UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC. 20549

                                    FORM 10-K



                                Travel Ports of America, Inc.
             (Exact name of registrant as specified in its charter)

New York                                                  16-1128554
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                            Identification No.)

            3495    Winton Place, Building C, Rochester, New York 14623 (Address
                    of principal executive offices)

Registrant's telephone number     (716) 272-1810

Securities registered pursuant to Section 12(b) of the Act:

                                                       Name of each exchange on
         Title of each class                                which registered

Common Stock (Par Value $.01 per share)                        NASDAQ
---------------------------------------                        ------

Securities registered pursuant to Section 12(g) of the Act:

                                      None
                                (Title of Class)


                        THIS REPORT CONSISTS OF 87 PAGES.
                    THE INDEX TO EXHIBITS APPEARS ON PAGE 41.




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


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


         The aggregate  market value of the voting stock held by  non-affiliates
of the Registrant is $12,022,210.79.  Market value is determined by reference to
the closing price of the Registrant's stock on July 2, 1998.

         Indicate the number of shares  outstanding of each of the  Registrant's
classes of common stock, as of the close of business on July 2, 1998.


      Class                               Number of shares outstanding
Common Stock, Par Value                              6,534,767
$.01 Per Share

         Documents  incorporated by reference and the Part of the Form 10-K into
which they are listed here under.

PART OF FORM 10-K                           DOCUMENT INCORPORATED
Part III
Items 10, 11, 12 and 13                     Registrant's Proxy Statement
Directors and Executive                     for the Annual Meeting of
Officers of the Registrant,                 Shareholders to be held on
Executive Compensation,                     October 27, 1998
Security Ownership of
Certain Beneficial Owners
and Management, and Certain
Relationships and Related
Transactions, respectively.


                          TRAVEL PORTS OF AMERICA, INC.
                                TABLE OF CONTENTS

          Item                                                           Page
PART I    1   Business.................................................   4

          2   Properties...............................................  14

          3   Legal Proceedings........................................  14

          4   Submission of matters to a vote of Security Holders......  15

PART II   5   Market for the Registrant's Common Equity and Related
              Stockholder Matters......................................  15

          6   Selected Financial Data..................................  16

          7   Management's Discussion and Analysis of Financial
              Condition and Results of Operations......................  17

          8   Financial Statements and Supplementary Data..............  22

          9   Disagreements on Accounting and Financial Disclosure.....  40

PART III 10   Directors and Executive Officers of the Registrant.......  40

         11   Executive Compensation...................................  40

         12   Security Ownership of Certain Beneficial Owners and
              Management.............................................    40

         13   Certain Relationships and Related Transactions.........    40

PART IV  14   Exhibits, and Financial Statement Schedules............    40

              Signatures..............................................   49



                                     PART I
Item 1.  Business
         Travel Ports of America,  Inc.  (Company) operates sixteen (16) 24-hour
per day travel plazas and one (1) fuel terminal in New York,  New Jersey,  North
Carolina, New Hampshire, Indiana, Maryland and Pennsylvania.

         During  1998,  the  Company  organized  wholly  owned  subsidiaries  to
facilitate the franchising of the Travel Port  operations.  Travel Port Systems,
Inc. (TPS) is a Delaware  company which owns the Travel Port trade name.  Travel
Port Franchising,  Inc. (TPF), also a Delaware company, was formed to enter into
and administer franchising agreements with third-party franchisees.

         The travel  plazas sell,  both to the trucking  industry and to others,
petroleum products (such as diesel fuel, gasoline and lubricants), and generally
include a truck service and repair shop, a tire and parts center,  a truck wash,
scales for weighing  trucks,  parking  facilities,  motel rooms,  a family-style
restaurant, a travel store, shower and laundry facilities, game rooms, telephone
facilities,  money transfer facilities, a convenience store at the gasoline pump
area, and billing and accounting services for truck fleet operators. The Company
hopes  to  continue  to  attract  both the  trucking  industry  and the  general
traveling public by maintaining clean, efficient travel plazas.

         The  Company's  strategic  plan calls for  continued  growth within its
current or surrounding market area through the acquisition  and/or  construction
of additional facilities if and when opportunities occur.  Acquisitions,  to the
extent feasible,  will be facilities  providing most or all of the services that
the Company believes are desirable. New facilities generally will be constructed
to provide all of such services.

         The  Company  derives  certain  benefits  from  being the  operator  of
multiple travel plazas. The Company has the ability to acquire the products that
it sells on a volume discount basis. Since it buys petroleum products,  food and
other merchandise for several  facilities,  the Company is often able to acquire
such products at discounted prices.

         In addition to favorable purchasing, the Company's multi-unit structure
provides  marketing  opportunities  that might not  otherwise be  available.  In
addition  to normal  drive-in  traffic,  truck  stop  operators,  including  the
Company,  often enter into  arrangements  with the  operators of truck fleets in
which the fleet operator sends all of its drivers who use an applicable route to
a certain travel plaza, primarily to take advantage of a centralized billing and
accounting  system such as that  offered by the  Company.  By  offering  several
facilities,  on different routes, the Company is in a better position to attract
and retain such  arrangements.  Also,  the Company  maintains a sales force that
seeks out and  attempts  to enter into such  arrangements  with fleet  operators
whose home offices may not be near some of the Company's facilities.

         The products and merchandise  purchased and sold by the Company are not
unique  and  generally  can be  obtained  readily  from a variety  of sources at
competitive  prices.  There are many  sources of petroleum  products,  tires and
truck parts,  restaurant food, supplies and merchandise for the Company's travel
and  convenience  stores.  Most of the  products  purchased  by the  Company are
acquired on an as needed basis,  through purchase orders.  The Company currently
buys petroleum products from major oil companies and from Griffith Oil Co., Inc.
(Griffith  Oil),  which  is  owned by Sugar  Creek  Corporation.  The  principal
shareholder and Chief  Executive  Officer of the Company owns and operates Sugar
Creek Corporation.  The Company buys its restaurant food primarily from a single
unrelated food distributor,  and its other products and merchandise from various
suppliers. Except for the Company's fuel purchase agreements,  including the one
with Griffith Oil, which expires  December 31, 2005,  all of these  arrangements
can be terminated at will.

         The Company has no customer  accounting for more than four percent (4%)
of its  sales.  Therefore,  the loss of any  single  customer  would  not have a
materially adverse effect on the Company's business.

Company Developments

         On April 30, 1994, the Company  acquired certain assets of Exit 3 Truck
Services,  Inc. in Greenland,  New Hampshire.  The acquisition  consisted of the
purchase of inventory and the  leasehold  interest in the real property on which
the truck stop is located.  The Company has since  signed a new 20 year lease on
the real  property  with two five year  extensions.  The  Company  has  purchase
options throughout the term of the lease.

         On June 30,  1994,  the Company  entered  into a  $2,500,000  term loan
agreement  with  its  primary  lender   covering  the  acquisition  and  certain
improvements to the facility in Greenland, New Hampshire. Principal payments are
$20,833.33  per month  plus  interest  at the fixed  rate of 9.65%.  The loan is
amortized over ten years with a balloon payment due on June 29, 1999.

         On September 29, 1994, the Company entered into an eight year term loan
with its primary  lender in the amount of  $10,500,000.  Proceeds from this loan
were used for payment of a term loan due in 1996 at prime plus 1.25%, payment of
$1.5 million due on the line of credit and capital expenditures.  The loan has a
fixed rate of 10.12% with interest only for six months. From April 1, 1995 until
the loan matures a monthly  payment of  principal  and interest in the amount of
$166,957.84  is payable with all remaining  principal and interest due September
29, 2002.

         The  Company,  through  a  private  placement,   issued  $4,650,000  of
Convertible Senior  Subordinated  Debentures due January 15, 2005, together with
warrants  to purchase  additional  shares of the  Company's  Common  Stock.  The
securities  were sold  under  Regulation  D of the  Securities  Act of 1933 (the
"Act")  and  in  offshore  transactions  under  Regulation  S of  the  Act.  The
debentures  carry an annual interest rate of 8.5%,  payable  quarterly,  and are
convertible  into the Company's Common Stock at a price equal to $3.00 per share
at the option of the holder at any time.  The  debentures  are  callable  at the
discretion of the Company after January 15, 1998, at a redemption price equal to
109% as of January 15, 1998,  and  gradually  decreasing  to 100% at maturity on
January 15, 2005.  The warrants,  which are  exercisable  at any time,  entitled
warrant  holders to  purchase  up to a total of 15,500  shares of the  Company's
Common Stock at a price of $3.60 per share.  The underwriter was issued warrants
for 77,500 shares of the Company's Common Stock at a price of $3.60 per share in
conjunction  with this  transaction.  As a result of the stock  dividend  issued
April 29, 1997, the bond conversion  price was adjusted to $2.83 and the warrant
price was adjusted to $3.40. The number of warrants was increased to 98,580.  As
a result of the stock dividend issued April 23, 1998, the bond conversion  price
was adjusted to $2.62 and the warrant price was adjusted to $3.15. The number of
warrants was increased to 106,467.

         During fiscal 1998, $500,000 of the 8.5% debentures were converted into
178,092  shares of common  stock,  after  adjusting  for the 1998 and 1997 stock
dividends of 8% and 6%, respectively.  At April 30, 1998, $4,150,000 of the 8.5%
convertible  senior  subordinated  debentures and 106,467 of the warrants remain
outstanding.

         On June 15, 1995,  the Company  sold its  facility at  Fairplay,  South
Carolina to an unrelated third party. The transaction was for the net book value
and the  Company  received  a  mortgage  on the  property  for a portion  of the
purchase price.

         On March 1, 1996,  the Company took over the operation of the Baltimore
Port Truck Plaza. The Company signed a seven year lease on the property.

         On October 4, 1996,  the Company  entered  into a  permanent  financing
arrangement for its Harborcreek, Pennsylvania facility (which was opened in June
1996) with its primary lender in accordance with the Restated and Amended Credit
Agreement dated December 21, 1995 in the amount of $6,000,000. Interest is fixed
at 9.44%  for ten years  with  level  principal  payments  based  upon a 15 year
amortization. A balloon payment is due on September 30, 2006.

         On November 6, 1996,  the Company  entered into an  agreement  with its
secondary  lender that (a)  refinanced  a mortgage  loan due 2001  covering  two
travel  plazas  in  Pennsylvania,  as well as a term  loan  due in 1997  and (b)
provided an additional $5,000,000 for 1996/97 capital expenditures.  Interest is
fixed at 8.63% for five years with level principal payments based upon a 15 year
amortization. A balloon payment is due on April 10, 2002.

         On December 4, 1997,  the Company  completed the sale of (1) $2,000,000
principal amount of 7.81%  Convertible  Subordinated  Debentures due December 4,
2007,  convertible at $4.30 per share and (2) Warrants to purchase 40,000 shares
of Common  Stock,  par value $.01 per share,  of the Company at a price of $5.16
per share to Cephas Capital Partners, L.P. A value of $100,000 has been assigned
to the warrants in  accordance  with  Accounting  Principles  Board  Opinion No.
14(APB 14). The values of the  subordinated  debentures and  additional  paid in
capital were  adjusted  accordingly.  As a result of the stock  dividend  issued
April 23, 1998, the bond conversion  price was adjusted to $3.98 and the warrant
price was adjusted to $4.78. The number of warrants was increased to 43,200.

         The Company  renewed  the  agreement  with its primary  lender that (a)
provides  a line of  credit  of  $3,750,000  until  September  28,  1999 and (b)
provides an additional $4,500,000 for a capital line of credit. The regular line
of credit  is  limited  to the  lesser  of  $3,750,000  or the sum of 80% of the
Company's  accounts  receivable  under 90 days  old,  plus 45% of the  Company's
inventory.  As of April 30,  1998,  the  Company  has  utilized  $200,000 of its
available  line of credit as  collateral  for  various  letters of  credit.  The
capital  line of  credit  calls  for  interest  only at prime  plus  1/4%  until
September  28, 1999.  At that time the line can be repaid or  amortized  over 42
months with interest at prime plus or LIBOR plus interest rate based upon funded
debt to EDITDA. No advances have been made against the capital line of credit.

         The Company, through its subsidiary Travel Port Franchising,  Inc., has
filed  a  franchise  offering  circular  in 48  states.  To  date  no  franchise
agreements have been signed.

         Information on major sales  classifications is included in Item 7, page
18 of this report.

Capital Expenditures

         For the  fiscal  year  ended  April 30,  1998,  the  Company's  Capital
Expenditures for property, plant and equipment amounted to $6,171,272.

Products and Services

The Company  provides the  following  products and services at its travel plazas
and mini-travel plazas.

         1.       Petroleum Products

         The  principal  products  sold  by  the  Company  at its  travel  plaza
locations  are  petroleum  derivatives,  primarily  diesel  fuel,  gasoline  and
lubricants.  Each  of the  Company's  travel  plazas  has  diesel  pump  islands
accessible to all sizes of trucks and tractor-trailers, as well as gasoline pump
islands that are used primarily for automobiles at most locations.  In addition,
a wide range of motor oils and other lubricants are available at all locations.

         An  agreement  between the  Company  and  Griffith  Oil,  that  expires
December 31, 2005 requires the Company to purchase all of its petroleum products
for three of its facilities from Griffith Oil. The purchases for the three sites
for the year were approximately 12.4% of all petroleum  purchases.  In addition,
the Company  purchased  spot market  pipeline  tenders (bulk  purchases) for its
Berwick,  Pennsylvania (Beach Haven) terminal, from Griffith Oil. These pipeline
tenders accounted for approximately  5.1% of the petroleum products purchased by
the Company  during the fiscal year ended April 30,  1998.  Management  believes
that the terms of the purchase agreement and the spot market purchases were fair
and  competitive  when compared with the  purchasing  opportunities  for similar
products in like quantities from other vendors.

         2.       Parts and Service

         Services and repairs are provided for trucks only, not for automobiles.
The Company  provides  services on an as needed basis, in the case of breakdowns
and unforeseen  problems,  and for regularly scheduled periodic  maintenance for
truck fleets and other customers. In addition to providing services and repairs,
the  Company  also  stocks  tires  and  commonly  needed  parts  at  most of its
locations.  Repair facilities are not available at Belmont, New York, Greenland,
New Hampshire, Baltimore, Maryland or Lake Station, Indiana. Truck washes, truck
scales  and  paved  parking  areas  large  enough  to  accommodate  a number  of
over-sized  vehicles  are  also  available  at  some  or all  of  the  Company's
facilities.

         3.       Restaurants

         Each  facility,  with the exception of Mahwah,  New Jersey,  includes a
24-hour,  family  style  restaurant  where  customers  are  served a variety  of
"home-cooked" meals. The Company operates most of its restaurants under the name
"Buckhorn Family  Restaurant".  The Company  purchases its food products in bulk
from unaffiliated sources and meals are prepared and cooked in on-site kitchens.

         4.       Motels

         The  Company's  motel   accommodations  at  travel  plazas,  which  are
available to truck  drivers and the general  public,  generally  contain  double
beds,  basic  furniture,  a color  television  and a full  bathroom.  Rooms  are
available  at nightly  rates  ranging  from  $25-$49 per night.  Public  laundry
facilities are also available.  Maybrook and Dansville, New York operate under a
franchise  from  Days  Inn.   Greencastle  and  Harborcreek,   Pennsylvania  and
Baltimore, Maryland operate under a franchise from the Rodeway Inn, Division of
Choice Hotels International.

         5.       Shopping

         The Company operates both travel stores and convenience stores.  Travel
stores carry a wide range of products often purchased by truck drivers including
health and beauty aids,  snacks,  tobacco  products,  western style clothing and
footwear,  electronic products (CB radios,  radar detectors,  small televisions,
radios, stereos), gift items and many other items. Convenience stores, generally
located near the gasoline pump islands,  and used more by the general  traveling
public,  offer bread,  milk,  beverages,  snacks,  food items and other products
usually  found in such  stores.  The  Company  has an ATM  machine at all of its
locations to provide cash services for its customers.

         6.       Billing and Accounting

         The  Company  offers its own  credit  billing  service  to truck  fleet
operators,  permitting a driver to charge  purchases  of products and  services.
This service  provides  the fleet  operator  with daily  records of its drivers'
purchases  through  direct  electronic  transmission.  The Company's  electronic
billing  system  can  accommodate  customers  who wish to pay on a cash basis to
avoid finance charges or the higher cost of credit billing.

Properties

         The Company's principal office is located in approximately 7,567 square
feet of leased office space at 3495 Winton  Place,  Building C,  Rochester,  New
York  14623.  The lease is through  December  1999 at an average  annual rent of
$60,168 plus common area charges with a three year extension until December 2002
and a five year extension until December 2007.

         The Company  attempts to locate its travel  plazas at sites with a high
volume of truck and  other  traffic,  as well as easy  access  for such  highway
traffic.  Sites are generally  located just off interstate  highways or on other
major  highways.  When and where  possible,  the Company  seeks  locations  near
intersections of such major routes, so that facilities will be easily accessible
from more than one such route.

         A  description  of the  travel  plazas,  mini-travel  plazas  and other
facilities operated by the Company follows.

Travel Plazas

         1.  Dansville,  New  York.  This  eight  acre  site is  located  at the
Dansville  interchange of Interstate Route 390, a major  north-south  highway in
western New York. The site, which is approximately  forty miles south of the New
York State  Thruway  and thirty  miles  north of US Route 17, is leased from the
Livingston  County  Industrial  Development  Agency.  The lease expires in March
2000,  at which time the Company has both the right and the intention to buy all
of the land and  improvements  for $ 1.00.  The travel plaza contains ten diesel
pumps with card readers,  four gasoline  fueling  positions with pay at the pump
capability,  a two-bay service area, a truck scale,  six acres of paved parking,
showers,  a game room, a one hundred thirty seat restaurant,  a twenty room Days
Inn motel, a travel store and a small convenience store.

         2.  Maybrook,  New York.  This  eighteen  acre site is  located  at the
Maybrook  interchange of Interstate Route 84, approximately ten miles east of US
Route 17 and eight miles west of the New York State  Thruway.  It is  sub-leased
from a corporation owned by two people, one of whom is the principal shareholder
of the  Company,  under a lease that  expires in March 2004 with three five year
renewal options  available.  The travel plaza contains eleven diesel pumps, four
gasoline fueling  positions,  a three-bay service area, a truck scale,  showers,
game  room,  eight  acres of paved  parking,  a one  hundred  thirty-eight  seat
restaurant,  a Pizza Hut Express,  a thirty-six room Days Inn motel and a travel
store.

         3.  Binghamton,  New York.  The Company owns a ten acre site located in
suburban  Binghamton at the intersection of US Route 17 and Interstate Route 81.
The travel plaza contains  eight diesel pumps,  a two-bay  service area, a truck
scale, six acres of paved parking, a seventy-seven  seat restaurant,  snack bar,
showers, a travel store and a convenience store with two gasoline pumps.

         4.  Mahwah,  New Jersey.  This six acre site in northern  New Jersey is
located on US Route 17, one interchange  south of the New York State Thruway and
approximately  ten miles  north of  Interstate  Route  80. It is leased  from an
unrelated  landlord for a term expiring February 2002. The travel plaza contains
five diesel fueling  positions,  a one-bay service area,  approximately four and
one-half  acres of paved  parking,  truck scales,  twelve motel rooms,  a travel
store and showers.

         5.  Fultonville,  New York. The Company owns a twenty acre site at Exit
28 of the New York State Thruway.  The travel plaza contains eleven diesel pumps
with card readers, a two-bay service area, a truck scale,  showers,  seven acres
of paved parking,  a one hundred  twenty-seven seat restaurant,  a fourteen room
motel, a travel store and a convenience store with four gasoline pumps.

         6.  Candler,  North  Carolina.  The Company owns an eighteen  acre site
located  at  Exit 37 of  Interstate  Route  40,  less  than  ten  miles  west of
Interstate Route 26 and Asheville, North Carolina. The travel plaza contains ten
diesel  pumps,  four  gasoline  pumps,  a two-bay  service  area, a truck scale,
showers, eight acres of paved parking, a one hundred forty seat restaurant and a
travel store.

         7.  Bloomsburg,  Pennsylvania.  The  Company  owns a sixteen  acre site
located at Exit 34 on  Interstate  Route 80. The travel  plaza  contains  twelve
diesel pumps with card readers,  four pay at the pump gasoline pumps, a five-bay
service area,  truck scales,  game room,  trucker  lounge,  snack bar,  showers,
laundromat,  travel store, a two hundred thirteen seat restaurant,  a Subway and
convenience store and lighted paved parking.

         8. Greenland, New Hampshire.  This seven acre site is located at Exit 3
on Interstate Route 95. This facility is leased from an unrelated landlord for a
term expiring April 2014. The travel plaza contains eight diesel pumps with card
readers,  four gasoline  pumps, a truck scale,  showers,  game room,  travel and
convenience  store,  a one  hundred  fifty-eight  seat  restaurant,  a Pizza Hut
Express and lighted paved parking.

         9. Milesburg, Pennsylvania. The Company owns an eleven and one half 
acre site located at Exit 23 on Interstate  Route 80. The travel plaza contains 
eight diesel fueling lanes,  four gasoline pumps, a three-bay  service area,  
showers, game room,  travel store, a one hundred forty seat  restaurant and 
lighted paved parking.

         10.  Paulsboro,  New Jersey.  The Company owns a  thirty-two  acre site
located at the Mt. Royal Exit on Interstate Route 295. The travel plaza contains
twelve diesel pumps with card readers,  eight  gasoline  pumps, a truck scale, a
thirteen room motel,  laundromat,  showers, a three-bay service area, game room,
travel store, a one hundred  forty-two seat  restaurant  plus a banquet room and
lighted paved parking.

         11.  Porter,  Indiana.  The Company owns a thirty-six and one half acre
site  located at 1600 US Highway 20 near Exit 22b on  Interstate  Route 94. This
travel plaza has a twenty-nine  thousand square foot main building that contains
a travel store, a Subway,  trucker lounge,  showers, game room, broker's offices
and a one hundred  sixty-two seat restaurant  plus a banquet room.  Additionally
there is a two-bay  service  area,  truck wash,  twelve  diesel  pumps with card
readers,  eight  gasoline  fueling  lanes  with pay at the pump  capability  and
approximately nine acres of lighted paved parking.

         12. Lake Station,  Indiana. This twenty-four acre site is located on US
Highway 51, just north of  Interstate  Routes 80 and 90. This facility is leased
from an unrelated  landlord until January 1999 with two ten year renewal options
available.  This travel plaza has a thirty  thousand  square foot main  building
that  contains  a travel  store,  convenience  store,  barber  shop,  a  Subway,
truckers' lounge,  game room,  laundromat,  showers,  brokers' offices and a one
hundred sixty-six seat restaurant.  There are seventeen diesel fuel islands with
card readers covered by a canopy, truck wash, truck scales and paved parking for
approximately  two hundred and fifty trucks. In addition there are four gasoline
pumps with pay at the pump capability.

         13.  Greencastle,  Pennsylvania.  The Company owns a twenty-seven  acre
site  located  at Exit 3 on  Interstate  Route  8 1, a few  miles  north  of the
Maryland  and  Pennsylvania  state  border.  The travel  plaza  consists of four
buildings,  a convenience  store with gasoline fuel islands,  a thirty-six  room
motel,  a fuel building with a four-bay  service area,  truck scales,  trucker's
store, snack bar, twelve diesel pumps with card readers and a main building with
a travel store, showers, a telephone room, a game room, trucker lounge and a one
hundred forty-nine seat restaurant.

         14.  Baltimore,  Maryland.  The Company leases a twenty-one acre travel
plaza and  (across  the  street) a two and one fifth  acre  gasoline/convenience
store  at Exit 57 on  Interstate  95.  The  total  facility  consists  of  three
buildings. The gasoline and convenience store has 16 pumps for both gasoline and
diesel.  The fuel building has a travel and convenience  store and a Subway fast
food  operation.  The main building  contains a super travel store,  showers,  a
telephone  room,  a game  room,  a Taco Bell  Express,  a sixty room motel and a
hundred  thirty-eight  seat  restaurant.  There  are 16 diesel  pumps  with card
readers, truck scales and secured parking for 260 trucks.

