The
      Company plans to accelerate European growth through selective
      acquisitions, strategic joint ventures or distribution agreements.

      LATIN AMERICA/MEXICO. Because the market dynamics in emerging Latin
      American and Mexican economies are comparable to those of the Asia/Pacific
      region, the Company intends to pursue a similar strategy to accelerate
      growth. AMTROL has taken preliminary steps towards increasing its presence
      by initiating a licensing program with local distributors and pump
      manufacturers to build and sell water pressure boosters utilizing AMTROL's
      accumulators. The Company intends to establish local sales, distribution
      and service capability in this region, which will enable the Company to
      better service its existing customers and provide a base for new business.

PRODUCTS AND MARKETS

      The Extrol, the first product to utilize the technology developed by
      AMTROL for handling fluid under pressure in hydronic heating systems,
      redefined the standards for controlling the expansion of water in these
      systems. Older systems consisted simply of a vessel containing air,
      resulting in excessive pressure, less efficiency and excessive corrosion.
      AMTROL developed a technology which uses a flexible diaphragm inside a
      pre-pressurized vessel to maintain the separation of air and water in the
      vessel, and has applied this technology in both water systems products and
      HVAC products.

      WATER SYSTEMS PRODUCTS

      AMTROL's net sales of its water systems products accounted for
      approximately $96.3 million (or 56.4%) of the Company's total net sales in
      1996. These products consist primarily of water accumulators and related
      accessories for residential and commercial well water systems and systems
      and components for residential water softening and purification.

      WELL WATER SYSTEMS. AMTROL produces and sells well water accumulators for
      both residential and commercial applications under the brand names
      Well-X-Trol and CHAMPION, as well as under several private label programs.
      Virtually all of the water accumulators sold by the Company incorporate an
      internally mounted rubber diaphragm that seals an air charge and allows
      pressure to increase as water fills the plastic lined vessel. This design
      serves to control pressure while maintaining the separation of air and
      water in the vessel, thereby eliminating water logging (absorption of air
      into water) as well as reducing wear on switches, pump motors and other
      system components caused by unnecessary on/off cycling. A typical well
      water system consists of a submersible or jet pump located in the well
      water that is attached to an AMTROL pre-pressurized vessel.


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      The pre-pressurized vessel is connected to the plumbing system in order to
      provide water on demand at a constant pressure. As the water level and
      pressure in the vessel lowers, the diaphragm flexes, which in turn causes
      the pump to cycle on until a sufficient level of water pressure is
      achieved in the system. The Company also provides a complete line of water
      systems accessories.

      WATER TREATMENT/FILTRATION PRODUCTS. AMTROL offers a range of products to
      meet increasing global demand for improved water quality and water
      pressure. AMTROL manufactures and markets water softeners, reverse osmosis
      accumulators and other related systems that may be utilized to purify or
      treat residential municipal-supplied and well water. The Company also
      manufactures and markets products that address the need to boost water
      pressure in many domestic and international locations where the available
      pressure is not adequate.

      HVAC PRODUCTS

      AMTROL's net sales to selected sectors of the HVAC market, which include
      net sales of products such as expansion accumulators, water heaters and
      pressure-rated cylinders for refrigerant gases, accounted for
      approximately $74.5 million (or 43.6%) of the Company's total net sales in
      1996. AMTROL's residential HVAC products include expansion vessels for
      heated water, potable water heaters and other accessories used in
      residential HVAC systems. AMTROL's commercial HVAC products are
      substantially identical in function to those used in residential
      applications, with the most significant difference being variations
      required by design codes to meet the higher operating pressures of larger
      systems. AMTROL's pressure-rated cylinders for refrigerant gases are used
      in the storage, transport and dispensing of gases used in air conditioning
      and refrigeration systems.

      EXTROLS. Extrol expansion accumulators, the first AMTROL product line to
      incorporate the Company's diaphragm technology for handling fluid under
      pressure, are used in conjunction with hydronic heating systems, which
      provide heat by circulating hot water through baseboard piping and
      radiators. The Extrol product eliminates the corrosive effects of oxygen
      in the heating system and eliminates problems related to hot water
      expansion by allowing the volume of water to increase as the temperature
      of the water increases within a closed system, preventing operating
      problems resulting from excessive or deficient water pressure in the
      system.

      THERM-X-TROLS. Therm-X-Trols accumulate expanded hot water escaping from
      potable water heaters that has been prevented from flowing back into the
      public water supply by backflow prevention devices. In response to the
      Clean Water Act of 1984 certain jurisdictions established local codes to
      require owners of commercial and residential buildings to install backflow
      prevention devices in order to prevent the contamination of the public
      water supply. Local codes adopted by organizations that set standards for
      approximately 90% of the United States also require a separate device to
      handle the expanded water prevented from flowing back into the public
      water supply. The principal  
      


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      alternatives are relief valves, which permit water to drain inside the
      building, and thermal expansion accumulators, such as the Therm-X-Trol,
      which capture the water. Therm-X-Trol satisfies these code requirements,
      as well as the codes of cities that specifically require a thermal
      expansion accumulator. Additionally, the two largest domestic water heater
      manufacturers will void their warranties if thermal expansion accumulators
      are not used in conjunction with their products where backflow prevention
      devices are installed.

      INDIRECT-FIRED WATER HEATERS. In response to market demands for energy
      conservation, AMTROL has developed a line of indirect-fired residential
      and commercial water heaters, which it manufactures and distributes under
      the brand name Hot Water Maker. Used in conjunction with a new or existing
      boiler installed to heat living and work areas, these water heaters offer
      an alternative to conventional gas and electric potable water heaters and
      tankless coils by generating hot water through the use of heat exchangers
      and circulators which circulate heated water from the boiler through a
      coil in the core of the water heater's reservoir. Hot Water Makers are
      sold for use in both commercial and residential applications. In addition
      to selling products under its own brand name, AMTROL is presently pursuing
      an OEM partnership strategy in this business whereby the Company supplies
      hydronic products manufacturers with private branded indirect-fired water
      heaters.

      REFRIGERANT CYLINDERS. AMTROL is one of two significant manufacturers of
      non-returnable pressure-rated cylinders used in the storage, transport and
      dispensing of refrigerant gases for air conditioning and refrigeration
      systems. These gases include chlorofluorocarbons ("CFC's") and
      hydrochlorofluorocarbons ("HCFC's"), as well as newly developed
      alternative refrigerants designed to mimic the desirable characteristics
      of CFC's and HCFC's. The Montreal Protocol on Substances that deplete the
      Ozone Layer (to which 140 countries are signatories) required the phase
      out of CFC production by the end of 1995 and established an HCFC
      consumption limit beginning January 1, 1996, with a complete phase out of
      HCFC's by 2030. The United States has accelerated the HCFC phase out,
      requiring the phase out of certain HCFC's by 2003, others by 2020 and the
      remainder by 2030. During the past three years, these regulatory phase
      outs and consumption limits on CFC's and HCFC's have created disruptions
      in the market and have resulted in uneven and less predictable demand for
      the Company's pressure-rated cylinders. These conditions may continue
      during the transition to new alternative refrigerant gases until the
      aftermarket service demand for the new alternative refrigerant gases grows
      to previous CFC levels. However, the Company believes that the increasing
      use of refrigeration and air conditioning in developing nations will
      generate increased international sales of refrigerant gas cylinders.


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DISTRIBUTION AND MARKETING

      AMTROL's principal channel of distribution is plumbing, heating and pump
      specialty wholesalers. The Company maintains its presence in the United
      States and Canadian wholesale markets through a network of approximately
      40 independent firms that represent multiple manufacturers, arranging
      sales on a commission basis, as well as approximately 20 salaried direct
      sales professionals. To service its customers with greater efficiency, the
      Company has streamlined its representative network and, through
      consolidation of multiple lines of business, has brought a broader range
      of products to its wholesalers. The Company also provides certain of its
      products to the DIY market segment through a separate sales force and
      marketing division to better service this rapidly growing segment. AMTROL
      has private label arrangements with Lowe's Companies, Menards, Cotter &
      Company (True Value) and Ace Hardware.

      At its Education Center, which is an integral part of the Company's
      marketing organization, and at Company-sponsored seminars throughout the
      United States and selected international locations, AMTROL provides
      education and training to wholesalers, contractors and engineers,
      independent sales representatives and their employees to assist them in
      understanding the technical aspects of their respective customers'
      requirements and AMTROL's product lines. By educating customers about the
      benefits of AMTROL's products, the Company's products are effectively
      "pulled" through its distribution system. During 1996, over 2,000
      customers and contractors attended technical programs at the Company's
      Education Center.

      AMTROL's major customers for reusable refrigerant gas cylinders are
      wholesale distributors who sell the products to service providers and
      refrigerant recovery equipment manufacturers. Non-returnable refrigerant
      pressure-rated cylinders are also sold to major chemical companies, which
      produce and package refrigerant gases, and to independent contractors that
      purchase bulk refrigerants and fill the cylinders.

      No single customer represented more than 5% of the Company's net sales in
      1996.

INTERNATIONAL SALES

      Sales in geographic regions outside of the United States and Canada,
      primarily Western Europe, Asia and Mexico, accounted for 13.0%, 13.2% and
      12.6% of the Company's total net sales in fiscal years 1994, 1995 and
      1996, respectively. The majority of these sales were refrigerant gas
      pressure-rated cylinders sold into Europe. In 1995, AMTROL believes that
      its international business was adversely affected by depressed economic
      conditions in Mexico and Europe.

      Historically, the Company's international expansion efforts were hampered
      by the lack of an international manufacturing presence and competitively
      priced AMTROL products suitable for use in international markets. To
      address these issues, the Company recently commenced manufacturing
      activities at its Singapore facility and has developed new products and
      modified existing products for use in specific international markets. The


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      Singapore facility will enable AMTROL to better service its existing
      customers and will provide a base for new business in the Asia/Pacific
      region. The local manufacturing presence will allow the Company to more
      effectively compete in the Asia/Pacific region. The Singapore facility
      commenced manufacturing non-returnable pressure-rated cylinders in October
      1996. The plans to focus on international expansion as a key part of its
      strategy. See "--New Management and Business Strategy--Expand
      Internationally."

      Over the last two years, AMTROL has opened international sales offices in
      Hong Kong and Singapore and plans to establish a sales office in Europe in
      1997. In addition to these initiatives, AMTROL is building its own
      distribution networks in the Asia/Pacific region and Latin America/Mexico.
      To further penetrate European markets, AMTROL is selectively pursuing
      acquisitions and distribution, OEM and manufacturing alliances.

MANUFACTURING, RAW MATERIALS AND SUPPLIERS

      The Company manufactures water systems and HVAC products using components
      produced in its own facilities, as well as those of outside suppliers. To
      assure quality in its product lines and to enable the Company to respond
      quickly to changing market demands, AMTROL manufactures most critical
      components in its own facilities. The Company has a "Continuous
      Improvement Program" for quality control directed at producing higher
      yields, lower controllable costs per unit, higher order fill rates, better
      on-time delivery and decreased warranty claims. AMTROL believes it has
      developed substantial manufacturing expertise related to its technology
      and its expertise in high quality, low cost manufacturing. This expertise,
      combined with its extensive knowledge of the manufacturing tolerances
      required to handle fluids under pressure, provides a competitive
      advantage. Principal manufacturing processes include thin-wall steel deep
      drawing, welding and rubber injection molding.

      The Company's engineering and development efforts are focused on
      developing new products and processes, adapting existing products for new
      applications and improving the performance, quality and manufacturing cost
      of its products.

      Due to significant productivity gains achieved at its principal
      manufacturing facilities, decisions were made to close two production
      facilities which were no longer necessary. The Company's Plano, Texas
      plant ceased operations in September 1995 and the Rogers, Arkansas plant
      ceased operations in April 1996. Certain equipment from the Plano, Texas
      plant was refurbished and redeployed in the company's new Singapore
      manufacturing facility.

      In addition to its ongoing facilities rationalization program, AMTROL has
      implemented a significant capital improvement program with the intention
      of further reducing manufacturing costs. During 1996, the Company spent
      $10.9 million on capital expenditures. Most significantly, the Company has
      spent approximately $2.4 million to automate the small diameter vessel
      production line in West Warwick, Rhode Island, and $2.1 million in
      conjunction with the opening of its Singapore facility.


                                       12
<PAGE>   13
      AMTROL's three principal export manufacturing facilities hold ISO 9001
      Certification, the most complete certification in the ISO 9000 Series from
      the International Organization for Standardization ("ISO"). ISO
      certification requires periodic audits of AMTROL's systems for product
      design, development, production, installation and servicing, and has
      become the international standard of quality required for manufacturers
      serving the European Economic Community, Southeast Asia, the Middle East
      and Latin America.

      Raw material suppliers generally offer commodities used by the Company,
      such as steel, synthetic rubber and plastic resins, to all manufacturers
      on substantially similar terms. Significant increases in raw material
      prices can adversely impact margins if the Company is unable to pass on
      such increases to its customers. In 1995, the Company experienced
      increased raw material costs, particularly steel and corrugated paper,
      which it was unable to offset and, as a result, its gross margin was
      adversely impacted. During 1996, the Company has experienced reductions in
      raw material prices offsetting many of the increases experienced in the
      prior year. Manufacturers of component parts also generally offer their
      products to others on substantially similar terms. Although certain
      components are only available from a limited number of manufacturers, the
      Company anticipates that it will be able to purchase all of the components
      it requires without disruption. The Company believes that its
      relationships with its suppliers are good.

SEASONALITY; BACKLOG

      Although AMTROL's sales are related to economic activity generally and
      sales of certain of its products are seasonal, its overall business is not
      seasonal to any significant extent. Due to the generally short lead time
      in orders, the Company historically has not carried any material backlog.

PATENTS, TRADEMARKS AND LICENSES

      While the Company owns a number of patents that are important to its
      business, the Company believes that its position in its markets depends
      primarily on factors such as manufacturing expertise, technological
      leadership, superior service and quality and strong brand name
      recognition, rather than on patent protection. The Company believes that
      foreign and domestic competitors have been unable to match the quality of
      AMTROL's branded products. The Company licenses certain of its technology
      to manufacturers in the Asia/Pacific region.

      The Company also has a number of registered and unregistered trademarks
      for its products. The Company believes the following registered
      trademarks, which appear on its products and are widely recognized in its
      markets, are material to its business: the AMTROL(R) name, Well-X-Trol(R),
      Therm-X-Trol(R), Extrol(R), Hot Water Maker(R) and CHAMPION(R).


                                       13
<PAGE>   14
COMPETITION

      Although the Company experiences substantial competition from a limited
      number of competitors in each of its markets, the Company believes that it
      is a market leader in its core products. The principal means of
      competition in the water systems products and HVAC markets are technology,
      quality, service and price. AMTROL brand name products generally compete
      on the basis of technology, quality, service and product line breadth and
      generally do not compete on the basis of price. No single company competes
      with AMTROL over a significant number of its product lines. As the Company
      expands into international markets, it may experience competition from
      local companies.

EMPLOYEES

      As of December 31, 1996, the Company had approximately 915 employees, none
      of whom were represented by collective bargaining units. AMTROL considers
      relations with its employees to be good.

