PETRO FINANCIAL CORP, 10-K405, 1999-03-31

PETRO FINANCIAL CORP
10-K405, 1999-03-31
AUTO DEALERS & GASOLINE STATIONS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the year ended December 31, 1998

Commission file number 1-13020
-------

PETRO FINANCIAL CORPORATION
(Exact name of the registrant as specified in its charter)

Delaware 74-2699614
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

6080 Surety Drive
El Paso, Texas 79905
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (915) 779-4711

_______________________________

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 requirement 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. Yes X No
----- -----

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant.

Not Applicable

Documents incorporated by reference: Petro Financial Corporation's Current
Report on Form 8-K filed on September 3, 1997, as amended on Forms 8-K/A, filed
on September 11, 1997.

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PART I

Item 1. Business

General

Petro Financial Corporation (the "Company") is a wholly-owned subsidiary of
Petro Stopping Centers, L.P. ("PSC") and was incorporated in February 1994 for
the sole purpose of acting as a co-obligor with PSC for the issuance of 100,000
units consisting of $100,000,000 12.5% Senior Notes due 2002 (the "Notes") and
100,000 exchangeable Debt Warrants (the "Warrants"). The Notes and Warrants
were recorded on the financial statements of PSC. In January 1997, PSC and the
Company, as co-obligors, issued $135,000,000 10.5% Senior Notes due 2007 (the
"New Notes") and made a tender offer for all of, and repurchased approximately
94% of the Notes and approximately 100% of the Warrants. The remaining Notes
and the New Notes are recorded on the financial statements of PSC.

The Company has no employees, only nominal assets and does not conduct any
operations. Accordingly, the financial statements of the Company are unaudited.
In the opinion of management, the accompanying unaudited financial statements
contain all necessary adjustments as of and for the years ended December 31,
1997 and 1998.

PSC files with the Securities and Exchange Commission the reports required
to be filed pursuant to the rules and regulations promulgated under the
Securities Exchange Act of 1934. For information regarding PSC and its business
and financial results, reference is made to PSC's Annual Report on Form 10-K for
1998, a copy of which is filed as Exhibit 99 to this report.

Item 2. Properties

None

Item 3. Legal Proceedings

None

Item 4. Submission of Matters to a Vote of Security Holders

None

PART II

Item 5. Market of Registrant's Common Equity and Related Stockholder Matters

The Company is a wholly-owned subsidiary of PSC. Consequently, there is no
established trading market for the Company's equity.

Item 6. Selected Financial Data

The Company is inactive and therefore does not have financial data to
present.

Item 7. Management's Discussion and Analysis

The Company is inactive and, accordingly, it has no operations and only
minimal assets.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

None

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Item 8. Financial Statements and Supplementary Data

PETRO FINANCIAL CORPORATION
UNAUDITED BALANCE SHEETS

As of December 31,

1997 1998
---- ----

Assets

Cash $ 1,000 1,000
------- -----

Total assets $ 1,000 1,000
======= =====

Stockholder's Equity

Common stock, $.01 par value:
10,000 shares authorized;
2,500 shares issued and outstanding $ 25 25
Additional paid-in capital 975 975
------- -----

Total stockholder's equity $ 1,000 1,000
======= =====

See accompanying notes to unaudited financial statements

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PETRO FINANCIAL CORPORATION
UNAUDITED STATEMENTS OF CASH FLOWS

For the years Ended December 31,

1997 1998
---- ----

Cash flows provided by financing activities:

Proceeds from sale of stock $ 1,000 -
------- -----

Net cash provided by financing activities 1,000 -
------- -----

Net increase in cash 1,000 -
Cash, beginning of period - 1,000
------- -----
Cash, end of period $ 1,000 1,000
======= =====

See accompanying notes to unaudited financial statements

3
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Petro Financial Corporation
Notes to Unaudited Financial Statements

(1) Company Formation and Description of Business

Organization

(2) Summary of Significant Accounting Policies

Basis of Presentation

The Company has no employees, only nominal assets, has not and will not
conduct any operations and, accordingly, has no statement of operations. At
December 31, 1997 and 1998, the Company's balance sheets consists only of common
stock and additional paid-in capital in the amount of $1,000 and cash in the
amount of $1,000. The accounts of the Company are included in the December 31,
1997 and 1998 consolidated balance sheets of PSC, which are included in PSC's
Annual Report on Form 10-K for the year ended December 31, 1998, a copy of which
is filed as Exhibit 99 to this report. In the opinion of management, the
accompanying unaudited financial statements contain all necessary adjustments as
of and for the years ended December 31, 1997 and 1998.

The Company meets all of the requirements of an Inactive Registrant as
defined by Rule 3-11 of the Securities and Exchange Commission's Regulation S-X
(the "Rule"). The Rule stipulates that if a registrant is inactive, the
financial statements required for purposes of reports pursuant to the Securities
Exchange Act of 1934 may be unaudited.

(3) Stockholder's Equity

The Company is a wholly-owned subsidiary of PSC, which is the sole
shareholder of the outstanding common stock of the Company. As the sole
shareholder, PSC holds all voting rights and privileges.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None

4
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PART III

Item 10. Directors and Executive Officers of the Registrant

Executive Officers and Members of Board of Directors

The executive officers and directors of the Company and their ages as of
February 1, 1999 are as follows:

Name Age Position
- ------------------------ --- ----------------------------
James A. Cardwell, Sr. 66 Director and President
Larry J. Zine 44 Director and Vice President
James A. Cardwell, Jr. 38 Director and Vice President
Evan C. Brudahl 43 Vice President
David A. Haug 38 Vice President and Secretary
David A. Appleby 32 Controller

James A. (Jack) Cardwell, Sr. - Jack Cardwell has been a Director and
President of the Company since its organization in 1994. He founded PSC in 1975
and has been serving as its Chief Executive Officer since May 1992, and has been
the Chairman since its formation in 1992. He is responsible for PSC's overall
performance, defining PSC's image in the marketplace and identifying growth
opportunities and overseeing employee and customer retention. He served as the
Chairman of the National Association of Truck Stop Operators ("NATSO") in 1983
and 1984 and has worked on various committees of NATSO since that time. He
currently serves as a trustee for Archstone Communities (a New York Stock
Exchange Company) and serves as a director of El Paso Electric Company (a
publicly traded Company). Jack Cardwell is the father of Jim Cardwell.

Larry J. Zine - Mr. Zine has been a Director and Vice President of the
Company since December 1996. He was hired by PSC in December 1996 as Executive
Vice President and Chief Financial Officer. As of January 1999, Larry Zine was
elected President and a member of the Board of Directors of PSC and is
responsible for all financial, accounting, management information and insurance
and benefit services for PSC. Mr. Zine was the Executive Vice President and
Chief Financial Officer for The Circle K Corporation, the second largest chain
of convenience stores in the United States, from 1988 to 1996. Mr. Zine was an
integral part of The Circle K Corporation's reorganization from bankruptcy in
July 1993, its initial public offering in March 1995, and subsequent sale in
June 1996. Mr. Zine had worked for The Circle K Corporation for 15 years in
various capacities including the last eight years as Chief Financial Officer.
Mr. Zine has been a director of MMH Holdings, Inc., a holding company whose sole
direct subsidiary is Morris Material Handling, Inc., a manufacturer, distributor
and service provider of "through-the-air" material handling equipment, since
March 30, 1998. He was educated at the University of North Dakota and holds a
M.S. degree in Accounting and a B.S.B.A. in Marketing. In March 1999, Mr. Zine
announced his resignation from the Company and PSC, although he will remain on
the Board of the Company and PSC. Effective resignation date to be determined.

James A. (Jim) Cardwell, Jr. - Jim Cardwell is a Director and Vice
President of the Company. Mr. Cardwell is Senior Vice President of Marketing
and Business Development for PSC. Mr. Cardwell has been involved with PSC full
time for 15 years and has held various positions including profit center
management and Vice President of Operations from 1986 to 1992. Prior to his
current position, he served as Senior Vice President of Operations and Marketing
in 1998, and Vice President of National Sales and Promotions from June 1993 to
January 1997. Mr. Cardwell studied Management and Finance at the University of
North Texas. Currently he

5
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serves on the Board of Directors of NATSO. He is also a member of the Young
Presidents Organization. Jim Cardwell is the son of Jack Cardwell.

Evan C. Brudahl - Evan Brudahl, a Mobil Oil employee, is a Vice President
of the Company and the Senior Vice President of Operations and a member of the
Board of Directors of PSC. Mr. Brudahl is responsible for PSC's operations,
overseeing engineering operations, fuel purchasing and transportion, franchise
operations and the fuel island, travel store and Petro:Lube operations. Mr.
Brudahl was most recently the Manager of U.S. Diesel Retail Marketing and Travel
Center Business at Mobil Oil and has worked for Mobil Oil for 21 years. He has
held the positions of District Manager, Manager of U.S. company-operated
Gasoline Stations Operations, Company Operations Accounting Manager, and various
other positions in U.S. Marketing and Administrative areas. He received a B.B.A.
in Marketing from the University of Wisconsin at Whitewater. Effective April 1,
1999, Mr. Brudahl will become a permanent Petro employee, resigning from Mobil
Oil. As of April 1, 1999, Mr. Brudahl will no longer be a member of the Board
of Directors but will continue to remain an officer of PSC. Mr. Brudahl has
worked for PSC since February 1997 as a Mobil Oil employee.

David A. Haug - David Haug is a Vice President and Secretary for the
Company. In March 1999, David Haug announced his resignation as Vice President
and Secretary of the Company in addition to his resignation as Vice President of
Finance of PSC; both resignations were effective March 19, 1999. Prior to such
position, he served as the Controller for PSC, a position he held since April
1990. Prior thereto, he served as Audit Manager with Lauterbach, Borschow and
Company, Certified Public Accountants from 1982 to 1990. He received a B.A. in
Accounting from New Mexico State University and is a Certified Public Accountant
in the State of Texas.

David A. Appleby - Effective March 20, 1999, David Appleby assumed the Vice
President and Secretary position of the Company. Mr. Appleby also assumed,
effective March 20, 1999, Vice President of Finance of PSC with the
responsibility for all accounting, finance, treasury and credit operations.
Prior to such date, Mr. Appleby was the Controller for PSC, a position he held
since February 1998. Prior thereto, Mr. Appleby was a Senior Audit Manager
with KPMG Peat Marwick, LLP from 1991 to 1998. He received a B.B.A. in
Accounting from the University of Texas at El Paso and is a Certified Public
Accountant in the State of Texas.

Item 11. Executive Compensation

None

Item 12. Security Ownership of Certain Beneficial Owners and Management

The Company is a wholly-owned subsidiary of PSC.

Item 13. Certain Relationships and Related Transactions

None

6
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PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Forms 8-k

The following documents are filed as a part of this report: Page
----
1. Financial statements

Balance Sheets 2

Statements of Cash Flows 3

The accounts of the Company are included in the December 31, 1997 and
December 31, 1998 consolidated balance sheets of PSC, which are included in
PSC's Annual Report on Form 10-K for the year ended December 31, 1998, a
copy of which is filed as Exhibit 99 to this report.

2. Financial statements schedule and supplementary information required to be
submitted.

None

All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the financial
statements or notes thereto.

3. Exhibits

Incorporated herein by reference is a list of Exhibits contained in the Exhibit
Index on Page 9 of this Annual Report.

(b) Reports on Form 8-K: None

7
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SIGNATURES

Pursuant to the requirements 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.

PETRO FINANCIAL CORPORATION

(Registrant)

/s/ Larry J. Zine
--------------------------------------
(Larry J. Zine)
Vice President and Director
(Principal Financial Officer
and Chief Accounting Officer)

March 31, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Petro
Financial Corporation and in the capacities on the date indicated:

Signature Title Date
--------- ----- ----

/s/ James A. Cardwell, Sr. President and Director March 31, 1999
- -------------------------- (Principal Executive Officer)
(James A. Cardwell, Sr.)

/s/ Larry J. Zine Vice President and Director March 31, 1999
- -------------------------- (Principal Financial Officer
(Larry J. Zine) and Chief Accounting Officer)

/s/ James A. Cardwell, Jr. Vice President and Director March 31, 1999
- ---------------------------
(James A. Cardwell, Jr.)

8
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EXHIBIT INDEX

Exhibit No. Exhibit Description

16.1(aa) Letter, dated September 3, 1997, from Coopers & Lybrand LLP,
Regarding change in Certifying Accountants.

16.2(aa) Letter, dated September 3, 1997, from Arthur Andersen LLP,
Regarding Change in Certifying Accountants.

16.3(bb) Letter, dated September 11, 1997, from Coopers & Lybrand LLP,
Regarding Change in Certifying Accountants.

23.1* Consent of experts and counsel from Arthur Andersen LLP.

23.2* Consent of experts and counsel from PricewaterhouseCoopers LLP.

27* Financial Data Schedule

99* Petro Stopping Centers, L.P.'s Annual Report on Form 10-K for the
year ended December 31, 1998, filed on March 31, 1999.

* Filed herewith.

(aa) Incorporated by reference to the Company's Current Report on Form 8-K,
filed on September 3, 1997.

(bb) Incorporated by reference to the Company's current Report on Form 8-K/A,
filed on September 11, 1997.

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Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the inclusion as Exhibit
99 in this Form 10-K of our report dated February 12, 1999, except with respect
to the matter discussed in Note 18 to the consolidated financial statements, as
to which the date is March 19, 1999, included in Form 10-K of Petro Stopping
Centers, L.P. (the "Company"). It should be noted that we have not audited any
financial statements of the Company subsequent to December 31, 1998 or performed
any audit procedures subsequent to the date of our report.

ARTHUR ANDERSEN LLP

Dallas, Texas,
March 31, 1999

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Exhibit 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We consent to the inclusion in this Form 10-K of Petro Financial Corporation
(commission file number 1-3020) of our report dated March 28, 1997, on our audit
of the consolidated financial statements of Petro Stopping Centers, L.P. for the
period ended December 31, 1996.

PRICEWATERHOUSECOOPERS LLP

Austin, Texas
March 29, 1999

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,000
<CURRENT-LIABILITIES> 0
<BONDS> 0<F1>
0
0
<COMMON> 25
<OTHER-SE> 975
<TOTAL-LIABILITY-AND-EQUITY> 1,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>NOT SEPARATELY IDENTIFIED IN THE CURRENT FINANCIAL STATEMENTS OR ACCOMPANYING
NOTES THERETO.
</FN>

</TABLE>

<PAGE>

EXHIBIT 99
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-K

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

For the year ended December 31, 1998

Commission file number 1-13018

PETRO STOPPING CENTERS, L.P.
(Exact name of the registrant as specified in its charter)

Delaware 74-2628339
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

6080 Surety Dr. 79905
El Paso, Texas (Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code: (915) 779-4711

__________________________

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
-- --

State the aggregate market value of the voting stock and non-voting common
equity held by non-affiliates of the registrant.

Not Applicable

DOCUMENTS INCORPORATED BY REFERENCE: Portions of Item 14 of Part IV are
incorporated by reference to: Petro Stopping Centers, L.P.'s Registration
Statement No. 33-76154, filed on April 26, 1994; Petro Stopping Centers, L.P.'s
Quarterly Report on Form 10-Q for the quarter ended March 30, 1994, filed on
July 1, 1994; Petro Stopping Centers, L.P.'s Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995, filed on May 15, 1995; Petro Stopping
Centers, L.P.'s Annual Report on Form 10-K for the fiscal year ended December
29, 1995, filed on March 28, 1996; Petro Stopping Centers, L.P.'s Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, filed on April 14,
1997; Petro Stopping Centers, L.P.'s Current Report on Form 8-K filed on
September 3, 1997, as amended on Form 8-K/A, filed on September 11, 1997; and
Petro Stopping Centers, L.P.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, filed on March 30, 1998; Petro Stopping Centers, L.P.'s
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, filed on May
15, 1998.
==============================================================================

<PAGE>

PART I
Item 1. Business

General

Petro Stopping Centers, L.P. (the "Company") is a leading operator of
large, full-service truck stops with a nationwide network of 49 facilities known
as Petro Stopping Centers ("Stopping Centers"), located in 29 States. The
Company has built its reputation by providing a high level of customer service
in a consistently clean and friendly environment. Each Stopping Center offers a
broad range of products, services and amenities, including diesel fuel,
gasoline, home-style restaurants ("Iron Skillet"), truck preventive maintenance
centers ("Petro:Lubes") and travel and convenience stores to commercial truck
drivers, other highway motorists and local residents. Of the 49 Stopping
Centers, 21 are operated by franchisees who are required to meet the Company's
high standards of quality and service.

The Company's primary customers are commercial and private trucking fleets
and professional truck drivers that comprise the long-haul sector of the
trucking industry. The Company sells diesel fuel to approximately 9,000 trucking
accounts.

The Company's facilities are designed to offer a number of benefits to
truck fleet operators and drivers. These advantages generally include well-lit
and fenced parking lots to enhance security for drivers, trucks and freight;
spacious parking areas and well-designed traffic flow to reduce accidents; and
fewer stops and out-of-route miles through the use of the Company's one-stop,
multi-service facilities. As trucking fleets consolidate and outsource their
fueling as well as maintenance requirements, the Company's facilities continue
to experience growth in diesel fuel volume and preventive maintenance revenues.

The Company's business was founded by Jack Cardwell, who opened the
Company's first truck stop in El Paso, Texas in 1975. Until 1992, the Company
conducted its operations through a variety of entities owned by Mr. Cardwell and
members of his family. Effective April 30, 1992, The Fremont Group, Inc.
("Fremont"), an affiliate of Bechtel Group, Inc. and then named Bechtel
Investments, Inc., made an equity investment in the business through two
Delaware limited partnerships, Petro PSC Properties, L.P. ("Petro Properties")
and Petro PSC, L.P. ("Petro PSC"). In the transaction, Fremont and Roadside,
Inc. ("Roadside"), which is a wholly owned subsidiary of Fremont and was one of
the general partners of Petro Properties and Petro PSC, invested $25,000,000 in
the partnerships and Mr. Cardwell, his son and entities controlled by them, as
well as Arcadian Management Corporation ("Arcadian"), a corporation wholly-owned
by a former executive officer of the Company, contributed most of the real
estate assets of the business to Petro Properties and the operating and other
assets of the business to Petro PSC. The contributions made by the members of
the Cardwell Group (as defined below) and Arcadian were valued at $45,570,000 by
the partners of Petro Properties. The Cardwell Group's contribution to Petro
Properties was recorded at the Cardwell Group's amortized cost of the related
assets and liabilities. Thereafter, Fremont and Roadside made additional equity
investments in the partnerships totaling $10,000,000. Effective December 31,
1994, Petro Properties and its principal operating subsidiary, Petro PSC, were
merged and the name of the surviving partnership was changed to Petro Stopping
Centers, L.P., a Delaware limited partnership.

In October 1996, Jack Cardwell, Jim Cardwell, JAJCO II, Inc. ("JAJCO"),
Petro Inc. (together with Jack Cardwell, Jim Cardwell, and JAJCO, collectively,
the "Cardwell Group"), Mobil Long Haul Inc. ("Mobil Long Haul"), a wholly owned
subsidiary of Mobil Oil Corporation ("Mobil"), Petro Holdings GP Corp.
("Holdings GP"), Petro Holdings LP Corp. ("Holdings LP") and together with
Holdings GP, "Chartwell," both of which were newly formed affiliates of
Chartwell Investments, Inc. ("Chartwell Investments") and the Company, entered
into the Omnibus Agreement pursuant to which the parties thereto agreed, among
other matters, that Chartwell and Mobil Long Haul would acquire the general and
limited partnership interests of the Company owned by Sequoia Ventures, Inc.
("SVI") and Roadside (and together with SVI, the "Fremont Partners") and invest
in the Company. On January 30, 1997, the Company consummated the Omnibus
Agreement transaction in which Chartwell and Mobil Long Haul invested
$20,700,000 and $15,000,000, respectively (the "Equity Investment"), and
directly acquired the partnership interest of the Fremont Partners for
approximately $25,600,000 and invested approximately $10,100,000 in the Company.
The Cardwell Group maintained its capital investment in the Company. Kirschner
Investments ("Kirschner"), a

1
<PAGE>

Company franchisee, invested $1,000,000 in the Company (the "Kirschner
Investment"). Following the Equity Investment and the Kirschner Investment, the
common partnership interests of the Company are owned by Chartwell
(approximately 50.6%), the Cardwell Group (approximately 39.7%), Mobil Long Haul
(approximately 7.3%), and Kirschner (approximately 2.4%), and the mandatorily
redeemable preferred partnership interests of the Company are owned by Mobil
Long Haul ($12,000,000) and the Cardwell Group ($7,600,000). Chartwell and the
Cardwell Group own both general and limited partnership interests in the
Company, and Mobil Long Haul and Kirschner own only limited partnership
interests in the Company. Mobil and the Company also entered into certain supply
and marketing agreements in connection with the Recapitalization (as defined).

As part of the Recapitalization, the Company issued $135,000,000 of 10 1/2%
Senior Notes due 2007 (the "New Notes"), and made a tender offer (the "Tender
Offer") for all of, and repurchased approximately 94% of, its 12 1/2% Senior
Notes due 2002 (the "Old Notes") and 100% of the outstanding debt warrants (the
"Debt Warrants").

The Company also amended its senior collateralized credit facility (the
"Old Credit Agreement" and, as amended, the "New Credit Agreement"). The New
Credit Agreement consists of a $25,000,000 revolving credit facility (the
"Revolving Credit Facility"), a $14,000,000 Term Loan A, a $30,000,000 Term Loan
B and a $40,000,000 Expansion Facility (the "Expansion Facility"). The New
Credit Agreement is collateralized by substantially all of the Company's assets
and the partnership interests of Mobil Long Haul and Chartwell and guaranteed by
each of the Company's subsidiaries, whose guarantees in turn are collateralized
by substantially all of such subsidiaries' assets.

The Recapitalization consists of the Equity Investment, the Tender Offer,
the Kirschner Investment, the issuance of the New Notes and the entering into of
the New Credit Agreement.

Recent Developments

In March 1999, the Company, certain of its Partners and Volvo Trucks North
America, Inc. ("Volvo") entered into letters of intent wherein Volvo agreed in
principle to acquire an interest in the Company. As part of the transactions, it
is contemplated that Chartwell's interest in Petro will be repurchased. Closing
of the transaction is subject to, among other matters, Volvo's satisfaction with
its due diligence, negotiation of definitive agreements, obtaining additional
financing, obtaining bank facility amendments, obtaining amendments to the New
Notes Indenture (and a to be determined minimum percentage of the New Notes
holders waiving the change of control provisions of the indenture), and receipt
of regulatory approvals. Closing of the transaction is anticipated in June 1999,
however, there can be no assurance that the transaction will occur by such date
or at all.

Petro Stopping Centers

There are 28 Company-operated Stopping Centers, of which 25 are full-size
locations and three are Petro:2 Centers ("Petro:2 Centers"). There are 21
franchised facilities, of which 16 are "full-service" locations and five are
Petro:2 Centers. Petro:2 Centers provide the same basic fuel, non-fuel, and
restaurant services as full-sized Stopping Centers, but on a smaller scale and
with fewer amenities. A typical full-size Stopping Center is built on 15 to 30
acres with separate entrances and parking areas for trucks and automobiles.
Parking areas typically accommodate 200 to 300 trucks and 100 to 175 cars or
recreational vehicles, and are well-lit and fenced to maximize customer safety.
Petro Stopping Centers are open 24 hours a day and typically consist of the
following:

Fuel

Each Stopping Center has a diesel fuel island which is a self-service
facility for professional drivers that typically consists of eight to 16 fueling
lanes. The fuel dispensers are computer driven, high speed units. Each fueling
lane permits simultaneous fueling of each of the truck's two tanks. Pursuant to
its strategic alliance with Mobil, the Company converted to selling Mobil
branded diesel fuel at all of the Company-operated diesel fuel islands during
1997. All Company-operated diesel fuel islands and dispensers carry signage with
both the "Petro" and "Mobil" brand names.

2
<PAGE>

In addition to the diesel fuel island for professional drivers, gasoline and
automobile diesel fuel are sold from a separate auto fuel island at 27 of the
Company's 28 locations. The auto fuel islands are accessed by separate "auto-
only" entrances which help to separate auto and truck traffic at the facility.
The typical auto fuel island is equipped with four to 12 fuel dispensers for
convenient and efficient fueling.

