PETRO FINANCIAL CORP, 10-K405, 2000-03-29

PETRO FINANCIAL CORP
10-K405, 2000-03-29
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, 1999

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: Portions of Item 14 of Part IV are
incorporated by reference to: Petro Stopping Centers, L.P.'s and Petro Financial
Corporation's Registration Statement No. 33-76154, filed on April 26, 1994.

The Registrant, Petro Financial Corporation, meets the conditions set forth in
the General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing
this form with reduced disclosure format.

================================================================================
<PAGE>

PART I

Item 1. Business

General

We are a wholly-owned subsidiary of Petro Stopping Centers, L.P. ("PSC"),
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, we as co-obligors, and PSC issued $135,000,000 10.5%
Senior Notes due 2007 (the "New Notes") and made a tender offer for all of, and
repurchased approximately 94.0% of the Notes and approximately 100% of the
Warrants. The remaining Notes and the New Notes are recorded on the financial
statements of PSC.

We have no employees, only nominal assets, have not and will not conduct
any operations and, accordingly, have no statement of operations. Our balance
sheets are unaudited. In the opinion of management, the accompanying unaudited
balance sheets contain all necessary adjustments for fair presentation as of the
years ended December 31, 1998 and 1999.

On July 23, 1999, PSC, consummated several transactions collectively
referred to as the "Recapitalization." Among other things, Petro Stopping
Centers Holdings, L.P. ("Holdings") was created as a holding company, and we and
PSC became subsidiaries of Holdings. The Recapitalization had no affect on the
recorded amounts of our assets or stockholder's equity accounts.

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
1999, a copy of which is filed as Exhibit 99 to this report.

Item 2. Properties

None

Item 3. Legal Proceedings

None

PART II

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

We are a wholly-owned subsidiary of PSC. Consequently, there is no
established trading market for our equity.

Item 7A. Quantitative and Qualitative Disclosures About Market Rate

None

1
<PAGE>

Item 8. Financial Statements and Supplementary Data

PETRO FINANCIAL CORPORATION
UNAUDITED BALANCE SHEETS
(in thousands)

<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
--------- ---------
<S> <C> <C>
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
========= ========
</TABLE>

See accompanying notes to unaudited financial statements

2
<PAGE>

PETRO FINANCIAL CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS

(1) Company Formation and Description of Business

Company Formation

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
94.0% 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 and does not conduct any operations.

On July 23, 1999, PSC, consummated several transactions collectively
referred to as the Recapitalization. Among other things, Petro Stopping Centers
Holdings, L.P. ("Holdings") was created as a holding company, and PSC and the
Company became subsidiaries of Holdings. The Recapitalization had no affect on
the recorded amounts of the Company's assets and stockholder's equity accounts.

(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, 1998 and 1999, 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,
1998 and 1999 consolidated balance sheets of PSC, which are included in PSC's
Annual Report on Form 10-K for the year ended December 31, 1999, a copy of which
is filed as Exhibit 99 to this report. In the opinion of management, the
accompanying unaudited balance sheets contain all necessary adjustments for fair
presentation as of the years ended December 31, 1998 and 1999.

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

3
<PAGE>

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

The accounts of the Company are included in the December 31, 1998 and
December 31, 1999 consolidated balance sheets of PSC, which are included in
PSC's Annual Report on Form 10-K for the year ended December 31, 1999, a
copy of which is filed as Exhibit 99 to this Annual 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 8 of this Annual Report.

(b) Reports on Form 8-K:

None

<PAGE>

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)

By: /s/ J. A. Cardwell, Sr.
--------------------------------
J. A. Cardwell, Sr.
President and Director
(Principal Executive Officer)

March 29, 2000

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/ J.A. Cardwell, Sr. President and Director March 29, 2000
- ------------------------------
(J.A. Cardwell, Sr.) (Principal Executive Officer)

/s/ James A. Cardwell, Jr. Vice President and Director March 29, 2000
- ------------------------------
(James A. Cardwell, Jr.)

/s/ David A. Appleby Vice President March 29, 2000
- ------------------------------
(David A. Appleby) (Principal Financial Officer
and Chief Accounting Officer)

/s/ Larry J. Zine Director March 29, 2000
- ------------------------------
(Larry J. Zine)

<PAGE>

EXHIBIT INDEX

Exhibit No. Exhibit Description

3.1(a) Certificate of Incorporation.

3.2(a) Bylaws.

23.1* Consent of Independent Public Accountants.

24.1 Power of Attorney (included as part of the signature page of the
Form 10-K).

27* Financial Data Schedule

99* Petro Stopping Centers, L.P.'s Annual Report on Form 10-K for the
year ended December 31, 1999, filed on March 29, 2000.

* Filed herewith.

(a) Incorporated by reference to Petro Stopping Centers, L.P.'s and Petro
Financial Corporation's Registration Statement on Form S-1 (Registration
No. 33-76154).

<PAGE>

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 16, 2000, included in the
Form 10-K for the year ended December 31, 1999 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, 1999 or performed any audit
procedures subsequent to the date of our report.

ARTHUR ANDERSEN LLP

Dallas, Texas,
March 27, 2000

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<ARTICLE> 5
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<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-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>NOT SEPARATELY IDENTIFIED IN THE CURRENT FINANCIAL STATEMENTS OR
ACCOMPANYING NOTES THERETO.
</FN>

</TABLE>

<PAGE>
================================================================================
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, 1999

Commission file number 1-13018

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

Delaware 74-2628339
(State or other jurisdiction of (I.R.S. 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 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
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 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; Petro Stopping Centers, L.P.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1998, filed on March 31, 1999;
Petro Stopping Centers, L.P.'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, filed on May 14, 1999; Petro Stopping Centers, L.P.'s
Current Report on Form 8-K filed on August 6, 1999; and Petro Stopping Centers
Holdings, L.P.'s Registration Statement (Registration No. 333-87371).
================================================================================
<PAGE>

PART I

Item 1. Business

General

On December 31, 1994, we were formed as a Delaware limited partnership. We
are a nationwide operator of large, multi-service truck stops with a network of
53 facilities known as Petro Stopping Centers ("Stopping Centers"), located in
30 states. Our business was founded by J.A. Cardwell Sr., who opened the first
truck stop in El Paso, Texas in 1975. We have built our reputation by providing
the "quality difference," which we believe to be a high level of customer
service and quality products delivered 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 53 Stopping Centers, 23 are operated by franchisees who
are required to meet our high standards of quality and service.

Our primary customers are commercial trucking fleets and professional truck
drivers that comprise the long-haul sector of the trucking industry. We sell
diesel fuel to approximately 9,000 trucking accounts.

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

Recapitalization

On July 23, 1999, we, certain of our partners and an affiliate of Volvo
Trucks North America, Inc. ("Volvo") consummated a transaction pursuant to which
Petro Stopping Centers Holdings, L.P. ("Holdings") was formed as a Delaware
limited partnership, and substantially all of the owners in us at that time
(other than Petro Holdings G.P. Corp. and Petro Holdings L.P. Corp., each of
which were affiliates of Chartwell Investments, Inc. (collectively, "Chartwell")
and Kirschner Investments, a company franchisee), including Petro, Inc.
(together with J.A. Cardwell Sr., James A. Cardwell Jr., and JAJCO,
collectively, the "Cardwell Group"), exchanged substantially all their interests
in us for identical interests in Holdings. Petro Holdings Financial Corporation
was formed for the purpose of serving as co-issuer of 15.0% senior discount
notes. Petro Holdings Financial Corporation, ourselves and our subsidiary, Petro
Financial Corporation, became subsidiaries of Holdings. Petro Warrant Holdings
Corporation ("Warrant Holdings") was formed for the purpose of owning a common
limited partnership interest in Holdings and issuing the warrants that are
exchangeable into all of the common stock of Warrant Holdings. In addition,
Volvo Petro Holdings L.L.C. ("Volvo Trucks"), the affiliate of Volvo, invested
$30.0 million to acquire a 28.7% limited common partnership interest in Holdings
while Mobil Long Haul, Inc., an affiliate of Mobil Oil Corporation, invested an
additional $5.0 million in Class B convertible preferred partnership interests
in Holdings. Holdings purchased the 50.8% of common interest in us owned by
affiliates of Chartwell for aggregate consideration of approximately $69.8
million, which consisted of a $55.0 million cash payment and the issuance to
Chartwell of approximately $14.8 million in accreted value ($11.2 million net of
an imputed market rate of interest discount) of 15.0% senior discount notes due
2008, without warrants. Holdings also purchased the 2.0% of common interests in
us owned by Kirschner for cash consideration of $2.8 million. The foregoing is
referred to as the "Recapitalization." The acquisition of Chartwell's and
Kirschner's interests was accounted for by Holdings under the purchase method
during the third quarter of 1999.

As part of the Recapitalization, Holdings issued 82,707 units each
consisting of $1,000 principal amount at stated maturity of Holdings' 15.0%
senior discount notes due 2008 and one warrant. As consideration for issuance
of the units, Holdings received $40.0 million cash of which $30.3 million was
allocated to the senior discount notes and $9.7 million was allocated to the
warrants. Holdings had acquired

1
<PAGE>

the warrants from Warrant Holdings for $9.7 million. Warrant Holdings, in turn,
invested the $9.7 million to acquire a 10.0% common limited partnership interest
in Holdings.

As a result of the Recapitalization, Holdings is the owner of approximately
99.5% of the common interests in us with the remaining 0.5% owned by Petro, Inc.
and another affiliate of the Cardwell Group.

The common limited partnership interests of Holdings are owned by the
Cardwell Group (approximately 51.6%), Volvo Trucks (approximately 28.7%), Mobil
Long Haul (approximately 9.7%) and Warrant Holdings (approximately 10.0%). The
mandatorily redeemable preferred partnership interests of Holdings are owned by
Mobil Long Haul ($17.0 million) and the Cardwell Group ($7.6 million).

Holdings funded a portion of its purchase of the Chartwell and Kirschner
interests with debt. Holdings currently has no operations of its own and is,
therefore, dependent upon our earnings and cash flows to satisfy its obligations
under the 15.0% senior discount notes and warrants.

Effect of Recapitalization on Us

In connection with the exchange of interests referred to above, we and our
partners (Holdings and various individuals and affiliates of the Cardwell Group)
agreed to restate our partnership agreement. Among other things, the parties
agreed to convert the outstanding amount of mandatorily redeemable preferred
partnership interests ($24.3 million, including accrued but unpaid preferred
returns) into common limited partnership interests.

Holdings raised funds from the capital contributions of Volvo Trucks and
Mobil Long Haul and the offering of the units exceeding the amounts necessary to
purchase the Chartwell and Kirschner interests. As a consequence, Holdings made
a cash contribution to us in the amount of approximately $10.8 million.

As part of the Recapitalization, we also amended our senior collateralized
credit facility. The new senior credit facility consists of an $85.0 million
revolving credit facility and a $40.0 million term loan B. The proceeds of the
new term loan B were used to repay principal amounts due under the term loans A
and B and the expansion facility of the then previous senior credit facility of
approximately $38.1 million, plus accrued interest. The new senior credit
facility is collateralized by substantially all of our assets and contains
certain covenants as described in Note 7 to notes to consolidated financial
statements included herein.

As of December 31, 1999, we capitalized debt issuance and other costs of
approximately $2.2 million and expensed legal, accounting and other professional
fees of $1.2 million incurred in connection with the Recapitalization. Holdings
incurred approximately $279,000 of these costs on behalf of us and that amount
has been reflected as a non-cash capital contribution in the accompanying
financial statements.

Other than described above, the Recapitalization had no effect on the
historical book values of our assets and liabilities.

1997 Recapitalization

On January 30, 1997, we consummated a transaction pursuant to which
Chartwell and Mobil Long Haul invested $20.7 million and $15.0 million,
respectively, to directly acquire the 40.0% common partnership interests owned
by the Fremont Group, Inc., an affiliate of Bechtel Group, Inc. and then named
Bechtel Investments, Inc. The respective Mobil Long Haul and Chartwell
investments were approximately $4.2 million and $5.8 million. The Cardwell Group
maintained its capital investment. Kirschner invested $1.0 million in exchange
for a 2.0% common partnership interest. Immediately thereafter, the Cardwell
Group and Mobil Long Haul agreed to assign $19.6 million of their capital
balances to mandatorily redeemable preferred partnership interests.

2
<PAGE>

Following these investments, our common partnership interests were owned
by:

. Chartwell (approximately 50.8%),
. Cardwell Group (approximately 39.9%),
. Mobil Long Haul (approximately 7.3%), and
. Kirschner (approximately 2.0%).

The manditorily redeemable preferred partnership interests were owned by:

. Mobil Long Haul ($12.0 million) and
. Cardwell Group ($7.6 million).

As a result of the 1997 recapitalization, Chartwell and the Cardwell Group
owned both general and limited partnership interests and Mobil Long Haul and
Kirschner owned only limited partnership interests. We also entered into
certain supply and marketing agreements with Mobil Oil Corporation.

As part of the 1997 recapitalization, we issued $135.0 million of 10 1/2%
notes due 2007 and repurchased approximately 94.0% of the existing 12 1/2% notes
due 2002 and approximately 100% of related outstanding debt warrants. We also
amended our then existing senior collateralized credit facility. The credit
agreement consisted of a $25.0 million revolving credit facility, a $14.0
million term loan A, a $30.0 million term loan B and a $40.0 million expansion
facility. In connection with the issuance of the 10 1/2% notes, we capitalized
approximately $14.5 million of debt issuance costs and wrote off, as an
extraordinary item, $12.7 million of debt restructuring costs. These costs
included the write-off of deferred financing costs relating to the replacement
of the prior credit agreement, the retirement of term A and B loans, the
replacement of the 12 1/2% notes, and the related debt warrants.

Petro Stopping Centers

We have identified two reportable operating segments. They are our
company-operated truck stop and our franchise truck stop operations. We operate
large, multi-service truck stops in the United States. Our facilities, which
are known as Petro Stopping Centers, generally are built on fifteen to thirty
acres situated at a convenient location with easy interstate highway access.
They can accommodate 200 to 300 trucks and 100 to 175 cars or recreational
vehicles in spacious, well-lit and fenced parking lots, which are designed to
provide good traffic flow, reduce accidents, and enhance security for the
drivers, their trucks and freight. Within the Petro Stopping Center network, we
offer standardized and consistent products and services to accommodate the
varied needs of professional truck drivers and other motorists. These include
separate gas and diesel fueling islands, our home-style "Iron Skillet"
restaurants, truck preventative maintenance and repair services, and travel and
convenience stores offering an array of merchandise selected to cater to
professional truck drivers' needs during long periods away from home.
Additionally, we provide amenities such as telephone, fax, photocopying,
computer, other communication services and postal services. Petro Stopping
Centers also offer certified truck weighing scales, truck washes, laundry
facilities, private showers, game, television and movie rooms, barbershops, and
at some sites, medical services. We have aggregated our company 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 company operations, we are a franchisor to 23 Petro Stopping
Center locations. We collect royalties and fees in exchange for the use of our
name and for services provided to the franchisees. During 1997, 1998, and 1999,
these revenues were $4.0 million, $4.5 million, and $5.0 million, respectively,
and are included in non-fuel revenues reported on the accompanying consolidated
statements of operations. We do not allocate any expenses or assets in measuring
this segment's profit and loss.

3
<PAGE>

The following table sets forth our total consolidated revenues by major
source:

SUMMARY OF SOURCES OF REVENUE
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------------
1997 1998 1999
---------------------------- ---------------------------- -------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Fuel $ 513,571 74.9% $ 464,025 71.0% $ 520,680 72.3%
Non-Fuel 122,609 17.9% 136,145 20.8% 143,468 19.9%
Restaurant 49,549 7.2% 53,246 8.2% 55,777 7.8%
---------------- ---------- --------------- ----------- ------------- ----------
Total Net Revenue $ 685,729 100.0% $ 653,416 100.0% $ 719,925 100.0%
================ ========== =============== =========== ============= ==========
</TABLE>

Of our 30 company-operated Petro Stopping Centers, 27 are full-size
locations and three are Petro:2 Centers. All of the company-operated Petro
Stopping Centers are owned or leased by us except for the Wheeler Ridge,
California facility which is jointly-owned with Tejon Development Corporation.
Of our 23 franchised facilities, eighteen are full-service locations and five
are Petro:2 Centers. Petro:2 Centers provide the same basic fuel and non-fuel
services as full-size Petro Stopping Centers, but on a smaller scale and with
fewer amenities.

Fuel

Each Petro Stopping Center has a diesel fuel island, which is a self-
service facility for professional drivers and typically consists of eight to
sixteen fueling lanes. The fuel dispensers are computer driven, high speed
units. Each fueling lane permits simultaneous fueling of each of a truck's two
tanks. Pursuant to our strategic alliance with Mobil Oil Corporation, we sell
Mobil branded diesel fuel at all but one of the company-operated diesel fuel
islands. All Mobil branded diesel fuel islands and dispensers we operate carry
signage with both the "Petro" and "Mobil" brand names.

In addition to the diesel fuel island for professional drivers, gasoline
and automobile diesel fuel are sold from a separate auto fuel island at 29 of
our 30 company-operated 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 six fuel
dispensers for convenient and efficient fueling.

Non-fuel

In 1983 we opened our first Petro:Lube facility to provide "while-you-wait"
preventive maintenance service for trucks. Since that time, Petro:Lubes have
been introduced at all but one of our company-operated Petro Stopping Centers.
In addition to Petro Stopping Center locations, we opened a stand-alone
Petro:Lube in 1996. Petro:Lube facilities offer oil, filter and lubrication
services, new, used and retread tires, as well as tire and other minor repairs.
We believe we were the first truck stop chain to offer these types of services
to truckers on an express basis.

Each Petro:Lube sells a number of what we believe to be high-quality brands
such as: Mobil Delvac, Shell and Chevron heavy duty motor oils and Kelly,
Bridgestone, Michelin and Firestone tires. Petro:Lubes primarily feature Mobil's
Delvac brand lubricants as part of our marketing strategy with Mobil Oil
Corporation See Item 13, "Certain Relationships and Related Transactions." Each
Petro:Lube honors manufacturers' warranties as well as our warranties for work
performed at any Petro:Lube throughout the country. Petro:Lube services are
primarily utilized by owner/operators and small fleets, but we believe that
larger fleets are increasingly looking to outsource their maintenance needs.

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

4
<PAGE>

of trucker accessories and supplies. In addition, other services (including
certified scales, check cashing, permit services, faxing and copying) are
available at the fuel islands. These facilities enable the driver seeking a
quick refueling stop to purchase consumables and services while refueling.

Each full size Petro Stopping Center also includes a "Travel Store,"
located in the main facility away from the fueling islands. Travel Stores
feature 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, we provide numerous additional services at the main facility of our
Petro Stopping Centers. At the typical Petro Stopping Center, customers have
access to telephone, internet, money wire services, fax and other communication
services, overnight express drop boxes and ATMs. In addition, customers may
receive their paychecks and cash advances. At most locations, professional
drivers have convenient on-site access to a certified truck weighing scale and a
truck wash operated by a third-party that leases part of a Petro Stopping Center
to provide these services. For a driver's comfort and relaxation, Petro Stopping
Centers provide laundry facilities, game rooms, television viewing rooms and, at
nine Petro Stopping Centers, movie rooms. We also lease retail space at our
Petro Stopping Centers to independent merchants.

Each full-size Petro Stopping Center features twelve to eighteen 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.

Since June 1993 the Petro 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 facilities. A third-party operator
manages the video poker operations and incurs all material related expenses
while paying a portion of each machine's "winnings" to us. 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. Therefore, we were required to
and did phase out video poker operations at the Hammond facility at the end of
June 1999. As part of the video poker license for 1999-2000, we leased the
Shreveport fuel island operation to Petro Truckstops, Inc., in order to satisfy
state law requirements.

Restaurants

Each full-size Petro Stopping Center includes our 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 "home cooked" items prepared fresh at each location. Recipes developed
at our 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, which are preferred by drivers who like to socialize
and exchange information with other drivers at our restaurants. Public
telephones are generally available throughout the dining area for customer
convenience.

We have introduced nationally branded fast food concepts at twelve of our
locations. We currently operate, under franchise agreements, one Wendy's, two
Blimpie Subs & Salads, three Baskin-Robbins, one Tastee Freeze, three Noble
Romans, and seven Pizza Hut Express units and plan to selectively expand our
fast food program during the next several years. In addition, we have introduced
our own branded deli program in some Petro Stopping Centers known as "The
Filling Station." At December 31, 1999, we had twelve locations that offered
Filling Stations and plan to selectively expand the concept in the future.

5
<PAGE>

Competition

The U.S. truck stop industry is large and highly fragmented. We believe
that there are approximately 2,000 truck stops located on interstate highways,
approximately 24.0% of which are operated by four national truck stop chains, of
which we are one. The other three chains are TravelCenters of America, Inc.,
(approximately 160 locations), Flying J Inc. (approximately 130 locations) and
Pilot Corporation (approximately 130 locations). We believe that, while we
compete with all truck stops, our principal competitors are increasingly these
nationwide, multi-service truck stop chains. We also believe that some of these
chains have substantially greater financial and marketing resources than we do.

While we price our diesel fuel competitively, we believe our larger sites
with more amenities offer 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 consolidation among
trucking companies in recent years have increased truck fleet owners' focus on
reducing their operating costs. This trend has put increased pressure on diesel
fuel margins for us and our competitors. In addition, from time to time, we face
intense price competition in some of our markets. Given that approximately two
out of every three stops made by a trucker is for a reason other than the
purchase of fuel, we believe that the variety of non-fuel services and products
we offer will continue to attract professional truck driver business and provide
us a competitive advantage in spite of continued fuel pricing competition.