ENVIRONMENTAL MATTERS

      Some of the Company's operations generate waste materials that may give
      rise to liability under environmental laws. Some risk of environmental and
      other damage is inherent in these operations, and certain of the Company's
      operations have been named a party in government enforcement and private
      actions associated with hazardous waste sites (including several sites
      under the federal Comprehensive Environmental Response, Compensation and
      Liability Act, known as "Superfund") and, in several matters, have been
      identified as being potentially responsible for a share of cleanup costs
      associated with such sites. Based upon the Company's experience in such
      matters, the amount of hazardous waste shipped to such sites attributable
      to the Company and the status of settlement proceedings, the Company
      estimates that its share of the aggregate cleanup costs for all of these
      sites will not be material. In addition, the Company is in the process of
      remediating contaminants discovered at its Plano, Texas facility, but does
      not anticipate that the costs associated with such remediation will be
      material. There can be no assurance that such liability arising from, for
      example, contamination at facilities the Company (or an entity or business
      the Company has acquired or disposed of) currently owns or operates or
      formerly owned or operated, or locations at which wastes or contaminants
      generated by the Company (or an entity or business the Company has
      acquired or disposed of) have been disposed of, will not arise or be
      asserted against the Company or entities for which the Company may be
      responsible in a manner that could materially and adversely affect the
      Company.


                                       14
<PAGE>   15
            The Company monitors and reviews its procedures and policies for
            compliance with environmental laws. Based upon the Company's
            experience to date, the Company operates in substantial compliance
            with environmental laws, and the cost of compliance with existing
            regulations is not expected to have a material adverse effect on the
            Company's results of operations, financial condition or competitive
            position. However, future events, such as changes in existing laws
            and regulations or enforcement policies, may give rise to additional
            compliance costs which could have a material adverse effect on the
            Company's results of operations, financial condition or competitive
            position.

ITEM 2.     PROPERTIES

            The following table sets forth information regarding the Company's
            principal properties each of which is owned by the Company unless
            otherwise indicated:

<TABLE>
<CAPTION>
LOCATION           SQUARE FOOTAGE              PRINCIPAL USE
--------           --------------              -------------
                   (approximate)
<S>                    <C>          <C>
West Warwick, RI       270,000      Corporate Headquarters, Manufacturing
                                       All AMTROL Product Lines, Education Center
Nashville, TN          121,600      Manufacturing Water Systems Products and
                                       Pressure-rated Cylinders
Peru, IN                60,600      Manufacturing Pumps, HVAC Products and
                                       Accessories (Residential and Commercial)
Baltimore, MD           37,000      Manufacturing Metal Stampings
Liverpool, NY(a)        68,000      Distribution of Water Systems Products and
                                       Accessories for Irrigation, Pools/ Spas, HVAC
Lithonia, GA(a)         30,000      Distribution of Water Systems Products and
                                       Accessories for Irrigation, Pools/ Spas, HVAC
Paducah, KY             46,300      Manufacturing Pressure-rated Cylinders
Ashland, OH(a)          37,000      Manufacturing Water Treatment/Filtration Products
Mansfield, OH(a)        45,000      Distribution Center for Do-It-Yourself Market
Singapore(a)            30,000      Manufacturing Pressure-rated Cylinders;
                                       Sales Office for Southeastern Asia
Hong Kong(a)               600      Sales Office for Northern Asia
Antwerp, Belgium(b)         --      Distribution
Kitchener, Ontario(a)   18,400      Distribution
Plano, TX               40,000      Held for Sale
                        ------
     TOTAL             804,500
                       =======
</TABLE>

(a) Leased facilities

(b)  The distribution center in Antwerp operates under a lease for space on an
     as-needed basis.


                                       15
<PAGE>   16
            AMTROL believes that its properties and equipment are generally well
            maintained, in good operating condition and adequate for its present
            needs. The Company regularly evaluates its manufacturing
            requirements and believes that it has sufficient capacity to meet
            its current and anticipated needs. The inability to renew any
            short-term real property lease would not have a material adverse
            effect on AMTROL's results of operations.

ITEM 3.     LEGAL PROCEEDINGS

            From time to time, the Company is named as a defendant in legal
            actions arising in the normal course of business. The Company is not
            a party to any pending legal proceeding the resolution of which
            management believes will have a material adverse effect on the
            Company's results of operations or financial condition or to any
            pending legal proceedings other than ordinary, routine litigation
            incidental to its business. See "Item 1, Business--Environmental
            Matters."

ITEM 4.     SUBMISSION OF MATTERS TO SECURITY HOLDERS

            On November 12, 1996 the Company held a Special Meeting of
            Shareholders. Set forth below are the results of each matter voted
            upon at the Special Meeting:

            PROPOSAL 1. Amendment to Articles of Incorporation. To consider and
            vote upon a proposal to adopt an Amendment to the Amended and
            Restated Articles of Incorporation of the Company (the "Articles")
            which would amend Article Sixth, Section D of the Articles, in
            contemplation of the Merger, to exclude the Merger from the
            definition of "business combination" in order that the Merger need
            only be approved by holders of a majority of the outstanding AMTROL
            Common Stock.

<TABLE>
<CAPTION>
                           For         Against     Abstentions
                           ---         -------     -----------
<S>                       <C>            <C>         <C>
                          6,327,038      8,868       31,300
</TABLE>


            PROPOSAL 2. The Merger. To consider and vote upon a proposal to
            approve the Merger Agreement, dated as of August 28, 1996 (the
            "Merger Agreement"), by and among AMTROL, Holdings and Acquisition,
            pursuant to which, among other matters, Acquisition will merge with
            and into AMTROL (the "Merger") and each share of AMTROL Common
            Stock, will be converted into the right to receive $28.25 in cash,
            without interest thereon.

<TABLE>
<CAPTION>
                             For         Against    Abstentions
                             ---         -------    -----------
<S>                       <C>            <C>         <C>
                          6,347,586      1,668       17,952
</TABLE>


                                       16
<PAGE>   17
                                     PART II


ITEM  5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS

            All of the Common Stock of the Company is owned by Holdings; thus,
            no trading market exists for such stock. Similarly, all of the
            common stock of Holdings is held by affiliates of Cypress and
            certain officers of the Company, and no trading market exists for
            such stock. See Item 12, "Security Ownership of Certain Beneficial
            Owners and Management".

            Prior to the Merger, AMTROL Common Stock was traded on The Nasdaq
            Stock Market's National Market ("Nasdaq National Market") under the
            symbol "AMTL". The following table sets forth the high and low
            prices per share of AMTROL Common Stock on the Nasdaq National
            Market with respect to each quarterly period since January 1, 1995
            through the effective date of the Merger.

<TABLE>
<CAPTION>
                                                            High        Low
                                                            ----        ---
<S>                                                          <C>        <C>
                  Fiscal 1995
                        Quarter ended April 1, 1995          17 3/4     14 3/4
                        Quarter ended July 1, 1995           20 5/16    15 3/4
                        Quarter ended September 30, 1995     19 3/8     15 3/4
                        Quarter ended December 31, 1995      18         14 1/2

                  Fiscal 1996
                        Quarter ended March 30, 1996         18 1/2     14 1/4
                        Quarter ended June 29, 1996          24 1/4     16 1/2
                        Quarter ended September 28, 1996     27 3/4     19 1/2
                        Quarter ended December 31, 1996      28 3/8     27 1/2
                           (through November 12, 1996)
</TABLE>


                                       17
<PAGE>   18
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below for and as of each of
the years and periods in the five-calendar-year period ended December 31, 1996
have been derived from the Consolidated Financial Statements of the Company,
including the related notes thereto, which have been audited by Arthur Andersen
LLP, independent certified public accountants. The selected consolidated balance
sheet data for November 12, 1996 have been derived from unaudited consolidated
financial statements of the Company which, in the opinion of management, include
all adjustments (consisting only of normal recurring items) necessary for a fair
and consistent presentation of such data. The information set forth below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and with the Consolidated Financial
Statements of the Company, including the related notes thereto, appearing
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
                                         ---------------------PREDECESSOR COMPANY---------------------
                                                                                                         SUCCESSER
                                                                                             PERIOD       COMPANY
                                                                                              ENDED     PERIOD ENDED
                                                       YEAR ENDED DECEMBER 31,            NOVEMBER 12,  DECEMBER 31,
                                            1992        1993           1994       1995        1996         1996
                                            ----        ----           ----       ----        ----         ----
                                                              (In Thousands, except ratio data)
<S>                                      <C>         <C>            <C>         <C>       <C>           <C>
STATEMENT OF OPERATIONS DATA:
   Net sales                             $ 148,462   $ 164,295      $ 173,472   $172,454   $ 152,193     $ 18,628
   Cost of goods sold                      103,521     116,180        123,184    124,303     110,582       15,108(e)
                                         ---------   ---------      ---------   --------   ---------     --------

         Gross profit                       44,941      48,115         50,288     48,151      41,611        3,520

   Selling, general and
     administrative expenses                28,731      29,099         30,402     29,943      25,796        3,508
   Amortization of goodwill                     --          --             --         --          --          313
   Plant closing charges                        --          --             --      3,825          --           --
   Capitalized in-process research
   and development                              --          --             --         --          --        1,000
                                         ---------   ---------      ---------   --------   ---------     --------

         Income (loss) from operations      16,210      19,016         19,886     14,383      15,815       (1,301)

   Interest income (expense), net           (2,677)       (805)            (7)        60          53       (2,224)
   License and distributorship fees            283         254            254        258         181           25
   Other income (expense), net                (534)       (141)          (179)        65        (175)         (99)
                                         ---------   ---------      ---------   --------   ---------     --------

         Income (loss) before
         provision for income taxes
         and extraordinary item             13,282      18,324         19,954     14,766      15,874       (3,599)

   Provision (benefit) for income taxes      5,090       7,149          7,683      5,681       6,152       (1,310)
                                         ---------   ---------      ---------   --------   ---------     --------

         Income (loss) before
         extraordinary item                  8,192      11,175         12,271      9,085       9,722       (2,289)

   Extraordinary item                           --        (911)(a)         --         --          --           --
                                         ---------   ---------      ---------   --------   ---------     --------

         Net income (loss)               $   8,192   $  10,264      $  12,271   $  9,085   $   9,722     $ (2,289)
                                         =========   =========      =========   ========   =========     ========

OTHER DATA:
   Depreciation and amortization         $   4,349   $   4,520      $   4,330   $  4,673   $   4,586     $    598
   Capital expenditures                      2,849       7,382          4,902      5,492       9,260        1,662
   EBITDA(b)                                20,842      23,790         24,470     23,139      20,582         (678)
   Ratio of earnings to fixed                 5.3x       16.3x          38.0x      41.5x       42.6x           --
   charges(c)

BALANCE SHEET DATA (AT PERIOD END):

   Working capital                       $  20,833   $  28,454      $  37,293   $ 43,303   $  41,778     $ 35,143
   Total assets                             74,499      82,612         91,634     93,909      96,280      255,193
   Long-term debt, less current                                                                                 
     installments                           29,676       3,333(d)       2,381         --          --      159,175
   Shareholders' equity                     16,656      53,017(d)      64,174     70,206      73,783       67,037
</TABLE>
       

(a)  Reflects an extraordinary loss of $1.5 million ($.9 million net of tax
     benefits) in 1993 from the early extinguishment of debt.

(b)  EBITDA represents income (loss) from operations before plant closing
     charges, plus depreciation and amortization and license and distributorship
     fees. EBITDA is presented because it is a widely accepted indicator of a
     company's ability to incur and service indebtedness. EBITDA (subject to
     certain adjustments) will be used to determine compliance with certain
     covenants in the Indenture. EBITDA, however, should not be considered as an
     alternative to net income, as a measure of the Company's operating results,
     or as an alternative to cash flow, as a measure of liquidity.

(c)  For purposes of this computation, earnings represent net income before
     extraordinary item, income taxes, plant closing charges and fixed charges.
     Fixed charges consist of interest expense, capitalized interest, the
     interest component of operating leases and amortization of deferred
     financing costs. The earnings for the period ended December 31, 1996 are
     inadequate to cover fixed charges by $3.6 million.

(d)  The Company completed an initial public offering in 1993 of its common
     stock and used the net proceeds to reduce its indebtedness.

(e)  Reflects a $1.0 million charge related to the upward revision of the
     Company's workers' compensation reserve estimate.


                                       18
<PAGE>   19
ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
            OPERATIONS AND FINANCIAL CONDITION


            The following discussion should be read in conjunction with the
            Consolidated Financial Statements of the Company included
            elsewhere herein.


OVERVIEW

            In connection with the acquisition of the Company by affiliates of
            Cypress, management has developed and begun to execute a new
            strategic plan to immediately reduce costs and capitalize on
            AMTROL's position as a technological and market leader. The
            Company's future results of operations will depend in a large part
            on management's ability to implement this strategy. See Item 1,
            "Business--New Management and Business Strategy."

            AMTROL's principal markets are highly replacement-oriented with 60
            to 70% of the Company's core business coming from replacement sales.
            The installed base of AMTROL's products in these core markets,
            combined with their stable nature, provide the Company with a
            consistent and predictable base business. Although generally stable,
            sales are affected by weather, as well as general economic activity.
            The Company monitors well water pump sales, existing home sales and
            boiler shipments in order to gauge activity in its markets. Although
            sales of certain of AMTROL's product lines are seasonal in nature,
            its overall business is not seasonal to any significant extent, as
            seasonal variations of individual product lines tend to offset each
            other.

            As a result of the Merger, the Company will have a higher level of
            depreciation and amortization and interest expense.

            NET SALES. Net sales of the Company's water systems products
            accounted for approximately 56.4% of the Company's total net sales
            in 1996, with the balance represented by sales to the HVAC market.
            Over the past three years, the percentage of water systems net sales
            to total net sales has been fairly constant.

            AMTROL's well water accumulators, marketed under the brand names
            Well-X-Trol and CHAMPION, account for over half of the Company's
            total water systems net sales and generally carry higher gross
            profit margins than other product sales. These pre-pressurized
            vessels are distributed through a network of pump specialty and
            plumbing and heating wholesalers and the DIY retail network. The
            market is experiencing a modest shift in the channels of
            distribution from wholesalers to DIY retailers, which generally
            carry slightly lower selling prices. Sales of water system
            accumulators are generally correlated to shipments of well water
            pumps.


                                       19
<PAGE>   20
            The Company's HVAC products include indirect-fired water heaters and
            water expansion accumulators for hydronic heating systems and
            non-returnable pressure-rated cylinders for refrigerant gas.
            AMTROL's plumbing and heating sales outside of North America are
            currently not significant. AMTROL believes it has opportunities to
            increase its sales in Europe, currently the world's largest hydronic
            heating market, as well as emerging markets in Northern Asia through
            a combination of planned new products and joint ventures.
            Therm-X-Trol product sales combined with planned new product
            introductions will provide growth opportunities in the plumbing and
            heating product group.

            The market for refrigerant gas pressure-rated cylinders is
            seasonable in nature, with roughly 60% of annual sales coming in the
            first six months of the year as producers build inventory in
            preparation for air conditioner use in the summer season. An
            unseasonably hot spring and early summer favorably impact unit
            volume demand. AMTROL and Worthington Industries are the major
            manufacturers of non-returnable refrigerant cylinders for a world
            market dominated by a few major customers. The Company expects that
            rapidly increasing demand for air conditioning and refrigerant
            products in the Asia/Pacific region will generate sales growth.

            COST OF GOODS SOLD. The principal elements comprising the Company's
            cost of goods sold are raw materials, labor and manufacturing
            overhead. The major raw materials used by the Company in its
            production process are steel, corrugated paper, plastic resins and
            synthetic rubber. Significant increases in raw material prices can
            adversely impact margins if the Company is unable to pass on such
            increases to its customers. The Company has an infrastructure of
            capital equipment, buildings and related support costs and,
            accordingly, decreases in volume can have a significant adverse
            effect on margins. Cost of goods sold can also be significantly
            affected by changes in product mix.