         15. Harborcreek, Pennsylvania. The Company owns a seventy-two acre site
of  which  twenty-four  acres  are  used  for  the  travel  plaza  at Exit 10 on
Interstate  90. The travel plaza consists of two  buildings,  a thirty-six  room
motel and a main building. The main building has a travel and convenience store,
a two hundred twelve seat restaurant, a Pizza Hut Express,  showers, a telephone
room, a game room, a trucker  lounge and a three bay shop.  There are ten diesel
pumps with satellites and card readers, a truck wash and truck scales. There are
four double sided gasoline pumps with pay at the pump capability. There is paved
parking for two hundred fifty trucks in addition to car and RV spaces.

         16. Belmont, New York. The Company owns a nine acre site at the Belmont
interchange  on US Route 17, in  southwestern  New York state.  The  mini-travel
plaza contains five diesel fueling lanes,  four gasoline  fueling  positions,  a
travel store, a convenience  store, a fifty-two seat  restaurant and three acres
of paved parking.

Other Facilities

         1.  Berwick,  Pennsylvania  (Beach  Haven) The Company owns a five acre
site that is a pipeline  terminal  consisting of five above ground storage tanks
with a total capacity of 2,411,585 gallons.  It is used to store diesel fuel and
home heating oil. An office building/warehouse is also located at the site.

Summary of Property Interest

         The  following  table  summarizes  the  Company's   interests  in  real
property, as discussed above:
                    Date      Approx.   Leased or    Rent Per         Lease
Location           Opened     Acreage     Owned      Month (1)      Expiration
---------          ------     -------   --------     ---------      ----------
Dansville, NY      Mar 80        8      Leased (2)   $ 4,000(3)       Mar 2000
Maybrook, NY       Mar 84       18      Leased (4)   $37,500          Mar 2004
Binghamton, NY     Mar 84       10      Owned          N/A              N/A
Mahwah, NJ         Mar 84        6      Leased       $ 8,788          Feb 2002
Fultonville, NY    Mar 84       20      Owned          N/A              N/A
Belmont, NY        May 86        9      Owned          N/A              N/A
Candler, NC        Dec 86       18      Owned          N/A              N/A
Bloomsburg, PA     Dec 86       13      Owned          N/A              N/A
Milesburg, PA      Dec 86       12      Owned          N/A              N/A
Paulsboro, NJ      Dec 86       32      Owned          N/A              N/A
Berwick, PA        Dec 86        5      Owned          N/A              N/A
Porter, IN         Jan 89       36      Owned          N/A              N/A
Lake Station, IN   Jan 89       24      Leased (5)   $29,583          Jan 1999
Greencastle, PA    Dec 89       27      Owned          N/A              N/A
Rochester, NY      Aug 91     Office    Leased       $ 5,014          Dec 1999
Greenland, NH      Apr 94        7      Leased (6)   $18,000          Apr 2014
Baltimore, MD      Mar 96       23      Leased (7)   $68,542          Feb 2003
Harborcreek, PA    Jun 96       72      Owned          N/A              N/A

(1) In  addition  to the base rent  listed in the above  table,  the  Company is
required to pay, under its leases, all property taxes,  maintenance expenses and
premiums for liability insurance on the respective  properties.  (2) The Company
has an option to purchase  for $1.00 at the  expiration  of the lease term.  (3)
Plus  interest  at 8.5% per  annum on the  declining  principal  balance  of the
Industrial  Development Loan for this facility. (4) Leased from Maybrook Realty,
Inc.,  a  corporation  owned  by two  people,  one  of  whom  is  the  principal
shareholder  of the  Company.  The Company has the option to renew the lease for
three five year periods with  monthly  payments of $41,250,  $45,375 and $49,913
respectively.  The  Company  has the option to purchase  the  facility  upon the
expiration of the lease or at the end of any extended term for  $3,500,000.  (5)
Leased from the previous owner of the Porter,  Indiana facility. The Company has
an option to purchase the facility any time after  January 1999 for  $3,250,000.
If the Company does not purchase the  facility,  it also has the option to renew
the lease for two ten year periods with monthly  payments of $31,050 and $35,707
respectively.  (6) Leased from unrelated third party for 20 years with option to
renew for two five year  periods.  Purchase  options of  $2,400,000  from 5/l/99
through 4/30/04,  $2,750,000 from 5/l/04 through 4/30/09 and the greater of fair
market  value or  $3,000,000  from  5/l/09  through  4/30/14.  (7)  Leased  from
unrelated  third  party  for 7 years.  There are  several  purchase,  sale,  and
extension options affecting the property.

Competition

         The truck stop  business in general and the separate  aspects that make
up such  business  are all highly  competitive.  There are many chain and single
operator  truck stops  throughout  the  Company's  marketing  area.  The Company
attempts to satisfy its customers' needs by providing  multiple  services at one
location.

         In addition to other truck stops,  the Company faces  competition  from
major and independent oil companies and independent  service station  operators;
national  and  independent  operators of motels and motel  chains;  national and
independent  operators of restaurants,  diners and other eating  establishments;
and super markets,  department stores, other convenience stores, drug stores and
other retail outlets.

         Many of the Company's competitors,  such as the major oil companies and
national and regional motel,  restaurant and retail chains,  are larger,  better
established  and have greater  financial and other  resources  than the Company.
While the Company intends to attempt to offset these advantages by continuing to
offer all of its products and services in one, well chosen,  highly  visible and
easily  accessible  location,  there can be no  assurance  that  this  marketing
strategy will be successful and profitable.

Regulation

         The  Company's  fueling  operations  are subject to federal,  state and
local laws and  regulations  concerning  environmental  matters.  These laws and
regulations affect the storing,  dispensing and discharge of petroleum and other
wastes and affect the  Company  both in the  securing of permits for its fueling
operations and in the ongoing conduct of such operations. Facilities that engage
primarily in dispensing  petroleum  products have in the last ten years been the
subject of close scrutiny by regulators.  Although the Company  believes that it
maintains operating procedures  satisfactory to comply with such regulations and
scrutiny,  maintains environmental  insurance on most of its facilities,  and to
date has not had any material  environmental  claim or expense,  there can be no
assurance that  significant  cleanup or compliance  costs may not be incurred by
the Company and may affect the Company's earnings.

         In addition,  the Company's motel and restaurant operations are subject
to federal, state and local regulations concerning health standards, sanitation,
fire and general overall safety.  In addition,  truck stops must comply with the
requirements of local governmental  bodies concerning  zoning,  land use and, as
discussed above,  environmental factors.  Difficulties in obtaining the required
licensing or approvals could result in delays or cancellations in the opening of
proposed new motor plazas.  There have been no material problems with compliance
with regulations governing the Company's restaurant or motel operations.

Employees

         As of April 30, 1998, the Company had a total of 1,447 employees, 1,170
full-time and 277 part-time.  Of the full-time employees, 32 are involved in the
corporate office and administrative  activities, 108 in travel plaza management,
4 in sales  and  marketing,  2 in design  and  construction  management  and the
balance in general  operating duties,  where all of the part-time  employees are
involved.

         The Company has never had a work stoppage and none of its employees are
represented  by a labor  organization.  The  Company  believes  that it provides
working conditions, wages and benefits that are competitive with other providers
of similar  products and services,  and  considers its employee  relations to be
excellent.

Item 2.  Properties

         A description of the Company's  facilities is set forth under Item 1 of
this  Report  beginning  on page 8  under  the  caption  "Properties"  and  such
information is hereby incorporated by reference in this Item 2.

Item 3. Legal Proceedings

         The Company is not presently a party to any  litigation (i) that is not
covered by  insurance  or (ii)  which  singly or in the  aggregate  would have a
material  adverse  effect on the  Company's  financial  condition and results of
operations,  and management  has no knowledge that any such  litigation has been
threatened.



Item 4.  Submission of matters to a vote of Security Holders.

         Not Applicable

                                     PART II

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

         The Company's  common stock trades on the on the Nasdaq National Market
tier of The Nasdaq Stock Market  under the Symbol:  TPOA.  The range of reported
high  and low sale  prices  of the  common  stock  during  each  quarter  of the
Company's  fiscal  years  ended  April 30,  1998,  and April 30,  1997,  were as
follows:
                           1998                               1997
                           ----                               ----
                  High              Low              High              Low

1st Quarter       3 1/4             2 3/8            3 5/8             2
2nd Quarter       4 1/2             3 1/8            3 1/2             2 9/16
3rd Quarter       4 7/32            3 1/4            3 1/8             2 1/8
4th Quarter       4 1/4             3 23/64          3 1/16            2 1/4

As of April 30, 1998, the  approximate  number of holders of common stock of the
registrant was 1,900.

Sale prices are as reported by NASDAQ  through  April 30 of each year.  All such
prices represent actual  transaction prices versus bid quotations because of the
Company's inclusion on the NASDAQ National Market System.

The Company may not declare  dividends  without  prior  consent from its primary
lender.  An 8% stock dividend was declared and issued on April 23, 1998 and a 6%
stock dividend was declared and issued on April 28, 1997.


Item 6.  Selected Financial Data

Operations      1998         1997         1996          1995          1994
---------- ------------  ------------  ------------  ------------  ------------

Net Sales  $211,508,861  $207,103,805  $165,164,391  $153,267,079  $137,575,675
Gross Profit
           $ 48,734,292  $ 46,436,813  $ 39,142,697  $ 38,237,699  $ 34,610,393

Income before cumulative effect
  of change in an accounting principle
           $  2,337,680  $  1,700,205  $  1,690,500  $  1,890,032  $  1,457,613

Cumulative effect of change in an
  accounting principle
           $          0  $          0  $          0  $          0  $    (99,735)

Net Income
           $  2,337,680  $  1,700,205  $  1,690,500  $  1,890,032  $  1,357,878

        Earnings Per Share

Basic Income Per Share:
Income before cumulative effect
  of change in an accounting principle
           $       .38   $        .28  $        .28  $        .32  $        .25

Cumulative effect of change in an
  accounting principle
           $       .00   $        .00  $        .00  $       .00   $       (.02)

Net Income
           $       .38   $        .28  $        .28  $       .32   $        .23

Basic Shares Outstanding
             6,136,062      6,034,054     6,008,787    5,986,122      5,964,551

Diluted Income Per Share:
Income before cumulative effect
  of change in an accounting principle
           $       .30   $        .24  $        .24  $       .26   $        .14

Cumulative effect of change in an
  accounting principle
           $       .00   $        .00  $        .00  $       .00   $       (.02)

Net Income
           $       .30   $        .24  $        .24  $       .14   $        .21

Diluted Shares
  Outstanding
             8,563,866      8,002,261     7,975,631    6,601,217      6,039,624

         Financial Data

Total Assets
          $ 64,812,728   $ 62,435,994  $ 55,278,604  $ 51,370,810  $ 41,847,897

Long Term Liabilities
          $ 31,023,936   $ 32,082,537  $ 27,828,457  $ 25,726,157  $ 18,268,139



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

RESULTS OF OPERATIONS

Quarter ended April 30, 1998 compared to quarter ended April 30, 1997

         Sales from operations were $49,741,000 for the fourth quarter of fiscal
1998,  down  $6,022,000,  or 10.8% from the fourth quarter last year. Net income
was  $368,000  ($.06 per  share),  down  $56,000,  or 13.2% from last year's net
income  of  $424,000   ($.07  per  share).   During  fiscal  1998,  the  Company
discontinued its "T-Bucks" coupon program, and accordingly,  related accruals of
$196,000  (after tax impact of $115,000)  were  reversed  into income during the
fourth quarter.

         Sales for the quarter were  impacted by lower retail  pricing on diesel
fuel that reduced sales by $7,135,000. The fiscal quarter also had six less days
than the prior year.  There would have been a 4.2% sales  increase if the retail
price of diesel  fuel had  remained  constant  with the prior year level and the
number of days were constant with last year.

         Gross profits decreased  $417,000,  primarily from lower diesel margins
as a result of  competitive  pressures  and to a lesser  extent from the reduced
number  of days.  Operating  expenses  decreased  $566,000,  as a result  of the
reduced number days, lower workers'  compensation  insurance and the elimination
of the grand opening expenses incurred last year.

         General and administrative  expense was $188,000 more than last year as
a result of  increased  travel  and  professional  fees  relating  to  potential
acquisition  investigations.  The Company also  expensed the costs of setting up
the subsidiaries for the franchising of Travel Ports.

Year ended April 30, 1998 compared to year ended April 30, 1997

         The  Company  had  earnings  of  $3,960,000  before  income  taxes  and
$2,338,000 in net income on net sales of $211,509,000 in fiscal 1998 compared to
earnings of $2,903,000  before income taxes and  $1,700,000 in net income on net
sales of  $207,104,000 in fiscal 1997. Due to reductions in pump prices stemming
from lower fuel costs compared to last year,  diesel fuel revenues  decreased by
$14,480,000.  Actual diesel gallons  increased 10.0% for the year.  Revenues for
gasoline  declined  from the  reduced  pump  prices  also,  but  again,  gallons
increased  5.3%.  Non-fuel sales  increased 6.3% for the year.  There would have
been a 9.1% sales  increase  if the  retail  price of diesel  fuel had  remained
constant with the prior year level.

         Retail diesel gallons sold during 1998 were 120 million, an increase of
11 million gallons over the prior year.  Sales of retail  gasoline  gallons were
12.7 million for 1998, an increase of .6 million gallons from the prior year.

         Gross  profits  increased  $2,297,000  or 4.9%  from  the  prior  year.
Non-fuel  gross  profit  increased  $1,973,000  or 6.2%.  Gasoline  gross profit
decreased  $183,000  primarily  due to lower  margins  while diesel gross profit
increased  $553,000.  Retail margins per gallon of diesel fuel declined slightly
when compared to the prior year.  The increase in gallons sold more than made up
for the reduced gross profit from the lower margins.

         Listed  below is the  breakdown  of revenue and gross  profits by major
sales  classification  for the fiscal years ended April 30, 1998,  and April 30,
1997.

                        Percent     Percent       Percent     Percent
     Sales              of 1998     of 1998       of 1997     of 1997
  Category              Revenue  Gross Profit     Revenue  Gross Profit
------------            -------  ------------     -------  ------------
Diesel Fuel               65          27            65          27
Gasoline                   7           3             8           4
Restaurant                11          33            10          33
Store                      8          14             8          13
Shop                       5          11             5          11
Motel                      1           4             1           3
Other                      3           8             3           9

         Operating  expenses  were  $710,000  or 2.0% more than the prior  year.
Wages  increased  $487,000  or  3.0%.  Unemployment  and  workers'  compensation
insurance  declined  $239,000.  Equipment rental,  depreciation and amortization
increased  $431,000.  Some of these  increases  are a result of the  Harborcreek
facility being open the entire year versus only 46 weeks last year.

         General  and  administrative  expenses  increased  $527,000 or 11.6% as
compared to the prior year.  Wages increased  $185,000 as a result of additional
staff,  salary  increases  and  additional  bonuses  on the  increased  profits.
Professional  fees  increased  $209,000  as a result  of  potential  acquisition
investigations  and new venture  activity,  public  relations  activity  and the
startup expenses of the subsidiaries for franchising Travel Ports.

         The  Company has completed a review of its operational and financial 
systems and believe all areas except one to be Year 2000 compliant.  New
software is being  acquired for its accounting  systems.  The new system is Year
2000 compliant and will be implemented prior to December 31, 1998.

Prior Year Quarter ended April 30, 1997 compared to quarter ended April 30, 1996

         Sales from operations were $55,763,000 for the fourth quarter of fiscal
1997, up  $8,514,000,  or 18% from the fourth  quarter last year. Net income was
$424,000 ($.07 per share),  up $222,000,  or 110% from last year's net income of
$202,000 ($.04 per share).

         Sales from same units increased  $1,139,000 or 2.5%. Sales from the new
travel  plazas added  $7,376,000  over last year's  sales.  Overall  every sales
category increased, including diesel fuel, the retail selling price of which was
the same as last year.

         Gross  profits  increased  $1,663,000,   primarily  from  the  two  new
locations  while same unit gross profit was down  slightly.  Operating  expenses
increased $1,153,000, all from the new locations as same unit operating expenses
were down $177,000 or 2.4%.

         General  and  administrative  expense  was the same as last year  while
interest expense  increased due to higher levels of debt. Other income increased
as a result of higher interest income.

Prior year ended April 30, 1997 compared to year ended April 30, 1996

         The  Company  had  earnings  of  $2,903,000  before  income  taxes  and
$1,700,000 in net income on net sales of $207,104,000. Net income is essentially
flat on an increase in net sales of $41,939,000 or 25.4%. Operating profits from
restaurant operations increased $483,000 or 22.3% over last year. On a same unit
basis, restaurant operating profits increased $303,000 or 13.9%. This offset the
decline in fuel operations income, primarily resulting from the absence of a one
time gain of $412,000 in January 1996 when the Company  exercised  its option to
cancel a fixed price contract for diesel fuel.

         Sales  increased by  $28,870,000  primarily  from the new travel plazas
more than  offsetting  the decrease  resulting  from the sale of the facility in
Fairplay,  South  Carolina  in June  1995.  On a same unit  basis  sales were up
$13,070,000.   Higher  retail  selling  prices  of  diesel  fuel  accounted  for
approximately $10,650,000 of the overall sales increase.

         Retail diesel gallons sold during 1997 were 109 million, an increase of
15  million  gallons  or 16% over the  prior  year.  Same  unit  diesel  gallons
increased 1.3 million or 1%. Sales of retail gasoline  gallons were 12.1 million
for 1997,  an increase of 3.0 million  gallons or 33% from the prior year.  Same
unit gasoline sales increased 0.2 million or 2%.

         Gross profits  increased  $7,294,000  from the prior year. Most of this
increase  came from the two new  facilities.  Non-fuel  gross  profit  increased
$5,587,000  and gasoline  gross  profit  increased  $374,000  while diesel gross
profit  increased  $1,337,000.  Retail diesel  margins per gallon were flat when
compared to the prior year. Same unit gross profit increased  $183,000 over last
year. Last year included a one time gain of $412,000 as noted above.


         Listed  below is the  breakdown  of revenue and gross  profits by major
sales  classification  for the fiscal years ended April 30, 1997,  and April 30,
1996.

                         Percent     Percent        Percent      Percent
     Sales               of 1997     of 1997        of 1996      of 1996
  Category               Revenue   Gross Profit     Revenue    Gross Profit
------------             -------   ------------     -------    ------------
Diesel Fuel                 65          27             64           29
Gasoline                     8           4              7            3
Restaurant                  10          33             11           32
Store                        8          13              8           13
Shop                         5          11              6           12
Motel                        1           3              1            3
Other                        3           9              3            8


         Operating  expenses  were  $6,254,000  or 21% more than the prior year.
Same unit expenses increased $40,000 or about 0.1%.

         General  and  administrative  expenses  increased  $288,000  or  7%  as
compared to the prior year.  Wages increased  $212,000 as a result of additional
staff and salary increases.  Legal and professional fees increased $102,000 as a
result of acquisition and new venture  activity.  Advertising  decreased $69,000
from changes in marketing programs.

         Interest expense  increased by $582,000 from the prior year as a result
of the  increased  levels of debt.  Other income  decreased  from last year as a
result of lower interest  income this year and the sale of two  properties  last
year.

Financial Condition, Liquidity and Capital Resources

         Generally, the Company's capital resources are derived mainly from cash
provided by operating activities.  In fiscal 1998 operating activities accounted
for the generation of cash in the amount of $7,658,000 compared to $5,038,000 in
fiscal 1997 and $3,208,000 in fiscal 1996.

         Cash used in  investing  activities  was  $5,781,000  in  fiscal  1998,
$7,295,000 in fiscal 1997 and  $11,532,000  in fiscal 1996. The spending in 1998
was at a reduced  level  from  1997  reflecting  the  completion  of some  major
renovation projects. The Company also received $1,368,000 of cash related to the
Allentown  mortgage that was paid in full in 1997.  The change from 1997 to 1996
was a result of the  completion of  Harborcreek  in June 1996 and the receipt of
$1,368,000 of cash noted above.

         Financing  activities used net cash of $930,000 in fiscal 1998 compared
to net cash provided of $3,725,000 in fiscal 1997 and $2,397,000 in fiscal 1996.
The change in 1998 was the result of increased  borrowings in 1997 and 1996 that
funded the construction and renovation projects.

         The overall  result of the above activity was a net increase of cash in
the amount of $947,000 in fiscal 1998 and  $1,468,000 in fiscal 1997 compared to
a net decline of cash in the amount of $5,927,000 in fiscal 1996.

         The Company's  working capital  excluding  current portion of long term
debt was $4,087,000 at April 30, 1998 and $4,462,000 at April 30, 1997.

         On October 4, 1996,  the Company  entered  into a  permanent  financing
arrangement for its Harborcreek, Pennsylvania facility (which was opened in June
1996) with its primary lender in accordance with the Restated and Amended Credit
Agreement dated December 21, 1995 in the amount of $6,000,000. Interest is fixed
at 9.44%  for ten years  with  level  principal  payments  based  upon a 15 year
amortization. A balloon payment is due on September 30, 2006.

         On November 6, 1996,  the Company  entered into an  agreement  with its
secondary  lender that (a)  refinanced  a mortgage  loan due 2001  covering  two
travel  plazas  in  Pennsylvania,  as well as a term  loan  due in 1997  and (b)
provided an additional $5,000,000 for 1996/97 capital expenditures.  Interest is
fixed at 8.63 % for five  years with level  principal  payments  based upon a 15
year amortization. A balloon payment is due on April 10, 2002.

         On December 4, 1997,  the Company  completed the sale of (1) $2,000,000
principal amount of 7.81%  Convertible  Subordinated  Debentures due December 4,
2007,  convertible at $4.30 per share and (2) Warrants to purchase 40,000 shares
of Common  Stock,  par value $.01 per share,  of the Company at a price of $5.16
per share to Cephas Capital Partners, L.P. A value of $100,000 has been assigned
to the warrants in  accordance  with  Accounting  Principles  Board  Opinion No.
14(APB 14). The values of the  subordinated  debentures and  additional  paid in
capital were  adjusted  accordingly.  As a result of the stock  dividend  issued
April 23, 1998, the bond conversion  price was adjusted to $3.98 and the warrant
price was adjusted to $4.78. The number of warrants was increased to 43,200.

         The Company  renewed  the  agreement  with its primary  lender that (a)
provides  a line of  credit  of  $3,750,000  until  September  28,  1999 and (b)
provides an additional $4,500,000 for a capital line of credit. The regular line
of credit  is  limited  to the  lesser  of  $3,750,000  or the sum of 80% of the
Company's  accounts  receivable  under 90 days  old,  plus 45% of the  Company's
inventory.  As of April 30,  1998,  the  Company  has  utilized  $200,000 of its
available  line of credit as  collateral  for  various  letters of  credit.  The
capital  line of  credit  calls  for  interest  only at prime  plus  1/4%  until
September  28, 1999.  At that time the line can be repaid or  amortized  over 42
months with interest at prime plus or LIBOR plus interest rate based upon funded
debt to EDITDA. No advances have been made against the capital line of credit.

         The Company now has a significant  portion of its  borrowings  financed
through fixed interest rates.

         Certain loan  agreements  require that the Company  maintain  specified
minimums with regard to net worth,  current maturity coverage and the incurrence
of additional  indebtedness.  In addition,  the Company cannot declare dividends
without the consent of its primary  lender.  The Company is in  compliance  with
such requirements and restrictions.

         The cash  requirements  associated  with the  Company's  expansion  and
renovation  programs  will  continue  to be met  through a  combination  of cash
generated from operations and bank financing.

         Authorized,  but  unissued  stock is  available  for  financing  needs;
however there are no current plans to use this source.