Non-fuel

In 1983 the Company opened its first Petro:Lube facility to provide "while-
you-wait" preventive maintenance service for trucks. Since that time,
Petro:Lubes have been introduced at all of the Company-operated Stopping Centers
but one. Petro:Lube facilities offer oil and filter changes, lubrication and
new, used and retread tires, as well as tire and other minor repairs. The
Company was the first truck stop chain to offer service to truckers on an
express basis.

Each Petro:Lube sells a limited number of high-quality brands such as Mobil
Delvac, and Chevron Delo heavy duty motor oils and Kelly, Bridgestone, Michelin
and Firestone tires. Under the marketing agreements entered into with Mobil,
Petro:Lubes feature Mobil's Delvac brand lubricants and have developed
marketing programs and strategies with Mobil. See Item 13, "Certain
Relationships and Related Transactions." Each Petro:Lube honors manufacturers'
warranties as well as the Company's warranties for work performed at any
Petro:Lube throughout the country.

Petro:Lube services are primarily utilized by owner/operators and small
fleets, but larger fleets are increasingly looking to outsource their
maintenance needs. In addition to Stopping Center locations, the Company opened
a stand-alone Petro:Lube in 1996.

To attract the business of drivers seeking a quick refueling stop, each
diesel fuel island includes a "mini-mart" offering an array of deli take out
food, snack foods, beverages, toiletries and a basic selection of trucker
accessories and supplies. In addition, other services including certified
scales, check cashing, money wire services, permit services, faxing and copying
are available. These facilities enable the driver seeking a quick refueling stop
to purchase consumables and services while refueling.

Each Stopping Center also includes a Travel Store featuring merchandise
specifically selected to cater to a professional truck driver's shopping needs
during the long periods typically spent away from home. Merchandise categories
include food items, clothing, electronics such as televisions, mobile satellite
dishes, VCR's and CB radios as well as toiletries, gifts and truck accessories
such as cables, fuses, reflectors and antennae. A travel store typically
carries approximately 7,500 SKUs and averages 1,900 square feet of selling
space.

To meet the personal and business needs of commercial drivers and other
motorists, the Company provides numerous additional services at its Stopping
Centers. At the typical Stopping Center, customers have access to telephone, fax
and other communications services, overnight express drop boxes and ATMs. In
addition, customers may receive their paychecks and cash advances. Professional
drivers have convenient on-site access to a certified truck weighing scale and a
truck wash operated by a third-party at most locations. For a driver's comfort
and relaxation, Stopping Centers provide laundry facilities, game rooms,
television viewing rooms and at certain Stopping Centers, movie theaters.

Each full-size Stopping Center features 12 to 18 private shower facilities.
The showers are fully tiled for easy maintenance and are professionally cleaned
after each use. Each shower room is equipped with a lock to provide privacy and
security. The Company also leases retail space at its Stopping Centers to
independent merchants.

3
<PAGE>

Since June 1993, the Stopping Centers located in Hammond and Shreveport,
Louisiana, have featured video poker operations. The primary customers for these
activities are local area residents. The video poker operations at each of these
sites feature 50 machines and are conducted in a stand-alone building, separated
from other Stopping Center facilities. A third-party operator manages the video
poker operations and incurs substantially all related expenses while paying a
portion of each machine's "winnings" to the Company. During 1996, the State of
Louisiana enacted a statute requiring the cessation of video poker operations
unless the parish in which the operations were conducted voted to allow the
continued operations of video poker machines. On November 5, 1996, the parish in
which the Shreveport facility is located voted to continue to allow video poker
operations, while the parish in which the Hammond facility is located voted to
disallow video poker operations. The video poker operations at the Hammond
facility are required to be phased out by the end of June, 1999.

Restaurants

Each full-size Stopping Center includes the Company's trademarked "Iron
Skillet" restaurant. This home-style, sit down restaurant typically seats
approximately 180 customers, and features counter and wait service, a soup and
salad bar and three "All-You-Can-Eat" buffets per day. The Iron Skillet prides
itself on the "home cooked" items prepared fresh at each location. Recipes
developed at the Company's test kitchen in El Paso are accessible from each
location by computer.

Iron Skillet restaurants are open 24 hours per day, 365 days per year and
have "drivers only" sections. Public telephones are generally available
throughout the dining area for customer convenience.

The Company has introduced nationally branded fast food concepts at several
of its locations. The Company currently operates one Wendy's, two Baskin-
Robbins, two Blimpie Subs & Salads and seven Pizza Hut Express units and plans
to expand its fast food program during the next several years. In addition, the
Company has introduced its own branded deli program in certain Stopping Centers
known as "The Filling Station." At December 31, 1998, the Company had eight
locations that contained "The Filling Station" and plans to expand the concept
in the future.

Competition

The U.S. truck stop industry is large and highly fragmented. According to
industry data, which is limited, there are approximately 2,200 truck stops
located on interstate highways. Management believes that approximately 30% are
operated by six major national or regional truck stop chains, in which Petro is
a competitor. Long-haul trucks can obtain diesel fuel from a wide variety of
sources, including their own fueling terminals, chains of large, high-quality
truck stops, limited service fueling facilities and some large service stations.
The Company believes that, while it competes with all truck stops, its principal
competitors are increasingly large, multi-service truck stop chains.

While the Company prices its diesel fuel competitively, it believes the
larger sites with more amenities offered by the Company is a competitive
advantage. A number of other large, multi-service truck stop chains build
somewhat smaller and less expensive facilities, emphasizing low-priced diesel
fuel and fast food restaurants. Many of the other truck stop chains employ
discount pricing of diesel fuel to compete. At the same time, increased
competition and over capacity among trucking companies in recent years have
increased truck fleet owners' focus on reducing their operating costs. This has
put increased pressure on diesel fuel margins for the Company and its
competitors. In recent years, a number of the larger fleets have also opened
proprietary terminals along their most-traveled routes. In addition, from time
to time, the Company is subject to intense price competition in certain of its
markets.

Fuel Suppliers

4
<PAGE>

Stopping Centers' diesel fuel requirements as well as a portion of their
lubricant and gasoline requirements. The diesel fuel sold at all Company-
operated Stopping Centers is branded Mobil Diesel, and the Company-operated
Petro:Lubes feature Mobil Delvac lubricants. Under the diesel fuel and gasoline
supply agreement dated January 30, 1997 (the "Supply Agreement"), the Company
has agreed to purchase from Mobil specified distribution terminals, a minimum
number of gallons of diesel fuel and gasoline on both a monthly and an annual
basis, subject to product availability and reductions by Mobil under certain
described circumstances. As a result of the Supply Agreement and in order to
comply with the laws governing the branding of diesel fuel, Mobil Diesel Supply
Corp. ("MDS"), a wholly owned subsidiary of Mobil, was formed. MDS purchases
diesel fuel from third-party suppliers and then sells it back to the Company at
cost, given that Mobil cannot supply 100% of the Company's diesel fuel demand
due to limited product availability. The Company's fuel purchase arrangement
with MDS enables the Company to meet its diesel fuel demand and to comply with
branding laws, which require Mobil to first take possession of the fuel before
it can be branded as Mobil Diesel.

The Supply Agreement allows the Company to continue to negotiate for the
purchase of diesel fuel with third-party suppliers approved by MDS. If the
Company is able to obtain a lower diesel fuel price from a third-party supplier
in a particular market area, the Company may request that Mobil meet such lower
price to allow a portion of the Company's diesel fuel requirements to be
supplied from such MDS approved third-party supplier, in which case MDS would
purchase the diesel fuel from the supplier and resell the product to the
Company. Any change in supply source, however, does not affect the Company's
requirement to purchase the annual minimum number of gallons from Mobil
specified distribution terminals fixed by the Supply Agreement. The Supply
Agreement also places a monthly limit on the maximum number of gallons of diesel
fuel and gasoline that the Company may lift from Mobil specified distribution
terminals. See Item 13, "Certain Relationships and Related Transactions."

The Company purchases diesel fuel for each of its Company-operated Stopping
Centers on a daily basis. Each location typically maintains a one to three day
inventory of fuel. During 1998, the Company purchased 100% of diesel fuel from
MDS.

Trademarks and Trade Names

The Company is the owner in the United States of various trademarks and
service marks with remaining lives of approximately five years. The Company
grants franchisees the non-exclusive right to use the proprietary marks at
franchised locations. The Company regards its trademarks and service marks as
valuable assets and believes that they have significant value in the marketing
of its products and services.

Governmental Regulation

Environmental Regulation

The Company's operations and property are subject to extensive federal and
state legislation and regulations relating to environmental matters. The Company
uses underground and above ground storage tanks (each a "UST") to store
petroleum products and waste oils. Statutory and regulatory requirements for UST
systems include requirements for tank construction, integrity testing, leak
detection and monitoring, overfill and spill control, and mandate corrective
action in case of a release from a UST into the environment. The Company is
also subject to regulation in certain locations relating to vapor recovery and
discharges into the water. Management believes that all of its USTs are
currently in compliance in all material respects with applicable environmental
laws, regulations and requirements. During 1998, the Company continued the
installation of cathodic protection and overfill equipment and devices in its
older USTs, as required by federal and state law, and all such work was
completed in December 1998, except in the Corning, California location, where
completion of the state required upgrades is ongoing pursuant to an agreement
between the State of California and the Company. The Corning, California work
is contemplated to be completed in April 1999, and the Company expects to expend
$940,000 during 1999 in connection with such work. Some site remediation may be
required in Corning, California as a result of completion of the 1998 upgrade
work. During 1996, 1997, and 1998, the Company's expenditures for environmental
matters were $180,000,

5
<PAGE>

$154,000, and $385,000. See Note 2 to Notes to Consolidated Financial Statements
for the year ended December 31, 1998 for a discussion of the Company's
accounting policies relating to environmental matters.

In connection with its ownership of the properties and the operation of its
business, the Company may be subject to liability under various federal, state,
and local environmental laws, ordinances and regulations relating to cleanup and
removal of hazardous substances (which may include petroleum and petroleum
products) on, under, or in such property. Certain laws typically impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. Persons who arrange, or are
deemed to have arranged, for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at the disposal or treatment site, regardless of whether such site is
owned or operated by such person. The Company is currently party to one
proceeding with the United States Environmental Protection Agency ("EPA")
regarding a waste oil storage and recycling plant located in Patterson,
Stanislaus County, California (the "Patterson Site"). In the ordinary course of
Company operations, waste oil products are generated which are required to be
transported to off-site facilities for treatment and disposal. Between June
1991 and February 1995 the Company arranged for the transportation of waste oil
products from the Corning location to the Patterson Site. Sometime in 1997 the
owners of the Patterson Site abandoned operation of the site, the condition of
the site began to deteriorate, and in October 1997 the EPA responded to a
request for assistance from the California Department of Toxic Substances
Control. Notwithstanding that the Company's activities with regards to use of
the Patterson Site were lawfully conducted and have not been challenged by the
EPA, by Order issued by the EPA on August 12, 1998 ("Order"), the Company and 55
other companies were identified by the EPA as "generators, transporters or
arrangers for disposal of hazardous substances" as those terms are defined under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C., Section 9601 to 9675, as amended by the Superfund Amendments
and Reauthorization Act of 1986 ("CERCLA"), and thus are named in the Order as
potentially responsible parties, strictly liable under CERCLA for removal
activities associated with the Patterson Site. The Company and approximately 20
of the other 55 companies identified by the EPA are working together towards a
resolution and plan of action for completion of the removal activities required
by the EPA pursuant to the Order. The Company does not believe that its
involvement in the Patterson Site will have a material adverse effect on its
consolidated financial condition or results of operation. See Note 15 to Notes
to Consolidated Financial Statements for the year ended December 31, 1998.

Where required or believed by the Company to be warranted, the Company takes
action at Company-operated locations to correct the effects on the environment
of prior disposal practices or releases of chemical or petroleum substances by
the Company or other parties. In light of the business of the Company and the
quantity of petroleum products that it handles, there can be no assurance that
hazardous substance contamination does not exist or that material liability will
not be imposed in the future.

Other Regulation

The Company is also subject to local licensing ordinances. The issuance of
permits for service station and lubrication operations is generally a matter of
discretion and is subject to the underlying requirement that the granting of the
permit be consistent with health, safety and moral welfare of the community.
Although the Company believes that careful planning and site selection reduces
the likelihood of significant zoning opposition, significant opposition to the
construction of a Stopping Center, if encountered, may cause the Company to
incur substantial expenses and delay.

The Company's restaurant operations are subject to federal, state and local
regulations concerning health standards, sanitation, fire and general safety,
noncompliance with which could result in temporary or permanent curtailment or
termination of a restaurant's operations. In addition, difficulties in obtaining
the required licensing or approvals could result in delays or cancellations in
the openings of new restaurant facilities.

In addition, the Company's video poker operations are subject to oversight
at the state and local level. During 1996, the State of Louisiana enacted a
statute requiring the cessation of video poker operations unless the parish in
which the operations were conducted voted to allow the continued operations of
video poker machines. On November 5, 1996, the parish in which the Shreveport
facility is located voted to continue to

6
<PAGE>

allow video poker operations, while the parish in which the Hammond facility is
located voted to disallow video poker operations. The video poker operations at
the Hammond facility are required to be phased out by the end of June, 1999.

The Louisiana State Police, who administer the gaming licensing process in
Louisiana, issued citations in February 1998, against the licensee of video
poker at the two Petro Truck Stops in Louisiana, alleging failure to file
complete license application forms for the business. In April 1998 at a hearing
before the Louisiana Gaming Control Board the issues giving rise to the
citations were resolved without interruption of gaming privileges. In July 1998
the Company met with representatives of the Louisiana State Police and the
Chairman of the Louisiana Gaming Control Board in connection with the renewal of
the 1998 Louisiana video poker licenses. As a result of that meeting, the
Company made modifications to its agreements with the licensee of the video
poker operations, and submitted all required information and documentation to
the Louisiana State Police in November 1998. While no formal action has, as of
this date, been taken as to the 1998 video poker license renewal applications,
management believes that the submissions address the considerations raised at
the July 1998 meeting. Further, management does not believe that the ultimate
outcome of the Louisiana video poker license matter will have a material adverse
effect on the business or financial condition of the Company.

The Company as a franchisor is also subject to federal and state regulation
in the states in which it offers franchises or where franchised Stopping Centers
are currently operating. Federal regulations require that the Company provide
each prospective franchisee with a disclosure document that provides information
regarding the Company and the relevant provisions of the franchise agreement and
other ancillary contracts. In addition, certain state regulations require that
the franchisor be registered or be exempt from the applicable registration
requirements. Federal and state franchising laws prohibit certain "deceptive
trade practices" and, in some cases, impose fairness and "anti-discrimination"
standards on the Company.

In addition to the franchise regulations outlined immediately above, the
Company's operations are subject to the Petroleum Marketing Practices Act
("PMPA"). PMPA is a federal law that prohibits a franchisor engaged in the sale,
consignment or distribution of refiner-branded motor fuels from terminating or
failing to renew a "franchise" or "franchise relationship," except on specified
grounds and only after compliance with the statute's notification provisions.
PMPA expressly preempts state law concerning the termination, nonrenewal and
notice thereof with respect to motor fuel franchises. PMPA is enforced
judicially through cases interpreting the statute.

The Company is also a franchisor under the PMPA because it distributes and
sells diesel fuel and gasoline under Mobil's trademarks to its franchisees.
Thus, the Company is subject, as a franchisor, to PMPA's termination, nonrenewal
and notice requirements in each of its individual motor fuel contracts with its
franchisees. At the same time, the Company is entitled to PMPA's protections in
its branded supply agreements with Mobil, as well as other branded suppliers.
At December 31, 1998, the Company is not party to any PMPA litigation.

Under the Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. While the Company believes its facilities
are in compliance with these requirements, a determination that the Company is
not in compliance with the ADA could result in the imposition of fines or an
award of damages, which could adversely affect the Company.

The Company believes that all of its Stopping Centers are in compliance with
existing laws and regulations. However, new laws and regulations could require
the Company to incur significant additional costs.

Employees

At December 31, 1998, the Company had a total of 3,902 employees, of which
3,618 were full-time and 284 were part time. At that date, 542 of the Company's
employees were salaried and performed executive, management, or administrative
functions and the remaining 3,360 employees were hourly employees. Almost 95%
of the Company's employees worked at the Stopping Centers and most employees at
the Stopping Centers work on an hourly basis.

7
<PAGE>

The Company has never had a work stoppage. The Company believes that it
provides working conditions, wages and benefits that are competitive with other
providers of the kinds of products and services offered by the Company. The
Company believes that its relations with its employees are good.

Item 2. Properties

The Company's corporate headquarters is located in a three-story building in
El Paso, Texas, which contains approximately 30,000 square feet of space. The
Company leases the entire building from a member of the Cardwell Group. The
Company's lease of the building expires in December 2005 and provides for annual
rental payments of $336,000, plus taxes, maintenance and operating expenses. See
Item 13, "Certain Relationships and Related Transactions."

The Company owns 24 of its 28 Stopping Centers in their entirety, owns all
but four acres of the West Memphis Stopping Center site, owns the facility and
leases the land at the Hammond, Louisiana site and leases both the Effingham,
Illinois and North Baltimore, Ohio Stopping Centers sites in their entirety. In
August and November of 1998, the Company purchased land in Mebane, North
Carolina and Glendale, Kentucky, respectively, for the future construction of
two new Stopping Centers.

The Company owns a site in Green River, Wyoming which is suitable for the
construction of a new Stopping Center. The Company has options, which expire in
December 2006, to purchase vacant land owned by the Cardwell Group that is
located adjacent to four existing Stopping Centers: Shreveport, Louisiana (7
acres subject to option); Weatherford, Texas (34 acres); Beaumont, Texas (17
acres); and Oklahoma City, Oklahoma (30 acres). See Item 13, "Certain
Relationships and Related Transactions."

The Stopping Center located in Effingham, Illinois, is leased from an entity
owned by current and former employees of the Company. The lease expires in May
2006 and provides for adjustable rental payments tied to interest rates (the
"Basic Rent"), which currently are approximately $89,000 per month, plus taxes
and operating expenses. The Company has three consecutive options to renew this
lease for terms of five years each at rental rates equal to the Basic Rent, plus
certain adjustments at the time of renewal and a right of first refusal to
purchase the Stopping Center complex. See Item 13, "Certain Relationships and
Related Transactions."

In December 1998, the Company entered into a twenty-year ground lease (25
acres) in Conyers, Georgia which allows for a due diligence period expiring in
April 1999. The Conyers ground lease expires in December 2018 and provides for
monthly rental payments of $31,250 for the initial five years of the lease term,
plus taxes. The lease also provides for scheduled rent increases in years six,
eleven and sixteen during the lease term. The Company has the option to
purchase the entire 25-acre tract of land and any improvements thereon on the
fifteenth anniversary of the lease term for a price of $5 million or on the
twentieth anniversary of the lease term for a price of $6 million.

In June 1998, the Company entered into a ground lease (approximately 16
acres) in Jackson, Mississippi. The Jackson ground lease expires in August 2038
and provides for annual rental payments of $58,700. The lease provides for
rental adjustments based on the current fair market value of the leased premises
on the eighth, sixteenth, twenty-fourth and thirty-second anniversary dates.

The land at the Hammond, Louisiana and a small portion (approximately 4
acres) of the West Memphis, Arkansas Stopping Centers are subject to ground
leases. The Hammond ground lease expires in September 2004 and provides for
annual rental payments of $123,000, plus taxes. The Company has the option,
which expires at the end of the lease term, to purchase the entire 21 acre tract
of land for $4.53 per square foot. If the Company elects to purchase less than
all of the property, the price shall be at a price to be determined according to
a formula specified in the lease. The Company's ground lease at the West
Memphis site expires in April 2005, and the Company has two additional options
to renew the ground lease for 10 years each, with scheduled rent increases every
five years, and a right of first refusal to purchase the land. Under the lease,
the Company makes annual rental payments of approximately $40,000 plus taxes.

8
<PAGE>

The Stopping Center located in North Baltimore, Ohio, is leased in its
entirety. The lease expires in August 2001 and provides for annual rental
payments of $560,000, plus taxes. The Company has four renewal options of five
years each with rental adjustment based on the Consumer Price Index. The
Company also has a purchase option on the property, which may be exercised at
any time during the lease.

The following table outlines the Company-operated Stopping Centers at
December 31, 1998:

<TABLE>
<CAPTION>
Approximate
--------------------------------------------------
Stopping Total Size of Main
Center Acreage Building
Location Acreage at Location (Sq. Ft.)
-------- -------- ------------ ------------
<S> <C> <C> <C>
Company - operated
El Paso, Texas .............................. 31 51 20,000
Weatherford, Texas .......................... 25 25 21,000
Beaumont, Texas ............................. 20 20 12,300
San Antonio, Texas .......................... 21 21 13,200
Eloy/Casa Grande, Arizona ................... 23 36 12,300
Corning , California ........................ 18 18 12,300
Amarillo, Texas ............................. 20 32 13,800
Shreveport, Louisiana ....................... 18 21 13,800
Hammond, Louisiana (a) ...................... 16 21 12,300
West Memphis, Arkansas (a) .................. 24 63 13,800
Milan, New Mexico ........................... 23 30 13,800
Knoxville, Tennessee ........................ 25 25 13,800
Kingman, Arizona ............................ 38 67 14,600
Oklahoma City, Oklahoma ..................... 30 30 14,600
Perrysburg/Toledo, Ohio ..................... 33 74 20,000
Kingdom City, Missouri ...................... 25 35 20,500
Bucksville, Alabama ......................... 48 51 14,400
Girard/Youngstown, Ohio ..................... 29 98 20,000
Vinton, Texas ............................... 8 19 4,800
Effingham, Illinois (b) ..................... 30 30 20,000
Kingston Springs, Tennessee ................. 9 12 6,900
Shorter, Alabama ............................ 9 9 12,700
Atlanta, Georgia ............................ 64 69 21,500
Laramie, Wyoming ............................ 35 50 15,500
Ocala, Florida .............................. 37 170 20,500
Medford, Oregon ............................. 15 15 11,500
North Baltimore, Ohio (a) ................... 17 40 29,000
North Little Rock, Arkansas ................. 17 24 16,000
</TABLE>
________

(a) The North Baltimore, Ohio facility is leased in its entirety, and the
Hammond, Louisiana and four acres of West Memphis, Arkansas units are
subject to ground leases.
(b) As discussed above, the Effingham, Illinois facility is owned by one
present and five former Company employees and leased to the Company.

9
<PAGE>

Franchises

As of December 31, 1998, the Company has 21 franchising agreements with
others to operate Stopping Centers in the following markets:

Franchised Locations
--------------------
Elkton, Maryland
Ft. Chiswell, Virginia
Portage, Wisconsin
Joplin, Missouri
Lake Station, Indiana
Ruther Glen, Virginia
New Paris, Ohio
Florence, South Carolina
Rochelle, Illinois
Fargo, North Dakota
Carnesville, Georgia
Bordentown, New Jersey
Benton Harbor, Michigan
Salina, Kansas
Jerome/Twin Falls, Idaho
York, Nebraska
Scranton, Pennsylvania
Claysville, Pennsylvania
Breezewood, Pennsylvania
Milton, Pennsylvania
Monee, Illinois

One location in York, Nebraska was opened in 1996, and two franchise
locations, Scranton, Pennsylvania and Claysville, Pennsylvania, were opened in
1997. In 1998, the Company opened its franchised Stopping Centers in
Breezewood, Pennsylvania, Milton, Pennsylvania, and Monee, Illinois. All
franchise agreements with the exception of one are for an initial ten-year term
and are automatically renewed for two consecutive five-year terms subject to the
satisfaction of certain conditions, unless the franchisee gives a termination
notice at least 12 months prior to the expiration thereof. One franchise
agreement has been amended so that its initial term is approximately 15 years
(expiring on December 2001), and such agreement provides for only one five-year
renewal thereof. The Company is currently in the process of negotiating the
renewal franchise agreement.

One franchisee operates four locations, two operate three locations, one
operates two locations, and nine operate one location each. All of the
franchisees are unaffiliated with the Company, except Highway Service Ventures,
Inc., see Item 13, "Certain Relationships and Related Transactions", which
operates four of the Company's franchised locations.