            Since the fourth quarter of 1995, the Company has significantly
            reduced its manufacturing cost base. The Company reduced its
            workforce by approximately 15%, or 125 people, by closing its Plano,
            Texas facility in September 1995 and its Rogers, Arkansas facility
            in April 1996. Production previously performed in these facilities
            was transferred to other existing production plants. In the fourth
            quarter of 1995 and the first half of 1996, the Company experienced
            certain inefficiencies and additional costs assimilating the
            production into the remaining plants. Historically, the Company's
            labor rate increases have been generally in line with inflation, but
            the Company is moving away from a straight cost of living increase
            to a pay-for-performance merit system.


                                       20
<PAGE>   21
            During 1996, the Company began to make increased capital investments
            to enhance production capabilities, eliminate production bottlenecks
            and improve production yield. As a result, plant efficiencies are
            expected to improve in 1997 and in the future as this program
            continues. In addition, to better service and reduce distribution
            costs in its growing customer base in the Asia/Pacific region, the
            Company recently opened a production facility in Singapore. This
            facility initially will manufacture non-returnable pressure-rated
            cylinders.

            In 1994, the Company introduced the "4BA" reusable pressure-rated
            cylinder product line to service the anticipated expanding
            reclamation and refrigerant recovery market. As a result of lower
            than expected demand, competitive pricing, and a high cost
            manufacturing process, the 4BA product line's cost of goods sold
            exceeded its net sales in 1994, 1995 and 1996, adversely impacting
            the Company's gross profits in those periods. The Company
            discontinued this product line in the fourth quarter of 1996.

            SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. During 1994, the
            Company reorganized its sales force and consolidated multiple
            product lines under one sales organization. This program resulted in
            reduced selling expenses in 1995. Generally, selling expenses will
            increase proportionally to increases in net sales.

            In 1994, to better position itself for future growth, the Company
            increased its spending on engineering and development. Additionally,
            in 1994, the Company organized itself into three separate business
            units: water systems, plumbing and heating systems and chemical
            containers. As a result of these actions, the Company experienced
            increased operating expenses, primarily due to higher staffing
            levels necessary to support the new organizational structure. As
            part of the Company's new business strategy, the three separate
            business units have been consolidated into one, which will result in
            annual expense savings of approximately $600,000. The Company began
            realizing the benefits of this consolidation during the fourth
            quarter of 1996. During 1995, AMTROL continued to increase its
            investment in engineering and development. To support its planned
            expansion in international markets, the Company began to increase
            its investment in staff and marketing in 1995 and this continued in
            1996, resulting in increased operating expenses.

            PLANT CLOSING CHARGES. In 1995, the Company recorded a $3.8 million
            charge to operating expenses for severance and other costs in
            anticipation of the closures of the Plano, Texas and Rogers,
            Arkansas plants.


                                       21
<PAGE>   22
            RESULTS OF OPERATIONS

            The following table sets forth, for the periods indicated, the
            percentage relationship to net sales of certain items included in
            the Company's statement of operations:

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                                ----------------------------------
                                                                 1994          1995          1996
                                                                ------        ------        ------
<S>                                                              <C>           <C>           <C>
            Net Sales                                            100.0%        100.0%        100.0%
            Cost of goods sold                                    71.0          72.1          73.6
                                                                ------        ------        ------
                Gross profit                                      29.0          27.9
                                                                                              26.4
            Selling, general and administrative expense           17.6          17.4
                                                                                              17.9
            Plant closing charges                                   --           2.2            --
                                                                ------        ------        ------

                 Income from operations                           11.4           8.3           8.5
            Interest income (expense), net                          --            .1          (1.3)
            Other income, net                                       .1            .2            --
                                                                ------        ------        ------

                 Income before provision for income taxes
                  and extraordinary item                          11.5           8.6           7.2
            Provision for income taxes                             4.4           3.3           2.8
                                                                ------        ------        ------
                 Income before extraordinary item                  7.1%          5.3%          4.4%
                                                                ======        ======        ======
</TABLE>


            Composition of net sales for the Company's water systems and HVAC
            products for the periods indicated is listed below:

<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                   -----------------------------------------------------------------------------
                                            1994                        1995                       1996
                                            ----                        ----                       ----
<S>                                <C>             <C>         <C>             <C>         <C>             <C>
            Net Sales
               Water Systems       $  98.2          56.6%      $  96.4          55.9%      $  96.3          56.4%
               HVAC                   75.3          43.4          76.1          44.1          74.5          43.6
                                   -------         -----       -------         -----       -------         -----
                   Total           $ 173.5         100.0%      $ 172.5         100.0%      $ 170.8         100.0%
                                   =======         =====       =======         =====       =======         =====
</TABLE>



            FISCAL YEAR ENDED DECEMBER 31, 1996 COMPARED TO FISCAL YEAR ENDED
            DECEMBER 31, 1995.

            The consolidated financial statements of the Company for the periods
            prior to November 13, 1996 have been prepared on the historical cost
            basis. The Merger has been accounted for as a purchase transaction.
            The consolidated balance sheet of the Company at December 31, 1996
            reflects allocation of the Merger Consideration and related costs to
            the assets acquired and thus is not comparable with the historical
            balance sheets presented for prior periods. Operating results
            subsequent to the Merger are comparable to prior periods, with the
            exception of cost of sales (due to the $ 1.0 million charge related
            to the upward revision of the workers' compensation reserve 
            estimate), 


                                       22
<PAGE>   23
            depreciation expense, amortization of intangible assets and
            capitalized in-process research and development and interest
            expense. The net impact of changes in depreciation and amortization
            on operating income for the seven weeks ended December 31, 1996 was
            a reduction of $1.5 million.
            
            NET SALES. Net sales decreased $1.7 million (or 1.0%) in 1996 to
            $170.8 million from $172.5 million in 1995. This decrease was
            primarily attributable to weak domestic demand for refrigerant
            pressure-rated cylinders partially offset by increased sales of
            residential plumbing and heating products due to stronger demand in
            the new and replacement hydronic heating market. Net sales
            attributable to the Company's water systems products were virtually
            flat in 1996 at $96.3 million as increased sales of water well
            accumulators were offset by decreased sales of water treatment
            products. Net sales attributable to the Company's HVAC products
            decreased $1.6 million (or 2.1%) to $74.5 million in 1996, primarily
            due to a decrease in sales of refrigerant pressure-rated cylinders
            resulting from a pre-buy of domestic non-returnable cylinders in
            1995, offset by increased sales of the Company's core HVAC products.
            The decline in domestic sales of non-returnable pressure-rated
            cylinders also reflects the continued transition from CFC's to new
            alternative refrigerant gases which is expected to continue until
            the after-market service demand for new refrigerant gases grows to
            previous CFC levels.

            COST OF GOODS SOLD. Cost of goods sold increased $1.4 million (or
            1.1%) in 1996 to $125.7 million from $124.3 million in 1995 and
            included a $1.0 million upward revision of estimates for worker
            compensation reserves. As a percentage of net sales, cost of goods
            sold increased in 1996 to 73.6% as compared to 72.1% in 1995. This
            increase was due primarily to the workers' compensation charge as
            well as inefficiencies associated with assimilating production
            requirements of the two manufacturing facilities closed during the
            prior fifteen months, and the cost of production interruptions
            associated with inclement weather.

            SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
            administrative expenses increased $.7 million (or 2.3%) in 1996 to
            $30.6 million from $29.9 million in 1995. As a percentage of net
            sales, selling, general and administrative expenses increased in
            1996 to 17.9% as compared to 17.4% in 1995. This increase was due to
            a purchase accounting related charge related to capitalized
            in-process research and development of $1.0 million, offset in part
            by reduced administrative expenses associated with the Chairman's
            office. Excluding charges for goodwill amortization and capitalized
            in-process research and development, selling, general and
            administrative expenses decreased $.6 million (or 2.1%) in 1996 to
            $29.3 million or 17.2%.


                                       23
<PAGE>   24
            INCOME FROM OPERATIONS. For the reasons set forth above, income from
            operations increased $.1 million in 1996 to $14.5 million from $14.4
            million (after plant closing charges of $3.8 million) in 1995.
            Excluding the effects of goodwill amortization and capitalized
            in-process research and development in 1996 and the plant closing
            charges in 1995, income from operations decreased $2.4 million in
            1996 to $15.8 million from $18.2 million in 1995. This decrease was
            primarily due to the lower gross profit percentage.

            INTEREST INCOME (EXPENSE), NET. Net interest expense increased $2.2
            million in 1996 from 1995 due to borrowing costs related to the
            financing of the Merger.

            INCOME TAXES.  Income tax expenses decreased $.8 million in 1996
            as compared to 1995.

            NET INCOME. Net income decreased $1.7 million (or 18.7%) in 1996 to
            $7.4 million from $9.1 million (including plant closing charges (net
            of tax benefit) of $1.9 million) in 1995.

FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER
            31, 1994

            NET SALES. Net Sales decreased $1.0 million (or .6%) in 1995 to
            $172.5 million from $173.5 million in 1994. This decrease was
            primarily attributable to a decline in the sales of certain water
            systems accessories and a softness in the residential plumbing and
            heating market. Net sales attributable to the Company's water
            systems products decreased $1.8 million (or 1.8%) in 1995 to $96.4
            million from $98.2 million in 1994, primarily due to the elimination
            of certain lower margin water systems accessory product offerings
            partially offset by increased sales of water system accumulators.
            Net sales attributable to the Company's HVAC products increased $.8
            million (or 1.1%) in 1995 to $76.1 million from $75.3 million in
            1994, principally due to increased sales of Therm-X-Trols,
            commercial and industrial heating products and certain refrigerant
            cylinder products; these increases were partially offset by a
            decrease in sales of residential plumbing and heating products,
            primarily due to weak domestic demand for new and replacement
            hydronic heating systems resulting from a relatively warm winter in
            1995. In addition, international sales in 1995 were adversely
            affected by depressed economic conditions in Mexico and Europe.

            COST OF GOODS SOLD. Cost of goods sold increased $1.1 million (or
            .9%) in 1995 to $124.3 million from $123.2 million in 1994. This
            increase was due to increased raw material costs. As a percentage of
            net sales, cost of goods sold increased in 1995 to 72.1% as compared
            to 71.0% in 1994. This increase was due to the poor performance of
            the 4BA reusable pressure-rated cylinder product line as well as
            increased raw material costs that the Company was unable to offset.


                                       24
<PAGE>   25
            SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
            administrative expenses decreased $.5 million (or 1.6%) in 1995 to
            $29.9 million from $30.4 million in 1994. This decrease in expenses
            was primarily due to a reduction in selling expenses resulting from
            a reorganization of the Company's sales force and consolidation of
            multiple lines of business partially offset by increased investment
            in engineering, research and development expenses. As a percentage
            of net sales, selling, general and administrative expenses decreased
            slightly in 1995 to 17.4% as compared to 17.6% in 1994.

            INCOME FROM OPERATIONS. Income from operations decreased $5.5
            million (or 27.6% in 1995 to $14.4 million from $19.9 million 1994.
            This decrease was primarily due to plant closing charges of $3.8
            million incurred in 1995 and reduced gross profits.

            INTEREST INCOME (EXPENSE), NET.  Net interest income increased
            $67,000 in 1995 to $60,000 from net interest expense of $7,000 in
            1994.

            INCOME TAXES.  Income tax expenses decreased $2.0 million (or
            26.0%) in 1995 to $5.7 million from $7.7 million in 1994.

            NET INCOME BEFORE EXTRAORDINARY ITEM. For the reasons set forth
            above, net income before extraordinary item decreased $3.2 million
            (or 26.0%) in 1995 to $9.1 million from $12.3 million in 1994.

            LIQUIDITY AND CAPITAL RESOURCES

            Cash provided by operations was $11.4 million for 1996, representing
            a decrease of $.5 million as compared to $11.9 million for 1995.
            Cash was utilized during the latest period to fund capital
            expenditures, ordinary dividends and a special dividend of $5.5
            million, which represented the proceeds from the sale of the
            Company's Rogers, Arkansas manufacturing facility, expected proceeds
            from the sale of the Company's Plano, Texas facility and proceeds
            from life insurance policies. The Company's cash flows from
            operating activities were approximately $10.7 million, $11.9 million
            and $11.4 million for the years ended December 31, 1994, 1995 and
            1996, respectively.

            In connection with the Merger, AMTROL issued $115.0 million of
            Senior Subordinated Notes due 2006 (the "Notes") issued under an
            Indenture dated as of November 13, 1996. The Notes are unsecured
            obligations of AMTROL. The Notes bear interest at a rate of 10.625%
            per annum and are payable semi-annually on each June 30 and December
            31 commencing on June 30, 1997. The Notes are redeemable at the
            option of AMTROL on or after December 31, 2001. From and after
            December 31, 2001, the Notes will be subject to redemption at the
            option of AMTROL, in whole or in part, at various redemption prices,
            declining from


                                       25
<PAGE>   26
            105.313% of the principal amount to par on and after December 31,
            2003. In addition, on or prior to December 31, 1999, the Company may
            use the net cash proceeds of one or more public equity offerings to
            redeem up to 35% of the aggregate principal amount of the Notes
            originally issued at a redemption price of 110.625% of the principal
            amount thereof plus accrued interest to the date of redemption. Upon
            a "Change of Control" (as defined in the Indenture), each Note
            holder has the right to require the Company to repurchase such
            holder's Notes at a purchase price of 101% of the principal amount
            plus accrued interest. The Indenture contains affirmative and
            negative covenants and restrictions similar to those required under
            the terms of the Bank Credit Agreement discussed below. As of
            December 31, 1996, AMTROL is in compliance with the various
            covenants of the Indenture.

            The Company intends to fund its future working capital, capital
            expenditures and debt service requirements through cash flows
            generated from operations (including the results of significantly
            reduced operating expenses) and borrowings under the revolving
            credit facility (the "Revolving Credit Facility") of the Bank Credit
            Facility. Upon consummation of the Merger on November 13, 1996, the
            Company became party to the Bank Credit Facility. The Bank Credit
            Facility consists of $45.0 million of senior term loans (the "Term
            Loans") and a $30.0 million Revolving Credit Facility. A portion
            ($20.0 million) of the Term Loans (the "Tranche A Term Loans") will
            mature five and one-half years after the effective date of the
            Merger, with quarterly amortization payments during the term of such
            loans. The remainder ($25.0 million) of the Term Loans (the "Tranche
            B Term Loans") will mature seven and one-half years after the
            effective date of the Merger, with nominal quarterly amortization
            prior to the maturity of the Tranche A Term Loans and with the
            remaining amounts amortizing on a quarterly basis thereafter. The
            Revolving Credit Facility includes a sublimit providing for up to
            $20.0 million of availability on a revolving credit basis to finance
            permitted acquisitions. The commitments under the Revolving Credit
            Facility and the acquisition sublimit will each reduce by $5.0
            million in the fourth year and $10.0 million in the fifth year after
            the effective date of the Merger. The Revolving Credit Facility will
            mature five and one-half years after the effective date of the
            Merger. The Bank Credit Facility is secured by substantially all
            assets of the Company and its subsidiaries.