Item 8.  Financial Statements and Supplementary Data

           Index to Financial Statements and Supplementary Schedules

The Following information is presented in this report:                   Page

         Report of Independent Accountants............................    23

         Consolidated Balance Sheets for the years ended
           April 30, 1998 and 1997....................................    24

         Consolidated Statements of Income for the years ended
          April 30, 1998, 1997 and 1996...............................    25

         Consolidated Statements of Cash Flows for the years ended
          April 30, 1998, 1997 and 1996...............................    26

         Notes to Consolidated Financial Statements...................    27

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


Item 9.  Disagreements on Accounting and Financial Disclosure

         Not Applicable



                        Report of Independent Accountants


To the Board of Directors and
Shareholders of
Travel Ports of America, Inc.

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements  of income and of cash  flows  present  fairly,  in all
material respects,  the financial position of Travel Ports of America,  Inc. and
its  subsidiaries  at April 30, 1998 and 1997, and the results of its operations
and its cash  flows for each of the three  years in the period  ended  April 30,
1998,  in  conformity  with  generally  accepted  accounting  principles.  These
financial  statements are the  responsibility of the Company's  management;  our
responsibility  is to express an opinion on these financial  statements based on
our audits.  We conducted  our audits of these  statements  in  accordance  with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable  assurance about whether the financial statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.





Price Waterhouse LLP
Rochester, New York
June 19, 1998



Consolidated Balance Sheets

                                                               April 30,
                                                           1998         1997
                                     Assets
Current assets:
Cash and cash equivalents, including interest-bearing
accounts of $3,162,400 and $2,727,500 in 1998 and 1997,
respectively                                            $4,082,203     3,134,871
Accounts receivable, less allowance for doubtful
accounts of $158,000 and $156,000 in 1998 and 1997,
respectively                                              4,167,966    4,357,665
   Notes receivable                                          30,346       20,725
   Inventories                                            5,726,512    5,763,023
   Prepaid and other current assets                         884,864    1,231,509
   Income taxes receivable                                  214,676      491,941
   Deferred taxes - current                                 532,000      791,100
                                                        ------------ -----------
         Total current assets                            15,638,567   15,790,834
Notes receivable due after one year, less allowance of $65,000
in 1998 and 1997                                            575,548      738,997
Property, plant and equipment, net                       44,597,242   41,686,254
Goodwill                                                  1,840,116    1,904,306
Other assets                                              2,161,255    2,315,603
                                                        ------------ -----------
                                                        $64,812,728   62,435,994
                                                        ------------ -----------
                      Liabilities and Shareholders' Equity
Current liabilities:
   Current portion of long-term debt and capital lease obligation
                                                          3,336,$65    3,207,254
   Accounts payable                                       6,669,874    5,350,448
   Accounts payable - affiliate                             236,263    1,179,927
   Accrued compensation                                   1,900,184    1,714,677
   Accrued sales and fuel tax                             1,806,814    1,925,570
   Accrued expenses and other current liabilities           938,720    1,158,607
                                                        ------------ -----------
         Total current liabilities                       14,888,120   14,536,483
Long-term debt and capital lease obligation              22,322,369   25,526,937
Convertible senior subordinated debentures                6,054,167    4,650,000
Deferred income taxes                                     2,647,400    1,905,600
                                                        ------------ -----------
         Total liabilities                               45,912,056   46,619,020
                                                        ------------ -----------
Shareholders' equity:
   Common stock, $.01 par value
    Authorized - 10,000,000 shares
    Issued and outstanding - 6,302,596 shares in 1998 (including
     464,983 shares issued on April 10, 1998 as a stock dividend,
     Note 12) and 5,574,965 shares in 1997                   63,026       55,749
   Additional paid-in capital                             7,337,021    4,649,414
   Retained earnings                                     11,500,625   11,111,811
                                                        ------------ -----------
         Total shareholders' equity                      18,900,672   15,816,974
                                                        ------------ -----------
                                                        $64,812,728   62,435,994
                                                        ------------ -----------

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


Consolidated Statements of Income

                              Years Ended April 30,
                                 1998 1997 1996

Net sales and operating revenues
(including consumer excise taxes
of $54,097,500 in 1998,$45,062,000
in 1997, and $36,258,000 in 1996)    $1211,508,861  $ 207,103,805  $ 165,164,391

Cost of goods sold                     162,774,569    160,666,992    126,021,694
                                      ------------   ------------   ------------
      Gross profit                      48,734,292    46,436,813      39,142,697
                                      ------------   ------------   ------------
Operating expenses                      36,965,541    36,255,639      30,001,684
General and administrative expenses      5,087,839     4,560,796      4,273,191
Interest expense                         3,155,072     3,103,045      2,520,728
Other income, net                        (434,640)     (385,872)       (537,406)
                                      ------------  ------------    ------------
      Total expenses                    44,773,812    43,533,608      36,258,197
                                      ------------  ------------    ------------
Income before income taxes               3,960,480     2,903,205       2,884,500
Provision for income taxes               1,622,800     1,203,000       1,194,000
                                      ------------  ------------  ------------

Net income                           $    2,337,68$    1,700,205  $    1,690,500
                                      ------------  ------------    ------------
Earnings per share - basic                   $ .38         $ .28           $ .28
                                             -----         -----           -----

Earnings per share - diluted                 $ .30         $ .24           $ .24
                                             -----         -----           -----

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

Consolidated Statements of Cash Flows

                                                     Years Ended April 30,
                                                 1998       1997       1996
Operating activities:
   Net income                               $   2,337,6$0  1,700,2$5  1,690,500
   Depreciation and amortization                3,393,177  3,266,330  2,724,604
   Provision for deferred income taxes          1,000,900   592,100     157,100
   Gain on sale of assets                       (150,457)   (13,812)   (213,881)
   Changes in operating assets and liabilities -
    Accounts receivable                          189,699       (419)   (674,011)
    Inventories                                   36,511   (429,194)    456,994
    Prepaid and other current assets             346,645   (309,480)   (392,668)
    Income taxes receivable                      277,265   (361,344)   (127,054)
    Accounts payable and accounts payable - affiliate
                                                 375,762   (212,304)   (751,744)
    Accrued compensation                         185,507    253,815     125,557
    Accrued sales and fuel tax                  (118,756)   677,984     199,937
    Accrued expenses and other current liabilities
                                                (219,887)     1,751      99,176
    Changes in other non-current assets            3,606   (127,290)    (86,663)
                                                ---------  ---------  ----------
      Net cash provided by operating activities
                                                7,657,652  5,038,342  3,207,847
                                                ---------  ---------  ----------
Investing activities:
   Expenditures for property, plant and equipment
                                              (6,171,272)(8,723,016)(12,021,255)
   Proceeds from sale of property, plant and
equipment                                        236,663     59,080     294,636
   Net proceeds received from notes receivable   153,828   1,368,864    194,669
                                                ---------  ---------  ----------
      Net cash used in investing activities   (5,780,781)(7,295,072)(11,531,950)
                                                ---------  ---------  ----------
Financing activities:
   Principal payments on long-term debt        (3,075,557)(8,961,395)(2,409,613)
   Proceeds from long-term borrowings                     12,655,227  4,761,000
   Proceeds from convertible senior subordinate
   debentures                                   2,000,000
   Exercise of stock options                      146,018     30,707     45,980
                                                ---------  ---------  ----------
      Net cash (used in) provided by financing  (929,539)  3,724,539  2,397,367
                                                ---------  ---------  ----------
Net increase (decrease) in cash and equivalents  947,332   1,467,809 (5,926,736)
Cash and equivalents - beginning of year       3,134,871   1,667,062  7,593,798
                                                ---------  ---------  ----------

Cash and equivalents - end of year          $   4,082,2$3  3,134,8$1  1,667,062
                                                ---------  ---------  ----------
               Supplemental Disclosure of Cash Flow Information
Cash paid during the year:
   Interest paid                            $   3,077,0$2  3,031,4$7  2,504,368
   Income taxes paid, net                   $   1,194,0$0  1,069,2$0  1,164,000

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

Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997


1.    The Company and Its Accounting Policies

    The Company is primarily  engaged in the  operation of travel plazas and has
    sixteen service plazas located in the states of New York, Pennsylvania,  New
    Jersey, Indiana,  Maryland,  North Carolina and New Hampshire. A significant
    portion of the Company's  sales and  receivables  are with  companies in the
    trucking and related industries.

    During 1998, the Company  organized wholly owned  subsidiaries to facilitate
    the franchising of the Travel Port  operations.  Travel Ports Systems,  Inc.
    (TPS) is a Delaware  company  which owns the Travel Port  tradename.  Travel
    Port Franchising,  Inc. (TPF), also a Delaware company,  will enter into and
    administer  franchising  agreements  with  third-party   franchisees.   Both
    subsidiaries are consolidated  into the Company's  financial  statements and
    all intercompany  transactions are eliminated. At April 30, 1998 the Company
    had not yet entered into any franchising agreements with third parties.

    The  accompanying  consolidated  financial  statements have been prepared in
    accordance with generally accepted accounting principles. The preparation of
    financial  statements in conformity with such principles requires the use of
    estimates by management  during the reporting  period.  Actual results could
    differ from those estimates.

    The Company's significant accounting policies follow.

    Inventories
    Inventories are stated at the lower of cost or market. Cost is determined on
    the first-in, first-out (FIFO) method.

    Property, Plant and Equipment
    Property,   plant  and  equipment  are  stated  at  cost  less   accumulated
    depreciation and amortization. Depreciation is provided on the straight-line
    basis over the estimated useful lives of the related assets as follows: land
    improvements  -  15  years;  buildings  and  improvements  - 39  years;  and
    equipment and fixtures - 3 to 15 years. Leasehold improvements are amortized
    over the remaining term of the applicable  leases or their estimated  useful
    lives,  whichever is shorter.  Expenditures  for maintenance and repairs are
    charged to expense as incurred. Major improvements are capitalized.

    Goodwill
    The  Company  amortizes  cost in excess  of  underlying  net asset  value of
    companies  acquired over 40 years. The amount presented on the balance sheet
    is net of  accumulated  amortization  of $727,488  and $663,298 at April 30,
    1998 and  1997,  respectively.  Amortization  expense  for each of the years
    ended April 30, 1998, 1997 and 1996 was $64,190. The recoverability of these
    assets is periodically  evaluated at the operating unit level by an analysis
    of operating  results and cash flows and  consideration of other significant
    events or changes in the business environment.

    Cash Equivalents
    For purposes of this  Statement,  the Company  considers  all highly  liquid
    instruments  with an original  maturity  of three  months or less to be cash
    equivalents.

    Commodity Contracts
    In order to reduce  price risk  caused by market  fluctuations,  the Company
    enters into futures contracts and options hedging the purchase price of bulk
    fuel products. The changes in the market value of such contracts have a high
    correlation to the price changes of the hedged commodity. Contract positions
    are designed to ensure that the Company will pay a defined maximum price for
    certain  quantities  of its  inventory  purchases.  Gains and losses and the
    related  costs  paid or  premium  received  for  contracts  which  hedge the
    purchase  prices of commodities  are deferred and  subsequently  included in
    income as part of the  hedged  transaction  when the  underlying  product is
    sold.  At April 30, 1998,  the Company has entered into hedging  commitments
    for a maximum of 9,240,000  gallons for delivery  during the period May 1998
    through  August  1998.  The current  market  value of these  commitments  is
    measured based on daily  commodity  trading market prices.  If these hedging
    commitments   had  been   terminated  as  of  April  30,  1998,  a  loss  of
    approximately  $55,000  would  have  been  realized.  Due  to  the  constant
    fluctuations  within the commodity  markets,  these estimated results may or
    may  not be  realized.  The  Company  does  not  hold  or  issue  derivative
    instruments for trading or speculative purposes.

    Fair Value of Financial Instruments
    Cash and cash equivalents, accounts receivable and inventories are valued at
    their carrying  amounts,  which are reasonable  estimates of fair value. The
    fair value of long-term debt and  convertible  debentures is estimated using
    rates  currently  available to the Company for debt with  similar  terms and
    maturities and is not materially  different  from the carrying  amount.  The
    fair value of all other financial instruments approximates cost as stated.

    Federal Income Taxes
    Deferred tax assets and  liabilities  are  determined  based on  differences
    between the financial  reporting and tax basis of assets and liabilities and
    are  measured  using the  enacted  tax rates and laws that will be in effect
    when those differences are expected to reverse.

2.    Facility Additions and Disposals

    On June 15,  1996,  the Company  opened a new full  service  travel plaza in
    Harborcreek,  Pennsylvania.  Total  construction costs of approximately $8.3
    million  were  financed   through  a  combination  of  cash  generated  from
    operations and bank financing (Note 8).

    On March 1, 1996, the Company  entered into a lease agreement for a facility
    in Baltimore, Maryland which is operated as a full service travel plaza. The
    term of the lease is seven years and is recorded as an operating lease (Note
    7).

    On June 15, 1995, the Company sold its Fairplay,  South  Carolina  facility.
    The Company received,  as consideration,  a cash down payment and a $600,000
    note receivable. This sale had no significant impact on operations.

3.    Earnings Per Share

    The Company has adopted the provisions of Statement of Financial  Accounting
    Standards (SFAS) No. 128, "Earnings Per Share" (EPS). Basic EPS excludes the
    effect of common  stock  equivalents  and is  computed  by  dividing  income
    available to common  shareholders  by the weighted  average of common shares
    outstanding for the period. Diluted EPS reflects the potential dilution that
    could  result if  securities  or other  contracts to issue common stock were
    exercised or converted into common stock. Historical earnings per share have
    been restated to conform with the provisions of SFAS 128.

                               For the Years Ended
                                    April 30,
                                 1998 1997 1996

Basic earnings per share:
   Income applicable to common stock       $ 2,337,680 $ 1,700,205 $ 1,690,500
   Weighted average common stock outstanding
                                             6,136,062   6,034,054   6,008,787
   Basic earnings per common share         $       .38 $       .28 $       .28
                                            ----------  ----------  ----------

Diluted earnings per share:
   Income applicable to common stock       $ 2,337,680 $ 1,700,205 $ 1,690,500
   Interest expense on convertible debentures
                                               269,776     237,150     237,150
                                            ----------  ----------  ----------

                                           $ 2,607,456 $ 1,937,355 $ 1,927,650
                                            ----------  ----------  ----------

Weighted average common stock outstanding    6,136,062   6,034,054   6,008,787
Options and warrants                           341,323     193,648     192,285
Convertible debentures                       2,086,481   1,774,559   1,774,559
                                            ----------  ----------  ----------

                                             8,563,866   8,002,261   7,975,631
                                            ----------  ----------  ----------

Diluted earnings per common share          $       .30  $      .24  $      .24
                                            ----------   ---------   ---------

4.    Inventories

    Major classifications of inventories are as follows:

                                               1998            1997

At FIFO cost:
   Petroleum products                     $    837,08     $  1,047,017
   Store merchandise                        2,385,387        2,328,955
   Parts for repairs and tires              1,823,610        1,803,705
   Other                                      680,435          583,346
                                           ----------      -----------

                                          $ 5,726,512     $  5,763,023
                                           ----------      -----------


5.    Property, Plant and Equipment

    Major classifications of property, plant and equipment are as follows:


                                                 1998         1997

Land                                      $    6,418,08  $  6,386,394
Land improvements                            13,079,873    11,949,337
Buildings and improvements                   26,132,301    24,031,725
Equipment and fixtures                       18,796,826    16,085,837
Leasehold improvements                        5,915,106     5,550,491
Construction in progress                        358,361       679,442
                                             -----------   -----------
                                             70,700,550    64,683,226
   Less - Allowance for depreciation and
          amortization                       26,103,308    22,996,972
                                             -----------   -----------

                                          $  44,597,242  $ 41,686,254
                                             -----------   -----------


Interest costs  capitalized  aggregated  $68,200 in 1997. No interest costs were
capitalized in 1998.

These amounts  include  property,  plant and equipment  under a capital lease as
follows:

                                              1998          1997

Building                                 $   706,031    $   706,031
Land improvements                            243,969        243,969
                                           ----------    ----------
                                             950,000        950,000
   Less - Accumulated amortization           686,300        663,200
   ----
                                           ----------    ----------

                                         $   263,700   $    286,800
                                          ----------     ----------

    The  leased  assets  relate  to an  agreement  with  the  Livingston  County
    Industrial  Development  Agency under which the Agency's  bond proceeds were
    used to acquire, construct and equip an operating facility in Dansville, New
    York.  The Company has the option to buy the  facility  for $1 at the end of
    the lease term,  February 2000. Lease  amortization  amounted to $23,100 for
    each of the years 1998,  1997, and 1996, and is included in depreciation and
    amortization expense.

6.    Other Assets

    At April 30, 1998 and 1997,  other assets include a leasehold  interest in a
    full service travel plaza in Greenland,  New Hampshire with a carrying value
    of  $1,700,300  and  $1,818,100,   respectively.   The  leasehold   interest
    represents  the amount  paid by the Company for the rights to operate a full
    service plaza under the terms of a twenty-year  lease and is being amortized
    over the life of the lease (Note 7).


    Deferred financing costs included within other assets are being amortized on
    a straight-line  basis over the term of the related debt and have a carrying
    value of $330,000  and  $343,000  at April 30, 1998 and 1997,  respectively.
    Amortization  expense for the leasehold  interest and deferred financing for
    the years ended 1998,  1997 and 1996 was  $244,800,  $233,800 and  $244,300,
    respectively.

7.    Leases

    The Company leases six of its operating facilities and its home office under
    various terms from 3 to 20 years.  Certain of the operating  leases  contain
    renewal  options for periods beyond their original terms at specified  rates
    of payment and five of the leases include  purchase  options  exercisable at
    future dates.  The Company has also entered into various leases of equipment
    and property used in operations  and related office space with various lease
    periods and renewal options.

    During  fiscal 1997,  the Company  entered  into a $3 million  lease line of
    credit with Fleet Capital  Leasing.  At April 30, 1998,  approximately  $1.2
    million of the line had been  utilized  to finance ten  separate  leases for
    equipment and furniture and fixtures.  Each lease  qualifies as an operating
    lease in accordance with SFAS 13 criteria,  and annual payments are included
    in the future minimum lease payment schedule below.

    At April 30, 1998,  future minimum  payments  required under  non-cancelable
    leases are as follows:



                                             Operating        Capital

1999                                     $   2,494,94   $     55,001
2000                                         2,125,164        50,965
2001                                         2,089,611        11,315
2002                                         1,918,231
2003                                         1,696,702
Future                                       4,913,026
                                            -----------    ----------
                                         $  15,237,674       117,281
                                            -----------

Less - Amount representing interest                           11,196
----
                                                           ----------

Present value of net minimum lease payments              $   106,085
                                                           ----------


    Rental expense  applicable to operating  leases,  net of sublease  income of
    $428,100,  $356,900 and $333,900,  amounted to  $2,269,200,  $2,501,100  and
    $1,352,200, for 1998, 1997 and 1996, respectively.

8.  Debt and Capital Lease Obligation

    Debt and capital lease obligation consist of the following:


                                                    1998         1997

Mortgage loans:
   Due 2002, LIBOR plus 2.25% and prime
   plus 1.000%, in 1998 and 1997,
   respectively                                 $   108,680   $  128,125
   Due 2003, LIBOR plus 2.25% and prime
   plus .875%, in 1998 and 1997,
   respectively                                     722,235      833,345
   Due 2004, LIBOR plus 2.25% and prime
   plus .875%, in 1998 and 1997,
   respectively                                   1,932,975    2,205,153
   Due 2005, LIBOR plus 2.25% and prime
   plus .875%, in 1998 and 1997,
   respectively                                   2,535,698    2,841,358
   Due 2006, fixed rate of 9.44%                  5,400,006    5,800,002

Term loans:
   Due 1999, fixed rate of 9.650%                 1,541,682    1,791,678
   Due 2002, fixed rate of 10.120%                7,099,727    8,325,718
   Due 2002, fixed rate of 8.630%                 6,211,546    6,655,228

Obligation under capital lease, 8.50%               106,085      153,584
                                                 -----------  -----------
                                                 25,658,634   28,734,191
   Less - Portion due within one year,
   including amounts for capital lease
   of $47,500 in 1998 and 1997                   (3,336,265)  (3,207,254)
                                                 -----------  -----------

                                              $  22,322,369 $ 25,526,937
                                                -----------  -----------

    The LIBOR rate was 5.66% at April 30, 1998 and the prime  interest  rate was
    8.50% at April 30, 1997.

    The Company's  primary  lender has extended its commitment for the Company's
    existing  line of  credit of  $3,750,000  through  September  28,  1999.  In
    addition,  the Company  also has a $4,500,000  capital  line of credit.  The
    working line of credit is limited to the lesser of  $3,750,000 or the sum of
    80% of the Company's accounts  receivable under 90 days old, plus 45% of the
    Company's inventory. At April 30, 1998, the Company had utilized $200,000 of
    its available  line of credit as collateral  for various  letters of credit.
    The remaining $3,550,000 is available.  The capital line of credit calls for
    interest only at prime plus .25% until  September 28, 1999. At that time the
    line can be repaid or amortized  over 42 months with  interest at prime plus
    .50%.  No advances  are  outstanding  against the capital  line of credit at
    April 30, 1998 and 1997.

    None  of the  debt  agreements  outstanding  during  1998  require  material
    compensating  balances or commitment fees.  Substantially  all assets of the
    Company have been pledged to secure the outstanding borrowings.

    Certain loan agreements require that the Company maintain specified minimums
    with regard to net worth,  current  maturity  coverage and the incurrence of
    additional  indebtedness.  In addition, the Company cannot declare dividends
    without the consent of its primary lender. The Company is in compliance with
    such requirements and restrictions.

    Long-term debt requirements excluding capital leases, over the next five
    years are as follows:  1999 - $3,336,300; 2000 - $3,478,900; 2001 -
    $3,600,200; 2002 - $8,200,400 and 2003 - $2,294,000.

9.    Convertible Senior Subordinated Debentures

    In December 1997, the Company issued $2,000,000 of 7.81% convertible  senior
    subordinated  debentures  due December 4, 2007,  together  with  warrants to
    purchase  40,000  additional  shares of the Company's  common stock,  43,200
    after the 1998 stock  dividend.  No principal  repayments are required until
    December  2002 at  which  time  $200,000  will be due  and  $400,000  a year
    thereafter  until  2006 and  $200,000  in 2007.  Interest  is  payable  on a
    quarterly basis. The debentures may be converted at the bondholders'  option
    into 502,512  shares of the Company's  common stock at $3.98 per share.  The
    warrants  are  exercisable  at any time  through  their  expiration  date of
    December 2007 at an exercise  price of $4.78 per share.  A value of $100,000
    was assigned to the warrants at issuance and has been credited to additional
    paid-in capital.

    In January 1995, the Company issued  $4,650,000 of 8.5%  convertible  senior
    subordinated  debentures  due  January 15, 2005  together  with  warrants to
    purchase 93,000  additional shares of the Company's common stock. Due to the
    1998 and 1997 stock dividends (Note 12), the warrants available at April 30,
    1998 and 1997 are  106,467.  No  principal  repayments  are  required  until
    January 2001. Commencing in January 2001, the Company is required to redeem,
    on an annual  basis,  20% of the  outstanding  balance of debentures at par.
    Interest is payable on a quarterly  basis. The debentures are subordinate to
    all other indebtedness and may be converted at the bondholders'  option into
    1,583,969  shares of the  Company's  common  stock at $2.62 per  share.  The
    debentures  were callable at the discretion of the Company after January 15,
    1998,  at  a  redemption  price  equal  to  109%  of  the  principal  amount
    outstanding as of January 15, 1998, and gradually  decreasing to 100% of the
    principal  amount  outstanding at maturity on January 15, 2005. The warrants
    are exercisable at any time through their expiration date of January 2005 at
    an exercise price of $3.15 per share.

    During fiscal 1998,  $500,000 of the 8.5%  debentures  were  converted  into
    178,092  shares  of  common  stock,  adjusted  for the 1998  and 1997  stock
    dividends  of 8%  and  6%,  respectively  (Note  12).  At  April  30,  1998,
    $4,150,000 of the 8.5% convertible  senior  subordinated  debentures  remain
    outstanding.