Each existing franchise agreement grants to the franchisee the right and
license to operate a Stopping Center in a specified territory. The franchise
agreements require that the franchisee build, at its own expense, and operate
the Stopping Center in accordance with certain requirements, standards and
specifications prescribed by the Company, including site approval, and that the
franchisee purchase certain products from suppliers approved by the Company.
The Company, in turn, is obligated to provide the franchisee with, among other
things, advisory assistance in the operation of the franchised Stopping Center
and assistance in connection with advertising and promotional programs.

The agreements require the franchisee to pay the Company (subject to
certain exceptions), in addition to certain initial fees and training fees, a
monthly royalty fee and a monthly advertising fee

10
<PAGE>

(administered through an advertising fund for national and regional
advertising). During 1998, the Company's revenues from its 21 franchisees
totaled $4,497,000. In addition, franchisees contributed $401,000 to advertising
programs sponsored by the Company.

While a majority of diesel purchases at Stopping Centers are paid for by
third-party billing companies, a portion of diesel fuel purchases are paid for
through direct billing arrangements with particular trucking companies. As
provided in the franchise agreements, the Company purchases all of the
receivables generated by the franchisees from customers using direct billing
arrangements. These purchases are on a non-recourse basis to the franchisee.

In addition, upon termination or expiration of the franchise agreement in
the event that the franchisee wishes to accept an offer from a third-party to
purchase its facility, each franchise agreement grants the Company a right of
first refusal to purchase the facility, at the price offered by the third party.
Similarly, in nine cases, the Company has the right to purchase the franchise
for fair market value, as determined by the parties or an independent appraiser,
upon termination or expiration of the franchise agreement.

Joint Venture

The Company has entered into a joint venture agreement with Tejon
Development Corporation ("Tejon") to build and operate a Petro branded location
in Southern California. Pursuant to the terms of the Limited Liability Company
Operating Agreement of Petro Travel Plaza LLC, dated as of December 5, 1997,
among the Company, Tejon and Tejon Ranch Company, as guarantor (the
"Agreement"), the Company is required to make an initial capital contribution
for working capital and inventory and contemplates that the joint venture will
finance construction of the location with a non-recourse credit facility. Under
the Agreement, the Company will receive a management fee of $250,000 per annum
and will share 40% of the location's operating earnings. At December 31, 1998,
the Petro Branded location was under construction and expected to be completed
in June 1999.

Item 3. Legal Proceedings

The Company is from time to time involved in ordinary routine litigation
incidental to its operations. The Company believes that the litigation
currently pending or threatened against it, including the EPA proceeding with
respect to the Patterson Site described in more detail in Item 1. "Business",
will not have a material adverse effect on its consolidated financial condition
or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

All of the Company's general and limited partnership interests are owned by
the Cardwell Group, Chartwell, Mobil Long Haul and Kirschner. See Note 1 to
Notes to Consolidated Financial Statements included elsewhere herein.
Consequently, there is no established public trading market for the Company's
equity.

11
<PAGE>

Item 6. Selected Financial Data

The information set forth below should be read in conjunction with the
consolidated financial statements and notes thereto included at Item 8 herein.
The selected consolidated financial data as of and for the years ended December
31, 1998, December 31, 1997, December 31, 1996, December 29, 1995, and December
30, 1994, have been derived from the audited financial statements of the
Company. The unaudited financial data presented include, in the opinion of
management, all necessary adjustments required for fair presentation of such
data. In 1994, the Company adopted a 52/53 week fiscal year, which ended on the
Friday closest to December 31. Beginning in 1996, the Company adopted a
calendar fiscal year, which ends on December 31. The acquisition by the Company
of its operating properties during the periods reflected in the following
selected financial data materially affect the comparability of such data from
one period to another.

Year ended Year ended Year ended Year ended Year ended
December 30, December 29, December 31, December 31, December 31,
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(dollars in thousands)
----------------------
<S> <C> <C> <C> <C> <C>
Net revenues (including motor fuel taxes):
Fuel......................................... $ 350,570 $385,181 $478,312 $513,571 $464,025
Non-fuel..................................... 93,446 100,447 111,410 122,609 136,145
Restaurant................................... 43,877 47,387 47,335 49,549 53,246
--------- -------- -------- -------- -------
Total net revenues.......................... 487,893 533,015 637,057 685,729 653,416
--------- -------- -------- -------- -------

Costs and expenses:
Cost of sales (including motor fuel taxes).. 373,436 411,893 511,431 546,581 499,396
Operating expenses........................... 64,968 73,052 81,522 85,560 93,012
General and administrative................... 11,448 12,053 13,925 17,035 19,335
Employee severance, benefit and
placement expenses.......................... - - 2,534 - -
Depreciation and amortization (1)............ 8,851 11,144 12,204 14,502 15,953
--------- -------- -------- -------- -------
Total costs and expenses.................... 458,703 508,142 621,616 663,678 627,696
--------- -------- -------- -------- -------
Operating income.............................. 29,190 24,873 15,441 22,051 25,720

Recapitalization costs........................ - - 2,938 - -
Interest expense, net......................... 18,711 21,098 21,263 20,292 20,042
--------- -------- -------- -------- -------
Income (loss) before extraordinary item and
cumulative effect of a change in
accounting principle....................... 10,479 3,775 (8,760) 1,759 5,678

Extraordinary item (2)........................ 5,250 - - 12,745 -
Minority interest............................. 191 - - - -
Cumulative effect of a change in accounting
principle (7)(8)............................. - _ _ 1,579 3,250
--------- -------- -------- -------- -------
Net income (loss) (3)......................... $ 5,038 $ 3,775 $ (8,760) $(12,565) $ 2,428
========= ======== ======== ======== =======
Other Data:
- ----------
EBITDA, as defined(4)(5)...................... $38,041 $ 36,017 $ 32,108 $ 36,553 $ 41,673
Capital expenditures(6)....................... 8,428 19,508 5,523 15,870 20,309

Balance Sheet Data:
- ------------------
Total assets.................................. $206,148 $221,699 $209,100 $239,666 $226,999
Total debt................................... 161,459 168,392 166,727 183,190 181,328
Mandatorily redeemable preferred partnership
interests.................................... - - - 21,202 23,172
Total partners' capital (deficit)............. 7,968 11,925 3,165 (19,555) (19,922)

Cash Flow Presentation:
- ----------------------
Cash provided by operating activities(9)...... $ 13,084 $ 12,766 $ 14,668 $ 30,328 $ 11,333
Cash used in investing activities............. (18,915) (21,130) (5,337) (15,779) (19,659)
Cash provided by (used in)
financing activities......................... 2,441 10,229 (11,837) 7,065 (3,287)
</TABLE>

(1) Includes depreciation and amortization relating to the Company's Stopping
Centers. Amortization of deferred debt issuance costs is classified as
interest expense.
(2) Extraordinary item reflects write-off of debt restructuring costs
associated with retired debt.
(3) No provision for income taxes is reflected in the financial statements as
the Company is a partnership for which taxable income and tax deductions
are passed through to the individual partners.
(4) EBITDA, as defined, represents operating income before deducting
depreciation, amortization and net interest. EBITDA data, which are not a
measure of financial performance under generally accepted accounting
principles, are presented because such data are used by certain investors
to determine a company's ability to meet historical debt service
requirements. Such data should not be considered as an alternative to net
income, as an indicator of the Company's operating performance or as an
alternative to cash flows as a measure of liquidity.
(5) EBITDA, as defined, results for fiscal 1996 excludes certain one-time
charges related to the Recapitalization and the change in management and
operations. Included in the one-time charges

12
<PAGE>

were $2.5 million related to severance and hiring costs; $1.4 million in
obsolete inventory reserves, included in cost of sales; and $.5 million in
insurance related costs.
(6) Capital expenditures primarily represent the cost of new Stopping Centers
and renovations of existing Stopping Centers.
(7) Cumulative effect of a change in accounting principle reflects expensing of
costs related to process reengineering activities as required by EITF Issue
No. 97-13 in the fourth quarter of 1997.
(8) Cumulative effect of a change in accounting principle reflects expensing of
organization and start-up costs as required by AICPA Statement of Position
98-5 in the fourth quarter of 1998.
(9) The decrease in cash provided by operating activities from 1997 is mainly
from interest payments of $7,000,000 on the New Notes made in February
and August of 1998.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Certain sections of this Form 10-K, including "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
contain various forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934 which represent the Company's expectations
or beliefs concerning future events that involve risks and uncertainties. All
statements, other than statements of historical facts included in this Form 10-
K, may be considered forward-looking statements. The Company cautions that these
statements are further qualified by important factors that could cause actual
results to differ materially from those in the forward-looking statements. Such
factors include without limitation, general economic change, legislative
regulation and market change.

The forward-looking statements are included in, without limitation,
"Business--Governmental Regulation", "--Liquidity and Capital Resources",
"--Year 2000", "--Environmental", and "--Recently Issued Accounting
Pronouncements." The Company, in the preparation of its financial statements,
also makes various estimates and assumptions that are forward-looking
statements.

General

Recapitalization

As discussed in Item 1, "Business," as part of the Recapitalization, in the
first quarter of 1997, the Company issued $135,000,000 of 10 1/2% Senior Notes
due 2007 and made a tender offer for all of, and repurchased approximately 94%
of, its 12 1/2% Senior Notes due 2002 and 100% of the outstanding debt warrants.

The Company also amended its senior collateralized credit facility in the
first quarter of 1997. The New Credit Agreement consists of a $25,000,000
revolving credit facility (the "Revolving Credit Facility"), a $14,000,000 Term
Loan A, a $30,000,000 Term Loan B and a $40,000,000 Expansion Facility. The New
Credit Agreement is collateralized by substantially all of the Company's assets
and the partnership interests of Mobil Long Haul and Chartwell and guaranteed by
each of the Company's subsidiaries, whose guarantees in turn are collateralized
by substantially all of such subsidiaries' assets.

As part of the Recapitalization in the first quarter of 1997, the Company
recognized an extraordinary charge of $12,745,000 relating to the amendment of
the Old Credit Agreement, retirement of the Old Notes and Debt Warrants and the
write-off of deferred financing costs.

Ongoing Operations

The following table sets forth the development of the Company's Stopping Center
network since 1994.

<TABLE>
<CAPTION>
Open at the end of
---------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Company-operated Stopping Centers.................... 24 26 26 28 28
Franchised........................................... 13 15 16 18 21
Independently operated .............................. 1 - - - -
---- ---- ---- ---- ----
Total Stopping Centers ............................ 38 41 42 46 49
==== ==== ==== ==== ====

</TABLE>

13
<PAGE>

The following table sets forth information on Stopping Centers opened since
January 1, 1994, all but two of which are full-sized facilities.

Location Date Opened
- ---------------------------------- -----------
Company-operated Stopping Centers:
Medford, Oregon January 1995
Ocala, Florida June 1995
North Baltimore, Ohio August 1997
North Little Rock, Arkansas September 1997

Franchised:
Fargo, North Dakota November 1994
Carnesville, Georgia January 1995
York, Nebraska December 1996
Scranton, Pennsylvania May 1997
Claysville, Pennsylvania November 1997
Breezewood, Pennsylvania February 1998
Milton, Pennsylvania March 1998
Monee, Illinois April 1998

In addition to the two full-sized facilities opened in 1997, the Company
opened Petro:Lubes at its San Antonio, Beaumont and Medford locations in June
1994, January 1995 and April 1996, respectively. In August and November of
1998, the Company purchased land in Mebane, North Carolina and Glendale,
Kentucky, respectively, for the future construction of two new Stopping Centers.
At December 31, 1998, the Company had no new Stopping Centers under
construction, with the exception of the joint venture being built in Southern
California pursuant to the Company's joint venture agreement with Tejon. The
approximate construction cost of a new Stopping Center (exclusive of land) is
between $7.0 and $9.5 million.

The Company operates 28 truck stop facilities selling diesel fuel, 27 of
which also sell gasoline. Of these facilities, 25 are full-size facilities.
Full-sized facilities include a Diesel Fuel Island, the Iron Skillet Restaurant,
a Petro:Lube and a Travel Store. In addition, eight of the 25 facilities also
have separate convenience stores. The Company also operates three Petro:2
facilities which are a smaller version of the full-size facility with various
fast food offerings. The Company has 21 additional locations which operate
under franchise agreements. In the months of February, March, and April 1998,
the Company added three franchise locations at Breezewood, Pennsylvania, Milton,
Pennsylvania, and Monee, Illinois, respectively. The Company signed agreements
in July and December of 1998 to open two new franchises located at Lowell,
Indiana and Frederick, Maryland, respectively. The Company believes it will add
additional franchise locations during 1999.

All franchises are operated under franchise agreements which, with the
exception of one, are for an initial ten-year term and are automatically renewed
for two consecutive five-year terms subject to the satisfaction of certain
conditions, unless the franchisee gives a termination notice at least 12 months
prior to the expiration thereof. One franchise agreement has been amended so
that its initial term is approximately 15 years (expiring on December 2001), and
such agreement provides for only one five-year renewal thereof. The Company is
currently in the process of negotiating the renewal franchise agreement for
such location.

In addition, the Company has entered into a joint venture agreement with
Tejon to build and operate a Petro branded location in Southern California.
Pursuant to the terms of the Agreement, the Company is required to make an
initial capital contribution for working capital and inventory and contemplates
that the joint venture will finance construction of the location with a non-
recourse credit facility. Under the Agreement, the Company will receive a
management fee of $250,000 per annum and will share 40% of the location's
operating earnings. At December 31, 1998, this joint venture was under
construction, and expected to be completed in June 1999.

The Company operates large, multi-service truck stops in the United States.
The Company's facilities, which are known as Petro Stopping Centers, offer a
broad range of products, services and

14
<PAGE>

amenities, including diesel fuel, gasoline, home-style restaurants, truck
preventive maintenance centers and retail merchandise stores to the highway
motorist. The Company has aggregated its corporate truck stop operations into
one reportable operating segment based on the distribution of products and
services under one common site facility, classified as a multi-service truck
stop. In addition to corporate operations, the Company is a franchisor to 21
Petro Stopping Center locations. The Company collects royalties and fees in
exchange for the use of its name and for certain services provided to the
franchisees.

Historically, the Company's revenues at each of its full-sized Stopping
Centers were recorded through the following divisions: Diesel Fuel Island,
restaurant, Petro:Lube and Travel and Convenience Stores. Beginning with the
first quarter of 1997 and in connection with new management, the presentation
format for results of operation has been changed to reflect revenues from fuel,
non-fuel and restaurant. The Company derives its revenues from (i) the sale of
fuels, diesel and gasoline; (ii) non-fuel items including the sale of
merchandise and offering of services including truck tire sales and preventative
maintenance, weighing scales, showers, laundry, video games and other
operations, and (iii) restaurant operations which include Iron Skillet and
certain fast-food operations. The presentation allows management to focus more
closely on the major sources of revenues of the business. The other operations
included in non-fuel revenue include franchise royalties and rental revenue from
video poker operations in Louisiana.

The Company's fuel revenues and cost of sales include federal and state
motor fuel taxes. Such taxes were $175,873,000, $192,650,000, and $203,274,000
for the years ended December 31, 1996, December 31, 1997, and December 31, 1998,
respectively.

No provision for income taxes is reflected in the financial statements as
the Company is a partnership for which taxable income and tax deductions are
passed through to the individual partners.

Results of Operations

Year ended December 31, 1998 Compared to Year ended December 31, 1997

Overview. The Company's net revenues decreased $32,313,000 or 4.7% to
$653,416,000 for the year ended December 31, 1998. The decrease was due
primarily to a 9.6% decrease in fuel revenues from the prior year as a result of
a 14% decline in the average retail-selling price per gallon from the prior year
which was partially offset by a 4.3% increase in fuel volumes. The decrease in
fuel revenues was partially offset by an 11% and 7.5% increase in non-fuel and
restaurant sales, respectively, from the prior year. Operating expenses
increased 8.7% from the prior year due mainly to employee related costs and the
full year effects of the addition of two new Company locations in 1997. General
and administrative expenses increased 13.5% to approximately $19,335,000 from
$17,035,000 for the same period in the prior year. This increase was
principally due to employee related expenses from the Company's expanding
operations and system costs.

Fuel. Revenues decreased 9.6% to $464,025,000 in 1998 from $513,571,000 in
1997. Fuel revenues decreased primarily due to lower pump prices stemming from
lower fuel costs compared to 1997. The decrease in fuel prices was offset by a
4.3% increase in fuel volumes which management believes, together with improved
pricing strategies, increased fuel margin dollars by 9.4% compared to prior
year. On a comparable unit basis, fuel volumes and fuel margin dollars
increased .8% and 5.8%, respectively. A Stopping Center is considered a
"comparable unit" as to a particular period in the current year if it was open
during the same period of the prior year.

Non-Fuel. Revenues increased 11% to $136,145,000 in 1998 from $122,609,000
in 1997. On a comparable unit basis, sales increased 8% over the prior year.
The increase in non-fuel revenues is primarily due to increased tire and repair
part sales at the Company's retail stores and the full year effects of the
addition of two new Company locations in 1997. Gross margins increased 12.3% to
$74,702,000 in 1998 from $66,499,000 in 1997.

Restaurant. Revenues increased 7.5% to $53,246,000 in 1998 from
$49,549,000 in 1997. On a comparable unit basis, revenues increased 2.5%
compared to the prior year. Revenue increases were

15
<PAGE>

primarily due to the full year effects of the Company's two new locations added
in 1997. Management also believes revenues were enhanced by the implementation
of new menus and featured menu specials. Gross margin in the restaurants
improved by 8.9% overall and 4% on a comparable unit basis, due to continued
management focus on costs and implementation of menu changes.

Costs and Expenses. Total costs and expenses decreased 5.4% to
$627,696,000 in 1998 from $663,678,000 in 1997. On a comparable unit basis,
total costs and expenses decreased 8.6% in 1998 compared to prior year. Costs
of sales decreased $47,185,000 or 8.6% from the prior year primarily due to
lower fuel costs experienced during the current year. Operating expenses
increased $7,452,000 or 8.7% to $93,012,000 in 1998. The increase is mainly due
to employee related costs and the full year effects of the Company's two new
locations added in 1997. General and administrative expenses increased
13.5% to approximately $19,335,000 from $17,035,000 in 1997. This increase was
principally due to employee related expenses from the Company's expanding
operations and system costs.

Interest Expense, net. Interest expense decreased $250,000 or 1.2% to
$20,042,000 in 1998 compared to 1997 due primarily to lower debt levels as a
result of principal payments and a .25% per annum decrease in interest rates on
Term Loans A and B beginning March 31, 1998.

Extraordinary item. Extraordinary item in 1997 reflects a charge to
earnings of $12,745,000 for the write-off of debt restructuring costs relating
to the Recapitalization.

Cumulative effect of a change in accounting principle. Cumulative effect
of a change in accounting principle in 1998 reflects the write-off of $3,250,000
of previously capitalizable costs. These costs, mainly incurred in prior years,
were related to start-up and organization costs, and as required by American
Institute of Certified Public Accountants (AICPA) Statement of Position (SOP)
98-5, were expensed upon adoption during the fourth quarter of 1998. Cumulative
effect of a change in accounting principle in 1997 also reflects the write-off
of $1,579,000 of costs previously allowed to be capitalized. These costs are
related to process reengineering activities and, as required by Emerging Issues
Task Force (EITF) Issue No. 97-13, were written off during the fourth quarter of
1997.

Year ended December 31, 1997 Compared to Year ended December 31, 1996

Overview. The Company's net revenues increased $48,672,000 or 7.6% to
$685,729,000 for the year ended December 31, 1997. Revenues from comparable
units contributed 80.8% of the increase. A Stopping Center is considered a
"comparable unit" as to a particular period in the current year if it was open
during the same period of the prior year. The increase was due principally to a
10.1% increase in fuel gallons and increases of 10.1% and 4.7% in non-fuel and
restaurant sales, respectively, from the prior year. The increases in revenues
were offset by product costs associated with higher levels of revenue and higher
general and administrative and operating expenses over the prior year. General
and administrative expenses increased 22.3% to approximately $17,035,000 from
$13,925,000 for the same period in the prior year. This increase was
principally due to an increase in certain employee expenses, certain transition
costs for new programs, and professional and travel related expenses in the
current year.

Fuel. Revenues increased 7.4% to $513,571,000 in 1997 from $478,312,000 in
1996. Fuel revenues increased due to a 10.1% increase in fuel volumes. On a
comparable unit basis, fuel volumes increased 8.7%. Fuel costs were up in the
first quarter, but declined in the latter quarters. On a per gallon basis,
margins remained relatively flat compared to fuel margins in the prior year.

Non-Fuel. Revenues increased 10.1% to $122,609,000 in 1997 from
$111,410,000 in 1996. On a comparable unit basis, sales increased 8.8%. Gross
margins increased 14.7% to $66,499,000 in 1997 from $57,991,000 in 1996. This
increase was due to improved cost management and lower margins in 1996 due to
establishment of inventory reserves.

Restaurant. Revenues increased 4.7% to $49,549,000 in 1997 from
$47,335,000 in 1996. On a comparable unit basis, revenues increased 2.0%.
Management implemented certain menu changes at its Iron Skillet Restaurants in
the first quarter designed to enhance revenues, which contributed to the

16
<PAGE>

increased sales. Gross margin in the restaurants improved by approximately 5.5%
in total and approximately 2.9% on a comparable unit basis. The improvement is
due in part to management focus on costs and implementation of menu changes.

Costs and Expenses. Total costs and expenses increased 6.8% to
$663,678,000 in 1997 from $621,616,000 in 1996. On a comparable unit basis,
total costs and expenses increased 5.0% in 1997. Costs of sales increased
$35,150,000 or 6.9% in 1997 from 1996. The increase is due to higher fuel and
product costs for both fuel and non-fuel revenue streams. Operating expenses
increased $4,038,000 or 5% to $85,560,000 in 1997. The increase is primarily
due to employee related expenses. General and administrative expenses increased
22.3% to approximately $17,035,000 from $13,925,000 in the prior year. This
increase was principally due to an increase in certain employee expenses,
certain transition costs for new programs, and professional and travel related
expenses in the current year.

Interest Expense, net. Interest expense decreased $971,000 or 4.6% to
$20,292,000 in 1997 compared to 1996 due to lower interest rates combined with a
reduction in amortization of deferred debt issuance costs and higher interest
income from short term investments. These items were partially offset by a
higher level of debt outstanding.

Extraordinary item. Extraordinary item reflects a charge to earnings of
$12,745,000 for the write-off of debt restructuring costs relating to the
Recapitalization.

Cumulative effect of a change in accounting principle. Cumulative effect
of a change in accounting principle reflects the write-off of $1,579,000 of
costs, previously allowed to be capitalized. These costs are related to process
reengineering activities and, as required by Emerging Issues Task Force (EITF)
Issue No. 97-13, were written off during the fourth quarter of 1997.

Liquidity and Capital Resources

Capital expenditures totaled $20,309,000 for 1998 and $15,870,000 for 1997.
Included in the capital expenditures for 1998 were funds spent on new and
existing facilities, in addition to expenditures related to information systems
implementation projects.

As noted in Item 1. "Business," in connection with the Recapitalization in
1997, the Old Credit Agreement was amended and borrowings thereunder, 94% of
existing Old Notes and approximately 100% of outstanding Debt Warrants, were
repaid with borrowings under the New Credit Agreement, the net proceeds from the
sale of the New Notes, a portion of the proceeds of the Equity Investment and
the proceeds of the Kirschner Investment. The New Credit Agreement provides for
a $25,000,000 revolving credit facility (the "Revolving Credit Facility"), a
$40,000,000 Expansion Facility, a $14,000,000 Term Loan A and a $30,000,000 Term
Loan B.

The Revolving Credit Facility permits the Company to borrow, repay and
reborrow up to $25,000,000 at any time until the fifth anniversary of the date
from the Recapitalization, the proceeds of which may be used for working capital
and other corporate purposes. Up to $5,000,000 of the Revolving Credit Facility
is available for the issuance of standby and documentary letters of credit.
Subject to certain covenants, the Expansion Facility permits the Company to
borrow, repay and reborrow up to $40,000,000 for the acquisition and development
of new Stopping Centers and stand-alone Petro:Lubes at any time until the third
anniversary from the date of the Recapitalization.