            Capital expenditures were $4.9 million, $5.5 million and $10.9
            million in the years ended December 31, 1994, 1995 and 1996,
            respectively. These expenditures related primarily to ongoing
            maintenance and upgrading of the Company's manufacturing technology
            and, in 1996, included capital expenditures related to the
            establishment of the Company's Singapore facility. Total capital
            expenditures are expected to be $7.0 million in 1997 and 1998.


                                       26
<PAGE>   27
            In the years ended December 31, 1994, 1995 and 1996, cash flows used
            in financing activities (excluding the Merger) were approximately
            $2.1 million, $6.4 million and $6.5 million, respectively. In each
            period, such cash flows were used primarily to pay cash dividends,
            make net repayments of borrowings and to repurchase the Company's
            common stock. 

            Management believes that cash generated from operations, together
            with borrowings available under the Revolving Credit Facility, will
            be sufficient to meet the Company's working capital and capital
            expenditure needs in the foreseeable future. The Company may
            consider other options available to it in connection with funding
            future working capital and capital expenditure needs, including the
            issuance of additional debt and equity securities.

            INFLATION

            The Company believes that inflation did not have a material effect
            on its results of operations or financial condition during 1994.
            However, in 1995, the Company experienced increased raw material
            costs, particularly steel and corrugated paper. During 1996, the
            Company has experienced reductions in raw material prices,
            offsetting many of the increases experienced in the prior year.


ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

            The index to financial statements is included on page 40 of this
            report.


ITEM 9.     CHANGES IN THE DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
            FINANCIAL DISCLOSURE.

            None.


                                       27
<PAGE>   28
                                    PART III


ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

            The following table sets forth certain information regarding each of
            the directors and executive officers of the Company following the
            Merger:

<TABLE>
<CAPTION>
      NAME                 AGE                     POSITION
      ----                 ---                     --------
<S>                        <C>            <C>
John P. Cashman            56             Chairman of the Board, Chief
                                          Executive Officer and President

Samuel L. Daniels          48             Executive Vice President and Director

Clifford A. Peterson       61             Senior Vice President-Operations &
                                          Technology and Director

Edward J. Cooney           49             Senior Vice President, Chief
                                          Financial Officer, Treasurer and
                                          Secretary

Mary C. Richmond           46             Vice President - Corporate
                                          Development

David P. Spalding          42             Director

James A. Stern             46             Director

Anthony D. Tutrone         32             Director
</TABLE>


John P. ("Jack") Cashman became Chairman of the Board, Chief Executive
Officer and President upon the Merger.  Mr. Cashman has over 30 years of
general industrial management experience in the filtration, minerals,
building products and pharmaceutical industries.  From 1989 until March 1996,
Mr. Cashman served as Chairman and Co-Chief Executive Officer of R.P. Scherer
Corporation ("R.P. Scherer").  Mr. Cashman joined R.P. Scherer concurrent
with that company's leveraged buyout in 1989.  Prior to R.P. Scherer, Mr.
Cashman had an extensive career at Johns-Manville Corporation as the
President of Manville International, President of Manville Canada Inc. and
Senior Vice President of Manville Corporation, as well as numerous other
positions in general management, marketing and operations.

Samuel L. Daniels, Executive Vice President has been with the Company since 1987
and became a director upon the Merger. From 1993 to 1996, Mr. Daniels served as
Vice President-Water Systems. From 1991 to 1993, he served as General Manager of
all AMTROL subsidiaries, and from 1989 to 1991, he was General Manager of the
Company's Clayton Mark subsidiary He originally joined the Company in 1987 as
Vice President of Marketing for Clayton Mark Inc. Prior to joining the Company,
he was Vice President of Mueller Pump.


                                       28
<PAGE>   29
Clifford A. Peterson, Senior Vice President-Operations & Technology, joined the
Company in July 1995 as Vice President of Technology and became a director upon
the Merger. Mr. Peterson served as Executive Vice President and Chief Operating
Officer from February to September 1996. From 1989 to 1994, he was Vice
President-General Manager of the Production Mail Division of Pitney Bowes Inc.
Prior to that, he served as Vice President-Operations of the Dictaphone
Corporation.

Edward J. Cooney, Senior Vice President, Chief Financial Officer and Treasurer,
joined the Company in 1978, serving as Chief Financial Officer since 1991, as
Senior Vice President-Operations from 1988 to 1991, as Vice President from 1985
to 1988 and as Treasurer since 1982. Prior to joining the Company, Mr. Cooney
was associated for nine years with Arthur Andersen LLP, independent public
accountants.

Mary C. Richmond, Vice President-Corporate Development, joined the Company in
December 1995 as Director of Business Development. From November 1993 to
December 1995 she was retained by the Company as an Acquisitions Consultant.
From 1981 to 1993 she was Director, Mergers and Acquisitions of Textron Inc.

David P. Spalding became a director of the Company upon the Merger.  Mr.
Spalding has been Vice Chairman of Cypress since its formation in April
1994.  Prior to joining Cypress, he was Managing Director in the Merchant
Banking Group of Lehman Brothers Inc. from February 1991.  Previously, he
held the position of Senior Vice President of Lehman Brothers Inc. from
September 1988 to February 1991.  From April 1987 to September 1988, he was
Senior Vice President of General Electric Capital Corporation Corporate
Finance Group, Inc.  Prior to 1987 he was a Vice President of The First
National Bank of Chicago,.  Mr. Spalding is also a director of Lear
Corporation.

James A. Stern became a director of the Company upon the Merger.  Mr. Stern
has been Chairman of Cypress since its formation in April 1994.  Prior to
joining Cypress, Mr. Stern spent his entire career with Lehman Brothers Inc.,
most recently as head of the Merchant Banking Group.  He also, at various
times, served as head of Lehman's High Yield and Primary Capital Markets
Groups, and was co-head of Investment Banking.  In addition, Mr. Stern was a
member of the firm's Operating Committee.  Mr. Stern is a director of Noel
Group, Inc., Lear Corporation, Cinemark USA, Inc., R.P. Scherer and K&F
Industries, Inc.

Anthony D. Tutrone became a director of the Company upon the Merger.  Mr.
Tutrone has been a Principal of Cypress since its formation in April 1994.
Prior to joining Cypress, he was a member of the Merchant Banking Group of
Lehman Brothers, Inc. from 1986 to 1994, except from 1990 to 1992 when he
attended Harvard Business School.


                                       29
<PAGE>   30
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.

Prior to the Merger, AMTROL Common Stock was registered pursuant to Section 12
of the Securities Exchange Act of 1934 as amended (the "Exchange Act"). Section
16(a) of the Exchange Act requires the Company's officers, directors and persons
who beneficially own more than ten percent of a registered class of the
Company's equity securities to file reports of securities ownership and changes
in such ownership with the Securities and Exchange Commission. Officers,
directors and greater than ten-percent beneficial owners also are required by
rules promulgated by the Securities and Exchange Commission to furnish the
Company with copies of all Section 16(a) forms they file. Based solely upon a
review of the copies of such forms furnished to the Company, or written
representations from the reporting persons, the Company believes that during
1996 its officers, directors and greater than ten-percent beneficial owners
complied with all applicable Section 16(a) filing requirements.

On November 13, 1996, pursuant to Rule 12h-3 under the Exchange Act, AMTROL
filed with the Securities and Exchange Commission a certification on Form 15,
suspending its obligations under Section 15(d) to file reports required by
Section 13(a) of the Exchange Act with respect to AMTROL Common Stock, and
terminating the registration of AMTROL Common Stock under Section 12(g) of the
Exchange Act. Accordingly, officers, directors and greater than ten-percent
beneficial owners are no longer required to file reports under Section 16(a) of
the Exchange Act.


                                       30
<PAGE>   31
ITEM 11.    EXECUTIVE COMPENSATION

            The following table summarizes the compensation paid or accrued by
            the Company to those individuals who served as its Chief Executive
            Officer at any time during 1996, each of its four most highly
            compensated executive officers who earned more than $100,000 in
            salary and bonus in 1996 and were employed by the Company on
            December 31, 1996 and each of two individuals who would have been
            one of the four most highly compensated executive officers but for
            the fact that they were no longer employed by the Company on
            December 31, 1996, in each case, for services rendered in all
            capacities to the Company during 1996:

<TABLE>
<CAPTION>
                                           SUMMARY COMPENSATION TABLE
                                           --------------------------
                                                                                          LONG TERM
                                                                                          ---------
                                                              ANNUAL                    COMPENSATION
                                                              ------                    ------------
                                                          COMPENSATION(b)                  AWARDS
                                                          ---------------                  ------
                                                                                         SECURITIES
                                                                                         UNDERLYING          ALL OTHER
NAME AND PRINCIPAL POSITION         YEAR           SALARY(A)             BONUS          OPTIONS/SARS       COMPENSATION(c)
---------------------------         ----           ---------             -----          ------------       ---------------
<S>                                 <C>             <C>                <C>              <C>                <C>
Chester H. Kirk*                    1996            $ 83,076                   0                 0            $690,191(d)
Chairman and CEO                    1995             530,000            $184,700            40,000              21,611
                                    1994             507,500             239,200            40,000              17,487

John P. Cashman*                    1996                   0                   0                --                  --
Chairman, President and             1995                  --                  --                --                  --
CEO                                 1994                  --                  --                --                  --

Kenneth L. Kirk                     1996             252,192                   0                 0              20,216
Chairman (e)                        1995             274,500              57,800            15,000              16,458
                                    1994             265,000              88,700            15,000              16,371

Samuel L. Daniels                   1996             149,192              39,600            20,000               8,395
Executive Vice                      1995             129,000              27,500            10,000               6,285
President(f)                        1994             120,043              40,680            10,000               7,945

Clifford A. Peterson                1996             159,521              44,010            15,000               8,682
Senior Vice                         1995             115,731              31,500            10,000                 718
President-Operations &              1994              36,500                  --                --                  --
Technology (g)

Edward J. Cooney                    1996             169,329              44,010            12,000               8,795
Senior Vice President-              1995             162,500              34,200            10,000               8,792
Chief Financial Officer             1994             160,000              49,600            10,000               8,877

Mary C. Richmond                    1996             110,569              40,000             5,000               1,271
Vice President-Corporate            1995              62,460                  --             5,000                  --
Development                         1994              25,704                  --                --                  --

David P. Whittingham                1996             147,500              23,660            12,000             257,430(h)
Senior Vice President-              1995             162,500              34,200            10,000               8,501
International Sales(h)              1994             155,000              49,600            10,000               8,607
</TABLE>


                                       31
<PAGE>   32
*     Mr. C. Kirk died on February 15, 1996.  Mr. Cashman assumed the
      positions of Chairman, President and CEO on November 13, 1996, upon
      consummation of the Merger.

(a)   Includes portion of salary deferred under the Company's 401(k) Plan.

(b)   Any prerequisites or other personal benefits received from the Company
      by any of the named executives were substantially less than the reporting
      thresholds established by the Securities and Exchange Commission (the
      lesser of $50,000 or 10% of the individual's cash compensation).

(c)   Amounts paid in 1996 include the Company's contributions under the
      Company's 401(k) Plan in the amount of $3,942 for Mr. C. Kirk, $7,623
      each for Messrs. K. Kirk, Cooney and Daniels, $5,373 for Mr. Peterson
      and $2,250 for Mr. Whittingham and premiums paid by the Company with
      respect to term life insurance purchased for such executive officers
      and not made available generally to salaried employees in the following
      amounts:  Mr. C. Kirk ($1,760), Mr. K. Kirk ($12,593), Mr. Cooney
      ($1,172), Mr. Daniels ($772), Mr. Peterson ($3,309), Mr. Whittingham
      ($770) and Ms. Richmond ($1,271).

(d)   Includes, in addition to amounts described in footnote (c) above, a lump
      sum cash death benefit of $656,000 paid to Mr. Kirk's surviving spouse and
      the value of Mr. Kirk's Company owned car ($28,489) which was transferred
      to his surviving spouse.

(e)   Mr. K. Kirk served as Chairman from February 21, 1996 until his
      resignation on November 13, 1996 in connection with the Merger.  Prior
      thereto, he served as Executive Vice President.

(f)   Mr. Daniels was elected Executive Vice President on October 7, 1996, in
      contemplation of the Merger.  Prior thereto he served as Vice
      President-Water Systems.

(g)   Mr. Peterson was elected Senior Vice President Operations & Technology
      on October 7, 1996 in contemplation of the Merger.  Prior thereto he
      served as Executive Vice President and Chief Operating Officer.  Mr.
      Peterson joined the Company in July 1995 as Vice President of
      Technology.

(h)   Mr. Whittingham's employment terminated on October 4, 1996. Includes, in
      addition to amounts described in footnote (c) above, $210,900 severance,
      $9,750 for unused vacation pay, $16,680, representing the value of Company
      owned car transferred to Mr. Whittingham, and $16,900 for outplacement
      services related to his termination of employment.


                                       32
<PAGE>   33
      OPTION PLANS

      The following table sets forth, for the named executive officers,
      information regarding stock options granted during 1996 pursuant to the
      Company's 1992 Stock Plan. The 1992 Stock Plan was terminated immediately
      prior to the Merger. No stock options were granted to Messrs. C. Kirk,
      Cashman, Beretta or K. Kirk in 1996.

<TABLE>
<CAPTION>
                                  OPTION/SAR GRANTS IN LAST FISCAL YEAR
                                  -------------------------------------
                                                % OF TOTAL                                           POTENTIAL REALIZABLE
                            NUMBER OF             OPTIONS/                                              VALUE AS ASSUMED
                           SECURITIES              SARS                                               ANNUAL RATES OF STOCK
                            UNDERLYING            GRANTED TO                                          PRICE APPRECIATION FOR
                             OPTIONS/             EMPLOYEES      EXERCISE OR                               TEN YEARS(b)
                                SARS              IN FISCAL      BASE PRICE     EXPIRATION            --------------------------
NAME                         GRANTED(a)             YEAR          ($/Sh)           DATE               5%($)               10%($)
----                         ----------             ----          ------           ----               -----               ------
<S>                            <C>                   <C>        <C>              <C>                 <C>                <C>
Samuel L. Daniels              20,000                14.7%      $   15.00        2/21/2006           $188,600           $478,200

Clifford A. Peterson           15,000                11.0%          15.00        2/21/2006            141,450            358,650


Edward J. Cooney               12,000                 8.8%          15.00        2/21/2006            113,160            286,920

Mary C. Richmond                5,000                 3.7%          15.00        2/21/2006             47,150            119,550

David P. Whittingham           12,000                 8.8%          15.00        2/21/2006            113,160            286,920
</TABLE>



(a)   All of these options were exercisable in four equal annual installments
      commencing on February 21, 1997, subject to acceleration on a change of
      control. Accordingly, all options became exercisable upon the Merger. See,
      table under "Aggregate Option/SAR Exercises in Last Fiscal Year and
      Year-End Option/SAR Values". Options granted to Messrs. Daniels, Cooney
      and Whittingham were non-qualified; options granted to Mr. Peterson and
      Ms. Richmond were incentive stock options. The options terminate three
      months after termination of employment, other than for death or
      disability. A portion of these options were exchanged for options to
      acquire Holdings common stock. See, "Ten Year Options/SAR Repricings".