10.  Income Taxes

    The provision for income taxes consists of the following:


                                     1998         1997        1996

Current provision:
   Federal                      $  435,800    $  482,500   $  810,300
   State                           186,100       128,400      226,600
                                ----------    ----------   ----------
                                   621,900       610,900    1,036,900
                                ----------    ----------   ----------

Deferred provision:
   Federal                         842,200       467,900      130,900
   State                           158,700       124,200       26,200
                                ----------    ----------   ----------
                                 1,000,900       592,100      157,100
                                ----------    ----------   ----------

                               $ 1,622,800   $ 1,203,000  $ 1,194,000
                                ----------    ----------   ----------

    The reconciliation of the federal statutory income tax rate to the effective
    income tax rate is as follows:

                                   1998        1997       1996

Statutory federal rate         $ 1,346,60   $  987,100   $   980,700
State income taxes, net
 of federal benefit               227,600      166,700       166,800
Amortization of goodwill           21,800       21,800        21,800
Meals and entertainment            25,700       24,800        22,000
Other                               1,100        2,600         2,700
                               ----------    ---------     ---------

Effective tax rate             $ 1,622,80   $1,203,000   $ 1,194,000
                               ----------    ---------     ---------


   A summary of the deferred income tax assets and liabilities are as follows:


                                                 1998        1997
                              Assets
Bad debt reserve                            $   86,700  $    84,600
Vacation accrual                                78,200       76,800
Inventory basis difference                     106,000      102,000
Book accruals not currently deductible for tax  18,300      175,100
Alternative minimum tax                        242,800      362,000
                                             ---------   ----------

    Gross deferred tax assets               $   532,00  $   800,500
                                             ---------   ----------

                           Liabilities
Depreciation                                $2,647,400  $ 1,915,000
                                             ---------   ----------

    Gross deferred tax liabilities          $2,647,400  $ 1,915,000
                                             ---------   ----------

    Net deferred tax liabilities            $2,115,400  $ 1,114,500
                                             ---------   ----------

11.    Employee Benefit Plan
    The Company sponsors a defined  contribution  employee benefit plan covering
    substantially all employees who have completed one year of service. Matching
    contributions  are made at the  discretion  of the Board of Directors at the
    rate of 50 per  cent of  employee  contributions  up to 6 per  cent of gross
    compensation.  Total Company matching contributions were $145,000,  $119,200
    and $104,500 for 1998, 1997 and 1996, respectively.


12.    Shareholders' Equity


                                        Additional                   Total
                              Common     paid-in      Retained    shareholders'
                               stock     capital      earnings       equity

Balance at April 30, 1995    $ 52,099  $ 3,767,741  $ 8,529,742  $  12,349,582
Net income                                            1,690,500      1,690,500
Exercise of options               292       45,688                      45,980
                             --------   ----------  -----------   ------------
Balance at April 30, 1996      52,391    3,813,429   10,220,242     14,086,062
Net income                                            1,700,205      1,700,205
Exercise of options               203       30,504                      30,707
Stock dividend                  3,155      805,481     (808,636)            -
                             --------   ----------  -----------   ------------
Balance at April 30, 1997      55,749    4,649,414   11,111,811     15,816,974
Net income                                            2,337,680      2,337,680
Exercise of options               846      146,689                     147,535
Stock dividend                  4,650    1,942,699   (1,948,866)        (1,517)
Issuance of warrants on 7.81%
 convertible subordinate debentures        100,000                     100,000
Conversions of 8.5% convertible
 subordinate debentures         1,781      498,219                     500,000
                             --------   ----------  -----------   ------------

Balance at April 30, 1998    $ 63,026  $ 7,337,021 $ 11,500,625  $  18,900,672
                             --------  ----------   -----------   ------------

    On April 23, 1998, the Company  declared an 8% stock dividend which was paid
    to  shareholders  of record on April 10,  1998.  The dividend was charged to
    retained  earnings  in the  amount  of  $1,947,349,  which  was based on the
    closing  price of $4.19  per  share on the date of  record.  Average  shares
    outstanding and all per share amounts included in the accompanying financial
    statements  and  notes are based on the  increased  number of shares  giving
    retroactive effect to the stock dividend.

    On April 28, 1997,  the Company  declared a 6% stock dividend which was paid
    to  shareholders  of record on April 17,  1997.  The dividend was charged to
    retained earnings in the amount of $808,636,  which was based on the closing
    price of $2.56 per share on the date of record.  Average shares  outstanding
    and all per share amounts included in the accompanying  financial statements
    and notes are based on the  increased  number of shares  giving  retroactive
    effect to the stock dividend.

13. Stock Option Plans

    The Company has stock option  plans for  officers  and other key  employees.
    Provisions  of the plans are  similar.  Options may be granted at prices not
    less than the fair  market  value at the date of grant  and  expire no later
    than ten  years  after  the date of grant.  At April  30,  1998,  a total of
    173,560  options were available for future grant under the existing plans. A
    summary of changes in outstanding stock options is as follows:

                                                               Weighted
                                               Shares          average
                                               under           exercise
                                               option          price

Outstanding at April 30, 1995                  483,950           $1.63
Granted                                        114,480           $2.94
Exercised                                      (33,428)          $1.38
Canceled                                       (5,712)           $1.77
                                               -------
Outstanding at April 30, 1996                  559,290           $1.92
Granted                                        187,091           $2.35
Exercised                                      (23,239)          $1.33
Canceled                                       (4,006)           $1.60
                                               -------
Outstanding at April 30, 1997                  719,136           $2.05
Granted                                        313,740           $2.86
Exercised                                      (91,334)          $1.62
                                               -------
Outstanding at April 30, 1998                  941,542           $2.36
                                               -------

Exercisable at April 30, 1998                  820,582           $2.21
                                               -------

    During 1997, the Company  adopted the disclosure  requirements  of SFAS 123,
    "Accounting for Stock-Based  Compensation." In accordance with SFAS 123, the
    Company has  elected not to  recognize  compensation  cost  related to stock
    options  with  exercise  prices  equal  to the  market  price at the date of
    issuance. If the Company had elected to recognize compensation cost based on
    the fair value of the options at grant date as  prescribed  by SFAS 123, net
    income and  earnings  per share  would have been  reduced  by  $350,900  and
    $319,300, or $.06 and $.06 per share, for the years ended April 30, 1998 and
    1997,  respectively.  The  weighted  average  fair value of options  granted
    during 1998 and 1997 were $2.04 and $1.84,  respectively,  determined by the
    Black-Scholes option valuation model. The following assumptions were used in
    the model:  expected volatility of 63.3 per cent, expected dividend yield of
    - 0 - per cent,  and risk-free  interest rate of 6.3 per cent.  The expected
    lives of the options are 8 years. Forfeitures are recognized as they occur.

                        Options outstanding

                                          Weighted
                                           average         Weighted
                                          remaining        average
    Range of              Number         contractual       exercise
    exercise           outstanding           life            price

 $1.31 - $2.02           335,533             5.2             $1.70
 $2.18 - $3.35           606,009             8.7             $2.73

                        Options exercisable

                                          Weighted
                                           average         Weighted
                                          remaining        average
    Range of              Number         contractual       exercise
    exercise           outstanding           life           price

 $1.31 - $2.02           335,533             5.2            $1.70
 $2.18 - $2.94           485,049             8.4            $2.57


14.    Related Party Transactions

    The Company has renewed its long-term contract with a petroleum  distributor
    owned by a  shareholder  director  for the supply of diesel  fuel to certain
    motor plazas.  The original contract expired on December 31, 1995.  However,
    the Company continued to operate under a verbal agreement with similar terms
    throughout  1996.  During  1997,  a new  ten-year  contract  was  negotiated
    retroactive to January 1, 1996.  Purchases under the contract and other open
    market  purchases  from  this  company  were  $29,937,400  in  fiscal  1998,
    $32,440,000 in fiscal 1997 and $23,710,000 in fiscal 1996. At April 30, 1998
    and 1997, $236,755 and $1,179,900,  respectively, were owed to this supplier
    under contract  terms calling for payment  within  fifteen days.  During the
    fourth  quarter,  this  distributor  signed  a  definitive  agreement  to be
    purchased by an unrelated third party.

    The Maybrook,  New York motor plaza is leased from a realty company owned by
    two individuals,  one of whom is a shareholder  director of the Company. The
    lease covers a period  through  March 2004 at which time the Company has the
    option to purchase the facility for  $3,500,000.  Annual  rentals  under the
    lease are $450,000.

    The Company pays a shareholder  director,  fees and bonuses for  consulting,
    management  and other  services  rendered  to the  Company.  These  fees and
    bonuses  amounted to approximately  $213,600,  $203,600 and $203,400 for the
    years 1998, 1997, and 1996, respectively.

15.  Quarterly Data (Unaudited)

    A capsule  summary of the  Company's  audited  quarterly  net  sales,  gross
    profit, net income and earnings per share for the years ended April 30, 1998
    and 1997 is presented below:


                  First        Second        Third        Fourth        Year
1998
Net sales    $ 56,397,785  $ 54,732,274  $ 50,637,375  $49,741,427  $211,508,861
Gross profit   13,360,963    12,485,980    11,518,613   11,368,736    48,734,292
Net income        901,241       732,770       336,081      367,588(1)  2,337,680
Net income per share:
   Basic             0.15          0.13          0.05         0.06          0.39
   Diluted           0.12          0.10          0.04         0.05          0.31
Share price:
   High             3 1/4         4 1/2        4 7/32        4 1/4        4 7/32
   Low              2 3/8         3 1/8         3 1/4      3 23/64         2 3/8

1997
Net sales    $ 46,488,936  $ 52,698,998  $ 52,152,573  $55,763,298  $207,103,805
Gross profit   11,648,378    12,071,153    10,931,519   11,785,763    46,436,813
Net income        690,401       536,748        49,098      423,958     1,700,205
Net income per share:
   Basic             0.11          0.09          0.01         0.07          0.28
   Diluted           0.09          0.07          0.01         0.06          0.23
Share price:
   High             3 5/8         3 1/2         3 1/3       3 1/16         3 5/8
   Low              2            2 9/16         2 1/8        2 1/4         2




    (1)During  fiscal  1998,  the  Company  discontinued  its  "T-Bucks"  coupon
       program, and accordingly,  related accruals of $196,000 (after tax impact
       of $115,600) were reversed into income during the fourth quarter.

    The Company's  common stock is traded on the NASDAQ  National  Market System
    under the symbol TPOA. There were approximately 1,900 shareholders of record
    at April 30, 1998.

  Item 9.   Disagreements on Accounting and Financial Disclosure


                                    PART III

  Item 10.  Directors and Executive Officers of Registrant

      The information  required by this item is incorporated herein by reference
to the Company's  proxy  statement,  to be issued in connection  with the Annual
Meeting of  Shareholders  of the  Company to be held  October  27,  1998,  under
"Election of Directors".

Item 11.    Executive Compensation

      The information  required by this item is incorporated herein by reference
to the Company's  proxy  statement,  to be issued in connection  with the Annual
Meeting of  Shareholders  of the  Company to be held  October  27,  1998,  under
"Compensation of the Directors and Executive Officers".

Item 12.    Security Ownership of Certain Beneficial Owners and Management

      The information  required by this item is incorporated herein by reference
to the Company's  proxy  statement,  to be issued in connection  with the Annual
Meeting of  Shareholders  of the  Company to be held  October  27,  1998,  under
"Principal Holders of Voting Securities" and "Election of Directors".

Item 13.    Certain Relationships and Related Transactions

      The information  required by this item is incorporated herein by reference
to the Company's  proxy  statement,  to be issued in connection  with the Annual
Meeting of  Shareholders  of the  Company to be held  October  27,  1998,  under
"Certain Relationships and Related Transactions" or "Compensation of Directors
and Executive Officers" and "Election of Officers".

                                     PART IV

Item 14.    Exhibits, Financial Statement Schedules on Form 10-K

Item 14(a)(1), 14(a)(2) and 14(d):

      The following  financial  statement and financial  statement schedules are
filed as a part of Item 8 of this Report:

      Report of Independent Accountants

      Balance Sheets for the years ended April 30, 1998 and 1997

      Statements of Income for the years ended April 30, 1998, 1997 and 1996

      Statements of Cash Flows for the years ended April 30, 1998, 1997 and 1996

      Notes to Financial Statements

      Selected Quarterly Financial Information (Unaudited)

      All other  schedules are not submitted  because they are not applicable or
not  required  under  Regulation  S-X or because  the  required  information  is
included in the financial statements or notes thereto.

Item 14(b):

      Not Applicable

Item 14(a)(3) and 14(c):

      See Index to Exhibits

                                INDEX TO EXHIBITS

(3)   Articles of Incorporation and By-laws

      Exhibit 3-a and exhibit 3-b to the  Company's  Registration  Statement  on
Form S- 18, File No. 0-14998 are  incorporated  herein by reference with respect
to the Restated Certificate of Incorporation and By-laws of the Company.

      3-c Certificate of Amendment of Certificate of Incorporation  changing the
name of the Corporation,  is incorporated  herein by reference to Exhibit 3-c of
the Company's report on Form 10-K dated July 27, 1993.

(4) Instruments defining the rights of security holders, including indentures

      The  Exhibits   referenced  under  (3)  of  this  Index  to  Exhibits  are
incorporated herein by reference.

      Exhibit  4-a,  Form  of  Common  Stock   Certificate,   to  the  Company's
Registration  Statement on Form S- 1 8, File No. 0-14998 is incorporated  herein
by  reference  with  respect to  instruments  defining  the  rights of  security
holders.

      Exhibit  4-c,  Form of  Indenture  dated as of January 24,  1995,  between
Travel Ports of America,  Inc. and American Stock Transfer and Trust Company, as
Trustee,  with respect to up to $5,000,000  principal amount of 8.5% Convertible
Senior Subordinated Debentures due January 15, 2005 is incorporated by reference
to Exhibit 4-c to the Company's  Current  Report on Form 8-K dated  February 15,
1995.

      Exhibit 4-d, Form of Warrant to purchase  Common Stock is  incorporated by
reference  to  Exhibit  4-d to the  Company's  Current  Report on Form 8-K dated
February 15, 1995.

      Exhibit  4-e,  Form of Indenture  as of December 4, 1997,  between  Travel
Ports of America,  Inc.  and Cephas  Capital  Partners,  L.P.,  with  respect to
$2,000,000  principal amount of 7.81%  Convertible  Subordinated  Debentures due
December 4, 2007, is  incorporated  by reference to Exhibit 4-e to the Company's
Form 10-Q dated December 12, 1997.

      Exhibit 4-f, Form of Warrant to purchase  Common Stock is  incorporated by
reference to Exhibit 4-e to the Company's Form 10-Q dated December 12, 1997.

(9)   Voting trust agreements

            None

(10)  Material contracts

      10.1 The following material contracts are incorporated herein by reference
      to the Company's Registration Statement on Form S-18, File No. 33-7870-NY:

            10-a  Employee Incentive Stock Option Plan

            10-b  Lease  dated as of  March  l,1980,  between  the  Company  and
            Livingston County Industrial  Development  Agency for the Dansville,
            New York facility.

            10-c  Sublease  dated as of March 30, 1984,  between the Company and
            Maybrook Realty for the Maybrook, New York facility.

            10-d  Sublease  dated March  l4,1984,  between the Company and Ryder
            Truckstops,  Inc.  ("Ryder")  for  part of the  Mahwah,  New  Jersey
            facility.

            10-e  Sublease  dated March 14, 1984,  between the Company and Ryder
            for part of the Mahwah, New Jersey facility.

            10-f Lease dated February 1, 1973, between Truckstop  Corporation of
            America,  Inc.  ("TCA")  and E.Elwood  Moore  and  Francis  Moore,
            together with  Assignments to the Company,  dated March 14, 1984 for
            part of the Mahwah, New Jersey facility.

            10-u Unbranded  Distillate  Sales  Agreement  dated January 2, 1986,
            between the Company and W.W. Griffith Oil Co., Inc.

            I 0-v Purchase and Sales Contract for the Belmont, New York facility
            dated  February 7, 1986,  between the Company and W.W.  Griffith Oil
            Co., Inc.

      10.2 Lease,  dated December 1, 1988, amended January 10, 1989, between the
      Company and Christ T. Panos is incorporated herein by reference to Exhibit
      2 (b) and (c) to the  Company's  Current  Report on Form 8-K dated January
      20, 1989, as amended by Form 8-K dated March 21, 1989.

      10.3 Real estate mortgage dated January 5, 1989, executed and delivered by
      the Company as  security  for the  Mortgage  payable to Fleet Bank N.A. is
      incorporated  herein by reference to Exhibits  2(n),  2(p) and 2(q) to the
      Company's Amended Current Report on Form 8-K dated March 21, 1989.

      10.4 Mortgage  Agreement dated December 1989 executed and delivered by the
      Company as security for the Mortgage  payable to Fleet Bank N.A.  relating
      to  the  construction  of  the  Greencastle,   Pennsylvania   facility  is
      incorporated herein by reference to Exhibit 10 (e) of the Company's report
      on Form I O-K dated August 10, 1990.

      10.5  Credit  Agreement  dated June 1988  executed  and  delivered  by the
      Company  as  security  for the  Mortgage  payable  to Fleet  Bank N.A.  is
      incorporated  herein by reference to Exhibit 10(f) of the Company's report
      on Form 10-K dated August 10, 1990.

      10.6 Term Loan Note dated January 28, 1991,  executed and delivered by the
      Company  as  security  for the  Mortgage  payable  to Fleet  Bank N.A.  is
      incorporated  herein by reference to Exhibit 4 (c) of the Company's report
      on Form 10-Q dated March 14, 1991.

      10.7 1991 Employee  Incentive Stock Option Plan is incorporated  herein by
      reference  to Appendix "A" of the Proxy  Statement  issued for the October
      29, 1991, Annual Meeting of Stockholders.

      10.9 1993 Employee  Incentive Stock Option Plan is incorporated  herein by
      reference  to Appendix "A" of the Proxy  Statement  issued for the October
      26, 1993, Annual Meeting of Stockholders.

      10.10  Lease dated May 3l, 1991 and  amended  June l7,  1992,  between the
      Company and Townline  Associates  is  incorporated  herein by reference to
      Exhibit  10.10,  page 50 of the Company's  report on Form I O-K dated July
      27, 1994.

      10.11 Lease dated November 20, 1987, amended April 21, 1993, and April 29,
      1994,  between the Company and Siegel Limited  Partnership is incorporated
      herein by reference to Exhibit 10.11,  page 91 of the Company's  report on
      Form 10-K dated July 27, 1994.

      10.12 Term Loan Note dated June 3O, l994,  executed  and  delivered by the
      Company as security for the Mortgage  payable to Fleet Bank of New York is
      incorporated  herein by  reference  to  Exhibit  10.  12,  page 120 of the
      Company's report on Form 10-K dated July 27, 1993.

      10.13 Restated and Amended Credit Agreement,  Revolving Line Note and Term
      Loan Note,  all dated  September  29, 1994,  executed and delivered by the
      Company to Fleet Bank of New York is  incorporated  herein by reference to
      Exhibit 10.13, page 14 of the Company's report on Form 10-Q dated November
      28, 1994.

      10.14 1995 Employee Incentive Stock Option Plan is incorporated  herein by
      reference  to Appendix "A" of the Proxy  Statement  issued for the October
      24, 1995, Annual Meeting of Stockholders.

      10.15 Restated and Amended Credit Agreement,  Revolving Line Note and Term
      Loan Note,  all dated  December  21, 1995,  executed and  delivered by the
      Company to Fleet Bank of New York is  incorporated  herein by reference to
      Exhibit 10. 14, page 16 of the  Company's  report on Form 10-Q dated March
      8, 1996.

      10.16 Lease dated February 16, 1996 between the Company and Baltimore Port
      Truck Plaza Limited Partnership, Truck Ex.  Inc. and Travel Plaza I, Inc.
      is incorporated herein by reference to Exhibits beginning on page 69 of
      the Company's report on Form 10-Q dated March 8, 1996.

      10.17 Loan Agreement dated November 6, 1996, executed and delivered to PNC
      Bank is incorporated  herein by reference to Exhibit 10.17, page 17 of the
      Company's report on Form 10-Q dated December 13, 1996.

      10.18 Restated and Amended Credit Agreement,  Revolving Line Note and Term
      Loan Note,  all dated  January 31,  1997,  executed  and  delivered by the
      Company to Fleet Bank of New York is  incorporated  herein by reference to
      Exhibit 10.18,  page 17 of the Company's report on Form 10-Q dated March I
      1, 1997.

      10.19  Distillate  Sales  Agreement  dated  January 1, 1996,  between  the
      Company and Griffith Oil Co., Inc. is incorporated  herein by reference to
      Exhibit 10.19, page 46 of the Company's report on Form 10-K dated July 28,
      1997.

      10.20  Restated  and Amended  Credit  Agreement  dated  October 27,  1997,
      executed  and  delivered  to Fleet Bank is  incorporated  by  reference to
      Exhibit 10.20, page 17 of the Company's report on Form 10-Q dated December
      12, 1997.

      10.21  Consulting  Agreement with E. Philip  Saunders is  incorporated  by
      reference to Exhibit 10.21,  page 18 of the Company's  report on Form 10-Q
      dated March 13, 1998.

(11)  Statement re computation of per share earnings

            Computation  of Per Share  Earnings is set forth in Exhibit  (11) on
      page xx of this report.

(12)  Statement re computation of ratios

            Not applicable

(13)  Annual report to security holders

            Not applicable

(16)  Letter re change in certifying accountant

            Not applicable

(18)  Letter re change in accounting principles

            Not applicable

(19)  Previously unfiled documents

            None

(21)  Subsidiaries of Registrant

            Exhibit (21) on page xx of this report.

(22) Published report regarding matters submitted to vote of security holders

            None

(23)  Consents of experts and counsel

            Exhibit (23) on page xx of this report.

(24)  Power of Attorney

            Not applicable

(27)  Financial Data Schedule

            Exhibit (27) on page xx of this report.

(28) Information from reports furnished to state insurance regulatory agencies

            None

(99)  Additional exhibits

            None



                                   Exhibit 11
                     Computation of Basic Per Share Earnings

      Net income per share was  computed by dividing  net income by the weighted
average number of common shares outstanding.

Shares outstanding at the end of May through July 1997             6,047,778
Shares outstanding at the end of August 1997                       6,053,318
Shares outstanding at the end of September 1997                    6,059,088
Shares outstanding at the end of October and November 1997         6,077,608
Shares outstanding at the end of December 1997                     6,089,668
Shares outstanding at the end of January 1998                      6,271,237
Shares outstanding at the end of February 1998                     6,276,496
Shares outstanding at the end of March 1998                        6,281,796
Shares outstanding at the end of April 1998                        6,302,596

Average shares outstanding for year ended April 30, 1998           6,136,062
                                                                  ==========

Net income for year ended April 30, 1998                          $2,337,680
                                                                  ==========

Net income per basic share for year ended April 30, 1998                $.38
                                                                        ====



                    Computation of Diluted Per Share Earnings

      Net income per share was  computed by dividing  net income,  adjusted  for
debenture interest,  by the weighted average number of common shares outstanding
and common stock equivalents.

                  Total Options
                  and Warrants      Average           Average
Quarter Ended     Below Market   Exercise Price     Market Price   Shares
-------------     ------------   --------------     ------------   ------
7/31/97             786,150         $2.05              $2.83       216,727
10/31/97          1,097,558         $2.41              $3.90       419,114
1/31/98           1,060,169         $2.44              $3.73       366,818
4/30/98           1,047,009         $2.44              $3.74       362,626

Average common stock equivalents                                   341,323
Average number of shares outstanding                             6,136,062
8.5% convertible debenture                                       1,583,969
7.81% convertible debenture                                        502,512
                                                                 ---------
                                                                 8,563,866
                                                                 =========

Net Income for year ended 4/30/98                               $2,337,680
Interest on convertible debentures, after tax                      237,150
                                                                ----------
                                                                $2,607,456
                                                                ==========

Net income per diluted share                                          $.30
                                                                      ====


                                   Exhibit 21

              Subsidiaries of the Registrant for the year ended April 30, 1998

      The  Company  has no parent.  During the year the  Company  organized  two
wholly  owned  subsidiaries  whose  results  have  been  consolidated  into  the
Company's financial statements and all inter-company transactions are eliminated
for the year ended April 30, 1998.