The term loans made to the Company under the Credit Facility Agreement
require the Company to make quarterly payments of principal. Aggregate yearly
term loan principal payments under the New Credit Agreement are as follows: (i)
$4.5 million in 1999; (ii) $5.5 million in 2000; (iii) $1.5 million in 2001;
(iv) $13.5 million in 2002; and (v) $14.0 million in 2003. Term Loans A and B
are repayable in 18 and 26 quarterly installments, respectively. As of December
31, 1998, the Company made principal payments on its Term Loans A and B of
$2,527,000 and $567,000, respectively.

17
<PAGE>

In accordance with the New Credit Agreement, the interest rate the Company
is required to pay on its Term Loans A and B was reduced .25% per annum,
effective March 31, 1998, due to the Company's improved leverage ratio, as
defined in the New Credit Agreement.

Borrowings under the New Credit Agreement are collateralized by
substantially all of the Company's assets and the partnership interests of Mobil
Long Haul and Chartwell and guaranteed by each of the Company's subsidiaries,
which guarantees in turn are collateralized by substantially all of such
subsidiaries' assets. The Indentures for the New Notes and those under the New
Credit Agreement each contain certain covenants. At December 31, 1998, the
Company was in compliance with all debt covenants.

At December 31, 1998, the Company had standby letters of credit issued for
approximately $2,413,000, resulting in an availability of approximately
$22,587,000 on the Revolving Credit Facility. As of December 31, 1998, there
were no borrowings on the Revolving Credit Facility or the Expansion Facility.

The Company had negative working capital of $3,060,000 at December 31,
1998, and working capital of $3,850,000 at December 31, 1997. Negative working
capital is normal in the truckstop industry; however, due to the
Recapitalization and reclassification of land held for sale during the fourth
quarter of 1997, the Company had positive working capital at December 31, 1997.
Diesel fuel inventory turns every two to three days, which is significantly
faster than payment is required. The truckstop business is an industry that
generates a large amount of cash business with relatively low levels of
inventories and receivables as a percentage of revenues. A substantial majority
of the Company's sales are cash (or the equivalent in the case of credit card
sales or sales paid for by check on a daily basis by third-party billing
companies).

Accrual of dividends on mandatorily redeemable preferred partnership
interests amounted to $1,972,000 for the year ended December 31, 1998. The
dividends are only payable in cash if permitted by the Company's then existing
debt instruments. The Indenture governing the New Notes and the New Credit
Agreement restrict payment of dividends on mandatorily redeemable preferred
partnership interests.

The Company, within certain limits, pays its own workers' compensation and
general liability claims. During 1998, the Company paid claims aggregating
$2,612,000 and $1,502,000 relating to workers' compensation and general
liability claims, respectively. The Company believes it provides an accrual
adequate to cover both reported and incurred but not reported claims.

In 1997, the Company acquired two existing truck stops, North Baltimore,
Ohio, in August and North Little Rock, Arkansas, in September. The North
Baltimore, Ohio site is a leased facility and the North Little Rock, Arkansas
facility is owned.

The Company's Board of Directors has approved the construction of five new
Stopping Centers to occur between the first quarter of 1999 and the end of the
year 2000.

Management of the Company believes that internally generated funds,
together with amounts available under the Revolving Credit Facility, will be
sufficient to satisfy its cash requirements for operations through 1999 and the
foreseeable future thereafter. The Company also expects that future expansion
and acquisitions will be financed from funds generated from operations,
borrowings under the Revolving Credit Facility and the Expansion Facility and
additional financings.

Impact of the Year 2000 Issue

The Company is aware of the complexity and the significance of the "Year
2000" issue. The Year 2000 issue is a result of computer programs being written
using two digits, rather than four, to define the applicable year. Any of the
company's systems that utilize date-sensitive software may recognize a date
using "00" as the year 1900 rather than as the year 2000. This could result in
a system failure or

18
<PAGE>

miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.

The Company's sales, accounts receivable, inventory management, accounts
payable, general ledger, payroll and Electronic Data Interchange systems
comprise its critical information technology ("IT") systems. The Company has
assessed its Year 2000 readiness with regard to critical IT systems and is
currently replacing, upgrading and testing its computer systems and
applications. The Company continues to assess communications with software
vendors, hardware vendors, banks, utilities, fuel suppliers, merchandise
suppliers, customers, partners, franchisees, service contract suppliers, and
insurance companies with which it does significant business to determine the
extent to which the Company is vulnerable to those third parties' failure to
remedy their own Year 2000 Issues. Based on the assessment and communications
received to date, the Company believes that its major customers will be Year
2000 ready. The Company is currently analyzing its relationship with its
suppliers, partners, franchisees and vendors. The Company has received
communications from its key financial and insurance service providers indicating
they are actively working to resolve their Year 2000 service issues. The Company
does not believe there has been or will be a significant disruption of the
Company's business due to the Year 2000 remediation effort. The Company
currently expects to have completed compliance testing to bring all of its
critical IT systems into Year 2000 readiness by August 1999.

Software and hardware, such as telecommunication and office automation
systems that facilitate operations of the Company's locations and corporate
headquarters, comprise the Company's primary non-IT systems. Currently, the
Company is in the process of assessing the Year 2000 readiness of its non-IT
systems and expects to have completed compliance testing to bring them into
readiness by August 1999.

The Company is using a mixture of internal and external resources to
address Year 2000 issues. The total costs of achieving Year 2000 readiness is
estimated to be approximately $9,000,000, which includes the costs of software
upgrades and replacements the Company is currently making. The Company incurred
$4,300,000 in costs attributable to the Year 2000 project in fiscal 1998 and
expects to incur $4,700,000 in such costs in fiscal 1999.

The Company is in the preliminary stages of establishing contingency plans
to address Year 2000 issues that may arise relating to key third parties and the
Company's IT and non-IT systems with an anticipated completion of such
contingency plans in September 1999. There can be no assurance that the Company
or its trading partners will not experience Year 2000 readiness difficulties
which could have a material adverse effect on the Company's business, results of
operations and financial condition. The costs and expenses associated with such
failure are not presently estimatable.

Environmental

Accruals for environmental matters are recorded in operating expenses when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. The measurement of environmental
liabilities is based on an evaluation of currently available facts with respect
to each individual site and considers factors such as existing technology,
presently enacted laws and regulations and prior experience in remediation of
contaminated sites. Accrued liabilities are exclusive of claims against third
parties and are not discounted.

The Company is subject to contingencies pursuant to environmental laws and
regulations that in the future may require the Company to take action to correct
the effects on the environment of prior disposal practices or releases of
chemical or petroleum substances by the Company or other parties. The Company
has accrued for certain environmental remediation activities consistent with the
policy set forth in Note 2 to Notes to Consolidated Financial Statements. At
December 31, 1998 and 1997, such accrual amounted to approximately $274,000 and
$187,000, respectively, and in management's opinion, was appropriate based on
existing facts and circumstances. Under the most adverse circumstances, however,
this potential liability could be significantly higher. In the event that future
remediation expenditures are in excess of amounts accrued, management does not
anticipate that they will have a material adverse effect on the consolidated
financial position or results of operations of the Company. At December 31, 1998
and 1997, the Company has recognized approximately $160,000 and $262,000,
respectively, in the consolidated balance sheet related to recoveries of certain
remediation costs from third parties.

19
<PAGE>

Recently Issued Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allow a derivative's gain and loss to
offset related results on the hedged item in the income statement and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. SFAS No. 133 is effective for
fiscal years beginning after June 15, 1999. A company may also implement the
statement as of the beginning of any fiscal quarter after issuance (that is,
fiscal quarters beginning June 16, 1999 and thereafter). SFAS No. 133 cannot be
applied retroactively. Management has not yet quantified the impact of adopting
SFAS No. 133 on the Company's financial statements and has not determined the
timing of, or method of, adoption. However, the implementation of SFAS No. 133
could increase volatility in earnings.

Item 7a. Quantitative and Qualitative Disclosures about Market Risk

Historically, the Company has not entered into significant long-term
contracts with fuel suppliers and engaged in only limited hedging activities. On
occasion, the Company has purchased fuel in the forward contract market. In
connection with the Recapitalization, the Company has entered into 10-year
supply agreements with Mobil pursuant to which Mobil will supply the Company-
operated Stopping Centers' diesel fuel requirements as well as a portion of
their lubricant and gasoline requirements. See Note 9 to Notes to Consolidated
Financial Statements for the year ended December 31, 1998.

As of December 31, 1997 and 1998, the carrying amounts of certain financial
instruments employed by the Company, including cash and cash equivalents,
accounts receivable, trade accounts payable and amounts due from/to affiliates
are representative of fair value because of the short-term maturity of these
instruments. The carrying amounts of notes payable approximate fair value due
to the floating nature of the interest rate. The Company's principal market risk
as it relates to long term debt is exposed to changes in interest rate. The
fair value of both series of Senior Notes has been estimated based on quoted
market prices for the same or similar issues or by discounting the future cash
flows using rates currently available for debt of similar terms and maturity.
The fair value of all derivative financial instruments is the amount at which
they could be settled, based on quoted market prices or estimates obtained from
dealers.

The following table reflects the carrying amount and estimated fair value
of the Company's financial instruments, as of December 31,

<TABLE>
<CAPTION>
1997 1998
Carrying Carrying
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Balance sheet financial instruments (in thousands)
Long-term debt $183,190 $191,088 $181,328 $188,416
Other financial instruments
Interest rate swap agreements - (154) - (153)
</TABLE>

The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company uses
derivatives to manage well-defined interest rate risks. At December 31, 1998,
the Company was party to an interest rate swap agreement with an aggregate
principal amount of $30,000,000. Under the agreement, the Company pays a fixed
rate of 6.15% and receives a floating rate based on LIBOR on the aggregate
principal amount as determined in three-month intervals. The transaction
effectively changes a portion of the Company's interest rate exposure from a
floating rate

20
<PAGE>

to a fixed rate basis. The effect of the swap was to increase the rate by .6%,
which resulted in additional interest expense of approximately $153,000.

The primary risks associated with swaps are the exposure to movements in
interest rates and the ability of the counterparties to meet the terms of the
contracts. Based on review and assessment of counterparty risk, the Company
does not anticipate non-performance by the other party. The Company does not
obtain collateral or other security to support financial instruments subject to
credit risk, but monitors the credit standing of counterparties. See Note 14 to
Notes to Consolidated Financial Statements.

21
<PAGE>

Item 8. Financial Statements and Supplementary Data

PETRO STOPPING CENTERS, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)

<TABLE>
<CAPTION>
December 31, December 31,
1997 1998
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 24,796 13,183
Trade accounts receivable, net 12,548 10,631
Inventories, net 16,362 16,459
Other current assets 2,551 2,892
Due from affiliates 980 1,163
Land held for sale 4,442 -
------------ ------------
Total current assets 61,679 44,328

Property and equipment, net 153,363 162,274
Deferred debt issuance costs, net 16,353 11,229
Other assets 8,271 9,168
------------ ------------
Total assets $239,666 226,999
============ ============

Liabilities and Partners' Capital (Deficit)

Current liabilities:
Current portion of long-term debt $ 3,000 4,967
Trade accounts payable 9,350 4,214
Accrued expenses and other liabilities 26,491 21,439
Due to affiliates 18,988 16,768
------------ ------------
Total current liabilities 57,829 47,388

Long-term debt, excluding current portion 180,190 176,361
------------ ------------
Total liabilities 238,019 223,749
------------ ------------

Commitments and contingencies

Mandatorily redeemable preferred partnership interests 21,202 23,172

Partners' capital (deficit):
General partners' ( 903) (915)
Limited partners' (18,652) (19,007)
------------ ------------
Total partners' capital (deficit) (19,555) (19,922)
------------ ------------
Total liabilities and partners' capital (deficit) $239,666 226,999
============ ============
</TABLE>

See accompanying notes to consolidated financial statements

22
<PAGE>

PETRO STOPPING CENTERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net revenues (including motor fuel taxes):
Fuel $478,312 513,571 464,025
Non-fuel 111,410 122,609 136,145
Restaurant 47,335 49,549 53,246
------------ ------------ ------------
Total net revenues 637,057 685,729 653,416

Costs and expenses:
Cost of sales (including motor fuel taxes) 511,431 546,581 499,396
Operating expenses 81,522 85,560 93,012
General and administrative 13,925 17,035 19,335
Employee severance, benefit and placement expenses 2,534 - -
Depreciation and amortization 12,204 14,502 15,953
------------ ------------ ------------

Total costs and expenses 621,616 663,678 627,696
------------ ------------ ------------

Operating income 15,441 22,051 25,720

Recapitalization costs 2,938 - -
Interest expense, net 21,263 20,292 20,042
------------ ------------ ------------

Income (loss) before extraordinary item and cumulative
effect of a change in accounting principle (8,760) 1,759 5,678

Extraordinary item - write off of debt
restructuring costs associated with retired debt - 12,745 -

Cumulative effect of a change in accounting principle - 1,579 3,250
------------ ------------ ------------

Net income (loss) $ (8,760) (12,565) 2,428
============ ============ ============
</TABLE>

See accompanying notes to consolidated financial statements

23
<PAGE>

PETRO STOPPING CENTERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands)

<TABLE>
<CAPTION>
General Limited Total
Partners' Partners' Partners'
Capital Capital Capital
(Deficit) (Deficit) (Deficit)
------------ ------------ -----------
<S> <C> <C> <C>
Balance, December 29, 1995 $(7,204) 19,129 11,925

Net loss (1,273) (7,487) (8,760)
-------- -------- ---------

Balance, December 31, 1996 (8,477) 11,642 3,165

Conversion of interest 7,972 (7,939) 33
Capital contributions - 11,047 11,047
Assignment of mandatorily redeemable preferred
partnership interests - (19,600) (19,600)
Accrual of preferred return on mandatorily
redeemable preferred partnership interests (35) (1,600) (1,635)

Net loss (363) (12,202) (12,565)
-------- -------- ---------

Balance, December 31, 1997 (903) (18,652) (19,555)

Accrual of preferred return on mandatorily
redeemable preferred partnership interests (42) (1,930) (1,972)
Accrual of partner minimum tax distributions (22) (801) (823)

Net income 52 2,376 2,428
-------- -------- ---------

Balance, December 31, 1998 $ (915) (19,007) (19,922)
======== ======= =======
</TABLE>

See accompanying notes to consolidated financial statements

24
<PAGE>

PETRO STOPPING CENTERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss) $ (8,760) (12,565) 2,428
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 12,204 14,502 15,953
Extraordinary item - write off of debt
restructuring costs associated with retired debt - 12,745 -
Cumulative effect of a change in accounting principle - 1,579 3,250
Deferred debt issuance cost amortization 1,485 1,749 1,637
Accretion of original issue discount 978 47 -
Bad debt expense 215 271 236
Increase (decrease) from changes in:
Accounts receivable 852 (2,418) 1,681
Inventories 1,124 (1,167) (97)
Other current assets 324 (1,147) (341)
Due from affiliates (571) 1,111 114
Due to affiliates 297 16,663 (3,340)
Trade accounts payable 1,535 (6,373) (5,136)
Accrued expenses and other liabilities 4,985 5,331 (5,052)
------------ ------------ ------------
Net cash provided by operating activities 14,668 30,328 11,333
------------ ------------ ------------
Cash flows provided by (used in) investing activities:
Purchase of property and equipment (5,523) (15,870) (20,309)
Proceeds from sale of property - 3,102 2,165
(Increase) decrease in other assets, net 186 (3,011) (1,515)
------------ ------------ ------------
Net cash used in investing activities (5,337) (15,779) (19,659)
------------ ------------ ------------
Cash flows provided by (used in) financing activities:
Repayments of notes payable (25,000) (23,639) -
Proceeds from notes payable 26,061 2,000 -
Repayments of long-term debt and capital lease (3,704) (152,800) (3,287)
Proceeds from issuance of long-term debt - 185,190 -
Capital contributions - 11,047 -
Payment of debt issuance costs (203) (14,733) -
Decrease in cash overdrafts (8,991) - -
------------ ------------ ------------
Net cash provided by (used in) financing activities (11,837) 7,065 (3,287)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (2,506) 21,614 (11,613)
Cash and cash equivalents, beginning of period 5,688 3,182 24,796
------------ ------------ ------------
Cash and cash equivalents, end of period $ 3,182 24,796 13,183
============ ============ ============

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

Supplemental cash flow information--
Interest paid during the period, net of capitalized interest of $80,
$0 and $0 in 1996, 1997 and 1998 $ 18,364 14,028 20,771
Non-cash transactions-
Acquisition of property and equipment through capital lease - - 1,425
Preferred return on mandatorily redeemable preferred partnership - 1,635 1,972
interests
Partner minimum tax distributions - - 1,120
</TABLE>

See accompanying notes to consolidated financial statements

25
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Company Formation and Description of Business

Company Formation

Petro Stopping Centers, L.P. (the "Company"), a Delaware limited
partnership, was formed on April 30, 1992 for the ownership, operation,
management and development of the Petro Stopping Centers network. The partners
are as follows:

General Partners
Petro, Inc.
Petro Holdings GP Corp., an entity owned by Chartwell Investments, Inc.

Limited Partners
Various individuals and entities affiliated with the Cardwell Group
Mobil Long Haul, Inc., an entity owned by Mobil Oil Corporation
Petro Holdings LP Corp., an entity owned by Chartwell Investments, Inc.
Kirschner Investments, an entity owned by a Company franchisee

Petro, Inc. and the various individuals and entities affiliated with Petro,
Inc. are collectively referred to herein as the "Cardwell Group". Petro
Holdings GP Corp. and Petro Holdings LP Corp. are collectively referred to
herein as "Chartwell".

Recapitalization

On January 30, 1997, the Company consummated a transaction entered into in
October 1996, under which Chartwell and Mobil Long Haul invested $20,700,000 and
$15,000,000, respectively (the "Equity Investment"), to directly acquire the
partnership interests of the Company owned by the Fremont Partners for
approximately $25,600,000 and invest approximately $10,100,000 in the Company.
The Cardwell Group maintained its capital investment in the Company. Kirschner
Investments ("Kirschner"), a Company franchisee, invested $1,000,000 in the
Company (the "Kirschner Investment"). Following the Equity Investment and the
Kirschner Investment, the common partnership interests of the Company are owned
by Chartwell (approximately 50.6%), the Cardwell Group (approximately 39.7%),
Mobil Long Haul (approximately 7.3%), and Kirschner (approximately 2.4%), and
the preferred partnership interests are owned by Mobil Long Haul ($12,000,000)
and the Cardwell Group ($7,600,000). Chartwell and the Cardwell Group own both
general and limited partnership interests and Mobil Long Haul and Kirschner own
only limited partnership interests. Mobil Oil Company and the Company also
entered into certain supply and marketing agreements.

As part of the Recapitalization, the Company issued $135,000,000 of 10 1/2%
senior unsecured notes due 2007 (the "New Notes"), and repurchased approximately
94% of the existing 12 1/2% Senior Notes due 2002 and approximately 100% of
outstanding Debt Warrants. In connection with the issuance of the New Notes,
the Company capitalized approximately $14,500,000 of debt issuance costs and
wrote off, as an extraordinary item, $12,745,000 of debt restructuring costs
associated with the retired debt.

Description of Business

The Company operates large, multi-service truck stops in the United States.
The Company's facilities, which are known as "Petro Stopping Centers" (the
"Stopping Centers"), are located along interstate highways and typically offer
diesel fuel, gasoline, home-style restaurants, truck preventative maintenance
centers, travel and convenience stores and a range of other products, services
and amenities to commercial truck drivers, as well as other highway motorists
and local residents. At December 31, 1998, the Company's network consisted of
49 Stopping Centers located in 29 states, of which 28 were operated by the
Company and 21 were franchised.

26
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements of the Company include
the consolidated balance sheets, statements of operations, changes in partners'
capital and cash flows of Petro Stopping Centers, L.P. and its wholly-owned
subsidiaries, Petro Financial Corporation and Petro Distributing, Inc. All
significant intercompany balances 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.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and accounts
receivable. Accounts receivable are primarily due from national and regional
commercial trucking companies, and include accounts receivable purchased at a
discount from the Company's franchisees. The receivables are not
collateralized, however, the risk is limited due to the large number of entities
comprising the Company's customer base and their dispersion across geographic
regions. At December 31, 1998, the Company had no significant concentrations of
credit risk.

Cash and Cash Equivalents

The Company considers as cash equivalents all highly liquid investments
with an original maturity of three months or less.

Allowance for Uncollectible Accounts

Accounts receivable are reviewed on a regular basis and the allowance for
uncollectible accounts is established to reserve for specific accounts believed
to be uncollectible. In addition, the allowance provides a reserve for the
remaining accounts not specifically identified. At December 31, 1997 and 1998
the allowance for uncollectible accounts totaled $330,000 and $627,000,
respectively.

Inventories

Inventories are stated at the lower of cost or market as determined by the
first-in, first-out method.

Land Held for Sale

In the fourth quarter of 1997, the Company's management committed to a plan
to dispose of certain real estate holdings. Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" requires that long-lived assets
held for sale be reported at the lower of carrying amount or fair value less
cost to sell. At December 31, 1997 and 1998, the Company reported land held
for sale at its net book value of $8,102,000 and $6,078,000, respectively. The
land held for sale consists of several parcels of undeveloped land considered by
management as excess and no longer necessary for the operations of the Company.
A portion of the 1997 balance is included in current assets and the remainder,
as well as all of the 1998 balance, is included in other assets in the
accompanying consolidated balance sheets. These amounts were previously reported
in property and equipment in the Company's consolidated balance sheet.

Property and Equipment

Property and equipment are recorded at historical cost. Depreciation and
amortization are generally provided using the straight-line method over the
estimated useful lives of the respective assets. Repairs and maintenance are
charged to expense as incurred, and amounted to $2,785,000, $3,486,000 and
$4,469,000 for 1996, 1997 and 1998, respectively. Renewals and betterments are
capitalized. Gains or losses on disposal of property and equipment are credited
or charged to income.

Leased equipment meeting certain criteria is capitalized and the present
value of the related lease payments is recorded as a liability. Amortization of
capitalized leased assets are computed on the straight line method over the term
of the lease.

27
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) Summary of Significant Accounting Policies (continued)

Facilities under development are recorded at cost, and include capitalized
interest costs associated with the development of a project. These costs are
classified as facilities under development until the project is completed, at
which time the costs are transferred to the appropriate property and equipment
accounts.

Debt Issuance Costs

Costs incurred in obtaining long-term financing are amortized over the life
of the related debt using a method that approximates the interest method. As of
December 31, 1997 and 1998 accumulated amortization of debt issuance costs were
$5,489,000 and $3,147,000, respectively.

Self Insurance

The Company is self-insured for employment practices, general liability,
workers' compensation, and group health benefit claims, up to stop-loss amounts
ranging from $50,000 to $250,000 on a per-occurrence basis. Provisions for
these self-insurance programs are made for both estimated losses on known claims
and claims incurred but not reported, based on claims history.

Advertising and Promotion

Costs incurred in connection with advertising and promotion are expensed as
incurred, net of reimbursements from franchisees. Net advertising and promotion
expenses of $2,156,000, $2,479,000 and $2,789,000 were incurred for 1996, 1997
and 1998, respectively, and are included in operating expenses in the
accompanying consolidated statements of operations. Advertising and promotion
reimbursements from franchisees totaled $292,000, $334,000 and $401,000 for
1996, 1997 and 1998, respectively.

Motor Fuel Taxes

Certain motor fuel taxes are collected from consumers and remitted to
governmental agencies by the Company. Such taxes were $175,873,000,
$192,650,000 and $203,274,000 for 1996, 1997 and 1998, respectively, and are
included in net revenues and cost of sales in the accompanying consolidated
statements of operations.

Environmental Liabilities and Expenditures

Accruals for environmental matters are recorded in operating expenses when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. The measurement of environmental
liabilities is based on an evaluation of currently available facts with respect
to each individual site and considers factors such as existing technology,
presently enacted laws and regulations and prior experience in remediation of
contaminated sites. Such liabilities are exclusive of claims against third
parties and are not discounted.

Franchise Revenues

The Company recognizes net revenue from individual franchises and initial
training fees when substantially all significant services to be provided by the
Company have been performed. Continuing franchise fees, which are based
generally upon a percentage of the franchisees' sales, are recognized monthly as
earned. Fees earned from franchises aggregated $3,397,000, $3,858,000 and
$4,497,000 during the years ended December 31, 1996, 1997 and 1998,
respectively.