Fuel and Lubricant Suppliers

As part of the Recapitalization, we terminated our previous fuel and
lubricant supply agreements and entered into new ten-year supply agreements with
Mobil Oil Corporation under which Mobil Oil Corporation will supply the company-
operated Petro Stopping Centers' diesel fuel requirements and gasoline
requirements in those markets in which Mobil branded gasoline is available for
sale. Under the lubricant supply agreement, we are allowed to purchase such
quantities of lubricants as we require at the prices set forth in the agreement.
The diesel fuel sold at all but one of our company-operated and some of our
franchise operated Petro Stopping Centers is branded Mobil Diesel, and all of
our company-operated Petro:Lubes feature Mobil Delvac lubricants. Under the new
fuel supply agreement and the agreement for the resale of oils and greases with
Mobil Oil Corporation, both dated July 23, 1999, we agreed to purchase Mobil
branded lubricant products and Mobil branded diesel fuel for sale and
distribution under Mobil's trademarks at our company-operated and eight of our
franchise operated truck stops and Mobil branded gasoline for sites as selected
by Mobil Oil Corporation, as limited however, by existing contractual
obligations to purchase gasoline from other suppliers. The Mobil Supply
Agreements require that we purchase from Mobil-specified distribution terminals,
a minimum number of gallons of diesel fuel on an annual basis, depending on
product availability and reductions by Mobil Oil Corporation under described
circumstances. For 1999, our annual volume commitment was 172.3 million gallons
of Mobil diesel under the fuel supply agreement and 1.2 million gallons of Mobil
lubricants under the lubricant supply agreement. This constitutes approximately
37.4% of our current diesel fuel requirements and approximately 63.1% of our
lubricant requirements. If we do not purchase any diesel fuel from Mobil Oil
Corporation under our Mobil Supply Agreements, our maximum penalty in any year
would be $0.0035 per gallon multiplied by the annual volume commitment as
provided for in the Mobil Supply Agreements, plus additional amounts for each
new Petro Stopping Center we open and which Mobil Oil Corporation agrees to
supply. As a result of the Mobil Supply Agreements and to comply with the laws
governing the branding of diesel fuel, if Mobil Oil Corporation is unable to
supply 100% of our diesel fuel demand due to limited product availability, Mobil
Diesel Supply Corporation, a wholly owned subsidiary of Mobil Oil Corporation,
purchases additional diesel fuel from third-party suppliers and then sells it to
us. Under the terms of the Mobil Supply Agreements, we negotiate with third
parties regarding price and other terms, and then designate them to Mobil Diesel
Supply Corporation. Third party suppliers are approved by Mobil Oil Corporation
if the fuel to be supplied by the third party meets all federal, state and local
diesel requirements. Our fuel purchase arrangement with Mobil Diesel Supply
Corporation enables us to meet our diesel fuel needs and to comply with branding
laws, which require Mobil Oil Corporation to first take possession of the fuel
before it can be branded as Mobil diesel.

<PAGE>

The Mobil Supply Agreements allow us to continue to negotiate for the
purchase of diesel fuel with third-party suppliers approved by Mobil Diesel
Supply Corporation. If we are able to obtain a lower diesel fuel price from a
third-party supplier in a particular market area, we may request that Mobil Oil
Corporation meet the lower price or allow a portion of our diesel fuel
requirements to be supplied from the Mobil Diesel Supply Corporation-approved
third-party supplier, in which case Mobil Diesel Supply Corporation would
purchase the diesel fuel from the supplier and resell the product to us. Any
change in supply source, other than a change resulting from Mobil Oil
Corporation's inability to supply, does not affect our requirement to purchase
the annual minimum number of gallons from Mobil-specified distribution terminals
fixed by the Mobil Supply Agreements. The Mobil Supply Agreements also place a
monthly limit on the maximum number of gallons of diesel fuel that we may lift
from Mobil-specified distribution terminals. Prices to be charged for fuel sold
to us under the Mobil Supply Agreements are based on referenced prices minus
discounts and plus delivery costs. See Item 13, "Certain Relationships and
Related Transactions." Upon the expiration of the ten year initial term, the
Mobil Supply Agreements are renewable for another five year term at the option
of Mobil Oil Corporation; however, we have the ability to terminate the
agreements at the end of the ten year term at a price based on a formula
discussed in the Mobil Supply Agreements.

We purchase diesel fuel for each of our company-operated Petro Stopping
Centers on a daily basis. Each location typically maintains a one to three day
inventory of fuel. During 1999, we purchased 100% of our diesel fuel through
Mobil Diesel Supply Corporation, approximately 65.8% of which was third-party
fuel purchased through this arrangement. The approximate aggregate amount paid
under the Mobil Supply Agreements for the year ended December 31, 1999 totaled
$422.0 million.

Trademarks and Service Marks

We are the owner in the United States of various registered trademarks and
service marks, including "Petro Stopping Centers," "Petro:Lube," "Iron Skillet"
and "Petro:2." We grant franchisees the non-exclusive right to use these
proprietary marks at franchised locations. We regard our trademarks and service
marks as valuable assets and believe that they have significant value in the
marketing of our products and services. We also have several applications to
register trademarks and service marks currently pending in the United States
Patent and Trademark Office.

Governmental Regulation

Environmental Regulation

We conduct our operations under extensive federal and state laws,
regulations and requirements relating to environmental matters. We use
underground and above ground storage tanks to store petroleum products and waste
oils. Statutory and regulatory requirements for storage tank 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 storage tank into the environment. We also face regulation
relating to vapor recovery and discharges into water. During 1998, we continued
the installation of cathodic protection and overfill equipment and devices in
our older storage tanks, as required by federal and state law, and all work was
completed in December 1998, except in the Corning, California location. The
Corning, California work was completed during the third quarter of 1999, and we
expended approximately $1.2 million during 1999 to complete this work. Some site
remediation will be required in Corning, California as a result of completion of
the upgrade work. We believe that all of our storage tanks are in compliance in
all material respects with applicable environmental laws, regulations and
requirements. Our expenditures for environmental matters were $154,000,
$385,000, and $156,000 for the years ended December 31, 1997, 1998, and 1999,
respectively. See Note 2 to notes to consolidated financial statements for the
year ended December 31, 1999 for a discussion of our accounting policies
relating to environmental matters.

Our ownership of the properties and the operation of our business, may
subject us to liability under various federal, state, and local environmental
laws, ordinances, and regulations relating to cleanup

7
<PAGE>

and removal of hazardous substances (which may include petroleum and petroleum
products) on, under, or in our property. Some laws impose liability whether or
not the owner or operator knew of, or was responsible for, the presence of
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 these substances at
the disposal or treatment site, regardless of whether the site is owned or
operated by that person.

We are 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 our 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 we 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 our 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"), we 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., Sections 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. We 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. Although we do not believe that our
involvement in the Patterson Site will have a material adverse effect on our
consolidated financial condition or results of operation, if a plan of action
cannot be agreed upon or if the EPA or the State of California imposes
remediation requirements beyond the scope presently contemplated based upon our
current understanding with the EPA, our liability could exceed our current
expectations. See Note 15 to notes to consolidated financial statements for the
year ended December 31, 1999.

We are defendants in a lawsuit brought by adjoining land owners alleging
damage to their property resulting from the discharge of sewage and other run-
off at one of our Petro Stopping Centers. We do not believe that our involvement
in this matter will have a material adverse effect on our consolidated financial
condition or results of operation.

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

Other Regulations

We also operate under local licensing ordinances. The issuance of permits
for service station and lubrication operations is generally a matter of
discretion and dependant on the underlying requirement that the granting of the
permit be consistent with the health, safety and moral welfare of the community.
Although we believe that careful planning and site selection reduces the
likelihood of significant zoning opposition, significant opposition to the
construction of a Petro Stopping Center, if encountered, may cause us to incur
substantial expenses and delay in the openings of new Petro Stopping Centers.

Our restaurant operations are conducted under 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.

8
<PAGE>

In addition, state and local authorities oversee our video poker
operations. 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.
Therefore, we were required to and did phase out video poker operations at the
Hammond facility at the end of June 1999. As part of the video poker license for
1999-2000, we leased the Shreveport fuel island operation to Petro Truckstops
Inc., in order to satisfy state law requirements.

As a franchisor we also operate under federal and state regulation in the
states in which we offer franchises or where franchised Petro Stopping Centers
are currently operating. Federal regulations require that we provide each
prospective franchisee with a disclosure document that provides information
regarding our company and the relevant provisions of the franchise agreement and
other ancillary contracts. In addition, some state regulations require that the
franchisor be registered or be exempt from the applicable registration
requirements. Federal and state franchising laws prohibit "deceptive trade
practices" and, in some cases, impose fairness and "anti-discrimination"
standards on us.

In addition to the franchise regulations outlined immediately above, our
operations are conducted under the Petroleum Marketing Practices Act. The
Petroleum Marketing Practices Act 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. The Petroleum Marketing Practices Act expressly
preempts state law concerning the termination, nonrenewal and notice with
respect to motor fuel franchises. The Petroleum Marketing Practices Act is
enforced judicially through cases interpreting the statute.

We are considered a franchisor under the Petroleum Marketing Practices Act
because we distribute and sell diesel fuel and gasoline under Mobil's trademarks
to some of our franchisees. Thus, we are subject, as a franchisor, to the
Petroleum Marketing Practices Act's termination, nonrenewal and notice
requirements in each of our individual motor fuel contracts with our
franchisees. At the same time, we are entitled to the Petroleum Marketing
Practices Act's protections in our branded supply agreements with Mobil Oil
Corporation, as well as other branded suppliers. At December 31, 1999, we are
not party to any Petroleum Marketing Practices Act litigation.

Under the Americans with Disabilities Act of 1990, all public
accommodations are required to meet federal requirements related to access and
use by disabled persons. While we believe our facilities are in compliance with
these requirements, a determination that we are not in compliance with the
Americans with Disabilities Act could result in the imposition of fines or an
award of damages, which could adversely affect us.

We believe that all of our Petro Stopping Centers are in compliance in all
material respects with existing laws and regulations. However, new laws and
regulations could require us to incur significant additional costs.

Employees

As of December 31, 1999, we had a total of 4,208 employees, of which 3,950
were full-time and 258 were part time. At that date, 600 of our employees were
salaried and performed executive, management, or administrative functions and
the remaining 3,608 employees were hourly employees. Almost 95.7% of our
employees worked at the Petro Stopping Centers and most employees at the Petro
Stopping Centers work on an hourly basis.

We have never had a work stoppage. We believe that we provide working
conditions, wages and benefits that are competitive with other providers of the
kinds of products and services offered by us. We believe that our relations with
our employees are good.

9
<PAGE>

Item 2. Properties

Our corporate headquarters is located in a three-story building in El Paso,
Texas, which contains approximately 30,000 square feet of space. The office
building is owned by J.A. Cardwell, Sr., the Chief Executive Officer and
Chairman of the Company. We lease 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. See Item 13, "Certain
Relationships and Related Transactions."

We own the underlying land and all facilities at 25 of our 30 company-
operated Petro Stopping Centers, own all but four acres of the West Memphis
site, own the facility and lease the land at the Hammond, Louisiana and Jackson,
Mississippi sites and lease both the Effingham, Illinois and North Baltimore,
Ohio sites in their entirety. The Petro Stopping Center located in Effingham,
Illinois, is leased from an entity owned by current and former employees of the
Company. See Item 13, "Certain Relationships and Related Transactions."

In August and November of 1998, we purchased land in Mebane, North
Carolina and Glendale, Kentucky, respectively, and in September and October of
1999, we also purchased land in North Las Vegas, Nevada and Marianna, Florida,
respectively, for the future construction of four new Petro Stopping Centers. We
also own a site in Green River, Wyoming which is suitable for the construction
of a new Petro Stopping Center. We have options, which expire in December 2006,
to purchase vacant land owned by the Cardwell Group or their affiliates that is
located adjacent to four existing Stopping Centers: Shreveport, Louisiana (seven
acres); Weatherford, Texas (thirty-four acres); Beaumont, Texas (seventeen
acres); and Oklahoma City, Oklahoma (thirty acres). See Item 13, "Certain
Relationships and Related Transactions."

10
<PAGE>

The following table outlines the company-operated Petro Stopping Centers at
December 31, 1999:
<TABLE>
<CAPTION>

Size of Main
Petro Stopping Total Location Building
Location Date Opened Center Acreage Acreage (Sq. Ft.)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
El Paso, Texas April 1975 31 51 20,000
Weatherford, Texas September 1977 25 25 21,000
Beaumont, Texas May 1981 20 20 13,500
San Antonio, Texas September 1982 21 21 13,200
Eloy/Casa Grande, Arizona June 1984 23 36 12,300
Corning, California May 1985 18 18 12,300
Amarillo, Texas June 1985 20 32 17,300
Shreveport, Louisiana November 1985 18 21 13,800
Hammond, Louisiana January 1986 16 21 12,300
West Memphis, Arkansas August 1986 24 63 15,700
Milan, New Mexico November 1986 23 30 13,800
Knoxville, Tennessee March 1987 25 25 13,800
Kingman, Arizona December 1987 38 67 18,200
Oklahoma City, Oklahoma May 1988 30 30 14,600
Perrysburg/Toledo, Ohio August 1988 33 74 20,000
Kingdom City, Missouri February 1989 25 35 20,500
Bucksville, Alabama February 1990 48 51 14,400
Girard/Youngstown, Ohio May 1990 29 98 20,000
Vinton, Texas January 1991 8 19 4,800
Effingham, Illinois March 1991 30 30 20,000
Kingston Springs, Tennessee September 1991 9 12 6,900
Shorter, Alabama September 1991 9 9 12,700
Atlanta, Georgia March 1992 64 69 21,500
Laramie, Wyoming October 1993 35 50 15,500
Medford, Oregon January 1995 15 15 11,500
Ocala, Florida June 1995 37 170 20,500
North Baltimore, Ohio August 1997 17 40 29,000
North Little Rock, Arkansas September 1997 17 24 16,000
Wheeler Ridge, California (1) June 1999 51 76 27,900
Jackson, Mississippi November 1999 17 21 23,200
</TABLE>

(1) The Wheeler Ridge facility is company-operated and jointly-owned with Tejon
Development Corporation. See, "Agreement with Tejon."

We also currently have under construction new Petro Stopping Centers in
Mebane, North Carolina and Glendale, Kentucky, which are to open in April and
June of 2000, respectively.

Franchises

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

The agreements require the franchisee to pay us, in addition to initial
fees and training fees, a monthly royalty fee and a monthly advertising fee
(administered through an advertising fund for national and regional
advertising). In some instances, we may waive our contractual right to receive
royalties with

11
<PAGE>

respect to a particular location for short periods of time. For the year ended
December 31, 1999, our revenues from our 23 franchise locations totaled $5.0
million. In addition, franchisees contributed $432,000 to the advertising
programs.

While a majority of diesel purchases at Petro 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, we purchase 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 us a right of first
refusal to purchase the facility, at the price offered by the third party.
Similarly, in fourteen cases, we have 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.

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, unless the franchisee gives a termination
notice at least twelve months prior to the expiration of the franchise
agreement. As of December 31, 1999, we had 23 franchise locations open and
operating in the following markets:

<TABLE>
<CAPTION>
Expiration of
Location Date Opened Initial Franchise Term
- --------------------------------------------------------------------------
<S> <C> <C>
Elkton, Maryland Sept. 1985 Sept. 1995(a)
Ft. Chiswell, Virginia Mar. 1986 Mar. 1996(a)
Portage, Wisconsin (b) Sept. 1986 Dec. 2001
Joplin, Missouri Oct. 1987 Oct. 1997(a)
Lake Station, Indiana Oct. 1987 Oct. 1997(a)
Ruther Glen, Virginia Mar. 1988 Mar. 1998(a)
Benton Harbor, Michigan July 1989 July 1999(a)
New Paris, Ohio Oct. 1989 Oct. 1999(a)
Salina, Kansas Feb. 1990 Feb. 2000(a)
Jerome/Twin Falls, Idaho (c) Dec. 1990 Dec. 2000
Florence, South Carolina Feb. 1991 Feb. 2001
Rochelle, Illinois Apr. 1992 Apr. 2002
Fargo, North Dakota Nov. 1994 Nov. 2004
Carnesville, Georgia Jan. 1995 Jan. 2005
Bordentown, New Jersey Jan. 1996 Jan. 2006
York, Nebraska Dec. 1996 Dec. 2006
Dupont, Pennsylvania May 1997 May 2007
Claysville, Pennsylvania Nov. 1997 Nov. 2007
Breezewood, Pennsylvania Feb. 1998 Feb. 2008
Milton, Pennsylvania Mar. 1998 Mar. 2008
Monee, Illinois Apr. 1998 Apr. 2008
Lowell, Indiana Apr. 1999 Apr. 2009
Racine, Wisconsin Dec. 1999 Dec. 2009
</TABLE>

(a) The initial ten year term provided for in eight of our oldest franchise
agreements has elapsed. Under the terms of these agreements, unless written
notice of termination is received from the franchisee twelve months prior
to the tenth anniversary date of the opening of the franchise location, the
franchise is automatically renewed for five additional years. With the
exception of Jerome/Twin Falls, Idaho, no notices of termination were
received from the affected franchisees. By agreement with the affected
franchisees, execution of a renewal franchise agreement was delayed pending
completion of the revised form franchise agreement. The revised franchise

12
<PAGE>

agreement has now been given to these franchisees for execution and each
franchisee has been given the choice to either enter into the new agreement
or remain as franchisees under the terms of their existing agreement.
(b) The franchise agreement for the Portage, Wisconsin location has been
amended so that its initial term is approximately fifteen years (expiring
in December 2001). The agreement provides for only one five-year renewal.
(c) As to the Jerome/Twin Falls franchise, timely notice of intent not to renew
the franchise was received December 9, 1999 and accordingly this franchise
agreement will terminate effective December 15, 2000. The Company has both
a right of first refusal to acquire this location and the option to
purchase it at fair market value. The Company is currently evaluating
options regarding this site.

Two franchisees operate four locations, one operates three locations, one
operates two locations, and ten operate one location each. All of the
franchisees are unaffiliated with us, except Highway Service Ventures, Inc.,
which operates four of our franchised locations. See Item 13, "Certain
Relationships and Related Transactions." In addition to our currently
operational 23 franchise locations, we have signed an agreement for an
additional franchise location in Frederick, Maryland.

Agreement with Tejon

We have an agreement and formed a limited liability corporation, Petro
Travel Plaza LLC, with Tejon Development Corporation to build and operate a
Petro Stopping Center 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 our company, Tejon, and Tejon Ranch
Company, as guarantor, we made an initial capital contribution of $2.0 million
for working capital and inventory, which is our basis for the investment in the
LLC. Pursuant to the agreement, the LLC financed construction of the location
with a non-recourse credit facility, we receive a management fee of $250,000 per
annum, and as a 40.0% member, we receive 40.0% of the location's operating
earnings. This location began operations in June 1999.

Item 3. Legal Proceedings

From time to time we are in ordinary routine litigation incidental to our
operations. We believe that the litigation currently pending or threatened
against us, 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 our 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 our general and limited partnership interests are owned by Holdings
and various affiliates of the Cardwell Group. See Note 1 to notes to
consolidated financial statements for the year ended December 31,1999 included
elsewhere herein. Consequently, there is no established public trading market
for our equity.