                                   Exhibit 23

                       Consent of Independent Accountants

      We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 0-14998) of
Travel Ports of America, Inc. of our report dated June 19, 1998, appearing on
page xx of this Form 10-K.


PRICEWATERHOUSECOOPERS LLP

Rochester, New York
July 30, 1998



                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, Travel Ports of America, Inc., has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.

                                      TRAVEL PORTS OF AMERICA, INC.

                                      By: /s/ John M. Holahan
  July 30, 1998                           John M. Holahan, President


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

Signature                   Title                               Date
/s/ E. Philip Saunders      Chairman of the Board and
E. Philip Saunders          Chief Executive Officer          July 30, 1998

/s/ John M. Holahan         President and Chief              July 30, 1998
-------------------
John M. Holahan             Operating Officer

/s/ William Burslem III     Vice President, Treasurer, Secretary
William Burslem III         and Chief Financial Officer      July 30, 1998

/s/ William A. DeNight      Director                         July 30, 1998
----------------------
William A. DeNight

/s/ W. Patrick Marchbanks   Director                         July 30, 1998
-------------------------
W. Patrick Marchbanks

/s/ Dante Gullace           Director                         July 30, 1998
      Dante Gullace

/s/ John H. Cline           Director                         July 30, 1998
-----------------
John H. Cline




                  RESTATED AND AMENDED CREDIT AGREEMENT


                  THIS RESTATED AND AMENDED CREDIT AGREEMENT is dated as of July
24, 1998 by and between FLEET NATIONAL BANK, a national banking  association and
successor by merger to Norstar  Bank,  N.A.,  Fleet Bank of New York,  and Fleet
Bank,  with offices at One East Avenue,  Rochester,  New York 14638  (called the
"Bank")  and TRAVEL  PORTS OF AMERICA,  INC.,  formerly  known as Roadway  Motor
Plazas,  Inc., a New York  corporation  with  offices now at 3495 Winton  Place,
Building C, Rochester, New York 14623 (the "Borrower").

                  WHEREAS,  the  Bank  and the  Borrower  entered  into a Credit
Agreement dated June, 1988, which Credit Agreement was amended and restated in a
Restated and Amended Credit Agreement dated January 28, 1991, which Restated and
Amended  Credit  Agreement  was also been  further  amended,  and  which  Credit
Agreement  was further  amended and  restated in a Restated  and Amended  Credit
Agreement  dated June 30, 1994,  which Credit  Agreement was further amended and
restated in a Restated and Amended Credit  Agreement  dated  September 29, 1994,
and which Credit  Agreement was further  amended by Credit  Agreement  Amendment
Number 1 dated September 7, 1995, and which Credit Agreement was further amended
by Restated and Amended Credit  Agreement dated December 21, 1995,  which Credit
Agreement was further amended by Restated and Amended Credit Agreement Amendment
Number 1 dated as of January 31, 1997,  and which Credit  Agreement  was further
amended by Restated  and Amended  Credit  Agreement  effective  November 1, 1997
(collectively, the "1988 Agreement"), and
                  WHEREAS,   the  parties  desire  to  further  amend  the  1988
Agreement,  and deem it in their  respective  best interest to restate and amend
the 1988 Agreement in its entirety for ease of reference,

                  NOW  THEREFORE,  the Bank and the Borrower  agree to amend and
restate the 1988  Agreement in its entirety as follows,  and further  agree that
(a) except as  expressly  changed  herein  this  Agreement  shall cover the same
rights and obligations as are covered by the 1988 Agreement,  (b) all references
in mortgages, security agreements, notes, and other documents,  instruments, and
agreements related to this Agreement or to the 1988 Agreement which refer to the
1988  Agreement  shall be deemed to refer to this  Restated  and Amended  Credit
Agreement as the same may be modified, extended, or replaced from time to time.

ARTICLE I - LOANS

                  A. Term Loans. The Bank previously consolidated existing loans
to the  Borrower  in an  aggregate  amount  of,  and the  Borrower  borrowed  an
aggregate amount of,  $10,500,000 (the "Term Loan").  The Term Loan is evidenced
by an amended,  consolidated,  and restated  Term Loan Note in the new principal
amount of  $10,500,000,  the form of which is attached  hereto as Exhibit A (the
"Term Loan Note").

                  The amount  outstanding  on the date of closing under the Term
Loan referenced in the 1988 Agreement remains  outstanding as a part of the Term
Loan  hereunder and the terms thereof shall be modified to the terms of the Term
Loan hereunder.  The remaining  principal portion of the Term Loan was available
to the  Borrower  first to repay  $1,500,000  in  existing  Bank  line of credit
obligations  on the date of closing.  The remaining  proceeds  shall be advanced
into an escrow account to be held by the Bank for the benefit of the Borrower.

                  The Bank will  invest the funds held in the escrow  account in
income  producing  accounts  at the Bank or an  Affiliate  of the Bank  mutually
satisfactory to the Bank and the Borrower. Advances will be made from the escrow
account as requested by Borrower for capital  expenditures in Borrower's  fiscal
year  1995,  improvements  to  Borrower's  property  commonly  known  as  Exit 3
Truckstop in  Greenland,  New  Hampshire,  and  infrastructure  improvements  to
Borrower's property in Harborcreek, Erie, Pennsylvania. Advance requests must be
accompanied by invoices for expenses  incurred  reasonably  satisfactory  to the
Bank.

                  Outstanding  principal balances under the Term Loan shall bear
interest at ten and  twelve/hundredths  percent  (10.12%) per annum,  calculated
based on  actual  days  elapsed  in a year of 360  days.  For  purposes  of this
Agreement,  the "Prime  Rate" is the Bank's rate of interest  stated by the Bank
from time to time to be its prime rate  (irrespective of any rate charged to any
customer in any actual transaction).

                  The Borrower  shall pay all interest  accrued on the Term Loan
on the first day of each month  commencing  on November  1, 1994 and  continuing
through  March 1, 1995.  On the first day of each month  commencing  on April 1,
1995,  the Borrower  shall make a combined  principal  and  interest  payment of
$166,957.84.  Payments  shall be applied  first to accrued  interest and then to
principal.  In the event that any  payment is  insufficient  to pay all  accrued
interest,  all such accrued  interest shall be immediately  payable and the Bank
reserves  the right to adjust the  monthly  payment  amount to an amount  deemed
reasonably  sufficient to fully  amortize the principal and interest of the Term
Loan by the maturity date. All remaining principal and interest shall be due and
payable in full on September 29, 2002.

                  The  Borrower may prepay,  in whole or in part,  the Term Loan
Note at any time.  The prepayment  shall be  accompanied by a prepayment  charge
computed as follows:

                  The latest  available  yield preceding the date of prepayment,
                  as available through active market trading or published in the
                  Wall Street Journal, for United States Treasury Notes or Bills
                  (with  Bills  on  a  discounted  basis  converted  to  a  bond
                  equivalent) with a maturity date closest to September 29, 2002
                  shall be  subtracted  from  7.62%.  If the result is zero or a
                  negative number,  there shall be no prepayment  charge. If the
                  result is a positive  number,  then the  resulting  percentage
                  shall (i) be multiplied by the principal amount prepaid,  then
                  (ii) divided by 360,  then (iii)  multiplied  by the number of
                  days  remaining  prior to September  29,  2002,  and then (iv)
                  reduced  to  a  present  value   calculated  using  the  above
                  referenced  Treasury Note or Bill yield.  The resulting amount
                  shall be the amount of the prepayment charge due to the Bank.

                  Principal  prepayments  shall be  applied  first  to  interest
accrued  on the  amount  prepaid,  and then to  principal  in  inverse  order of
maturity.

                  B.  Revolving  Line of Credit.  The Bank hereby  establishes a
revolving line of credit (the "Revolving  Line") in the maximum principal amount
of  Three  Million  Seven  Hundred  Fifty  Thousand  Dollars  ($3,750,000).  The
Revolving Line replaces and supersedes  existing  revolving lines established by
the Bank for Borrower.

                  A  Revolving  Line  Note  (the   "Revolving   Line  Note")  in
substantially the form of Exhibit B hereto will evidence the Revolving Line.

                  All  outstanding  principal  amounts under the Revolving  Line
shall bear interest  until paid at a rate per annum equal to the Prime Rate plus
the Applicable Prime Margin calculated based on actual days elapsed in a year of
360 days,  but never  exceeding  the maximum rate allowed by law. All changes in
the  interest  rate  due  to a  change  in  the  Prime  Rate  shall  take  place
automatically  and without  notice to Borrower as of the  effective  date of the
change in the Prime Rate.

                  The  Borrower  shall  make a payment of all  interest  accrued
under the Revolving Line Note on the first day of each month.

                  The  Borrower  shall make  principal  payments  sufficient  to
assure that the aggregate  principal amount outstanding under the Revolving Line
never exceeds the amount then available  under the Borrowing  Formula  described
below,  and also  sufficient  to assure that there is no  outstanding  principal
under the Revolving Line for at least thirty (30)  consecutive days between each
September  1 and the next  succeeding  August 31. All  remaining  principal  and
interest  shall  be due and  payable  in full on the date of  expiration  of the
Revolving Line.

                  The Revolving  Line shall  terminate on September 28, 1999 (or
the date of an Event of Default if  earlier)  unless  extended in writing in the
sole  discretion  of and on such  terms as are  acceptable  to the Bank,  and no
further advances shall be made thereafter.

                  The  Borrower  may  borrow,  repay,  and  reborrow  under  the
Revolving  Line so long as no Event of Default  hereunder  has  occurred and the
aggregate  principal  amount  outstanding  at any one time does not  exceed  the
lesser  of  $3,750,000  or the sum then  available  according  to the  following
formula (the  "Borrowing  Formula"):  (a) eighty  percent  (80%) of all Borrower
eligible  accounts  receivable as defined below  ("Eligible  Accounts") plus (b)
forty-five  percent (45%) of all Borrower eligible  inventories as defined below
("Eligible Inventories").

                  Eligible  accounts  receivable  are  defined as: (i) all trade
accounts  receivable less than 90 days beyond date of invoice plus (ii) the less
than 90 days beyond date of invoice portion of receivables  from one customer of
which at least 50% of the outstanding amount is less than 90 days beyond date of
invoice,   minus  all  (iii)  marginal  accounts  receivable,   contra  accounts
receivable,  affiliate company accounts receivable, foreign accounts receivable,
employee accounts  receivable,  bill and hold accounts receivable (i.e. accounts
relating  to  goods  not  yet  shipped  but  invoiced),  uncollectible  accounts
receivable,  accounts receivable arising from progressive billings (ie. accounts
receivable from billings for work performed on a partially completed  contract),
accounts  receivable arising from guaranteed sales with buy-back provisions (ie.
accounts  receivable  arising  from sales in which the  Borrower is obligated to
repurchase inventory or merchandise sold to customers),  and accounts receivable
of companies or businesses  actually known to the Bank to be  deteriorating.  In
the event that total accounts  receivable from any payor represent more than 20%
of the Borrower's total accounts receivable,  the Bank reserves the right in its
sole  discretion to delete those  accounts  receivable in excess of 20% of total
accounts from eligible  accounts  receivable unless the Borrower has provided to
the Bank  sufficient  information  regarding the obligor on the accounts for the
Bank to make a determination as to the creditworthiness of that obligor.

                  Eligible  inventories are defined as all inventories  owned by
the Borrower valued at cost minus all perishable or non-saleable inventories.

                  Eligible  accounts  receivable and eligible  inventories  must
arise from the Borrower's  ordinary  course of business as it exists on the date
hereof.  The Bank  reserves  the  right in its sole  discretion  to  modify  the
borrowing  formula or make changes in the  definitions  of eligible  accounts or
eligible  inventories,  or to delete certain  accounts or  inventories  from the
borrowing  formula,  all  in the  event  of a  material  adverse  change  in the
collateral or its collectibility.

                  The amount available under the Revolving Line shall be reduced
by the aggregate amount of outstanding  Letters of Credit issued by the Bank for
the account of the Borrower.  Letters of Credit will be issued at the request of
the Borrower in the discretion of, and upon terms  acceptable to, the Bank up to
an aggregate  maximum  outstanding face amount at any one time of $500,000.  The
Borrower shall pay to the Bank a  non-refundable  commission of one and one-half
percent  (1.5%) per annum with  respect  to the face  amount of each  respective
letter of credit on the date such letter of credit is issued.  Letters of credit
shall have maturity dates no longer than one year following the termination date
of the Revolving Line described above.

                  Borrower agrees to allow the Bank complete access to all books
and records of the Borrower upon reasonable  request.  Borrower agrees to submit
information  which  the  Bank  may  reasonably  request  from  time  to  time in
connection  with the Revolving  Line. The Borrower will provide to the Bank such
borrowing  reconciliation  reports,  agings,  listings,  and other  reports  and
information as the Bank requests in connection with the Revolving Line including
without limitation accounts agings and inventory reports as requested.

                  C.       Mortgage Loans.  The  Borrower  and the Bank  hereby
reaffirm  the  Borrower's (and its  predecessor's)  existing  mortgage secured
obligations to the Bank (the "Mortgage  Loans"),  as follows:

                  1.       1980 Livingston County  Industrial  Development
         Agency Industrial Development Revenue Bonds (Interstate Travel Plaza,
         Inc. Facility) in the original principal amount $950,000 secured by
         Mortgages on property in Livingston County (Dansville), New York,

                  2.  obligations  covered  by  a  Consolidation  and  Extension
         Agreement in the original aggregate  principal amount of $350,000 dated
         October  23,  1987 and secured by a Mortgage on property in the Town of
         Amity (Belmont), New York,

                  3. obligations covered by a Deed of Trust Note in the original
         principal amount of $2,000,000 dated July 5, 1988 and secured by a Deed
         of Trust on property in Buncombe County (Asheville), North Carolina,

                  4.  obligations  covered by a Note in the  original  principal
         amount of $4,400,000 dated January 5, 1989 and secured by a Mortgage on
         property in Porter County (Porter), Indiana,

                  5.  obligations  covered by a Note in the  original  principal
         amount of $500,000 dated January 5, 1989 secured by a Mortgage covering
         leasehold interests in Lake County (Lake Station), Indiana, and

                  6.  obligations  covered by a Note in the  original  principal
         amount of  $5,500,000  dated  January  4, 1990  secured  by a  Mortgage
         covering property in Franklin County (Greencastle), Pennsylvania.

The interest rate and payment terms related to the  obligations  described in 2,
3, 4, 5, and 6 above were  amended as  provided  in  Exhibits H, I, J, K, and L,
respectively,  attached to and made part of this Agreement.  The remaining terms
of the Mortgage Loans shall remain in full force and effect, but such loans also
shall be covered by the terms of this Agreement.

                  D.       1992 Loan.       [Intentionally  omitted: On April
30, 1992 the Bank made an additional  term loan to the Borrower in the aggregate
principal  amount of $1,966,685 (the "1992 Loan"). The 1992 Loan has been paid
in full.]

                  E. 1994 Loan.  The Bank made,  on or about June 30,  1994,  an
additional  term  loan to the  Borrower  in the  aggregate  principal  amount of
$2,500,000  (the "1994  Loan").  The 1994 Loan shall be repaid  according to the
terms of the 1994 Loan Note,  the form of which is attached  hereto as Exhibit C
(the "1994 Loan  Note").  The  Borrower  was required to use the proceeds of the
1994 Loan Note for the purchase of assets which  constitute the Exit 3 Truckstop
in  Greenland,  New  Hampshire.  The terms of the 1994 Loan shall remain in full
force and effect, and also shall be covered by the terms of this Agreement.

                  F. Assumption of Interstate  Travellers Debt. The Borrower has
previously assumed and hereby reaffirms its assumption of all of the obligations
of any kind or  nature  of  Interstate  Traveller  Services,  Inc.  to the Bank,
including without  limitation  obligations  related to the Mortgage Loans and to
the mortgages given to the Bank in 1988 covering  properties  located in Centre,
Luzerne,  Columbia, and Franklin Counties,  Pennsylvania.  The Borrower shall be
deemed to be a party  to,  and shall be bound by all  documents  and  agreements
relating to obligations of Interstate  Traveller  Services,  Inc. to the Bank in
the same manner as if the Borrower had executed such documents and agreements in
the first  instance.  The Borrower  shall provide such further  instruments  and
assurances regarding the aforesaid assumption as the Bank may reasonably request
from time to time.

                  G. Erie Term  Loan.  The Bank has made a term loan (the  "Erie
Loan") in the original principal amount of Six Million Dollars ($6,000,000), the
proceeds of which were used to fund capital  expenditures and construction costs
relating to  construction of a truck  stop/travel  center located in Harborcreek
(Erie), Pennsylvania.

                  An Erie Loan Note (the "Erie Loan Note") in substantially  the
form of Exhibit E hereto evidences the Erie Loan.

                  All  outstanding  principal  amounts  under the Erie Loan Note
shall  bear  interest  until  paid in full,  at nine and  forty-four  hundredths
percent  (9.44%) per annum.  Interest  shall be calculated  based on actual days
elapsed divided by a year of 360 days.

                  Payments of all accrued  interest,  plus payments of principal
of $33,333  each,  shall be due on the first day of every month.  All  remaining
principal and interest  under the Erie Loan Note shall be due and payable on the
date ten (10) years after the date of the Erie Loan Note.

                  In the event that the Borrower chooses to prepay,  in whole or
in part, the Erie Loan Note, the prepayment shall be accompanied by a premium as
follows:

                  The latest  available  yield preceding the date of prepayment,
                  as available through active market trading or published in the
                  Wall Street Journal, for United States Treasury Notes or Bills
                  (with  Bills  on  a  discounted  basis  converted  to  a  bond
                  equivalent)  with a maturity date closest to the maturity date
                  of the Erie Loan  Note  shall be  subtracted  from the cost of
                  funds used in  establishing  the initial  fixed  rate.  If the
                  result  is  zero  or a  negative  number,  there  shall  be no
                  prepayment  charge.  If the result is a positive number,  then
                  the  resulting  percentage  shall  (i)  be  multiplied  by the
                  principal amount prepaid, then (ii) divided by 360, then (iii)
                  multiplied  by the  number  of  days  remaining  prior  to the
                  maturity date of the Erie Loan Note,  and then (iv) reduced to
                  a present value calculated using the above referenced Treasury
                  Note or Bill yield.  The resulting  amount shall be the amount
                  of the prepayment charge due to the Bank.

Principal  prepayments  shall be applied  first to principal in inverse order of
maturity.

                  H. Capital  Expenditure  Line.  The Bank hereby  establishes a
line of credit for the purpose of funding capital  expenditures and construction
costs not funded by other sources (the "Capital Line") in the maximum  principal
amount of Four Million Five Hundred Thousand Dollars ($4,500,000).

                  A Capital Line Note (the "Capital Line Note") in substantially
the form of Exhibit F hereto will evidence the Capital Line.

                  Except to the  extent  that the LIBOR  Rate  option  described
below has been exercised,  all outstanding  principal  amounts under the Capital
Line shall bear interest  until paid at a rate per annum equal to the Prime Rate
plus the Applicable Prime Rate Margin calculated based on actual days elapsed in
a year of 360 days,  but never  exceeding  the maximum  rate allowed by law. All
changes in the interest  rate due to a change in the Prime Rate shall take place
automatically  and without  notice to Borrower as of the  effective  date of the
change in the Prime Rate. At the option of the Borrower,  however,  exercised by
giving the Bank notice at least two London  Banking  Days prior to the first day
of any month,  the Borrower may elect to have the principal  amount  outstanding
under the Capital Line Note (which must not be less than $500,000) bear interest
for a LIBOR  Interest  Period,  designated  in the notice and  commencing on the
first  day of a  month,  at a fixed  rate  equal  to the  LIBOR  Rate  plus  the
Applicable  LIBOR  Margin as of the date two  London  Banking  Days prior to the
LIBOR  Interest  Period  selected.  The LIBOR  Interest  Period  shall be either
one-month, two months, or three months, as elected by the Borrower. The Borrower
may make a maximum of six LIBOR Rate  elections  per year related to the Capital
Line Note.

                  The  Borrower  shall  make a payment of all  interest  accrued
under the Capital Line Note with respect to principal which bears interest based
upon the  Prime  Rate on the  first  day of each  month,  and a  payment  of all
interest accrued with respect to principal for which a LIBOR Interest Period has
been elected on the last day of each such respective LIBOR Interest Period.

                  The  Borrower may prepay  principal  under the Capital Line at
any time. Any  prepayment of principal  covered by a rate of interest based upon
the  LIBOR  Rate on a date  other  than  the last  day of the  applicable  LIBOR
Interest Period must be accompanied by a payment of Break Costs.

                  All remaining  principal and interest shall be due and payable
in full on the date of expiration of the Capital Line, provided,  however, if no
Event of Default has occurred the  outstanding  principal under the Capital Line
may be refinanced by the Capital Loan (described  below in Article I. I.) at the
option of the Borrower on the Termination Date of the Capital Line .

                  The Capital Line shall  terminate on September 28, 1999 (or if
earlier,  the date of an  Event of  Default  or the date of  termination  of the
Revolving  Line unless such Revolving  Line has been  extended),  and no further
advances shall be made thereafter.

                  The Borrower may borrow, repay, and reborrow under the Capital
Line so long as no Event of Default  hereunder  has occurred  and the  aggregate
principal  amount  outstanding at any one time does not exceed the lesser of (i)
$4,500,000 or (ii) eighty percent (80%) of the cost of the capital  expenditures
of the Borrower  funded under the Capital  Line.  Any advance made other than on
the  first day of a month  shall  bear  interest  based  upon the Prime  Rate as
described  above;  provided,  however,  that the Borrower may elect a rate based
upon the LIBOR  Rate for such  advance  on the first day of the next  succeeding
month in the manner  described above and subject to the restriction of six LIBOR
Rate elections in any one year.

                  I. Capital  Expenditure  Loan.  At the request of the Borrower
and provided that no Event of Default or termination  date of the Revolving Line
has occurred,  upon termination of the Capital Line the Bank will make a Capital
Loan to the Borrower in the amount of the then outstanding  principal balance of
the Capital Line.

                  A Capital Loan Note (the "Capital Loan Note") in substantially
the form of Exhibit G hereto will evidence the Capital Loan.

                  Except to the  extent  that the LIBOR  Rate  option  described
below has been exercised,  all outstanding  principal  amounts under the Capital
Loan shall bear interest  until paid at a rate per annum equal to the Prime Rate
plus the Applicable  Prime Margin  calculated  based on actual days elapsed in a
year of 360 days,  but never  exceeding  the maximum  rate  allowed by law.  All
changes in the interest  rate due to a change in the Prime Rate shall take place
automatically  and without  notice to Borrower as of the  effective  date of the
change in the Prime Rate. At the option of the Borrower,  however,  exercised by
giving the Bank notice at least two London  Banking  Days prior to the first day
of any month,  the Borrower may elect to have the principal  amount  outstanding
under the Capital Loan Note (which must not be less than $500,000) bear interest
for a LIBOR  Interest  Period,  designated  in the notice and  commencing on the
first  day of a  month,  at a fixed  rate  equal  to the  LIBOR  Rate  plus  the
Applicable  LIBOR  Margin as of the date two  London  Banking  Days prior to the
LIBOR  Interest  Period  selected.  The LIBOR  Interest  Period  shall be either
one-month, two months, or three months, as elected by the Borrower. The Borrower
may make a maximum of six LIBOR Rate  elections  per year related to the Capital
Loan Note.

                  The  Borrower  shall  make a payment of all  interest  accrued
under the Capital Loan Note with respect to principal which bears interest based
upon the  Prime  Rate on the  first  day of each  month,  and a  payment  of all
interest accrued with respect to principal for which a LIBOR Interest Period has
been elected on the last day of each such respective LIBOR Interest Period.

                  In addition,  on the first day of each November 1, February 1,
May 1, and August 1  respectively  a  principal  payment  equal to 1/14th of the
original  principal  amount of the Capital Loan Note shall be due. All remaining
principal and interest shall be due and payable in full on March 27, 2003.