Financial Instruments with Off-Balance Sheet Risk

The Company occasionally utilizes futures and options contracts with the
objective of minimizing fuel cost risk due to market fluctuations. Gains and
losses resulting from changes in the market value of these contracts are
recognized when the related inventory is sold. The Company also may
occasionally enter into futures and options contracts that are not specific
hedges and gains or losses resulting from changes in market value of these types
of futures contracts are recognized in income currently. At December 31, 1998,
the Company was not a party to any futures or options contracts. Interest rate
swap agreements are utilized from time to time to manage interest rate
exposures. The amount to be paid or received on these agreements is accrued
as interest rates change and is recognized over the lives of the respective
agreements. At December 31, 1998, the Company was party to an interest rate
swap agreement with an aggregate notional principal amount of $30,000,000, which
effectively changes a portion of the

28
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) Summary of Significant Accounting Policies (continued)

Company's interest rate exposure from a floating rate to a fixed rate basis.
The effect of the swap was to increase the fixed rate of 6.15% by .6%, which
resulted in additional interest expense of approximately $153,000 during 1998.

Income Taxes

The Company is not subject to federal or state income taxes. Results of
operations are allocated to the partners in accordance with the provisions of
the Company's Partnership Agreement and reported by each partner on their
respective federal and state income tax returns. The taxable income or loss
allocated to the partners in any one year generally varies substantially from
income or loss for financial reporting purposes due to differences between the
periods in which such items are reported for financial reporting and income tax
purposes.

Change in Accounting Principles

In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP 98-5"), "Reporting the Costs of Start-up
Activities". SOP 98-5 requires the costs of start-up activities (including,
among other things, pre-opening costs related to the development of new sites
and organization costs) be expensed as incurred and that previously
capitalizable costs expensed in the initial adoption be reported as a cumulative
effect of a change in accounting principle. The adoption of SOP 98-5 resulted
in a charge to income of $3,250,000 and is presented as a cumulative effect of a
change in accounting principle, as required.

In the fourth quarter of 1997 the Financial Accounting Standards Board
issued, and the Company adopted, Emerging Issues Task Force Issue No. 97-13,
"Accounting for Costs Incurred in Connection with a Consulting Contract that
Combines Business Process Reengineering and Information Technology
Transformation" ("EITF No. 97-13"). EITF No. 97-13 required the immediate write
off, during the Company's fourth quarter, of cumulative costs related to process
reengineering activities that were previously allowed to be capitalized.
Prospective costs of a similar nature are also required to be expensed as
incurred. The adoption of EITF No. 97-13 resulted in a charge to income of
$1,579,000 and is presented as a cumulative effect of a change in accounting
principle, as required.

Reclassifications

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

(3) Inventories

The following is a summary of inventories at December 31, 1997 and 1998:

<TABLE>
<CAPTION>
1997 1998
------- ------
(in thousands)
<S> <C> <C>
Motor fuels and lubricants $ 5,207 3,704
Tires and tubes 3,387 4,141
Merchandise and accessories 7,476 7,827
Restaurant and other 1,420 1,244
Less reserve for obsolescence (1,128) (457)
------- ------
Inventories, net $16,362 16,459
======= ======
</TABLE>

29
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4) Property and Equipment

Property and equipment is summarized at December 31, 1997 and 1998 as
follows:

<TABLE>
<CAPTION>
Estimated
Useful
Lives
(years) 1997 1998
-------- ---- ----
(in thousands)

<S> <C> <C> <C>
Land and improvements 10 $ 26,526 28,370
Buildings and improvements 30 99,361 106,417
Furniture and equipment under capital lease 3-10 48,350 61,070
Leasehold improvements 7-30 20,234 20,234
Facilities under development - 148 -
--------- -------
194,619 216,091
Less accumulated depreciation and amortization (41,256) (53,817)
--------- -------
Property and equipment, net $153,363 162,274
========= =======
</TABLE>

The Company currently has equipment under a Capital Lease. Facilities under
development includes costs associated with new facilities and major renovations
of existing facilities. There were no future construction commitments at
December 31, 1998 with the exception of the joint venture located in Southern
California being built pursuant to a joint venture agreement with Tejon
Development Corporation.

(5) Operating Leases

The Company has entered into various operating leases. The operating
leases are for the leases on two Stopping Center locations, an office building,
truck leases and various equipment leases. The leases contain renewal options
varying from automatic annual renewals to multiple five-year options.

A summary of future minimum rental payments on operating leases which have
initial or remaining noncancellable lease terms in excess of one year as of
December 31, 1998, is as follows:

<TABLE>
<CAPTION>
Related Third
Fiscal Year Ending Party Party Total
- ------------------ ----- ----- -----
<S> <C> <C> <C>
(in thousands)
1999 $ 1,494 896 2,390
2000 1,482 896 2,378
2001 1,422 858 2,280
2002 1,422 858 2,280
2003 1,422 858 2,280
Later years 3,241 9,823 13,064
------- ------ ------
Total minimum lease payments $10,483 14,189 24,672
======= ====== ======
</TABLE>

Rent expense under all operating leases was $2,201,000, $2,034,000 and
$2,639,000 for 1996, 1997 and 1998, respectively. Of these rentals, $1,487,000,
$1,481,000 and $2,330,000 were paid to related parties for 1996, 1997 and 1998,
respectively.

(6) Notes Payable

Notes payable at December 31, 1996, consisted of a five-year revolving
credit facility under which up to $35,000,000 was available. The balance
outstanding on the credit facility was $21,639,000 as of December 31, 1996 and
was paid-off as part of the Recapitalization in January 1997 and a new credit
facility was established.

30
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) Notes Payable (continued)

At December 31, 1998, the Company has available a $25,000,000 five-year
revolving credit facility (the "Credit Facility") that may be used for working
capital and other corporate uses. The Credit Facility matures in January 2002
and interest on drawn funds is paid monthly at 1.5% above the bank's base rate
or 2.75% over the Eurodollar rate (the rate is determined at time of borrowing
at the Company's option). Fees of 2.75% on drawn funds and commitment fees of
.5% on undrawn funds are paid quarterly. At December 31, 1998, the Company did
not have a balance outstanding on the Credit Facility.

The Company did have standby letters of credit outstanding under the
respective revolving credit facilities at December 31, 1997 and 1998. At
December 31, 1997 and 1998, the standby letters of credit principally related to
unfunded insurance claims were $3,150,000 and $1,986,000, respectively. Various
other standby letters of credit at December 31, 1997 and 1998 total $777,000 and
$427,000, respectively.

Also as part of the Recapitalization, subject to certain covenants, the
Company has available a $40,000,000 three-year Expansion Facility which may be
used to fund the acquisition and development of new Stopping Centers and
stand-alone Petro:Lubes. The Expansion Facility matures in January 2000 and
interest on drawn funds is paid monthly at 1.5% above the bank's base rate or
2.75% over the Eurodollar rate (the rate is determined at time of borrowing at
the Company's option). Fees of 2.75% on drawn funds and commitment fees of .5%
on undrawn funds are paid quarterly. At December 31, 1998, the Company did not
have a balance outstanding on the Expansion Facility.

Any funds drawn on both the Credit Facility or Expansion Facility are
secured by substantially all of the Company's assets and the partnership
interests of Mobil Long Haul and Chartwell and guaranteed by each of the
Company's subsidiaries, whose guarantees in turn are collateralized by
substantially all of such subsidiaries' assets.

31
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Long-Term Debt

Long-term debt at December 31, 1997 and 1998 is presented below.

<TABLE>
<CAPTION>
1997 1998
--------- --------
(in thousands)
----------------------
<S> <C> <C>
Four-year term note to a bank in an original amount of $20,000,000 maturing
September 30, 2001. The note is payable in 18 consecutive quarterly installments
varying from $625,000 to $3,500,000 commencing September 30, 1997. In accordance
with the debt agreements entered into as part of the Recapitalization, proceeds not
used to retire the 12 1/2% Senior Notes were to be used to paydown this term note.
Accordingly, the Company retired approximately $6,000,000 of this note in addition
to the quarterly installments due during 1997. Interest at either the bank's prime
rate plus 1.5% or the Eurodollar rate plus 2.75% is payable monthly. The rate was
7.75% at December 31, 1998. The note is collateralized by substantially all of the
Company's assets. $ 12,500 9,973

Six-year term note to a bank in an original amount of $30,000,000 maturing September
30, 2003. The note is payable in 26 consecutive quarterly installments varying from
$125,000 to $3,500,000 commencing September 30, 1997. Interest at either the
bank's prime rate plus 2% or the Eurodollar rate plus 3.25% is payable monthly.
The effective rate was 8.3125% at December 31, 1998, as a result of an interest
swap agreement (the "Swap") with the lender as required under the loan agreement.
The Swap expires on February 12, 2000. The note is collateralized by substantially
all of the Company's assets. 29,500 28,933

12 1/2% Senior Notes due 2002 (the "Notes") in an original aggregate principal
amount of $100,000,000, net of original issue discount. As part of the
Recapitalization, approximately 94% of the Notes were retired during 1997.
Interest on the Notes is payable on June 1 and December 1 of each year beginning
December 1, 1994. 6,190 6,190

10 1/2% Senior Notes due 2007 (the "New Notes") in an original aggregate principal
amount of $135,000,000. Interest on the New Notes is payable on February 1 and
August 1 of each year, beginning August 1, 1997. The New Notes will be effectively
subordinated to the loans outstanding under the New Credit Agreement to the extent
of the value of the assets securing such loans. 135,000 135,000

Obligation under equipment capital lease - 1,232
--------- --------
Total long-term debt 183,190 181,328
Less current portion 3,000 4,967
--------- --------
Long-term debt, excluding current portion $180,190 176,361
========= ========
</TABLE>

The Indentures for the Long-Term Debt and the Credit Facility agreement
each contain certain covenants, including without limitation, covenants with
respect to the following matters: (i) limitation on indebtedness; (ii)
limitation on restricted payments; (iii) limitation on sales of restricted
subsidiary stock; (iv) limitation on transactions with affiliates; (v)
limitation on liens; (vi) limitation on disposition of proceeds of asset sales;
(vii) limitation on distributions and other payment restrictions affecting
restricted subsidiaries; (viii) restrictions on mergers and certain transfers
of assets and (ix) in the case of the Credit Facility financial covenants
covering leverage, cash flows, capital expenditures, EBITDA (as defined),
interest coverage, and minimum net worth. At December 31, 1997 and 1998, the
Company was in compliance with all debt covenants.

32
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Long-Term Debt (continued)

Estimated principal payment requirements on long-term debt and a capital
lease obligation are as follows:
<TABLE>
<CAPTION>

Fiscal Year Ending (in thousands)
- ------------------ ---------------
<S> <C>
1999 $ 4,967
2000 6,001
2001 1,737
2002 19,690
2003 13,933
Thereafter 135,000
--------
Total $181,328
========
</TABLE>

(8) Accrued Expenses and Other Liabilities

The following is a summary of accrued expenses and other liabilities at
December 31, 1997 and 1998:

<TABLE>
<CAPTION>
1997 1998
------------ -------------
(in thousands)
--------------
<S> <C> <C>
Accrued expenses:
Employee related expenses $10,071 9,794
Taxes payable-sales, fuel and property 2,935 2,594
Other 8,424 6,934
Due to franchisees 5,061 2,117
------- -------
Total $26,491 21,439
======= =======
</TABLE>

(9) Related Party Transactions

Related party transactions are handled on an "arm's-length" basis. Amounts
due to and from affiliates as of December 31, 1997 and 1998, consist of the
following:

<TABLE>
<CAPTION>
1997 1998
------------- -------------
(in thousands)
----------------------------
Due from affiliates:
<S> <C> <C>
C&R Distributing, Inc. $ 105 39
Petro Truckstops, Inc. 196 181
Highway Service Ventures, Inc. 114 39
J.A. Cardwell, Sr. 412 412
Cardwell Group - 235
Other 153 257
------- -------
Total $ 980 1,163
======= =======

Due to affiliates:
El Paso Amusement Company $ 221 189
Highway Service Ventures, Inc. 1,471 481
C&R Distributing, Inc. 167 83
Mobil Diesel Supply Corp. 13,792 13,177
Mobil Oil Corp. 3,337 1,718
Cardwell Group - 1,058
Other - 62
------- -------
Total $18,988 16,768
======= =======
</TABLE>

In connection with the Recapitalization, the Company has entered into 10-
year supply agreements with Mobil Oil Corp. ("Mobil") under which Mobil will
supply the Company-operated Stopping Centers' diesel fuel requirements as well
as a portion of their lubricant and gasoline requirements. The diesel fuel sold

33
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) Related Party Transactions (continued)

at all Company-operated Stopping Centers is branded Mobil Diesel, and the
Company-operated Petro:Lubes feature Mobil Delvac lubricants. Under the diesel
fuel and gasoline supply agreement dated January 30, 1997 (the "Supply
Agreement"), the Company has agreed to purchase from Mobil specified
distribution terminals a minimum number of gallons of diesel fuel and gasoline
on both a monthly and annual basis, subject to product availability and
reductions by Mobil under certain described circumstances. As a result of the
Supply Agreement and in order to comply with the laws governing the branding of
diesel fuel, Mobil Diesel Supply Corp. ("MDS"), a wholly-owned subsidiary of
Mobil, was formed. MDS purchases diesel fuel from third party suppliers and then
sells it back to the Company at cost, given that Mobil cannot supply 100% of the
Company's diesel fuel demand because of product availability. The Company's
fuel purchase arrangement with MDS enables the Company to meet its diesel fuel
demand and to comply with branding laws, which require Mobil to first take
possession of the fuel before it can be branded as Mobil Diesel.

The Supply Agreement allows the Company to continue to negotiate for the
purchase of diesel fuel with third-party suppliers approved by MDS. In such
cases, MDS purchases the diesel fuel from the third-party supplier and resells
the product to the Company. Any change in supply source, however, does not
affect the Company's requirement to purchase the annual minimum number of
gallons from Mobil. The Supply Agreement also places a monthly limit on the
maximum number of gallons of diesel fuel and gasoline that the Company may lift
from Mobil specified distribution terminals.

The Company purchases diesel fuel for each of its Company-owned Stopping
Centers on a daily basis. Each location typically maintains a one to three day
inventory of fuel. During 1998, the Company purchased 100% of diesel fuel from
MDS.

The office building in which the Company's principal executive offices are
located is owned by Jack Cardwell, the Chief Executive Officer and a Director of
the Company. The Company leases the entire building under a lease expiring on
December 31, 2005, paying monthly rent totaling $336,000 per year, as well as
taxes, maintenance and other operating expenses. For each of the fiscal years
ended December 31, 1996, December 31, 1997 and December 31, 1998, the Company
made annual rental payments of $336,000.

The Company entered into an agreement with Chartwell Investments, Inc.,
providing for the payment of fees and reimbursement of certain expenses to
Chartwell Investments, Inc. for acting as financial advisor with respect to the
Recapitalization, including soliciting, structuring and arranging the financing
of the Recapitalization. The fees, totaling approximately $3,000,000, equal to
1% of the total capitalization of the Company, plus .5% of the Expansion
Facility and the reimbursement of certain expenses, were paid at the closing.

Fuel sales aggregating $4,567,000, $3,315,000 and $1,345,000 for 1996, 1997
and 1998, respectively, were made to C&R Distributing, Inc. ("C&R") at the
Company's cost. C&R sales of fuel and lubricants and truck hauling fees,
aggregating $11,432,000, $5,079,000 and $3,995,000 for 1996, 1997 and 1998,
respectively, were charged to the Company.

Highway Service Ventures, Inc. ("HSV"), a corporation in which Jack
Cardwell owns a 32.5% interest, operates four franchised Stopping Centers
located in Elkton, Maryland; Ruther Glen, Virginia; Florence, South Carolina;
and Carnesville, Georgia pursuant to franchise agreements with the Company. None
of these franchise agreements contain terms that are any more favorable to the
franchisee than the terms in any of the Company's other franchise agreements.

34
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) Related Party Transactions (continued)

Cardwell owns 100%. Such sales amounted to $153,000, $47,000 and $60,000 in
1996, 1997 and 1998, respectively.

In connection with the formation of the Company in May 1992 under an Option
and Right of First Refusal Agreement, Jack Cardwell and Jim Cardwell, officers
and Directors of the Company, granted to the Company and Roadside, options which
expire in December 2006, to purchase certain properties owned by the Cardwells
that are located near or adjacent to certain of the Company's Stopping Centers,
and a right of first refusal on these properties. At the closing of the
Recapitalization, Roadside assigned all of its rights under the Option and Right
of First Refusal Agreement to Mobil Long Haul, Petro Holdings GP Corp. and Petro
Holdings LP Corp. The price at which an Option Property may be purchased will
be equal to the fair market value of the property when the option is exercised
as determined by an appraisal.

Jack Cardwell, Jim Cardwell and Mrs. Jack Cardwell own 60%, 30% and 10%,
respectively, of the stock of PPR, Inc. ("C&PPR"). Jack Cardwell is the sole
shareholder of CYMA Development Corporation ("CYMA") and Jim Cardwell is the
sole shareholder of Petro Truckstops, Inc. ("Petro Truckstops") and Petro
Beverage, Inc. The Company entered into agreements with CYMA, C&PPR, Petro
Truckstops, Inc., and Petro Beverage, Inc. to engage in retail sales of beer,
wine or wine coolers at a limited number of its facilities. The agreements
continue in effect until terminated by either party. Under the agreements with
CYMA and C&PPR, the Company agreed to operate the alcohol sales business at
these locations in exchange for 10% of the gross receipts generated from
alcoholic beverage sales, plus reimbursement of all operating expenses. Under a
similar agreement with Petro Truckstops and Petro Beverage, Inc., the Company
receives 15% of gross receipts generated from alcoholic beverage sales. In each
of the agreements, the net payments to the Company are approximately equal to
the gross profit received by the above entities.

In connection with the formation of the Company in May 1992, Motor Media,
Inc., a company owned 100% by Jim Cardwell ("Motor Media"), entered into a five-
year agreement with the Company (the "Motor Media Agreement"), under which Motor
Media leases floor and wall space at all Stopping Centers operated by the
Company and sells space for in-store advertising to third parties. Under the
agreement, the Company and Motor Media are entitled to 25% and 75%,
respectively, of the gross revenues generated. Motor Media received $214,000,
$234,000 and $215,000, respectively, before its selling, maintenance and
administrative expenses for the fiscal years ended December 31, 1996, December
31, 1997 and December 31, 1998, representing its share of the gross receipts
generated. Motor Media has entered into similar floor and wall space leases with
other truck stops nationwide. The Company and Motor Media have extended the term
of the Motor Media Agreement through April 2002.

Under an existing agreement (the "Amusement Agreement") between El Paso
Vending and Amusement Company ("EPAC"), of which Jack Cardwell and Jim Cardwell
own 99% and 1%, respectively, and the Company, EPAC furnishes video and other
games to four of the Company's Stopping Centers and services these games.
Pursuant to the Amusement Agreement, which expires in May 2002 or until earlier
terminated by either party, the Company paid 60% of the revenues generated by
the games to EPAC and retained the remaining 40%. Beginning November 1994, the
arrangement was modified to pay 50% of the revenue generated by the games to
EPAC and 50% to the Company. The Company amended the Amusement Agreement to
cause EPAC to contract directly with the Company to furnish and service video
and other games at an additional 12 Stopping Centers. Subsequent thereto, EPAC
began furnishing and servicing games at an additional five Stopping Centers
under the terms of the Amusement Agreement of which one site agreement
guarantees a minimum annual revenue to the Company of $180,000. Effective
December 1, 1998, EPAC began furnishing and servicing video and other games to
an additional Stopping Center under the terms of the Amusement Agreement, of
which the Company pays 40% of the revenues generated by the games to EPAC and
retains the remaining 60%. EPAC received $2,021,000, $2,421,000 and $2,634,000
in revenues, respectively, generated from the furnishing and servicing games
located at the Stopping Centers for the fiscal years ended December 31, 1996,
December 31, 1997 and December 31, 1998.

35
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) Related Party Transactions (continued)

Since June 1993, the two Stopping Centers located in Louisiana have
featured video poker games housed in a separate on-site facility and operated by
a third party, Petro Truckstops, Inc., an affiliate who, under terms of a
contract, turns over a specified portion of the revenue generated from the
machines. Petro Truckstops, Inc. pays 95% of revenue collected to the Company
and retains 5% for operating expenses in accordance with a lease agreement. The
Amusement Agreement has been amended to extend its term through May 2002.
Payments to the Company under this arrangement aggregated $1,979,000 during
1996, $2,103,000 during 1997 and $2,231,000 during 1998. During 1996, the State
of Louisiana enacted a statute requiring the cessation of video poker operations
unless the parish in which the operations were conducted voted to allow the
continued operation of video poker machines. On November 5, 1996, the parish in
which the Shreveport facility is located voted to continue to allow video poker
operations, while the parish in which the Hammond facility is located voted to
disallow video poker operations. The video poker operations at the Hammond
facility are required to be phased out by the end of June 1999. During the year
ended December 31, 1998, the Hammond location generated approximately $1,067,000
of revenue from video poker.

Management fees of $250,000 were earned by The Fremont Group for the year
ended December 31, 1996. Management fees of $300,000 were earned by Mobil Oil,
in accordance with the terms of the Company's Partnership Agreement for each of
the years ended December 31, 1997 and 1998.

The Company has entered into a management consulting agreement with
Chartwell Investments, commencing January 30, 1997, pursuant to which Chartwell
Investments will provide the Company with certain management, advisory and
consulting services for a fee of $600,000 for each fiscal year of the Company
during the term of the agreement, with up to an additional $100,000 payable for
each fiscal year, provided that EBITDA is at least $45 million, plus
reimbursement of certain expenses. The term of the management consulting
agreement is ten years and is renewable for additional one year periods unless
the Board of Directors of the Company gives prior written notice of non-renewal
to Chartwell Investments. Mr. Berman and Mr. Shein are directors of the Company
and are officers and directors of Chartwell Investments. During 1997 and 1998,
the Company paid Chartwell Investments $600,000 and $714,000, respectively,
under this agreement.

Each of the affiliates, with the exception of Mobil Diesel Supply
Corporation, Mobil Oil Corporation and Chartwell, is owned or controlled to some
degree by a member or members of the Cardwell Group. Related party
transactions, other than those specifically discussed above, generally arise in
the ordinary course of business as a result of the Company's purchase of trade
accounts receivable or receipt of franchisee fees from certain related parties
who own properties which are part of the Company's network.

In order to comply with applicable Internal Revenue Service Code and
Treasury Regulation provisions dealing with recourse debt, certain Cardwell
entities and Arcadian Management Corporation each entered into an indemnity
agreement under which each has agreed to indemnify the Company, the general
partners and certain limited partners in the event that the indemnified party is
required to pay certain of the Company's indebtedness after a default,
acceleration by the creditor and exhaustion of any collateral securing the
credit facility. In May 1994, certain Cardwell entities and Arcadian Management
Corporation amended their original indemnity agreements in connection with the
May 1994 financing. No payments have been made under these agreements.

36
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10) Partners' Capital (Deficit)

Ownership

As discussed in Note 1, effective January 30, 1997, the Company consummated
a transaction under which Chartwell and Mobil Long Haul invested to directly
acquire the partnership interests of the Company and invest in the Company. The
Cardwell Group maintained its capital investment in the Company. Kirschner
Investments, a Company franchisee, also invested in the Company. Immediately
following the transaction, the common partnership interests of the Company are
owned by Chartwell (approximately 50.6%), the Cardwell Group (approximately
39.7%), Mobil Long Haul (approximately 7.3%), and Kirschner (approximately
2.4%), and the preferred partnership interests are owned by Mobil Long Haul
($12,000,000) and the Cardwell Group ($7,600,000). Chartwell and the Cardwell
Group own both general and limited partnership interests and Mobil Long Haul and
Kirschner own only limited partnership interests.

Under the Company's Partnership Agreement ("the Agreement"), the general
partners delegated management authority to a committee of the partners'
representatives ("the Board" or "Board of Directors"). Both the Cardwell Group
and Mobil Long Haul have the right to appoint two persons each to the Board, and
Chartwell may appoint four persons. Additionally, each of these partners
(subject to maintaining certain ownership percentages, as detailed in the
Agreement) also has the right to veto most actions by the Board.