Item 6. Selected Financial Data

The information set forth below should be read in conjunction with both
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 7 and the consolidated financial statements and notes
thereto included in Item 8. The selected consolidated financial data as of

13
<PAGE>

and for the years ended December 29, 1995, December 31, 1996, December 31, 1997,
December 31, 1998, and December 31, 1999, have been derived from our audited
financial statements. The unaudited financial data presented include, in the
opinion of management, all necessary adjustments required for fair presentation
of such data. Beginning in 1996, we adopted a calendar fiscal year, which ends
on December 31. The opening or acquisition of our operating properties during
the periods reflected in the following selected financial data materially effect
the comparability of such data from one period to another.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
Year ended Year ended Year ended Year ended Year ended
December 29, December 31, December 31, December 31, December 31,
1995 1996 1997 1998 1999
------------ ------------- ------------- ------------- -------------
(dollars in thousands)
----------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net revenues:
Fuel (including motor fuel taxes)....................... $385,181 $478,312 $513,571 $464,025 $520,680
Non-fuel................................................ 147,834 158,745 172,158 189,391 199,245
----------- ------------ ------------- ------------- ------------
Total net revenues.................................... 533,015 637,057 685,729 653,416 719,925

Costs and expenses:
Cost of sales
Fuel (including motor fuel taxes)...................... 352,207 443,967 476,033 422,945 481,483
Non-fuel............................................... 59,686 67,464 70,548 76,451 80,491

Operating expenses...................................... 73,052 81,522 85,560 93,012 100,156
General and administrative.............................. 12,053 13,832 17,004 19,329 19,154
Employee severance, benefit and placement
expenses............................................... - 2,534 - - -
Depreciation and amortization........................... 11,144 12,204 14,502 15,953 13,951
(Gain) loss on disposition of assets.................... - 93 31 6 (836)
----------- ------------ ------------- ------------- ------------
Total costs and expenses............................... 508,142 621,616 663,678 627,696 694,399
----------- ------------ ------------- ------------- ------------
Operating income......................................... 24,873 15,441 22,051 25,720 25,526

Recapitalization costs................................... - 2,938 - - 1,163
Equity in loss of affiliate.............................. - - - - 593
Interest expense, net.................................... 21,098 21,263 20,292 20,042 19,654
----------- ------------ ------------- ------------- ------------
Income (loss) before extraordinary item and
cumulative effect of a change in
accounting principle................................... 3,775 (8,760) 1,759 5,678 4,116
Extraordinary item (a)................................... - - 12,745 - 2,016
Cumulative effect of a change in accounting
principle (b)(c)........................................ - - 1,579 3,250 -
----------- ------------ ------------- ------------- ------------
Net income (loss) (d)(e)................................. $ 3,775 $ (8,760) $(12,565) $ 2,428 $ 2,100
=========== ============ ============= ============= ============
Balance Sheet Data:
(at end of period)
Working capital.......................................... $ (9,607) $(13,863) $ 3,850 $ (3,060) $ (9,564)
Total assets............................................. 221,699 209,100 239,666 226,999 253,961
Total debt............................................... 168,392 166,727 183,190 181,328 181,298
Mandatorily redeemable preferred partnership interests... - - 21,202 23,172 -
Partners' capital (deficit).............................. 11,925 3,165 (19,555) (19,922) 16,083

Other Financial Data:
Net cash provided by operating activities................ $ 12,766 $ 14,668 $ 30,328 $ 11,333 $ 31,126
Net cash (used) in investing activities.................. (21,130) (5,337) (15,779) (19,659) (38,237)
Net cash provided by (used in) financing activities...... 10,229 (11,837) 7,065 (3,287) 7,322
Capital expenditures(f).................................. 19,508 5,523 15,870 20,309 36,564
Number of truck stops:
(at end of period)
Company-operated....................................... 26 26 28 28 30
Franchised............................................. 15 16 18 21 23
----------- ------------ ------------- ------------- ------------
Total................................................... 41 42 46 49 53
=========== ============ ============= ============= ============
</TABLE>

14
<PAGE>

(a) Extraordinary item reflects the write-off of unamortized deferred debt
issuance costs associated with retired debt.
(b) Cumulative effect of a change in accounting principle in 1997 reflects
expensing of costs related to process reengineering activities that were
previously capitalized as required by Emerging Issues Task Force Issue No.
97-13.
(c) Cumulative effect of a change in accounting principle in 1998 reflects
expensing of organization and start up costs that were previously
capitalized as required by AICPA Statement of Position 98-5.
(d) No provision for income taxes is reflected in the financial statements as
we are a partnership for which taxable income and tax deductions are passed
through to the individual partners.
(e) Management considers EBITDA to be meaningful to investors in understanding
our operating performance because we have no publicly traded equity
securities; we are capitalized largely with long-term debt (creating a
significant amount of interest expense); and we operate as a partnership
(we do not have a provision for income taxes). EBITDA represents operating
income plus depreciation and amortization. EBITDA data, which is not a
measure of financial performance under generally accepted accounting
principles, is presented because such data is 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 our operating performance or as an alternative to cash flows
as a measure of liquidity. EBITDA results were $36.0 million, $32.1
million, $36.6 million, $41.7 million, and $39.5 million in 1995, 1996,
1997, 1998, and 1999, respectively. EBITDA results for fiscal 1996 exclude
certain one-time charges related to our 1997 Recapitalization and the
change in management and operations. Included in the one-time charges were
$2.5 million related to severance and hiring costs; $1.4 million in
obsolete inventory reserves, included in cost of sales; and $0.5 million in
insurance related costs.
(f) Capital expenditures primarily represent the cost of new Petro Stopping
Centers and maintenance of existing Petro Stopping Centers. Capital
expenditures related to new Petro Stopping Centers were $13.8 million, $1.9
million, $7.3 million, $6.1 million, and $20.6 million in 1995, 1996, 1997,
1998, and 1999, respectively.

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

Certain sections of this Form 10-K, including "Business", "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Quantitative and Qualitative Disclosures about Market Risk," contain various
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 which represent management'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. Management 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," "--
Environmental," and "--Recently Issued Accounting Pronouncements." In the
preparation of the financial statements, management makes various estimates and
assumptions that are forward-looking statements.

Reporting Format

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 we adopted in 1998.
SFAS No. 131 requires us to identify and report information regarding operating
segments of our business. The two reportable, operating segments identified are
our company-operated truck stops and our franchise truck stops operations.

We operate large, multi-service truck stops in the United States. Our
facilities, which are known as Petro Stopping Centers, offer a broad range of
products, services and amenities, including diesel fuel,

15
<PAGE>

gasoline, home-style restaurants, truck preventive maintenance centers and
retail merchandise stores to the highway motorist. We have aggregated our
company 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 company operations, we are a franchisor to 23 Petro Stopping
Center locations. We collect royalties and fees in exchange for the use of our
name and for services provided to the franchisees. During 1997, 1998, and 1999,
these revenues were $4.0 million, $4.5 million, and $5.0 million, respectively.
The increases in our franchise revenues are mostly due to the addition of seven
new franchise locations since January 1997. These revenues are included in non-
fuel revenues reported on the accompanying consolidated statements of
operations. We do not allocate any expenses or assets in measuring this
segment's profit and loss.

We derive our revenues from:

. the sale of diesel and gasoline fuels;

. 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, franchise royalties and
other operations; and

. restaurant operations which include Iron Skillet and fast-food
operations.

The following table sets forth our total consolidated revenues by major
source:

<TABLE>
<CAPTION>
SUMMARY OF SOURCES OF REVENUE

Year Ended December 31,
--------------------------------------------------------------------------------------------
1997 1998 1999
----------------------------- ----------------------------- ---------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Fuel $513,571 74.9% $464,025 71.0% $520,680 72.3%
Non-Fuel 122,609 17.9% 136,145 20.8% 143,468 19.9%
Restaurant 49,549 7.2% 53,246 8.2% 55,777 7.8%
----------- ----------- ------------ ----------- ----------- ------------
Total Net Revenue $685,729 100.0% $653,416 100.0% $719,925 100.0%
=========== =========== ============ =========== =========== ============
</TABLE>

Our fuel revenues and cost of sales include federal and state motor fuel
taxes. Such taxes were $192.7 million, $203.3 million, and $211.6 million for
the years ended December 31, 1997, 1998, and 1999, respectively.

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

General

Recapitalization

On July 23, 1999, we, certain of our partners and Volvo Trucks
consummated a series of transactions pursuant to which:

. Holdings was formed, and substantially all of the present owners in us
other than Chartwell and Kirschner, exchanged their interests in us
for identical interests in Holdings and became owners of Holdings;

16
<PAGE>

. Petro Holdings Financial Corporation was formed for the purpose of
serving as co-issuer of the 15.0% senior discount notes issued by
Holdings;

. Petro Holdings Financial Corporation, ourselves and our subsidiary,
Petro Financial Corporation, became subsidiaries of Holdings;

. Petro Warrant Holdings Corporation was formed for the purpose of
owning a common limited partnership interest in Holdings and issuing
the warrants that are exchangeable into all of the common stock of
Petro Warrant Holdings Corporation;

. Volvo Trucks, an affiliate of Volvo, invested $30.0 million to acquire
a 28.7% common limited partnership interest in Holdings;

. Mobil Long Haul, an affiliate of Mobil Oil Corporation, invested an
additional $5.0 million in Class B convertible preferred partnership
interests of Holdings;

. Holdings purchased the 50.8% common interest in us owned by affiliates
of Chartwell for aggregate consideration of approximately $69.8
million, which consisted of a $55.0 million cash payment and the
issuance to Chartwell of approximately $14.8 million in accreted value
of 15.0% senior discount notes, without warrants;

. Holdings purchased the 2.0% common interests in us owned by Kirschner
for cash consideration of $2.8 million; and

. Holdings and Petro Holdings Financial Corporation sold for cash $82.7
million in principal amount at stated maturity 15.0% senior discount
notes due 2008 together with warrants to purchase all the common stock
of Petro Warrant Holdings Corporation.

The foregoing is referred to as the "Recapitalization." The acquisition of
Chartwell's and Kirschner's interests was accounted for by Holdings under the
purchase method during the third quarter of 1999.

As part of the Recapitalization, Holdings issued 82,707 units each
consisting of $1,000 principal amount at stated maturity of Holdings 15.0%
senior discount notes due 2008 and one warrant. As consideration for the 15.0%
notes, Holdings received cash proceeds of $40.0 million, of which $30.3 million
was allocated to the 15.0% notes and $9.7 million was allocated to the warrants.
Holdings acquired the warrants from Petro Warrant Holdings Corporation for $9.7
million. Petro Warrant Holdings Corporation, in turn, invested the $9.7 million
to acquire a 10.0% common limited partnership interest in Holdings.

As a result of the Recapitalization, Holdings is the owner of approximately
99.5% of the common partnership interests in us, and the minority interest is
owned by affiliates of the Cardwell Group. The common limited partnership
interests of Holdings are owned by:

Cardwell Group:
General partnership interest...................................... 1.1%
Limited partnership interest...................................... 50.5%
Volvo Trucks........................................................ 28.7%
Mobil Long Haul..................................................... 9.7%
Petro Warrant Holdings Corporation.................................. 10.0%

17
<PAGE>

The mandatorily redeemable preferred partnership interests of Holdings are
owned by Mobil Long Haul ($17.0 million) and the Cardwell Group ($7.6 million).
Petro, Inc. and another affiliate of the Cardwell Group own the remaining 0.5%
of us.

Effect of Recapitalization on Us

In connection with the exchange of interests referred to above, we and
our partners (Holdings and various individuals and affiliates of the Cardwell
Group) agreed to restate our partnership agreement. Among other things, the
parties agreed to convert the outstanding amount of mandatorily redeemable
preferred partnership interests ($24.3 million, including accrued but unpaid
preferred returns) into common limited partnership interests.

As of December 31, 1999, we capitalized debt issuance and other costs of
approximately $2.2 million and expensed legal, accounting and other professional
fees of $1.2 million incurred in connection with the Recapitalization. Holdings
incurred approximately $279,000 of these costs on our behalf and that amount has
been reflected as a non-cash capital contribution in the accompanying financial
statements.

Other than described above, the Recapitalization had no effect on the
historical book values of our assets and liabilities.

1997 Recapitalization

On January 30, 1997, we consummated a transaction entered into in October
1996, under which:

. Chartwell invested $20.7 million and Mobil Long Haul invested $15.0
million, to directly acquire the 40.0% common partnership interests
owned by The Fremont Group, Inc.;

. The Cardwell Group maintained their capital investment; and

. Kirschner, a company franchisee, invested $1.0 million in exchange for
a 2.0% common partnership interest.

18
<PAGE>

Following the investment by Mobil Long Haul, Chartwell and Kirschner, our
common partnership interests were owned as follows:

Chartwell...................................................... 50.8%
Cardwell Group................................................. 39.9%
Mobil Long Haul ............................................... 7.3%
Kirschner...................................................... 2.0%

The preferred partnership interests were owned by Mobil Long Haul ($12.0
million) and the Cardwell Group ($7.6 million). Chartwell and the Cardwell Group
owned both general and limited partnership interests and Mobil Long Haul and
Kirschner owned only limited partnership interests. We and Mobil Oil
Corporation also entered into supply and marketing agreements.

At December 31, 1996, we had incurred and accrued for $2.5 million of one-
time severance and hiring costs attributable to the removal and replacement
prior to December 31, 1996 of our pre-1997 recapitalization management. In
connection with the 1997 recapitalization, the new partners required that old
management be replaced, and we incurred costs and expenses with regard to their
termination as well as costs associated with their replacement with new
management. The termination costs, which were incurred during 1996, approximated
$1.2 million, were paid in January 1997, and related to four executive officers
and other members of management. The remaining costs were primarily related to
the hiring of new management, which occurred in 1996 and were expensed
accordingly. Additionally, during 1996 we recognized $2.9 million of legal,
accounting and other professional fees, which were incurred in connection with
the 1997 recapitalization.

Results of Operations

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Overview. Our net revenues increased 10.2% to $719.9 million from $653.4
million for the year ended December 31, 1999. The increase was primarily due to
a 12.2% or $56.7 million increase in fuel revenues from the prior year as a
result of a 9.7% increase in the average retail-selling price per fuel gallon
from the prior year and a 2.3% or 11.0 million gallon increase in fuel volumes.
Operating expenses increased 7.7% to $100.2 million from $93.0 million in the
prior year due mainly to employee-related costs, our customer loyalty program,
system project costs, and pre-opening expense. General and administrative
expenses decreased slightly to approximately $19.2 million compared to $19.3
million in the prior year. Total costs and expenses were offset by an $836,000
gain due primarily to the disposition of location scale equipment in June, as
part of our continued strategy to focus on our core business.

Fuel. Revenues increased 12.2% to $520.7 million in 1999 from $464.0
million in 1998. Fuel revenues increased primarily due to a 9.7% increase in our
average retail-selling price per gallon stemming from higher fuel costs compared
to prior year. The increase in fuel revenues was also due to a 2.3% or 11.0
million gallon increase in fuel volumes. Management believes the increased
volume is due primarily to our customer loyalty program implemented on September
30, 1999. Fuel margin decreased by 4.6% to $39.2

19
<PAGE>

million in 1999 compared to $41.1 million for the prior year due mainly to
rising fuel costs, which we are not always able to immediately pass on to our
customers.

Non-Fuel. Revenues increased 5.4% to $143.5 million in 1999 from $136.1
million in the prior year. The increase in non-fuel revenues is primarily due to
a 8.8% or $2.5 million increase in oil, new and used tire and repair part sales
and a 5.7% or $2.5 million increase in sales at our retail stores. Gross margins
increased 5.5% to $78.8 million in 1999 from $74.7 million in the prior year. We
believe the improved margins reflect the result of our continued focus on
improving profitability in these areas by increasing efficiency through greater
procedural controls and improved retailing.

Restaurant. Revenues increased 4.8% to $55.8 million in 1999 from $53.2
million in 1998. We believe revenues were enhanced by the implementation of new
menus and featured meal specials, resulting in the average ticket price
increasing by 4.5%. Gross margin in the restaurants improved by 4.5% or $1.7
million due to increased revenues resulting from the implementation of the menu
changes and featured meal specials.

Costs and Expenses. Total costs and expenses increased 10.6% to $694.4
million in 1999 from $627.7 million in 1998. Cost of sales increased $62.6
million or 12.5% from the prior year primarily due to higher fuel costs in the
current year. Operating expenses increased $7.1 million or 7.7%, to $100.2
million in 1999. The increase is mainly due to a $4.2 million increase in
employee-related costs, a $1.1 million increase in our customer loyalty program,
and a $738,000 increase in system project costs and pre-opening expense. General
and administrative expenses decreased $175,000 or 0.9% compared to 1998. These
costs and expenses were offset by a net gain of $836,000 mostly related to the
disposition of location scale equipment as part of our strategy to focus on our
core business.

Recapitalization Costs. Our income was impacted by approximately $1.2
million of expenses, primarily related to legal, accounting and other
professional fees, incurred in connection with the Recapitalization.

Equity in Loss of Affiliate. We recognized a $593,000 loss primarily from
startup costs related to our investment in the Wheeler Ridge facility in
Southern California, which opened in June 1999.

Interest Expense, net. Interest expense, net decreased $388,000 to $19.7
million in 1999 compared to 1998 primarily due to increased capitalized interest
of $299,000 in 1999 compared to 1998.

Extraordinary item. Extraordinary item reflects a charge to earnings of
$2.0 million for the write-off of unamortized deferred debt issuance costs
associated with retired debt and related to the Recapitalization.

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

Overview. Our net revenues decreased 4.7% from $685.7 million to $653.4
million for the year ended December 31, 1998. The decrease was due primarily to
a 9.6% or $49.5 million decrease in fuel revenues from the prior year as a
result of a 14.0% decline in the average retail-selling price per fuel gallon
from the prior year which was partially offset by a 4.3% or 19.6 million gallon
increase in fuel volumes. The decrease in fuel revenues was partially offset by
an 11.0% or a $13.5 million increase in non-fuel sales and a 7.5% or a $3.7
million increase in restaurant sales from the prior year. Operating expenses
increased 8.7% to $93.0 million from $85.6 million in the prior year due mainly
to employee related costs and the full year effects of the addition of two new
company-operated locations in 1997. General and administrative expenses
increased 13.5% to approximately $19.3 million from $17.0 million for the same
period in the prior year. This increase was principally due to employee related
expenses from the expanding operations and system costs.

Fuel. Revenues decreased 9.6% to $464.0 million in 1998 from $513.6 million
in 1997. Fuel revenues decreased primarily due to a 14.0% decline in the average
retail-selling price per gallon compared to 1997. The decrease in fuel prices
was offset by a 4.3% or 19.6 million gallon increase in fuel volumes,

20
<PAGE>

which management believes, together with improved pricing strategies, increased
fuel margin dollars by 9.4% or $3.5 million compared to the prior year. On a
comparable unit basis, fuel volumes increased 0.8% or 3.6 million gallons in
1998 compared to prior year and fuel margin dollars increased 5.8% or $2.2
million in 1998 compared to prior year. A Petro 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 11.0% to $136.1 million in 1998 from $122.6
million in 1997. On a comparable unit basis, sales increased 8.0% or $9.9
million over the prior year. The increase in non-fuel revenues is primarily due
to a 21.5% increase in tire and repair part sales and a 9.3% increase in sales
at our retail stores and the full year effects of the addition of two new
company-operated locations in 1997. Gross margins increased 12.3% or $8.2
million to $74.7 million in 1998 from $66.5 million in 1997.

Restaurant. Revenues increased 7.5% to $53.2 million in 1998 from $49.5
million in 1997. On a comparable unit basis, revenues increased 2.5% or $1.2
million compared to the prior year. Revenue increases were primarily due to the
full year effects of the two new locations added in 1997. Management believes
revenues were enhanced by the implementation of new menus and featured menu
specials. Gross margin in the restaurants improved by 8.9% or $3.1 million
overall and 4.0% or $1.4 million on a comparable unit basis, due to continued
management focus on costs and implementation of menu changes, resulting in the
average ticket price increasing by 1.5%.

Costs and Expenses. Total costs and expenses decreased 5.4% to $627.7
million in 1998 from $663.7 million in 1997. On a comparable unit basis, total
costs and expenses decreased 8.6% or $57.3 million in 1998 compared to the prior
year. Costs of sales decreased $47.2 million or 8.6% from the prior year
primarily due to lower fuel costs experienced during the current year. Operating
expenses increased $7.5 million or 8.7% to $93.0 million in 1998. The increase
is mainly due to an 8.1% increase related to employee costs, including the full
year effect of our two new company-operated locations added in 1997. During
1998 we also increased our provision for self-insurance claims by approximately
$1.0 million principally due to a change in estimates related to specific
claims, as well as the full year effects of having two new company-operated
locations which were opened in August and September of 1997. In addition, the
allowance for doubtful accounts was increased principally to reserve for a
specific customer who filed for bankruptcy protection. This specific reserve
approximated $180,000. General and administrative expenses increased 13.5% to
approximately $19.3 million from $17.0 million in 1997. This increase was
principally due to a $1.8 million or 18.5% increase in employee related expenses
from our expanding operations and system costs totaling $726,000.

Interest Expense, net. Interest expense, net decreased 1.2% to $20.0
million in 1998 compared to 1997. This decrease was due primarily to lower debt
levels as a result of principal payments and a 0.25% per annum decrease in
interest rates on term loans A and B under the previous senior credit facility.

Extraordinary item. Extraordinary item in 1997 reflects a charge to
earnings of $12.7 million for the write-off of debt restructuring costs relating
to the 1997 recapitalization.

Cumulative effect of a change in accounting principle. Cumulative effect of
a change in accounting principle in 1998 reflects the write-off of $3.3 million
of previously capitalizable costs. These costs, mainly incurred in prior years,
were related to start-up and organization costs, and as required by the 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 $1.6 million 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

In recent years, our principal sources of liquidity have been:

21
<PAGE>

. The proceeds from the issuance of our debt securities, which raised
gross proceeds of $135.0 million in 1997 (10 1/2% notes);

. Borrowings under our new senior credit facility, which currently
consists of an $85.0 million revolving credit facility and a $40.0
million term loan B, providing an aggregate borrowing up to $125.0
million;

. Sales of common and preferred partnership interests and capital
contribution transactions which raised $11.1 million in 1997 and $10.8
million in 1999;

. Cash flows from operations, which provided $30.3 million, $11.3
million, and $31.1 million in 1997, 1998, and 1999, respectively. The
large increase for 1997 was primarily due to the 1997
recapitalization, in which we redeemed approximately 94.0% of the
outstanding 12 1/2% notes and issued our 10 1/2% notes on which
initial interest payments of approximately $14.2 million per year,
were not due until February 1, 1998, and normal fluctuations in the
timing of payments to Mobil Diesel Supply for fuel purchases. The
large increase for 1999 was primarily due to normal fluctuations in
the timing of payments to Mobil Diesel Supply for fuel purchases and
variations in the timing of payments related to trade payables; and

. Our cash flow used in investment activities were $15.8 million, $19.7
million, and $38.2 million in 1997, 1998, and 1999, respectively. This
increase is due primarily to additional investment in property and
equipment of $15.9 million, $20.3 million, and $36.6 million in 1997,
1998, and 1999, respectively.

. Cash flow (used in) or provided by financing activities were $7.1
million, ($3.3) million, and $7.3 million in 1997, 1998, and 1999,
respectively. These fluctuations are almost entirely due to our
borrowings and repayments in the ordinary course of business with the
exception of 1997 and 1999, which are related to the 1997
recapitalization and the July 23, 1999 Recapitalization transaction,
respectively.

We had negative working capital of $3.1 million and $9.6 million at
December 31, 1998 and 1999, respectively. Negative working capital is normal in
the truckstop industry. Diesel fuel inventory turns every two to three days,
while payment is generally required in 12-15 days. Approximately 74.0% of our
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).