                  The Borrower may prepay  principal under the Capital Loan Note
at any time.  Any  prepayment of principal  covered by a rate of interest  based
upon the LIBOR Rate on a date other  than the last day of the  applicable  LIBOR
Interest  Period must be accompanied by a payment of Break Costs.  All principal
prepayments shall be applied in inverse order of maturity.

ARTICLE II

                  For purposes of this Agreement, the following terms shall have
the following definitions:

                  "Applicable  LIBOR Margin"  shall mean the  following  amounts
         related to the following obligations  determined according to the ratio
         of Funded Debt to EBITDA  shown on the most recent  quarterly or annual
         financial statement submitted by the Borrower to the Bank:

                              Funded Debt/EBITDA           Funded
Debt/EBITDA
              Obligation      greater than or equal 3.0    less than 3.0
              ----------      -------------------------    -------------
              Capital Line    187.5 basis points (1.875%)  162.5  basis  points
(1.625%)
              Capital Loan    225 basis points (2.25%)     200    basis  points
(2.00%)
              Mortgage Loans  225 basis  points (2.25%)    200    basis  points
(2.00%)

         If the most recent  financial  statement  was not  received by the Bank
         more  than ten days  prior to the date on which  the  Applicable  LIBOR
         Margin is being determined, the ratio of Funded Debt to EBITDA shall be
         based  upon  the  immediately   prior  quarterly  or  annual  financial
         statement submitted by the Borrower.

                  "Applicable  Prime Margin"  shall mean the  following  amounts
         related to the following obligations  determined according to the ratio
         of Funded Debt to EBITDA  shown on the most recent  quarterly or annual
         financial statement submitted by the Borrower to the Bank:

                                            Funded Debt/EBITDA         Funded
Debt/EBITDA
             Obligation       greater than or equal 3.0      less than 3.0
             ----------       -------------------------      --------------
             Revolving Line   0 basis points (0%)          minus 25 basis points
 (-.25%)
             Capital Line     25 basis points (.25%)       0 basis points (0%)
             Capital Loan     50 basis points (.50%)      25 basis points
(.25%)
             Mortgage  Loans  50 basis points (.50%)      25 basis points
(.25%)

         If the most recent  financial  statement  was not  received by the Bank
         more  than ten days  prior to the date on which  the  Applicable  Prime
         Margin is being determined, the ratio of Funded Debt to EBITDA shall be
         based  upon  the  immediately   prior  quarterly  or  annual  financial
         statement submitted by the Borrower.

                  "Break  Costs"  shall  mean an amount  equal to the amount (if
         any)  required  to  compensate  the  Bank  for  any  additional  losses
         (including  without  limitation any loss,  cost, or expense incurred by
         reason of the liquidation or reemployment of deposits or funds acquired
         by the Bank to fund or maintain the applicable obligation),  costs, and
         expenses  (including  without  limitation  penalties) it may reasonably
         incur as a result of or in connection with a prepayment.

                  "Business  Day"  shall  mean,  in  respect of any date that is
         specified in this  Agreement to be subject to  adjustment in accordance
         with the Modified Following Business Day Convention, a New York Banking
         Day or London Banking Day respectively.

                  "EBITDA" shall mean net income before interest expense, taxes,
         depreciation,  and  amortization,  calculated for the quarter ending on
         the measurement date plus the last three preceding  quarters,  as shown
         on the Borrower's  quarterly and annual financial  statements delivered
         to the Bank.

                  "Funded  Debt" shall mean shall mean all  indebtedness  of the
         Borrower for borrowed money and the like including  without  limitation
         obligations to the Bank and other financial  institutions  and lenders,
         obligations  related  to  subordinated  debt,  obligations  related  to
         capitalized  leases,  obligations  related to  letters  of credit,  and
         guarantees of all of such obligations.

                  "Increased  Cost" means any additional  amounts  sufficient to
         compensate  the Bank for any increased  costs of funding or maintaining
         the  applicable  obligations  hereunder  as a  result  of  any  law  or
         guideline adopted pursuant to or arising out of the July 1988 report of
         the Basle Committee on Banking  Regulations  and Supervisory  Practices
         entitled "International  Convergence of Capital Measurement and Capital
         Standards", or the adoption after the date of this Agreement of any law
         or guideline  regarding capital  adequacy,  or any change in any of the
         foregoing  or in the  interpretation  or  administration  of any of the
         foregoing by any  governmental  authority,  central bank or  comparable
         agency charged with the  interpretation or administration  thereof,  or
         compliance by the Bank or the Bank's holding company,  if any, with any
         request or directive  regarding capital adequacy (whether or not having
         the force of law) of any such  authority,  central  bank or  comparable
         agency,  which has or would  have the  effect of  reducing  the rate of
         return on the Bank's  capital or on the  capital of the Bank's  holding
         company,  if any, as a consequence of the transactions  contemplated by
         this Note,  to a level below that which the Bank or the Bank's  holding
         company could have achieved but for such adoption, change or compliance
         (taking into consideration such Bank's policies on capital adequacy).

                  LIBOR"  is the rate  equal to the rate of  interest  per annum
         (rounded  upward if  necessary,  to the nearest 1/32 of one percent) as
         determined  on the basis of the  offered  rates for  deposits in United
         States Dollars, for the respective one-month, two-month, or three-month
         period which appears on the Telerate Page 3750 as of 11:00 a.m., London
         time on the day that is two London  Banking Days  preceding  the day of
         the applicable  LIBOR Interest  Period (the "Interest  Setting  Date");
         provided,  however,  if the rate described above does not appear on the
         Telerate System on any applicable Interest Setting Date, the LIBOR rate
         shall be the rate (rounded  upwards as described  above,  if necessary)
         for deposits in United  States  Dollars for the  respective  one-month,
         two-month,  or  three-month  period on the Reuters Page "LIBO" (or such
         other page as may replace the LIBO Page on that service for the purpose
         of displaying  such rates, as of 11:00 a.m. London Time on the day that
         is two  London  Banking  Days  prior  to the  beginning  of such  LIBOR
         Interest  Period).   If  both  the  Telerate  and  Reuters  system  are
         unavailable,  then the rate for that  date  will be  determined  on the
         basis of the offered  rates for deposits in United  States  Dollars for
         the respective  one-month,  two-month,  or three-month period which are
         offered  by  four  major  banks  in  the  London  interbank  market  at
         approximately  11:00 a.m.  London Time,  on the date that is two London
         Banking Days preceding the beginning of such LIBOR Interest Period.  In
         the  event  that the Bank is unable to  obtain  any such  quotation  as
         provided  above,  or  there  is any  change  in any law or  application
         thereof  that  makes  it  unlawful,   or  any  central  bank  or  other
         governmental  authority  asserts that it is  unlawful,  for the Bank to
         hold  obligations if the rate is determined with reference to the LIBOR
         (collectively,  a "LIBOR End Date"), the Borrower shall not be entitled
         to elect an  interest  rate based  upon the LIBOR Rate until  LIBOR can
         again be determined.

                  "LIBOR Interest  Period" shall mean any particular  one-month,
         two-month,  or three-month period during which an applicable LIBOR Rate
         shall be in effect.

                  "LIBOR  Rate"  shall  mean,  with  respect  to any  applicable
         interest rate period,  the rate per anum equal to the quotient obtained
         by dividing  (and  rounding  to the  nearest  1/100 of 1%) (i) LIBOR as
         defined below by (ii) a percentage  equal to 100% minus the then stated
         maximum  rate  of all  reserve  requirements,  if any,  imposed  by the
         Federal  Reserve Board with respect to LIBOR  deposits of the Bank. The
         LIBOR Rate shall be further adjusted to reflect any Increased Cost.

                  "Loan   Documents"  means  all  notes,   mortgages,   security
         agreements,  and other  instruments,  documents,  and agreements of any
         kind related to this Agreement and the Obligations.

                  "London  Banking Day" shall mean any date on which  commercial
         banks are generally open for business and upon which  commercial  banks
         settle payments in London.

                  "Modified  Following  Business Day Convention"  shall mean the
         convention  for adjusting any relevant date if it would  otherwise fall
         on a day that is not a Business Day.  Terms,  when used in  conjunction
         with the term,  "Modified  Following  Business Day  Convention",  and a
         date,  shall  mean that an  adjustment  will be made if that date would
         otherwise  fall on a day  that is not a  Business  Day so that the date
         will be the first following day that is a Business Day.

                  "New York Banking Day" shall mean any date on which commercial
         banks are generally open for business and upon which  commercial  banks
         settle payments in New York.

                  "Obligations"  shall mean all  indebtedness  or obligations of
         any  kind or  nature  of the  Borrower  to the Bank  including  without
         limitation the  obligations  of Borrower under the Revolving  Line, the
         Capital Line, the Capital Loan, the Term Loan, the Mortgage Loans,  the
         1994 Loan, and the Erie Loan.

                  "Prime  Rate"  shall  mean  the  variable  per  annum  rate of
         interest so designated from time to time by the Bank as its prime rate.
         The Prime Rate is a reference rate and does not  necessarily  represent
         the lowest or best rate being charged to any customer.

                  "Rate  Change  Date"  shall mean the date on which any rate of
         interest based upon the LIBOR Rate shall become effective.

ARTICLE III - FEES AND EXPENSES

                  A. Placement and  Administration  Expense.  The Borrower shall
pay any reasonable fees, expenses,  and disbursements,  including legal fees, of
the Bank related to  preparation  and execution of this  Agreement and any loans
made hereunder. The Borrower shall pay the Bank's customary and reasonable fees,
expenses,  and disbursements in connection with administration of this Agreement
including  costs of periodic  appraisals of the collateral and monitoring of the
Revolving Line.

                  B. Collection  Costs. At the request of the Bank, the Borrower
shall  promptly  pay  any  expenses,   reasonable  attorney's  fees,  costs,  or
disbursements  in connection with  collection of any of the obligations  covered
hereby or enforcement  of any of the Bank's rights  hereunder or under any note,
security  agreement,  guarantee,  or  other  agreement  given  to  the  Bank  in
connection  herewith.  This  obligation  shall  survive the payment of any notes
executed hereunder. The Bank may apply any payments of any nature received by it
first to the payment of  obligations  under this  section,  notwithstanding  any
conflicting provision contained in any other agreement related hereto.

                  C.  Origination  Fees. The Borrower paid  origination  fees in
connection with (i) the  consolidated  Term Loan and (ii) the Bank's purchase of
the LaBar loans which were repaid with the proceeds of the 1992 Loan.

                  The Borrower paid an origination  fee of $25,000 in connection
with the making of the 1994 Loan.

                  The  Borrower  paid  an  origination  fee of  Thirty  Thousand
Dollars ($30,000) in connection with the making of the Term Loan.

                  The Borrower paid an origination fee equal to one-half percent
(.5%) of the  original  principal  amount  of the Erie  Loan Note on the date of
closing of the Erie Loan.

                  The  Borrower  paid a  facility  fee to the  Bank of  $8750 in
connection with the Capital Line.

                  The Borrower  will pay a Capital Line  facility fee of $11,250
on the date of this Agreement. 

                  On the date the Capital Loan is made, the Borrower shall pay a
conversion  fee to the Bank equal to one-fourth  percent  (.25%) of the original
principal amount of the Capital Loan.

                  D. Default  Interest Rate. Upon the failure of the Borrower to
comply  with any  covenant  contained  in Article  VII,  Sections A, J, or K, or
Article VIII,  Sections H and J of this Agreement,  the rate of interest on each
of the  obligations  covered  hereby  shall be  increased to a rate at all times
equal to two percent  (2%) above the rate of  interest  which would be in effect
absent  such  failure of  compliance,  such  increased  rate to remain in effect
through and  including  the end of the month in which such failure of compliance
is remedied. Upon the occurrence of an Event of Default, however, the provisions
of this paragraph shall be superseded by the provisions of the next paragraph of
this Section D.

                  Upon the occurrence of an Event of Default,  Borrower's  right
to select  pricing  options  shall cease and the rate of interest on each of the
Obligations  shall be increased to a rate at all times equal to two percent (2%)
above the rate of  interest  which  would be in effect  absent  such  failure of
compliance,  such  increased  rate to  remain in effect  through  and  including
payment  in  full  of all of the  obligations  covered  by  this  Agreement  and
cancellation  of further  commitments to lend under this  Agreement,  or written
waiver of such Event of Default by the Bank.

                  E. Late Payment Fees.  Payments of principal  and/or  interest
not made in full  before  the date ten (10)  days  after  the date due  shall be
subject to a processing charge of five percent (5%) of the payment due.

ARTICLE IV - COLLATERAL

                  The Term Loan, the Mortgage Loans,  and the Erie Loan shall be
secured by  mortgage  liens and  assignments  of  mortgage  liens on  Borrower's
interests in real properties located in (i) Gloucester County, New Jersey,  (ii)
Montgomery, Livingston, and Broome Counties, New York, (iii) Anderson and Oconee
Counties,  South Carolina,  (iv) Buncombe  County,  North Carolina,  (v) Centre,
Lehigh, Luzerne, Columbia,  Clinton, Franklin, and Erie Counties,  Pennsylvania,
(vi)  Rockingham  County,  New  Hampshire,  and (vii) Porter and Lake  Counties,
Indiana.

                  The 1992 Loan was  secured  by  mortgage  liens on  Borrower's
interests in real properties in Gloucester County, New Jersey,  Columbia County,
Pennsylvania, and Lehigh County, Pennsylvania.

                  The 1994 Loan shall be secured by mortgage liens on Borrower's
interests in real properties in Rockingham  County,  New Hampshire as well as by
interests in Borrower's other properties including without limitation properties
in Gloucester County, New Jersey and Franklin County, Pennsylvania.

                  All  of  the  aforesaid  mortgages  shall  be  documented  and
perfected in a manner satisfactory to the Bank and its legal counsel.

                  The  Revolving  Line,  the Capital  Line and the Capital  Loan
shall be secured by the  collateral  for the Term Loan and the 1994 Loan as well
as a sole  first  lien in all  assets  of every  kind and  nature,  now owned or
hereafter acquired, of Borrower,  including without limitation goods, equipment,
machinery,  furniture,  fixtures,  supplies, tools, parts, accounts,  inventory,
documents,  chattel  paper,  instruments,  and general  intangibles of Borrower,
together with additions, accessions, replacements, substitutions, and proceeds.

                  The Capital  Loan shall be secured by a mortgage  covering any
of the  Borrower's  property  acquired with  proceeds of the Capital  Loan.  The
mortgage shall be documented and perfected in a manner  satisfactory to the Bank
and its legal counsel.

                  The Erie Term Loan  shall be  secured  by all  assets of every
kind and nature, now owned or hereafter acquired, of Borrower, including without
limitation goods, equipment,  machinery,  furniture,  fixtures, supplies, tools,
parts, accounts,  inventory,  documents, chattel paper, instruments, and general
intangibles  of Borrower,  together with  additions,  accessions,  replacements,
substitutions, and proceeds. In addition, the Erie Term Loan shall be secured by
a mortgage covering the Borrower's property in Erie County, Pennsylvania.

                  The existing  collateral for the Mortgage Loans shall continue
to secure such Mortgage Loans.

                  The Borrower shall execute such documentation and deliver such
items as the Bank deems  necessary from time to time to perfect its interests in
all  collateral  provided  hereunder,  and authorizes the Bank to file financing
statements without its signature from time to time.

ARTICLE V - REPRESENTATIONS AND WARRANTIES

                  The Borrower represents and warrants as follows:

                  A.  Organization  and  Power.  The  Borrower  is duly  formed,
validly  existing and in good standing  under the laws of New York,  and is duly
qualified  to  transact  business  and is in good  standing  in all  states  and
countries  in which it owns  properties  or in which it conducts  intrastate  or
international  business.  The Borrower  has full power and  authority to own its
properties,  to carry on its  business  as now being  conducted,  to execute and
perform this Agreement, and to borrow hereunder.

                  B.  Proceedings of Borrower.  All necessary action on the part
of the  Borrower  and  any  other  required  persons  or  entities  relating  to
authorization   of  the  execution  and  delivery  of  this  Agreement  and  the
performance of other obligations  hereunder  including,  but not limited to, the
delivery  of  any  notes,  security  agreements,   and  guarantees  contemplated
hereunder,  has been  taken.  All of the  same  are  valid  and  enforceable  in
accordance with their  respective  terms except as may be limited by bankruptcy,
insolvency,  or other laws of general  application  relating to  enforcement  of
creditor's  rights,  and except as remedies may be limited by the application of
equitable  principles.  Said action will not violate any provision of law or the
Borrower's  or  any  other   required   person's  or  entity's   Certificate  of
Incorporation  or By-laws.  Such action will not violate,  be in conflict  with,
result in a breach of, or  constitute a default under any agreement to which the
Borrower  or any  other  required  person  or entity is party or by which any of
their  properties are bound, or any order,  writ,  injunction,  or decree of any
court or  governmental  instrumentality,  and will not result in the creation or
imposition of any lien,  charge or encumbrance upon any of their properties with
the sole exception of those in favor of the Bank contemplated hereby.

                  C.  Litigation.  At the  date of this  Agreement,  there is no
action,  suit or proceeding at law or in equity or by or before any governmental
instrumentality  or other  agency  pending  or, to their  knowledge,  threatened
against or affecting the Borrower which, if adversely  determined,  would have a
material adverse effect on its financial condition or business.

                  D. Financial Statements. All financial statements furnished by
the  Borrower  to the Bank are  complete  and  correct,  have been  prepared  in
accordance with generally accepted accounting  principles  consistently followed
throughout the period indicated,  and fairly present the financial  condition of
the  Borrower  as of  the  respective  dates  thereof  and  the  results  of its
operations for the respective  periods  covered  thereby;  provided that interim
financial  statements are subject to normal  recurring year end  adjustments and
matters that  customarily  would be set forth in the notes to audited  financial
statements.

                  E.  Adverse  Changes.  Since the latest  financial  statements
described in Article V.D.,  there have been no material  adverse  changes in the
condition, financial or otherwise, of the Borrower.

                  F. Taxes. The Borrower have obtained  extensions or have filed
or caused to be filed all tax returns which, to the knowledge of the officers of
the Borrower  are  required to be filed,  and have paid or caused to be paid all
taxes or any assessments to the extent that such taxes have become due.

                  G.  Properties.  The Borrower has good and marketable title to
all its material property  interests and assets,  including without  limitation,
the property  and assets set forth in the  financial  statements  referred to in
Article V.D.  hereof,  except as previously  disclosed to the Bank. The Borrower
has  undisturbed  peaceable  possession  under  all  leases  under  which  it is
operating,  none of which  contain  unusual or burdensome  provisions  which may
materially affect the operations of the Borrower and all such leases are in full
force and effect.

                  H. Indebtedness.  The Borrower has no outstanding indebtedness
other than  indebtedness  described in the financial  statements  referred to in
Article V.D. hereof,  trade payables not yet due incurred in the ordinary course
of Borrower's business, and indebtedness to the Bank.

                  I.  Franchises,   Permits.   The  Borrower  has  all  material
franchises, permits, licenses, and other authority as are necessary to enable it
to conduct its business as now being conducted, and is not in default under such
franchises, permits, licenses, and authority.

                  J. ERISA. No action,  event, or transaction has occurred which
could give rise to a lien or encumbrance on Borrower's assets as a result of the
application of relevant  provisions of the Employee  Retirement  Income Security
Act of 1974 ("ERISA").

ARTICLE VI - CONDITIONS OF LENDING

                  The following  conditions must be satisfied by Borrower before
the Bank  shall  have any  obligation  to make any  advance  or loan  under this
Agreement:

                  A.  Representations  and Warranties.  The  representations and
warranties  of the Borrower  contained in Article V shall be true and correct in
all material  respects as of the time of the making of each such loan or advance
with the same effect as if made on and as of such date.

                  B. No  Defaults.  There  shall  exist  no  condition  or event
constituting  an Event of Default  under Article IX hereof at the time of making
of each loan or advance hereunder.

                  C. Performance. The Borrower shall have performed and complied
in all material  respects  with all  agreements  and  conditions  required to be
performed or complied  with by it prior to or at the time of making each loan or
advance hereunder.

                  D.  Documents  to  be  Delivered.   The  Borrower  shall  have
delivered  to the  Bank  security  agreements,  guarantees,  and  other  related
documents as more particularly described in Article IV hereof.

                  E.  Certified  Resolutions.  The Borrower shall have delivered
the  certificate of its Secretary,  certifying as of the date of this Agreement,
resolutions of its Board of Directors authorizing execution and delivery of this
Agreement  and of the notes,  security  agreements  and other  agreements  to be
delivered hereunder.

                  F. Fees and  Taxes.  The  Borrower  shall have paid all filing
fees, taxes, and assessments related to the borrowings and the perfection of any
collateral security required hereunder.

                  G.  Insurance.  The Borrowers  shall have  delivered  evidence
satisfactory to the Bank of the existence of insurance required hereby.

                  H. Opinion of Counsel.  The  Borrower  shall have caused to be
delivered  the opinion of its legal  counsel as to such matters and in such form
as may be required by legal  counsel to the Bank,  including as to the existence
of the  Borrower,  its  power and  authority  to take the  actions  contemplated
hereby,  and the  enforceability of the agreements and obligations  contemplated
hereby.

ARTICLE VII - AFFIRMATIVE COVENANTS OF BORROWER

                  So long as the  Revolving  Line  commitment,  the Capital Line
commitment,  the Capital Loan, the Term Loan, the Mortgage Loans, the 1994 Loan,
the Erie Loan, or any loans  hereunder or any other  obligations  of Borrower to
the Bank under or related to this  Agreement  shall be  outstanding,  unless the
Bank shall otherwise consent in writing, the Borrower shall:

                  A.  Financial  Statements.  Furnish  to the  Bank  as  soon as
available,  but in no event more than one  hundred  twenty  (120) days after the
close of each fiscal year of Borrower,  copies of annual financial statements of
Borrower in reasonable  detail  satisfactory  to the Bank prepared in accordance
with generally accepted accounting  principles,  certified without qualification
by an independent  certified  public  accountant  satisfactory to the Bank. Said
financial  statements  shall  include  all  financial  disclosures  required  by
generally  accepted  accounting  principles and shall include at least a balance
sheet and a statement of profit and loss.

                  Borrower  also shall furnish to the Bank  unaudited  financial
statements  not more than  forty-five  (45) days after the close of each  fiscal
month.  Said statements shall be in reasonable  detail  satisfactory to the Bank
including at least a balance sheet and  statement of profit and loss,  and shall
be prepared in accordance with generally accepted  accounting  principles.  Said
financial  statements  shall be certified to be complete and correct by officers
of Borrower.

                  The  Borrower  also  shall  promptly  provide  to the Bank any
interim   financial   statements   reviewed  or  certified  by  its  independent
accountants,  as well as copies of any of its filings  with the  Securities  and
Exchange Commission including its Form 10K within 120 days after its fiscal year
end  and  its  Form  10Q  within  60 days  after  the end of each of its  fiscal
quarters.

                  At the time of submission of annual  financial  statements the
Borrower shall submit to the Bank a signed certificate of its chief executive or
financial officer to the effect that no Events of Default have occurred,  exist,
or to the  knowledge of Borrower  will exist in the future  under  Article IX of
this Agreement or any other agreements contemplated hereunder.

                  Borrower shall furnish to the Bank,  quarterly at the time its
Report  10Q  is  required  to  be  furnished,   a  report  showing  its  capital
expenditures  during the  quarter  and on a  cumulative  basis since the date of
commitment  of the Capital  Line, as well as sources of funding for the same, in
form and with detail reasonably satisfactory to the Bank.

                  B. Other  Reports  and  Inspections.  Furnish to the Bank such
additional  information,  reports or financial  statements as the Bank may, from
time to time, reasonably request. Borrower shall permit any person designated by
the Bank to inspect its property, assets, and books and the Bank's collateral at
reasonable  times,  and shall  discuss its  affairs,  finances  and  accounts at
reasonable  times with the Bank from time to time as often as may be  reasonably
requested.