Mandatorily Redeemable Preferred Partnership Interests

The mandatorily redeemable preferred partnership interests are entitled to
cumulative preferred returns of 9.5% for preferred interests owned by Mobil Long
Haul and 8.0% for preferred interests owned by the Cardwell Group, and are
subject to mandatory redemption 270 days after the tenth anniversary of the date
of closing of the Recapitalization, which is subsequent to the maturity date of
the New Notes. The preferred returns on the mandatorily redeemable preferred
partnership interest accrue, but are only payable in cash if permitted by the
Company's then existing debt instruments. The Indenture governing the New Notes
and the New Credit Agreement restrict the payment of dividends on mandatorily
redeemable preferred partnership interests.

The Company had accrued and unpaid preferred returns on the mandatorily
redeemable preferred partnership interests totaling to $1,635,000 and $3,607,000
at December 31, 1997 and 1998, respectively.

Distributions

Under the terms of the Agreement, the Company is required to distribute to
the partners, on a pro rata basis in accordance with ownership percentage
interests, an amount calculated based upon allocated taxable income using
certain state and federal tax rates ("Minimum Tax Distribution"). The payments
are to be made on or before the estimated tax payment dates, which are April 15,
June 15, September 15 and December 15. Debt agreements restrict distributions
upon certain debt covenant violations.

As of December 31, 1998, the historical net book value of assets and
liabilities was approximately $36,000,000 greater than the associated net tax
basis of those assets and liabilities.

Occasionally, the Company's Board of Directors may elect to make
distributions (subject to loan covenants in effect at that time) to the
partners. After the preference given to the Minimum Tax Distribution described
above, in general, distributions, including any liquidating distributions, are
first made to partners in proportion to their preferred ownership, in an amount
equal to any unpaid and accrued return on the manditorily redeemable partnership
interests. Next, distributions may be made to common or preferred partners
(with preference given to the preferred interests), in proportion to their
respective ownership, equal to any unrecovered capital. Finally, remaining
distributions may be given to the partners in accordance with their positive
capital account balances. Distributions in 1996, 1997 and 1998 were $0, $0 and
$1,120,000 respectively.

37
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(11) Employee Benefits

The Company sponsors a defined contribution retirement plan under Internal
Revenue Code Section 401(k) covering substantially all of its employees ("the
Plan"). Company contributions equal 50% of the participants' contributions up
to 4% of the participants' annual salary and aggregated approximately $138,000,
$189,000 and $318,000 for 1996, 1997 and 1998, respectively. At December 31,
1997 and 1998 there were no other post employment or retirement plans.

The Plan failed to correctly perform the requirements under Section
401(k)(3)(ii) of the Internal Revenue Code of 1986, as amended (the "Code"),
Section 401(m) of the Code and the underlying Treasury Regulations (hereinafter
referred to as the ADP/ACP Test) for the Plan years 1990-1996. In addition, the
Plan failed to allocate forfeitures of employee contributions in accordance with
the terms of the Plan since its inception. Management of the Company believes
it has identified all operational defects of the Plan, and has taken corrective
actions to ensure future compliance. The Plan administrator submitted a request
for a compliance statement to the IRS on December 19, 1996, under the IRS
Voluntary Compliance Resolution Program (VCR). On August 20, 1998, the IRS
notified the Plan that due to certain technical legal issues under the Plan, the
submission could not be accepted under the VCR Program, and should be redirected
to the Walk in Closing Agreement Program (Walk in CAP). Under the Walk in CAP,
it is anticipated the Plan will be permitted to take corrective actions with
respect to the operational defects and receive a compliance statement from the
IRS acknowledging such action. At December 31, 1998, management of the Company
believes it has accrued amounts sufficient to cover any corrective contribution
required by the IRS.

During 1998, the Company established the "Petro Stopping Centers Deferred
Compensation Plan" (the "Comp Plan") for key employees. Under the Comp Plan,
the participants may defer base compensation and earn interest on their deferred
amounts. The program is not qualified under Section 401 of the Internal Revenue
Code. Participants may defer no more than 20% of their compensation per year.
The Company will credit matching deferrals for each participant equal to 50% of
the first 4% of the participant's compensation up to $9,500 per year. Company
matched deferrals will vest at 20% after one year of service and an additional
20% for each year thereafter. The Plan Trustee will invest each participant's
account balance in a separate account. The participants are general creditors of
the Company with respect to these benefits. The total of participant deferrals,
which is reflected in accrued expenses and other liabilities, was $160,000 at
December 31, 1998. The Company's matched deferral expenses for the year ended
December 31, 1998 was $9,900.

(12) Partnership Interests Option Plan

The Company has established an equity incentive plan to attract and retain
key personnel, including senior management, and to enhance their interest in the
Company's continued success. The Company applies Accounting Principles Board
Opinion No. 25 ("APB No. 25") in accounting for its plan. Accordingly, no
compensation cost has been recognized in the Consolidated Statement of
Operations from options issued under the partnership interest option plan.

The plan grants options to purchase between 0.03 to 0.90 percent of Class B
Percentage Interest at a price between $4,000 and $6,000 per each .01 (one
hundredth) percent. The exercise price for an option shall be equal to not less
than 100% of the fair market value of the Partnership as determined on the date
the Option was granted.

Participants become fully vested upon the occurrence of a Change in Control
(as defined in the Option Plan), upon a sale of substantially all of the assets
of the Partnership, upon the liquidation of the Partnership, or upon the
Partnership's consummation or adoption of a plan to make an Extraordinary
Distribution or Redemption (as defined in the Option Plan). Options may be
exercised at any time, to the extent that such options are exercisable. All
Options expire on the earlier to occur of (i) the tenth anniversary of the date
the Option was granted, (ii) one year after the participant ceases to be an
employee of the Partnership due to retirement, death or disability, (iii)
immediately, if the participant ceases to be an

38
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(12) Partnership Interests Option Plan (continued)

employee of the Partnership for cause, or (iv) ninety days after the occurrence
of the termination of the participant's employment with the Partnership, for any
reason other than (ii) or (iii) above.

The Company anticipates that the aggregate equity issued pursuant to such
plans and any future plans will be between 5% and 10% of the fully-diluted
equity of the Company. At December 31, 1998, options covering 6.76% of the
partnership interests in the Company were outstanding. Vesting occurs over four
years at 25% per year. At December 31, 1998, approximately 2.3% of the
partnership interests were vested. No options were exercised during 1998.

The Company has awarded options to purchase 2.75% of the common limited
partnership interests of the Company granted pursuant to the terms of Mr. Zine's
employment agreement; 25% of the Options become exercisable on each of December
31, 1997, 1998, 1999 and 2000.

(13) Commitments and Contingencies

The Company is involved in various litigation incidental to the business
for which estimates of losses have been accrued, when appropriate. In the
opinion of management, such proceedings will not have a material adverse effect
on the consolidated financial position or results of operations.

The Company has entered into a joint venture agreement with Tejon
Development Corporation ("Tejon") to build and operate a Petro branded location
in Southern California. Pursuant to the terms of the Limited Liability Company
Operating Agreement of Petro Travel Plaza LLC, dated as of December 5, 1997,
among the Company, Tejon and Tejon Ranch Company, as guarantor (the
"Agreement"), the Company is required to make an initial capital contribution
for working capital and inventory and contemplates that the joint venture will
finance construction of the location with a non-recourse credit facility. Under
the Agreement, the Company will receive a management fee of $250,000 per annum
and will receive 40% of the location's operating earnings. At December 31, 1998,
this Petro branded location was under construction and expected to be completed
June 1999.

(14) Financial Instruments

As of December 31, 1997 and 1998, the carrying amounts of certain financial
instruments employed by the Company, including cash and cash equivalents,
accounts receivable, trade accounts payable and amounts due from/to affiliates
are representative of fair value because of the short-term maturity of these
instruments. The carrying amounts of notes payable approximate fair value due
to the floating nature of the interest rate. The Company's principal market
risk as it relates to long term debt is exposed to changes in interest rates.
The fair value of both series of Senior Notes has been estimated based on quoted
market prices for the same or similar issues or by discounting the future cash
flows using rates currently available for debt of similar terms and maturity.
The fair value of all derivative financial instruments is the amount at which
they could be settled, based on quoted market prices or estimates obtained from
dealers.

The following table reflects the carrying amount and estimated fair value
of the Company's financial instruments, as of December 31,

<TABLE>
<CAPTION>
1997 1998
Carrying Carrying
Amount Fair Value Amount Fair Value
----------------- ---------------- ------------- ---------------
Balance sheet financial instruments (in thousands)
<S> <C> <C> <C> <C>
Long-term debt $183,190 $191,088 $181,328 $188,416
Other financial instruments
Interest rate swap agreements - (154) - (153)
</TABLE>

39
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(14) Financial Instruments (continued)

(15) Environmental Matters

The Company's operations and property are subject to extensive federal and
state legislation and regulations relating to environmental matters. The Company
uses underground and above ground storage tanks (each a "UST") to store
petroleum products and waste oils. Statutory and regulatory requirements for UST
systems include requirements for tank construction, integrity testing, leak
detection and monitoring, overfill and spill control, and mandate corrective
action in case of a release from a UST into the environment. The Company is
also subject to regulation in certain locations relating to vapor recovery and
discharges into the water. Management believes that all of its USTs are
currently in compliance in all material respects with applicable environmental
laws, regulations and requirements. During 1998 the Company continued the
installation of cathodic protection and overfill equipment and devices in its
older USTs, as required by federal and state law, and all such work was
completed in December 1998, except in the Corning, California location, where
completion of the state required upgrades is ongoing pursuant to an agreement
between the State of California and the Company. The Corning, California work is
contemplated to be completed in April 1999, and the Company expects to expend
$940,000 during 1999 in connection with such work. Some site remediation may be
required in Corning, California as a result of completion of the 1998 upgrade
work. During 1996, 1997, and 1998, the Company's expenditures for environmental
matters were $180,000, $154,000, and $385,000, respectively. See Note 2 to Notes
to Consolidated Financial Statements for a discussion of its accounting policies
relating to environmental matters.

In connection with its ownership of the properties and operation of its
business, the Company may be subject to liability under various federal, state,
and local environmental laws, ordinances and regulations relating to cleanup and
removal of hazardous substances (which may include petroleum and petroleum
products) on, under, or in such property. Certain laws typically impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. Persons who arrange, or are
deemed to have arranged, for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at the disposal or treatment site, regardless of whether such site is
owned or operated by such person. The Company is currently party to one
proceeding with the United States Environmental Protection Agency ("EPA")
regarding a waste oil storage and recycling plant located in Patterson,
Stanislaus County, California (the "Patterson Site"). In the ordinary course of
Company operations, waste oil products are generated which are required to be
transported to off-site facilities for treatment and disposal. Between June
1991 and February 1995 the Company arranged for the transportation of waste oil
products from the Corning location to the Patterson Site. Sometime in 1997 the
owners of the Patterson Site abandoned operation of the site, the condition of
the site began to deteriorate, and in October 1997 the EPA responded to a
request for assistance from the California Department of Toxic Substances
Control. Notwithstanding that the Company's activities with regards to use of
the Patterson Site were lawfully conducted and have not been challenged by the
EPA, by Order issued by the EPA on August 12, 1998 ("Order"), the Company and 55
other companies were identified by the EPA as "generators,

40
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(15) Environmental Matters (continued)

transporters or arrangers for disposal of hazardous substances" as those terms
are defined under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C., Section 9601 to 9675, as amended by the
Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), and thus are
named in the Order as potentially responsible parties, strictly liable under
CERCLA for removal activities associated with the Patterson Site. The Company
and approximately 20 of the other 55 companies identified by the EPA are working
together toward a resolution and plan of action for completion of the removal
activities required by the EPA pursuant to the Order. The Company does not
believe that its involvement in the Patterson Site will have a material adverse
effect on its consolidated financial condition or results of operations.

The Company has accrued for certain environmental remediation activities
consistent with the policy set forth in Note 2 to Notes to Consolidated
Financial Statements. At December 31, 1998 and 1997, such accrual amounted to
approximately $274,000 and $187,000, respectively, and in management's opinion,
was appropriate based on existing facts and circumstances. Under the most
adverse circumstances, however, this potential liability could be significantly
higher. In the event that future remediation expenditures are in excess of
amounts accrued, management does not anticipate that they will have a material
adverse effect on the consolidated financial position or results of operations
of the Company. At December 31, 1998 and 1997, the Company has recognized
approximately $160,000 and $262,000, respectively, in the consolidated balance
sheet related to recoveries of certain remediation costs from third parties.

(16) Segments

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"), which the Company has
adopted in the current year. The new rules establish revised standards for
public companies relating to the reporting of financial information about
operating segments. The adoption of SFAS No. 131 did not have a material effect
on either the Company's primary consolidated financial statements or segment
information disclosures.

SFAS No. 131 requires the Company to identify and report certain
information on its reportable operating segments. The Company identified two
reportable operating segments in adopting SFAS No. 131. The two reportable,
operating segments identified are the Company's corporate operated truck stops
and the Company's franchise truck stop operations.

The Company operates large, multi-service truck stops in the United States.
The Company's facilities, which are known as Petro Stopping Centers, offer a
broad range of products, services and amenities, including diesel fuel,
gasoline, home-style restaurants, truck preventive maintenance centers and
retail merchandise stores to the highway motorist. The Company has aggregated
its corporate truck stop operations into one reportable operating segment based
on the distribution of products and services under one common site facility,
classified as a multi-service truck stop.

In addition to corporate operations, the Company is a franchisor to 21
Petro Stopping Center locations. The Company collects royalties and fees in
exchange for the use of its name and for certain services provided to the
franchisees. During the years ended December 31, 1996, 1997 and 1998, the
revenues generated from the Company's franchise operations were $3,397,000,
$3,954,000, and $4,497,000, respectively. These revenues are included in non-
fuel revenues reported on the accompanying consolidated statements of
operations. The Company does not allocate any expenses or assets in measuring
this segment's profit and loss.

Historically, the Company's revenues at each of its full-sized Stopping
Centers were recorded through the following divisions: Diesel Fuel Island, Iron
Skillet Restaurant, Petro:Lube and Travel and Convenience Stores. Beginning with
the first quarter of 1997 and in connection with new management, the
presentation format

41
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(16) Segments (continued)

for results of operations has been changed to reflect revenues from fuel, non-
fuel and restaurant. The Company derives its revenues from the sale of fuels,
diesel and gasoline, non-fuel items including the sale of merchandise and
offering of services including truck tire sales and preventative maintenance,
weighing scales, showers, laundry, video games and other operations, and its
restaurant operations which includes Iron Skillet and certain fast-food
operations. The presentation allows management to focus more closely on the
major sources of revenues of the business. The other operations included in non-
fuel revenues include franchise royalties and rental revenues from video poker
operations in Louisiana.

(17) Recently Issued Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allow a derivative's gain and loss to
offset related results on the hedged item in the income statement and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. SFAS No. 133 is effective for
fiscal years beginning after June 15, 1999. A company may also implement the
statement as of the beginning of any fiscal quarter after issuance (that is,
fiscal quarters beginning June 16, 1999, and thereafter). SFAS No. 133 cannot
be applied retroactively. Management has not yet quantified the impact of
adopting SFAS No. 133 on the Company's financial statements and has not
determined the timing of, or method of, adoption. However, the implementation
of SFAS No. 133 could increase volatility in earnings.

(18) Subsequent Events

In March 1999, the Company, certain of its Partners and Volvo Trucks
North America, Inc. ("Volvo") entered into letters of intent wherein Volvo
agreed in principle to acquire an interest in the Company. As part of the
transactions, it is contemplated that Chartwell's interest in Petro will be
repurchased. Closing of the transaction is subject to, among other matters,
Volvo's satisfaction with its due diligence, negotiation of definitive
agreements, obtaining additional financing, obtaining bank facility amendments,
obtaining amendments to the New Notes Indenture (and a to be determined minimum
percentage of the New Notes holders waiving the change of control provisions of
the indenture), and receipt of regulatory approvals. Closing of the transaction
is anticipated in June 1999, however, there can be no assurance that the
transaction will occur by such date or at all.

42
<PAGE>

PETRO STOPPING CENTERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(19) Selected Quarterly Financial Data (unaudited)

<TABLE>
<CAPTION>
(in thousands)
-----------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------------------------- ---------------------- ----------------------- --------------------------
<S> <C> <C> <C> <C>
1997
- ----
Net revenues $162,565 160,759 168,209 194,196

Operating income 3,680 6,418 7,241 4,712

Net income (loss) (14,135)(a) 1,073 2,119 (1,622)(b)
</TABLE>

<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------------------- ---------------------- ---------------------- --------------------------
1998
- ----
<S> <C> <C> <C> <C>
Net revenues $162,932 165,157 167,288 158,039

Operating income 5,219 6,938 7,831 5,732

Net income (loss) 202 1,966 2,774 (2,514)(c)
</TABLE>

(a) Approximately $12,745,000 of this net loss is due to the Company charging,
as an extraordinary item, debt restructuring costs in conjunction with the
Recapitalization.

(b) Approximately $1,900,000 of this net loss is due to additional depreciation
expense recorded as a result of revising the service life of certain
computer equipment. Furthermore, a charge of $1,579,000 was recorded in the
fourth quarter as a result of the adoption of EITF No. 97-13, which
required the write-off of certain costs related to process reengineering
activities that were previously allowed to be capitalized. In accordance
with EITF No. 97-13, the charge was recorded as a cumulative effect of a
change in accounting principle.

(c) A charge of $3,250,000 was recorded in the fourth quarter as a result of
the adoption of SOP No. 98-5, which required the costs of start-up
activities and organization costs to be expensed as incurred rather than
capitalized and amortized. In accordance with SOP No. 98-5, the charge was
recorded as a cumulative effect of a change in accounting principle.

43
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------

The Board of Directors and Partners
Petro Stopping Centers, L.P.

We have audited the accompanying consolidated balance sheets of Petro Stopping
Centers, L.P. (a Delaware limited partnership) and subsidiaries as of December
31, 1997 and 1998, and the related consolidated statements of operations,
changes in partners' capital (deficit) and cash flows for the years 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 audits.

We conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Petro Stopping
Centers, L.P. and subsidiaries as of December 31, 1997 and 1998, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, effective
October 1, 1997, the Company changed its method of accounting for process
reengineering costs.

As discussed in Note 2 to the consolidated financial statements, effective
October 1, 1998, the Company changed its method of accounting for start-up
activities.

ARTHUR ANDERSEN LLP

Dallas, Texas,
February 12, 1999 (except with respect to the matter
discussed in Note 18 to the consolidated financial
statements, as to which the date is March 19, 1999)

44
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------

The Board of Directors and Partners
Petro Stopping Centers, L.P.

We have audited the accompanying consolidated statements of operations, changes
in partners' capital (deficit) and cash flows of Petro Stopping Centers, L.P.
and subsidiaries for the year ended December 31, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Petro Stopping Centers, L.P. and subsidiaries for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

El Paso, Texas
March 28, 1997

45
<PAGE>

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

On August 27, 1997, the Registrant notified Coopers & Lybrand LLP (El Paso,
Texas, office) of its decision to dismiss Coopers & Lybrand LLP and to retain
Arthur Andersen LLP (Dallas, Texas, office) for the audit of its financial
statements for fiscal year ended December 31, 1997. The change in the
independent accountants was recommended by the Audit Committee of the Board of
Directors.

During the fiscal year 1996 and interim periods through August 27, 1997,
there were no disagreements with Coopers & Lybrand LLP on matters of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which disagreement(s), if not resolved to the satisfaction of Coopers
& Lybrand LLP, would have caused them to make reference to the subject matter of
the disagreement(s) in connection with their report. In addition, during such
period, there have been no "reportable events" with Coopers & Lybrand LLP as
described in Items 304 (a)(I)(v) of Regulation S-K.

During the fiscal year 1996 and through September 3, 1997, the Company did
not consult Arthur Andersen LLP on either the application of accounting
principles to a complete or proposed specific transaction, or on the type of
audit opinion that might be rendered on the Company's financial statements.

46
<PAGE>

PART III

Item 10. Directors and Executive Officers of the Registrant

The following sets forth certain information with respect to the persons
who are members of the Company's Board of Directors, Executive Committee and
senior management team as of February 1, 1999.

Name Age Position
- ------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
James A. Cardwell, Sr. 66 Chairman, Chief Executive Officer, Member of the Executive
Committee and Director
Larry J. Zine 44 President, Chief Financial Officer and Director
Evan C. Brudahl 43 Senior Vice President of Operations and Director
James A. Cardwell, Jr. 38 Senior Vice President of Marketing and Business Development
and Director
Travis R. Roberts 63 Vice President of Real Estate Acquisitions
Nancy C. Santana 42 Vice President and General Counsel and Secretary
David Latimer 40 Vice President of Petro:Lube
David A. Haug 38 Vice President of Finance and Assistant Secretary
David A. Appleby 32 Controller
Todd R. Berman 41 Member of the Executive Committee and Director
Michael S. Shein 35 Assistant Secretary, Member of the Audit Committee and Director
Malcolm Lassman 60 Member of the Executive Committee, Audit Committee and Director
Kevin T. Weir 42 Member of the Executive Committee, Audit Committee and Director
</TABLE>

James A. (Jack) Cardwell, Sr. - Jack Cardwell founded the Company in 1975
and has been serving as the Chief Executive Officer since May 1992, and has been
the Chairman since its formation in 1992. He is the Chairman and Chief Executive
Officer of the Company with responsibility for the Company's overall
performance, defining Petro's image in the marketplace and identifying growth
opportunities and overseeing employee and customer retention. He served as the
Chairman of the National Association of Truck Stop Operators ("NATSO") in 1983
and 1984 and has worked on various committees of NATSO since that time. He
currently serves as a trustee for Archstone Communities (a New York Stock
Exchange Company) and serves as a director of El Paso Electric Company (a
publicly traded Company). Jack Cardwell is the father of Jim Cardwell.

Larry J. Zine - Mr. Zine was hired in December 1996 as Executive Vice
President and Chief Financial Officer of the Company. As of January 1999, Larry
Zine was elected President and a member of the Board of Directors of the Company
and is responsible for all financial, accounting, management information and
insurance and benefit services for the Company. Mr. Zine was the Executive Vice
President and Chief Financial Officer for The Circle K Corporation, the second
largest chain of convenience stores in the United States, from 1988 to 1996. Mr.
Zine was an integral part of The Circle K Corporation's reorganization from
bankruptcy in July 1993, its initial public offering in March 1995, and
subsequent sale in June 1996. Mr. Zine had worked for The Circle K Corporation
for 15 years in various capacities including the last eight years as Chief
Financial Officer. Mr. Zine has been a director of MMH Holdings, Inc., a holding
company whose sole direct subsidiary is Morris Material Handling, Inc., a
manufacturer, distributor and service provider of "through-the-air" material
handling equipment, since March 30, 1998. He was educated at the University of
North Dakota and holds a M.S. degree in Accounting and a B.S.B.A. in Marketing.
In March 1999, Mr. Zine announced his resignation from the Company, although he
will remain on the Board. The effective date of such resignation is to be
determined.

Evan Brudahl - Evan Brudahl, a Mobil Oil employee, is the Senior Vice
President of Operations and a member of the Board of Directors. Mr. Brudahl is
responsible for the Company's operations, overseeing engineering operations,
fuel purchasing and transportion, franchise operations and the Diesel Fuel
Island, Travel and Convenience Stores and Petro:Lube operations. Mr. Brudahl was
most recently the Manager of U.S. Diesel Retail Marketing and Travel Center
Business at Mobil Oil and has worked for Mobil Oil for 21 years. He has held the
positions of District Manager, Manager of U.S. company-operated Gasoline
Stations Operations, Company Operations Accounting Manager, and various other
positions in U.S. Marketing and Administrative areas. He received a

47
<PAGE>

B.B.A. in Marketing from the University of Wisconsin at Whitewater. Effective
April 1, 1999, Mr. Brudahl will become a permanent Petro employee, resigning
from Mobil Oil. As of April 1, 1999, Mr. Brudahl will no longer be a member of
the Board of Directors but will continue to remain an officer of the Company.
Mr. Brudahl has worked for Petro since February 1997 as a Mobil Oil employee.