(b)   Amounts represent hypothetical gains that could be achieved for the
      respective options if exercised at the end of the option term. They are
      calculated by multiplying the number of options granted by the difference
      between a future hypothetical stock price and the option exercise price
      and are shown pursuant to rules of the Securities and Exchange Commission.
      They assume the value of the Company's Common Stock appreciates 5% or 10%
      each year, compounded annually, for ten years. They are not intended to
      forecast possible future appreciation, if any, of such stock price or to
      establish a present value for the options. In connection with the Merger,
      all options were either canceled in exchange for the difference between
      the per share Merger Consideration and the option exercise price or
      exchanged for options to acquire Holdings common stock.


                                       33
<PAGE>   34
      Immediately prior to the Merger, all outstanding options (other than
      options exchanged for options exercisable for Holdings common stock, as
      described below) were canceled and the holder received cash equal to the
      excess of $28.25 over the per share exercise price of such option,
      multiplied by the number of shares of AMTROL Common Stock then subject to
      the option. The following table sets forth the amounts received by the
      named executives during 1996, in connection with the Merger. No options
      were exercised by the named executives during 1996.

<TABLE>
<CAPTION>
  AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR VALUES

                                                        NUMBER OF
                                                       SECURITIES
                                                       UNDERLYING
                       NUMBER OF                       UNEXERCISED
                       SECURITIES                      OPTION/SARS
                       UNDERLYING                       AT FISCAL      VALUE OF UNEXERCISED
                      OPTIONS/SARS      VALUE           YEAR END          IN-THE-MONEY
NAME                 EXERCISED (a)   REALIZED($)(a)     1996 (b)        OPTIONS/SAR($)(c)
----                 -------------   --------------     --------       ---------------------
<S>                  <C>              <C>               <C>            <C>
Chester H. Kirk        130,000        $1,560,000              0
John P. Cashman              0                 0              0                    0
David Beretta           75,000           871,875              0                    0
Kenneth L. Kirk         46,000           548,563              0                    0
Samuel L. Daniels       29,597           393,334           4662              200,036
Clifford A. Peterson         0                 0           7062              316,250
Edward J. Cooney        55,398           838,639           2839              100,003
Mary C. Richmond         8,774            16,273           2478              109,977
David P. Whittingham    49,500           634,225              0                    0
</TABLE>

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

(a)   Share and dollar numbers represent cash payments received in the Merger in
      exchange for cancellation of options for AMTROL Common Stock.

(b)   Immediately prior to the Merger, Messrs. Daniels, Peterson, and Cooney and
      Ms. Richmond exchanged options exercisable for AMTROL Common Stock for
      options exercisable for Holdings common stock ("Amended Options") based on
      a conversation ratio of .2825 share of Holdings common stock for each
      share of AMTROL Common Stock subject to the option. Represents number of
      shares of Holdings Common Stock subject to Amended Options received in the
      exchange. All Amended Options are fully exercisable. 

(c)   Based on the purchase price of Holdings common stock issued in connection
      with the Merger less the exercise price of the Amended Options.


                                       34
<PAGE>   35
      Immediately prior to the Merger, each of the following individuals
exchanged options exercisable for AMTROL Common Stock for Amended Options
exercisable for Holdings common stock, as follows:

<TABLE>
<CAPTION>
                                    TEN-YEAR OPTION/SAR REPRICINGS
                                                                                       LENGTH OF
                                    NUMBER OF                                           ORIGINAL
                                    SECURITIES       MARKET PRICE                      OPTION TERM
                                    UNDERLYING       OF STOCK AT                        REMAINING
                                    OPTIONS/SARS       TIME OF            NEW          AT DATE OF
                                    REPRICED OR      REPRICING OR      EXERCISE       REPRICING OR
NAME                  DATE(a)       AMENDED (#)(b)   AMENDMENT(c)     PRICE($)(d)       AMENDMENT
----                  -------       --------------   ------------     -----------       ---------
<S>                   <C>           <C>              <C>              <C>              <C>
Samuel L. Daniels     11/13/96           2825         $100.00           $57.965         7/21/2004
                                         1837          100.00            55.75          2/12/2005

Clifford A.           11/13/96           2825          100.00            58.41          9/1/2005
Peterson                                 4237          100.00            53.10          2/21/2006

Edward J. Cooney      11/13/96           2825          100.00            64.82          4/21/2004
                                           14          100.00            55.75          2/12/2005

Mary C. Richmond      11/13/96           1412          100.00            57.52          12/1/2005
                                         1066          100.00            53.10          2/21/2006
</TABLE>

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

(a)   Effective date of Merger.

(b)   Represents shares underlying Amended Options exercisable for Holdings
      common stock received in exchange for options exercisable for AMTROL
      Common Stock based on a conversion ratio of .2825.

(c)   Represents purchase price of Holdings common stock issued in connection
      with the Merger.

(d)   Exercise price for Amended Options was established by dividing the
      exercise price of the exchanged option by the conversion ratio (i.e.,
      .2825).


                                       35
<PAGE>   36
            SUPPLEMENTAL RETIREMENT PLANS

            The Company maintains two Supplemental Retirement Plans:
            Supplemental Retirement Plan I which covers Mr. K. Kirk and
            Supplemental Retirement Plan II which covers Mr. Cooney and two
            former officers.  Under Supplemental Retirement Plan I, Mr. K.
            Kirk is entitled to receive an annual benefit of $150,000 per
            year for 15 years following his retirement.  Mr. Kirk retired on
            November 13, 1996, in connection with the Merger, and in January
            1997, began to receive the annual benefit in equal quarterly
            installments.  Mr. Cooney is entitled to receive an annual
            benefit of $50,000 per year for a period of 15 years upon
            retirement on or after age 62.  The retirement benefit is
            forfeited in its entirety if he terminates employment or dies
            prior to age 62.  The Company has purchased a split-dollar life
            insurance policy on Mr. Cooney to provide a death benefit not to
            exceed $300,000.  If his employment is terminated prior to
            retirement he may purchase the policy from the Company.  In the
            event a participant in either Supplemental Retirement Plan dies
            after retirement, his beneficiary will receive any remaining
            benefits which such participant was entitled to receive at the
            time of his death.

            EMPLOYMENT AGREEMENTS AND OTHER TRANSACTIONS

            The Company has entered into employment agreements (each referred to
            individually as an "Agreement" and collectively as the
            "Agreements"), with Messrs. Daniels, Peterson and Cooney to secure
            their continued employment with the Company. The Agreements provide
            for annual base salary of $240,000 for Mr. Daniels, $200,000 for Mr.
            Peterson and $180,000 for Mr. Cooney, subject to adjustments
            annually commencing in January 1998. In addition, the executives are
            entitled to participate in incentive compensation plans and all
            employee benefit arrangements generally appropriate to such
            executive's responsibilities. In the event the executive's
            employment is terminated without cause by the Company or with Good
            Reason by the executive, such executive is entitled to receive a
            monthly amount, for 24 months after termination, equal to
            one-twelfth of the executive's annual average salary for the prior
            24 months and the pro rata portion of any bonus or incentive
            compensation otherwise payable for the fiscal period in which such
            termination occurs, as well as maintenance for 24 months of all
            life, disability, medical and health insurance benefits to which the
            executive was entitled immediately prior to termination. The
            Agreements also prohibit the executive, for a period of two years
            after the termination of his employment, from directly or
            indirectly, advising, assisting or being connected with any
            enterprise which competes with the Company.


                                       36
<PAGE>   37
           In addition, under separate Management Stockholder's Agreements
           between Holdings and Messrs. Cashman, Daniels, Peterson, and Cooney
           and Ms. Richmond if, prior to a public offering of the common stock
           of Holdings, the executive dies or becomes disabled while employed by
           the Company or following normal retirement or the executive's
           employment is terminated without Cause by the Company or with Good
           Reason by the executive (as such terms are defined in the
           agreements), the executive has the right to require Holdings to
           purchase all or any portion of Holdings common stock then held by the
           executive at the repurchase price specified in the agreement and to
           pay the executive the amount by which the repurchase price exceeds
           the exercise price of any options then held by the executive. If
           there exists and is continuing an event of default on the part of the
           Company under any loan guarantee or other agreement under which the
           Company has borrowed money or such repurchase would result in an
           event of default, the Company shall not be obligated to repurchase
           any of the common stock until such condition no longer exists. The
           repurchase price is $100 if the repurchase occurs prior to November
           13, 1999, and the market price of the Holdings common stock
           thereafter. If an executive's employment is terminated for Cause by
           the Company or without Good Reason by the executive, Holdings has the
           right to purchase all, but not less than all, Holdings common stock
           then held by the executive at a price equal to the lesser of $100 or
           the market price of the Holdings common stock, provided that if the
           executive's employment is terminated by the executive without Good
           Reason following a public offering, the repurchase price is the
           market price of the Holdings common stock. If Holdings exercises its
           repurchase right it must also pay the executive an amount equal to
           the excess of the repurchase price over the exercise price of any
           options held by the executive in cancellation of such options. Good
           Reason includes certain significant changes in the nature of the
           executive's employment including certain reductions in compensation
           and changes in responsibilities and powers. 


                                       37
<PAGE>   38
ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT

            As a result of the Merger, the Company is a direct, wholly owned
            subsidiary of Holdings. The following table sets forth information
            with respect to the beneficial ownership of Holdings common stock by
            (i) each person known to the Company to beneficially own more than
            5% of Holdings' outstanding common stock, (ii) each of the Company's
            directors and certain executive officers and (iii) all directors and
            executive officers of the Company as a group. Unless otherwise
            indicated below, the persons and entities named in the table have
            sole voting investment power with respect to all shares beneficially
            owned.

<TABLE>
<CAPTION>
                                                        NUMBER OF SHARES OF
             NAME AND ADDRESS OF BENEFICIAL OWNER      HOLDINGS COMMON STOCK   PERCENTAGE
             ------------------------------------      ---------------------   ----------
<S>                                                    <C>                     <C>
             Cypress Merchant Banking Partners                  637,957           90.7%
             L.P. (a)
             c/o The Cypress Group L.L.C.
             65 East 55th Street, 19th Floor
             New York, NY  10022

             Cypress Offshore Partners L.P. (a)                  33,043           4.7%
             c/o The Cypress Group L.L.C.
             65 East 55th Street, 19th Floor
             New York, NY  10022

             John P. Cashman                                     15,000           2.1%
             Samuel L. Daniels(b)                                4,662              *
             Clifford A. Peterson(b)                             7.062            1.0%
             Edward J. Cooney(b)                                 2,839              *
             Mary C. Richmond(b)                                 2,478              *
             David P. Spalding(a)                                  --              --
             James A. Stern(a)                                     --              --
             Anthony P. Tutrone(a)                                 --              --
             All directors and executive                         32,041           4.6%
             officers as a group (consisting of
             8 persons)
</TABLE>

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

            *     Less than 1%.

            (a)  Cypress Merchant Banking Partners L.P. and Cypress Offshore
            Partners L.P. are affiliates of The Cypress Group L.L.C.  Messrs.
            Spalding, Stern and Tutrone are executives of  The Cypress Group
            L.L.C. and may be deemed to share beneficial ownership of the
            shares shown as beneficially owned by such Cypress entities.
            Each of such individuals disclaims beneficial ownership of such
            shares.  See, Item 10, "Directors and Executive Officers of the
            Registrant."

            (b) Immediately prior to the Merger, each of these individuals
            exchanged options exercisable for AMTROL Common Stock for options
            exercisable for Holdings common stock. All shares shown to be
            beneficially owned by these individuals represent shares issuable
            upon exercise of such options. See, Item 11, "Executive
            Compensation".


                                       38
<PAGE>   39
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            David Beretta served as President of the Company from 1991 until his
            retirement on May 31, 1996. Mr. Beretta's services were provided
            pursuant to a Consulting Agreement between the Company and Executive
            Consulting, Inc., of which Mr. Beretta was the sole shareholder.
            During 1996, the Company paid Executive Consulting, Inc. $141,665 as
            consideration for Mr. Beretta's services. In addition, the Company
            paid Mr. Beretta a lump sum cash benefit of $262,000 upon his
            retirement. The payment was made in recognition of his many years of
            valuable service to the Company.

            On October 28, 1988, the Company loaned $150,000 to Mr. K. Kirk
            under a demand promissory note, bearing interest at the prime rate,
            the entire amount of which was repaid in December 1996.

            Stephen J. Carlotti, who served as a director of the Company and
            Vice Chairman of the Board from February 21, 1996 until the Merger
            on November 13, 1996, received a consulting fee of $530,431 pursuant
            to a Consulting Agreement with AMTROL dated as of June 20, 1996 (the
            "Consulting Agreement"). Mr. Carlotti was retained to lead and
            supervise the activities associated with the Company's engagement of
            Smith Barney Inc. to explore strategic alternatives and to assist
            with day-to-day management. The consulting fee was paid on the date
            of the Merger and was equal to 0.5375% of the amount by which the
            aggregate amount of consideration paid to holders of AMTROL Common
            Stock pursuant to the Merger exceeded $111,620,730. Mr. Carlotti is
            a partner of the law firm of Hinckley, Allen & Snyder ("Hinckley
            Allen"), legal counsel to AMTROL. Pursuant to Hinckley Allen's
            partnership agreement, any amounts paid to Mr. Carlotti under the
            Consulting Agreement or with respect to the options he received as a
            director were paid to Hinckley Allen.

            Upon consummation of the Merger, Acquisition paid Cypress Advisors
            L.P. ("Advisors"), an affiliate of Cypress, $2,000,000 plus
            out-of-pocket expenses for Advisors' services with respect to the
            negotiation and execution of the Merger Agreement and consummation
            of the Merger, negotiation and execution of the Bank Credit
            Agreement and the issuance and sale of the Notes.


                                       39
<PAGE>   40

                                    PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE
          & REPORTS ON FORM 8-K



(A) (1)  FINANCIAL STATEMENTS

         The following financial statements are included in a separate section
         of this Report commencing on the page numbers specified below:

<TABLE>
<CAPTION>
                                                                                   PAGE
<S>                                                                                <C>
         REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS                                   41

         CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1996
         (SUCCESSOR) AND 1995 (PREDECESSOR)                                          43

         CONSOLIDATED STATEMENTS OF OPERTIONS FOR THE PERIODS ENDED DECEMBER 31,
         1996 (SUCCESSOR) AND NOVEMBER 12, 1996 AND
         FISCAL YEARS ENDED DECEMBER 31, 1995 AND 1994 (PREDECESSOR)                 44

         CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE PERIODS ENDED
         DECEMBER 31, 1996 (SUCCESSOR) AND NOVEMBER 12,
         1996 AND FISCAL YEARS ENDED DECEMBER 31, 1995 AND 1994 (PREDECESSOR)        45

         CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS
         ENDED DECEMBER 31, 1996 (SUCCESSOR) AND NOVEMBER 12, 1996
         AND FISCAL YEARS ENDED DECEMBER 31, 1995 AND 1994 (PREDECESSOR)             46

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                  47

(A) (2)  FINANCIAL STATEMENT SCHEDULE

         SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE
         PERIODS ENDED DECEMBER 31, 1996 (SUCCESSOR) AND NOVEMBER 12, 1996
         AND FISCAL YEARS ENDED DECEMBER 31, 1995 AND 1994 (PREDECESSOR)             63
</TABLE>

All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

(A) (3)  EXHIBITS

         See List of Exhibits

(B)      REPORTS FILED ON FORM 8-K

         None


                                       40
<PAGE>   41
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To AMTROL Inc.:

We have audited the accompanying balance sheet of AMTROL Inc. (the Successor),
(a Rhode Island corporation and wholly owned subsidiary of AMTROL Holdings,
Inc.), as of December 31, 1996, and the related statements of operations,
shareholders' equity and cash flows for the period then ended. 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about wehther 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AMTROL Inc. as of December 31,
1996, and the results of its operations and its cash flows for the period then
ended, in conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic
consolidated financials statements taken as a whole. The financial statement
schedule listed in item 14(a)(2) is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects, the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.