                  C. Taxes.  Pay and discharge all taxes,  assessments,  levies,
and governmental charges upon it, its income and property,  prior to the date on
which penalties are attached  thereto,  provided that they shall not be required
to pay any such tax, assessment, levy or charge which is being contested in good
faith  and by  appropriate  legal  proceedings  so long  as no  lien or  similar
encumbrance is placed by taxing authorities on any of their property.

                  D. Insurance. Maintain or cause to be maintained insurance, of
kinds and in  amounts  satisfactory  to the  Bank,  with  responsible  insurance
companies on all of its properties in such amounts and against such risks as are
prudent  including but not limited to hazard  insurance,  worker's  compensation
insurance,  and liability  insurance.  All such hazard insurance  policies shall
name the Bank as  mortgagee/loss  payee as its  interest  may  appear  and shall
provide  for  thirty  days prior  written  notice of  cancellation  to the Bank.
Borrower  shall  provide  to Bank,  upon its  request,  a  detailed  list of its
insurance  carriers and coverage and shall obtain such  additional  insurance as
the Bank may reasonably request from time to time.

                  E. Payments. Make all payments promptly and as the same become
due under this Agreement and the notes related hereto.

                  F.  Existence.  Cause  to be  done  all  things  necessary  to
preserve  and to keep in full  force  and  effect  its  existence,  rights,  and
franchises  and to  comply in all  material  respects  with all  valid  laws and
regulations now in effect or hereafter  promulgated by any properly  constituted
governmental authority having jurisdiction.

                  G. Maintenance of Properties. At all times maintain, preserve,
protect, and keep its property used or useful in conducting its business in good
repair, working order, and condition and from time to time, and make all needful
and  proper  repairs,  renewals,  replacements,   betterments  and  improvements
thereto,  so that the  business  carried on may be properly  and  advantageously
conducted at all times.

                  H. Material Changes, Judgments. Notify the Bank immediately of
any Event of Default or material adverse  business  development or change in its
financial  condition.  Borrower shall notify the Bank of any change in its name,
identity, or corporate or organizational structure.

                  I. ERISA.  Comply with all  requirements  of the  Employee
 Retirement  Income  Security Act, as amended ("ERISA") on a timely basis.

                  J.  Minimum  Net  Worth.  Maintain  at all  times  net  worth
calculated  by  generally accepted accounting principles ("GAAP") of at least
$13,850,000.

                  K.  Current  Maturity  Coverage  Ratio.   Maintain  a  current
maturity  coverage ratio (net income plus  depreciation  plus  amortization less
dividends  and  distributions  divided  by  currently  maturing  long term debt)
calculated by GAAP.  Such ratio shall be (a) reported on or before each December
15 commencing  December 15, 1993 and measured as of the preceding October 31 and
shall not be lower than 1.2 to 1 on an  annualized  basis of six months  results
for the period  between the preceding May 1 and such  preceding  October 31, and
(b) shall be reported on or before each July 31 and measured as of the preceding
April 30 and shall not be lower than 1.2 to 1 for the twelve month period ending
on such April 30.

                  L.  Proceeds of Sales.  Cause the  proceeds,  after payment of
expenses related thereto,  of any sales of properties  covered by the mortgages,
or sales of other collateral, referenced in Article IV hereof to be delivered to
the Bank to be used to retire  obligations  first  under the Term  Loan,  second
under the  Mortgage  Loans,  third  under the 1994 Loan,  and  fourth  under the
Capital Loan; provided, however, that to the extent proceeds specifically relate
to a property  covered by one of the Mortgage  Loans, or the Erie Loan, the 1994
Loan, or the Capital Loan, to the extent applicable, such proceeds shall be used
to reduce the  respective  Mortgage  Loan,  the Erie Loan,  or the Capital  Loan
respectively;  and further provided,  however, that if any mortgaged property is
the subject of a  sale-leaseback,  the Bank will not  unreasonably  withhold its
approval of the same on such terms and  conditions as may be mutually  agreeable
between the Bank and the Borrower.

                  M.  Interest  Exposure  Coverage.  Cause  at all  times  to be
subject to fixed rates or interest rate caps or other  interest rate  protection
satisfactory  to the  Bank,  at least  fifty  percent  (50%) of the  outstanding
principal amount of the aggregate of (i) its obligations to the Bank of any kind
or nature and (ii) its obligations with respect to the 8.5%  Convertible  Senior
Subordinated Debentures described in Article VIII.A. of this Agreement.


ARTICLE VIII - NEGATIVE COVENANTS OF BORROWER

                  So long as the Revolving Line  commitment,  the Term Loan, the
Mortgage Loans, the 1994 Loan, the Erie Loan, the Capital Line  commitment,  the
Capital Loan, or any loans hereunder or any other obligations of Borrower to the
Bank under or related to this Agreement  shall be  outstanding,  unless the Bank
otherwise consents in writing, Borrower shall not, directly or indirectly:

                  A. Indebtedness,  Mortgages and Liens. Create,  incur, assume,
or allow to exist,  voluntarily  or  involuntarily,  any obligation for borrowed
money,  lease,  pledge,  lien or other  encumbrance  of any kind  (including the
charge upon property  purchased under conditional sales or other title retention
agreements) upon, or any security interest in, any of their assets,  whether now
owned or hereafter acquired,  excluding only (i) interests or borrowings held by
the Bank, (ii) interests or borrowings in existence on the date hereof and fully
disclosed on the financial  statements referred to in Article VI D hereof, (iii)
involuntary liens of any kind being contested in good faith by appropriate legal
proceedings  with respect to which  enforcement  has been stayed,  (iv) purchase
money liens, (v) obligations  under the Indenture dated January 24, 1995 between
the Borrower and American  Stock Transfer and Trust  Company,  as Trustee,  with
respect  to up  to  $5,000,000  principal  amount  of  8.5%  Convertible  Senior
Subordinated Debentures due January 15, 2005 so long as such obligations are not
modified and so long as such obligations  remain  expressly  subordinated to the
obligations  of the Borrower to the Bank in form  satisfactory  to the Bank, and
(vi) indebtedness to other financial  institutions provided that the opportunity
to finance such indebtedness on similar terms has been given to the Bank and the
Bank has refused to provide such financing.

                  B.  Contingent  Liabilities.   Assume,   guarantee,   endorse,
contingently  agree to purchase,  or otherwise  become liable in any manner upon
any obligation, contingent or otherwise, whether funded or current, or guarantee
the dividends of any person,  firm,  corporation,  or other  entity,  except for
endorsement  of negotiable  instruments  for deposit or  collection,  or similar
transactions (including customary indemnity agreements with distributors) in the
ordinary course of business, and except in connection with asset purchases.

                  C. Loans.  Make loans or advances to any person or entity,  or
investments of any kind in any person or entity; provided however, that Borrower
may make (i) loans or advances to, or  investments  in, wholly owned  subsidiary
corporations  which are guarantors of its  obligations  hereunder and (ii) short
term loans or advances in  reasonable  amounts to officers and  employees in the
ordinary course of business for relocation or similar purposes.

                  D. Mergers,  Sales and Acquisitions.  Enter into any merger or
consolidation with or among any person or entity, or sell, lease,  transfer,  or
otherwise dispose of substantially all of its assets, or allow a transfer of any
controlling interest in the Borrower.

                  E.   Amendments.   Amend  or  modify   its   Certificates   of
Incorporation,  By-laws, or other governing instruments in any manner that would
be materially adverse to the interests of the Bank hereunder.

                  F.  Judgments.  Allow any liens  other  than  those  expressly
permitted by this  Agreement or final  judgments to exist  against it other than
liens or  judgments  which are bonded or covered  by  insurance  or for which an
appeal or other  proceeding for the review thereof shall have been taken and for
which a stay of execution pending such appeal shall have been obtained.

                  G. Material Changes.  Permit any material adverse change to be
made in the basic  character of its business or in the nature of its  operations
as carried on at the date of execution of this Agreement.

                  H.  Funded  Debt/EBITDA.  Permit  its ratio of Funded  Debt to
EBITDA to exceed  3.75 to 1.00 prior to July 31, 1998 and to exceed 3.50 to 1.00
on July 31, 1998 and thereafter.

                  I. Dividends.  Declare any cash, property,  or other dividends
with respect to their capital  stock,  apply any of their  property or assets to
the purchase,  redemption,  or other  retirement of their capital stock, or make
any other distribution of any kind with respect to any of their capital stock.

ARTICLE IX - DEFAULTS

                  A. Defaults.  The following events (hereinafter called "Events
of Default") shall constitute  defaults under this Agreement and under any notes
or agreements executed in connection herewith. Such Events of Default also shall
be deemed to be events of default with respect to Borrower's  pre-existing loans
from the Bank.

                  1. Nonpayment. Failure of Borrower to make any payments of any
                  type  under  the  terms  of this  Agreement,  or of any of the
                  agreements  contemplated  hereunder, or under the terms of any
                  notes hereunder, within fifteen days after the same become due
                  and payable.

                  2. Performance.  Failure of Borrower to observe or perform any
                  other condition, covenant, or term of this Agreement or of any
                  other agreement with the Bank,  after 30 days prior notice and
                  opportunity to cure.

                  3.  Reports.  Failure of  Borrower  to  provide  any report or
                  financial  statement or certificate of no default, or to allow
                  any inspection for which this Agreement provides after 30 days
                  prior notice and opportunity to cure.

                  4. Representations.  Failure of any representation or warranty
                  made  by  Borrower  in  connection   with  the  execution  and
                  performance of this Agreement,  or any certificate of officers
                  pursuant  hereto,  to be truthful,  accurate or correct in any
                  material respect.

                  5. Financial Difficulties.  Financial difficulties of Borrower
as evidenced by:

                  a.       any admission in writing of inability to pay debts as
                           they become due; or

                  b.       the filing of a voluntary or involuntary  petition in
                           bankruptcy,  or under any chapters  of the
                           Bankruptcy  Code,  or under  any  Federal  or  state
                           statute providing for the relief of debtors; or

                  c.       making an assignment for the benefit of creditors; or

                  d.       consenting  to the  appointment  of a trustee or
                           receiver for all or a material part of any of its
                           property; or

                  e.       the entry of a court  order  appointing  a receiver
                           or a trustee  for all or a material part of any of
                           its property; or

                  f.       the occurrence of any event,  action, or transaction
                           which could give rise to a lien or  encumbrance  on
                           Borrower's  assets  as a  result  of  application  of
                           relevant provisions of ERISA; or

                  g.       entry of any judgment  against  Borrower not fully
                           covered by insurance and not discharged  or bonded
                           for 60 days and for which a stay  pending  appeal has
                           not been obtained; or

                  h.       default by the Borrower under any other material
                           obligation for borrowed money or its equivalent.

                  6.  Cross-Default.  Default  by  Borrower  under any other
                      material  obligation  to the Bank outstanding at any time.

                  7.  Mortgage  Options.   Failure  by  Borrower  to  provide  a
                  marketable first mortgage lien to Bank on properties mortgaged
                  in Columbia  County,  Pennsylvania  (Buckhorn)  and Livingston
                  County,  New  York  (Dansville  -  lien  on  ground  leasehold
                  interest)  at such time as  Borrower's  option to purchase the
                  premises must be exercised or is  exercisable  in the ordinary
                  course.

                  B.  Remedies.  If any one or more Events of Default  listed in
Section A.5.,  subsections b, c, d, and e occur,  the Bank shall have no further
commitments or obligations  and all obligations of Borrower to the Bank shall be
automatically  accelerated  such that the same become  forthwith due and payable
without presentment,  demand, protest, or other notice of any kind, all of which
are hereby  expressly  waived.  If any other Event of Default  listed in Section
A.5. occurs,  the Bank may, at its option,  take either or both of the following
actions at the same or different times: (i) terminate any further commitments or
obligations of the Bank, and (ii)  accelerate all obligations of Borrower to the
Bank such that the same become  forthwith due and payable  without  presentment,
demand,  protest, or other notice of any kind, all of which are hereby expressly
waived.

                  In case any such Events of Default shall occur, the Bank shall
be entitled to use any legal  remedy,  and the Bank shall be entitled to recover
judgment against the Borrower for all obligations of Borrower to the Bank either
before,  or after, or during the pendency of any proceedings for the enforcement
of any  security  interests,  mortgages  or  guarantees  and,  in the  event  of
realization of any funds from any security or guarantee and application  thereof
to the  payment of the  obligations  due,  the Bank shall be entitled to enforce
payment of and recover  judgment for all amounts  remaining  due and unpaid upon
such obligations.  The Bank may proceed to protect and enforce its rights by any
other appropriate proceedings,  including action for the specific performance of
any  covenant or  agreement  contained in this  Agreement  and other  agreements
contemplated hereunder held by the Bank.

ARTICLE X - MISCELLANEOUS

                  A.  Waiver.  No delay or failure of the Bank to  exercise  any
right,  remedy,  power  or  privilege  hereunder  shall  impair  the  same or be
construed to be a waiver of the same or of any Event of Default or  acquiescence
therein. No single or partial exercise of any right,  remedy, power or privilege
shall  preclude  other or  further  exercise  thereof by the Bank.  All  rights,
remedies,  powers, and privileges herein conferred upon the Bank shall be deemed
cumulative and not exclusive of any others available.

                  B.  Survival  of  Representations.   All  representations  and
warranties  contained  herein shall  survive the  execution and delivery of this
Agreement  and the  execution and delivery of other  agreements  hereunder,  and
shall  continue  in full  force  and  effect  so long as any  obligation  of the
Borrower to the Bank is outstanding.

                  C. Additional  Security/Setoff.  The Borrower hereby grants to
the Bank a lien,  security  interest,  and right of set off as security  for the
Obligations upon and against all deposits, credits, collateral and property, now
or hereafter in the possession,  custody,  safekeeping or control of Bank or any
entity under the control of Fleet Financial Group, Inc., or in transit to any of
them.  After an Event of Default,  without demand or notice the Bank may set off
the same or any part thereof and apply the same to any  liability or  obligation
of Borrower even though  unmatured  and  regardless of the adequacy of any other
collateral  securing  the  Obligations.  Any and all rights to  require  Bank to
exercise  its rights or  remedies  with  respect to any other  collateral  which
secures the  Obligations,  prior to exercising its right of set off with respect
to such  deposits,  credits,  or  other  property  of the  Borrower  are  hereby
knowingly, voluntarily, and irrevocably waived.

                  D.  Notices.  Any notice or demand upon the Borrower  shall be
deemed to have been  sufficiently  given or served for all purposes thereof when
delivered by courier or mailed, first class,  postage prepaid,  addressed to the
Borrower at the address shown in this Agreement, or to such other address as may
be furnished in writing to the Bank for such purpose by the Borrower.

                  Any  notice or demand to the Bank shall be deemed to have been
sufficiently  given or served for all purposes  hereof when delivered by courier
or mailed,  first class,  postage  prepaid,  to the Bank at the address shown in
this  Agreement,  or to such other address as may be furnished in writing to the
Borrower for such purpose by the Bank.

                  E. Business Days. All Loan Documents  shall be governed by the
Modified Following Business Day Convention,  but any extension of time shall, in
each such case, be included in the computation of any interest or fees.

                  F.  Entire  Agreement.  This  Agreement  embodies  the  entire
agreement and understanding between the Bank and the Borrower and supersedes all
prior agreements and understandings  relating to the subject matter hereof. This
Agreement shall not be changed or amended without the written  agreement of both
the Borrower and the Bank.

                  G. Parties in Interest.  All the terms and  provisions of this
Agreement  shall inure to the benefit of and be binding upon and be  enforceable
by  the  respective  successors  and  assigns  of the  parties  hereto  and,  in
particular,  shall inure to the benefit of and be  enforceable  by any holder of
notes executed hereunder.

                  H.  Governing Law. This Agreement and the notes and agreements
related  hereto,  together with all of the rights and obligations of the parties
hereto, shall be construed,  governed,  and enforced in accordance with the laws
of the State of New York.

                  I.  Agreement  Covers  All  Indebtedness.  This  Agreement  is
intended to cover all  indebtedness  of the Borrower to the Bank existing now or
in the future, whether or not portions of the indebtedness are from time to time
repaid or new  indebtedness is created,  unless  otherwise  expressly  agreed in
writing by the Bank.

                  J.  Assignment/Participation.  All the terms and provisions of
this  Agreement  shall  inure  to the  benefit  of and be  binding  upon  and be
enforceable by the parties and their respective successors and assigns and shall
inure to the  benefit  of and be  enforceable  by any  holder of notes  executed
hereunder.

                  Bank may at any time  pledge all or any  portion of its rights
under the Loan  Documents,  including  any  portion of any note  evidencing  the
Obligations, to any of the twelve (12) Federal Reserve Banks.

                  The Bank shall have the unrestricted right at any time or from
time to time, and without  Borrower's  consent,  to assign all or any portion of
its rights and  obligations  hereunder  to one or more banks or other  financial
institutions (each an "Assignee"), and Borrower agrees that it shall execute, or
cause to be executed, such documents,  including without limitation,  amendments
to this  Agreement  and to any other  Loan  Documents,  as the Bank  shall  deem
necessary to effect the foregoing.  In addition,  at the request of the Bank and
any such Assignee,  Borrower shall issue one or more new  promissory  notes,  as
applicable, to any such Assignee and, if Bank has retained any of its rights and
obligations  hereunder following such assignment,  to Bank, which new promissory
notes shall be issued in replacement  of, but not in discharge of, the liability
evidenced by the promissory note held by Bank prior to such assignment and shall
reflect the amount of the respective commitments and loans held by such Assignee
and Bank after giving effect to such assignment. Upon the execution and delivery
of appropriate assignment documentation, amendments, and any other documentation
required by Bank in connection with such assignment, and the payment by Assignee
of the purchase price agreed to by Bank and such  Assignee,  such Assignee shall
be a party to this Agreement and shall have all of the rights and obligations of
the Bank  hereunder  (and under any and all other Loan  Documents) to the extent
that such rights and obligations  have been assigned by the Bank pursuant to the
assignment  documentation between the Bank and such Assignee,  and Bank shall be
released  from its  obligations  hereunder  and  thereunder  to a  corresponding
extent.

                  The Bank  shall  have the  unrestricted  right at any time and
from time to time, and without the consent of or notice to Borrower, to grant to
one or more  banks  or  other  financial  institutions  (each  a  "Participant")
participating interests in Bank's obligation to lend hereunder and/or any or all
of the  Obligations.  In the event of any such grant by Bank of a  participating
interest  to  Participant,  whether or not upon notice to  Borrower,  Bank shall
remain responsible for the performance of its obligations hereunder and Borrower
shall  continue to deal solely and directly with Bank in connection  with Bank's
rights and obligations hereunder.

                  The Bank may furnish any  information  concerning  Borrower in
its  possession  from time to time to  prospective  Assignees and  Participants,
provided  that  the  Bank  shall  require  any  such  prospective   Assignee  or
Participant  to  agree  in  writing  to  maintain  the  confidentiality  of such
information.

                  K. Loss or  Mutilation.  Upon  receipt of an  affidavit  of an
officer of Bank as to the loss,  theft,  destruction,  or mutilation of any note
evidencing  any  Obligation  or any other Loan  Document  which is not of public
record,  and, in the case of any such loss,  theft,  destruction  or mutilation,
upon surrender and  cancellation  of such note or other Loan Document,  Borrower
will issue,  in lieu thereof,  a replacement  note or other Loan Document in the
same principal amount thereof and otherwise of like tenor.

                  L. Usury. All agreements  between Borrower and Bank are hereby
expressly  limited so that in no  contingency  or event  whatsoever,  whether by
reason of  acceleration  or maturity  of the  indebtedness  evidenced  hereby or
otherwise, shall the amount paid or agreed to be paid to Bank for the use or the
forbearance of the indebtedness  evidenced hereby exceed the maximum permissible
under  applicable law. As used herein,  the term "applicable law" shall mean the
law in effect as of the date hereof,  provided,  however that in the event there
is a change in the law which results in a higher  permissible  rate of interest,
then the Loan  Documents  shall be governed by such new law as of its  effective
date. In this regard,  it is expressly  agreed that it is the intent of Borrower
and Bank in the execution, delivery and acceptance of this Agreement to contract
in strict compliance with the laws of the State of New York from time to time in
effect.  If,  under or from any  circumstances  whatsoever,  fulfillment  of any
provision hereof or of any of the Loan Documents at the time performance of such
provision  shall be due, shall involve  transcending  the limit of such validity
prescribed  by  applicable  law,  then  the  obligation  to be  fulfilled  shall
automatically  be reduced to the limits of such  validity,  and if under or from
any  circumstances  whatsoever  Bank should  ever  receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest  shall be applied to the reduction of the principal  balance  evidenced
hereby and not to the payment of interest.  This  provision  shall control every
other provision of all agreements between Borrower and Bank.

                  M.   Jurisdiction/TRIAL   BY  JURY.   Borrower   consents   to
jurisdiction  and  service of process in the courts of the State of New York and
in the courts of the United States having jurisdiction hereof. BORROWER AND BANK
MUTUALLY HEREBY KNOWINGLY,  VOLUNTARILY AND  INTENTIONALLY  WAIVE THE RIGHT TO A
TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON,  ARISING OUT OF, UNDER OR IN
CONNECTION  WITH THIS  AGREEMENT  OR ANY OTHER LOAN  DOCUMENTS  OR ANY COURSE OF
CONDUCT,  COURSE OF DEALINGS,  STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY. THIS WAIVER  CONSTITUTES A MATERIAL  INDUCEMENT FOR BANK TO ACCEPT
THIS AGREEMENT AND MAKE THE LOANS CONTEMPLATED HEREUNDER.

         N.  Measurement  of  Financial  Information.   All  financial  covenant
compliance and related  Applicable Prime Rate Margin and Applicable LIBOR Margin
computations  shall be  measured  based  upon  quarterly  and  annual  financial
statements as filed by the Borrower with the Securities and Exchange Commission.

ARTICLE XI - ENVIRONMENTAL MATTERS

                  A.       Definitions.  For purposes of this Article XI, the
following  capitalized terms shall have the meanings indicated:

                  "Environment"  means any water  including  but not  limited to
                  surface  water  and  ground  water  or water  vapor;  any land
                  including land surface or subsurface;  stream sediments;  air;
                  fish;  wildlife;  plants;  and all other natural  resources or
                  environmental media.

                  "Environmental  Laws"  means  all  federal,  state  and  local
                  environmental,  land use, zoning, health, chemical use, safety
                  and sanitation laws, statutes, ordinances,  regulations, codes
                  and rules relating to the protection of the Environment and/or
                  governing   the   use,   storage,    treatment,    generation,
                  transportation,  processing,  handling, production or disposal
                  of   Hazardous   Substances   and  the   regulations,   rules,
                  ordinances,   bylaws,   policies,   guidelines,    procedures,
                  interpretations,  decisions, orders and directives of federal,
                  state and local  governmental  agencies and  authorities  with
                  respect thereto.

                  "Environmental   Permits"   means   all   licenses,   permits,
                  approvals, authorizations,  consents or registrations required
                  by  any  applicable  Environmental  Laws  and  all  applicable
                  judicial  and   administrative   orders  in  connection   with
                  ownership,  lease,  purchase,  transfer,  closure,  use and/or
                  operation of the Mortgaged  Property and/or as may be required
                  for  the  storage,  treatment,   generation,   transportation,
                  processing,  handling,  production  or disposal  of  Hazardous
                  Substances.

                  "Environmental Report" means a written report prepared for the
                  Mortgagor or the Mortgagee by an  environmental  consulting or
                  environmental engineering firm.

                  "Hazardous   Substances"  means,   without   limitation,   any
                  explosives,  radon,  radioactive  materials,   asbestos,  urea
                  formaldehyde  foam  insulation,   polychlorinated   biphenyls,
                  petroleum   and   petroleum   products,   methane,   hazardous
                  materials, hazardous wastes, hazardous or toxic substances and
                  any other  material  defined as a hazardous  substance  in the
                  Comprehensive   Environmental   Response,   Compensation   and
                  Liability Act of 1980, as amended,  42 U.S.C.  Sections  9601,
                  et.  seq.;  the  Hazardous  Materials  Transportation  Act, as
                  amended,  49 U.S.C.  Sections  1801,  et.  seq.;  the Resource
                  Conservation and Recovery Act, as amended, 42 U.S.C.  Sections
                  6901,  et.  seq.;  Articles  15 and 27 of the New  York  State
                  Environmental Conservation Law or any other federal, state, or
                  local  law,  regulation,   rule,  ordinance,   bylaw,  policy,
                  guideline,  procedure,  interpretation,  decision,  order,  or
                  directive,  whether existing as of the date hereof, previously
                  enforced or subsequently enacted.