James A. (Jim) Cardwell, Jr. - Jim Cardwell is Senior Vice President of
Marketing and Business Planning. Mr. Cardwell has been involved with the
Company full time for 15 years and has held various positions including profit
center management and Vice President of Operations from 1986 to 1992. Prior to
his current position, he served as Senior Vice President of Operations and
Marketing in 1998, and Vice President of National Sales and Promotions from June
1993 to January 1997. Mr. Cardwell studied Management and Finance at the
University of North Texas. Currently he serves on the Board of Directors of
NATSO. He is also a member of the Young Presidents Organization. Jim Cardwell
is the son of Jack Cardwell.

Travis Roberts - Travis Roberts is Vice President of Real Estate
Acquisitions. Mr. Roberts oversees new site acquisitions and new site
selections. Mr. Roberts has been involved with the Company since 1975 and prior
to his current position, he served as Vice President of Maintenance and
Development, Vice President of Development from 1985 to 1992, and Vice President
of Engineering from 1992 to 1998.

Nancy C. Santana - Nancy Santana joined the Company effective July 1, 1998
in the capacity of Vice President, Secretary and General Counsel, after a 16
year legal career in private practice. Ms. Santana is former Chairman of the
Real Estate, Banking and Lending section at Kemp, Smith, Duncan & Hammond, P.C.,
in El Paso, Texas, where her experiences included representation of various
financial institutions in a wide range of lending, regulatory and operational
matters, as well as extensive transactional real estate experience including
zoning and land use matters, and the development, acquisition, leasing,
management and disposition of all types of residential and commercial real
properties. Ms. Santana has been named to the Best Lawyers in America in
-----------------------
Banking and Real Estate. Ms. Santana obtained her undergraduate degree from
Southern Methodist University, and her law degree from the University of
Houston.

David Latimer - David Latimer has been serving as Vice President of
Petro:Lube since April 1995, prior to which he served as Vice President of
Operations from 1993 to 1995. Mr. Latimer joined the Company in 1983 and was
instrumental in the introduction and development of the Petro:Lube express truck
service center business. Mr. Latimer served for four years on the
Bridgestone/Firestone Dealer Board. Mr. Latimer also serves as the Company
representative to the National Tire Dealers and Retreaders Association and The
Maintenance Council.

David A. Haug - In March 1999, David Haug announced his resignation as Vice
President of Finance of the Company effective March 19, 1999. Prior to his
current such position, he served as the Controller for the Company, a position
he held since April 1990. Prior to that, he was an Audit Manager with
Lauterbach, Borschow and Company, Certified Public Accountants from 1982 to
1990. He received a B.A. in Accounting from New Mexico State University and is a
Certified Public Accountant in the State of Texas.

David A. Appleby - Effective March 20, 1999, David Appleby will assume the
Vice President of Finance position. As Vice President of Finance, Mr. Appleby
will be responsible for all accounting, finance, treasury and credit operations.
Prior to such date, Mr. Appleby was the Controller for the Company, a position
he has held since February 1998. Prior to his position with the Company, Mr.
Appleby was a Senior Audit Manager with KPMG Peat Marwick, LLP from 1991 to
1998. He received a B.B.A. in Accounting from the University of Texas at El
Paso and is a Certified Public Accountant in the State of Texas.

Todd R. Berman - Todd Berman has been a director of the Company since
January 30, 1997. Mr. Berman is the founder and President of Chartwell
Investments and has been with Chartwell Investments or its predecessor since
1992. Mr. Berman has served as Chairman of the Board of MMH Holdings, Inc.
("Holdings") and Morris Material Handling Inc. ("MMH") since March 30, 1998.
Holdings is a holding company whose sole direct subsidiary is MMH, a
manufacturer, distributor and service provider of "through-

48
<PAGE>

the-air" material handling equipment. Mr. Berman received a B.A. from Brown
University and a M.B.A. from Columbia University Graduate School of Business.

Michael S. Shein - Mr. Shein has been assistant secretary and a director of
the Company since January 30, 1997. Mr. Shein, a managing director and co-
founder of Chartwell Investments, has been with Chartwell Investments or its
predecessor since 1992. Mr. Shein has been a director of MMH Holdings, Inc.
("Holdings") and Morris Material Handling Inc. ("MMH") since March 30, 1998.
Holdings is a holding company whose sole direct subsidiary is MMH, a
manufacturer, distributor and service provider of "through-the-air" material
handling equipment. He received a B.S. summa cum laude from The Wharton School
at the University of Pennsylvania.

Malcolm Lassman - Mr. Lassman has been a director of the Company since
September 23, 1997. Mr. Lassman is a managing partner of the Washington, D.C.
office of the law firm Akin, Gump, Strauss, Hauer & Feld, L.L.P., where he has
practiced law since 1971. Mr. Lassman currently serves as a director of MMH
Holdings, Inc., a holding company whose sole direct subsidiary is Morris
Material Handling, Inc., a manufacturer, distributor and service provider of
"through-the-air" material handling equipment, since August 31, 1998, and
Project NorthStar, a company committed to assisting underprivileged children.
Mr. Lassman received a B.A. in Economics from Washington & Lee University and a
L.L.B. cum laude from Washington & Lee University.

Kevin T. Weir - Mr. Weir has been a director of the Company since January
1999. Mr. Weir currently serves as Manager of the North American Distillate
Business for Mobil Oil Corporation ("Mobil") and has since January 1999. Prior
to his current position at Mobil, he served as Retail Dealer Operations Manager
and Surface Transportation Manager of Mobil's North America Marketing and
Refining division. Mr. Weir has been an employee of Mobil for 20 years.

49
<PAGE>

Item 11. Executive Compensation

Executive Compensation

The following table presents information concerning compensation paid for
services to the Company during 1996, 1997 and 1998, to the Chief Executive
Officer of the Company and the four other most highly paid executive officers
employed by the Company at the end of 1998, collectively, the "Named Executive
Officers."

Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------ ------------

Awards
-------------------
Name and
Principal Other Annual Options All Other
Position Year Salary Bonus Compensation (% Interest)(10) Compensation
- ---------- ----- -------------- ----------- ------------- ------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
James A. Cardwell- 1998 $398,566 240,000 248,242(1)
Chief Executive Officer 1997 362,700 - 247,177(1)
1996 363,686 - 247,037(1)

Larry Zine- 1998 $328,462 198,000 3,049(11)
Executive Vice President 1997(3) 290,000 174,000 2.75(6) 64,728(7)
& Chief Financial
Officer

Joseph R. Schillaci- 1997 $ 31,277(5) - 458,314(2)(8)
Former President 1996 274,189 - 10,586(2)
& Chief Operating Officer

Walter A. Fitzgerald, Jr.- 1997 $ 16,730(5) - 197,696(8)(9)
Former Vice President- 1996 145,514 - 960(9)
Operations

Evan Brudahl- 1998 $160,000 96,000
Senior Vice President- 1997(3) 135,000 81,000 .90
Operations

James A. Cardwell, Jr.- 1998 $160,135 96,000 4,692(12)
Senior Vice President- 1997 135,000 81,000 .90 1,326(4)
Marketing & Business 1996 107,882 - 1,179(4)
Development

David Latimer- 1998 $131,101 64,704 2,772(13)
Vice President- 1997 128,516 90,959 .25 3,166(4)
Lube Operations 1996 123,296 - 2,767(4)

</TABLE>
__________________
(1) Represents employer contributions to the Company's 401(k) Plan of $4,702,
$3,637 and $3,497 in 1998, 1997 and 1996, respectively, and life insurance
premiums paid by the Company for the benefit of Mr. Cardwell in the amount
of $243,540 annually for 1998, 1997 and 1996.

(2) Represents insurance premiums of $0 and $7,653 paid by the Company for the
benefit of Mr. Schillaci in 1997 and 1996, respectively, and $314 and
$2,933 of employer contributions to the Company's 401(k) Plan for 1997 and
1996, respectively.

(3) Mr. Zine's employment with the Company commenced December 1996 and Mr.
Brudahl's commenced January 30, 1997.

50
<PAGE>

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

(5) Mr. Schillaci's and Mr. Fitzgerald's employment was terminated in January
1997.

(6) Represents options to purchase 2.75% of the common partnership interests of
the Company granted pursuant to the terms of his employment agreement;
25% of the options become exercisable on each of December 31, 1997, 1998,
1999, and 2000.

(7) Represents payments in connection with relocation expenses incurred by Mr.
Zine.

(8) Amount includes $458,000 and $194,000 of payments related to the buyout of
Mr. Schillaci's employment contract and Mr. Fitzgerald's severance letter,
respectively.

(9) Represents $3,696 and $960 of employer contributions to the Company's
401(k) Plan in 1997 and 1996, respectively.

(10) Options held by the Named Executive Officers in the Company, expressed as a
percent of the partnership equity.

(11) Represents employer contributions to the Company's Nonqualified Deferred
Compensation Plan.

(12) Represents employer contributions to the Company's 401(k) Plan and
Nonqualified Deferred Compensation Plan of $3,459 and $1,233, respectively.

(13) Represents employer contributions to the Company's 401(k) Plan and
Nonqualified Deferred Compensation Plan of $1,450 and $1,322, respectively.

Fiscal Year End Option Values

Partnership interests in the Company are not registered or publicly traded
and, therefore, a public market price of the partnership interests is not
available. While a formal valuation of the Company's partnership interests has
not been undertaken recently, the Company believes that the exercise price of
the Options held by the Named Executive Officers at December 31, 1998, was in
each case greater than or equal to the fair market value of the underlying
partnership interests as of such date.

Partnership Interests Option Plan

The Company has established an equity incentive plan to attract and retain
key personnel, including senior management, and to enhance their interest in the
Company's continued success. The Company applies Accounting Principles Board
Opinion No. 25 ("APB No. 25") in accounting for its plans. Accordingly, no
compensation cost has been recognized in the Consolidated Statement of
Operations from options issued under the partnership interest option plan.

Participants become fully vested upon the occurrence of a Change in Control
(as defined in the Option Plan), upon a sale of substantially all of the assets
of the Partnership, upon the liquidation of the Partnership, or upon the
Partnership's consummation or adoption of a plan to make an Extraordinary
Distribution or Redemption (as defined in the Option Plan). Options may be
exercised at any time, to the extent that such Options are exercisable. All
Options expire on the earlier to occur of (i) the tenth anniversary of the date
the Option was granted, (ii) one year after the participant ceases to be an
employee of the Partnership due to retirement, death or disability, (iii)
immediately, if the participant ceases to be an employee of the Partnership for
cause, or (iv) ninety days after the occurrence of the termination of the
participant's employment with the Partnership, for any reason other than (ii) or
(iii) above.

51
<PAGE>

Compensation of Members of the Board of Directors

Outside members of the Board of Directors receive a payment of $3,500 per
meeting from the Company for their services. Members who are employees of the
Company or employees of affiliates of the Company do not receive a salary or any
other payment for their services on the Board of Directors.

Compensation Committee

The Company does not maintain a formal Compensation Committee. The Company
administers the compensation program in conjunction with the Chief Executive
Officer, the President and the Board of Directors. The Chief Executive
Officer's salary is determined by the Executive Committee of the Board of
Directors.

Employment Agreements

The Company entered into employment agreements with Jack Cardwell and Jim
Cardwell on January 30, 1997 and, effective December 16, 1996, entered into an
employment agreement with Mr. Zine (collectively the "Employment Agreements").
The Employment Agreements commenced on the date of execution and expire on
December 31, 1999. Under the Employment Agreements, the annual base salaries of
Jack Cardwell, Jim Cardwell and Mr. Zine (the "Executives") are $362,700,
$135,000 and $290,000, respectively, and are subject to review and may be
increased by the Company's Board of Directors (or compensation committee, if one
is elected). Jack Cardwell and Jim Cardwell are also entitled to participate in
any bonus plan approved by the Board of Directors of the Company. Mr. Zine is
eligible to receive an annual cash bonus, based on parameters to be established
by Jack Cardwell and Mr. Zine and approved by the Board of Directors.

On January 30, 1997, Mr. Zine received options to purchase (at an exercise
price per share of approximately $400,000 per 1%) 2.75% of the Company's common
limited partnership interests, on a fully diluted basis.

If the Company terminates any of the Employment Agreements without cause or
because the officer has been incapacitated for three consecutive months, or the
Executive terminates his Employment Agreement for "good reason" (as defined in
each Employment Agreement), then the terminated officer will be entitled to
continue to receive his salary, plus certain benefits, for twelve months from
the date of the notice of termination. The Employment Agreements contain certain
customary nonsolicitation provisions upon termination of such agreements.

The Company and Joseph R. Schillaci, the Company's former President and
Chief Operating Officer, entered into an employment agreement dated as of
January 1, 1993 (the "Employment Agreement"). The Company terminated the
Employment Agreement at the closing of the Recapitalization. Pursuant to the
terms of the Employment Agreement, at the closing, the Company: (i) paid Mr.
Schillaci a lump sum of $300,000; and (ii) paid Mr. Schillaci for reasonable
expenses in connection with his relocation and out-placement assistance.

The Company has entered into an employment agreement with Evan Brudahl
effective April 1, 1999 which will expire on December 31, 2003. Under the
employment agreement, Mr. Brudahl's annual base salary totals $189,600 which is
subject to annual review and may be increased by the Company's Board of
Directors (or compensation committee, if one is elected). Mr. Brudahl is also
entitled to receive an annual cash bonus, based on parameters within the
agreement.

52
<PAGE>

Secondment Letter Agreement

The Company entered into an agreement with Mobil Oil providing for the
temporary secondment (or loan) of one of Mobil Oil's employees, Evan C. Brudahl,
to the Company. The period of secondment commenced on January 30, 1997 and is
contemplated to continue until July 1, 2000, subject to certain termination
rights, including the right of Mobil Oil or Mr. Brudahl to terminate the
agreement at their discretion. Under the agreement, the Company has the right,
if Mr. Brudahl is performing at an unacceptable level, to terminate the
secondment period on 120 days notice. During the secondment period, the loaned
employee, Mr. Brudahl, will continue as an employee of Mobil Oil but will be
under the day-to-day supervision of the Company. The Company will be responsible
for all compensation, benefit and other expenses relating to the secondment of
Mr. Brudahl to the Company. Effective April 1, 1999, Mr. Brudahl will become a
permanent Petro employee, and will concurrently resign from Mobil Oil.

Employee Benefits Plans

The Plan failed to correctly perform the requirements under Section
401(k)(3)(ii) of the Internal Revenue Code of 1986, as amended (the "Code"),
Section 401(m) of the Code and the underlying Treasury Regulations (hereinafter
referred to as the ADP/ACP Test) for the Plan years 1990-1996. In addition, the
Plan failed to allocate forfeitures of employee contributions in accordance with
the terms of the Plan since its inception. Management of the Company believes
it has identified all operational defects of the Plan, and has taken corrective
actions to ensure future compliance. The plan administrator submitted a request
for a compliance statement to the IRS on December 19, 1996, under the IRS
Voluntary Compliance Resolution Program (VCR). On August 20, 1998, the IRS
notified the Plan that due to certain technical legal issues under the Plan, the
submission could not be accepted under the VCR Program, and should be redirected
to the Walk in Closing Agreement Program (Walk in CAP). Under the Walk in CAP,
it is anticipated the Plan will be permitted to take corrective actions with
respect to the operational defects and receive a compliance statement from the
IRS acknowledging such action. At December 31, 1998, management of the Company
believes it has accrued amounts sufficient to cover any corrective contribution
required by the IRS.

During 1998, the Company established the "Petro Deferred Compensation Plan"
(the "Comp Plan") for key employees. Under the Comp Plan, the participants may
defer base compensation and earn interest on their deferred amounts. The program
is not qualified under Section 401 of the Internal Revenue Code. Participants
may defer no more than 20% of their compensation per year. The Company will
credit matching deferrals for each participant equal to 50% of the first 4% of
the participant's compensation up to $9,500 per year. Company matched deferrals
will vest at 20% after one year of service and an additional 20% for each year
thereafter. The Plan Trustee will invest each participant's account balance in a
separate account. The participants are general creditors of the Company with
respect to these benefits. The total of participant deferrals, which is
reflected in accrued expenses and other liabilities, was $160,000 at December
31, 1998. The Company's matched deferral expenses for the year ended December
31, 1998 was $9,900.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding beneficial
ownership of the Company's common partnership interests by each general partner,
each limited partner who owns more than 5% of the Company's common partnership
interests, each director who beneficially owns partnership interests, each
executive officer who beneficially owns partnership interests and all directors
and executive officers of the Company as a group. Except as set forth in the
footnotes to the table, each partner listed below has informed

53
<PAGE>

the Company that such partner will have (i) sole voting and investment power
with respect to such partner's partnership interests, except to the extent that
authority is shared by spouses under applicable law and (ii) record and
beneficial ownership with respect to such partner's partnership interests.

Type of Class of Capital Percentage
Names Interest Interest Contribution of Class
------- --------- -------- --------------- -----------
<S> <C> <C> <C> <C>
James A. Cardwell, Sr. General Partner Common $ 485,560(1) 1.1843(2)
6080 Surety Drive Limited Partner Common 14,143,493(1) 34.4963(2)
El Paso, Texas 79905

Chartwell L.P.(3)(4) General Partner Common 400,000 0.9756
c/o Maples & Calder Limited Partner Common 20,330,000 49.5854
Ugland House
P.O. Box 309
George Town, Grand Cayman
Cayman Islands (B.W.I.)

James A. Cardwell, Jr. Limited Partner Common 1,640,947(1) 4.0023(5)
6080 Surety Drive
El Paso, Texas 79905

Mobil Long Haul Inc. Limited Partner Common 3,000,000 7.3171
3225 Gallows Road
Fairfax, Virginia 22037
97.5610%
- --------------

All directors and officers
as a group (10 persons) 39.6829%

______________
</TABLE>

(1) Represents the implied carryover value of the Cardwell Group in the Company
after the consummation of the Recapitalization. The Cardwell Group did not
receive or invest any cash in the Recapitalization. For purposes of the
Recapitalization, its partnership interests were given an implied value of
approximately $23,900,000, of which $7,600,000 was the face value of
preferred partnership interests and approximately $16,300,000 was the
implied value of common partnership interests. The value of the Cardwell
Group's partnership interests has been implied based on the partnership
interest purchase price paid and capital contributions to the Company made
by Chartwell and Mobil Long Haul in the Recapitalization.

(2) Includes partnership interests owned of record by Petro, Inc. Petro, Inc.
is a wholly owned subsidiary of Nevada Trio, Inc., a Nevada corporation,
which is a wholly owned subsidiary of Card Partners, L.P., a Texas limited
partnership of which Jack Cardwell and Mrs. Jack Cardwell are limited
partners and of which Texas Mec, Inc., a Texas corporation, is the general
partner. Jack Cardwell is the sole shareholder of Texas Mec, Inc.
Accordingly, Jack Cardwell may be deemed to have beneficial ownership of
the partnership interests owned by Petro, Inc.

(3) Represents partnership interests owned of record by Petro Holdings GP Corp.
and Petro Holdings LP Corp. Petro Holdings GP Corp., a Delaware
corporation, is a wholly owned subsidiary of Petro Holdings LP Corp., which
is a wholly owned subsidiary of Petro Holdings L.L.C., a Delaware limited
liability company. Chartwell L.P., a Cayman Islands limited partnership, is
the majority shareholder of Petro Holdings L.L.C. Todd R. Berman, who is a
Director and a member of the Executive Committee of the Company, is a
limited partner of Chartwell L.P. Michael S. Shein, who is a Director and a
member of the Operating Committee of the Company, is also a limited partner
of Chartwell L.P. Mr. Berman and Mr. Shein are the Managers of Petro
Holdings L.L.C. Other minority

54
<PAGE>

shareholders include an affiliate of CIBC Wood Gundy Securities Corp. and
The First National Bank of Boston, the agent and a lender under the New
Credit Agreement.

(4) In March 1999, the Company, certain of its Partners and Volvo Trucks North
America, Inc. ("Volvo") entered into letters of intent wherein Volvo agreed
in principle to acquire an interest in the Company. As part of the
transaction, it is contemplated that Chartwell's interest in Petro will be
repurchased. See Item 1. "Business-General-Recent Developments".

(5) Includes partnership interests owned of record by JAJCO II, Inc. Jim
Cardwell is the sole shareholder of JAJCO II, Inc. and may be deemed to
have beneficial ownership of the partnership interest owned by JAJCO II,
Inc.

Item 13. Certain Relationships and Related Transactions

Tax Reimbursements

The Restated Partnership Agreement requires the Company to make
distributions to each of its partners in an amount sufficient to allow each
partner to pay federal, state and local income taxes with respect to allocations
of taxable income to such partner by the Company. Historically, aggregate tax
distributions to the Company's partners were based on the Company's taxable
income. For the fiscal years ended December 31, 1996, December 31, 1997 and
December 31, 1998, tax distributions made to the Company's partners were $0, $0
and $1,120,000, respectively. Tax distributions in the future will be based on
separate allocations of taxable income of the Company's partners rather than the
taxable income of the Company. Under certain circumstances, the Company's
partners receiving tax distributions with respect to allocations of taxable
income under the Restated Partnership Agreement will be obligated to repay the
portion of such tax distribution that exceeds the amount of a tax distribution
that would have been made had tax distributions been based on the Company's
taxable income.

Principal Executive Offices

The office building in which the Company's principal executive offices are
located is owned by Jack Cardwell, the Chief Executive Officer and a Director of
the Company. The Company leases the entire building under a lease expiring on
December 31, 2005. Under the lease, the Company pays monthly rent totaling
$336,000 per year, as well as taxes, maintenance and other operating expenses.
For each of the fiscal years ended December 31, 1996, December 31, 1997 and
December 31, 1998, the Company made annual rental payments of $336,000.

Effingham, Illinois Stopping Center

The Stopping Center located in Effingham, Illinois, is owned by Truck Stop
Property Owners, Inc. ("Truck Stop"), which is owned by Travis Roberts, who is a
current officer of the Company, and five former employees of the Company. Mr.
Roberts owns 22% of the stock of Truck Stop. The Company leases the Effingham
Center under a lease expiring in May 2006, which provides for adjustable rental
payments tied to interest rates (the "Basic Rent"), plus taxes and operating
expenses. The Company has three consecutive options to renew the lease for terms
of five years each at rental rates equal to the Basic Rent, plus certain
adjustments at the time of renewal. The Company also has a right of first
refusal to purchase the Stopping Center at a purchase price agreed upon between
Truck Stop and a third party. For the fiscal years ended December 31, 1996,
December 31, 1997 and December 31, 1998, the Company made rental payments to
Truck Stop of $1,080,000, $1,073,000 and $1,073,000, respectively.

Highway Service Ventures, Inc.

Highway Service Ventures, Inc. ("HSV"), a corporation in which Jack
Cardwell owns a 32.5% interest, operates four franchised Stopping Centers
located in Elkton, Maryland; Ruther Glen, Virginia; Florence, South Carolina;
and Carnesville, Georgia pursuant to franchise agreements with the Company. The
initial term of each of these franchise agreements is ten years and they are
automatically renewed for two

55
<PAGE>

five-year terms unless terminated by the franchisee. None of these franchise
agreements contain terms that are any more favorable to the franchisee than the
terms in any of the Company's other franchise agreements.

Petro:Tread

In May 1992, the Company leased a facility in El Paso, Texas, from a trust
in which Jack Cardwell is a 50% beneficiary, to operate the Company's retread
plant, which produces retread tires for sale at Stopping Centers (including
franchisees) and to others. The lease, which expired in October 1995, provided
for two consecutive renewal options for terms of five years each. The Company
exercised its first renewal option in October 1995 to renew the lease for five
years commencing November 1, 1995. The Company made lease payments of $72,000
for the fiscal years ended December 31, 1996, 1997 and 1998, respectively. In
addition, the Company sells retread tires to El Paso Tire Center, Inc., a
corporation in which Jack Cardwell owns 100%. Such sales amounted to $153,000,
$47,000 and $60,000 in 1996, 1997 and 1998, respectively.