Boston, Massachusetts
March 6, 1997


                                       41
<PAGE>   42
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To AMTROL Inc.:

We have audited the accompanying consolidated balance sheet of AMTROL Inc. (the
Predecessor), (a Rhode Island corporation), and subsidiaries as of December 31,
1995, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the two years in the period ended December 31,
1995 and period ended November 12, 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 audit in accordance with generally accepted auditing standards.
Those standards 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. 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AMTROL Inc. and subsidiaries as
of December 31, 1995, and the results of their operations and their cash flows
for each of the two years in the period ended December 31, 1995 and for the
period ended November 12, 1996, in conformity with generally accepted accounting
principles.

Our audit was made for the purpose of forming an opinion on the basic
consolidated financials statements taken as a whole. The financial statement
schedule listed in item 14(a)(2) is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects, the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.






Boston, Massachusetts
March 6, 1997


                                       42
<PAGE>   43
                          AMTROL INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except per share data)

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                                  DECEMBER 31,
                                                                                             1995              1996
                                                                                        (Predecessor       (Successor
                                                                                           Company)          Company)
<S>                                                                                     <C>                <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                              $   9,078         $   6,383
   Accounts receivable, less allowance for doubtful accounts of $1,055 and $990 in
     1996 and 1995, respectively                                                             24,108            21,861
   Inventories                                                                               21,315            24,783
   Income tax refund receivable                                                                  --             2,000
   Prepaid income taxes                                                                       2,793             1,734
   Prepaid expenses and other                                                                   462               691
   Assets held for sale                                                                       3,736             1,500
                                                                                          ---------         ---------

         Total current assets                                                                61,492            58,952
                                                                                          ---------         ---------

PROPERTY, PLANT AND EQUIPMENT, at cost                                                          
   Land                                                                                       1,796             4,153
   Buildings and improvements                                                                11,107             8,081
   Machinery and equipment                                                                   51,031            20,048
   Furniture and fixtures                                                                     2,935               907
   Construction-in-progress and other                                                         1,104             4,277
                                                                                          ---------         ---------
                                                                                             67,973            37,466

   Less-accumulated depreciation and amortization                                            40,040               577
                                                                                          ---------         ---------
                                                                                             27,933            36,889
                                                                                          ---------         ---------

OTHER ASSETS:
   Goodwill                                                                                     501           147,756
   Debt financing costs                                                                          --             8,387
   Cash surrender value of officers' life insurance                                           3,156             1,614
   Other                                                                                        827             1,285
                                                                                          ---------         ---------
                                                                                              4,484           159,042
                                                                                          ---------         ---------

                                                                                          $  93,909         $ 254,883
                                                                                          =========         =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current installments of long-term debt                                                 $      --         $     825
   Accounts payable                                                                           6,526             5,794
   Accrued expenses                                                                          11,070            14,472
   Accrued interest                                                                              34             2,232
   Accrued income taxes                                                                         559               582
                                                                                          ---------         ---------

         Total current liabilities                                                           18,189            23,905
                                                                                          ---------         ---------

OTHER NONCURRENT LIABILITIES                                                                  4,903             4,544
                                                                                          ---------         ---------

DEFERRED INCOME TAXES                                                                           611               222
                                                                                          ---------         ---------

LONG-TERM DEBT, LESS CURRENT INSTALLMENTS                                                        --           159,175
                                                                                          ---------         ---------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
   Common stock $.01 par value- Authorized-1,000 shares
     Issued-7,641,398 shares in 1995                                                             76                --
   Common stock $.01 par value- Authorized-1,000 shares
     Issued-100 shares in 1996                                                                   --                --
   Additional paid-in capital                                                                29,083            69,326
   Retained earnings                                                                         44,313            (2,289)
   Treasury stock, at cost-213,200 shares in 1995                                            (3,226)               --
                                                                                          ---------         ---------

         Total shareholders' equity                                                          70,206            67,037
                                                                                          ---------         ---------
                                                                                          $  93,909         $ 254,883
                                                                                          =========         =========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       43
<PAGE>   44
                          AMTROL INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                   --------------PREDECESSOR COMPANY-------------    SUCCESSOR COMPANY
                                                            YEARS ENDED              PERIOD ENDED       PERIOD ENDED
                                                            DECEMBER 31,              NOVEMBER 12        DECEMBER 31,
                                                       1994             1995              1996              1996
<S>                                                <C>               <C>             <C>             <C>     
NET SALES                                          $ 173,472         $ 172,454         $ 152,193         $ 18,628

COST OF GOODS SOLD                                   123,184           124,303           110,582           15,108
                                                   ---------         ---------         ---------         --------

         Gross profit                                 50,288            48,151            41,611            3,520

OPERATING EXPENSES:
   Selling                                            15,561            15,171            14,236            1,997
   General and administrative                         14,841            14,772            11,560            1,511
   Plant closing charges                                  --             3,825                --               --
   Amortization of Goodwill                               --                --                --              313
   Capitalized in-process research
     and development                                      --                --                --            1,000
                                                   ---------         ---------         ---------         --------
   Income (loss) from operations                      19,886            14,383            15,815           (1,301)

OTHER INCOME (EXPENSE):
   Interest expense                                     (276)             (195)             (151)          (2,263)
   Interest income                                       269               255               204               39
   License and distributorship fees                      254               258               181               25
   Other, net                                           (179)               65              (175)             (99)
                                                   ---------         ---------         ---------         --------

         Income (loss) before provision for
         income taxes                                 19,954            14,766            15,874           (3,599)

PROVISION (BENEFIT) FOR INCOME TAXES                   7,683             5,681             6,152           (1,310)
                                                   ---------         ---------         ---------         --------

NET INCOME (LOSS)                                  $  12,271         $   9,085         $   9,722         $ (2,289)
                                                   =========         =========         =========         ========
</TABLE>


   The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       44
<PAGE>   45
                          AMTROL INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                             TREASURY STOCK
                                                           ADDITIONAL
                                               COMMON       PAID-IN       RETAINED        NUMBER OF
                                               STOCK        CAPITAL       EARNINGS         SHARES        COST
<S>                                            <C>         <C>            <C>             <C>           <C>
PREDECESSOR COMPANY
BALANCE, DECEMBER 31, 1993                       $75        $26,976        $ 25,966           --        $   --
   Net income                                     --             --          12,271           --            --
   Dividend                                       --             --          (1,509)          --            --
   Exercise of stock options                       1          1,137              --           67         1,007
   Repurchase of common stock                     --             --              --           --            --
   Amortization of deferred compensation          --            204              --           --            --
   Tax effect of disqualifying
     dispositions on stock options                --             60              --           --            --
                                                 ---        -------        --------         ----        ------


BALANCE, DECEMBER 31, 1994                       $76        $28,377        $ 36,728           67        $1,007
   Net income                                     --             --           9,085           --            --
   Dividend                                       --             --          (1,500)          --            --
   Exercise of stock options                      --            598              --           --
   Repurchase of common stock                     --             --              --          146         2,259
   Tax effect of disqualifying
     dispositions on stock options                --            108              --           --            --
                                                 ---        -------        --------         ----        ------


BALANCE, DECEMBER 31, 1995                       $76        $29,083        $ 44,313          213        $3,266
   Net income                                     --             --           9,722           --            --
   Dividend                                       --             --          (6,694)          --            --
   Exercise of stock options                      --            191              --           --            --
   Repurchase of common stock                     --             --              --            1            15
                                                 ---        -------        --------         ----        ------

BALANCE, NOVEMBER 12, 1996                       $76        $29,274        $ 47,714          214        $3,281
                                                 ===        =======        ========         ====        ======

SUCCESSOR COMPANY
   Net loss                                       --             --          (2,289)          --            --
   Issuance of common stock in connection
     with Merger, net                             --         69,326              --           --            --
                                                 ---        -------        --------         ----        ------

BALANCE, DECEMBER 31, 1996                       $--        $69,236        $ (2,289)          --        $   --
                                                 ===        =======        ========         ====        ======
</TABLE>


   The accompanying notes are an integral part of these consolidated financial
                                   statements.


                                       45
<PAGE>   46
                          AMTROL INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                            --------------PREDECESSOR COMPANY-----------   SUCCESSOR COMPANY
                                                                   YEARS ENDED              PERIOD ENDED      PERIOD ENDED
                                                                   DECEMBER 31,             NOVEMBER 12,       DECEMBER 31
                                                              1994             1995            1996               1996
<S>                                                         <C>              <C>            <C>            <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:

   Net income (loss)                                        $ 12,271         $  9,085         $  9,722         $  (2,289)
                                                            --------         --------         --------         ---------
   Adjustments to reconcile net income (loss) to
     net cash provided by operating activities-
     Depreciation and amortization                             4,330            4,673            4,586               598
     Writedown of assets held for sale to
       realizable value                                           --              980               --                --
     Provision for losses on accounts receivable                 206               93              172                91
     Loss (gain) on sale of fixed assets                          12               83               92              (106)
     Captialized in-process research and development
                                                                  --               --               --             1,000
     Changes in assets and liabilities-
     (Increase) decrease in assets-
         Accounts receivable, net                             (4,798)            (532)          (1,215)            3,199
       Income tax refund receivable                               --               --               --            (2,000)
         Inventory                                              (866)            (498)          (3,573)            2,633
         Prepaid income taxes                                   (100)            (685)           1,090               (31)
         Prepaid expenses and other                            1,027             (152)            (834)              605
         Cash surrender value of officers' life
           insurance                                            (191)            (132)           1,411               131
         Other assets                                             (8)            (602)            (520)              331
     Increase (decrease) in liabilities-
         Accounts payable                                     (1,865)             369            2,443            (3,175)
         Accrued expenses                                        783              918           (2,590)              142
         Accrued income taxes                                    567             (795)             600              (363)
         Other noncurrent liabilities                            (39)            (965)            (283)              (65)
         Deferred income taxes                                  (629)              48             (389)               --
                                                            --------         --------         --------         ---------
                                                              (1,571)           2,803              990             2,990
                                                            --------         --------         --------         ---------
           Net cash provided by operating activities
                                                              10,700           11,888           10,712               701

CASH FLOWS FROM INVESTING ACTIVITIES:
   Cash paid for Merger                                           --               --               --          (218,200)
   Proceeds from sale of property, plant and
    equipment                                                    119               30            1,991                 9
   Capital expenditures                                       (4,902)          (5,492)          (9,260)           (1,662)
                                                            --------         --------         --------         ---------

           Net cash used in investing activities              (4,783)          (5,462)          (7,269)         (216,547)
                                                            --------         --------         --------         ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash dividends                                             (1,509)          (1,500)          (6,694)               --
   Repayment of long-term debt                                (1,952)          (4,948)          (3,500)               --
   Issuance of long-term debt                                  1,000            1,615            3,500                --
   Proceeds from sale of notes                                    --               --               --           115,000
   Proceeds from term loan                                        --               --               --            45,000
   Payment of transaction financing costs                         --               --               --           (13,100)
   Issuance of common stock  in connection with
     Merger                                                       --               --               --            69,326
   Issuance of common stock - exercise
     of stock options                                          1,137              598              191                --
   Repurchase of treasury stock                               (1,007)          (2,259)             (15)               --
   Tax effect of disqualifying dispositions of
     incentive stock options                                      60              108               --                --
   Tax effect on restricted stock                                147               --               --                --
                                                            --------         --------         --------         ---------

           Net cash (used in) provided by financing
           activities                                         (2,124)          (6,386)          (6,518)          216,226
                                                            --------         --------         --------         ---------

NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                                        3,793               40           (3,075)              380
CASH AND CASH EQUIVALENTS, beginning
   of period                                                   5,245            9,038            9,078             6,003
                                                            --------         --------         --------         ---------
CASH AND CASH EQUIVALENTS, end of period                    $  9,038         $  9,078         $  6,003         $   6,383
                                                            ========         ========         ========         =========
CASH PAID FOR-
   Interest                                                 $    351         $    126         $    132         $      --
                                                            ========         ========         ========         =========
   Income taxes                                             $  6,936         $  7,083         $  4,286         $      --
                                                            ========         ========         ========         =========
</TABLE>


   The accompanying notes are an integral part of these consolidated financial
                                   statements.


                                       46
<PAGE>   47
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996




(1)    BASIS OF PRESENTATION

       For periods prior to November 13, 1996, the accompanying financial
       statements represent the consolidated results and financial position of
       AMTROL Inc. and Subsidiaries (the Predecessor). On November 13, 1996,
       immediately after the close of business on November 12, 1996, the
       Predecessor merged with AMTROL Acquisition, Inc., a wholly-owned
       subsidiary of AMTROL Holdings, Inc., a Delaware corporation organized by
       The Cypress Group L.L.C. as more fully described in Note 3 (the Merger).
       Financial statements for periods subsequent to November 12, 1996
       represent the consolidated financial statements of AMTROL Inc. and
       Subsidiaries (the Successor) after giving effect to the Merger.
       References to the Company refer to the Predecessor prior to the Merger
       and the Successor post-Merger.

 (2)   ORGANIZATION AND OPERATIONS

       The Company designs, manufactures and markets products used principally
       in flow control, storage, heating and other treatment of fluids in the
       water systems market and selected sectors of the heating, ventilating and
       air conditioning ("HVAC") market. The Company offers a broad product line
       of quality fluid handling products and services marketed under widely
       recognized brand names.

(3)    MERGER AND FINANCING

       AMTROL Acquisition Inc. ("Acquisition") and AMTROL Holdings, Inc.
       ("Holdings") were formed by The Cypress Group L.L.C. ("Cypress)" in 1996
       to effect the acquisition of all of the outstanding common stock of the
       Predecessor through the Merger of Acquisition with and into the
       Successor. Upon consummation of the Merger on November 13, 1996 all of
       the outstanding common stock of Acquisition was converted into common
       stock of the Successor and the Successor became a wholly-owned subsidiary
       of Holdings. The Successor, as the surviving entity, continues to be
       named AMTROL Inc. Holdings has no other material assets, liabilities or
       operations other than those that result from its ownership of the common
       stock of the Successor.


                                       47
<PAGE>   48
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)


(3)    MERGER AND FINANCING (continued)

       The total financing related to the Merger was $232.7 million (including
       transaction fees and expenses of $13.8 million). A summary of the Merger
       is as follows (in millions):

<TABLE>
<S>                                                 <C>        
        Borrowing under notes                       $     115.0
        Equity contribution                                69.3
        Borrowings under term loans                        45.0
        Existing cash                                       3.4
                                                    -----------

                                                    $     232.7
                                                    ===========
</TABLE>

       The Merger has been accounted for as a purchase transaction effective as
       of November 13, 1996, in accordance with Accounting Principles Board
       Opinion No. 16, Business Combinations, and EITF Issue No. 88-16, Basis in
       Leveraged Buyout Transactions and, accordingly, the consolidated
       financial statements for the periods subsequent to November 12, 1996
       reflect the purchase price, including transaction costs, allocated to
       tangible and intangible assets acquired and liabilities assumed, based on
       their estimated fair values as of November 12, 1996, which may be revised
       at a later date. The excess of the purchase price over the fair value of
       net assets acquired has been allocated to goodwill.