                  "Mortgagee" means the Bank.

                  "Mortgagor"  means the  Borrower,  and to the extent  that the
                  mortgagor  of the  Mortgaged  Property is  different  from the
                  Borrower, the Borrower will cause the mortgagor to be bound by
                  the representation, terms and conditions of this Article XI.

                  "Mortgaged  Property"  means  the  properties  covered  by the
                  mortgages  referenced in Article IV of this  Agreement as well
                  as  any  other   properties  owned  or  occupied  or  used  by
                  Mortgagor.

                  "Release"  has the  same  meaning  as  given  to that  term in
                  Section 101(22) of the Comprehensive  Environmental  Response,
                  Compensation and Liability Act of 1980, as amended,  42 U.S.C.
                  Section 9601(22), and the regulations promulgated thereunder.

                  B.  Representations.  The  Mortgagor  represents  and warrants
that, to the best of  Mortgagor's  knowledge,  except as indicated in any Report
provided  to  Mortgagee  prior to the date  hereof  and except  with  respect to
properties  located in  Fultonville  (Montgomery  County,  New York),  Paulsboro
(Gloucester  County, New Jersey),  Binghamton (Broome County, New York),  Porter
(Porter  County,  Indiana),  Bloomsburg  (Columbia  County,  Pennsylvania),  and
Milesburg  (Luzerne  County,  Pennsylvania)  which  have  been  the  subject  of
disclosures by the Borrower to the Bank regarding environmental matters:

                           (1) Neither the  Mortgaged  Property nor any property
                  adjacent to the  Mortgaged  Property is being or has been used
                  for  the  storage,  treatment,   generation,   transportation,
                  processing,  handling, production or disposal of any Hazardous
                  Substance or as a landfill or other waste disposal site or for
                  military,  manufacturing  or  industrial  purposes  or for the
                  storage of  petroleum or petroleum  based  products  except in
                  compliance with all Environmental Laws.

                           (2)  Underground  storage  tanks are not and have not
                  been located on the  Mortgaged  Property  except in compliance
                  with all Environmental Laws.

                           (3) The soil,  subsoil,  bedrock,  surface  water and
                  groundwater  of  the  Mortgaged   Property  are  free  of  any
                  Hazardous Substances.

                           (4) There has been no Release nor is there the threat
                  of a Release  of any  Hazardous  Substance  on, at or from the
                  Mortgaged  Property or any property  adjacent to or within the
                  immediate  vicinity of the  Mortgaged  Property  which through
                  soil, subsoil, bedrock, surface water or groundwater migration
                  could  come  to be  located  on the  Mortgaged  Property,  and
                  Mortgagor  has not received any form of notice or inquiry from
                  any federal,  state or local governmental agency or authority,
                  any operator,  tenant, subtenant,  licensee or occupant of the
                  Mortgaged  Property or any property  adjacent to or within the
                  immediate  vicinity  of the  Mortgaged  Property  or any other
                  person  with regard to a Release or the threat of a Release of
                  any Hazardous  Substance on, at or from the Mortgaged Property
                  or any property adjacent to the Mortgaged Property.

                           (5) All Environmental  Permits have been obtained and
                  are in full force and effect.

                           (6)  No  event  has  occurred  with  respect  to  the
                  Mortgaged  Property which would  constitute a violation of any
                  applicable   Environmental  Law  or  non-compliance  with  any
                  Environmental Permit.

                           (7) There are no agreements, consent orders, decrees,
                  judgments,  license or permit  conditions  or other  orders or
                  directives of any federal, state or local court,  governmental
                  agency or  authority  relating to the past,  present or future
                  ownership, use, operation, sale, transfer or conveyance of the
                  Mortgaged  Property  which  require  any change in the present
                  condition  of the  Mortgaged  Property  or any work,  repairs,
                  construction,  containment, clean up, investigations, studies,
                  removal or other remedial action or capital  expenditures with
                  respect to the Mortgaged Property.

                           (8)  There   are  no   actions,   suits,   claims  or
                  proceedings,  pending or  threatened,  which  could  cause the
                  incurrence of expenses or costs of any name or  description or
                  which seek money damages,  injunctive relief,  remedial action
                  or any other  remedy  that  arise out of,  relate to or result
                  from (a) a violation or alleged  violation  of any  applicable
                  Environmental Law or non-compliance or alleged  non-compliance
                  with  any  Environmental  Permit,  (b)  the  presence  of  any
                  Hazardous Substance or a Release or the threat of a Release of
                  any Hazardous  Substance on, at or from the Mortgaged Property
                  or any property  adjacent to or within the immediate  vicinity
                  of  the  Mortgaged  Property  or  (c)  human  exposure  to any
                  Hazardous  Substance,   noises,  vibrations  or  nuisances  of
                  whatever  kind to the extent the same arise from the condition
                  of the Mortgaged  Property or the ownership,  use,  operation,
                  sale, transfer or conveyance thereof.

                  C.       Covenants.  The  Mortgagor  covenants  and agrees
with the  Mortgagee  that so long as the Mortgagee holds liens on the Mortgaged
Property or any of it, that the Mortgagor shall:

                           (1) Keep,  and shall  cause all  operators,  tenants,
                  subtenants,  licensees and occupants of the Mortgaged Property
                  to  keep,  the  Mortgaged   Property  free  of  all  Hazardous
                  Substances except in compliance with all  Environmental  Laws,
                  and shall not cause or permit the  Mortgaged  Property  or any
                  part   thereof  to  be  used  for  the   storage,   treatment,
                  generation,  transportation,  processing, handling, production
                  or disposal of any Hazardous  Substances  except in compliance
                  with all Environmental Laws.

                           (2)  Comply  with,  and shall  cause  all  operators,
                  tenants, subtenants,  licensees and occupants of the Mortgaged
                  Property to comply with all applicable  Environmental Laws and
                  shall obtain and comply with,  and shall cause all  operators,
                  tenants, subtenants,  licensees and occupants of the Mortgaged
                  Property to obtain and comply with, all Environmental Permits.

                           (3) Not cause or permit  any change to be made in the
                  present or intended use of the Mortgaged  Property which would
                  (a)    involve    the    storage,    treatment,    generation,
                  transportation,  processing,  handling, production or disposal
                  of  any  Hazardous  Substance  or the  use  of  the  Mortgaged
                  Property  as a landfill or other  waste  disposal  site or for
                  military,  manufacturing  or  industrial  purposes  or for the
                  storage of petroleum or petroleum  based  products,  except in
                  compliance  with  all  Environmental  Laws,  (b)  violate  any
                  applicable  Environmental  Law, (c) constitute  non-compliance
                  with any  Environmental  Permit or (d)  increase the risk of a
                  Release of any Hazardous Substance.

                           (4)  Promptly  provide  Mortgagee  with a copy of all
                  notifications  which it gives or receives  with respect to any
                  past or  present  Release  or the  threat of a Release  of any
                  Hazardous  Substance on, at or from the Mortgaged  Property or
                  any property adjacent to the Mortgaged Property.

                           (5)  Undertake   and  complete  all   investigations,
                  studies,  sampling  and  testing  and all  removal  and  other
                  remedial actions required by law to contain,  remove and clean
                  up all Hazardous  Substances that are determined to be present
                  at the Mortgaged  Property in accordance  with all  applicable
                  Environmental Laws and all Environmental Permits.

                           (6) At all times allow  Mortgagee  and its  officers,
                  employees,    agents,    representatives,    contractors   and
                  subcontractors reasonable access after reasonable prior notice
                  to the  Mortgaged  Property for the  purposes of  ascertaining
                  site  conditions,  including,  but not limited to,  subsurface
                  conditions.

                           (7) Deliver promptly to the Mortgagee:  (a) copies of
                  any documents  received  from the Untied States  Environmental
                  Protection   Agency,   or  any  state,   county  or  municipal
                  environmental  or health  agency  concerning  the  Mortgagor's
                  operations  at the Mortgaged  Property;  and (b) copies of any
                  documents  submitted  by the  Mortgagor  to the United  States
                  Environmental  Protection  Agency  or  any  state,  county  or
                  municipal   environmental  or  health  agency  concerning  its
                  operations at the Mortgaged Property.

                           (8) If at any time  Mortgagee  obtains any reasonable
                  evidence  or  information   which  suggests  that  a  material
                  potential  environmental  problem  may exist at the  Mortgaged
                  Property,  Mortgagee  may require that a full or  supplemental
                  environmental  inspection and audit report with respect to the
                  Mortgaged Property of a scope and level of detail satisfactory
                  to Mortgagee be prepared by an environmental engineer or other
                  qualified  person   acceptable  to  Mortgagee  at  Mortgagor's
                  expense.  Such audit may include a physical  inspection of the
                  Mortgaged  Property,  a  visual  inspection  of  any  property
                  adjacent to or within the immediate  vicinity of the Mortgaged
                  Property,   personnel   interviews   and  a   review   of  all
                  Environmental Permits. If Mortgagee requires,  such inspection
                  shall also include a records search and/or subsurface  testing
                  for the presence of Hazardous Substances in the soil, subsoil,
                  bedrock,  surface  water  and/or  groundwater.  If such  audit
                  report indicates the presence of any Hazardous  Substance or a
                  Release or the threat of a Release of any Hazardous  Substance
                  on,  at  or  from  the  Mortgaged  Property,  Mortgagor  shall
                  promptly  undertake and  diligently  pursue to completion  all
                  necessary,  appropriate and legally authorized  investigative,
                  containment,  removal,  clean up and other  remedial  actions,
                  using methods  recommended by the engineer or other person who
                  prepared said audit report and  acceptable to the  appropriate
                  federal, state and local agencies or authorities.

                  D. Indemnity.  The Mortgagor agrees to indemnify,  defend, and
hold harmless the Mortgagee  from and against any and all  liabilities,  claims,
damages, penalties, expenditures, losses, or charges, including, but not limited
to,  all costs of  investigation,  monitoring,  legal  representation,  remedial
response,  removal,  restoration or permit  acquisition of any kind  whatsoever,
which may now or in the future be undertaken, suffered, paid, awarded, assessed,
or otherwise  incurred by the  Mortgagee or any other person or entity  relating
to,  resulting from or arising out of (1) the use of the Mortgaged  Property for
the  storage,  treatment,  generation,  transportation,   processing,  handling,
production  or disposal  of any  Hazardous  Substance  or as a landfill or other
waste disposal site or for military, manufacturing or industrial purposes or for
the storage of petroleum or petroleum  based  products,  (2) the presence of any
Hazardous  Substance  or a Release or the  threat of a Release of any  Hazardous
Substance  on, at or from the  Mortgaged  Property,  (3) the failure to promptly
undertake and diligently  pursue to completion all  necessary,  appropriate  and
legally  authorized  investigative,  containment,  removal,  clean up and  other
remedial  actions  with  respect  to a Release or the threat of a Release of any
Hazardous Substance on, at or from the Mortgaged Property, (4) human exposure to
any Hazardous Substance, noises, vibrations or nuisances of whatever kind to the
extent  the same arise  from the  condition  of the  Mortgaged  Property  or the
ownership, use, operation, sale, transfer or conveyance thereof, (5) a violation
of any applicable  Environmental Law, (6) non-compliance  with any Environmental
Permit or (7) a material  misrepresentation  or inaccuracy in any representation
or warranty or a material  breach of or failure to perform any covenant  made by
Mortgagor  in this  Mortgage.  Such costs or other  liabilities  incurred by the
Mortgagee  or any other  person or entity  shall be deemed to  include,  without
limitation,  any sums which the  Mortgagee  deems it  necessary  or desirable to
expend to protects its security interest in the Mortgaged Property.

                  The  liability  of  Mortgagor  hereunder  shall  in no  way be
limited,  abridged,  impaired  or  otherwise  affected by (1) any  amendment  or
modification of this Mortgage or any other document  relating to the obligations
covered by this  Agreement by or for the benefit of Mortgagor or any  subsequent
owner of the  Mortgaged  Property,  (2) any  extensions  of time for  payment or
performance  required by any of this Mortgage or any other document  relating to
the  obligations  covered by this Agreement,  (3) the release of Mortgagor,  any
guarantor or any other person from the  performance  or observance of any of the
agreements,  covenants,  terms or conditions  contained in this Agreement or any
other document  relating to the obligations  covered hereby by operation of law,
Mortgagee's  voluntary act or otherwise,  (4) the invalidity or unenforceability
of any of the terms of  provisions  of this  Agreement or any other  mortgage or
document  relating  to the  obligations  covered  by  this  Agreement,  (5)  any
exculpatory  provision  contained  in this  Agreement  or any other  mortgage or
document  relating  to  the  obligations  covered  by  this  Agreement  limiting
Mortgagee's  recourse  to the  Mortgaged  Property  or to any other  security or
limiting Mortgagee's rights to a deficiency judgment against Mortgagor,  (6) any
applicable statute of limitations, (7) any investigation or inquiry conducted by
or on the behalf of Mortgagee or any  information  which  Mortgagee  may have or
obtain  with  respect  to  the  environmental  or  ecological  condition  of the
Mortgaged  Property,  (8) the sale,  assignment or  foreclosure  of any mortgage
covering the Mortgaged Property,  (9) the sale, transfer or conveyance of all or
part  of the  Mortgaged  Property,  (10)  the  dissolution  and  liquidation  of
Mortgagor,  (11) the release or discharge,  in whole or in part, of Mortgagor in
any   bankruptcy,   insolvency,   reorganization,   arrangement,   readjustment,
composition,  liquidation or similar proceeding or (12) any other  circumstances
which might  otherwise  constitute a legal or equitable  release or discharge of
Mortgagor, in whole or in part.

                  E.       Survival.        Notwithstanding  anything to the
contrary  contained  herein, the Mortgagor's  liability  shall survive the
discharge,  satisfaction or assignment of this Agreement and any mortgages
covered  hereby by the Mortgagee  until all of the  following  conditions  are
satisfied in full:

                           (1) all principal,  interest and other sums evidenced
                  or  covered  by  this  Agreement  and  the  documents,  notes,
                  mortgages and other  agreements  related  hereto and any other
                  costs and expenses  incurred by Mortgagee in  connection  with
                  this Agreement and the obligations  covered hereby are paid in
                  full by Mortgagor or by any guarantor;

                           (2) neither  Mortgagee nor any affiliate of Mortgagee
                  has  at  any  time  or  in  any  manner  participated  in  the
                  management or control of, taken  possession of or title to the
                  Mortgaged   Property  or  any  portion  thereof,   whether  by
                  foreclosure,  deed in lieu of foreclosure or otherwise, or had
                  the  capacity or ability to  participate  in the  decisions or
                  actions  of the  Mortgagor  as the same  relate  to  Hazardous
                  Substances;

                           (3) between the date of this  Agreement  and the date
                  on which all  obligations  covered hereby are paid in full, as
                  provided in clause (1) above,  there has been no change in any
                  applicable  Environmental  Law  which  would  make a lender or
                  mortgagee liable in respect of any of the indemnified  matters
                  contained in this Article XI notwithstanding  the fact that no
                  event,  circumstance  or condition of the nature  described in
                  clause (2) above ever occurred; and

                           (4)      there exist no indemnified matters which are
                  then pending.

                  F.  Default.   If  the  Mortgagor   defaults  on  any  of  its
obligations pursuant to this Agreement or any other document, mortgage, note, or
agreement  related  hereto,  the Mortgagee or its designee shall have the right,
upon reasonable  notice to the Mortgagor,  to enter upon the Mortgaged  Property
and conduct such tests, investigation and sampling, including but not limited to
installation  of  monitoring  wells,  as shall be  reasonably  necessary for the
Mortgagee to determine whether any disposal of Hazardous Substances has occurred
on,  at  or  near  the  Mortgaged  Property.   The  costs  of  all  such  tests,
investigations  and samplings  shall be  considered  as additional  indebtedness
secured hereby and shall become  immediately  due and payable without notice and
with interest thereon at the rate provided in the Term Loan Note.

                  G. No Reliance On Information.  The Mortgagor  agrees that the
Mortgagee shall not be liable in any way for the completeness or accuracy of any
Environmental Report or the information contained therein. The Mortgagor further
agrees that the  Mortgagee has no duty to warn the Mortgagor or any other person
or entity about any actual or  potential  environmental  contamination  or other
problem that may have become apparent or will become apparent to Mortgagee.

         IN WITNESS  WHEREOF,  the  parties  have caused  this  Agreement  to be
executed  by their duly  authorized,  respective  officers  as of the date first
above written.

                                            FLEET NATIONAL BANK
                                            By:      _________________________
                                            Title:   _________________________

                                            TRAVEL PORTS OF AMERICA, INC.
                                            By:      _________________________
                                            Title:   _________________________

                                    EXHIBIT F

                          REPLACEMENT CAPITAL LINE NOTE

$4,500,000                                                        July 24, 1998

                  THIS CAPITAL LINE NOTE RESTATES,  AMENDS,  AND REPLACES IN ITS
ENTIRETY  THE  CAPITAL  LINE NOTE DATED AS OF JANUARY  31,  1997 IN THE  MAXIMUM
PRINCIPAL  AMOUNT OF  $3,500,000  GIVEN BY THE BORROWER IN FAVOR OF THE BANK, AS
REPLACED  BY THE  CAPITAL  LINE NOTE DATED AS OF NOVEMBER 1, 1997 IN THE MAXIMUM
PRINCIPAL AMOUNT OF $3,500,000 GIVEN BY THE BORROWER IN FAVOR OF THE BANK.

                  Capitalized  terms not otherwise defined herein shall have the
meanings given to them in the Restated and Amended Credit Agreement  between the
Borrower and the Bank dated as of July 24, 1998, as the same has been and may be
modified, extended, or replaced from time to time (the "Credit Agreement").

                  FOR VALUE RECEIVED, TRAVEL PORTS OF AMERICA, INC. ("Borrower")
hereby  promises  to pay to the  order  of FLEET  NATIONAL  BANK  ("Bank"),  the
principal sum of Four Million Five Hundred Thousand  Dollars  ($4,500,000) or if
less,  the  aggregate  unpaid  principal  amount of all advances made by Bank of
Borrower.  The Bank shall maintain a record of amounts of principal and interest
payable by Borrower from time to time, and the records of the Bank maintained in
the ordinary  course of business  shall be prima facie evidence of the existence
and amounts of Borrower's obligations recorded therein. In the event of transfer
of this Capital Line Note, or if the Bank shall  otherwise deem it  appropriate,
the Borrower hereby authorizes the Bank to endorse on this Capital Line Note the
amount of advances and  payments to reflect the  principal  balance  outstanding
from  time to time.  The  Bank may send  written  confirmation  of  advances  to
Borrower  but any  failure  to do so  shall  not  relieve  the  Borrower  of the
obligation to repay any advance.

                  Except to the  extent  that the LIBOR  Rate  option  described
below has been exercised,  all outstanding  principal amounts under this Capital
Line Note shall bear interest  until paid at a rate per annum equal to the Prime
Rate plus the  Applicable  Prime Rate  Margin  calculated  based on actual  days
elapsed in a year of 360 days,  but never  exceeding the maximum rate allowed by
law.  All changes in the  interest  rate due to a change in the Prime Rate shall
take place automatically and without notice to Borrower as of the effective date
of the  change in the  Prime  Rate.  At the  option  of the  Borrower,  however,
exercised  by giving the Bank notice at least two London  Banking  Days prior to
the first day of any month,  the Borrower may elect to have the principal amount
outstanding  under this Capital Line Note (which must not be less than $500,000)
bear  interest  for a  LIBOR  Interest  Period,  designated  in the  notice  and
commencing on the first day of a month,  at a fixed rate equal to the LIBOR Rate
plus the Applicable LIBOR Margin as of the date two London Banking Days prior to
the LIBOR Interest  Period  selected.  The LIBOR Interest Period shall be either
one-month, two months, or three months, as elected by the Borrower. The Borrower
may make a maximum of six LIBOR Rate  elections per year related to this Capital
Line Note.

                  A payment of all interest accrued under this Capital Line Note
with respect to principal  which bears  interest based upon the Prime Rate shall
be due on the first day of each  month,  and a payment of all  interest  accrued
with respect to  principal  for which a LIBOR  Interest  Period has been elected
shall be due on the last day of each such respective LIBOR Interest Period.  All
payments shall be in lawful money of the United States in immediately  available
funds.

                  The Borrower may prepay principal under this Capital Line Note
at any time.  Any  prepayment of principal  covered by a rate of interest  based
upon the LIBOR Rate on a date other  than the last day of the  applicable  LIBOR
Interest Period must be accompanied by a payment of Break Costs.

                  All remaining  principal and interest shall be due and payable
in full on the date of  expiration of the Capital Line as provided in the Credit
Agreement.

                  Interest  shall  continue to accrue after maturity at the rate
required by this Capital Line Note until this Capital Line Note is paid in full.
The rate of  interest  on this  Capital  Line  Note may be  increased  under the
circumstances  provided  in the Credit  Agreement.  The right of Bank to receive
such increased rate of interest shall not constitute a waiver of any other right
or remedy of Bank.

                  Any  payment not  received  within ten days of when due may be
subject to an additional late charge equal to 5% of the payment due.

                  If this Capital Line Note or any payment hereunder becomes due
on a Saturday, Sunday or other holiday on which the Bank is authorized to close,
the due date for the Capital Line Note or payment  shall be extended to the next
succeeding business day, but any interest or fees shall be calculated based upon
the actual time of payment.

                  This Capital  Line Note shall,  at the Bank's  option,  become
immediately  due and payable  without  presentment,  demand,  protest,  or other
notice of any kind, all of which are hereby expressly waived, upon the happening
of any Event of Default under the Credit Agreement.

                  This  Capital  Line Note is subject to the  express  condition
that at no time shall  Borrower be  obligated or required to pay interest on the
principal  balance of this Capital Line Note at a rate which could  subject Bank
to  either  civil or  criminal  liability  as a result of being in excess of the
maximum rate which  Borrower is permitted by law to contract or agree to pay. If
by the terms of this  Capital  Line Note,  Borrower  is at any time  required or
obligated to pay interest on the principal  balance of this Capital Line Note at
a rate in excess of such maximum rate,  the rate of interest  under this Capital
Line Note shall be deemed to be  immediately  reduced to such  maximum  rate and
interest  payable  hereunder  shall be  computed  at such  maximum  rate and the
portion of all prior  interest  payments in excess of such maximum rate shall be
applied and shall be deemed to have been  payments in reduction of the principal
balance of this Capital Line Note.

                  The terms of this Capital Line Note cannot be changed, nor may
this Capital Line Note be  discharged  in whole or in part,  except by a writing
executed by the  holder.  In the event that  holder  demands or accepts  partial
payments  of this  Capital  Line Note,  such demand or  acceptance  shall not be
deemed to constitute a waiver of the right to demand the entire  unpaid  balance
of this Capital Line Note at any time in accordance  with the terms hereof.  Any
delay by holder in exercising any rights hereunder shall not operate as a waiver
of such rights.

                  Bank may set off toward payment of any obligations  under this
Capital  Line Note any  indebtedness  due or to become due from Bank to Borrower
and any moneys or other property of Borrower in possession of Bank at any time.

                  Borrower on demand shall pay all  expenses of Bank,  including
without  limitation  reasonable  attorneys' fees, in connection with enforcement
and collection of this Capital Line Note.
                  This  Capital  Line Note shall be  governed by the laws of the
                  State of New York.  Whenever used,  the singular  number shall
                  include the plural, the plural the singular,
and the words "Bank" and "Borrower" shall include their respective successors
and assigns.
                                                 TRAVEL PORTS OF AMERICA, INC.
                                                 By:__________________________
                                                 Title:_______________________