The new senior credit facility consists of an $85.0 million revolving
credit facility and a $40.0 million term loan B. As part of the
Recapitalization, we used the proceeds from the term loan B to repay principal
amounts due under our previous senior credit facility of $38.1 million, plus
accrued interest.

Under this new senior credit facility, subject to certain covenants, the
revolving credit facility may be used for working capital and to fund the
acquisition and development of new Petro Stopping Centers. Any principal amount
up to $60.0 million outstanding at July 23, 2002 will automatically convert to a
term loan A. Following this conversion, $25.0 million will continue to be
available on a revolving basis until maturity at July 23, 2004. The outstanding
balance under term loan A, if any, will amortize in eight equal quarterly
installments following the conversion. 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 our option). Commitment fees of .5% on
undrawn funds are paid quarterly. At December 31, 1999, we had standby letters
of credit issued for approximately $2.4 million resulting in availability of
approximately $82.6 million on the revolving credit facility. As of December 31,
1999, there were no borrowings on the revolving credit facility.

Principal payments on the new term loan B are due quarterly, beginning
September 30, 2000. The first sixteen quarterly payments due are $250,000 each.

22
<PAGE>

Any funds drawn on the new senior credit facility are secured by
substantially all of our assets, the pledge by Holdings of all the partnership
interests it holds, and is guaranteed by Holdings and all of our subsidiaries.

Accrual of dividends on mandatorily redeemable preferred partnership
interests amounted to $1.2 million for the year ended December 31, 1999. As part
of the Recapitalization, Holdings, Volvo Trucks, Mobil Long Haul, and various
individuals and affiliates of the Cardwell Group agreed to restate our
partnership agreement. The parties agreed to convert the outstanding amount of
mandatorily redeemable preferred partnership interests ($24.3 million, including
accrued but unpaid preferred dividends) into common limited partnership
interests.

We are self-insured, paying our own 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. For the
year ended December 31, 1999, we paid $8.6 million on claims related to these
self-insurance programs. 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. For the year ended December 31, 1999, aggregated
provisions amounted to $8.3 million. At December 31, 1999, the aggregated
accrual amounted to approximately $4.3 million, which we believe is adequate to
cover both reported and incurred but not reported claims.

Capital expenditures totaled $15.9 million, $20.3 million, and $36.6
million for 1997, 1998, and 1999, respectively. Included in capital
expenditures for both 1998 and 1999 were funds spent on new and existing Petro
Stopping Centers, in addition to information systems projects.

We currently expect to invest approximately $55.0 million during the year
2000 on capital expenditures. We currently plan to open four new truck stops
during the year 2000, with a cost of approximately $10.0 million to $11.0
million per site including land acquisition costs. Approximately $10.0 million
will be spent on regular capital maintenance and volume building projects. These
capital outlays will be funded through additional bank financing under the new
senior credit facility and internally generated cash.

Management believes that internally generated funds, together with amounts
available under the new senior credit facility, will be sufficient to satisfy
our cash requirements for operations through 2000 and the foreseeable future
thereafter. We also expect that current and future expansion and acquisitions
will be financed from funds generated from operations, the new senior credit
facility and to the extent necessary, additional financing.

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. Such liabilities are exclusive of claims against third
parties and are not discounted.

Contingencies under environmental laws and regulations may require us to
take action to correct the effects on the environment of prior disposal
practices or releases of chemical or petroleum substances by us or other
parties. We have accrued liabilities for environmental remediation activities
consistent with the policy set forth in Note 2 to notes to consolidated
financial statements included herein. At December 31, 1998 and 1999, this
accrual amounted to approximately $274,000 and $122,000, respectively. In
management's opinion, these accruals were appropriate based on existing facts
and circumstances. We accrue for environmental remediation expenses based upon
initial estimates obtained from contractors engaged to perform the remediation
work as required by local, state and federal authorities. It is often difficult
to predict the extent and the cost of environmental remediation until work has
commenced and the full scope of the contamination determined. Accruals are
periodically evaluated and updated as information

23
<PAGE>

regarding the nature of the clean up work is obtained. In the event that future
remediation expenditures are in excess of amounts accrued, we do not anticipate
that they will have a material adverse effect on our consolidated financial
position or results of operations. Actual results, however, could differ from
estimated amounts and those differences could be material. At December 31, 1999,
we have recognized approximately $162,000 in the consolidated balance sheet
related to recoveries of remediation costs from third parties.

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 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 was originally
effective for fiscal years beginning after June 15, 1999, but has been postponed
by Statement of Financial Accounting Standard No. 137, "An Amendment of SFAS No.
133", for one year with a mandatory effective date for fiscal years beginning
after June 15, 2000. Additionally, SFAS No. 133 has been modified regarding
recognition in the balance sheet of an embedded derivative that is required to
be separated from the host contract. At the date of initial application of SFAS
No. 133, an entity may choose either to recognize these embedded derivatives or
to select either January 1, 1998 or January 1, 1999, as a transition date for
embedded derivatives. 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 our 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, we have not entered into significant long-term contracts with
fuel suppliers and engaged in only limited hedging activities. On occasion, we
have purchased fuel in the forward contract market. As part of the
Recapitalization, we terminated our previous fuel and lubricant supply
agreements and entered into new ten-year supply agreements with Mobil Oil
Corporation under which Mobil Oil Corporation will supply the company-operated
Petro Stopping Centers' diesel fuel requirements as well as gasoline
requirements in those markets in which Mobil branded diesel and gasoline are
available for sale. Under the lubricant supply agreement, we are allowed to
purchase such quantities of lubricants as we require at the prices set forth in
the agreement. See Note 9 to notes to consolidated financial statements for the
year ended December 31, 1999.

As of December 31, 1998 and 1999, the carrying amounts of certain financial
instruments, employed by us, 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. Our principal market risk as it
relates to long term debt is exposure 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.

24
<PAGE>

The following table reflects the carrying amount and estimated fair value
of our financial instruments, as of December 31:

<TABLE>
<CAPTION>
1998 1999
Carrying Carrying
Amount Fair Value Amount Fair Value
-------- ----------- -------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Balance sheet financial instruments
Long-term debt $181,328 $188,416 $181,298 $172,167
Other financial instruments
Interest rate swap agreements -- (153) -- (264)
</TABLE>

We have only limited involvement with derivative financial instruments and
do not use them for trading purposes. We use derivatives to manage well-defined
interest rate risks. At December 31, 1999, we were party to an interest rate
swap agreement with an aggregate principal amount of $30.0 million. Under the
agreement, we pay a fixed rate of 6.15% in exchange for a floating rate based on
LIBOR on the aggregate principal amount as determined in three-month intervals.
The transaction effectively changes a portion of our interest rate exposure from
a floating rate to a fixed rate basis. The effect of the swap was to increase
the rate we were required to pay by 0.66%, which resulted in additional interest
expense of approximately $264,000.

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, we do not
anticipate non-performance by the other party. We do not obtain collateral or
other security to support financial instruments subject to credit risk, but
monitor the credit standing of counterparties.

25
<PAGE>

Item 8. Financial Statements and Supplementary Data

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

<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
--------------- ---------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 13,183 $ 13,394
Trade accounts receivable, net 10,631 7,439
Inventories, net 16,459 21,989
Other current assets 2,892 3,120
Due from affiliates 1,163 2,075
--------------- ---------------
Total current assets 44,328 48,017

Property and equipment, net 162,274 184,375
Deferred debt issuance costs, net 11,229 9,972
Other assets 9,168 11,597
--------------- ---------------
Total assets $226,999 $253,961
=============== ===============

Liabilities and Partners' Capital (Deficit)

Current liabilities:
Current portion of long-term debt $ 4,967 $ 1,001
Trade accounts payable 4,214 10,767
Accrued expenses and other liabilities 21,439 20,276
Due to affiliates 16,768 25,537
--------------- ---------------
Total current liabilities 47,388 57,581

Long-term debt, excluding current portion 176,361 180,297
--------------- ---------------
Total liabilities 223,749 237,878
--------------- ---------------
Commitments and contingencies

Mandatorily redeemable preferred partnership interests 23,172 -

Partners' capital (deficit):
General partners' (915) (254)
Limited partners' (19,007) 16,337
--------------- ---------------
Total partners' capital (deficit) (19,922) 16,083
--------------- ---------------

Total liabilities and partners' capital (deficit) $226,999 $253,961
=============== ===============
</TABLE>

See accompanying notes to consolidated financial statements

26
<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,
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Net revenues:
Fuel (including motor fuel taxes) $513,571 $464,025 $520,680
Non-fuel 172,158 189,391 199,245
------------- ------------- -------------
Total net revenues 685,729 653,416 719,925

Costs and expenses:
Cost of sales -
Fuel (including motor fuel taxes) 476,033 422,945 481,483
Non-fuel 70,548 76,451 80,491
Operating expenses 85,560 93,012 100,156
General and administrative 17,004 19,329 19,154
Depreciation and amortization 14,502 15,953 13,951
(Gain) loss on disposition of fixed assets 31 6 (836)
------------- ------------- -------------

Total costs and expenses 663,678 627,696 694,399
------------- ------------- -------------
Operating income 22,051 25,720 25,526

Recapitalization costs - - (1,163)
Equity in loss of affiliate - - (593)
Interest income 956 729 596
Interest expense (21,248) (20,771) (20,250)
------------- ------------- -------------
Income before extraordinary item and cumulative
effect of a change in accounting principle 1,759 5,678 4,116

Extraordinary item - write-off of debt
restructuring costs associated with retired (12,745) - (2,016)
debt

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

Net income (loss) $(12,565) $ 2,428 $ 2,100
============= ============= =============
</TABLE>

See accompanying notes to consolidated financial statements.

27
<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 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)
Partners' minimum tax distributions (8) (972) (980)
Accrual of preferred return on mandatorily
redeemable preferred partnership interests (25) (1,134) (1,159)
Assignment of mandatorily redeemable preferred
partnership interests and accrued but unpaid
preferred returns to partners' capital - 24,331 24,331
Conversion of interest 637 (637) -
Cash contributions - 10,759 10,759
Non-cash contributions - 954 954

Net income 57 2,043 2,100
------------- -------------- --------------
Balance, December 31, 1999 $ (254) $ 16,337 $ 16,083
============= ============== ==============
</TABLE>

See accompanying notes to consolidated financial statements.

28
<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,
1997 1998 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss) $ (12,565) $ 2,428 $ 2,100
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 14,502 15,953 13,951
Extraordinary item - write-off of deferred financing
costs associated with retired debt 12,745 - 2,016
Cumulative effect of a change in accounting principle 1,579 3,250 -
Deferred debt issuance cost amortization 1,749 1,637 1,501
Accretion of original issue discount 47 - -
Bad debt expense 271 236 246
Equity in loss of affiliate - - 593
Gain on disposition of assets - - (836)
Increase (decrease) from changes in:
Trade accounts receivable (2,418) 1,681 2,946
Inventories (1,167) (97) (5,530)
Other current assets (1,147) (341) (228)
Due from affiliates 1,111 114 (912)
Due to affiliates 16,663 (3,340) 9,889
Trade accounts payable (6,373) (5,136) 6,553
Accrued expenses and other liabilities 5,331 (5,052) (1,163)
---------------- ---------------- ----------------
Net cash provided by operating activities 30,328 11,333 31,126
---------------- ---------------- ----------------
Cash flows provided by (used in) investing activities:
Proceeds from disposition of assets 3,102 2,165 1,425
Purchases of property and equipment (15,870) (20,309) (36,564)
Increase in other assets, net (3,011) (1,515) (3,098)
---------------- ---------------- ----------------
Net cash (used in) investing activities (15,779) (19,659) (38,237)
---------------- ---------------- ----------------

Cash flows provided by (used in) financing activities:
Repayments of notes payable (23,639) - (1,400)
Proceeds from notes payable 2,000 - 1,400
Repayments of long-term debt and capital lease (152,800) (3,287) (39,374)
Proceeds from long-term debt issuance 185,190 - 40,000
Minimum tax distributions to partners - - (2,100)
Capital contributions 11,047 - 10,759
Payment of debt issuance costs (14,733) - (1,963)
---------------- ---------------- ----------------
Net cash provided by (used in) financing activities 7,065 (3,287) 7,322
---------------- ---------------- ----------------

Net increase (decrease) in cash and cash equivalents 21,614 (11,613) 211
Cash and cash equivalents, beginning of period 3,182 24,796 13,183
---------------- ---------------- ----------------
Cash and cash equivalents, end of period $ 24,796 $ 13,183 $ 13,394
================ ================ ================
</TABLE>

See accompanying notes to consolidated financial statements.

29
<PAGE>

PETRO STOPPING CENTERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1997 1998 1999
--------------- ---------------- ---------------
<S> <C> <C> <C>
Supplemental cash flow information--
Interest paid during the period, net of capitalized interest of $0,
$0 and $299 in 1997, 1998 and 1999 $14,028 $20,771 $18,256
Non-cash transaction --
Acquisition of property and equipment through capital lease - 1,425 -
Preferred return on mandatorily redeemable preferred partnership 1,635 1,972 1,159
interests
Minimum tax distributions to partners - 1,120 -
Assignment of mandatorily redeemable preferred partnership interests
and accrued but unpaid preferred returns to partners' capital - - 24,331
Non-cash contributions - - 954
Assignment of mandatorily redeemable preferred partnership interests
in connection with the 1997 recapitalization 19,600 - -
Conversion of Cardwell general and limited partner interest in connection
with the 1997 recapitalization 7,972 - -
Direct purchase of interests formerly owned by The Fremont Group, Inc. by
Mobil in connection with the 1997 recapitalization 10,110 - -
</TABLE>

See accompanying notes to consolidated financial statements.

30
<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 Partner
Petro, Inc.

Limited Partners
James A. Cardwell, Jr.
Petro Stopping Centers Holdings, L.P.
Petro Holdings G.P., LLC

Petro, Inc. and various individuals and entities affiliated with Petro,
Inc. are controlled by the Company's Chairman and Chief Executive Officer and
are collectively referred to as the Cardwell Group. Petro, Inc. is a retailer of
truck and passenger car tires and also holds investments that include the
general partner interest and a limited partner interest in Petro Stopping
Centers Holdings, L.P. ("Holdings"), a general partner interest in the Company,
and a portion of Holdings' mandatorily redeemable preferred partnership
interests. For the period from January 30, 1997 to July 23, 1999, the general
partners of the Company were Petro, Inc. and an affiliate of Chartwell
(described below). Prior to January 30, 1997, the general partners of the
Company were Petro, Inc. and Roadside, Inc., an entity owned by The Fremont
Group, Inc.

Recapitalization

On July 23, 1999, the Company, certain of its partners and an
affiliate of Volvo Trucks North America, Inc. ("Volvo") consummated a
transaction pursuant to which Holdings was formed, and substantially all of the
present owners in the Company (other than Petro Holdings G.P. Corp. and Petro
Holdings L.P. Corp., each of which were affiliates of Chartwell Investments,
Inc. (collectively, "Chartwell") and Kirschner Investments ("Kirschner"), a
company franchisee), including Petro, Inc. (together with J.A. Cardwell Sr.,
James A. Cardwell Jr., and JAJCO, collectively, the "Cardwell Group"), exchanged
substantially all their interests in the Company for identical interests in
Holdings. Petro Holdings Financial Corporation ("Financial Holdings") was formed
for the purpose of serving as co-issuer of 15.0% senior discount notes due 2008
(as defined below). Financial Holdings, the Company and its subsidiary, Petro
Financial Corporation, became subsidiaries of Holdings. Petro Warrant Holdings
Corporation ("Warrant Holdings") was formed for the purpose of owning a common
limited partnership interest in Holdings and issuing the warrants (see below)
that are exchangeable into all of the common stock of Warrant Holdings. In
addition, Volvo Petro Holdings L.L.C. ("Volvo Trucks"), an affiliate of Volvo,
invested $30.0 million to acquire a 28.7% limited common partnership interest in
Holdings while Mobil Long Haul, Inc., an affiliate of Mobil Oil Corporation,
invested an additional $5.0 million in Class B convertible preferred partnership
interests of Holdings. Holdings purchased the 50.8% common interest in the
Company owned by affiliates of Chartwell for aggregate consideration of
approximately $69.8 million, which consisted of a $55.0 million cash payment and
the issuance to Chartwell of approximately $14.8 million in accreted value
($11.2 million net of an imputed market rate of interest discount) of 15.0%
senior discount notes due 2008 (as defined below), without warrants. Holdings
also purchased the 2.0% common interests in the Company owned by Kirschner for
cash consideration of $2.8 million. The foregoing is referred to as the
"Recapitalization." The acquisition of Chartwell's and Kirschner's interests was
accounted for by Holdings under the purchase method during the third quarter of
1999.

As part of the Recapitalization, Holdings issued 82,707 units, each
consisting of $1,000 principal amount at stated maturity of Holdings' 15.0%
senior discount notes due 2008 ("15% Notes") and one warrant. As consideration
for issuance of the units, Holdings received $40.0 million cash of which $30.3
million was allocated to the 15% Notes and $9.7 million was allocated to the
warrants. Holdings acquired

31
<PAGE>

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

(1) Company Formation and Description of Business - continued

the warrants from Warrant Holdings for $9.7 million. Warrant Holdings, in turn,
invested the $9.7 million to acquire a 10.0% common limited partnership interest
in Holdings.

As a result of the Recapitalization, Holdings is the owner of approximately
99.5% of the common interests of the Company. Petro, Inc. and another affiliate
of the Cardwell Group own the remaining 0.5% of the Company. The common limited
partnership interests of Holdings are owned by the Cardwell Group (approximately
51.6%), Volvo Trucks (approximately 28.7%), Mobil Long Haul (approximately 9.7%)
and Warrant Holdings (approximately 10.0%).

The mandatorily redeemable preferred partnership interests of Holdings are
owned by Mobil Long Haul ($17.0 million) and the Cardwell Group ($7.6 million).

Holdings funded a portion of its purchase of the Chartwell and Kirschner
interests in the Company with debt. Holdings currently has no operations of its
own and is, therefore, dependent upon the Company's earnings and cash flows to
satisfy its obligations under the 15% Notes and warrants.

Effect of Recapitalization on the Company

In connection with the exchange of interests referred to above, the
Company and its partners (Holdings, Volvo Trucks, Mobil Long Haul, and various
individuals and affiliates of the Cardwell Group) agreed to restate the
Company's partnership agreement. Among other things, the parties agreed to
convert the outstanding amount of mandatorily redeemable preferred partnership
interests ($24.3 million, including accrued but unpaid preferred returns) into
common limited partnership interests of the Company.

Holdings raised funds from the capital contributions of Volvo Trucks
and Mobil Long Haul and the offering of the units exceeding the amounts
necessary to purchase the interests in the Company owned by Chartwell and
Kirschner. As a consequence, Holdings made a cash contribution to the Company
in the amount of approximately $10.8 million.

As part of the Recapitalization, the Company also amended its previous
senior credit facility. The New Senior Credit Facility consists of an $85.0
million revolving credit facility and a $40.0 million New Term Loan B. The
proceeds of the New Term Loan B were used to repay principal amounts due under
the term A and B loans and the expansion facility of the then previous senior
credit facility of approximately $38.1 million, plus accrued interest. The New
Senior Credit Facility is collateralized by substantially all of the Company's
assets and contains certain covenants as described in Note (7).

As of December 31, 1999, the Company capitalized debt issuance and other
costs of approximately $2.2 million and expensed legal, accounting and other
professional fees of $1.2 million incurred in connection with the
Recapitalization. Holdings incurred approximately $279,000 of these costs on
behalf of the Company and that amount has been reflected as a non-cash capital
contribution in the accompanying financial statements.

Other than described above, the Recapitalization had no effect on the
historical book values of the Company's assets and liabilities.

1997 Recapitalization

On January 30, 1997, the Company consummated a transaction entered into in
October 1996, under which Chartwell and Mobil Long Haul invested $20.7 million
and $15.0 million, respectively, to directly acquire the 40.0% common
partnership interests of the Company owned by The Fremont Group, Inc. The
respective Mobil Long Haul and Chartwell investments in the Company were
approximately $4.2 million and $5.8 million. The Cardwell Group maintained its
capital investment in the Company. Kirschner, a Company franchisee, invested
$1.0 million in the Company in exchange for a 2.0% common

32
<PAGE>

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

(1) Company Formation and Description of Business - continued

partnership interest. Immediately thereafter, the Cardwell Group and Mobil Long
Haul agreed to assign $19.6 million of their capital balances to mandatorily
redeemable preferred partnership interests.

Following these investments, the common partnership interests of the
Company were owned by:

. Chartwell (approximately 50.8%),
. Cardwell Group (approximately 39.9%),
. Mobil Long Haul (approximately 7.3%), and
. Kirschner (approximately 2.0%).

The mandatorily redeemable preferred partnership interests were owned by:

. Mobil Long Haul ($12.0 million) and
. Cardwell Group ($7.6 million).

As a result of the 1997 recapitalization, Chartwell and the Cardwell Group
owned both general and limited partnership interests and Mobil Long Haul and
Kirschner owned only limited partnership interests. Mobil Oil Corporation and
the Company also entered into certain supply and marketing agreements.

As part of the 1997 recapitalization, the Company issued $135.0 million of
10 1/2% notes due 2007 and repurchased approximately 94.0% of the existing 12
1/2% notes due 2002 and approximately 100% of related outstanding debt warrants.
The Company also amended its then existing senior collateralized credit
facility. The credit agreement consisted of a $25.0 million revolving credit
facility, a $14.0 million term loan A, a $30.0 million term loan B and a $40.0
million expansion facility. In connection with the issuance of the 10 1/2%
notes, the Company capitalized approximately $14.5 million of debt issuance
costs and wrote off, as an extraordinary item, $12.7 million of debt
restructuring costs. These costs included the write-off of deferred financing
costs relating to the replacement of the prior credit agreement, the retirement
of term A and B loans, the replacement of the 12 1/2% notes, and the related
debt warrants.