Product Services Agreement and Fuel Sales Agreement

The Company currently purchases Chevron branded gasoline and motor oils at
cost for three of its Auto Fuel Islands pursuant to a sales agreement with C&R
Distributing, Inc. ("C&R"), a corporation in which Jack Cardwell is the sole
shareholder. In addition, in May 1992, C&R and the Company entered into a
product services agreement terminating in 1999, under which C&R provides the
Company with fuel hauling and fuel pump maintenance and services within the El
Paso, Texas, metropolitan area, if requested by the Company. The agreement
provides that C&R will charge the Company for these services at the lowest rates
charged by C&R for similar services and, in any event, at rates that will not
exceed rates available from unrelated parties providing similar services. During
fiscal years 1996, 1997 and 1998, the Company's purchases from C&R under these
two agreements aggregated $10,771,000, $5,079,000 and $3,995,000, respectively.
Furthermore, the Company and C&R agreed to notify the other if either party had
petroleum products for sale with no obligation on either party to purchase any
portion of such products. During fiscal years 1996, 1997 and 1998, the Company
made sales to C&R under this agreement aggregating $3,950,000, $3,315,000 and
$1,444,000, respectively. The term of the product services agreement with C&R
has been extended through December 31, 2004. Notwithstanding the extension, the
Company has the option of not purchasing products or services from C&R if the
Company can purchase such products or services more economically from third
parties.

Option and Right of First Refusal Agreement

In connection with the formation of the Company in May 1992 under an Option
and Right of First Refusal Agreement, Jack Cardwell and Jim Cardwell, officers
and members of the Board of Directors of the Company, granted to the Company and
Roadside options, which expire in December 2006, to purchase certain properties
owned by the Cardwells that are located near or adjacent to the Company's
Stopping Centers located in Shreveport, Louisiana (7 acres subject to option),
Weatherford, Texas (34 acres), Beaumont, Texas (17 acres) and Oklahoma City,
Oklahoma (30 acres) (the "Option Properties"), and a right of first refusal on
each of the Option Properties. At the closing of the Recapitalization, Roadside
assigned all of its rights under the Option and Right of First Refusal Agreement
to Mobil Long Haul, Holdings GP and Holdings LP. The price at which an Option
Property may be purchased will be equal to the fair market value of the property
when the option is exercised as determined by an appraisal.

Alcohol Sales and Servicing Agreements

In order to continue engaging in retail sales of beer, wine or wine coolers
at a limited number of its facilities after the formation of the Company in May
1992, the Company entered into agreements with CYMA Development Corporation
("CYMA"), C and PPR, Inc. ("C&PPR"), Petro Truckstops, Inc. ("Petro Truckstops")
and Petro Beverage, Inc., which collectively hold permits or licenses to sell
alcoholic beverages in the states of Louisiana, Texas and Oregon. Jack Cardwell,
Jim Cardwell and Mrs. Jack Cardwell own 60%, 30% and 10%, respectively, of the
stock of C&PPR. Jack Cardwell is the sole shareholder of CYMA and Jim

56
<PAGE>

Cardwell is the sole shareholder of Petro Truckstops and Petro Beverage, Inc.
The agreements continue in effect until terminated by either party. Under the
agreements with CYMA and C&PPR, the Company agreed to operate the alcohol sales
business at these locations in exchange for 10% of the gross receipts generated
from alcoholic beverage sales, plus reimbursement of all operating expenses.
Under a similar agreement with Petro Truckstops, dated April 8, 1994, and Petro
Beverage, Inc., dated February 10, 1995, each of which has a one year initial
term and continues in effect until terminated by either party, the Company
receives 15% of gross receipts generated from alcoholic beverage sales. In each
of the agreements, the net payments to the Company are approximately equal to
the gross profit received by the above entities.

Motor Media Arrangements

Amusement and Video Poker Games Agreements

Indemnity Agreements

In order to comply with applicable Internal Revenue Code and Treasury
Regulation provisions dealing with recourse debt, Jack Cardwell, Jim Cardwell,
Texas JIMCO, Inc., JAJCO, Inc., JAJCO II Inc., and Arcadian Management
Corporation each entered into an indemnity agreement under which each has agreed
to indemnify the Company, the general partners and certain limited partners in
the event that the indemnified party is required to pay certain of the Company's
indebtedness after a default, acceleration by the creditor and exhaustion of any
collateral securing the credit facility. In May 1994, Jack Cardwell, Jim

57
<PAGE>

Cardwell, Texas JIMCO, Inc., JAJCO, Inc., JAJCO II Inc., and Arcadian Management
Corporation amended their original indemnity agreements in connection with the
May 1994 financing. No payments have been made under these agreements.

Motor Fuels Franchise Agreement

On January 30, 1997, the Company and Mobil Oil Corp. ("Mobil") entered into
a 10-year Motor Fuels Franchise Agreement whereby the Company has agreed to
purchase Mobil branded diesel fuel and gasoline for sale and distribution under
Mobil's trademarks at the Company-operated truckstops. The agreement requires
the Company to purchase from Mobil certain minimum monthly and annual quantities
of diesel fuel and gasoline available at Mobil's specified delivery terminals
subject to product availability and reductions by Mobil under certain described
circumstances and subject to existing gasoline supply contractual obligations.
As a result of the agreement and in order to comply with the laws governing the
branding of diesel fuel, Mobil Diesel Supply Corp. ("MDS"), a wholly-owned
subsidiary of Mobil, was formed. MDS purchases diesel fuel from third-party
suppliers and then sells it back to the Company at cost, given that Mobil cannot
supply 100% of the Company's diesel fuel demand due to limited product
availability and restrictions on the amount of diesel fuel that the Company is
allowed to purchase from Mobil. The Company's fuel purchase arrangement with
MDS enables the Company to meet its diesel fuel demand and to comply with
branding laws, which require Mobil to first take possession of the fuel before
it can be branded as Mobil Diesel. The agreement allows the Company to continue
to negotiate for the purchase of diesel fuel with third-party suppliers approved
by MDS. In such cases, MDS purchases the diesel fuel from the supplier and
resells the product to the Company. Any change in supply source, however, does
not affect the Company's requirement to purchase the annual minimum number of
gallons from Mobil. The Company is also limited to certain monthly maximum
purchase quantities from each Mobil specified delivery terminal. Prices charged
for Mobil fuel sold to the Company during the term are based on certain
referenced prices, plus or minus discounts or premiums. Subject to certain
adjustments based upon fuel availability at specified Mobil supply terminals,
beginning with the calendar year January 1, 1997, and each succeeding calendar
year thereafter, to the extent the Company purchases from Mobil quantities of
diesel fuel below the minimum amount required by the agreement, the Company is
required to pay Mobil a fee based on the shortfall.

Master Supply Contract for Resale of Oils and Greases

Mobil Oil and the Company have also entered into a 10-year supply
agreement, commencing January 30, 1997, whereby the Company will purchase and
feature certain Mobil Delvac branded oils and lubricants at the truckstop
locations operated by the Company.

Marketing Services Agreement

On January 30, 1997, Mobil Oil and the Company entered into a 10-year
Marketing Services Agreement whereby Mobil Oil provides advice and assistance to
the Company on matters concerning the distribution and marketing of fuels and
petroleum products, including certain personnel support. In connection
therewith, the Company will pay to Mobil Oil an annual marketing services fee of
$300,000, payable in two semi-annual installments, and additionally will pay or
directly reimburse Mobil Oil for all costs of certain personnel support,
including salary compensation, benefits, travel and other out-of-pocket expenses
incurred by certain Mobil Oil employees in connection with the Company's
business.

Joint Venture Agreement

58
<PAGE>

Agreement, the Company will receive a management fee of $250,000 per annum
and will share in 40% of the location's operating earnings. At December 31,
1998, the Petro branded location was under construction.

Secondment Letter Agreement

On January 30, 1997, the Company had entered into an agreement with Mobil
Oil, providing for the temporary secondment (or loan) of one of Mobil Oil's
employees, Evan C. Brudahl, to the Company. The period of secondment commenced
upon the closing of the Recapitalization and is contemplated to continue until
July 1, 2000, subject to certain termination rights, including the right of
Mobil Oil or the employee to terminate the agreement at their discretion. Under
the agreement, the Company has the right, if the employee is performing at an
unacceptable level, to terminate the secondment period on 120 days' notice.
During the secondment period, the loaned employee will continue as an employee
of Mobil Oil but will be under the day-to-day supervision of the Company. The
Company is responsible for all compensation, benefit and other expenses relating
to the secondment of the employee to the Company. Effective April 1, 1999, Mr.
Brudahl will become a permanent Petro employee, and will concurrently resign
from Mobil Oil.

Chartwell Financial Advisory Agreement

The Company entered into an agreement with Chartwell Investments,
commencing January 30, 1997, providing for the payment of fees and reimbursement
of certain expenses to Chartwell Investments for acting as financial advisor
with respect to the Recapitalization, including soliciting, structuring and
arranging the financing of the Recapitalization. The fees, totaling
approximately $3,000,000, equal to 1% of the total capitalization of the Company
plus .5% of the Expansion Facility and the reimbursement of certain expenses,
were paid at the closing of the Recapitalization. Mr. Berman and Mr. Shein are
directors of the Company and are officers and directors of Chartwell
Investments.

Chartwell Management Consulting Agreement

The Company has entered into a management consulting agreement with
Chartwell Investments, commencing January 30, 1997, pursuant to which Chartwell
Investments will provide the Company with certain management, advisory and
consulting services for a fee of $600,000 for each fiscal year of the Company
during the term of the agreement, with up to an additional $100,000 payable for
each fiscal year, provided that EBITDA is at least $45 million, plus
reimbursement of certain expenses. The term of the management consulting
agreement is ten years and is renewable for additional one year periods unless
the Board of Directors of the Company gives prior written notice of non-renewal
to Chartwell Investments. Mr. Berman and Mr. Shein are directors of the Company
and are officers and directors of Chartwell Investments. During 1998, the
Company paid Chartwell Investments $714,000 under this agreement.

Certain Business Relationships

Mr. Lassman, a director of the Company since September 23, 1997, is a
managing partner of Akin, Gump, Strauss, Hauer & Feld, L.L.P., which has
provided legal services to the Company during 1998 and will continue to provide
legal services to the Company during 1999.

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<PAGE>

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) The following documents are filed as a part of this report:
1. Financial statements
The following consolidated financial statements of the Company are included in
Part II, Item 8 of this report:

<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheets 22
Consolidated Statements of Operations 23
Consolidated Statements of Changes in Partners' Capital (Deficit) 24
Consolidated Statements of Cash Flows 25
Notes to Consolidated Financial Statements 26-43
Reports of Independent Accountants 44-45
</TABLE>

All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the audited
consolidated financial statements or notes thereto.

2. Exhibits

Incorporated herein by reference is a list of Exhibits contained in the
Exhibit Index on pages 62 through 66 of this Annual Report.

(b) Reports on Form 8-K: None.

60
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Petro Stopping Centers, L.P. has duly caused this report
to be signed on its behalf by undersigned, thereunto duly authorized.

PETRO STOPPING CENTERS, L.P.
Registrant

By /s/ James A. Cardwell, Sr.
-------------------------------
James A. Cardwell, Sr.
Chairman of the Board of Directors
and Chief Executive Officer
March 31, 1999
(DATE)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Petro
Stopping Centers, L.P. and in the capacities on the date indicated:

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

/s/ James A. Cardwell, Sr. Chairman of the Board of Directors March 31, 1999
- ------------------------------- and Chief Executive Officer
(James A. Cardwell, Sr.) (Principal Executive Officer)

/s/ Larry J. Zine President, Chief Financial Officer March 31, 1999
- ------------------------------- and Director
(Larry J. Zine) (Principal Financial Officer)

/s/ David A. Appleby Vice President of Finance March 31, 1999
- ------------------------------- (Chief Accounting Officer)
(David A. Appleby)

/s/ Evan Brudahl Member of the Board of Directors and March 31, 1999
- ------------------------------- Sr. Vice President of Operations
(Evan Brudahl)

/s/ James A. Cardwell, Jr. Member of the Board of Directors and March 31, 1999
- ------------------------------- Sr. Vice President of Marketing and
(James A. Cardwell, Jr.) Business Development

/s/ Todd R. Berman Member of the Board of Directors March 31, 1999
- -------------------------------
(Todd R. Berman)

/s/ Michael S. Shein Member of the Board of Directors, March 31, 1999
- ------------------------------- Assistant Secretary
(Michael S. Shein)

/s/ Malcolm Lassman Member of the Board of Directors March 31, 1999
- -------------------------------
(Malcolm Lassman)

/s/ Kevin Weir Member of the Board of Directors March 31, 1999
- -------------------------------
(Kevin Weir)
</TABLE>

61
<PAGE>

PETRO STOPPING CENTERS, L.P.
Exhibit Index

3.1(aa) Amended and Restated Certificate of Limited Partnership of the
Company dated as of January 30, 1997.

3.2(aa) Third Amended and Restated Limited Partnership Agreement of the
Company, dated as of January 30, 1997, by and among the Petro, Inc.,
James A. Cardwell, Sr., James A. Cardwell, Jr., JAJCO II, Inc.,
Petro Holdings GP Corp, Petro Holdings LP Corp., Mobil Long Haul
Inc., and Kirschner Investments.

3.3(bb) Certificate of Incorporation of Petro Financial Corporation.

3.4(bb) Bylaws of Petro Financial Corporation.

4.1(cc) Indenture, dated as of May 24, 1994, among the Company, Petro
Financial Corporation and First Trust National Association, as
trustee, for the Company's $100,000,000 principal amount 12 1/2%
Senior Notes due 2002.

4.2(cc) Form of 12 1/2% Senior Note due 2002.

4.3(cc) Guarantee Agreement, dated as of May 24, 1994, between the Company
and First Trust National Association.

4.4(cc) Warrant Agreement, dated as of May 24, 1994, among the Company,
Petro Financial Corporation and First Trust National Association.

4.5(cc) Specimen of Exchangeable Debt Warrant

4.6(aa) Indenture dated as of January 30, 1997, among the Company, Petro
Financial Corporation and State Street Bank and Trust Company, as
trustee, relating to the Company's $135,000,000 principal amount 10
1/2% Senior Notes due 2007.

4.7(aa) Form of 10 1/2% Senior Note due 2007.

4.8(aa) Note Registration Rights Agreement, dated as of January 30, 1997,
by and among the Company, Petro Financial Corporation and CIBC Wood
Gundy Securities Corp. and Morgan Stanley Incorporated.

4.9(aa) Amended and Restated Revolving Credit and Term Loan Agreement,
dated as of January 30, 1997, among the Company, the Lenders party
thereto, and The First National Bank of Boston, as Agent.

4.10(aa) First Amendment to Amended and Restated Revolving Credit and Term
Loan Agreement and Limited Waiver, dated as of February 12, 1997,
among the Company, the Lenders party thereto, and The First National
Bank of Boston, as Agent.

10.1 Form of the Company's Franchise Agreement.

10.2 Schedule of Existing Franchise Agreements (including franchises in
which James A. Cardwell has an interest: Florence, SC; Elkton, MD;
Ruther Glen, VA; and Carnesville, GA).

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10.3(bb) Surety Drive Lease Agreement, dated April 30, 1992, between James
A. Cardwell and the Company.

10.4(bb) Agreement relating to trademark license for Bordentown, New
Jersey, dated April 30, 1992, between the Company and Petro, Inc.

10.5(bb) Petro:Tread Lease Agreement, dated April 30, 1992, between James
Arthur Lyle and the Company.

10.6(bb) Lease Agreement relating to Louisiana liquor sales, dated April
30, 1992, between the Company and Petro, Inc.

10.7(bb) Servicing Agreement relating to Louisiana liquor sales, dated
April 30, 1992, between the Company and Petro, Inc.

10.8(bb) Lease Agreement relating to Arlington, Texas, liquor sales, dated
April 30, 1992, between the Company and CYMA Development
Corporation.

10.9(bb) Servicing Agreement relating to Arlington, Texas, liquor sales,
dated April 30, 1992, between the Company and CYMA Development
Corporation.

10.10(bb) Lease Agreement relating to Texas convenience store liquor
sales, dated April 30, 1992, between the Company and C and PPR, Inc.

10.11(bb) Servicing Agreement relating to Texas convenience store liquor
sales, dated April 30, 1992, between the Company and C and PPR, Inc.

10.12(bb) Sublease and Services Agreement relating to Shreveport,
Louisiana, liquor sales, dated April 8, 1994, between the Company
and Petro Truckstops, Inc.

10.13(bb) Sublease and Services Agreement relating to Shorter, Alabama,
liquor sales, dated April 13, 1994, between the Company and Petro,
Inc.

10.14(bb) Lease relating to the Effingham, Illinois, Stopping Center,
dated May 23, 1990, between Truck Stop Property Owners, Inc. and
Petro, Inc.

10.15(bb) Lease with Option to Purchase, dated September 9, 1983, among
Vaughn O. Seale, Francine S. Dodson, Hazel S. Darouse and Metro
Hammond, Inc.

10.16(bb) Profit Participation Agreement, dated March 1, 1993, between
Pelican Gaming, Inc. and Petro Truckstops, Inc.

10.17(bb) Amended and Restated Sublease and Services Agreement dated to be
effective as of February 26, 1993, between the Company and Petro
Truckstops, Inc.

10.18(bb) Agreement and General Release, dated February 22, 1993, among
the Company, Petro PSC Properties, L.P., Petro, Inc., Arcadian
Management Corporation and William J. La Croix.

10.19(bb) Agreement relating to the purchase of Chevron brand and other
petroleum products of Chevron U.S.A. Products Company for the
Shorter, Alabama, convenience store (facility no. 13929), between
the Company and C&R Distributing, Inc.

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10.20(bb) Agreement relating to the purchase of Chevron brand and other
petroleum products of Chevron U.S.A. Products Company for the
Bucksville, Alabama, convenience store (facility no.13817), between
the Company and C&R Distributing, Inc.

10.21(bb) Agreement relating to the purchase of Chevron brand and other
petroleum products of Chevron U.S.A. Products Company for the
Kingston Springs, Tennessee, convenience store (facility no. 13928),
between the Company and C&R Distributing, Inc.

10.22(bb) Agreement relating to the purchase of Chevron brand and other
petroleum products of Chevron U.S.A. Products Company for the
Vinton, Texas, convenience store (facility no. 7-5661), between the
Company and C&R Distributing, Inc.

10.23(bb) Agreement relating to the purchase of Chevron brand and other
petroleum products of Chevron U.S.A. Products Company for the El
Paso, Texas, convenience store (facility no. 20-1602), between the
Company and C&R Distributing, Inc.

10.24(aa) Distributor Sales Agreement (Branded) Renewal Offer dated
November 1, 1996, between Exxon Company, U.S.A. and the Company.

10.25(aa) Amended Split Dollar Life Insurance Agreement, dated as of May
1, 1995, among the Company, James A. Cardwell, Jr., Trustee of the
James A., and Evonne Cardwell Trust Number Two and James A.
Cardwell, Jr., Trustee of the James A. Cardwell Trust No. Three.

10.26(dd) Lease and Services Agreement, dated January 26, 1995, between
the Company and Petro Truckstops, Inc.

10.27(dd) Lease and Services Agreement, dated February 10, 1995, between
the Company and Petro Beverage, Inc.

10.28(aa) Omnibus Agreement by and among James A. Cardwell, Sr., James A.
Cardwell, Jr. JAJCO II, Petro Inc., Mobil Long Haul Inc., Petro
Holdings GP Corp., Petro Holdings LP Corp., the Company and
Kirschner Investments Company dated as of October 18, 1996 (the
"Omnibus Agreement").

10.29(aa) Amendment No. 1 to the Omnibus Agreement, dated as of January
30, 1997.

10.30(aa) Employment Agreement, dated January 30, 1997, by and between
James A. Cardwell, Sr. and the Company.

10.31(aa) Employment Agreement, dated January 30, 1997, by and between
James A. Cardwell, Jr. and the Company.

10.32(aa) Employment Agreement, dated December 16, 1996, by and between
Larry Zine and the Company.

10.33(aa) PMPA Distributor Motor Fuels Franchise Agreement, dated January
30, 1997, by and between Mobil Oil and the Company.

10.34(aa) Marketing Services Agreement, dated January 30, 1997, by and
between Mobil Oil and the Company.

10.35(aa) Memorandum of Understanding - Joint Project Development, dated
January 30, 1997, by and between Mobil Oil and the Company.

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10.36(aa) Secondment Agreement, dated January 30, 1997, by and between
Mobil Oil and the Company

10.37(aa) Master Supply Contract for Resale of Oils and Greases, dated
January 30, 1997, by and between Mobil Oil and the Company.

10.38(aa) Financial Advisory Agreement, dated January 30, 1997, by and
between Chartwell Investment and the Company.

10.39(aa) Management Consulting Agreement, dated January 30, 1997, by and
between Chartwell Investment and the Company.

10.40(aa) Product Services Agreement, dated January 30, 1997, by and
between C&R Distributing, Inc., a Texas corporation, and the
Company.

10.41(aa) Petro/El Paso Amusement Services Agreement, dated January 30,
1997, by and between El Paso Vending and Amusement Company and the
Company.

10.42(aa) Display Space Agreement, dated January 30, 1997, by and between
Motor Media, Inc. and the Company.

10.43(aa) Second Amended and Restated Indemnity and Hold Harmless
Agreement, dated January 30, 1997, by James A. Cardwell, Sr. for the
benefit of Petro Holdings GP Corp., Petro, Inc., the Company and
Petro Financial Corporation.

10.44(aa) Second Amended and Restated Indemnity and Hold Harmless
Agreement, dated January 30, 1997, by James A. Cardwell, Jr. and for
the benefit of Petro Holdings GP Corp., Petro, Inc., the Company and
Petro Financial Corporation.

10.45(aa) Second Amended and Restated Indemnity and Hold Harmless
Agreement, dated January 30, 1997, by JAJCO II for the benefit of
Petro Holdings GP Corp., Petro, Inc., the Company and Petro
Financial Corporation.

10.46(aa) Indemnity and Hold Harmless Agreement, dated January 30, 1997,
by Petro, Inc. for the benefit of Petro Holdings GP Corp., Petro,
Inc., the Company and Petro Financial Corporation.

10.47(aa) Second Amended and Restated Indemnity and Hold Harmless
Agreement, dated January 30, 1997, by Arcadian Management
Corporation, a Colorado corporation, for the benefit of Petro
Holdings GP Corp., Petro, Inc., the Company and Petro Financial
Corporation.

10.48(aa) Interest Purchase Agreement among Sequoia Ventures Inc.,
Roadside, Inc., Chartwell, Mobil Long Haul and the Company dated as
of October 18, 1997.

10.49(bb) Southwestern Bell Telephone Company Multi-State License
Agreement for placement of Public Telephone Equipment, dated April
1, 1993, between the Company and Southwestern Bell Telephone
Company.

10.50(bb) Southwestern Bell Telephone Company Public Telephone License
Agreement, dated May 16, 1990, between Southwestern Bell Telephone
Company and Petro, Inc.

10.51(ee) Form of Key Employee Incentive Compensation Plan.

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10.52(aa) 1996 Management Incentive Plan.

10.53(hh) Purchase and Sale Agreement dated October 27, 1997, between Dr.
Jung Y. Park and Wife, Kyung Hee Park and Petro Stopping Centers,
L.P.

10.54(hh) Amendment No. 1 dated November 3, 1997 to Purchase and Sale
Agreement between Dr. Jung Y. Park and Wife, Kyung Hee Park and
Petro Stopping Centers, L.P.

10.55(ii) Limited Liability Company Operating Agreement of Petro Travel
Plaza, LLC, dated as of December 5, 1997, among the Company, Tejon
Development Corporation, and Tejon Ranch Company, as Guarantor.

10.56* Petro Stopping Centers Deferred Compensation Plan Agreement, dated
November 26, 1997.

16.1(ff) Letter, dated September 3, 1997, from Coopers & Lybrand LLP,
Regarding Change in Certifying Accountants.

16.2(ff) Letter, dated September 3, 1997, from Arthur Andersen LLP,
Regarding Change in Certifying Accountants.

16.3(gg) Letter, dated September 11, 1997, from Coopers & Lybrand LLP,
Regarding Change in Certifying Accountants.

21(aa) Subsidiaries of the Company

27* Financial Data Schedule

- -------------------------
* Filed herewith.
(aa) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
(bb) Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration No. 33-76154).
(cc) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 30, 1994.
(dd) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995.
(ee) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year end December 29, 1995.
(ff) Incorporated by reference to the Company's Current Report on Form 8-K,
filed on September 3, 1997.
(gg) Incorporated by reference to the Company's Current Report on Form 8-K/A,
filed on September 11, 1997.
(hh) Incorporated by reference to the Company's Annual Report on Form 10K for
the fiscal year ended December 31, 1997.
(ii) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998.