       The purchase price and preliminary allocation is summarized as follows 
       (in millions):

<TABLE>
<S>                                                                      <C>        
        Cash paid to shareholders for common stock                       $     210.3
        Cash paid for stock options                                              7.9
        Management stock option rollover                                          .7
                                                                         -----------

                 Total                                                         218.9

        Direct acquisition costs                                                 5.3
                                                                         -----------
                 Total consideration and direct acquisition costs              224.2

        Predecessor historical cost of net assets acquired                      73.2
                                                                         -----------
          Excess of consideration paid over predecessor historical cost        151.0

        Financing related expenses                                               8.5
                                                                         -----------
                 Net adjustment                                                159.5
                                                                         -----------
</TABLE>


                                       48
<PAGE>   49
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)


(3)    MERGER AND FINANCING (continued)

<TABLE>
<S>                                                                  <C>
        Allocation of net adjustment-
          Inventories                                                $       2.1
          Income tax refund receivable                                       2.8
          Property, plant and equipment, net                                 2.7
          Intangible assets                                                  1.0
          Deferred financing                                                 8.5
          Liabilities and other                                             (5.2)
          Goodwill                                                         147.6
                                                                     -----------

                 Total                                               $     159.5
                                                                     ===========
</TABLE>

       The $1.0 million related to intangible assets represents the allocation
       of purchase price to capitalizable in-process research and development
       and was expensed in the period ended December 31, 1996.

(4)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       Principles of Consolidation

       The accompanying consolidated financial statements include the accounts
       of AMTROL Inc. and its wholly owned subsidiaries (the "Company"). All
       material intercompany balances and transactions have been eliminated in
       consolidation.

       Use of Estimates

       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
       and 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.

       Fiscal year

       The Company uses a calendar fiscal year and four quarterly interim
       periods ended on Saturday of the thirteenth week of the quarter.


                                       49
<PAGE>   50
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)


(4)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

       Cash and Cash Equivalents

       Cash and cash equivalents include cash on hand and short-term investments
       that are readily convertible into cash with an original maturity to the
       Company of three months or less.

       Depreciable Property and Equipment

       The Company provides for depreciation by charges to income (computed on
       the straight-line method) in amounts estimated to amortize the cost of
       properties over their estimated useful lives which generally fall within
       the following ranges:

<TABLE>
<S>                                                         <C>        
        Building and improvements                           10-40 years
        Machinery and equipment                              3-12 years
        Furniture and fixtures                               5-20 years
        Other                                                3-10 years
</TABLE>

       Leasehold improvements are amortized over the life of the lease or the
       estimated useful life of the improvement, whichever is shorter.

       Interest costs, during the construction period, on borrowings used to
       finance construction of buildings and related property are included in
       the cost of the constructed property.

       Inventories

       The Company's inventories are stated at the lower of cost or market
       including material, labor and manufacturing overhead (see Note 6.)

       Goodwill

       The excess of purchase price over the fair value of net assets acquired
       is allocated to goodwill and is included in other assets. Goodwill is
       being amortized over 40 years. Goodwill (net of accumulated amortization)
       at December 31, 1995 and December 31, 1996 is approximately $.5 million
       and $147.8 million, respectively. The Company accounts for long-lived and
       intangible assets in accordance with SFAS No. 121, Accounting for the
       Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
       Of. The Company continually reviews its intangible assets for events or
       changes in


                                       50
<PAGE>   51
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)


(4)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Goodwill (Continued)

     circumstances which might indicate the carrying amount of the assets may
     not be recoverable. The Company assesses the recoverability of the assets
     by determining whether the amortization of such intangibles over their
     remaining lives can be recovered through projected undiscounted future cash
     flows. The amount of impairment, if any, is measured based on projected
     discounted future cash flows using a discount rate reflecting the Company's
     average cost of funds. At December 31, 1996, no such impairment of assets
     was indicated.

     Fair Value of Financial Instruments

     In accordance with the requirements of Statement of Financial Accounting
     Standards (SFAS) No. 107, Disclosures About Fair Value of Financial
     Instruments, the Company has determined the estimated fair value of its
     financial instruments using appropriate market information and valuation
     methodologies. Considerable judgment is required to develop the estimates
     of fair value; thus, the estimates are not necessarily indicative of the
     amounts that could be realized in a current market exchange. The Company's
     financial instruments consist of cash, accounts receivable, accounts
     payable, senior subordinated notes and bank debt. The carrying value of
     these assets and liabilities is a reasonable estimate of their fair market
     value at December 31, 1996.

     Engineering and Development Expenses

     All costs for engineering and development, which amounted to approximately
     $.8 million, $.9 million, $.8 million and $.1 million for fiscal 1994 and
     1995 and the periods ended November 12 and December 31, 1996, respectively,
     are charged to general and administrative expense as incurred.

     Income Taxes

     The Company utilizes an asset and liability approach to determine income
     tax liabilities in accordance with SFAS No. 109. The standard recognizes
     tax assets and liabilities for the cumulative effect of all temporary
     differences between financial statement carrying amounts and the tax basis
     of assets and liabilities. The standard also requires the adjustment of
     deferred tax liabilities or assets for an enacted change in tax laws or
     rates.


                                       51
<PAGE>   52
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)

(4)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Deferred Financing Costs

     Deferred financing costs are stated at cost as a component of other assets
     and amortized over the life of the related debt using the effective
     interest method. Amortization of deferred financing costs is included in
     interest expense.

     Accrued Expenses

     Certain customers are allowed a rebate if agreed upon sales targets are
     achieved for a given year. At December 31, 1995 and 1996, the Company has
     accrued $2.7 million and $3.6 million, respectively, for such volume
     allowances. These amounts are included in accrued expenses in the
     accompanying consolidated balance sheets.

     International Sales

     In fiscal 1994, 1995 and the periods ended November 12 and December 31,
     1996, net sales to customers in various geographic areas outside the United
     States and Canada, primarily Mexico, Western Europe and Asia, amounted to
     $22.9 million, $22.6 million, $19.7 million and $1.9 million, respectively.

     Reclassification

     Certain prior year balances have been reclassified to conform with the
     current year presentation.

(5)  COMMON STOCK TRANSACTIONS

     During December 1994, the Board of Directors authorized a program to
     purchase up to 500,000 shares of the Company's common stock. Through
     November 12, 1996, the Company had purchased 214,200 shares at an
     approximate cost of $3.3 million.


                                       52
<PAGE>   53
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)

(6)  INVENTORIES

     Inventories were as follows at December 31 (in thousands):

<TABLE>
<CAPTION>
                                          DECEMBER 31,
                                      1995           1996
                                   PREDECESSOR     SUCCESSOR
                                     COMPANY        COMPANY
     <S>                           <C>            <C>
     Raw materials and work in     $   10,388     $    9,429
     process
     Finished goods                    10,927         15,354
                                   ----------     ----------

                                   $   21,315     $   24,783
                                   ==========     ==========
</TABLE>

     Inventories valued under the last-in, first-out (LIFO) cost method
     comprised approximately 57.0% of the 1995 totals and 60.5% of the 1996
     totals. If the first-in, first-out (FIFO) cost method of inventory
     accounting had been used, inventories would have been approximately $2.3
     million higher than reported at December 31, 1995. In connection with the
     acquisition, the existing LIFO reserve of approximately $1.7 million was
     eliminated and finished goods were adjusted to fair market value less
     normal selling costs.

(7)  LONG-TERM DEBT AND NOTES PAYABLE TO BANKS

     Long-term debt consisted of the following at December 31 (in thousands):

<TABLE>
<CAPTION>
                                                         1995           1996
                                                      PREDECESSOR     SUCCESSOR
                                                        COMPANY        COMPANY
     <S>                                              <C>            <C>
     Revolving credit facility                        $        -     $        -
     Tranche A Term Loan                                       -         20,000
     Tranche B Term Loan                                       -         25,000
     Senior subordinated notes, due 2006, 10.625%              -        115,000
                                                      ----------     ----------

                                                               -        160,000
     Less - Current portion of long-term debt                  -            825
                                                      ----------     ----------

           Total                                      $        -     $  159,175
                                                      ==========     ==========
</TABLE>


                                       53
<PAGE>   54
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)

(7)  LONG-TERM DEBT AND NOTES PAYABLE TO BANKS (Continued)

     Revolving Credit and Term Loans

     In November 1996, the Company entered into a Bank Credit Agreement (the
     Agreement) that provides for secured borrowings from a syndicate of lenders
     consisting of (i) a five and one-half year revolving credit facility
     providing for up to $30 million in revolving loans, $5.0 million of which
     may be used for letters of credit (the Revolving Credit Facility) and (ii)
     a term loan facility providing for $45.0 million in term loans, consisting
     of a five and one-half year Tranche A Term Loan of $20.0 million and a
     seven and one half year Tranche B Term Loan for $25.0 million
     (collectively, the Term Loans).

     The Revolving Credit Facility includes a $20.0 million sublimit which is
     available to finance permitted acquisitions. At December 31, 1996, there
     were no borrowings outstanding on the Revolving Credit Facility. During the
     period from November 13, 1996 to December 31, 1996, the Company did not
     borrow under the Revolving Credit Facility.

     The loans under the Agreement bear interest, at the Company's option, at
     either (A) a "base rate" equal to the higher of (i) the Federal funds rate
     plus .5% or (ii) the Bank's prime lending rate plus (x) in the case of
     Tranche A Term Loans and loans under the Revolving Credit Facility, an
     applicable spread ranging from .75% to 1.50% (determined based on the
     Company's leverage ratio) or (y) in the case of Tranche B Term Loans,
     2.00%; or (B) a 'Eurodollar rate" plus (x) in the case of Tranche A Term
     Loans and loans under the Revolving Credit Facility, an applicable spread
     ranging from 1.75% to 2.50% (determined based on the Company's leverage
     ratio), or (y) in the case of Tranche B Term Loans, 3.00%. Swingline Loans
     may only be "base rate" loans.

     Tranche A Term Loans amortize on a quarterly basis over the term of the
     loans. The Tranche B Term Loans have nominal quarterly amortization prior
     to the maturity of the Tranche A Term Loans, and will amortize remaining
     amounts on a quarterly basis thereafter. The commitments under the
     Revolving Credit Facility and the acquisition sublimit will each reduce by
     $5.0 million in the fourth year and $10.0 million in the fifth year after
     the date of the Merger. The Revolving Credit Facility will mature five and
     one-half years after the date of the Merger. In addition, the Agreement
     provides for mandatory prepayments, subject to certain exceptions, of the
     Term Loans with the net proceeds of certain asset sales, with the net
     proceeds of certain debt and equity issuances and from a portion of the
     Company's excess cash flow.


                                       54
<PAGE>   55
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)


(7)  LONG-TERM DEBT AND NOTES PAYABLE TO BANKS (Continued)

     Revolving Credit and Term Loans (Continued)

     The Revolving Credit Facility also requires the Company to pay a commitment
     fee on the average daily aggregate unutilized portion of the Revolving
     Credit Facility at a rate of .50% per annum. The fee is payable quarterly
     in arrears as well as a commission on trade and standby letters of credit
     of 1.25% per annum of the amount to be drawn under the Agreement. Amounts
     outstanding under the Revolving Credit Facility are due on May 12, 2002.

     The Agreement contains a number of covenants that, among other things,
     restrict the ability of the Company and its subsidiaries to dispose of
     assets, incur additional indebtedness, incur guaranty obligations, repay
     other indebtedness or amend other debt instruments, pay dividends, create
     liens on assets, enter into leases,, make investments, make acquisitions,
     engage in mergers or consolidations, make capital expenditures, engage in
     certain transactions with subsidiaries and affiliates and otherwise
     restrict corporate activities. In addition, the Agreement requires
     compliance with certain financial covenants, including requiring the
     Company to maintain a minimum EBITDA level, a minimum ratio of EBITDA to
     interest expense and a maximum ratio of Indebtedness to EBITDA, in each
     case tested at the end of each fiscal quarter of the Company.

     The Company's obligations under the Agreement are guaranteed by Holdings
     and each direct and indirect domestic subsidiary of the Company. The
     Company's obligations under the Agreement are secured by substantially all
     assets of the Company and its subsidiaries.

     In connection with the Merger, the Company issued $115.0 million of Senior
     Subordinated Notes due in 2006 (the "Notes"). The Notes are unsecured
     obligations of the Company. The Notes bear interest at a rate of 10.625%
     per annum and are payable semi-annually on each June 30 and December 31
     commencing on June 30, 1997.

     The Notes are redeemable at the option of the Company on or after December
     31, 2001. The Notes will be subject to redemption at the option of the
     Company, in whole or in part, at various redemption prices, declining from
     105.313% of the principal amount to par on and after December 31, 2003. In
     addition, on or prior to December 31, 1999, the Company may use the net
     cash proceeds of one or more equity offerings to redeem up to 35% of the
     aggregate principal amount of the Notes originally issued at a redemption
     price of 110.625% of the principal amount thereof plus accrued interest to
     the date of redemption. Upon a change of control, each Note holder has the
     right to require the Company to repurchase such holder's Notes at a
     purchase price of 110% of the principle amount plus accrued interest.


                                       55
<PAGE>   56
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)

(7)  LONG-TERM DEBT AND NOTES PAYABLE TO BANKS (Continued)

     Revolving Credit and Term Loans (Continued)

     The Note Indenture contains certain affirmative and negative covenants and
     restrictions. As of December 31, 1996, the Company is in compliance with
     the various covenants of the Note Indenture.

(8)  INCOME TAXES

     The components of the provision for income taxes are as follows (in
     thousands):

<TABLE>
<CAPTION>
                                                                SUCCESSOR
                     ----------PREDECESSOR COMPANY-----------    COMPANY
                                                 PERIOD ENDED   PERIOD ENDED
                     YEAR ENDED DECEMBER 31,     NOVEMBER 12,   DECEMBER 31,
                       1994           1995           1996          1996
     <S>             <C>            <C>          <C>            <C>
     Current:
       Federal       $ 7,351        $ 5,798        $ 5,233        $(1,376)
       State           1,150            586            258            (23)
                     -------        -------        -------        -------
                       8,501          6,384          5,491         (1,399)

     Deferred:
       Federal          (712)          (591)           622             82
       State            (106)          (112)            39              7
                     -------        -------        -------        -------
                        (818)          (703)           661             89
                     -------        -------        -------        -------

                     $ 7,683        $ 5,681        $ 6,152        $(1,310)
                     =======        =======        =======        =======
</TABLE>

     The deferred income tax provision resulted primarily from temporary
     differences due to the use of accelerated depreciation for income tax
     purposes and straight-line depreciation for financial statement purposes,
     temporary differences related to deferred compensation and the reversal of
     temporary differences related to safe-harbor lease transactions that had
     previously transferred tax benefits to the Company.


                                       56
<PAGE>   57
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)


(8)  INCOME TAXES (Continued)

     The difference between a provision computed using the respective statutory
     U.S. federal income tax rate and the provision for income taxes in the
     accompanying consolidated financial statements is primarily the result of
     state taxes, net of federal benefits.