Description of Business

The Company operates large, multi-service truck stops known as "Petro
Stopping Centers" ("Stopping Centers"), that are located along interstate
highways and typically offer diesel fuel, gasoline, home-style restaurants
("Iron Skillet"), truck preventative maintenance centers ("Petro:Lubes"), travel
and convenience stores and a range of other products, services and amenities to
professional truck drivers, other highway motorists and local residents. At
December 31, 1999, the Company's network consisted of 53 Stopping Centers
located in 30 states, of which 30 were company-operated and 23 were franchised.

(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

33
<PAGE>

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

(2) Summary of Significant Accounting Policies - continued

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 for a
fee from franchisees. The receivables are not collateralized. The risk, however,
is limited due to the large number of entities comprising the customer base and
their dispersion across geographic regions. At December 31, 1999, 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, 1998 and 1999,
the allowance for uncollectible accounts totaled $627,000 and $742,000,
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, 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, 1998 and 1999, the Company reported land held for sale at
its net book value of $6.1 million for each year. 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. All of the
1998 and 1999 balances are included in other assets in the accompanying
consolidated balance sheets.

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 $3.5 million, $4.5 million, and
$4.2 million for the years ended December 31, 1997, 1998, and 1999,
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 is computed on the straight - line method over the
term of the lease.

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

34
<PAGE>

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

(2) Summary of Significant Accounting Policies - continued

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.
At December 31, 1998 and 1999, accumulated amortization of debt issuance costs
were $3.1 million and $1.5 million, 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. For the years ended
December 31, 1997, 1998, and 1999, the Company paid $4.1 million, $6.8 million,
and $8.6 million, respectively, on claims related to these self-insurance
programs. 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. At December 31, 1998 and 1999, such aggregated provisions
amounted to approximately $6.0 million and $8.3 million, respectively. At
December 31, 1998 and 1999, the aggregated accrual amounted to approximately
$4.6 million and $4.3 million, respectively. The Company believes it provides
an accrual adequate to cover both reported and incurred but not reported claims.

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 $2.5 million, $2.8 million, and $2.6 million were incurred for the
years ended December 31, 1997, 1998, and 1999, respectively, and are included in
operating expenses in the accompanying consolidated statements of operations.
Advertising and promotion reimbursements from franchisees totaled $334,000,
$401,000, and $432,000 for the years ended December 31, 1997, 1998, and 1999,
respectively.

Motor Fuel Taxes

Certain motor fuel taxes are collected from consumers and remitted to
governmental agencies by the Company. Such taxes were $192.7 million, $203.3
million, and $211.6 million for the years ended December 31, 1997, 1998, and
1999, 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 remediation activities 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. At December 31, 1998 and 1999, such accrual amounted to
$274,000 and $122,000, respectively. These liabilities are exclusive of claims
against third parties and are not discounted.

Revenue Recognition

The Company recognizes revenue from the sale of fuel and non-fuel products
and services at the time delivery has occurred and services have been performed.

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. Given the insignificance of initial franchise fees and other revenue
types, the Company

35
<PAGE>

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

(2) Summary of Significant Accounting Policies - continued

reports a total combined revenue amount. Fees earned from franchises aggregated
$4.0 million, $4.5 million, and $5.0 million during the years ended December 31,
1997, 1998, and 1999, respectively. There were 18, 21, and 23 franchise
locations in operation during the years ended December 31, 1997, 1998, and 1999,
respectively. The Company does not allocate any expenses or assets in measuring
its franchise segment's profit and loss, nor does it believe there are any
significant commitments or obligations resulting from these franchise
agreements.

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, 1999, 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, 1999, the Company was party to an interest rate swap agreement with
an aggregate principal amount of $30.0 million, which effectively changes a
portion of the Company's interest rate exposure from a floating rate to a fixed
rate basis. The effect of the swap was to increase the rate the Company paid of
6.15% by 0.66%, which resulted in additional interest expense of approximately
$264,000 for the year ended December 31, 1999.

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 98-5, "Reporting the Costs of Start-up Activities"
("SOP 98-5"). 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 $3.3 million in 1998 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 $1.6 million in 1997 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.

36
<PAGE>

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

(3) Inventories

The following is a summary of inventories at December 31, 1998 and 1999:

<TABLE>
<CAPTION>
1998 1999
---- ----
(in thousands)

<S> <C> <C>
Motor fuels and lubricants $ 3,704 $ 7,222
Tires and tubes 4,141 4,453
Merchandise and accessories 7,827 9,668
Restaurant and other 1,244 1,103
Less reserve for obsolescence (457) (457)
------- -------
Inventories, net $16,459 $21,989
======= =======
</TABLE>

During 1998, the Company wrote off a majority of its inventories that had
been deemed to be obsolete.

(4) Property and Equipment

Property and equipment is summarized at December 31, 1998 and 1999, as
follows:

<TABLE>
<CAPTION>
Estimated
Useful
Lives
(years) 1998 1999
------- ---- ----
(in thousands)
<S> <C> <C> <C>
Land and improvements 10 $ 28,370 $ 28,780
Buildings and improvements 30 106,417 125,028
Furniture and equipment including capital lease 3-10 61,070 66,778
Leasehold improvements 7-30 20,234 19,810
Facilities under development - - 9,636
-------- --------
216,091 250,032
Less accumulated depreciation and amortization (53,817) (65,657)
-------- --------
Property and equipment, net $162,274 $184,375
======== ========
</TABLE>

The Company currently has equipment under a capital lease. Facilities under
development include costs associated with new facilities and major renovations
of existing facilities. Other than as related to Mebane, North Carolina and
Glendale, Kentucky, there were no other future construction commitments at
December 31, 1999.

37
<PAGE>

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

(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 noncancelable lease terms in excess of one year as of December 31,
1999, is as follows:

<TABLE>
<CAPTION>
Related Third
Fiscal Year Ending Party Party Total
- ------------------ ----- ----- -----
(in thousands)
<S> <C> <C> <C>
2000 $1,409 $ 858 $ 2,267
2001 1,409 843 2,252
2002 1,409 843 2,252
2003 1,409 843 2,252
2004 1,409 751 2,160
Later years 1,806 9,078 10,884
------ ------- -------
Total minimum lease payments $8,851 $13,216 $22,067
====== ======= =======
</TABLE>

Rent expense under all operating leases was $2.3 million, $2.6 million, and
$2.3 million for 1997, 1998, and 1999, respectively. Of these rentals, $1.5 were
paid to related-parties for each of the years ended December 31, 1997, 1998, and
1999. The related-party operating leases, which are more fully described in Note
(9), are:

. The Company leases a facility in El Paso, Texas, from a trust in which
J.A. Cardwell, Sr. is a 50% beneficiary, to operate the Company's
retread plant and made lease payments of $72,000 for each of the
fiscal years ended December 31, 1997, 1998, and 1999.

. The office building in which the Company's principal executive offices
are located is owned by J.A. Cardwell, Sr. The Company made annual
rent payments of $336,000 for each of the years ended December 31,
1997, 1998, and 1999 .

. The Stopping Center located in Effingham, Illinois is leased by the
Company from Truck Stop Property Owners, Inc., which is partially
owned by Travis Roberts, a current officer of the Company. The Company
made rental payments of $1.1 million for each of the years ended
December 31, 1997, 1998, and 1999.

(6) Notes Payable

At December 31, 1998, the Company had available a five-year Revolving
Credit Facility and a three-year Expansion Facility (collectively, "Credit
Facility"), under which up to $25.0 million and $40.0 million were available,
respectively. At December 31, 1998, the balance available on the Credit
Facility, net of letters of credit outstanding, was $22.6 million and the
Company did not have a balance outstanding on the expansion facility.

As discussed in Note (1), as part of the Recapitalization, the Company
amended its Existing Senior Credit Facility. Under the New Senior Credit
Facility, the Company, subject to certain covenants, has available an $85.0
million revolving credit facility that may be used for working capital and to
fund the acquisition and development of new Stopping Centers. Any principal
amount up to $60.0 million outstanding at July 23, 2002, will automatically
convert to a term loan A. Following this conversion, $25.0

38
<PAGE>

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

(6) Notes Payable - continued

million will continue to be available on a revolving basis until maturity at
July 23, 2004. The outstanding amounts under term loan A, if any, will amortize
in eight equal quarterly installments following the conversion. 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). Commitment fees of .5% on undrawn funds are paid quarterly. At
December 31, 1999, the Company did not have a balance outstanding on the
revolving credit facility.

The Company did have standby letters of credit outstanding under the
respective revolving credit facilities at December 31, 1998 and 1999. For each
of the years ended December 31, 1998 and 1999, the standby letters of credit,
principally related to unfunded insurance claims were $2.0 million. Various
other standby letters of credit totaled $427,000 for each year ended December
31, 1998 and 1999.

Any funds drawn on the New Senior Credit Facility are secured by
substantially all of the Company's assets, the pledge by Holdings of all the
partnership interests it holds in the Company, and is guaranteed by Holdings and
all subsidiaries of the Company.

39
<PAGE>

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

(7) Long-Term Debt

Long-term debt at December 31, 1998 and 1999, is presented below.

<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
---- ----
(in thousands)
--------------

<S> <C> <C>
Four-year term note to a bank in an original amount of $20.0 million maturing
September 30, 2001. The note was payable in 18 consecutive quarterly installments
commencing September 30, 1997. Interest at either the bank's prime rate plus
1.5% or the Eurodollar rate plus 2.75% was payable monthly. The rate was 7.75%
at December 31, 1998. The note was repaid July 23, 1999.
$ 9,973 $ -
Six-year term note to a bank in an original amount of $30.0 million maturing
September 30, 2003. The note was payable in 26 consecutive quarterly installments
commencing September 30, 1997. Interest at either the bank's prime rate plus
2.0% or the Eurodollar rate plus 3.25% was 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. This note was
repaid July 23, 1999, and the Swap was transferred to the New Senior Credit
Facility. 28,933 -

Seven-year term note to a bank in an original amount of $40.0 million maturing
July 23, 2006. The note is payable in 24 consecutive quarterly installments
varying from $250,000 to $600,000 commencing September 30, 2000. Interest at
either the bank's prime rate plus 1.5% or the Eurodollar rate plus 3.0% is
payable monthly. The effective rate was 7.83% at December 31, 1999, as a result
the Swap with the lender as required under the loan agreement. The Swap expires
on January 1, 2000. The note is collateralized by substantially all of the
Company's assets. - 40,000

12 1/2% Senior Notes due 2002 (the "12 1/2 Notes") in an original aggregate
principal amount of $100.0 million, net of original issue discount. As part of
the 1997 recapitalization, approximately 94.0% of the 12 1/2 Notes were retired.
Interest on the 12 1/2 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 "10 1/2 Notes") in an original aggregate
principal amount of $135.0 million, net of unamortized discount of $656,000.
Interest on the 10 1/2 Notes is payable on February 1 and August 1 of each year,
beginning August 1, 1997. The 10 1/2 Notes are effectively subordinate to the
loans outstanding under the New Senior Credit Facility to the extent of the value
of the assets securing such loans. 135,000 134,344

Obligation under equipment capital lease 1,232 764
--------- ---------
Total long-term debt 181,328 181,298
Less current portion 4,967 1,001
--------- ---------
Long-term debt, excluding current portion $176,361 $180,297
========= =========
</TABLE>

40
<PAGE>

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

(7) Long-Term Debt - continued

The 12 1/2 Notes may be redeemed at the option of the Company, in whole or
in part, at any time on or after June 1, 1999, upon not less than 30 and no more
than 60 days notice at the following redemption prices (expressed as percentages
of the principal amount to be redeemed) as set forth below, plus accrued
interest:

<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
1999 103.57%
2000 101.79%
2001 100.00%
</TABLE>

The 10 1/2 Notes may be redeemed at the option of the Company, in whole or
in part, at any time on or after February 1, 2002, upon not less than 30 and no
more than 60 days notice at the following prices (expressed as percentages of
the principal amount to be redeemed) as set forth below, plus accrued interest:

<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2002 105.2%
2003 103.5%
2004 101.7%
2005 and thereafter 100.0%
</TABLE>

In addition, prior to February 1, 2000, the Company may, with the net
proceeds of one or more public equity offerings of qualified capital interest in
the Company, redeem up to 35.0% of aggregate principal amount of the outstanding
10 1/2 Notes at a redemption price of 110.5%, plus accrued interest.

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, 1998, and 1999, the
Company was in compliance with all debt covenants.

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>
2000 $ 1,001
2001 1,263
2002 7,190
2003 1,000
2004 6,500
Thereafter 165,000
Less unamortized discount (656)
---------
Total $181,298
=========
</TABLE>

41
<PAGE>

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

(8) Accrued Expenses and Other Liabilities

The following is a summary of accrued expenses and other liabilities at
December 31, 1998 and 1999:

<TABLE>
<CAPTION>
1998 1999
---- ----
(in thousands)
-------------
<S> <C> <C>
Accrued expenses:
Employee related expenses $ 9,794 $ 7,117
Taxes payable-sales, fuel and property 2,594 2,578
Other 6,934 10,581
Due to franchisees 2,117 -
--------- --------
Total $21,439 $20,276
========= ========
</TABLE>

(9) Related-Party Transactions

Amounts due to and from affiliates as of December 31, 1998 and 1999,
consist of the following:

<TABLE>
<CAPTION>
1998 1999
---- ----
(in thousands)
---------------
<S> <C> <C>
Due from affiliates:
C&R Distributing, Inc. $ 39 $ 161
Petro Truckstops, Inc. 181 159
Petro Travel Plaza, LLC (Wheeler Ridge) - 535
Highway Service Ventures, Inc. 39 88
Cardwell Group 647 647
Other 257 485
--------- --------
Total $ 1,163 $2,075
========= ========
Due to affiliates:
El Paso Amusement Company $ 189 $ 131
Highway Service Ventures, Inc. 481 -
C&R Distributing, Inc. 83 57
Mobil Diesel Supply Corporation 13,177 21,338
Mobil Oil Corporation 1,718 4,011
Cardwell Group 1,058 -
Other 62 -
--------- --------
Total $16,768 $25,537
========= ========
</TABLE>

In connection with the Recapitalization, the Company entered into new ten-
year supply agreements with Mobil Oil Corporation under which Mobil Oil
Corporation will supply the company-operated Stopping Centers' diesel fuel
requirements and gasoline requirements in those markets in which Mobil branded
gasoline is available for sale. Under the lubricant supply agreement, the
Company is allowed to purchase such quantities of lubricants as the Company
requires at the prices set forth in the agreement. The diesel fuel sold at all
but one company-operated Stopping Centers and some of the Company's franchise
operated Stopping Centers are branded Mobil Diesel, and all of the company-
operated Petro:Lubes feature Mobil Delvac lubricants. Under the new fuel supply
agreement and the agreement for the resale of oils and greases with Mobil Oil
Corporation, both dated July 23, 1999, the

42
<PAGE>

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

9) Related-Party Transactions - continued

Company agreed to purchase Mobil branded lubricant products and Mobil branded
diesel fuel for sale and distribution under Mobil's trademarks at the company-
operated Stopping Centers and eight of the Company's franchise operated truck
stops and Mobil branded gasoline for sites as selected by Mobil Oil Corporation,
as limited however, by existing contractual obligations to purchase gasoline
from other suppliers. The Mobil Supply Agreements require that the Company
purchase from Mobil-specified distribution terminals, a minimum number of
gallons of diesel fuel on an annual basis, depending on product availability and
reductions by Mobil Oil Corporation under described circumstances. For 1999, the
Company's annual volume commitment was 172.3 million gallons of Mobil diesel
under the fuel supply agreement and 1.2 million gallons of Mobil lubricants
under the lubricant supply agreement. This constitutes approximately 37.4% of
the Company's current diesel fuel requirements and approximately 63.1% of the
Company's lubricant requirements. If the Company does not purchase any diesel
fuel from Mobil Oil Corporation under the Mobil Supply Agreements, the maximum
penalties in any year would be $0.0035 per gallon multiplied by the annual
volume commitment as provided for in the Mobil Supply Agreements, plus
additional amounts for each new Stopping Center opened and which Mobil Oil
Corporation agrees to supply. As a result of the Mobil Supply Agreements and to
comply with the laws governing the branding of diesel fuel, if Mobil Oil
Corporation is unable to supply 100% of the Company's diesel fuel demand due to
limited product availability, Mobil Diesel Supply Corporation ("MDS"), a wholly
owned subsidiary of Mobil Oil Corporation, purchases additional diesel fuel
from third-party suppliers and then sells it to the Company. Under the terms of
the Mobil Supply Agreements, the Company may continue to negotiate with third-
parties regarding price and other terms, and then designate them to MDS. Third-
party suppliers are approved by Mobil Oil Corporation if the fuel to be supplied
by the third-party meets all federal, state and local diesel requirements. The
Company's fuel purchase arrangement with MDS enables the Company to meet its
diesel fuel needs and to comply with branding laws, which require Mobil Oil
Corporation to first take possession of the fuel before it can be branded as
Mobil diesel.

The Mobil Supply Agreements allow 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 Oil Corporation
meet the lower price or allow a portion of its diesel fuel requirements to be
supplied from the 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, other than a change resulting from Mobil
Oil Corporation's inability to supply, does not affect the Company's requirement
to purchase the annual minimum number of gallons from Mobil-specified
distribution terminals fixed by the Mobil Supply Agreements. The Mobil Supply
Agreements also place a monthly limit on the maximum number of gallons of diesel
fuel that the Company may lift from Mobil-specified distribution terminals.
Prices to be charged for fuel sold to the Company under the Mobil Supply
Agreements are based on referenced prices minus discounts and plus delivery
costs. Upon the expiration of the ten-year initial term, the Mobil Supply
Agreements are renewable for another five-year term at the option of Mobil Oil
Corporation; however, the Company has the ability to terminate the agreements at
the end of the ten-year term at a price based on a formula discussed in the
Mobil Supply Agreements.

The Company purchases diesel fuel for each of its company-operated Stopping
Centers on a daily basis. During 1999, the Company purchased 100% of diesel fuel
through MDS, approximately 65.8% of which was third-party fuel purchased through
this arrangement. The approximate aggregate amount paid under the Mobil Supply
Agreements for the year ended December 31, 1999 totaled $422.0 million.

The office building in which the Company's principal executive offices are
located is owned by J.A. Cardwell, Sr., the Chief Executive Officer and Chairman
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 years ended
December 31, 1997, 1998, and 1999, the Company made annual rental payments of
$336,000.

43
<PAGE>

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

(9) Related-Party Transactions - continued

The Stopping Center located in Effingham, Illinois, is owned by Truck Stop
Property Owners, Inc. ("Truck Stop"), a corporation owned by Travis Roberts, and
five former employees of the Company. Mr. Roberts is a current officer of the
Company and owns 22.0% of the stock of Truck Stop. The Company leases the
Effingham Center under a lease expiring in May 2006, which provides for basic
rent payments, 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 base rent, plus certain adjustments at the time of renewal.
The Company also has the right of first refusal to purchase the Petro Stopping
Center at any purchase price agreed upon between Truck Stop and a third party.
The Company made rental payments to Truck Stop of $1.1 million on this property
in each of the years ended December 31, 1997, 1998, and 1999.

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
1997 recapitalization, including soliciting, structuring and arranging the
financing of the 1997 recapitalization. The fees, totaling approximately $3.0
million, equal to 1.0% of the total capitalization of the Company, plus .5% of
the expansion facility and the reimbursement of certain expenses, were paid at
the closing. These costs were deferred and are being amortized over the terms of
the respective debt instruments to which they relate.

Under the terms of an agreement with C&R Distributing, Inc. ("C&R"), the
Company currently purchases Chevron branded gasoline and motor oils at cost for
three of its facilities from C&R. The sole shareholder of C&R Distributing is
Nevada Trio, Inc., a Nevada Corporation, which is 100% owned by the Cardwell
Group. The C&R fuel agreement requires the Company to keep Chevron unleaded
gasoline, regular gasoline and motor oils continuously stocked and offered for
sale in quantities sufficient to meet demand. In 1997, the Company entered into
a product services agreement with C&R which terminates in December 2004, under
which C&R provides the Company with fuel hauling and fuel pump maintenance and
services within the El Paso, Texas metropolitan area. The C&R 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. The C&R fuel
agreement is exclusive but allows the Company to cancel the agreement with 30
days prior notice. The C&R services agreement is non-exclusive and allows the
Company to enter into similar agreements with other parties. Fuel sales
aggregating $3.3 million, $169,000, and $100,000 for the years ended December
31, 1997, 1998, and 1999, respectively, were made to C&R Distributing, Inc. at
the Company's cost. C&R sales of fuel and lubricants and truck hauling fees,
aggregating $5.1 million, $4.0 million, and $3.7 million for the years ended
December 31, 1997, 1998, and 1999, respectively, were charged to the Company.

At the time of the Recapitalization, Volvo and the Company entered into an
Operating Agreement related to the warranty, maintenance and service work the
Company will provide to Volvo managed vehicles, the sale by the Company of all
the truck parts, on a preferred basis, joint advertising and marketing
initiatives and the co-development of Stopping Centers by Volvo and the Company
to utilize truckstop space for Volvo truck sales and marketing.

Highway Service Ventures, Inc., a corporation in which J.A. Cardwell, Sr.
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.

In May 1992, the Company leased a facility in El Paso, Texas, from a trust
in which J.A. Cardwell, Sr. is a 50.0% beneficiary, to operate the Company's
retread plant, which produces retread tires for sale at Stopping Centers
(including franchisees) and to others. The Company made lease payments of
$72,000 for each of the years ended December 31, 1997, 1998, and 1999. In
addition, the Company sells retread tires to El Paso Tire Center, Inc., a
corporation owned 100% by J.A. Cardwell, Sr. sales

44
<PAGE>

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

9) Related-Party Transactions - continued

amounted to $47,000, $60,000, and $33,000 for the years ended December 31, 1997,
1998, and 1999, respectively.

In connection with the formation of the Company in May 1992, J.A. Cardwell,
Sr. and James A. Cardwell, Jr., officers and Directors of the Company executed
an Option and Right of First Refusal Agreement which granted to the Company,
options which expire in December 2006, to purchase certain properties owned by
the Cardwell Group that are located near or adjacent to certain of the Company's
Stopping Centers, and a right of first refusal on these properties. 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.

J.A. Cardwell, Sr., James A. Cardwell, Jr. and Mrs. J.A. Cardwell, Sr. own
60.0%, 30.0% and 10.0%, respectively, of the stock of C&PPR, Inc. ("C&PPR").
J.A. Cardwell, Sr. is the sole shareholder of CYMA Development Corporation
("CYMA") and James A. Cardwell, Jr. 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, 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, C&PPR, Petro Truckstops, and Petro Beverage,
Inc., the Company agreed to operate the alcohol sales business at these
locations in exchange for 15.0% of the gross receipts generated from alcoholic
beverage sales of which 5.0% is the Company's reimbursement of all related
operating expenses as defined under the agreements. In each of the agreements,
the net payments to the Company are approximately equal to the gross profit
received by the above entities. The Company's revenues in connection with its
agreement with C&PPR were $47,000, $59,000, and $74,000 for the years ended
December 31, 1997, 1998, and 1999, respectively. The Company's revenues relating
to the CYMA agreement were $1,200, $1,000, and $0 for the years ended December
31, 1997, 1998, and 1999, respectively. The Company's revenues in connection
with its agreement with Petro Beverage, Inc. were $4,600, $5,900, and $5,600
for the years ended December 31, 1997, 1998, and 1999, respectively. The
Company's revenues in connection with the Petro Truckstops agreement were
$16,000, $36,000, and $29,000 for the years ended December 31, 1997, 1998, and
1999, respectively.

The Company has an agreement and formed a limited liability corporation,
Petro Travel Plaza LLC, with Tejon Development Corporation to build and operate
a Petro Stopping Center 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 Company made an initial capital contribution of $2.0
million for working capital and inventory, which is the Company's basis for the
investment in the LLC. Pursuant to the agreement, the LLC financed construction
of the location with a non-recourse credit facility, the Company receives a
management fee of $250,000 per annum and as a 40.0% member in the joint
venture, the Company receives 40.0% of the location's operating earnings. This
location began operations in June 1999.

In connection with the formation of the Company in May 1992, Motor Media,
Inc. ("Motor Media"), which is owned 100% by James A. Cardwell, Jr., 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 25.0% and 75.0%,
respectively, of the gross revenues generated. Motor Media received $234,000,
$215,000, and $177,000, before its selling, maintenance and administrative
expenses, for the years ended December 31, 1997, 1998, and 1999, respectively,
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, which will be automatically extended until canceled by
either party with 60 days written notice.

45
<PAGE>

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

9) Related-Party Transactions - continued

Under an existing agreement (the "Amusement Agreement") between El Paso
Vending and Amusement Company ("EPAC"), of which J.A. Cardwell, Sr. and James A.
Cardwell, Jr. own 99.0% and 1.0%, 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 60.0% of the revenues
generated by the games to EPAC and retained the remaining 40.0%. Beginning
November 1994, the arrangement was modified to pay 50.0% of the revenue
generated by the games to EPAC and 50.0% 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
six 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.
Subsequent to December 1, 1998, EPAC began furnishing and servicing video and
other games to two additional Stopping Centers under the terms of the Amusement
Agreement, of which the Company pays 40.0% of the revenues generated by the
games to EPAC and retains the remaining 60.0%. EPAC received $2.4 million, $2.6
million, and $2.7 million in revenues, respectively, generated from the
furnishing and servicing games located at the Stopping Centers for the years
ended December 31, 1997, 1998, and 1999.

Beginning in June 1993 the two Stopping Centers located in Louisiana
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 20.0%-70.0% of the revenue generated from the machines.
Petro Truckstops, Inc. pays 95.0% of revenue collected to the Company and
retains 5.0% 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 $2.1 million, $2.2
million, and $1.7 million for the years ended December 31, 1997, 1998, and 1999,
respectively. 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 were required to be, and
were, phased out at the end of June 1999. During the years ended December 31,
1998 and 1999, the Hammond location generated approximately $1.1 million and
$603,000 of revenue from video poker, respectively. As part of the video poker
license for 1999-2000, the Company leased the Shreveport fuel island operation
to Petro Truckstops, Inc., in order to satisfy state law requirements.

Management fees of $300,000 for each of the years ended December 31, 1997
and 1998, and $175,000 for the year ended December 31, 1999, were earned by
Mobil Oil Corporation, in accordance with the terms of the Company's
Partnership Agreement. Subsequent to the Recapitalization discussed in Note (1),
these fees were discontinued.

The Company entered into a management consulting agreement with Chartwell
Investments, commencing January 30, 1997, pursuant to which Chartwell
Investments provided 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, plus reimbursement of certain expenses. For
the years ended December 31, 1997, 1998, and 1999, the Company paid Chartwell
Investments $600,000, $714,000, and $408,000, respectively, under this
agreement. Subsequent to the Recapitalization discussed in Note (1), those fees
were discontinued.

In connection with the Recapitalization, and in compliance with applicable
Internal Revenue Code and Treasury Regulation provisions dealing with recourse
debt, J.A. Cardwell, Sr., James A. Cardwell, Jr., and Petro, Inc. each entered
into an indemnity agreement under which each agreed to indemnify the Company,
and the general and limited partners thereof in the event that the indemnified
parties are required to pay any current indebtedness or any other liabilities of
the Company after a default, acceleration by the

46
<PAGE>

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

9) Related-Party Transactions - continued

creditor and exhaustion of any collateral securing the credit facility. No
payments have been made under these agreements.

Each of the affiliates, with the exception of Mobil Oil Corporation, Mobil
Diesel Supply Corporation, Chartwell, Volvo, Volvo Trucks, and Petro Travel
Plaza LLC 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 Highway Service Ventures, Inc., a corporation in which J.A. Cardwell,
Sr. owns an interest, which owns properties that are part of the Company's truck
stop network. For the years ended December 31, 1997, 1998, and 1999, the Company
purchased receivables from an affiliated franchisee in the amounts of $18.2
million, $16.9 million, and $17.1 million, respectively and received franchise
fees from an affiliated franchisee of approximately $1.0 million in each of the
years.

(10) Partners' Capital (Deficit)

Ownership

As a result of the Recapitalization and purchase of Chartwell's and
Kirschner's interests, discussed in Note (1), Holdings is the owner of
approximately 99.5% of the common interests of the Company with Petro, Inc. and
another affiliate of the Cardwell Group owning the remaining 0.5%.

Under the Company's partnership agreement ("the Agreement"), the partners
delegated management authority to a seven member Board of Directors. The
Cardwell Group, Volvo Trucks, and Mobil Long Haul have the right to appoint two
persons each to the Board of Directors. These three partners also have the
right to veto certain major partnership decisions. The seventh member is Mr.
Larry Zine, who served as the Company's executive vice president and chief
financial officer from December 1996 to July 1999, and also as its president
from January 1999 to July 1999.

Mandatorily Redeemable Preferred Partnership Interests

As part of the Recapitalization, Holdings and various individuals and
affiliates of the Cardwell Group agreed to restate the Agreement. The parties
agreed to convert the outstanding amount of mandatorily redeemable preferred
partnership interests ($24.3 million, including accrued but unpaid preferred
returns) into common limited partnership interests of the Company.

The Company had accrued and unpaid preferred returns on the mandatorily
redeemable preferred partnership interest totaling to $1.6 million and $3.6
million at December 31, 1997 and 1998, respectively. There were no manditorily
redeemable preferred partnership interests at December 31, 1999, due to the
Recapitalization.

Distributions

Under the terms of the Agreement, the Company is required to make
distributions to each of its partners in an amount sufficient to allow each
partner to pay federal, state and local taxes with respect to allocation of
taxable income to such partner by the Company. Tax distributions to partners
will be based on separate allocations of taxable income of Holdings.
Distributions for the years ended December 31, 1997, 1998, and 1999, were $0,
$823,000 and $980,000, respectively.

As of December 31, 1999, the historical net book value of assets and
liabilities was approximately $22.0 million greater than the associated net tax
basis of those assets and liabilities.

47
<PAGE>

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

(10) Partners' Capital (Deficit) - continued

Allocations of Income

In any fiscal year, the Company's profits shall be allocated first to those
partners to which losses have previously been allocated, then pro rata among the
common limited partners. Losses for any fiscal year shall be allocated to the
common partners.

Upon liquidation of the Company, the proceeds will be distributed first to
creditors; next, pro rata, to partners who have distribution shortfalls; then to
common partnership interests to the extent of unrecovered capital, and lastly,
pro rata, to the partners in accordance with their positive capital account
balances.

(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 50.0% of the participants' contributions up
to 4.0% of the participants' annual salary and aggregated approximately
$189,000, $318,000 and $350,000 for the years ended December 31, 1997, 1998,
and 1999, respectively. Other than those discussed below, there were no other
post employment or retirement plans at December 31, 1998 and 1999.

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,
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. In April 1999, the Internal Revenue Service issued a
ruling allowing the Company to take corrective action with regards to the Plan
pursuant to the Walk in Cap. Under the approved Walk in Cap settlement, the
Company will pay $250,000 in contributions and $35,000 in penalties. The Company
completed this settlement in March 2000. The Company's liability is reflected
in the accompanying consolidated balance sheet as of December 31, 1999.

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. The Company will credit matching deferrals for each participant equal to
50.0% of the first 4.0% of the participant's compensation up to $9,500 per year.
Company matched deferrals will vest at 20.0% after one year of service and an
additional 20.0% 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 and $463,000 at December 31, 1998 and 1999,
respectively. The Company's matched deferral expenses for the years ended
December 31, 1998 and 1999, totaled $9,900 and $27,000, respectively.

(12) Partnership Interests Option Plan

The Company had established an equity incentive plan ("Option Plan") to
attract and retain key personnel, including senior management, and to enhance
their interest in the

48
<PAGE>

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

(12) Partnership Interests Option Plan - continued

Company's continued success. The Company applied Accounting Principles Board
Opinion No. 25 in accounting for its plan.

The Company had also awarded options to Mr. Larry Zine to purchase 2.75% of
the common limited partnership interests of the Company pursuant to the terms of
Mr. Zine's employment agreement. As a result of the purchase of Chartwell's
interests described in Note (1), these options became fully exercisable.

Effective upon the consummation of the Recapitalization, all options,
pursuant to their terms, became sponsored by Holdings, and all then outstanding
options granted under the Option Plan and Mr. Zine's options were converted on
an equivalent economic basis to options for equity interests in Holdings on the
same terms and conditions, including their vesting schedules.

(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 an agreement with Tejon Development Corporation ("Tejon")
to build and operate a Petro Stopping Center branded location in Southern
California. Pursuant to the terms of the Limited Liability Company Operating
Agreement of Petro Travel Plaza LLC ("LLC"), dated as of December 5, 1997, among
the Company, Tejon and Tejon Ranch Company, as guarantor (the "Tejon
Agreement"), the Company made an initial capital contribution of $2.0 million
for working capital and inventory. Pursuant to the Agreement, the LLC financed
construction of the location with a non-recourse credit facility. The Company
receives a management fee of $250,000 per annum and receives 40.0% of the
location's operating earnings which is accounted for using the equity method.
This Petro branded location began operations in June 1999.

(14) Financial Instruments

As of December 31, 1998 and 1999, 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 its exposure to changes in interest rates. The
fair value of the 10 1/2 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>
1998 1999
Carrying Carrying
Amount Fair Value Amount Fair Value
-------- ----------- -------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Balance sheet financial instruments -
Long-term debt $181,328 $188,416 $181,298 172,167
Other financial instruments -
Interest rate swap agreements -- (153) -- (264)
</TABLE>

49
<PAGE>

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

(14) Financial Instruments - continued

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, 1999,
the Company was party to an interest rate swap agreement with an aggregate
principal amount of $30.0 million. Under the agreement, the Company pays a fixed
rate of 6.15% in exchange for 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 to a fixed rate basis. The effect of the swap was to increase the
rate the Company was required to pay by 0.66%, which resulted in additional
interest expense of approximately $264,000.

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.

(15) Environmental Matters

The Company 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. The
Corning, California work was completed during the third quarter of 1999, and the
Company expended approximately $1.2 million during 1999 to complete this work.
Some site remediation will be required in Corning, California as a result of
completion of the upgrade work. Management believes that all of the Company's
storage tanks are in compliance in all material respects with applicable
environmental laws, regulations and requirements. For the years ended December
31, 1997, 1998, and 1999, the Company's expenditures for environmental matters
were $154,000, $385,000, and $156,000, respectively. See Note (2) 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

50
<PAGE>

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

(15) Environmental Matters - continued

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 toward a resolution and plan of action for completion of
the removal activities required by the EPA pursuant to the Order. Although the
Company does not believe that its involvement in the Patterson Site will have a
material adverse effect on the Company's consolidated financial condition or
results of operations, if a plan of action cannot be agreed upon or if the EPA
or the State of California imposes remediation requirements beyond the scope
presently contemplated based upon the Company's current understanding with the
EPA, the liability could be higher.

The Company has accrued for certain environmental remediation activities
consistent with the policy set forth in Note (2). At December 31, 1998 and 1999,
such accrual amounted to approximately $274,000 and $122,000 respectively, and
in management's opinion, was appropriate based on existing facts and
circumstances. The Company's accrual for environmental remediation expenses is
based upon initial estimates obtained from contractors engaged to perform the
remediation work as required by local, state, and federal authorities. It is
often difficult to predict the extent and the cost of environmental remediation
until work has commenced and the full scope of the contamination determined.
Accruals are periodically evaluated and updated as information regarding the
nature of the clean up work is obtained. 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. Actual results, however, could
differ from estimated amounts and those differences could be material. At
December 31, 1998 and 1999, the Company has recognized approximately $160,000
and $162,000, 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 adopted
in 1998. 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 company-operated truck stops and
its 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. During the years ended December 31,
1997, 1998 and 1999, the revenues generated from the Company's truck-stop
operations were $681.8 million, $648.9 million and $714.9 million, respectively.

In addition to company operations, the Company is a franchisor to 23 Petro
Stopping Center locations. The Company collects royalties and fees in exchange
for the use of its name and for certain

51
<PAGE>

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

(16) Segments - continued

services provided to the franchisees. Franchise fees are based generally upon a
percentage of franchisee's sales. Given the insignificance of initial franchise
fees and other revenue types, the Company reports a total combined revenue
amount. For the years ended December 31, 1997, 1998, and 1999, the revenues
generated from the Company's franchise operations were $4.0 million, $4.5
million, and $5.0 million, respectively. These revenues are included in net
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, nor does it believe there are any significant commitments or
obligations resulting from these franchise agreements.

(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 was originally
effective for fiscal years beginning after June 15, 1999, but has been postponed
by Statement of Financial Accounting Standard No. 137, "An Amendment of SFAS No.
133," for one year with a mandatory effective date for fiscal years beginning
after June 15, 2000. Additionally, SFAS No. 133 has been modified regarding
recognition in the balance sheet of an embedded derivative that is required to
be separated from the host contract. At the date of initial application of SFAS
No. 133, an entity may choose either to recognize such embedded derivatives or
to select either January 1, 1998 or January 1, 1999, as a transition date for
embedded derivatives. 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.

52
<PAGE>

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

(18) Selected Quarterly Financial Data (unaudited)

<TABLE>
<CAPTION>
First Second Third Fourth
1998 Quarter Quarter Quarter Quarter
- ---- ------- ------- ------- -------
(in thousands)
------------
<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) (a)
<CAPTION>
First Second Third Fourth
1999 Quarter Quarter Quarter Quarter
- ---- ------- ------- ------- -------
(in thousands)
------------
<S> <C> <C> <C> <C>
Net revenues.................................. $153,573 $168,440 $183,748 $214,164 (c)
Operating income.............................. 5,737 7,793 6,698 5,298
Net income (loss)............................. 775 1,875 (773) (b) 223
</TABLE>

(a) A charge of $3.3 million was recorded in the fourth quarter of 1998 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.

(b) A charge of $2.0 million was recorded in the third quarter of 1999 as a
result of the write off of previously deferred financing costs related to
the Recapitalization discussed in Note (1).

(c) The significant increase in net revenues for the fourth quarter of 1999 is
mostly due to a $53.1 million increase in fuel revenues due primarily to a
26.9% increase in average pump prices stemming from higher fuel costs in
addition to a 16.7% increase in fuel volumes.

53
<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, 1998 and 1999, and the related consolidated statements of
operations, changes in partners' capital (deficit) and cash flows for each of
the three years in the period ended December 31, 1999. 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 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, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, 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.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for purposes of complying with
the Securities and Exchange Commissions rules and is not part of the basic
financial statements. This schedules has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

ARTHUR ANDERSEN LLP

Dallas, Texas,
February 16, 2000

54
<PAGE>

PETRO STOPPING CENTERS, L.P.

Schedule II -Valuation and Qualifying Accounts

Years Ended December 31, 1999, 1998 and 1997
(in thousands)

<TABLE>
<CAPTION>
Balance at Charged to
beginning of costs and Write-off/ Balance at end
Description year expenses (Recovery) of year
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1999:
Allowance for doubtful accounts $ 627 246 131 $ 742
Inventory Reserve 457 - - 457

Year Ended December 31, 1998:
Allowance for doubtful accounts $ 330 236 (61) $ 627
Inventory Reserve 1,128 - 671 457

Year Ended December 31, 1997:
Allowance for doubtful accounts $ 321 271 262 $ 330
Inventory Reserve 1,129 - 1 1,128

</TABLE>

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

None

55
<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 Board of Directors and senior management team of the
Company as of February 1, 2000.

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
J.A. Cardwell, Sr. 67 Chairman, Chief Executive Officer, Member of the Executive Committee
James A. Cardwell, Jr. 39 Senior Vice President of Marketing and Business Development and
Director
Evan C. Brudahl 44 Senior Vice President of Operations
David A. Appleby 33 Vice President of Finance, Treasurer and Assistant Secretary
Nancy C. Santana 43 Vice President and General Counsel and Secretary
Travis R. Roberts 64 Vice President of Real Estate Acquisitions
David Latimer 41 Vice President of Petro:Lube
Kevin T. Weir 43 Director and Member of the Audit Committee and Executive Committee
Robert Grussing IV 41 Director and Member of the Audit Committee and Executive Committee
Larry J. Zine 45 Director
Martha P. Boyd 38 Director
Nancy B. Carlson 44 Director
</TABLE>

J.A. Cardwell, Sr.--J.A. Cardwell, Sr. opened the first Petro Stopping
Center in 1975 and has been serving as our Chairman and Chief Executive Officer
and director of the Company since May 1992. Mr. Cardwell, Sr. has responsibility
for our overall performance, defining our image in the marketplace, identifying
growth opportunities and overseeing employee and customer retention. Mr.
Cardwell, Sr. served as the Chairman of the National Association of Truck Stop
Operators in 1983 and 1984 and has worked on various committees of the
association since that time. Currently, Mr. Cardwell, Sr. serves as a trustee
for Archstone Communities and as a director of El Paso Electric Company (both
publicly traded companies). J.A. Cardwell, Sr. is the father of James A.
Cardwell, Jr.

James A. Cardwell, Jr.--James A. Cardwell, Jr. is Senior Vice President of
Marketing and Business Development and a director of the Company, responsible
for marketing fleet business and the Iron Skillet and branded fast food
operations. Mr. Cardwell has been involved with the Company full time for 15
years and has held various positions including operations management as Vice
President of Operations from 1986 to 1992. Prior to his current position, Mr.
Cardwell served as Vice President of National Sales and Promotions from June
1993 to January 1997 and as Senior Vice President of Operations and Marketing
during 1997 and early 1998. He is currently the Chairman of the Board of
Directors of NATSO. James A. Cardwell, Jr. is the son of J.A. Cardwell, Sr.

Evan C. Brudahl--Evan Brudahl is the Senior Vice President of Operations
and is acting as our interim Chief Operating Officer while we complete our
search for a new President and Chief Financial Officer. Mr. Brudahl is
responsible for our operations, overseeing engineering, fuel purchasing and
transportation, franchise operations and the diesel fuel island, travel and
convenience stores and Petro:Lube operations. Mr. Brudahl worked for Mobil Oil
Corporation for 21 years holding various management positions. Mr. Brudahl
worked for us on secondment from Mobil Oil Corporation from January 1997 until
March 31, 1999, when he became our employee. From January 1997 to March 31,
1999, while Mr. Brudahl was still an employee of Mobil Oil Corporation, he
served as Mobil Oil Corporation's representative on the Board of Directors, but
resigned from the Board when he became our employee.

David A. Appleby--David Appleby has been the Vice President of Finance,
Treasurer and Assistant Secretary since March 1999 and is responsible for all
accounting, finance, treasury and credit operations. Prior to assuming this
position, Mr. Appleby was the Controller for the Company, a position he had 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.