     Significant items giving rise to deferred tax assets and deferred tax
     liabilities at December 31, 1995 and 1996 are as follows (in thousands) :

<TABLE>
<CAPTION>
                                           1995            1996
                                        PREDECESSOR      SUCCESSOR
                                          COMPANY         COMPANY
     <S>                                <C>              <C>
     PREPAID INCOME TAXES:
       Warranty reserves - current       $      167      $      145
       Allowance for doubtful accounts          265             351
       Plant closing reserve                  1,035               -
       Reserves not currently deductible        389             218
       Accrued vacation                         307             278
       UNICAP adjustment                        238             253
       Other                                    392             489
                                         ----------      ----------
                                         $    2,793           1,734
                                         ==========      ==========
</TABLE>


                                       57
<PAGE>   58
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)


(8)  INCOME TAXES (Continued)

<TABLE>
<CAPTION>
                                              1995           1996
                                          PREDECESSOR      SUCCESSOR
                                            COMPANY         COMPANY
                                                 (in thousands)
     <S>                                    <C>             <C>
     DEFERRED INCOME TAXES:
       Accelerated depreciation             $ 1,370         $ 1,265
       Safe harbor leases                       801             492
       Warranty reserves - long-term           (753)           (781)
       Deferred compensation and               (761)           (724)
        restricted stock plan
       Other                                    (46)            (30)
                                            -------         -------
                                            $   611         $   222
                                            =======         =======
</TABLE>

(9)  PENSION AND PROFIT SHARING PLANS

     The Company has a defined contribution 401(k) plan covering substantially
     all of its employees. Under the Plan, eligible employees are permitted to
     contribute up to 10% of gross pay, not to exceed the maximum allowed under
     the Internal Revenue Code. The Company matches each employee contribution
     up to 6% of gross pay at a rate of $.25 per $1 of employee contribution.
     The Company also contributes 3% of each employee's gross pay up to the
     Social Security taxable wage base and 4% of amounts in excess of that level
     up to approximately $.2 million of wages. Company contributions to the
     401(k) plan totaled approximately $1.2 million in 1994, $1.1 million in
     1995 and $.9 million and $.1 million for the periods ending November 12 and
     December 31, 1996, respectively.

(10)  LEASE COMMITMENTS

     The Company leases certain plant facilities and equipment. Total rental
     expenses charged to operations amounted to approximately $.8 million in
     fiscal 1994 and 1995 and $1.0 million and $.2 million, respectively, for
     the periods ended November 12 and December 31, 1996. Minimum rental
     commitments under all non-cancelable operating leases are as follows (in
     thousands):

<TABLE>
<CAPTION>
                          <S>               <C>
                          1997              $    1,469
                          1998                   1,288
                          1999                     634
                          2000                     370
                          2001                     129
                                            ----------

                                            $    3,890
                                            ==========
</TABLE>

     Certain of the leases provide for renewal options.


                                       58
<PAGE>   59
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)

(11) COMMITMENTS AND CONTINGENCIES

     Compensation Plans

     The Company maintains a supplemental pension program for certain officers
     which provides pre-retirement death and retirement benefits in addition to
     the benefits in the defined contribution 401(k) plan. The retirement
     benefits are being accrued currently by charges to income over the
     officers' expected employment periods. Compensation expense under this
     program totaled approximately $.1 million in 1994, 1995 and 1996.

     The Company maintains the Profitability Rewards In Recognition of Dedicated
     Employees Bonus Plan (the "PRIDE Bonus Plan") for the purpose of providing
     non-executive employees with an annual year-end cash bonus based on the
     profitability of the Company during such year. All employees of AMTROL Inc.
     at year end, and employees who have retired, died or become disabled during
     the calendar year, are eligible for a bonus award under the PRIDE Bonus
     Plan. The total amount to be awarded under the PRIDE Bonus Plan each year
     is determined by the Board of Directors. Awards are allocated to eligible
     employees on the basis of years of service and compensation.

     Other Commitments and Contingencies

     At December 31, 1996, the Revolving Credit Facility contains a sublimit to
     support the issuance of letters of credit in the amount of $5.0 million
     with approximately $.7 million outstanding. The Company is self-insured for
     worker's compensation claims in the State of Rhode Island. The State of
     Rhode Island requires the Company to post a $.7 million standby letter of
     credit.

     The Company is involved in various legal proceedings which, in the opinion
     of management, will not result in a material adverse effect on its
     financial condition or results of operations.

     The Company has received three "Notice Letters" from the Environmental
     Protection Agency ("EPA") stating that it is one of several potential
     responsible parties pursuant to the Comprehensive Environmental Response,
     Compensation and Liability Act, and that it will be required to share in
     the cost of cleaning up the sites identified by the EPA. The Company's
     degree of responsibility, if any, is not presently determinable in all
     cases; however, management is of the opinion that these will not have a
     material adverse effect on the accompanying consolidated financial
     statements.


                                       59


<PAGE>   60
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)


(12) STOCK PLANS

     During 1992, the Company established the 1992 Stock Plan, which provided
     for awards covering a maximum of 800,000 shares of common stock to be
     granted to directors, officers and certain key employees of the Company in
     the form of (i) incentive stock options within the meaning of Section 422
     of the Internal Revenue Code, (ii) non-qualified stock options, (iii)
     shares of common stock subject to specified restrictions, (iv) restricted
     units that entitle the holder thereof to receive one share of common stock
     (or equivalent cash payments) for each unit in increments during a
     restricted period, (v) stock appreciation rights accompanying options or
     granted separately, or (vi) limited stock appreciation rights accompanying
     options. Options granted in 1994, 1995 and 1996 were exercisable in four
     equal annual installments generally commencing one year from grant and have
     terms of ten years.

     In 1994, the shareholders approved the AMTROL Inc. Non-Employee Director
     Compensation Plan (the Director Plan). The Director Plan provided for
     annual automatic grants of options to purchase common stock up to a maximum
     of 2,000 shares annually to each director. On April 22, 1994 options were
     granted to purchase 10,000 shares of common stock at $19.00 per share, the
     price on the grant date, and because exercisable in three equal
     installments on October 22, 1994, April 22, 1995 and April 22, 1996. On
     April 21, 1995, options were granted to purchase 7,873 shares of common
     stock at $18.25 per share, the price on the grant date, and became
     exercisable in three equal installments on October 21, 1995, April 21, 1996
     and April 21, 1997. On February 21, 1996, options were granted to purchase
     2,000 shares of common stock at $15.00 per share, the price on the grant
     date, and became exercisable in three equal installments on August 21,
     1996, February 21, 1997 and February 21, 1998. On June 19, 1996, options
     were granted to purchase 6,728 shares of common stock at $19.5 per share,
     the price on the grant date, and became exercisable in three equal
     installments on December 19, 1996 and June 19, 1997 and June 19, 1998. All
     options under the Director Plan have a term of ten years.

     A disqualifying disposition occurs when shares acquired by the exercise of
     incentive stock options are sold within one year. Because of the tax
     deduction received for disqualifying dispositions, the Company has recorded
     a related tax benefit of $.1 million, respectively, in additional paid-in
     capital for fiscal 1994 and 1995.


                                       60
<PAGE>   61
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)


(12) STOCK PLANS (Continued)

     The following is a summary of option activity in the Company's stock plans
     through November 12, 1996:

<TABLE>
<CAPTION>
                                               NUMBER OF
                                                OPTIONS         PRICE RANGE

     <S>                                       <C>            <C>
     Options outstanding, December 31, 1993:     403,681      $3.45 - $15.00
       Granted                                   172,500      16.38 -  19.00
       Exercised                                (121,227)      3.45 -  15.00
       Forfeited                                 (12,875)     11.55 -  15.00
                                               ---------      --------------

     Options outstanding, December 31, 1994:     442,079       7.00 -  19.00
       Granted                                   192,973      15.75 -  18.25
       Exercised                                 (57,025)      7.00 -  15.00
       Forfeited                                 (31,721)     15.00 -  18.31
                                               ---------      --------------

     Options outstanding, December 31, 1995:     546,306       7.00 -  19.00
       Granted                                   155,028      15.00 -  19.25
       Exercised                                 (17,247)      7.00 -  19.00
       Forfeited                                  (5,089)     15.00 -  16.38
       Canceled                                        -                   -
                                               ---------      --------------

     Options outstanding, November 12, 1996      678,998      $7.00 - $19.25
                                               =========      ==============
</TABLE>

     The 1992 Stock Plan and the Director Plan were terminated effective
     immediately prior to the Merger. In addition, all outstanding options
     (other than options for 60,327 shares of AMTROL common stock which were
     exchanged for options exercisable for Holdings common stock) were canceled
     and the holder received, upon consummation of the Merger, cash equal to the
     excess of $28.25 over the per share exercise price of such option,
     multiplied by the number of shares of AMTROL common stock then subject to
     the option.

(13) OTHER INCOME AND EXPENSE

     In September 1995, the Company ceased operations at its Plano, Texas
     facility. In December 1995, the Company decided to close its Rogers,
     Arkansas plant. Production at this facility ceased in April 1996. Programs
     to raise productivity in other facilities and free-up production capacity
     have made these plant consolidations possible. As a result of these plant
     closings, all jobs at these locations have been eliminated resulting in a
     worldwide workforce reduction of approximately 150 jobs.


                                       61
<PAGE>   62
                          AMTROL INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996

                                   (Continued)


(13) OTHER INCOME AND EXPENSE (Continued)

     The Company recorded a $3.8 million charge to operating expense in 1995 for
     severance and other costs in connection with the closures. Included in this
     charge is an amount of $2.0 million for accrued termination benefits of
     which approximately $.7 million had been paid at December 31, 1995 (for the
     facility's) and the balance of which was substantially spent in 1996. The
     Rogers, Arkansas facility was sold in April 1996. Included in current
     assets as "Assets Held for Sale" is an amount of $3.7 million in 1995 and
     $1.5 million in 1996 (for one facility) representing the estimated net
     market value of the land and buildings for these two facilities which the
     Company was or is holding for sale as of the end of the respective fiscal
     years.



                                       62
<PAGE>   63
                                   AMTROL INC.






   ITEM 14(a)(2) SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                 (In Thousands)




<TABLE>
<CAPTION>
                                       BALANCE AT                                       BALANCE AT
                                       BEGINNING                                          END OF
CONSOLIDATED                           OF PERIOD    PROVISION  RECOVERIES  WRITE-OFFS     PERIOD
<S>                                    <C>          <C>        <C>         <C>          <C>
PREDECESSOR

Year Ended December 31, 1994
  Allowance for doubtful accounts        $  980        $206        $25       $(117)     $  1,094


Year Ended December 31, 1995
  Allowance for doubtful accounts         1,094          93          2        (199)          990


Period Ended November 12, 1996
  Allowance for doubtful accounts           990         172         21        (108)        1,075


SUCCESSOR

Period Ended December 31, 1996
  Allowance for doubtful accounts         1,075          91          4        (115)        1,055
</TABLE>


                                       63
<PAGE>   64
                                  SIGNATURES


Pursuant to the requirements of Section 13 or 5(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in West Warwick, Rhode
Island, on the 27th day of March 1997.

                                          AMTROL Inc.


                                          By:   /s/ Edward J. Cooney
                                             ----------------------------------
                                                   Edward J. Cooney
                                                Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1934, this registration
statement has been signed by the following persons in the capacities and on the
date indicated.

<TABLE>
<CAPTION>
     Signature                           Title                                         Date
     ---------                           -----                                         ----

<S>                             <C>                                                <C>
                                Chairman of the Board, President                   March 27, 1997
---------------------------     and Chief Executive Officer (principal
     John P. Cashman            executive officer) and Director


  /s/  Samuel L. Daniels        Executive Vice President and Director              March 27, 1997
---------------------------
     Samuel L. Daniels


  /s/  Clifford A. Peterson     Senior Vice President and Director                 March 27,1997
---------------------------
     Clifford A. Peterson


  /s/  Edward J. Cooney         Senior Vice President, Chief Financial             March 27, 1997
---------------------------     Officer and Treasurer (principal
     Edward J. Cooney           financial and accounting officer)


  /s/  David P. Spalding        Director                                           March 27, 1997
---------------------------
     David P. Spalding


                                Director                                           March 27, 1997
---------------------------
     James A. Stern


  /s/  Anthony D. Tutrone       Director                                           March 27, 1997
---------------------------
     Anthony D. Tutrone
</TABLE>


                                       64
<PAGE>   65
                                  EXHIBIT INDEX

EXHIBIT #                     DOCUMENT DESCRIPTION
---------                     --------------------

3.1   Restated Articles of Incorporation of AMTROL Inc. (incorporated by
      reference from the Company's Registration Statement on Form S-4,
      Registration No. 333-18075, declared effective by the Securities and
      Exchange Commission on January 2, 1997).

3.2   Bylaws of AMTROL Inc. (incorporated by reference from the Company's
      Registration Statement on Form S-4, Registration No. 333-18075,
      declared effective by the Securities and Exchange Commission on January
      2, 1997).

4.1   Indenture, dated as of November 1, 1996 between AMTROL Acquisition,
      Inc. and The Bank of New York (incorporated by reference from the
      Company's Registration Statement on Form S-4, Registration No.
      333-18075, declared effective by the Securities and Exchange Commission
      on January 2, 1997).

4.2   Form of 10-5/8% Senior Subordinated Notes due 2006 (included in Exhibit
      4.1) (incorporated by reference from the Company's Registration Statement
      on Form S-4, Registration No. 333-18075, declared effective by the
      Securities and Exchange Commission on January 2, 1997).

4.3   First Supplemental Indenture, dated as of November 13, 1996, between
      AMTROL Inc. and The Bank of New York (incorporated by reference from
      the Company's Registration Statement on Form S-4, Registration No.
      333-18075, declared effective by the Securities and Exchange Commission
      on January 2, 1997).

10.1  Credit Agreement, dated as of November 13, 1996, among AMTROL Acquisition,
      Inc. and AMTROL Holdings, Inc., various lending institutions party
      thereto, Morgan Stanley Senior Funding, Inc. as documentation agent, and
      Bankers Trust Company, as administrative agent (incorporated by reference
      from the Company's Registration Statement on Form S-4, Registration No.
      333-18075, declared effective by the Securities and Exchange Commission on
      January 2, 1997).

10.2  AMTROL Inc. Pension Plan and Trust (incorporated by reference from the
      Company's Registration Statement on Form S-1, Registration No.
      33-48413, declared effective by the Commission on March 18, 1993).*

10.3  Amendments to AMTROL Inc. Pension Plan and Trust (incorporated by
      reference from the Company's Registration Statement on Form S-1,
      Registration No. 33-48413, declared effective by the Securities and
      Exchange Commission on March 18, 1993).*

10.4  AMTROL Inc. Executive Cash Bonus Plan (incorporated by reference from
      the Company's Annual Report on Form 10-K for the fiscal year ended
      December 31, 1994).*

10.5  AMTROL Inc. Supplemental Retirement Plan II (incorporated by reference
      from the Company's Registration Statement on Form S-1, Registration No.
      33-48413, declared effective by the Commission on March 18, 1993).*

10.6  First Amendment to AMTROL Inc. Supplemental Retirement Plan II
      (incorporated by reference from the Company's Annual Report on Form 10-K
      for the fiscal year ended December 31, 1995).*

10.7  Employment Agreement dated January 19, 1997 by and between AMTROL Inc.
      and Samuel L. Daniels. *


                                       65
<PAGE>   66
10.8  Employment Agreement dated January 19, 1997 by and between AMTROL Inc.
      and Clifford A. Peterson. *

10.9  Employment Agreement dated January 19, 1997 by and between AMTROL Inc.
      and Edward J. Cooney. *

12    Computation of ratio of earnings to fixed charges.

21    Subsidiaries of AMTROL Inc.

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

*  Management contract or compensatory plan or arrangement.


                                       66