56
<PAGE>

Nancy C. Santana--Nancy Santana joined the Company effective July 1, 1998
in the capacity of Vice President, General Counsel and Secretary, after a
sixteen year legal career in private practice. Prior to joining us, Ms. Santana
was the Chairman of the Real Estate, Banking and Lending section at Kemp, Smith,
Duncan & Hammond, P.C., in El Paso, Texas. Ms. Santana is responsible for
coordination of all our legal matters, real estate acquisitions and risk
management.

Travis R. Roberts--Travis Roberts is Vice President of Real Estate
Acquisitions. Mr. Roberts oversees 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 Engineering from 1992 to 1998.

David Latimer--David Latimer joined the Company in 1983, and has been
serving as Vice President of Petro:Lube since April 1995. Mr. Latimer also
serves as our representative to the National Tire Dealers and Retreaders
Association and The Maintenance Council.

Kevin T. Weir--Kevin 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. Prior to his current position at Mobil Oil
Corporation, Mr. Weir served as Retail Dealer Operations Manager and Surface
Transportation Manager of Mobil Oil Corporation's North America Marketing and
Refining division. Mr. Weir has been an employee of Mobil Oil Corporation for 20
years.

Robert Grussing IV--Robert Grussing has been a director of the Company
since July 1999. Mr. Grussing currently serves as Senior Vice President,
Business Development and Strategic Planning for Volvo Trucks North America in
Greensboro, NC. From 1992 to 1997, he served in a number of executive positions
at Mack Trucks, Inc. in Allentown, PA. From 1980 to 1992, Mr. Grussing was an
employee of General Electric Company. Mr. Grussing currently serves as Chairman
of the Board for Volvo Trucks Canada, Inc. and is a director of Volvo Trucks de
Mexico, S.A. de C.V. and Arrow Truck Sales, Inc.

Larry J. Zine--Larry Zine has been a director of the Company since January
1999. Mr. Zine served as Executive Vice President and Chief Financial Officer of
the Company from December 1996 until January 1999 when he was elected President.
Mr. Zine resigned from the Company as President effective upon the consummation
of the Recapitalization. Mr. Zine currently serves as Executive Vice President
and Chief Financial Officer of Blockbuster, Inc. since April 1999. Prior to
joining 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 is a
director of MMH Holdings, Inc., a holding company whose sole direct subsidiary
is Morris Material Handling, Inc. He was educated at the University of North
Dakota and holds a M.S. degree in Accounting and a B.B.S. in Marketing.

Martha P. Boyd--Martha Boyd has been a director of the Company since July
1999. Ms. Boyd is employed by Volvo Trucks of North America, Inc. as Special
Counsel, Strategic Support. In her current role, Ms. Boyd acts as liaison
between Volvo Trucks of North America and companies in which it holds a
substantial interest. Ms. Boyd has been employed in the legal department of
Volvo Trucks of North America for nine years, most recently as Vice President,
General Counsel and Secretary. Prior to joining Volvo Trucks of North America,
Ms. Boyd practiced commercial litigation with the law firm of Balch & Bingham.

57
<PAGE>

Nancy B. Carlson--Nancy Carlson has been a director of the Company since
May 1999. Ms. Carlson currently serves as the Manager of the Automotive
Lubricant Business for Mobil Oil Corporation's North American business. Prior to
her current position, Ms. Carlson served as the Global Brand Manager for Mobil
Oil Corporation. Prior to these positions, Ms. Carlson held several marketing
positions within North America's Marketing and Refining division. Ms. Carlson
has been an employee of Mobil Oil Corporation for 20 years. Ms. Carlson
rendered her resignation from the Board effective February 23, 2000 and David
Parsons was appointed by Mobil Oil Corporation as her replacement.

58
<PAGE>

Item 11. Executive Compensation

Executive Compensation

The following tables present information concerning the compensation paid
for services rendered to the Company for the years ended December 31, 1997,
1998, and 1999, 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 1999,
collectively, the "Named Executive Officers." After the Recapitalization, the
individuals listed below, other than Mr. Zine, continued to hold the same
positions with the Company, but the option award obligation described below were
assumed on an equivalent economic basis by Holdings.

Summary Compensation Table

Annual Long-Term
Compensation Compensation
------------ Awards
Name and Other Annual Options All Other
Principal Position Year Salary Bonus Compensation (% Interest) (1) Compensation
------------------ ---- ------ ----- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
J.A. Cardwell, Sr. ............ 1999 417,154 83,431 253,508 (2)
Chief Executive Officer 1998 398,566 240,000 248,242 (2)
1997 362,700 - 247,177 (2)

Larry Zine..................... 1999 224,077 - 8,807 (3)
Former President & Chief 1998 328,462 198,000 3,049 (3)
Financial Officer 1997 (4) 290,000 174,000 3.91 (5) 64,728 (6)

Evan Brudahl................... 1999 171,655 37,920 40,811 (7)
Senior Vice President- 1998 160,000 96,000
Operations 1997 (4) 135,000 81,000 1.28 (8)

James A. Cardwell, Jr. ........ 1999 177,154 35,431 5,601 (9)
Senior Vice President - 1998 160,135 96,000 4,692 (9)
Marketing & Business 1997 135,000 81,000 1.28 (8) 1,326 (10)
Development

David Latimer.................. 1999 134,793 29,654 2,591 (11)
Vice President- 1998 131,101 64,704 2,772 (11)
Lube Operations 1997 128,516 90,959 0.36 (8) 3,166 (10)
</TABLE>

______________
(1) Options granted to the Named Executive Officers in our Company, expressed
as a percent of Holdings equity. As noted below under "Partnership
Interests Option Plan," effective upon the consummation of the
Recapitalization, the option plan as well as the options granted to Mr.
Zine, under their terms, became sponsored by Holdings and were converted on
an equivalent economic basis on the same terms and conditions including
their vesting schedules. Accordingly, the historical amounts and
percentages have been restated to reflect this conversion.
(2) Represents employer contributions to a 401(k) Plan of $3,637, $4,702, and
$3,468, in 1997, 1998, and 1999, respectively, and life insurance premiums
paid for the benefit of J.A. Cardwell, Sr. in the amount of $243,540
annually for 1997, 1998, and 1999. Additionally, 1999 includes $6,500
related to employer contributions to a Nonqualified Deferred Compensation
Plan.
(3) Represents employer contributions to a Nonqualified Deferred Compensation
Plan for 1998 and also for employer contributions to a 401(k) Plan for
1999 of $5,000 and $3,807, respectively.
(4) Mr. Zine's employment commenced December 1996 and Mr. Brudahl's commenced
January 30, 1997, as a seconded employee on loan from Mobil Oil Corporation
until April 1, 1999 when he retired from Mobil Oil Corporation and became
an employee.
(5) Represents options to purchase 3.91% of the common partnership interests of
Holdings granted under the terms of his employment agreement; 25% of the
options became exercisable on

59
<PAGE>

each of December 31, 1997 and 1998. The options were originally granted as
options to purchase equity in the Company. As a result of the
Recapitalization, these options became fully vested and exercisable to
purchase partnership interests in Holdings.
(6) Represents payments in connection with relocation expenses incurred by Mr.
Zine.
(7) Mr. Brudahl received a one-time signing bonus of $38,000 upon execution of
his employment agreement which became effective April 1, 1999. In addition,
he received $2,811 of employer contributions to a Nonqualified Deferred
Compensation Plan.
(8) Represents options to purchase the indicated percentage of the Class B
limited partnership interests of the Company granted under the option plan;
25% of the options become exercisable on each of January 30, 1998, 1999,
2000, and 2001. The options were originally granted as options to purchase
equity in the Company. As noted below under "Partnership Interest Option
Plan," effective upon the consummation of the Recapitalization, the options
granted under the option plan, by their terms become sponsored by Holdings
and were converted on an equivalent economic basis on the same terms and
basis including their vesting schedules.
(9) Represents employer contributions to a 401(k) Plan and a Nonqualified
Deferred Compensation Plan of $3,459 and $1,233, respectively for 1998 and
$2,225 and $3,376, respectively for 1999.
(10) Represents employer contributions to a 401(k) Plan.
(11) Represents employer contributions to a 401(k) Plan and a Nonqualified
Deferred Compensation Plan of $1,450 and $1,322, respectively for 1998 and
$1,348 and $1,243, respectively for 1999.

Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-end Option/SAR Values

<TABLE>
<CAPTION>
Company Interests
Underlying Value of Unexercised
Unexercised Options/SARs In-The-Money Options/SARs
at Fiscal at Fiscal
Amount Acquired Value Year-end(%)(2) Year-end($)(3)
Name on Exercise(%)(1) Realized($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
J.A. Cardwell, Sr. -- -- -- --
Larry J. Zine -- -- 3.91/0(4) $ 2,692,250/0
Evan C. Brudahl -- -- .64/.64 440,550/440,550
James A. Cardwell, Jr. -- -- .64/.64 440,550/440,550
David Latimer -- -- .18/.18 122,375/122,375
</TABLE>

- --------
(1) No options were exercised in 1999.
(2) Options granted to the Named Executive Officers in the Company, expressed
as a percent of Holdings' equity.
(3) No market exists for the partnership interests under option. Fair value for
purposes of this table has been determined based on the values received by
Kirschner and Chartwell for their interests in connection with the
Recapitalization.
(4) Mr. Zine's options became 100% exercisable as a result of the
Recapitalization.

Partnership Interests Option Plan

We had established an equity incentive plan to attract and retain key
personnel, including senior management, and to enhance their interest in our
continued success. We applied Accounting Principles Board Opinion No. 25 in
accounting for all options granted.

Mr. Zine was granted options separate from the option plan to acquire an
ownership interest in the Company, which options became fully vested and
exercisable to purchase partnership interests in Holdings as a result of the
Recapitalization.

Effective upon the consummation of the Recapitalization, all options,
pursuant to their terms, became sponsored by Holdings, and all then outstanding
options granted under the option plan and Mr. Zine's options were converted on
an equivalent economic basis to options for equity interests in Holdings on the
same terms and conditions, including their vesting schedules.

Due to the necessity of a cash outlay in order to exercise the options and
the illiquid nature of the equity interest which may thereby be obtained, we are

60
<PAGE>

considering the adoption of a phantom option plan. We believe that the phantom
option plan would be more effective in promoting the goals of equity
compensation, while avoiding the practical and administrative problems inherent
in the current option plan.

It is anticipated that the phantom option plan would be structured
similarly to the option plan, with the exception that awards would be paid in
cash, and no equity interest issued. Under the phantom option plan, the vesting
schedule would be increased to no fewer than six years. However, employees would
be guaranteed awards under the phantom option plan which would be at least equal
to the difference between the current value of equity interest subject to their
option award, minus the current exercise price. Participants in the current
option plan would not be eligible to participate in the proposed phantom option
plan unless they agreed to waive any rights under the option plan. Employees who
did not elect to participate in the phantom option plan within a specified
period of time following its adoption would not be permitted to enter the plan
at a later date.

Compensation of Members of the Boards of Directors

Members of the Boards of Directors of the Company who are not full-time
employees of the Company receive a payment of $3,500 per meeting from the
Company for their services. Members who are our full-time employees or employees
of our partners do not receive a salary or any other payment for their services
on the Boards of Directors.

Compensation Committee

The Company does not maintain a formal Compensation Committee. Executive
level compensation is established by the Board of Directors while other levels
of compensation are established pursuant to established policies and procedures.
The officers administer any bonus plan adopted by the Board of Directors. The
Chief Executive Officer's salary is determined by the Executive Committee of the
Board of Directors. The members of the Executive Committee are J.A. Cardwell,
Sr., Robert Grussing and Kevin Weir.

Employment Agreements

The Company has entered into three employment agreements with company
executives: J.A. Cardwell, Sr., James A. Cardwell, Jr. and Evan C. Brudahl.

J.A. Cardwell, Sr.'s employment agreement commenced on February 10, 1999
and will expire on February 10, 2002. J.A. Cardwell, Sr.'s employment agreement
is automatically renewable each year for one additional year, unless either
party gives at least three months prior written notice not to renew the
agreement. Under his employment agreement, J.A. Cardwell, Sr.'s annual base
salary is $420,000 and may be increased by the Company's Board of Directors or
compensation committee, if one is elected. J.A. Cardwell, Sr. is entitled to
receive an annual bonus of between 0%-120% of his annual base salary based on
our financial performance measured by EBITDA targets. The EBITDA targets are
mutually agreed upon between J.A. Cardwell, Sr. and the Company's Board of
Directors. Under the terms of his employment agreement, J.A. Cardwell, Sr. also
receives a car, life insurance, tax preparation advice and a country club
membership, which, in the aggregate, costs the Company approximately $33,000 per
annum.

The employment of J.A. Cardwell, Sr. may be terminated either with cause,
which includes termination for felony conviction, misconduct or continued
failure to use reasonable best efforts, or without cause. He may elect to
terminate his employment agreement at any time with 60 days notice; and in any
of these cases, he will be entitled to receive his base salary and accrued
vacation pay. If the Company terminates J.A. Cardwell, Sr. because of a
disability, he will be entitled to his base salary and accrued vacation pay
through the date of termination, offset dollar for dollar by any disability
insurance benefits he receives from insurance the Company provides. J.A.
Cardwell, Sr.'s employment agreement contains customary non-solicitation
provisions upon termination of the agreement.

61
<PAGE>

James A. Cardwell, Jr.'s employment agreement commenced on February 10,
1999 and will expire on February 10, 2002. Under his employment agreement, the
annual base salary of James A. Cardwell, Jr. is $180,000 and may be increased by
the Company's Board of Directors or compensation committee, if one is elected.
James A. Cardwell, Jr. is entitled to receive an annual bonus of between 0%-110%
of his annual base salary based on our financial performance measured by EBITDA
targets. The EBITDA targets are determined at the sole discretion of the
Company's Board of Directors. Under the terms of his employment agreement, James
A. Cardwell, Jr. also receives life and disability insurance and a country club
membership, which, in the aggregate, costs the Company approximately $11,000 per
annum.

Under his employment agreement, the Company may terminate James A.
Cardwell, Jr.'s employment with cause, which includes termination for felony
conviction, misconduct or continued failure to use reasonable best efforts,
without cause, or due to his disability. James A. Cardwell, Jr. may terminate
his employment either for good reason, which includes a reduction in base salary
or the Company's failure to provide the material benefits due to him, or without
good reason. Generally termination of the employment agreement by the Company
without cause or by James A. Cardwell, Jr. for good reason entitles him to
receive his base salary and accrued vacation pay through the date of
termination, a lump-sum payment equal to one times his then-current base salary,
specified benefits for twelve months following the date of termination, and his
annual bonus for the year his employment terminates which he would have
otherwise received, pro-rated to the date of termination. Termination of the
employment agreement by the Company with cause or by James A. Cardwell, Jr.
without good reason entitles him to receive only his base salary and accrued
vacation pay through the date of termination. If the Company terminates James A.
Cardwell, Jr. because of his disability, he will be entitled to his base salary
and accrued vacation pay through the date of termination, offset dollar for
dollar by any disability insurance benefits he receives from insurance the
Company provides. James A. Cardwell, Jr.'s employment agreement contains non-
solicitation provisions upon termination of the agreement.

Evan C. Brudahl's employment agreement commenced on April 1, 1999 and will
expire on December 31, 2003. Mr. Brudahl received a one-time signing bonus of
$38,000 upon execution of his employment agreement. Mr. Brudahl's annual base
salary is $189,600 and may be increased by the Company's Board of Directors or
compensation committee, if one is elected. Mr. Brudahl is entitled to receive an
annual bonus of between 0%-120% of his annual base salary based on our financial
performance measured by EBITDA targets. The EBITDA targets are determined at the
sole discretion of the Company's Board of Directors. Under the terms of his
employment agreement, Mr. Brudahl also receives disability insurance and a
country club membership, which, in the aggregate, costs the Company
approximately $10,000 per annum.

Under his employment agreement, the Company may terminate his employment
with cause, which includes termination for felony conviction, misconduct or
continued willful failure to use reasonable best efforts, without cause, or due
to his disability. Mr. Brudahl may terminate his employment for good reason,
which includes a reduction in base salary or the Company's failure to provide
the material benefits due to him. Generally, termination of the employment
agreement by the Company without cause or by Mr. Brudahl for good reason
entitles him to receive his base salary and accrued vacation pay through the
date of termination, a lump-sum payment equal to two times his then-current base
salary, specified benefits for twelve months following the date of termination,
and his annual bonus for the year his employment terminates which he would have
otherwise received, pro-rated to the date of termination and an additional cash
payment of $50,000. Failure by the Company to negotiate the renewal of Mr.
Brudahl's employment agreement in good faith prior to its expiration will also
entitle him to a lump sum payment equal to his annual base salary plus an
additional payment of $50,000.

Termination of the employment agreement by the Company with cause or by Mr.
Brudahl without good reason entitles him to receive only his base salary and
accrued vacation pay through the date of termination. If the Company terminates
him because of his disability, Mr. Brudahl will be entitled to his base salary
and accrued vacation pay through the date of termination, offset dollar for
dollar by any disability insurance benefits he receives from insurance the
Company provides. The employment agreement contains customary non-solicitation
provisions upon termination of the agreement.

62
<PAGE>

Generally, if a third party acquires more than 50.0% of the common
partnership interests in the Company, or the Company transfers more than 50.0%
of its equity interests to an unrelated third party, and any payments made to
Mr. Brudahl as a result of this change in control are subject to the excise tax
imposed under the Internal Revenue Code on "excess parachute payments" (as
defined in the Code), Mr. Brudahl's employment agreement provides that the
Company will make an additional tax gross-up payment to Mr. Brudahl to reimburse
him for all excise taxes imposed on all such payments and for any income taxes
imposed on the additional gross-up payment.

Item 12. Security Ownership of Certain Beneficial Owners and Management

As a result of the Recapitalization, Holdings is the owner of approximately
99.5% of the common limited partnership interests of the Company with Petro,
Inc. and another affiliate of the Cardwell Group owning the remaining 0.5%. 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 discussed in the
footnotes to the table, each partner listed below has informed us that it will
have (1) sole voting and investment power with respect to its partnership
interests, except to the extent that authority is shared by spouses under
applicable law and (2) record and beneficial ownership with respect to such
partner's partnership interests.

<TABLE>
<CAPTION>
Type of Class of Percentage
Names Interest Interest of Class
----- -------- -------- --------
<S> <C> <C> <C>
J.A. Cardwell, Sr. (1) General Partner Common 0.2537%(2)
6080 Surety Drive
El Paso, Texas 79905

Petro Stopping Centers Holdings, L.P. Limited Partner Common 99.4926%(3)
6080 Surety Drive
El Paso, Texas 79905

James A. Cardwell, Jr. (1) Limited Partner Common 0.2537%
6080 Surety Drive
El Paso, Texas 79905
</TABLE>

- --------
1. The Cardwell Group did not receive or invest any cash in the
recapitalization.

2. Represents 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 J.A. Cardwell, Sr. and Mrs. J.A. Cardwell, Sr. are
limited partners and of which Texas Mec, Inc., a Texas corporation, is the
general partner. J.A. Cardwell, Sr. is the sole shareholder of Texas Mec,
Inc. Accordingly, J.A. Cardwell, Sr. may be deemed to have beneficial
ownership of the partnership interests owned by Petro, Inc.

3. Petro Stopping Centers Holdings, L.P., a Delaware limited partnership, was
formed on July 23, 1999 as a holding partnership and conducts substantially
all of its operations through the Company, which holds the operating assets
of Holdings. The common limited partnership interests of Holdings are owned
by the Cardwell Group (approximately 51.6%), Volvo Trucks (approximately
28.7%), Mobil Long Haul (approximately 9.7%), and Warrant Holdings
(approximately 10.0%).

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<PAGE>

Item 13. Certain Relationships and Related Transactions

Since 1997, all new related-party transactions or the renewal of existing
related-party transactions have been subject to a process whereby the project is
competitively bid, and, if awarded to a related-party, is reviewed by a member
of senior management not affiliated with the Cardwell Group, Mobil Oil
Corporation, Volvo, Volvo Trucks or Petro Travel Plaza LLC to ensure that the
contracts contain arms-length terms and competitive pricing. We believe this
process ensures that our current affiliated transactions are on arms-length
terms.

Many of the relationships described below between the Company and entities
affiliated with the Cardwell Group were entered into prior to 1992, when the
Cardwell Group or their affiliates owned 100% of the Company. Prior to 1997,
other than Board of Director approval, there was no formal procedure to ensure
that related-party contracts contained arms-length terms and competitive
pricing. We believe that all of our existing related-party transactions are on
terms comparable to those which could have been received in an arms-length
transaction.

Recapitalization Agreements

On July 23, 1999, we consummated an agreement with Chartwell, Mobil Long
Haul, Volvo Trucks, the Cardwell Group, Holdings and Petro Warrant Holdings
Corporation. Under this agreement:

. Holdings purchased the partnership interests held by Chartwell in exchange
for $55.0 million in cash and a note with an accreted value on the date of
issuance of $14.8 million;

. the Cardwell Group and their affiliates and Mobil Long Haul contributed all
or a portion of their common limited and preferred limited partnership
interests in us, as the case may be, to Holdings, in exchange for like
partnership interests in Holdings;

. Mobil Long Haul invested an additional $5.0 million in Holdings in exchange
for a Class B preferred limited partnership interest in Holdings;

. Volvo Trucks invested $30.0 million in Holdings in exchange for a common
limited partnership interest in Holdings; and

. Petro Warrant Holdings Corporation invested $9.7 million in Holdings in
exchange for a common limited partnership interest.

Concurrently with the consummation of these transactions, we also entered
into agreements with Mobil Long Haul and Volvo, which are described below.

On July 23, 1999, Holdings also consummated an agreement with Kirschner,
under which Holdings purchased the common limited partnership interest held by
Kirschner in us in exchange for $2.8 million in cash.

Tax Reimbursements

Under the terms of the Partnership Agreement, we are required to make
distributions to each of the Company's partners in an amount sufficient to allow
each partner to pay federal, state and local taxes with respect to allocation of
taxable income to each partner by us. Tax distributions to partners will be
based on separate allocations of taxable income of Holdings. Distributions for
the years ended December 31, 1997, 1998, and 1999 were $0, $823,000 and $980,000
respectively.

Principal Executive Offices

The office building in which our principal executive offices are located is
owned by J.A. Cardwell, Sr., the Chief Executive Officer and a Chairman of the
Company. We lease the entire building under a lease

64
<PAGE>

expiring on December 31, 2005. Under the lease, we pay monthly rent totaling
$336,000 per year, as well as taxes, maintenance and other operating expenses.
For each of the years ended December 31, 1997, 1998, and 1999, we 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"), a corporation owned by Travis Roberts, and
five former employees of the Company. Mr. Roberts is a current officer of the
Company and owns 22.0% of the stock of Truck Stop. We lease the Effingham
Center under a lease expiring in May 2006, which provides for adjustable base
rent payments tied to interest rates plus taxes and operating expenses. We have
three consecutive options to renew the lease for terms of five years each at
rental rates equal to the base rent, plus certain adjustments at the time of
renewal. We also have the right of first refusal to purchase the Petro Stopping
Center at any purchase price agreed upon between Truck Stop and a third party.
We made rental payments to Truck Stop of $1.1 million on this property in each
of years ended December 31, 1997, 1998, and 1999.

Highway Service Ventures, Inc.

Highway Service Ventures, Inc. ("HSV"), a corporation in which J.A.
Cardwell, Sr. owns a 32.5% interest, operates four franchised Stopping Centers
located in Elkton, Maryland; Ruther Glen, Virginia; Florence, South Carolina;
and Carnesville, Georgia. The original franchise agreements with respect to two
of these Petro Stopping Centers have expired and HSV and the Company are in the
process of completing an extension of these franchise agreements. HSV continues
to operate all four locations as Petro Stopping Centers under the terms of the
prior agreements. We have finalized a new form of franchise agreement with
input from HSV, and we expect HSV to enter into this new agreement.
Alternatively, HSV has been given the choice to continue to operate under the
terms of its existing franchise agreement. None of these franchise agreements
contains terms that are any more favorable to HSV than the terms in any of our
other franchise agreements.

Petro:Tread

In May 1992, we leased a facility in El Paso, Texas, from a trust in which
J.A. Cardwell, Sr. is a 50.0% beneficiary, to operate our 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. We exercised our first
renewal option in October 1995 to renew the lease for five years commencing
November 1, 1995. We made lease payments of $72,000 for each of the years ended
December 31, 1997, 1998, and 1999. In addition, we had sold retread tires to El
Paso Tire Center, Inc., a corporation owned 100% by J.A. Cardwell, Sr. Such
sales amounted to $47,000, $60,000, and $33,000 for the years ended December 31,
1997, 1998, and 1999, respectively.

Product Services Agreement and Fuel Sales Agreement

Under an exemption from the exclusive terms of the Mobil Gasoline Supply
Agreement and under the terms of three petroleum products agreements with C&R
Distributing, Inc. ("C&R"), we currently purchase Chevron branded gasoline and
motor oils at cost for three of our facilities from C&R. The sole shareholder of
C&R Distributing is Nevada Trio, Inc., a Nevada Corporation, which is 100% owned
by the Cardwell Group. The C&R fuel agreement requires us to keep Chevron
unleaded gasoline, regular gasoline and motor oils continuously stocked and
offered for sale in quantities sufficient to meet demand. In 1997, we entered
into a product services agreement with C&R which terminates in December 2004,
under which C&R provides us with fuel hauling and fuel pump maintenance and
services within the El Paso, Texas metropolitan area. The C&R agreement provides
that C&R will charge us 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. The C&R Fuel
Agreement is exclusive but allows us to cancel the agreement with 30 days prior
notice. The C&R Services Agreement is non-exclusive and allows us to enter into
similar agreements with other parties. Fuel sales aggregating $3.3 million,
$169,000, and $100,000 for the years ended December 31, 1997, 1998, and 1999,
respectively, were made to C&R Distributing, Inc.

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<PAGE>

("C&R") at our cost. C&R sales of fuel and lubricants and truck hauling fees,
aggregating $5.1 million, $4.0 million, and $3.7 million for the years ended
December 31, 1997, 1998, and 1999, respectively, were charged to us.

Option and Right of First Refusal Agreement

Concurrently with the formation of the Company in May 1992, James A.
Cardwell, Jr., officers and Directors of the Company executed an Option and
Right of First Refusal Agreement which granted to the Company and another third
party options, which expire in December 2006, to purchase certain properties
owned by the Cardwell Group that are located near or adjacent to certain of our
Petro Stopping Centers located in Shreveport, Louisiana (seven acres),
Weatherford, Texas (thirty-four acres), Beaumont, Texas (seventeen acres) and
Oklahoma City, Oklahoma (thirty acres), and a right of first refusal on these
properties. All of its rights under the Option and Right of First Refusal
Agreement to Mobil Long Haul, Petro Holdings G.P. Corp. and Petro Holdings L.P.
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.

Alcohol Sales and Servicing Agreements

To continue engaging in retail sales of beer, wine or wine coolers at seven
of our facilities after the formation of the Company in 1992, we entered into
agreements with C and PPR, Inc. ("C&PPR"), Petro Truckstops, Inc. ("Petro
Truckstops"), CYMA Development Corporation ("CYMA"), and Petro Beverage, Inc.,
which collectively hold permits or licenses to sell alcoholic beverages in the
states of Louisiana, Texas and Oregon. J.A. Cardwell, Sr. owns 60.0% of the
stock, James A. Cardwell, Jr. owns 30.0% of the stock and Mrs. J.A. Cardwell,
Sr. owns 10.0% of the stock of C&PPR. James A. Cardwell, Jr. is the sole
shareholder of CYMA, Petro Truckstops and Petro Beverage, Inc. The agreements
continue in effect until terminated by either party. Under the servicing and
license agreements with C&PPR dated April 30, 1992, we have agreed to operate
the alcohol sales business at four locations in exchange for 15.0% of the gross
receipts generated from alcoholic beverage sales, of which 5.0% is the Company's
reimbursement of all related operating expenses. Under similar agreements with
Petro Truckstops, dated January 26, 1995, and April 8, 1994, and with Petro
Beverage, Inc., dated February 10, 1995, and CYMA dated April 30, 1992, each of
which has a one year initial term and continues in effect until terminated by
either party, we receive 15.0% of gross receipts generated from alcoholic
beverage sales, of which 5.0% is the Company's reimbursement of all related
operating expenses. In each of the agreements, the net payments to us are
approximately equal to the gross profit received by the above entities.

The amounts collected to date under each of these agreements is:

C&PPR, Inc. $343,400
Petro Beverage, Inc. $ 21,000
Petro Truckstops, Inc. $108,300
CYMA Development Corporation $ 16,000

Motor Media Arrangements

Concurrently with the formation of the Company in May 1992, Motor Media,
Inc. ("Motor Media"), a company owned 100% by James A. Cardwell, Jr., entered
into a five-year agreement with us (the "Motor Media Agreement"), under which
Motor Media leases floor and wall space at all Stopping Centers operated by us
and sells space for in-store advertising to third parties. Under the agreement,
Motor Media pays us 25.0% of the gross revenues generated by the advertising.
Motor Media received $234,000, $215,000, and $177,000, before its selling,
maintenance and administrative expenses, for the years ended December 31, 1997,
1998, and 1999, respectively, 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, which will be automatically
extended until canceled by either party with 60 days written notice.

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<PAGE>

Amusement and Video Poker Games Agreements

Under an agreement (the "Amusement Agreement") between us and El Paso
Vending and Amusement Company ("EPAC"), of which J.A. Cardwell, Sr. and James A.
Cardwell, Jr. own 99.0% and 1.0%, respectively, EPAC furnishes video and other
games to 24 of our Petro Stopping Centers and services these games. Under the
Amusement Agreement, 50.0%, of the revenues from the games operations goes to
EPAC and 50.0% goes to us. Although most of the sites are serviced under the
terms of the Amusement Agreement (as amended), at one site, we are guaranteed a
minimum annual revenue of $180,000. At two sites, we pay 40.0% of the
revenues generated by the games to EPAC and we retain the remaining 60.0%. EPAC
received $2.4 million, $2.6 million, and $2.7 million in revenues, respectively,
generated from the furnishing and servicing games located at the Petro Stopping
Centers for the years ended December 31, 1997, 1998, and 1999. The Amusement
Agreement with EPAC has been amended to extend its term through May 2002.

Since June 1993, the two Petro Stopping Centers located in Louisiana have
featured video poker games housed in a separate on-site facility and operated by
a third party under terms of a contract, which pays to us from 20% to 70% of the
revenue generated from the machines. The licenses to operate video gaming in
Louisiana are issued to Petro Truckstops, Inc., a company wholly owned by James
A. Cardwell, Jr. Previously, Petro Truckstops, Inc. leased from the Company only
that portion of the facility premises in Shreveport and Hammond where the
video gaming was conducted. As a result of meetings with the Louisiana State
Gaming Commission and in order to satisfy state gaming law requirements, the
Company and Petro Truckstops, Inc. have now entered into a property lease
agreement for the entire truck stop facility premises, exclusive of the portions
of the property where the Petro:Lube, truck scales and truck wash facilities are
located. Petro Truckstops, Inc. pays to the Company a fair market value rental
under the terms of the lease. Petro Truckstops, Inc. contracts with a third
party operator to run the video games. 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. Therefore, we were required to and did phase
out video poker operations at the Hammond facility at the end of June 1999. As
part of the video poker license for 1999-2000, we leased the Shreveport
fuel island operation to Petro Truckstops Inc., in order to satisfy state law
requirements.

Indemnity Agreements

Concurrently with the Recapitalization, and in compliance with applicable
Internal Revenue Code and Treasury Regulation provisions dealing with recourse
debt, J.A. Cardwell, Sr., James A. Cardwell, Jr., and Petro, Inc. each entered
into an indemnity agreement under which each agreed to indemnify the Company,
and the general and limited partners thereof in the event that the indemnified
parties are required to pay any current indebtedness or any other liabilities of
the Company after a default, acceleration by the creditor and exhaustion of any
collateral securing the credit facility.

Agreement with Tejon

We have an agreement and formed a limited liability corporation, Petro
Travel Plaza LLC, with Tejon Development Corporation to build and operate a
Petro Stopping Center 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 our company, Tejon, and Tejon Ranch
Company, as guarantor, we made an initial capital contribution of $2.0 million
for working capital and inventory, which is our basis for the investment in the
LLC. Pursuant to the Agreement, the LLC financed construction of the location
with a non-recourse credit facility, we receive a management fee of $250,000 per
annum and as a 40.0% member in the joint venture, receive 40.0% of the
location's operating earnings. This location began operations in June 1999.

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<PAGE>

Motor Fuels Franchise Agreement

On July 23, 1999, the Company and Mobil Oil Corporation entered into a new
ten-year fuel supply agreement whereby we agreed to purchase Mobil branded
gasoline for sale and distribution under Mobil's trademarks at our truck stops.
Under our fuel supply agreement with Mobil Oil Corporation, we purchased diesel
fuel and gasoline from Mobil Diesel Supply Corporation ("MDS") for the years
ended December 31, 1997, 1998, and 1999, totaling $178.3 million, $214.9
million, and $418.9 million, respectively.

Master Supply Contract for Resale of Oils and Greases

On July 23, 1999, the Company and Mobil Oil Corporation entered into a new
ten year supply agreement whereby we agree to purchase and feature Mobil
branded oils and lubricants under Mobil's trademarks at our truck stop locations
operated by us. Under our supply agreement with Mobil Oil Corporation, we
purchased Mobil branded oils and lubricants from Mobil Oil Corporation for the
years ended December 31, 1997, 1998, and 1999, totaling $3.3 million, $5.0
million, and $3.1 million, respectively.

Marketing Relationships

Contemporaneously with the consummation of the Recapitalization, Volvo
Trucks and the Company entered into an Operating Agreement which reflects the
desire and intention of both companies to cooperate in business activities
which:

. enhance each company's brand image and awareness;

. expands the truck parts and service support segment of each company's
business;

. develops closer ties with Volvo Trucks' franchised dealers;

. improves the lifestyle of truck drivers and results in innovative
approaches to customer services; and

. supports both companies' growth and expansion.

The Volvo Operating Agreement addresses the warranty, maintenance and
service work Petro will provide to Volvo managed vehicles, the sale by Petro of
Volvo truck parts, on a preferred basis, joint advertising and marketing
initiatives, and the co-development of truck stops by Volvo and Petro so as to
utilize truck stop space for Volvo truck sales and marketing. In addition, under
the terms of the Volvo Operating Agreement, Volvo and Petro have committed to
work together to develop a common maintenance system or data link between
Volvo's and Petro's respective maintenance systems in order to provide
individualized customer service to the truck drivers.

Relationships Between Related Parties, Affiliated Entities and the Cardwell
Group and their Affiliates

Each of the related parties and/or affiliates of the Company involved in
the transactions described in this section, with the exception of Mobil Diesel
Supply Corporation, Mobil Oil Corporation, Volvo, Volvo Trucks, Petro Travel
Plaza LLC, and the Effingham, Illinois Stopping Center, is owned or controlled
to some degree by the Cardwell Group. Related-party transactions, other than
those specifically discussed above, generally arise in the ordinary course of
business as a result of our purchase of trade accounts receivable or receipt of
franchisee fees from Highway Service Ventures, Inc., a corporation in which J.A.
Cardwell, Sr. owns an interest, which owns properties that are part of our truck
stop network. For the years ended December 31, 1997, 1998, and 1999, we
purchased receivables from affiliated franchises in the amounts of $18.2
million, $16.9 million, and $17.1 million, respectively and received

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<PAGE>

franchise fees from related parties of approximately $1.0 million for each of
the years.

69
<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:

Page
----
Consolidated Balance Sheets 26
Consolidated Statements of Operations 27
Consolidated Statements of Changes in Partners' Capital
(Deficit) 28
Consolidated Statements of Cash Flows 29-30
Notes to Consolidated Financial Statements 31-53
Report of Independent Public Accountants 54

2. Financial statement schedule and supplementary information
required to be submitted.
Schedule II-Valuation and Qualifying Accounts 55

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.

3. Exhibits

Incorporated herein by reference is a list of Exhibits contained in
the Exhibit Index on pages 72 through 74 of this Annual Report.

(b) Reports on Form 8-K:

A Current Report on Form 8-K was filed by the Company on August 6,
1999, with respect to the Recapitalization transaction consummated on
July 23, 1999.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

PETRO STOPPING CENTERS, L.P.
Registrant

By /s/ J.A. Cardwell, Sr.
------------------------------
J.A. Cardwell, Sr.
Chairman And Chief Executive Officer
(Principal Executive Officer)

March 29, 2000

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

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ J.A. Cardwell, Sr. Chairman and Chief Executive Officer March 29, 2000
- ------------------------------------ (Principal Executive Officer)
(J.A. Cardwell, Sr.)

/s/ James A. Cardwell, Jr. Sr. Vice President of Marketing and March 29, 2000
- ------------------------------------ Business Development and Director
(James A. Cardwell, Jr.)

/s/ David A. Appleby Vice President of Finance and March 29, 2000
- ------------------------------------ Treasurer (Principal Financial and Chief
(David A. Appleby) Accounting Officer)

/s/ Larry J. Zine Director March 29, 2000
- ------------------------------------
(Larry J. Zine)

/s/ Kevin T. Weir Director March 29, 2000
- ------------------------------------
(Kevin T. Weir)

/s/ Robert Grussing IV Director March 29, 2000
- ------------------------------------
(Robert Grussing IV)

/s/ Martha P. Boyd Director March 29, 2000
- ------------------------------------
(Martha P. Boyd)

/s/ David Parsons Director March 29, 2000
- ------------------------------------
(David Parsons)
</TABLE>

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<PAGE>

Petro Stopping Centers, L.P.
Exhibit Index

Exhibit
No. Description
- ------- -----------

3.1 (aa) Amended and Restated Certificate of Limited Partnership of Petro
Stopping Centers, L.P.

3.2 (gg) Fourth Amended and Restated Limited Partnership Agreement of Petro
Stopping Centers, L.P., dated July 23, 1999, by and among Petro
Inc., as a General Partner and Petro Stopping Centers Holdings,
L.P., Petro Holdings GP, L.L.C. and James A. Cardwell, Jr., as
Limited Partners.

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

3.4 (bb) Bylaws of Petro Financial Corporation.

4.1* Agreement with Securities and Exchange Commission pursuant to Item
601(b)(4)(iii)(a) of Regulation S-K to furnish certain documents
relating to the 12 1/2% Senior Notes due 2002.

4.2 (aa) Indenture, dated as of January 30, 1997 among Petro Stopping
Centers, L.P., Petro Financial Corporation and State Street Bank
and Trust Company, as trustee, relating to Petro Stopping Centers,
L.P.'s $135.0 million principal amount 10 1/2% Senior Notes due
2007.

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

4.4 (aa) Supplemental Indenture, dated as of January 29, 1997, by and among
Petro Stopping Centers, L.P., Petro Financial Corporation and First
Trust National Association, relating to Petro Stopping Centers,
L.P.'s $100.0 million principal amount 12 1/2% Senior Notes due
2002.

4.5 (hh) Supplemental Indenture, dated July 23, 1999, by and among Petro
Stopping Centers, L.P., Petro Financial Corporation and State
Street Bank and Trust Company, relating to Petro Stopping Centers,
L.P.'s 10 1/2% Senior Notes due 2007.

4.6 (gg) Second Amended and Restated Revolving Credit and Term Loan
Agreement, dated as of July 23, 1999, among Petro Stopping Centers,
L.P., Bankboston, N.A. (formerly known as The First National Bank
of Boston) and the other lending institutions listed as Fleet
Business Credit Corporation, Merrill Lynch Prime Rate Portfolio,
Merrill Lynch Senior Floating Rate Fund, Inc., Morgan Stanley Dean
Witter Prime Income Trust, Natexis Banque, KZH Crescent-3 LLC, KZH
Crescent-2 LLC, KZH Crescent LLC, United of Omaha Life Insurance
Company, Sequils I, Ltd., Wells Fargo Bank, N.A. and Bank of
Boston), as Agent, Union

72
<PAGE>

Bank of California, N.A., as Co-Agent, First Union National Bank,
as Documentation Agent and BancBoston Robertson Stephens Inc., as
Arranger.

10.1 (bb) Surety Drive lease agreement, dated April 30, 1992, between
James A. Cardwell and Petro Stopping Centers, L.P.

10.2 (cc) Form of the Company's Franchise Agreement.

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

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

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

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

10.7 (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.

10.8 (aa) Product Services Agreement, dated January 30, 1997, by and between
C&R Distributing, Inc., a Texas corporation, and Petro Stopping
Centers, L.P.

10.9 (aa) Petro/El Paso Amusement Services Agreement, dated January 30, 1997,
by and between El Paso Vending and Amusement Company and Petro
Stopping Centers, L.P.

10.10 (aa) Display Space Agreement, dated January 30, 1997, by and between
Motor Media, Inc. and Petro Stopping Centers, L.P.

10.11 (dd) Limited Liability Company Operating Agreement of Petro Travel
Plaza, LLC, dated as of December 5, 1997, among the Company, Tejon
Ranch Company, as Guarantor.

10.12 (ee) Petro Stopping Centers Deferred Compensation Plan Agreement, dated
November 26, 1997.

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<PAGE>

10.13 (ff) Employment Agreement, dated February 10, 1999, by and between James
A. Cardwell, Sr. and Petro Stopping Centers, L.P.

10.14 (ff) Employment Agreement, dated February 10, 1999, by and between James
A. Cardwell, Jr. and Petro Stopping Centers, L.P.

10.15 (ff) Employment Agreement, dated March 1, 1999, by and between Evan
Brudahl and Petro Stopping Centers, L.P.

10.16 (gg) Amended and Restated PMPA Motor Fuels Franchise Agreement, dated
July 23, 1999, by and between Mobil Oil Corporation and Petro
Stopping Centers, L.P.

10.17 (gg) Master Supply Contract for Resale of Oils and Greases, dated July
23, 1999, by and between Mobil Oil Corporation and Petro Stopping
Centers, L.P.

21.1 (aa) Subsidiaries of the Company

24.1 Power of Attorney (included as part of the signature page)

27.1* Financial Data Schedule

- --------
(aa) Incorporated by reference to Petro Stopping Centers, L.P.'s Annual Report
on Form 10-K for the year ended December 31, 1996.
(bb) Incorporated by reference to Petro Stopping Centers, L.P.'s Registration
Statement on Form S-1 (Registration No. 33-76154).
(cc) Incorporated by reference to Petro Stopping Centers, L.P.'s Annual
Report on Form 10-K for the year ended December 31, 1997.
(dd) Incorporated by reference to Petro Stopping Centers, L.P.'s Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998.
(ee) Incorporated by reference to Petro Stopping Centers, L.P.'s Annual Report
on Form 10-K for the year ended December 31, 1998.
(ff) Incorporated by reference to Petro Stopping Centers, L.P.'s Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999.
(gg) Incorporated by reference to Petro Stopping Centers, L.P.'s Current Report
on Form 8-K, filed on August 6, 1999.
(hh) Incorporated by reference to Petro Stopping Centers Holdings, L.P.
Registration Statement on Form S-4 (Registration No. 333-87371).

* Filed herewith